-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, emD4zmkxmKBkjsHkuoDgXECFjMf3AAVZ+W6GeKL+I0edvQYVKiHizuqmLtPOjqN5 HdjUx3lcB9EDMjULGkScMw== 0000950152-94-000359.txt : 19940331 0000950152-94-000359.hdr.sgml : 19940331 ACCESSION NUMBER: 0000950152-94-000359 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 27 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LUBRIZOL CORP CENTRAL INDEX KEY: 0000060751 STANDARD INDUSTRIAL CLASSIFICATION: 2890 IRS NUMBER: 340367600 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-05263 FILM NUMBER: 94519153 BUSINESS ADDRESS: STREET 1: 29400 LAKELAND BLVD CITY: WICKLIFFE STATE: OH ZIP: 44092 BUSINESS PHONE: 2169434200 10-K 1 LUBRIZOL CORP 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 Commission file number 1-5263 THE LUBRIZOL CORPORATION 29400 Lakeland Boulevard Wickliffe, Ohio 44092-2298 (Name of registrant and address of principal executive offices) OHIO 34-0367600 (State of incorporation) (I.R.S. Employer Identification No.) Registrant's telephone number, including area code: (216) 943-4200 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ------------------------------- ----------------------- Common Shares without par value New York Stock Exchange Common Share purchase rights New York Stock Exchange Preferred Share purchase rights New York Stock Exchange Securities registered pursuant to section 12(g) of the Act: None 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 X No______ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value (on basis of closing sale price) of voting stock held by non-affiliates as of March 4, 1994: $2,433,762,869 Number of the registrant's Common Shares, without par value, outstanding as of March 4, 1994: 66,554,659 DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's 1993 Annual Report to its shareholders (Incorporated into Part I and II of this Form 10-K) Portions of the registrant's Proxy Statement dated March 16, 1994 (Incorporated into Part III of this Form 10-K) 2 PART I ITEM 1. BUSINESS Lubrizol was organized under the laws of Ohio in 1928. The company began business as a compounder of special-purpose lubricants, and in the early 1930's was among the first to commence research in the field of lubricant additives. Today, the company is a full service supplier of performance chemicals to diverse markets worldwide. These specialty chemical products are created through the application of advanced chemical, mechanical and biological technologies to enhance the performance and quality of the customer products in which they are used. The company develops, produces and sells chemical additives for transportation and industrial lubricants and functional fluids, fuel additives and diversified specialty chemical products. Prior to December 1, 1992, the company also had a separately reportable Agribusiness segment. That segment included traditional operations which develop, produce and market planting seeds and specialty vegetable oils, and also included strategic biotechnology research and development. As described in Note 16 to the Financial Statements (included in the company's 1993 Annual Report to its shareholders and incorporated herein by reference) on December 1, 1992, the company transferred substantially all of its Agribusiness segment, other than the specialty vegetable oil operations, to Mycogen Corporation and a joint venture partnership formed with Mycogen. The transferred assets were related to the seed business activities of the company's former Agrigenetics Division. The Agribusiness assets and operations retained by the company are not reportable as a separate industry segment after 1992. Financial information for the industry segments, prior to December 1, 1992, is contained in Note 14 to the Financial Statements and in the table of Operating Results by Business Segment contained in Management's Discussion and Analysis on page 29 of the 1993 Annual Report to shareholders which are incorporated herein by reference. Specialty Chemicals PRINCIPAL PRODUCTS. The company's principal products are additive systems for gasoline and diesel engine oils, automatic transmission fluids, gear oils, industrial fluids, metalworking compounds and fuels. The company also offers other specialty chemical products. Additives for engine oils accounted for 50% of consolidated revenues in 1993, 48% in 1992, and 45% in 1991. Additives for driveline oils accounted for 19%, 18% and 19% of consolidated revenues for these respective periods. Additives improve the lubricants and fuels used in cars, trucks, buses, off-highway equipment, marine engines and industrial applications. In lubricants, additives enable oil to withstand a broader range of temperatures, limit the buildup of sludge and varnish deposits, reduce wear, inhibit the formation of foam, rust and corrosion, and retard oxidation. In fuels, additives help maintain efficient operation of the fuel delivery system, help control deposits and corrosion, improve combustion and assist in preventing decomposition during storage. 3 Due to the variety in the properties and applications of oils, a number of different chemicals are used to formulate Lubrizol's products. Each additive combination is designed to fit the characteristics of the customer's base oil and the level of performance specified. Engine oils for passenger cars contain a combination of chemical additives which usually includes one or more detergents, dispersants, oxidation inhibitors and wear inhibitors, pour point depressants and viscosity improvers. Other chemical combinations are used in heavy duty engine oils for trucks and off-highway equipment and in formulations for gear oils, automatic transmission fluids, industrial oils, metalworking fluids, and gasoline, diesel and residual fuels. COMPETITION. The chemical additive field is highly competitive in terms of price, product performance and customer service. The company's principal competitors, both in the United States and overseas, are four major petroleum companies and one chemical company. The petroleum companies produce lubricant and fuel additives for their own use, and also sell additives to others. These competing companies are also customers of Lubrizol. Excluding viscosity improvers, management believes, based on volume sold, that it is the largest supplier to the petroleum industry of performance chemicals for lubricants. CUSTOMERS. In the United States, Lubrizol markets its additive products through its own sales organization. The company's additive customers consist primarily of oil refiners and independent oil blenders and are located in more than 100 countries. Approximately 60% of the company's sales are made to customers outside of North America. The company's ten largest customers, most of which are international oil companies and a number of which are groups of affiliated entities, accounted for approximately 44% of consolidated sales in 1993. Although the loss of any one of these customers could have a material adverse effect on the company's business, each is made up of a number of separate business units that the company believes make independent purchasing decisions with respect to chemical additives. Sales to Royal Dutch Petroleum Company (Shell) and its affiliates accounted for 9% of consolidated sales in 1993. RAW MATERIALS. Lubrizol utilizes a broad variety of chemical raw materials in the manufacture of its additives and uses oil in processing and blending additives. These materials are obtainable from several sources, and for the most part are derived from petroleum. Historically, the unstable conditions in the Middle East have caused the cost of raw materials to fluctuate significantly; however, it has not significantly affected the availability of raw materials to the company. The company expects raw materials to be available in adequate amounts in 1994. RESEARCH, TESTING AND DEVELOPMENT. Lubrizol has historically emphasized research and has developed a large percentage of the additives it manufactures and sells. Technological developments in the design of engines and other automotive equipment, combined with rising demands for environmental protection and fuel economy, require increasingly sophisticated chemical additives. -2- 4 Research and development expenditures were $88.5 million in 1993, $76.2 million for 1992 and $63.7 million for 1991. These amounts were equivalent to 5.8%, 5.3% and 4.7% of the respective revenues for such years. These amounts include expenditures for the performance evaluation of additive developments in engines and other types of mechanical equipment as well as expenditures for the development of specialty chemicals for industrial applications. In addition, $83.0 million, $63.6 million and $64.0 million was spent in 1993, 1992 and 1991, respectively, for technical service activities, principally for evaluation in mechanical equipment of specific lubricant formulations designed for the needs of petroleum industry customers throughout the world. The company has two research facilities at Wickliffe, Ohio, one of which is principally for lubricant additive research and the other for research in the field of other specialty chemicals. The company also maintains a mechanical testing laboratory at Wickliffe, equipped with a variety of gasoline and diesel engines and other mechanical equipment to evaluate the performance of additives for lubricants and fuels. Lubrizol has similar mechanical testing laboratories in England and Japan and, in addition, makes extensive use of independent contract research firms. Extensive field testing is also conducted through various arrangements with fleet operators and others. Liaison offices in Detroit, Michigan; Hazelwood, England; Hamburg, Germany; Tokyo, Japan; and Paris, France maintain close contact with the principal automotive and equipment manufacturers of the world and keep the company abreast of the performance requirements for Lubrizol products in the face of changing technologies. These liaison activities also serve as contacts for cooperative development and evaluation of products for future applications. Contacts with the automotive and equipment industry are important so the company may have the necessary direction and lead time to develop products for use in engines, transmissions, gear sets, and other areas of equipment that require lubricants of advanced design. PATENTS. Lubrizol owns certain United States patents relating to lubricant and fuel additives, lubricants, chemical compositions and processes, and protective coating materials and processes. It also owns similar patents in foreign countries. While such domestic and foreign patents expire from time to time, Lubrizol continues to apply for and obtain patent protection on an ongoing basis. Although the company believes that, in the aggregate, its patents constitute an important asset, it does not regard its business as being materially dependent upon any single patent or any group of related patents. The company has filed claims against Exxon Corporation and its affiliates ("Exxon") alleging infringements by Exxon of certain of the company's patents. These suits are pending in the United States and in Canada, France and the United Kingdom, and are at various stages. The international suits allege infringement of patents that correspond to a United States patent admitted as valid by Exxon in a settlement in 1988. In the suit in Canada, a determination of liability has been made by the courts against Exxon and in favor of the company, and the case has been returned to the trial court for an assessment of damages. In another patent infringement suit, instituted by Exxon in the United States, liability and -3- 5 damages determinations have been made (which are subject to appeal) against the company and in favor of Exxon. For further information regarding these cases, refer to Note 18 to the Financial Statements included in the company's 1993 Annual Report to its shareholders. ENVIRONMENTAL MATTERS. The company is subject to federal, state and local laws and regulations designed to protect the environment and limit manufacturing wastes and emissions. The company believes that as a general matter its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and the consequent financial liability to the company. Compliance with the environmental laws and regulations requires continuing management effort and expenditures by the company. Capital expenditures for environmental projects are anticipated to be $20 million in 1994, which is approximately the same as 1993. Management believes that the cost of complying with environmental laws and regulations will not have a material affect on the earnings, liquidity or competitive position of the company. The company is engaged in the handling, manufacture, use, transportation and disposal of substances that are classified as hazardous or toxic by one or more regulatory agencies. The company believes that its handling, manufacture, use, transportation and disposal of such substances generally have been in accord with environmental laws and regulations. Among other environmental laws, the company is subject to the federal "Superfund" law, under which the company has been designated as a "potentially responsible party" that may be liable for cleanup costs associated with various waste sites, some of which are on the U.S. Environmental Protection Agency Superfund priority list. The company's experience, consistent with what it believes to be the experience of others in similar cases, is that Superfund site liability tends to be apportioned among parties based upon contribution of materials to the Superfund site. Accordingly, the company measures its liability and carries out its financial reporting responsibilities with respect to Superfund sites based upon this standard, even though Superfund site liability is technically joint and several in nature. The company views the expense of remedial clean-up as a part of its product cost, and accrues for estimated environmental liabilities with regular charges to cost of sales. Management considers its environmental accrual to be adequate to provide for its portion of costs for all known environmental matters, including Superfund sites. Based upon consideration of currently available information, management does not believe liabilities for environmental matters will have a material adverse effect on the company's financial position, operating results or liquidity. -4- 6 EXHIBIT 12 THE LUBRIZOL CORPORATION AND SUBSIDIARIES Computation of Ratio of Earnings to Fixed Charges (all amounts except ratios are shown in thousands)
1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- Pretax income $119,651 $177,144 $178,140 $271,212 $137,746 Deduct earnings of less than 50% owned affiliates (net of distributed earnings) included in pretax income (2,355) 9 (3,796) (3,401) (43) Add losses of less than 50% owned affiliates included in pretax income 21,063 2,769 53 -0- 972 Add fixed charges net of capitalized interest 4,154 3,615 7,738 6,049 5,438 Add previously capitalized interest amortized during period 272 162 96 6 ------- ------- ------- ------- ------- "Earnings" $142,785 $183,699 $182,231 $273,866 $144,113 ======= ======= ======= ======= ======= Gross interest expense including capitalized interest ("Fixed Charges") $ 6,292 $ 4,981 $ 9,049 $ 7,070 $ 5,438 Ratio of earnings to fixed charges 22.7 36.9 20.1 38.7 26.5 Special adjustments: - ------------------- "Earnings" $142,785 $273,866 Plus special charges 86,303 Less Genentech gain (42,443) (101,921) Plus Agribusiness write-off 9,734 ------- ------- Adjusted "Earnings" $186,645 $181,679 ======= ======= Ratio of adjusted earnings to fixed charges 29.7 25.7
7 AGRIBUSINESS As discussed in Note 16 to the Financial Statements, on December 1, 1992, the company transferred substantially all of the Agribusiness segment, other than the specialty vegetable oil operations, to Mycogen Corporation and a joint venture partnership (Agrigenetics, L.P.) formed with Mycogen. The company's 1993 consolidated revenues, costs and expenses include specialty vegetable oil operations, but do not include amounts related to the transferred assets. As also discussed in Note 16 to the Financial Statements, on December 31, 1993, the company exchanged another portion of its investment in the partnership for additional Mycogen common stock and cash. The company's investment in Mycogen, which includes Agrigenetics, Inc. (formerly Agrigenetics, L.P.), is accounted for by the equity method, under which the company recognizes its share of the earnings or losses of such entities. The specialty vegetable oil operation retained by the company sells specialty vegetable oils and operates an oilseed crushing and refining facility. Specialty vegetable oil sales consist primarily of high oleic sunflower oil in either crude or refined forms and safflower oil. Pursuant to contractual arrangements, the company has agreed to purchase planting seed for specialty vegetable oils from Agrigenetics, Inc., which in turn is to supervise production of oilseed for crushing. The company's ability to acquire high oleic oil seed is subject to governmental, agricultural and export policies as well as the weather. The discussion below is presented only for historical purposes except for any references to specialty vegetable oils. The transferred portion of the Agribusiness operations produced and marketed planting seeds for agricultural crops. The principal seed products were hybrid seed corn, hybrid sorghum, soybeans, hybrid sunflowers, alfalfa, and cotton. Revenues from planting seeds contributed approximately 75% of the Agribusiness sales in 1992 and 68% in 1991. Substantially all of the company's planting seed, and oilseed for crushing, was produced by an established network of growers under specified planting conditions on a short-term contract basis. The company furnished parental seed to its growers, primarily from stock developed, multiplied and maintained by the company. Company personnel supervised planting, growing and harvesting. The seed products were marketed through three regional groups representing eight Agrigenetics seed brands and through an international marketing group and three overseas subsidiaries, all of which sold planting seeds. The products were marketed primarily to dealers and distributors, most of whom were farmers with long-term relationships with the company. The company sold its seeds primarily in the major farm production areas in the United States. The company markets specialty vegetable oil through its own sales organization and commissioned agents. Sales to date have been principally to food processors. -5- 8 The United States seed industry is highly competitive and fragmented. Based on revenue figures from industry sources, management believes the transferred Agribusiness operations were the sixth largest seed company in the United States. The market for vegetable oils is very large and very competitive. The company's TRISUN(R) sunflower oil sells for a premium over regular sunflower oil. TRISUN(R) oil is very high in monounsaturates, and therefore more stable and resistant to oxidation than other vegetable oils. Agribusiness revenues from the sale of planting seeds were earned principally during the first half of the calendar year, and losses from these operations were incurred in the last half as a result of continuing operating expenses with low sales. Working capital needs were also seasonal. Expenditures for inventories were made during the last half of the year, while substantial collections on sales were not received until the second and third quarters of the following year. Strategic Agribusiness activities consisted principally of internal biotechnology research and development directed toward developing new products for the agriculture, food and chemical industries. Agribusiness' research and development consisted of traditional plant breeding and strategic research in advanced plant science. Plant breeding attempts to create desirable plants by crossing selected parent plants. The genetic combinations of the crosses are then tested under field conditions to determine if desired characteristics appear. Traditional research expense of the Agribusiness segment was $7.2 million in 1992 and $7.8 million in 1991. A major portion of Agribusiness' strategic research and development was conducted at the research laboratory in Madison, Wisconsin. Strategic research was focused on specialty chemicals and food products derived from oil seed crops and on genetic improvement of specific attributes of hybrid plant varieties. Total Agribusiness strategic research expense was $7.7 million in 1992 and $8.6 million in 1991. The company has United States utility patents covering its high oleic sunflower oil and seeds. The high oleic patents are being re-examined by the U.S. Patent and Trademark Office, and such re-examination has not been resolved. If the re-examination results in the cancellation of the patents, management believes that its business will not be materially affected. GENERAL EMPLOYEES. At December 31, 1993, the company and its wholly-owned subsidiaries had 4,613 employees of which approximately 60% were in the U.S. INTERNATIONAL OPERATIONS. Financial information with respect to domestic and foreign operations is contained in Note 12 to the Financial Statements that is included in the company's 1993 Annual Report to its shareholders and is incorporated herein by reference. -6- 9 The company supplies its additive customers abroad from overseas manufacturing plants and through export from the United States. Sales and technical service offices are maintained in more than 30 countries outside the United States. As a result, the company is subject to business risks inherent in non-U.S. activities, including political uncertainty, import and export limitations, exchange controls and currency fluctuations. The company believes risks related to its foreign operations are mitigated due to the political and economic stability of the countries in which its largest foreign operations are located. While changes in the dollar value of foreign currencies will affect earnings from time to time, the longer term economic effect of these changes should not be significant given the company's net asset exposure, currency mix and pricing flexibility. Generally, the income statement effect of changes in the dollar value of foreign currencies is partially or wholly offset by the company's ability to make corresponding price changes in local currency. The company's consolidated net income will generally benefit (decline) as foreign currencies increase (decrease) in value compared to the U.S. dollar. In 1993, European currencies weakened and the Japanese yen strengthened resulting in insignificant net earnings effect. ITEM 2. PROPERTIES The general offices of the company are located in Wickliffe, Ohio. The company has various leases for general office space primarily located in Eastlake, Ohio; Houston, Texas; and London, England. The company owns three additive manufacturing plants in the United States; one located in the Cleveland, Ohio area, at Painesville, and two near Houston, Texas, at Deer Park and Bayport. Outside the United States, the company owns additive manufacturing plants in Australia, Brazil, Canada, England, France (three locations), Japan, South Africa and Singapore. All of these plants, other than Singapore, are owned in fee. In Singapore, Lubrizol owns the plant but leases the land on which the plant is located. The company owns in fee mechanical testing facilities in Wickliffe, Ohio; Hazelwood, England; and Atsugi, Japan. The company also owns an oilseed crushing and refining plant located in Culbertson, Montana. Finally, the company owns in fee a manufacturing plant in Germany that manufactures performance chemical additives for the coatings industry. Additive manufacturing plants in India, Mexico, Saudi Arabia and Venezuela are owned and operated by joint venture companies licensed by Lubrizol. Lubrizol's ownership of each of these companies ranges from 40% to 49%. Lubrizol has entered into long-term contracts for its exclusive use of major marine terminal facilities at the Port of Houston, Texas. In addition, Lubrizol has leases for storage facilities in Australia, Chile, Ecuador, Finland, France, Holland, Singapore, Spain, South Africa, Sweden, and Turkey; East Liverpool, Ohio; Los Angeles, California; St. Paul, Minnesota; Bayonne, New Jersey; and Tacoma, Washington. In some cases, the ownership or leasing of such facilities is through certain of its subsidiaries or affiliates. -7- 10 The company initiated a manufacturing rationalization plan during the third quarter of 1993. The plan will be implemented over the next several years and, through consolidation, is expected to result in a one-third reduction in the number of units used to produce intermediate products. See Note 17 to the Financial Statements included in the company's Annual Report to its shareholders. Although the company continues to maintain a capital expenditure program to support its operations, management of the company believes that its facilities are adequate for its present operations and for the foreseeable future. ITEM 3. LEGAL PROCEEDINGS The company is a party in a case brought by Exxon Corporation and its affiliates, Exxon Chemical Patents, Inc. and Exxon Research & Engineering Company, in the Southern District of Texas, Houston Division on September 19, 1989. In December 1992, the trial jury rendered a verdict that the company willfully infringed an Exxon patent pertaining to an oil soluble copper additive component. In early 1993, the court prohibited the company from making or selling any additive packages in the United States that contained this component and awarded Exxon $18.1 million for attorneys' fees. On November 18, 1993, another jury in the same case awarded Exxon $48 million in damages. The findings of infringement and validity of the Exxon patent as well as the $18.1 million attorneys' fee award are on appeal to the United States Court of Appeals for the Federal Circuit in Washington, D.C., which has jurisdiction over all patent cases. Oral argument in this appeal was heard on December 6, 1993, and a decision may be forthcoming in 1994. On February 18, 1994, acting on a request from Exxon that the damages amount be tripled, the trial court judge doubled the damages amount and awarded prejudgment interest, court costs and additional attorneys' fees to Exxon. The total amount of the judgment, including the previously awarded attorneys' fees, is $129 million. The company has the right to appeal the February 1994 damages award to the same court in Washington, D.C., as is considering the appeal of the original verdict. The company's management continues to believe that it has not infringed the Exxon patent and that the patent is invalid. Based on the advice of legal counsel, management believes that the December 1992 trial court judgment will not be upheld on appeal. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to the vote of the security holders during the three months ended December 31, 1993. -8- 11 EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth the name, age, recent business experience and certain other information relative to each person who is an executive officer of Lubrizol as of March 1, 1994.
Name Business Experience ---- ------------------- L. E. Coleman Dr. Coleman, age 63, has been Chairman of the Board since 1982. He has been Chief Executive Officer since 1978. W. G. Bares Mr. Bares, age 52, was elected President in 1982 and Chief Operating Officer in 1987. J. R. Ahern Mr. Ahern, age 47, became Controller in June 1990. From August 1987 to June 1990, he served as Vice President of Finance for Agrigenetics Company. R. A. Andreas Mr. Andreas, age 49, has been Vice President and Chief Financial Officer since June 1990. From 1983 to 1990 he was Corporate Controller. J. W. Bauer Mr. Bauer, age 40, became Vice President and General Counsel in April 1992, after serving as General Counsel from August 1991. From 1989 to 1991, he was Corporate Counsel - Litigation. J. G. Bulger Mr. Bulger, age 58, holds the position of Vice President - Sales and was named Vice President in September 1993. From 1989 to 1993, he was Senior Vice President - Sales for Lubrizol Petroleum Chemicals Company. S. A. Di Biase Dr. Di Biase, age 41, is Vice President - Research and Development and has been Vice President since September 1993. From 1990 to September 1993, he was Director of Strategic Research. During 1989 through 1990, he was Manager of Industrial Technology. G. R. Hill Dr. Hill, age 52, became Senior Vice President - Business Development in October 1993 and was named Senior Vice President in 1988.
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Name Business Experience ---- ------------------- J. E. Hodge Mr. Hodge, age 51, is Vice President - Operations and was named Vice President in September 1993. During 1989 through 1993, he was General Manager - Deer Park/Bayport Plants. K. H. Hopping Mr. Hopping, age 47, became Vice President and Secretary of the Corporation in April 1991 after serving as Senior Vice President - Marketing and Product Development for Lubrizol Petroleum Chemicals Company from 1988 to 1991. R. Y. K. Hsu Dr. Hsu, age 66, was named Counselor to the Chairman in 1992, upon reaching the mandatory retirement age for elected officers. From 1982 to 1992, he was Senior Vice President. W. R. Jones Mr. Jones, age 51, has been Treasurer since 1980. S. F. Kirk Mr. Kirk, age 44, holds the position of Vice President - Segment Management and was named Vice President in September 1993. From January 1991 to 1993, he was Senior Vice President - Marketing and Technology for Lubrizol Petroleum Chemicals Company. During 1989 through January 1991, Mr. Kirk was General Manager - North American Sales for Lubrizol Petroleum Chemicals Company. Y. Le Couedic Mr. Le Couedic, age 46, is Vice President - Management Information Systems and became Vice President in September 1993. From 1991 to 1993, he was Division Head - Corporate R&D - Administrative Services. From September 1989 to August 1991 he was Administrative Manager for the Hazelwood, U.K. Laboratory. W. D. Manning Mr. Manning, age 59, was named Assistant to the President in August 1993 and has been Senior Vice President since 1987. From 1987 to 1993, he was President of Lubrizol Petroleum Chemicals Company.
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Name Business Experience ---- ------------------- M. W. Meister Mr. Meister, age 39, is Vice President - Human Resources and was named Vice President in April 1993. From November 1992 to April 1993, he was General Manager - Human Resources. During 1989 to 1992, he was Director - Human Resources for Agrigenetics Company. D. A. Muskat Mr. Muskat, age 54, was named Operations Manager in August 1993. From September 1989 to August 1993 he was Vice President - Operations for Lubrizol Petroleum Chemicals Company. From 1987 to 1989, he was Division Head - USA Operations. R. J. Senz Mr. Senz, age 52, was named Senior Vice President - Corporate Planning and Development in August 1993 and has been Senior Vice President since 1992. From 1989 to 1992, he served as Vice President. He was President of Lubrizol Performance Products Company from 1985 to 1993. Mr. Senz is the brother-in-law of Mr. Bares. All executive officers serve at the pleasure of the Board.
-11- 14 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Common Shares of The Lubrizol Corporation are listed on the New York Stock Exchange under the symbol LZ. The number of shareholders of record of Common Shares was 6,576 as of February 10, 1994. Information relating to the recent price and dividend history of the company's Common Shares follows:
Common Share Price History ------------------------------------------- Dividends 1993 1992 Per Common Share --------------------------------------------------------------------- High Low High Low 1993 1992 --------------------------------------------------------------------- 1st quarter $31 1/4 $26 5/8 $34 $27 7/8 $ .21 $ .20 2nd quarter 34 1/2 28 7/8 34 7/8 31 .21 .20 3rd quarter 36 29 34 7/8 27 3/8 .21 .20 4th quarter 36 3/8 30 3/4 28 3/4 24 5/8 .22 .21 ------------------- $ .85 $ .81 ===================
All share and per share data have been restated to reflect the 2-for-1 stock split effected on August 31, 1992. ITEM 6. SELECTED FINANCIAL DATA. The summary of selected financial data for each of the last five years included in the Historical Summary contained on pages 44 and 45 of Lubrizol's 1993 Annual Report to its shareholders is incorporated herein by reference. Other income for 1993 includes $42.4 million for the gain on sale of Genentech (see Note 7) and a special charge of $86.3 million (see Note 17). Included in other income for 1990 is $101.9 million for the gain on sale of Genentech. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Management's Discussion and Analysis of Financial Condition and Results of Operations contained on pages 25 through 29, inclusive, of Lubrizol's 1993 Annual Report to its shareholders is incorporated herein by reference. -12- 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of Lubrizol and its subsidiaries, together with the independent auditors' report relating thereto, contained on pages 30 through 42, inclusive, of Lubrizol's 1993 Annual Report to its shareholders, and the Quarterly Financial Data (Unaudited) contained on page 43 of such 1993 Annual Report are incorporated herein by reference. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information relating to directors of Lubrizol contained under the heading "Election of Directors" on pages 1 to 5, inclusive, of Lubrizol's Proxy Statement dated March 16, 1994, is incorporated herein by reference. Information relative to executive officers of Lubrizol is contained under Part I of this Annual Report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION. The information relating to executive compensation contained under the headings "Committees and Compensation of the Board of Directors" on page 6, "Executive Compensation" on pages 8 through 11, inclusive, and under "Employee and Executive Officer Benefit Plans - Pension Plans" and "- Executive Agreements" on pages 15, 16, and 17 of Lubrizol's Proxy Statement dated March 16, 1994, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information relating to security ownership set forth under the heading "Security Ownership of Directors and Management" on page 7 of Lubrizol's Proxy Statement dated March 16, 1994, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Not applicable. -13- 16 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) Documents filed as part of this Annual Report: 1. The following consolidated financial statements of The Lubrizol Corporation and its subsidiaries, together with the independent auditors' report relating thereto, contained on pages 30 through 43, inclusive, of Lubrizol's 1993 Annual Report to its shareholders and incorporated herein by reference: Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991 Consolidated Balance Sheets at December 31, 1993 and 1992 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 Notes to Financial Statements Independent Auditors' Report Quarterly Financial Data (Unaudited) 2. Schedules I Other Investments V Property, Plant and Equipment VI Accumulated Depreciation of Property, Plant and Equipment IX Short-Term Borrowings X Supplementary Income Statement Information Schedules other than those listed above are omitted because of the absence of conditions under which they are required or because the required information is included in the financial statements and notes thereto. 3. Exhibits (3)(a) Amended Articles of Incorporation of The Lubrizol Corporation, as adopted September 23, 1991. -14- 17 (3)(b) Regulations of The Lubrizol Corporation, as amended effective April 27, 1992. (4)(a) Article Fourth of Amended Articles of Incorporation. (4)(b) The company agrees, upon request, to furnish to the Securities and Exchange Commission copies of financial documents evidencing long-term debt, which debt does not exceed 10% of the total assets of the company and its subsidiaries on a consolidated basis. (4)(c) Rights Agreement between The Lubrizol Corporation and National City Bank dated October 6, 1987. (4)(d) Amendment to Rights Agreement dated October 6, 1987, between The Lubrizol Corporation and National City Bank, effective October 24, 1988. (4)(e) Special Rights Agreement between The Lubrizol Corporation and National City Bank dated October 31, 1988. (4)(f) Amendment No. 2 to Rights Agreement dated October 6, 1987, as amended, between The Lubrizol Corporation and National City Bank, effective October 28, 1991. (4)(g) Amendment No. 1 to Special Rights Agreement dated October 31, 1988, between The Lubrizol Corporation and National City Bank, effective October 28, 1991. (10)(a)* The Lubrizol Corporation 1975 Employee Stock Option Plan, as amended. (10)(b)* The Lubrizol Corporation 1985 Employee Stock Option Plan, as amended. (10)(c)* The Lubrizol Corporation 1981 Key Employee Incentive Stock Option Plan. (10)(d)* The Lubrizol Corporation Deferred Compensation Plan for Directors. (10)(e)* Form of Employment Agreement between The Lubrizol Corporation and certain of its senior executive officers. -15- 18 (10)(f)* The Lubrizol Corporation Excess Defined Benefit Plan, as amended. (10)(g)* The Lubrizol Corporation Excess Defined Contribution Plan, as amended. (10)(h)* The Lubrizol Corporation Variable Award Plan. (10)(i)* The Lubrizol Corporation Executive Death Benefit Plan, as amended. (10)(j)* Amendment No. 1 to the Amended and Restated Severance Agreement between The Lubrizol Corporation and Dr. R.Y.K. Hsu. (Reference is made to Exhibit (10)(k) to The Lubrizol Corporation's Annual Report on Form 10-K for the year ended December 31, 1990, which Exhibit is incorporated herein by reference.) (10)(k)* Employment and Consulting Agreement dated February 23, 1987, between The Lubrizol Corporation and Dr. R.Y.K. Hsu with Amendment dated December 28, 1989. (Reference is made to Exhibit (10)(l) to The Lubrizol Corporation's Annual Report on Form 10-K for the year ended December 31, 1990, which Exhibit is incorporated herein by reference.) (10)(l)* The Lubrizol Corporation 1991 Stock Incentive Plan, as amended. (10)(m)* The Lubrizol Corporation Deferred Stock Compensation Plan for Outside Directors. (10)(n)* Amendment to Employment and Consulting Agreement dated October 1, 1992, between The Lubrizol Corporation and Dr. R.Y.K. Hsu. (Reference is made to Exhibit (10)(q) to The Lubrizol Corporation's Annual Report on Form 10-K for the year ended December 31, 1992, which Exhibit is incorporated herein by reference.) (10)(o)* Early Retirement and General Release Agreement dated April 14, 1993, between The Lubrizol Corporation and William D. Manning. (10)(p)* The Lubrizol Corporation Officers' Supplemental Retirement Plan (11) Statement setting forth computation of per share earnings. -16- 19 (12) Computation of Ratio of Earnings to Fixed Charges. (13) The following portions of The Lubrizol Corporation 1993 Annual Report to its shareholders: Pages 25-29 Management's Discussion and Analysis of Financial Condition and Results of Operations Page 30 Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991 Page 31 Consolidated Balance Sheets at December 31, 1993 and 1992 Page 32 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 Page 33 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 Pages 34-41 Notes to Financial Statements Page 42 Independent Auditors' Report Page 43 Quarterly Financial Data (Unaudited) Pages 44-45 Historical Summary (21) List of Subsidiaries of The Lubrizol Corporation. (23) Consent of Independent Auditors. *Indicates management contract or compensatory plan or arrangement. (b) The Lubrizol Corporation filed a Current Report on Form 8-K, reporting under "Item 5 - Other Events," a damage award granted to Exxon Corporation on November 18, 1993, against the company. -17- 20 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on March 28, 1994, on its behalf by the undersigned, thereunto duly authorized. THE LUBRIZOL CORPORATION BY /s/L. E. Coleman --------------------------------- L. E. Coleman, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on March 28, 1994, by the following persons on behalf of the Registrant and in the capacities indicated. /s/L. E. Coleman Chairman of the Board and Chief - ------------------------------- Executive Officer and Director L. E. Coleman (Principal Executive Officer) /s/R. A. Andreas Vice President and Chief Financial - ------------------------------- Officer (Principal Financial Officer) R. A. Andreas /s/G. P. Lieb Controller, Accounting and Financial - ------------------------------- Reporting (Principal Accounting G. P. Lieb Officer) /s/W. G. Bares President, Chief Operating Officer - ------------------------------- and Director W. G. Bares /s/Edward F. Bell Director - ------------------------------- Edward F. Bell /s/Peggy G. Elliott Director - ------------------------------- Peggy G. Elliott /s/David H. Hoag Director - ------------------------------ David H. Hoag /s/Thomas C. MacAvoy Director - ------------------------------- Thomas C. MacAvoy /s/William P. Madar Director - ------------------------------- William P. Madar /s/Richard A. Miller Director - ------------------------------- Richard A. Miller /s/Ronald A. Mitsch Director - ------------------------------- Ronald A. Mitsch /s/Renold D. Thompson Director - ------------------------------- Renold D. Thompson /s/Karl E. Ware Director - ------------------------------- Karl E. Ware 21 INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Directors of The Lubrizol Corporation: We have audited the consolidated financial statements of The Lubrizol Corporation as of December 31, 1993 and 1992 and for each of the three years in the period ended December 31, 1993, and have issued our report thereon dated February 18, 1994; such consolidated financial statements and report are included in your 1993 Annual Report to shareholders and are incorporated herein by reference. Our audits also included the financial statement schedules of The Lubrizol Corporation, listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/Deloitte & Touche - ---------------------------- DELOITTE & TOUCHE Cleveland, Ohio February 18, 1994 S-1 22 SCHEDULE I THE LUBRIZOL CORPORATION AND SUBSIDIARIES OTHER INVESTMENTS December 31, 1993 (In Thousands)
Balance at Number of Market End of Company Shares(A) Cost(A) Value(A) Period - ------------------------------ --------- ------- -------- ---------- Investments at Equity: Mycogen Corporation (common stock) 6,134 $32,241 $ 62,874 $32,241 Lubrizol India, Ltd. 9,874 Agrigenetics, Inc. 9,092 Other 8,702 ------- Total $59,909 ======= Investments at Cost: Mycogen Corporation (preferred stock) $28,540 Catalytica, Inc. 2,341 $8,979 $ 18,144 8,979 Genentech, Inc. (common stock) 2,000 $4,094 $101,000 4,094 Other 1,724 ------- Total $43,337 ======= NOTE: (A) Where number of shares, cost and market value are not shown, companies (or in the case of Mycogen Corporation, shares of its preferred stock) were not publicly traded.
S-2 23 SCHEDULE V THE LUBRIZOL CORPORATION AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT (In Thousands of Dollars)
Balance at Balance at Beginning Additions Retire- Other End of of Period at Cost ments Changes Period ---------- --------- ------- ------- --------- Year Ended December 31, 1993 Land & improvements $ 75,997 $ 5,772 $ 176 $ (924) $ 80,669 Buildings & improvements 153,232 18,860 1,071 10,597 181,618 Machinery & equipment 659,574 73,250 12,011 6,596 727,409 Construction in progress 69,889 29,973 (452) 99,410 -------- -------- ------- -------- ---------- Total $958,692 $127,855 $13,258 $ 15,817(A) $1,089,106 ======== ======== ======= ======== ========== Year Ended December 31, 1992 Land & improvements $ 75,348 $ 5,102 $ 22 $ (4,431) $ 75,997 Buildings & improvements 168,186 14,908 734 (29,128) 153,232 Machinery & equipment 658,966 63,337 10,216 (52,513) 659,574 Construction in progress 59,761 12,467 303 (2,036) 69,889 -------- -------- ------- -------- ---------- Total $962,261 $ 95,814 $11,275 $(88,108)(B) $ 958,692 ======== ======== ======= ======== ========== Year Ended December 31, 1991 Land & improvements $ 70,799 $ 4,628 $ 671 $ 592 $ 75,348 Buildings & improvements 158,451 8,680 835 1,890 168,186 Machinery & equipment 604,929 61,443 8,322 916 658,966 Construction in progress 52,817 7,647 (703) 59,761 -------- -------- ------- -------- ---------- Total $886,996 $ 82,398 $ 9,828 $ 2,695(B) $ 962,261 ======== ======== ======= ======== ========== NOTE: (A) Translation adjustment; $1.0 million land and improvements, $9.7 buildings and improvements, and $12.9 machinery and equipment from purchase of Langer & Company G.m.b.H.; $(1.4) land and improvements as a result of the special charge (see Note 17 to the Financial Statements). (B) Translation adjustment and in 1992, $(3.1) million land and improvements, $(25.5) buildings and improvements, $(34.5) machinery and equipment and $(1.0) construction in progress from transfer of certain Agribusiness assets.
S-3 24 SCHEDULE VI THE LUBRIZOL CORPORATION AND SUBSIDIARIES ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT (Note A) (In Thousands of Dollars)
Additions Balance at Charged to Balance at Beginning Cost and Retire- Other End of of Period Expenses ments Changes Period --------- ---------- ------- ------- ---------- Year Ended December 31, 1993 Land & improvements $ 35,508 $ 2,768 $ 92 $ (244) $ 37,940 Buildings & improvements 70,889 6,635 955 773 77,342 Machinery & equipment 476,708 50,192 11,796 21,085 536,189 -------- ------- ------- ------- -------- Total $583,105 $59,595 $12,843 $21,614 (B) $651,471 ======== ======= ======= ======= ======== Year Ended December 31, 1992 Land & improvements $ 33,804 $ 2,484 $ 5 $ (775) $ 35,508 Buildings & improvements 77,143 6,686 533 (12,407) 70,889 Machinery & equipment 471,284 49,265 9,288 (34,553) 476,708 -------- ------- ------- -------- -------- Total $582,231 $58,435 $ 9,826 $(47,735)(C) $583,105 ======== ======= ======= ======== ======== Year Ended December 31, 1991 Land & improvements $ 31,695 $ 2,327 $ 149 $ (69) $ 33,804 Buildings & improvements 70,278 6,457 779 1,187 77,143 Machinery & equipment 431,472 45,830 7,689 1,671 471,284 -------- ------- ------- -------- -------- Total $533,445 $54,614 $ 8,617 $ 2,789(C) $582,231 ======== ======= ======= ======== ======== NOTES: (A) Depreciation is computed using the straight-line, sum-of-the-years digits, and declining balance methods, at rates based on the estimated useful lives of the assets. A general range of the estimated useful lives follows: Land improvements. . . . . . . . . . 8 to 25 years Buildings and improvements . . . . . 5 to 65 years Machinery and equipment. . . . . . . 3 to 20 years (B) Translation adjustment and $25.3 million machinery and equipment as a result of the special charge (see Note 17 to the Financial Statements). (C) Translation adjustment and in 1992, $(0.3) million land and improvements, $(11.2) buildings and improvements and $(24.1) machinery and equipment from transfer of certain Agribusiness assets.
S-4 25 SCHEDULE IX THE LUBRIZOL CORPORATION AND SUBSIDIARIES SHORT-TERM BORROWINGS Years Ended December 31, 1993, 1992 and 1991 (In Thousands of Dollars)
Weighted Maximum Weighted Category of Average Amount Average Aggregate Interest Outstanding Average Interest Short-Term Balance at Rate at at Any Daily Rate for Borrowings End of Year End of Year Month-End Balance the Year (A) - ---------------- ----------- ----------- ----------- ------- ------------ 1993 Commercial Paper $ 4,400 3.3% $28,500 $15,277 3.2% Bank Borrowings 10,190 6.1% $32,300 $16,862 5.4% ------- $14,590 ======= 1992 Bank Borrowings $25,140 6.9% $27,071 $11,465 8.1% ------- $25,140 ======= 1991 Bank Borrowings $32,801 8.7% $54,298 $30,310 8.6% ------- $32,801 ======= NOTE: (A) The weighted average interest rates were computed by relating interest expense for the year to average daily balances.
S-5 26 SCHEDULE X THE LUBRIZOL CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION (In Thousands of Dollars)
Charged to Cost Item(A) and Expenses - ----------------------------- --------------------------------------------- For the Year Ended December 31 --------------------------------------------- 1993 1992 1991 ------- ------ ------ Maintenance and repairs $57,170 $54,712 $51,969 ======= ======= ======= Depreciation and amortization of intangible assets $61,674 $62,013 $59,473 ======= ======= ======= Taxes, other than payroll and income taxes $19,281 $18,352 $16,186 ======= ======= ======= NOTE: (A) Amounts for royalties and advertising costs are not presented as such amounts are less than 1% of revenues.
S-6 27 EXHIBIT INDEX (3)(a) Amended Articles of Incorporation of The Lubrizol Corporation, as adopted September 23, 1991. (3)(b) Regulations of The Lubrizol Corporation, as amended effective April 27, 1992. (4)(a) Article Fourth of Amended Articles of Incorporation. (4)(b) The company agrees, upon request, to furnish to the Securities and Exchange Commission copies of financial documents evidencing long-term debt, which debt does not exceed 10% of the total assets of the company and its subsidiaries on a consolidated basis. (4)(c) Rights Agreement between The Lubrizol Corporation and National City Bank dated October 6, 1987. (4)(d) Amendment to Rights Agreement dated October 6, 1987, between The Lubrizol Corporation and National City Bank, effective October 24, 1988. (4)(e) Special Rights Agreement between The Lubrizol Corporation and National City Bank dated October 31, 1988. (4)(f) Amendment No. 2 to Rights Agreement dated October 6, 1987, as amended, between The Lubrizol Corporation and National City Bank, effective October 28, 1991. (4)(g) Amendment No. 1 to Special Rights Agreement dated October 31, 1988, between The Lubrizol Corporation and National City Bank, effective October 28, 1991. (10)(a) The Lubrizol Corporation 1975 Employee Stock Option Plan, as amended. (10)(b) The Lubrizol Corporation 1985 Employee Stock Option Plan, as amended. (10)(c) The Lubrizol Corporation 1981 Key Employee Incentive Stock Option Plan. (10)(d) The Lubrizol Corporation Deferred Compensation Plan for Directors. (10)(e) Form of Employment Agreement between The Lubrizol Corporation and certain of its senior executive officers. (10)(f) The Lubrizol Corporation Excess Defined Benefit Plan, as amended. (10)(g) The Lubrizol Corporation Excess Defined Contribution Plan, as amended. (10)(h) The Lubrizol Corporation Variable Award Plan. (10)(i) The Lubrizol Corporation Executive Death Benefit Plan, as amended. (10)(j) Amendment No. 1 to the Amended and Restated Severance Agreement between The Lubrizol Corporation and Dr. R.Y.K. Hsu. (Reference is made to Exhibit (10)(k) to The Lubrizol Corporation's Annual Report on Form 10-K for the year ended December 31, 1990, which Exhibit is incorporated herein by reference.) 28 (10)(k) Employment and Consulting Agreement dated February 23, 1987, between The Lubrizol Corporation and Dr. R.Y.K. Hsu with Amendment dated December 28, 1989. (Reference is made to Exhibit (10)(l) to The Lubrizol Corporation's Annual Report on Form 10-K for the year ended December 31, 1990, which Exhibit is incorporated herein by reference.) (10)(l) The Lubrizol Corporation 1991 Stock Incentive Plan, as amended. (10)(m) The Lubrizol Corporation Deferred Stock Compensation Plan for Outside Directors. (10)(n) Amendment to Employment and Consulting Agreement dated October 1, 1992, between The Lubrizol Corporation and Dr. R.Y.K. Hsu. (Reference is made to Exhibit (10)(q) to The Lubrizol Corporation's Annual Report on Form 10-K for the year ended December 31, 1992, which Exhibit is incorporated herein by reference.) (10)(o) Early Retirement and General Release Agreement dated April 14, 1993, between The Lubrizol Corporation and William D. Manning. (10)(p) The Lubrizol Corporation Officers' Supplemental Retirement Plan. (11) Statement setting forth computation of per share earnings. (12) Computation of Ratio of Earnings to Fixed Charges. (13) The following portions of The Lubrizol Corporation 1993 Annual Report to its shareholders: Pages 25-29 Management's Discussion and Analysis of Financial Condition and Results of Operations Page 30 Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991 Page 31 Consolidated Balance Sheets at December 31, 1993 and 1992 Page 32 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 Page 33 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 Pages 34-41 Notes to Financial Statements Page 42 Independent Auditors' Report Page 43 Quarterly Financial Data (Unaudited) Pages 44-45 Historical Summary (21) List of Subsidiaries of The Lubrizol Corporation. (23) Consent of Independent Auditors. EX-3.A 2 LUBRIZOL EXHIBIT 3.A 1 EXHIBIT (3)(a) CERTIFICATE OF ADOPTION OF AMENDED ARTICLES OF INCORPORATION OF THE LUBRIZOL CORPORATION L.E. Coleman, Chairman of the Board of Directors, and K.H. Hopping, Vice President and Secretary, of The Lubrizol Corporation, an Ohio corporation (the "Corporation") with its principal place of business located in Wickliffe, Ohio, do hereby certify that a meeting of the Board of Directors of the Corporation was duly called and held on September 23, 1991, at which meeting a quorum of the directors of the Corporation was present, and that by the affirmative vote of the majority of such directors the following resolution was adopted for the purpose of consolidating the existing Amended Articles of Incorporation and the amendments to the existing Amended Articles of Incorporation that previously have been adopted by the shareholders of the Corporation and filed with the Secretary of State of Ohio (such consolidation being permitted by Section 1701.72(B) of the Ohio Revised Code): RESOLVED, that the Amended Articles of Incorporation attached hereto as Exhibit A be, and they hereby are, adopted to supersede the existing Amended Articles of Incorporation of the Corporation. IN WITNESS WHEREOF, L.E. Coleman, Chairman of the Board of Directors, and K.H. Hopping, Vice President and Secretary, of The Lubrizol Corporation, acting for and on behalf of the Corporation, have hereunto subscribed their names this 23rd day of September, 1991. /s/ [L.E. Coleman] L.E. Coleman Chairman of the Board /s/ [K.H. Hopping] K.H. Hopping Vice President and Secretary 2 3380P Exhibit A AMENDED 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. 3 2 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 4 3 (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. 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 5 4 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 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 6 5 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 7 6 full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon outstanding shares of Serial 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 8 7 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 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 9 8 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. 10 9 (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 11 10 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. 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 12 11 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 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. 13 12 (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 14 13 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 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 or 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 to 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 15 14 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 payments shall have been 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: 16 15 (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 17 16 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 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 18 17 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 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 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 19 18 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 other than 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) or the Series A Stock, and no shares of Series A Stock not issuable pursuant to and in accordance with the Rights Agreement, may be issued by the Corporation. (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 (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. 20 19 (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, of 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 21 20 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 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 22 21 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 Personal 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 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. 23 22 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 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 24 23 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. 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 Corporation's outstanding Voting Stock excluding the Voting Stock owned by the Related Party involved in the Related Party Transaction. 25 24 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. 26 25 (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 (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 27 26 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. 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 28 27 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 29 28 (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 30 29 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. 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: No person shall make a Control Share Acquisition without first obtaining the prior authorization of the Corporation's shareholders at a special meeting of shareholders called by the Board of Directors in accordance with this Article Ninth. Section 1. PROCEDURE. Any Person who proposes to make a Control Share Acquisition shall deliver a notice ("Notice") to the Corporation at its principal place of business that sets forth all of the following information: (A) The identity of the Person who is giving the Notice; 31 30 (B) A Statement that the Notice is given pursuant to this Article Ninth. (C) The number and class of shares of the Corporation owned, directly or indirectly, by the Person who gives the Notice; (D) The range of voting power (as specified in Section 6(B)(1)) under which the proposed Control Share Acquisition would, if consummated, fall; (E) A description in reasonable detail of the terms of the proposed Control Share Acquisition; and (F) Representatives, supported by reasonable information, that the proposed Control Share Acquisition would be consummated if shareholder approval is obtained and, if consummated, would not be contrary to law and that the Person who is giving the Notice has the financial capacity to make the proposed Control Share Acquisition. Section 2. CALL OF SPECIAL MEETING OF SHAREHOLDERS. The Board of Directors of the Corporation shall, within ten (10) days after receipt by the Corporation of a Notice that complies with Section 1, call a special meeting of shareholders to be held not later than fifty (50) days after receipt of the Notice by the Corporation, unless the Person who delivered the Notice agrees to a later date, to consider the proposed Control Share Acquisition; provided that the Board of Directors shall have no obligation to call such a meeting if they make a determination with ten (10) days after receipt of the Notice that the proposed Control Share Acquisition could not be consummated for financial or legal reasons. The Board of Directors may adjourn such special meeting of shareholders if prior to such meeting the Corporation has received a Notice from any other Person and the Board of Directors has determined that the Control Share Acquisition proposed by such other Person, or a merger, consolidation or sale of assets of the Corporation, should be presented to shareholders at an adjourned meeting or at a special meeting held at a later date. For purposes of making a determination that a special meeting of shareholders should not be allowed pursuant to this Section 2, no such determination shall be deemed void or voidable with respect to the Corporation merely because one or more of its directors or officers who participated in deliberations regarding such determination may be deemed to be other than disinterested, if in any such case the material 32 31 facts of the relationship giving rise to a basis for self-interest are known to the directors and the directors, in good faith reasonably justified by the facts, make such determination by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors constitute less than a quorum. For purposes of this paragraph, "disinterested directors" shall mean directors whose material contacts with the Corporation are limited principally to activities as a director or shareholder. Persons who have substantial, recurring business or professional contacts with the Corporation shall not be deemed to be "disinterested directors" for purposes of this provision. A director shall not be deemed to be other than a "disinterested director" merely because he would no longer be a director if the proposed Control Share Acquisition were approved and consummated. Section 3. NOTICE OF SPECIAL MEETING. The Corporation shall, as promptly as practicable, give notice of the special meeting of shareholders called pursuant to Section 2 to all shareholders of record as of the record date set for such meeting. Such notice shall include or be accompanied by a copy of the Notice and by a statement of the Corporation, authorized by the Board of Directors, of its position or recommendation, or that it is taking no position or making no recommendation, with respect to the proposed Control Share Acquisition. Section 4. REQUIREMENTS FOR APPROVAL. The Person who delivered the Notice may make the proposed Control Share Acquisition if both of the following occur: (A) The Shareholders of the Corporation authorize such acquisition at the special meeting of shareholders called pursuant to Section 2, at which meeting a quorum is present, by the affirmative vote of a majority of the Voting Stock represented at such meeting in person or by proxy and by a majority of the portion of such Voting Stock represented at such meeting in person or by proxy excluding the votes of Interested Shares. A quorum shall be deemed to be present at such special meeting if at least a majority of the issued and outstanding Voting Stock, and a majority of such Voting Stock excluding Interested Shares, are represented at such meeting in person or by proxy. (B) Such acquisition is consummated, in accordance with the terms so authorized, not later 33 32 than three hundred sixty (360) days following shareholder authorization of the Control Share Acquisition. Section 5. VIOLATIONS OF RESTRICTION. Any Voting Stock issued or transferred to any Person in violation of this Article Ninth shall hereinafter be called "Excess Shares." In the event that any Person acquires Excess Shares, then, in addition to any other remedies which the Corporation may have at law or in equity as a result of such acquisition, the Corporation shall have the right to redeem, or to deny voting rights or other shareholder rights appurtenant to such Excess Shares. The Corporation additionally shall have the right to regard the Person who holds Excess Shares as having acted as an agent on behalf of the Corporation in acquiring the Excess Shares and to hold such Excess Shares on behalf of the Corporation. As the equivalent of treasury securities for such purposes, the Excess Shares shall not be entitled to any voting rights, shall not be considered to be outstanding for quorum or voting purposes, and the Person who holds Excess Shares shall not be entitled to receive dividends, interest or any other distribution with respect to the Excess Shares. Any Person who receives dividends, interest or any other distribution with respect to Excess Shares shall hold the same as agent for the Corporation and, following a permitted transfer, for the transferee thereof. Notwithstanding the foregoing, any Person who holds Excess Shares may transfer the same (together with any distributions thereon) to any Person who, following such transfer, would not own shares in violation of this Article Ninth. Upon such permitted transfer, the Corporation shall pay or distribute to the transferee any distributions on the Excess Shares not previously paid or distributed. Section 6. DEFINITIONS. As used in this Article Ninth: (A) "Person" includes, without limitation, an individual, a corporation (whether nonprofit or for profit), a partnership, an unincorporated society or association, and two or more persons having a joint or common interest. (B)(1) "Control Share Acquisition" means the acquisition, directly or indirectly, by any Person, of shares of the Corporation that, when added to all other shares of the Corporation in respect of which such Person, directly or indirectly, may exercise or direct the exercise of voting power as provided in this Section 6(B)(1), would entitle such Person, immediately after such acquisition, directly or indirectly, to exercise or direct the exercise of 34 33 voting power of the Corporation in the election of directors within any of the following ranges of such voting power: (a) One-fifth or more but less than one-third of such voting power; (b) One-third or more but less than a majority of such voting power; or (c) A majority or more of such voting power. A bank, broker, nominee, trustee, or other Person who acquires shares in the ordinary course of business for the benefit of others in good faith and not for the purpose of circumventing this Article Ninth shall, however, be deemed to have voting power only of shares in respect of which such Person would be able to exercise or direct the exercise of votes at a special meeting of shareholders called pursuant to Section 2 of this Article Ninth without further instruction from others. For purposes of this Article Ninth, the acquisition of securities immediately convertible into shares of the Corporation with voting power in the election of directors shall be treated as an acquisition of such shares. (2) The acquisition of any shares of the Corporation does not constitute a Control Share Acquisition for the purposes of this Article Ninth if the acquisition is consummated in any of the following circumstances: (a) By underwriters in good faith and not for the purpose of circumventing this Article Ninth in connection with an offering to the public of securities of the Corporation; (b) By bequest or inheritance, by operation of law upon the death of any individual, or by any other transfer without valuable consideration, including a gift that is made in good faith and not for the purpose of circumventing this Article Ninth; (c) Pursuant to the satisfaction of a pledge or other security interest created in good faith and not for the purpose of circumventing this Article Ninth; 35 34 (d) Pursuant to a merger, consolidation, combination or majority share acquisition adopted or authorized by shareholder vote in compliance with the provisions of Article Seventh of these Articles of Incorporation and Section 1701.78 or 1701.83 of the Ohio Revised Code if the Corporation is the surviving or new corporation in the merger or consolidation or is the acquiring corporation in the combination or majority share acquisition; (e) Under such circumstances that the acquisition does not result in the Person acquiring shares of the Corporation being entitled, immediately thereafter and for the first time, directly or indirectly, to exercise or direct the exercise of voting power of the Corporation in the election of directors within the range of one-fifth or more but less than one-third of such voting power, or within any of the ranges of voting power specified in Section 6(B)(1)(a), (b) or (c) which is higher than the range of voting power applicable to such Person immediately prior to such acquisition; (f) Prior to [date of the Merger]; or (g) Pursuant to a contract existing prior to [date of the Merger]. The acquisition by any Person of shares of the Corporation in a manner described under this Section 6(B)(2) shall be deemed to be a Control Share Acquisition authorized pursuant to this Article Ninth within the range of voting power specified in Section 6(B)(1)(a), (b) or (c) that such Person is entitled to exercise after such acquisition, provided that, in the case of an acquisition in a manner described under Section 6(B)(2)(b) or (c), the transferor of shares to such Person had previously obtained any authorization of shareholders required under this Article Ninth in connection with such transferor's acquisition of shares of the Corporation. (3) The acquisition of shares of the Corporation in good faith and not for the purpose of circumventing this Article Ninth from any Person whose Control Share Acquisition had previously been authorized by shareholders in compliance with this Article Ninth, or from any Person whose previous acquisition of shares would have constituted a Control Share Acquisition but for Section 6(B)(2), does not constitute a Control 36 35 Share Acquisition for the purpose of this Article Ninth unless such acquisition entitles any Person, directly or indirectly, alone or with others, to exercise or direct the exercise of voting power of the Corporation in the election of directors in excess of the range of such voting power authorized pursuant to this Article Ninth, or deemed to be so authorized under Section 6(B)(2). (C) "Interested Shares" means Voting Stock with respect to which any of the following persons may exercise or direct the exercise of the voting power: (1) any Person whose Notice prompted the calling of a special meeting of shareholders pursuant to Section 2; (2) any officer of the Corporation elected or appointed by the directors of the Corporation; and (3) any employee of the Corporation who is also a director of the Corporation. (D) "Voting Stock" means all securities of the Corporation entitled to vote generally in the election of directors, and, for purposes of Section 5 of this Article Ninth, shall mean securities of the Corporation immediately convertible into securities entitled to vote generally in the election of directors. Section 7. PROXIES. No proxy appointed for or in connection with the Shareholder authorization of a Control Share Acquisition pursuant to this Article Ninth is valid if it provides that it is irrevocable. No such proxy is valid unless it is sought, appointed, and received both: (A) In accordance with all applicable requirements of law; and (B) Separate and apart from the sale or purchase, contract or tender for sale or purchase, or request or invitation for tender for sale or purchase, of shares of the Corporation. Section 8. REVOCABILITY OF PROXIES. Proxies appointed for or in connection with the shareholder authorization of a Control Share Acquisition pursuant to this Article Ninth shall be revocable at all times prior to the 37 36 obtaining of such shareholder authorization, whether or not coupled with an interest. Section 9. AMENDMENTS. Notwithstanding any other provisions of these Articles of Incorporation or the Regulations of the Corporation or any provision of law that 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, the Articles of Incorporation or the Regulations of the Corporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the Voting Stock, voting as a single class, shall be required to alter, amend or repeal this Article Ninth or adopt any provisions in the Articles of Incorporation or Regulations of the Corporation which are inconsistent with the provisions of this Article Ninth. Section 10. LEGEND ON SHARE CERTIFICATES. Each certificate representing shares of the Corporation's capital stock shall contain the following legend: Transfer of the shares represented by this Certificate is subject to the provisions of Article Ninth of the Corporation's Articles of Incorporation as the same may be in effect from time to time. Upon written request delivered to the Secretary of the Corporation at its principal place of business, the Corporation will mail to the holder of this Certificate a copy of such provisions without charge within five (5) days after receipt of written request therefor. By accepting this Certificate the holder hereof acknowledges that it is accepting same subject to the provisions of said Article Ninth as the same may be in effect from time to time and covenants with the Corporation and each shareholder thereof from time to time to comply with the provisions of said Article Ninth as the same may be in effect from time to time. 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. 38 37 ELEVENTH: These Amended Articles of Incorporation supersede the existing Amended Articles of Incorporation of the Corporation. EX-3.B 3 EXHIBIT 3.B 1 EXHIBIT (3)(b) REGULATIONS OF THE LUBRIZOL CORPORATION 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. Special meetings of the shareholders may be called at any time by the Chairman of the Board, the Vice Chairman of the Board, the President, or by a majority of the directors acting with or without a meeting, or by shareholders holding fifty percent (50%) or more of the outstanding shares entitled to vote thereat. Such meetings may be held within or without the State of Ohio at such time and place as may be specified in the notice thereof. Section 3. Notice of Meetings. 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. 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. 2 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. Business to be Conducted at Meetings. At any meeting of shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a meeting of shareholders, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Directors, otherwise properly brought before the meeting by or at the direction of the directors or otherwise properly brought before the meeting by a shareholder. For business to be properly brought before a meeting of shareholders by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Company. 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 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 the shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the fifteenth (15th) day following the earlier of the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (ii) the name and record address of the shareholder proposing such business; (iii) the class and number of shares of the Company which are beneficially owned by such shareholder; and (iv) any material interest of such shareholder in such business. Notwithstanding anything in the Regulations of the Company to the contrary, no business shall be conducted at a meeting of shareholders except in accordance with the procedures set forth in this Section 6. 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. - 2 - 3 DIRECTORS Section 7. Number. The number of directors may be determined by the vote of the holders of a majority of the shares of the Company entitled to vote for the election of directors that are represented at any annual meeting or special meeting called for the purpose of electing directors or by resolution adopted by affirmative vote of a majority of the directors then in office, provided that the number of directors shall in no event be fewer than nine (9) nor more than thirteen (13). When so fixed, such number shall continue to be the authorized number of directors until changed by the shareholders or directors by vote as aforesaid. Section 8. Nominations. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election as directors of the Company may be made at a meeting of shareholders by or at the direction of the directors, by any nominating committee or person appointed by the directors, or by any shareholder of the Company entitled to vote for the election of directors who complies with the notice procedures set forth in this Section 8. Nominations by shareholders shall be made pursuant to timely notice in writing to the Secretary of the Company. To be timely, a shareholder's notice shall 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 to be timely must be so received not later than the close of business on the fifteenth (15th) day following the earlier of the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such shareholder's notice shall set forth: (a) as to each person who is not an incumbent director whom the shareholder proposes to nominate for election as a director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Company which are beneficially owned by such person, and (iv) any other information relating to such person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934 (or any comparable successor rule or regulation under such Act); and (b) as to the shareholder giving the notice (i) the name and record address of such shareholder, and (ii) the class and number of shares of the Company which are beneficially owned by such shareholder. Such notice shall be accompanied by the written consent of each proposed nominee to serve as a director of the Company, if elected. No person shall be eligible for election as a director of the Company unless nominated in accordance with the procedures set forth in this Section 8. The Chairman 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 Section 8, and if he should so determine the defective nomination shall be disregarded. - 3 - 4 Section 9. Classification, Election and Term of Office of Directors. The directors shall be divided into three classes, as nearly equal in number as possible. At the 1985 Annual Meeting of Shareholders, one class of directors shall be elected for a one-year term, one class for a two-year term and one class for a three-year term. At each succeeding annual meeting of shareholders, successors to the class of directors whose term expires in that year will be elected for a three-year term. At such time as the shareholders or directors fix or change the total number of directors comprising the Board of directors, they shall also fix, or determine the adjustment to be made to, the number of directors comprising the three classes of directors, provided, however, that no reduction in the number of directors shall of itself result in the removal of or shorten the term of any incumbent director. In the case of any increase in the number of directors of any class, any additional directors elected to such class shall hold office for a term which shall coincide with the term of such class. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, or removal from office. Election of directors shall be by ballot whenever requested by any person entitled to vote at the meeting, but unless so requested, such election may be conducted in any way approved at such meeting. Section 10. Removal. Except as otherwise provided by law, all the directors, or all the directors of a particular class, or any individual director, may be removed from office without assigning any cause, by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) 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 such purpose. Section 11. Vacancies. Whenever any vacancy shall occur among the directors, the remaining directors shall constitute the directors of the Company until such vacancy is filled or until the number of directors is changed as above provided. The remaining directors; though less than a majority of the whole authorized number of directors, may, by a vote of a majority of their number, fill any vacancy for a term ending with the next annual meeting or until a successor is elected and qualified. Section 12. 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. - 4 - 5 Section 13. 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 14. Regular Meetings. Regular meetings of the directors may be 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 15. 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 16. 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 18 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. EXECUTIVE COMMITTEE AND OTHER COMMITTEES Section 17. 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. - 5 - 6 (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. Section 18. 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 19. 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 20. 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 15 and 16 shall be applicable to such other committees. OFFICERS Section 21. 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, - 6 - 7 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 22. 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. Section 23. 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 24. 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 25. 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 - 7 - 8 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 26. 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 27. 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. Section 28. 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 29. 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 30. Compensation. The directors are authorized to determine or to provide the method of determining the compensation of all officers. - 8 - 9 Section 31. 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 32. 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. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES Section 33. 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. CORPORATE SEAL Section 34. The corporate seal of this Company shall be circular in form and contain the name of the Company. - 9 - 10 PROVISIONS IN ARTICLES OF INCORPORATION Section 35. 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. AMENDMENTS Section 36. Amendments. (a) 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 shares of the Company present in person or by proxy and entitled to vote thereon, at an annual or special meeting duly called for such purpose. (b) Notwithstanding the provisions of Section 36(a) hereof 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 7, 9 or 10 of these Regulations shall require the affirmative vote, at an annual or special meeting duly called for such purpose, of the holders of shares representing at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the Company, unless such amendment, alteration, change, repeal or adoption has been recommended by at least two-thirds of the Board of Directors of the Company then in office, in which event the provisions of Section 36(a) hereof shall apply. - 10 - EX-4.A 4 EXHIBIT 4.A 1 EXHIBIT (4)(a) CERTIFICATE OF AMENDMENT TO AMENDED ARTICLES OF INCORPORATION of THE LUBRIZOL CORPORATION L. E. Coleman, Chairman and Chief Executive Officer and K. H. Hopping, Secretary, of The Lubrizol Corporation, an Ohio corporation (the "Corporation"), DO HEREBY CERTIFY THAT: Pursuant to the authority conferred upon the Directors by the Amended Articles of Incorporation of the Corporation, the Directors at a meeting duly called and held on October 28, 1991, at which a quorum was present and acting throughout, adopted the following resolution to amend the Amended Articles of Incorporation of the Corporation pursuant to Section 1701.70(B)(1) of the Ohio Revised Code to amend the terms of a series of the Corporation's Serial Preferred Stock designated as Serial Preferred Stock, Series A: RESOLVED, that in accordance with the Special Rights Plan Amendment and pursuant to the authority vested in the Directors of this Corporation in accordance with the provisions of its Amended Articles of Incorporation (the "Articles"), Section 7(A) of Division C of Article Fourth of the Articles be and hereby is amended to read in its entirety as follows: (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. IN WITNESS WHEREOF L. E. Coleman, Chairman and Chief Executive Officer, and K. H. Hopping, Secretary, of The Lubrizol Corporation, acting for and on behalf of the Corporation, have hereunto subscribed their names this 28th day of October, 1991. L. E. Coleman, Chairman & CEO K. H. Hopping, Secretary EX-4.C 5 EXHIBIT 4.C 1 EXHIBIT (4)(c) THE LUBRIZOL CORPORATION and NATIONAL CITY BANK RIGHTS AGREEMENT Dated as of October 6, 1987 2 TABLE OF CONTENTS
PAGE RECITALS 1 Section 1. Certain Definitions 2 Section 2. Appointment of Rights Agent 7 Section 3. Issue of Right Certificates 8 Section 4. Form of Right Certificates 12 Section 5. Countersignature and Registration 13 Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates 14 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights 15 Section 8. Cancellation and Destruction of Right Certificates 18 Section 9. Reservation and Availability of Common Shares 18 Section 10. Common Shares Record Date 20 Section 11. Adjustment of Purchase Price, Number and Type of Shares or Number of Rights 21 Section 12. Certificate of Adjusted Purchase Price or Number of Shares 44 Section 13. Notice of Adjusted Purchase Price or Number or Type of Shares to Holders of Rights 44 Section 14. Fractional Rights and Fractional Shares 44 Section 15. Rights of Action 47 Section 16. Agreement of Rights Holders 47 Section 17. Right Certificate Holder Not Deemed a Shareholder 48
- i - 3 TABLE OF CONTENTS (Continued)
PAGE Section 18. Concerning the Rights Agent 49 Section 19. Merger or Consolidation or Change of Name of Rights Agent 50 Section 20. Duties of Rights Agent 52 Section 21. Change of Rights Agent 56 Section 22. Issuance of New Right Certificates 58 Section 23. Redemption 59 Section 24. Notice of Certain Events 62 Section 25. Notices 63 Section 26. Supplements and Amendments 64 Section 27. Successors 65 Section 28. Benefits of this Agreement 66 Section 29. Action by Directors 66 Section 30. Severability 66 Section 31. Governing Law 67 Section 32. Counterparts 67 Section 33. Descriptive Headings 67 Exhibit A A-1 Exhibit B B-1
- ii - 4 5277J Rights Agreement, dated as of October 6, 1987 ("Agreement"), between The Lubrizol Corporation, an Ohio corporation (the "Company"), and National City Bank, a national banking association headquartered in Cleveland, Ohio (the "Rights Agent"). RECITALS The Directors of the Company have authorized and declared a dividend consisting of one right ("Right") for each Common Share, without par value, of the Company ("Common Share") outstanding as of the close of business on October 13, 1987 (the "Record Date"), each Right representing an option to purchase one-half of one Common Share, and have authorized the issuance of one Right with respect to each Common Share issued after the Record Date but prior to the earlier of (i) the Distribution Date (in the case of Common Shares issued upon conversion of the Company's convertible securities or upon exercise of employee stock options, prior to the thirtieth day after the Distribution Date), (ii) the date on which the Rights are redeemed as provided in Section 23 hereof (the "Expiration Date"), or (iii) October 12, 1997 (the "Final Expiration Date"), including, without limitation, Common Shares issued upon conversion of the Company's convertible securities and upon exercise of employee stock options and Common Shares which are treasury shares as of the Record Date and subsequently become outstanding. 5 Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 20% or more of the Common Shares then outstanding, but shall not include the Company, any Subsidiary or any employee benefit or stock ownership plan of the Company or an entity holding Common Shares for or pursuant to the terms of any such plan, or any Person who or which, together with all Affiliates and Associates of such Person, effects one or more Control Share Acquisitions, in each case, after obtaining the prior authorization of the Company's shareholders required for each such Control Share Acquisition by Article NINTH. (b) "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 Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof. -2- 6 (c) "Article NINTH" shall mean Article NINTH of the Company's Amended Articles of Incorporation, and any successor or replacement Article thereto, if any. (d) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: (i) which such person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such Person or any of such Person's 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, rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially 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 -3- 7 until such tendered securities are accepted for purchase or payment; or (B) the right to vote or dispose of 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 such Person's Affiliates or Associates has any agreement, arrangement or understanding for the purpose of 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 to beneficially own, any security if such Person has the right to vote such security pursuant to an agreement, arrangement or understanding which (1) 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). -4- 8 (e) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the States of Ohio and New York are authorized or obligated by law or executive order to close. (f) "Close of business" on any given date shall mean 5:00 P.M., Cleveland, Ohio time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., Cleveland, Ohio time, on the next succeeding Business Day. (g) "Common Shares" when used with reference to the Company shall mean the Common Shares, without par value, of the Company; provided that, if the Company is the continuing or surviving corporation in a transaction described in Section 11(d)(ii) hereof, "Common Shares" when used with reference to the Company shall mean the capital stock with the greatest aggregate voting power of the Company, or, if the Company is a subsidiary of another corporation or business trust, the corporation or business trust which ultimately controls the Company. "Common Shares" when used with reference to any corporation or business trust, other than the Company, shall mean the capital stock with the greatest -5- 9 aggregate voting power of such corporation or business trust, or, if such corporation or business Crust is a subsidiary of another corporation or business trust, the corporation or business trust which ultimately controls such first-mentioned corporation or business trust. (h) "Control Share Acquisition" shall have the meaning defined in Article NINTH. (i) "Permitted Transaction" shall mean any Related Party Transaction (as defined in Article SEVENTH of the Company's Amended Articles of Incorporation, or in any successor or replacement Article thereto, if any) which has received the affirmative vote required in such Article SEVENTH, or which is specifically exempted from the provisions of such Article SEVENTH by the terms thereof, provided, that, the Related Party (as defined in such Article SEVENTH) involved in such Related Party Transaction has not acquired any Common Shares in contravention of Article NINTH within the five years preceding the date of such Related Party Transaction. (j) "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. -6- 10 (k) "Share Acquisition Date" shall mean the first date of public announcement by the Company or an Acquiring Person (by press release, filing made with the Securities and Exchange Commission or otherwise) that an Acquiring Person has become such. (l) "Subsidiary" shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interests is owned, directly or indirectly, by the Company. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall also be, prior to the Distribution Date, the holders of the Common Shares) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment and hereby certifies that it complies with the requirements of the New York Stock Exchange governing transfer agents and registrars. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. Any actions which may be taken by the Rights Agent pursuant to the terms of this Agreement may be taken by any such Co-Rights Agent. -7- 11 Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the fifteenth calendar day after the Share Acquisition Date or (ii) the fifteenth calendar day after the date of the commencement of a tender or exchange offer (as determined by reference to Rule 14d-2(a) under the Exchange Act) by any Person (other than the Company or any employee benefit plan of the Company) for 20% or more (including any and all) of the outstanding Common Shares (including any such date which is after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates being herein referred to as the "Distribution Date"), the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for Common Shares registered in the names of the record holders thereof (which certificates for Common Shares shall also be deemed to be Right Certificates) and not by separate Right Certificates, and the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares in the stock transfer books of the Company maintained by the Company or its appointed transfer agent. As soon as practicable after the Distribution Date, the Rights Agent will send, by first-class, insured, postage prepaid mail, to each record holder of Common Shares as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit A -8- 12 hereto, evidencing one Right for each Common Share so held, subject to adjustment, together with a notice setting forth the Purchase Price (as defined in Section 4 hereof) as in effect on the Distribution Date. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. Any Right Certificate issued pursuant to this Section 3 that represents Rights beneficially owned by an Acquiring Person or any Associate or Affiliate thereof and any Right Certificate issued at any time upon the transfer of any Rights to an Acquiring Person or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate, and any Right Certificate issued pursuant to Sections 6 or 11 hereof upon transfer, exchange, replacement or adjustment of any other Right Certificate referred to in this sentence, shall be subject to and contain the following legend or such similar legend as the Company may deem appropriate and as is not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage: The Rights represented by this Right Certificate were issued to or acquired by a Person who was an Acquiring Person or an Affiliate or an Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). This Right Certificate and the Rights represented hereby may become null -9- 13 and void in the circumstances specified in Section 11(a)(ii) or Section 11(d) of the Rights Agreement. (b) On the Record Date or as soon as practicable thereafter, the Company will send a copy of a Summary of Rights to Purchase Common Shares, in substantially the form attached hereto as Exhibit B (the "Summary of Rights"), by first-class, postage prepaid mail, to each record holder of Common Shares as of the close of business on the Record Date, at the address of such holder shown on the records of the Company as of such date. With respect to certificates for Common Shares outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates for Common Shares registered in the names of the holders thereof together with a copy of the Summary of Rights. Until the Distribution Date (or the earlier of the Expiration Date or the Final Expiration Date), the surrender for transfer of any certificate for Common Shares outstanding on the Record Date, with or without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. (c) Certificates for Common Shares issued (including, without limitation, any certificates for Common Shares issued upon conversion of the Company's convertible securities or upon exercise of employee stock options) or -10- 14 surrendered for transfer or exchange after the Record Date but prior to the earlier of the Distribution Date, the Expiration Date or the Final Expiration Date, shall have stamped on, impressed on, printed on, written on or otherwise affixed to them the following legend or such similar legend as the Company may deem appropriate and as is not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Common Shares or the Rights may from time to time be listed, or to conform to usage: This Certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between The Lubrizol Corporation and National City Bank, dated as of October 6, 1987 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of The Lubrizol Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this Certificate. The Lubrizol Corporation will mail to the holder of this Certificate a copy of the Rights Agreement without charge within five business days after receipt of a written request therefor. Under certain circumstances, Rights beneficially owned by an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement) and any subsequent holder of such Rights may become null and void. With respect to certificates containing the legend described above, until the Distribution Date, the Rights associated with -11- 15 the Common Shares represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the surrender for transfer of the Rights associated with the Common Shares represented thereby. Section 4. Form of Right Certificates. The Right Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit A hereto with such changes, marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Sections 11 and 22 hereof, the Right Certificates, whenever issued, shall be dated as of the Record Date, and on their face shall entitle the holders thereof to purchase such number of Common Shares as shall be set forth therein at the price per whole share set forth therein (the "Purchase Price"), but the number of such shares and the Purchase Price shall be subject to adjustment as provided herein. -12- 16 Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, President or any Vice President, either manually or by facsimile signature, and have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent, and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. -13- 17 Following the Distribution Date, the Rights Agent will keep or cause to be kept, at one of its offices in New York, New York, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the earlier of the Expiration Date or the Final Expiration Date, any Right Certificate or Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of Common Shares as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged -14- 18 at the principal office of the Rights Agent in New York, New York or in Cleveland, Ohio. Thereupon, the Rights Agent shall countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expense incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby -15- 19 (except as otherwise provided herein) in whole or in part at any time after the Distribution Date and at or prior to the close of business on the earlier of the Expiration Date or the Final Expiration Date, upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent in New York, New York, or Cleveland, Ohio, together with payment for each Right exercised of an amount equal to the product of the then-current Purchase Price multiplied by the number of Common Shares then issuable upon exercise of a Right. (b) The Purchase Price shall initially be $150 (equivalent to $75 for each one-half of a Common Share), and shall be subject to adjustment from time to time as provided in Section 11 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax in cash, or by certified check or bank draft payable to the order of the Rights Agent, the Rights Agent shall thereupon promptly (i) requisition from any -16- 20 transfer agent of the Common Shares (or make available, if the Rights Agent is the transfer agent) certificates for the number of whole Common Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, (ii) when appropriate, requisition from the Company the amount of cash to be paid or depositary receipts to be issued in lieu of the issuance of fractional shares in accordance with Section 14 hereof or the amount of cash to be paid in lieu of the issuance of Common Shares in accordance with Sections 11(a)(iii) or 11(d) hereof, (iii) promptly after receipt of such certificates (or depositary receipts, when appropriate), cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt promptly deliver such cash to or upon the order of the registered holder of such Right Certificate. (d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof. -17- 21 Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its stock transfer agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Right Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Common Shares. The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Common Shares or any authorized and issued Common Shares held in its treasury, the number of Common Shares that will be sufficient to permit the exercise pursuant to Section 7 -18- 22 hereof of all outstanding Rights; such number of Common Shares reserved and kept available shall be adjusted from time to time, if and to the extent required, upon the occurrence of any of the events described in Section 11 hereof. So long as the Company's Common Shares are listed on a national securities exchange, the Company shall endeavor to cause, from and after such time as the Rights become exercisable, all Common Shares reserved for issuance upon exercise of the Rights to be listed on such exchange upon official notice of issuance. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Common Shares delivered upon exercise of Rights shall be, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), duly and validly authorized and issued, fully paid, nonassessable and freely tradeable shares, free and clear of any liens, encumbrances and other adverse claims and not subject to any rights of call or first refusal. The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Common -19- 23 Shares upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a person other than, or the issuance or delivery of certificates for the Common Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise, or to issue or deliver any certificates for Common Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. Common Shares Record Date. Each person in whose name any certificate for Common Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Common Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Common Shares transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next -20- 24 succeeding Business Day on which the Common Shares transfer books of the Company are open. Prior to the exercise pursuant to Section 7 hereof of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a shareholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number and Type of Shares or Number of Rights. The Purchase Price, the number and type of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a)(i) In the event that the Company shall at any time after the date of this Agreement (A) declare a dividend on the Common Shares payable in Common Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding Common Shares into a smaller number of shares or (D) issue any shares of its capital stock in a reclassification of the Common Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing -21- 25 or surviving corporation), except as otherwise provided in this Section 11(a) or in Section 11(d) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and/or the number and/or kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Common Shares transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof or Section 11(d) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) or Section 11(d) hereof. (ii) In the event that (A) any Acquiring Person or any Associate or Affiliate of any Acquiring Person, at any time after the date of this Agreement, directly or indirectly, shall -22- 26 (1) merge into or consolidate with the Company or otherwise combine with the Company and the Company shall be the continuing or surviving corporation of such merger, consolidation or combination, other than in a transaction subject to Section 11(d)(ii) hereof, (2) merge, consolidate or otherwise combine with any Subsidiary, (3) in one or more transactions, transfer any assets to the Company or any Subsidiary in exchange (in whole or in part) for shares of any class of capital stock of the Company or any Subsidiary or for securities exercisable for or convertible into shares of any class of capital stock of the Company or any Subsidiary, or otherwise obtain from the Company or any Subsidiary, with or without consideration, any additional shares of any class of capital stock of the Company or any Subsidiary or securities exercisable for or convertible into shares of any class of capital stock of the Company or any Subsidiary (other than as part of a pro rata distribution to all holders of such shares of any class of capital stock of the Company or any Subsidiary), (4) sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise dispose (in one or more transactions), to, from or with, as the case may be, the Company or any Subsidiary, other than in a transaction subject to Section 11(d) hereof, assets on terms and -23- 27 conditions less favorable to the Company than the Company would be able to obtain in arm's-length negotiation with an unaffiliated third party, (5) receive any compensation from the Company or any Subsidiary other than compensation for full-time employment as a regular employee at rates in accordance with the Company's (or its Subsidiaries') past practices, or (6) receive the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantage provided by the Company or any Subsidiaries, or (B) during such time as there is an Acquiring Person, there shall be any reclassification of securities (including any reverse stock split), or recapitalization of the Company, or any merger or consolidation of the Company with any Subsidiary or any other transaction or series of transactions (whether or not with or into or otherwise involving an Acquiring Person), other than a transaction subject to Section 11(d) hereof, which has the effect, directly or indirectly, of increasing by more than 1% the proportionate share of the outstanding shares of any class of equity securities or of securities exercisable -24- 28 for or convertible into equity securities of the Company or any Subsidiary which is directly or indirectly beneficially owned by any Acquiring Person or any Associate or Affiliate of any Acquiring Person, or (C) any Person (other than the Company or any Subsidiary or any employee benefit or stock ownership plan of the Company or an entity holding or acquiring Common Shares for or pursuant to the terms of any such plan) who or which, together with all Affiliates and Associates of such Person, shall become the Beneficial Owner of 20% or more of the Common Shares then outstanding without obtaining any one or more of the prior authorizations of the Company's shareholders required by Article NINTH, then, and in each such case, except as otherwise provided herein, proper provision shall be made so that each holder of a Right, except as provided below, shall thereafter have a right to receive, upon exercise thereof in accordance with the terms of this Agreement at an exercise price per Right equal to the product of two (2) times the then-current Purchase Price multiplied by the then number of Common Shares for which a Right is then exercisable, such number of Common Shares as shall equal the result obtained by (x) multiplying the product -25- 29 of two (2) times the then-current Purchase Price by the then number of Common Shares for which a Right is then exercisable and dividing that product by (y) 50% of the current per share market price of the Common Shares (determined pursuant to Section 11(e) hereof) on the date of the occurrence of any one of the events listed above in this subparagraph (ii). Notwithstanding the foregoing, upon the occurrence of any of the events listed above in this subparagraph (ii), any Rights that are or were at any time beneficially owned by any Acquiring Person or any Associate or Affiliate of such Acquiring Person (which Acquiring Person, Associate or Affiliate is engaging in one or more of the transactions set forth in subparagraph (ii)(A) above, or realizing the benefit set forth in subparagraph (ii)(B) above, or owning the Common Shares described in subparagraph (ii)(C) above, as the case may be) after the date upon which such Acquiring Person became such shall become void and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement. Notwithstanding anything to the contrary set forth herein, the provisions of this Section 11(a)(ii) shall not apply to any Permitted Transaction. (iii) In the event that there shall not be sufficient authorized but unissued Common Shares or authorized and issued Common Shares held in Treasury to permit the -26- 30 exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exercise of the Rights; provided, however, if the Company is unable to cause the authorization of additional Common Shares then, notwithstanding any other provision of this Agreement, in lieu of issuing such additional Common Shares and requiring payment therefor, upon exercise of the Rights, the Company shall pay, with respect to each Right, to the extent permitted by applicable law and any agreements or instruments in effect on the Share Acquisition Date to which the Company is a party, cash at a rate per Right equal to the product of two (2) times the Purchase Price in effect at the time of exercise multiplied by the number of Common Shares for which a Right was exercisable immediately prior to the first occurrence of any of the events specified in the foregoing subparagraph (ii). To the extent that any legal or contractual restrictions prevent the Company from paying the full amount of cash payable in accordance with the foregoing sentence, the Company shall pay to holders of the Rights as to which such payments are being made all amounts which are not then restricted on a pro rata basis. The Company shall continue to make payments on a pro rata basis as funds become available until such payments have been paid in full. -27- 31 (b) In the event that the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Common Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Common Shares (or shares having the same rights, privileges and preferences as the Common Shares ("equivalent common shares")) or securities convertible into Common Shares or equivalent common shares at a price per Common Share or equivalent common share (or having a conversion price per share, if a security convertible into Common Shares or equivalent common shares) less than the current per share market price of the Common Shares (as determined pursuant to Section 11(e) hereof) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Common Shares outstanding on such record date plus the number of Common Shares which the aggregate offering price of the total number of Common Shares and/or equivalent common shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Common Shares outstanding on such record date plus the number of additional Common Shares and/or equivalent common shares to be offered for -28- 32 subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. Common Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In the event that the Company shall fix a record date for the making of a distribution to all holders of the Common Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness, cash (other than a regular periodic cash dividend at a rate not in excess of 125% of the rate of the last cash dividend theretofore paid), assets, stock (other than a dividend payable in Common Shares) or subscription rights, -29- 33 options or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current per share market price of the Common Shares (as determined pursuant to Section 11(e) hereof) on such record date, less the fair market value (as determined in good faith by the Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes) of the portion of the cash, assets, stock or evidences of indebtedness so to be distributed (in the case of regular periodic cash dividends at a rate in excess of 125% of the rate of the last cash dividend theretofore paid, only that portion in excess of 125% of such rate) or of such subscription rights, options or warrants applicable to one Common Share, and the denominator of which shall be such current per share market price of the Common Shares. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) In the event that, directly or indirectly, (i) the Company shall consolidate with, or merge with or into, -30- 34 any Acquiring Person or any Associate or Affiliate of any Acquiring Person and the Company shall not be the continuing or surviving corporation of such merger or consolidation, (ii) any Acquiring Person or any Associate or Affiliate of any Acquiring Person shall consolidate with the Company, or merge with or into the Company and the Company shall be the continuing or surviving corporation of such merger or consolidation and, in connection with such merger or consolidation, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of such other Person or cash or any other property, or (iii) the Company shall sell or otherwise transfer (or one or more Subsidiaries shall sell or otherwise transfer), 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) to any Acquiring Person or any Associate or Affiliate of any Acquiring Person, then, and in each such case, except as otherwise provided herein, proper provision shall be made so that (A) except as provided below, each holder of a Right shall thereafter have the right to receive, upon the exercise thereof in accordance with the terms of this Agreement at an exercise price per Right equal to the product of two (2) times the then-current Purchase Price multiplied by the then number of Common Shares for which a Right is then exercisable, such number of validly authorized and issued, fully paid, -31- 35 nonassessable and freely tradeable Common Shares of such surviving, resulting or acquiring Person (including the Company as the continuing or surviving corporation of a transaction described in clause (ii) above), as the case may be, free and clear of any liens, encumbrances and other adverse claims and not subject to any rights of call or first refusal, as shall be equal to the result obtained by (x) multiplying the product of two (2) times the then-current Purchase Price by the number of Common Shares for which a Right is then exercisable and dividing that product by (y) 50% of the current per share market price of the Common Shares of such Person (determined pursuant to Section 11(e) hereof) immediately prior to the consummation of such consolidation, merger, sale or transfer; (B) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (C) the term "Company" shall thereafter be deemed to refer to such issuer; and (D) such issuer shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be possible, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights. Notwithstanding -32- 36 the foregoing, if the surviving, resulting or acquiring Person in any of the events listed above in subparagraphs (i) through (iii), inclusive, is not a corporation or business trust, then, and in each such case, if such surviving, resulting or acquiring Person is directly or indirectly wholly owned by a corporation or business trust, then all references to Common Shares of such surviving, resulting or acquiring Person in this Section 11(d) shall be deemed to be references to the Common Shares of the corporation or business trust which ultimately controls such Person, and if there is no such corporation or business trust, (Y) proper provision shall be made so that such surviving, resulting or acquiring Person shall create or otherwise make available for purposes of the exercise of the Rights in accordance with the terms of this Agreement, a type or types of security or securities having a fair market value at least equal to the economic value of the Common Shares which each holder of a Right would have been entitled to receive if such surviving, resulting or acquiring Person had been a corporation or a business trust; and (Z) all other provisions of this Section 11(d) shall apply to the issuer of such securities as if such securities were Common Shares. The Company shall not consummate any of the transactions listed above in subparagraphs (i) through (iii), inclusive, unless prior thereto the Company and the issuer of the Common Shares or other securities, as the case may be, shall have executed -33- 37 and delivered to the Rights Agent an agreement providing for the foregoing. Notwithstanding the foregoing, upon the occurrence of any of the events listed above in subparagraphs (i) through (iii), inclusive, any Rights that are or were at any time beneficially owned by any Acquiring Person or any Associate or Affiliate of such Acquiring Person (which Acquiring Person, Associate or Affiliate is engaging in one or more of the transactions set forth in subparagraphs (i) through (iii), inclusive, above) after the date upon which such Acquiring Person became such shall become void and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement. The provisions of this Section 11(d) shall similarly apply to successive mergers or consolidations or sales or other transfers. Notwithstanding anything to the contrary set forth herein, the provisions of this Section (d) shall not apply to any Permitted Transactions. In the event that the Company shall be the continuing or surviving corporation in a merger or combination referred to in subparagraph (ii) above and Common Shares of the Company are required to be issued upon exercise of the Rights following such merger or consolidation, and if there shall not be sufficient authorized but unissued Common Shares or authorized and issued Common Shares held in Treasury to permit the -34- 38 exercise in full of the Rights in accordance with the foregoing, the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exercise of the Rights; provided, however, if the Company is unable to cause the authorization of additional Common Shares then, notwithstanding any other provision of this Agreement, in lieu of issuing such additional Common Shares and requiring payment therefor, upon exercise of the Rights, the Company shall pay, with respect to each Right, to the extent permitted by applicable law and any agreements or instruments in effect on the Share Acquisition Date to which the Company is a party, cash at a rate per Right equal to the product of two (2) times the Purchase Price in effect at the time of exercise multiplied by the number of Common Shares for which a Right was exercisable immediately prior to the occurrence of the merger or combination referred to in subparagraph (ii) above. To the extent that any legal or contractual restrictions prevent the Company from paying the full amount of cash payable in accordance with the foregoing sentence, the Company shall pay to holders of the Rights as to which such payments are being made all amounts which are not then restricted on a pro rata basis. The Company shall continue to make payments on a pro rata basis as funds become available until such payments have been paid in full. -35- 39 (e) For the purpose of any computation hereunder, the "current per share market price" of Common Shares on any date shall be deemed to be the average of the daily closing prices per share of such Common Shares for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Common Shares is determined during a period following the announcement by the issuer of such Common Shares (i) of a dividend or distribution on such Common Shares payable in such Common Shares or securities convertible into such Common Shares or (ii) any subdivision, combination or reclassification of such Common Shares, and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution or the record date for such subdivision, combination or reclassification, then, and in each such case, the "current market price" shall be appropriately adjusted to take into account ex-dividend trading or to reflect the current market price per Common Share equivalent. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Shares are not listed or -36- 40 admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Shares are listed or admitted to trading or, if the Common Shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date the Common Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Shares selected by the Directors of the Company. The term "Trading Day" shall mean any day on which the principal national securities exchange on which the Common Shares are listed or admitted to trading is open for the transaction of business or, if the Common Shares are not listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of New York are not authorized or obligated by law or executive order to close. If the Common Shares are not publicly held or not so listed or traded, or not the subject of available bid and asked quotes, "current per share market price" shall mean the fair value per share as -37- 41 determined in good faith by the Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. (f) Except as set forth below, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 11(f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest thousandth of a share, as the case may be. Notwithstanding the first sentence of this Section 11(f), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights. (g) If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Common Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to -38- 42 adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in this Section 11 and the provisions of Sections 7, 9, 10 and 14 hereof with respect to the Common Shares shall apply on like terms to any such other shares. In the event that the Rights become exercisable under both Section 11(a)(ii) and Section 11(d) hereof, a holder may, at his or her option, elect to exercise Rights under either provision, but each Right may be exercised only once. (h) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of Common Shares purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (i) Unless the Company shall have exercised its election as provided in Section 11(j) hereof, upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of shares (calculated to the nearest thousandth) obtained by (i) multiplying (x) the -39- 43 number of shares covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (j) The Company may elect, on or after the date of any adjustment of the Purchase Price, to adjust the number of Rights in substitution for any adjustment in the number of Common Shares purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of Common Shares for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 calendar days later than -40- 44 the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(j), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (k) Irrespective of any adjustment or change in the Purchase Price or the number or type of shares issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price per whole share and the number of shares which were expressed in the initial Right Certificate issued hereunder. -41- 45 (l) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the Common Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Common Shares at such adjusted Purchase Price. (m) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date the Common Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Common Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. -42- 46 (n) Anything in Sections 11 (a) through (m), inclusive, hereof to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Common Shares, issuance wholly for cash of any of the Common Shares at less than the current market price, issuance wholly for cash of Common Shares or securities which by their terms are convertible into or exchangeable for Common Shares, stock dividends or issuance of rights, options or warrants referred to hereinabove in this Section 11, hereafter made by the Company to holders of its Common Shares shall not be taxable to such shareholders. (o) Notwithstanding any other provision of this Agreement, no adjustment to the Purchase Price (other than pursuant to Section 11(n)), the number of shares of Common Stock (or fractions of a share) for which a Right is exercisable or the number or Rights outstanding shall be made or be effective if such adjustment would have the effect of reducing or limiting the benefits the holders of the Rights would have had absent such adjustment, including, without limitation, the benefits under Sections 11(a)(ii) and 11(d) hereof, unless the terms of this Agreement are amended so as to preserve such benefits. -43- 47 Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 hereof, the Company shall promptly prepare a certificate setting forth such adjustment, (including a description of any Rights which have become void as a result thereof), and a brief statement of the facts accounting for such adjustment and promptly file with the Rights Agent and with each transfer agent for the Common Shares a copy of such certificate. Section 13. Notice of Adjusted Purchase Price or Number or Type of Shares to Holders of Rights. Whenever an adjustment is made as provided in Section 11 hereof after the Distribution Date, the Company shall mail a brief summary of such adjustment to each holder of a Right Certificate in accordance with Section 25 hereof. Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid as promptly as practicable to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of -44- 48 a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Directors of the Company. If on any such date no such market maker is making a market in the Rights the fair -45- 49 value of the Rights on such date as determined in good faith by the Directors of the Company shall be used and shall be conclusive for all purposes. (b) The Company shall not be required to issue fractions of shares upon exercise of the Rights or to distribute certificates which evidence fractional shares. Fractions of Common Shares may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of Common Shares. In lieu of fractional shares, the Company may pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Common Share. For purposes of this Section 14(b), the current market value of a Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(e) hereof) for the Trading Day immediately prior to the date of such exercise. (c) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right. -46- 50 Section 15. Rights of Action. All rights of action in respect of this Agreement are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under this Agreement, and injunctive relief against actual or threatened violations of the obligations of any Person subject to this Agreement. Section 16. Agreement of Rights Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: -47- 51 (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares; (b) after the Distribution Date, the Right Certificates will be transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent in New York, New York, or Cleveland, Ohio, duly endorsed or accompanied by a proper instrument of transfer; and (c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificate or the associated Common Share certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Common Shares or any other -48- 52 securities of the Company which may at any time be issuable upon exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 24 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with Section 7 hereof. Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, suit, action, proceeding or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done -49- 53 or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability. If the Rights Agent asserts or intends to assert a right of indemnification under this Section 18 in connection with a suit, action or proceeding, the Company shall have the right, but not the obligation, to assume the responsibility for the defense of any such suit, action or proceeding. The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Right Certificate or certificate for Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons. Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any -50- 54 merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may -51- 55 adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established -52- 56 by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and -53- 57 delivery hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 hereof (including any adjustment which results in Rights becoming void) or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment or voidance); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Common Shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any Common Shares will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. -54- 58 (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, or the Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any -55- 59 such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. The Rights Agent shall not be under any duty or responsibility to insure compliance with any applicable federal or state securities laws in connection with the issuance, transfer or exchange of Right Certificates. (j) The Rights Agent shall promptly remit to the Company any funds paid to it upon exercise of the Rights pursuant to Section 7 hereof. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the -56- 60 Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of the States of Ohio or New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the States of Ohio or New York), in good standing, having a principal office in the States of Ohio or New York, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million and which shall otherwise meet any requirements imposed by the New York Stock Exchange on transfer agents and registrars. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and -57- 61 responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. -58- 62 Section 23. Redemption. (a) The Directors of the Company may, at their option, at any time prior to the Close of Business, on the earlier of (i) the later of (A) the calendar day next preceding the Distribution Date and (B) the Share Acquisition Date, or (ii) the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $.05 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). (b) In addition, if at any time the Company shall merge with or into, or consolidate with, any Person in a transaction which is not covered by either Section 11(a)(ii) or Section 11(d) hereof (and which will not, in connection with any other related transactions, result in any material assets of the Company coming under the direct or indirect ownership or control of any Person who at any time has been an Acquiring Person or an Associate or an Affiliate of an Acquiring Person), and as a result of such transaction either (i) the Company is not the continuing or surviving corporation of such merger or consolidation, or (ii) all of the Company's outstanding Common Shares become owned by another Person (or such Person together with its Affiliates and Associates), then in connection with the consummation of such merger or consolidation, the Directors -59- 63 of the Company may, at their option, redeem (at any time, including without limitation, after the Distribution Date) all but not less than all of the then outstanding Rights at the Redemption Price. (c) In addition, if at any time (including, without limitation, after the Distribution Date), a Person shall obtain the prior authorization of the Company's shareholders required pursuant to Article NINTH in connection with a Control Share Acquisition involving a majority of the voting power of the Company in the election of directors, then, in connection with the consummation of such Control Share Acquisition, the Directors of the Company shall redeem all, but not less than all, of the Rights at the Redemption Price. (d) Immediately upon the action of the Directors of the Company ordering the redemption of the Rights, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. Promptly after the action of the Directors ordering the redemption of the Rights, the Company shall publicly announce such action. Within 10 calendar days after ordering the redemption of the Rights, the Company shall give notice of such redemption to the holders of the then -60- 64 outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. (e) At any time following the Share Acquisition Date, the Directors of the Company may relinquish their rights to redeem the Rights under paragraphs (a) or (b) above, or both, by duly adopting a resolution to that effect. Immediately upon adoption of such resolution, the rights of the Directors under the portions of this Section 23 specified in such resolution shall terminate without further action and without any notice. (f) Notwithstanding anything in this Section 23 to the contrary, all rights of, and requirements for, redemption set forth above shall terminate immediately and automatically upon the occurrence of any one or more of the events set forth in Sections 11(a)(ii)(A) or (B) or Sections 11(d)(i), (ii) or (iii), hereof, unless such event is a Permitted Transaction. -61- 65 Section 24. Notice of Certain Events. In case, after the Distribution Date, the Company shall propose (a) to pay any dividend payable in stock of any class to the holders of Common Shares or to make any other distribution to the holders of Common Shares (other than a regular periodic cash dividend at a rate not in excess of 125% of the rate of the last cash dividend theretofore paid) or (b) to offer to the holders of Common Shares rights, options or warrants to subscribe for or to purchase any additional Common Shares or shares of stock of any class or any other securities, rights or options, or (c) to effect any reclassification of its Common Shares (other than a reclassification involving only the subdivision of outstanding Common Shares), or (d) to effect any consolidation or merger, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries, taken as a whole, to any other Person or Persons, or (e) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 25 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution or offering of rights, options or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, -62- 66 liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares, if any such date is to be fixed, and such notice shall be so given, in the case of any action covered by clause (a) or (b) above, at least 20 calendar days prior to the record date for determining holders of the Common Shares for purposes of such action, and, in the case of any such other action, at least 20 calendar days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares, whichever shall be the earlier. In case any of the events set forth in Section 11(a)(ii) or Section 11(d) hereof shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to the Rights Agent and each holder of a Right Certificate, in accordance with Section 25 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights. Section 25. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: The Lubrizol Corporation 29400 Lakeland Boulevard Wickliffe, Ohio 44092 Attention: Secretary -63- 67 Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: National City Bank 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Corporate Trust Department Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Rights Agent. Section 26. Supplements and Amendments. Prior to the Distribution Date, the Company may, and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing Common Shares, except for a supplement or amendment which would change the Redemption Price or the Final Expiration Date or reduce the number of Common Shares for which a Right is then exercisable. From and after the Distribution Date, the Company and the Rights Agent may at any time and from time to time supplement or amend this -64- 68 Agreement without the approval of any holders of Rights in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Rights Agent may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights, as such. Section 27. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. The Company covenants and agrees that it shall not (i) consolidate with, (ii) merge with or into, or (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 Acquiring Person or its Affiliates or Associates if at the time of or after such consolidation, merger or sale there would be any charter or by-law provisions 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 without the affirmative vote of the holders of at least 80% of -65- 69 the then outstanding Rights beneficially owned by Persons other than the Acquiring Person or its Affiliates or Associates. The Company shall not consummate any such consolidation, merger or sale unless prior thereto the Company and such other Person shall have executed and delivered to the Rights Agent an agreement evidencing compliance with this Section. Section 28. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates. Section 29. Action by Directors. Whenever any action hereunder or in connection with the Rights is required or permitted to be taken by the Directors of the Company, such action may be taken by the Executive Committee of the Directors or by any other duly authorized committee thereof. Section 30. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void -66- 70 or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 31. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Ohio and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. Section 32. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 33. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -67- 71 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, this 6th day of October, 1987. THE LUBRIZOL CORPORATION Attest: By By Secretary Attest: NATIONAL CITY BANK By By -68- 72 Exhibit A [Form of Right Certificate] Certificate No. R- Rights NOT EXERCISABLE AFTER October 12, 1997 OR EARLIER IF REDEEMED. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.05 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE WERE ISSUED TO OR ACQUIRED BY A PERSON WHO WAS AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 11(a)(ii) OR SECTION 11(d) OF THE RIGHTS AGREEMENT.*] Right Certificate THE LUBRIZOL CORPORATION This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of October 6, 1987 (the "Rights Agreement") between The Lubrizol Corporation, an Ohio corporation (the "Company"), and National City Bank, a national banking association (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M. * The portion of the legend in brackets shall be inserted only if applicable. A-1 73 (Cleveland, Ohio time) on October 12, 1997 at the principal office of the Rights Agent, or its successors as Rights Agent, in New York, New York or Cleveland, Ohio, one-half of one fully paid nonassessable Common Share, without par value (a "Common Share") of the Company, at a purchase price of $150 per whole Common Share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of October 13, 1987, based on the Common Shares as constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number of Common Shares which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events. This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of A-2 74 the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent. This Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent in New York, New York or Cleveland, Ohio, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Common Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at a redemption price of $.05 per Right. No fractional Common Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than A-3 75 fractions which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Common Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or, to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. A-4 76 WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of October 13, 1987. ATTEST: THE LUBRIZOL CORPORATION By Secretary Title: Countersigned: By Authorized Signature A-5 77 [Form of Reverse Side of Right Certificate] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Right Certificates.) FOR VALUE RECEIVED, hereby sells, assigns and transfers unto (Please print name and address of transferee) this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution. Dated: , 19 Signature Signature Guaranteed: NOTICE The signature to the foregoing Assignment must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. A-6 78 FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise the Right Certificate.) To The Lubrizol Corporation: The undersigned hereby irrevocably elects to exercise Rights represented by this Right Certificate to purchase the Common Shares issuable upon the exercise of such Rights and requests that certificates for such shares be issued in the name of: Please insert social security or other identifying number (Please print name and address) If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number (Please print name and address) Dated: , 19 Signature (Signature must conform in all respects to name of holder as specified on the face of this Right Certificate) Signature Guaranteed: A-7 79 Exhibit B SUMMARY OF RIGHTS TO PURCHASE COMMON SHARES On September 28, 1987, the Directors of The Lubrizol Corporation (the "Company") declared a dividend distribution of one right (a "Right") for each outstanding Common Share, without par value (the "Common Shares"), of the Company. The distribution is payable on October 13, 1987 (the "Record Date") to the shareholders of record as of the close of business on the Record Date. Each Right entitles the registered holder to purchase from the Company one-half of one Common Share at a price of $150 per whole share, subject to adjustment (the "Purchase Price"). The description and terms of the Rights are set forth in a Rights Agreement dated as of October 6, 1987 (the "Rights Agreement") between the Company and National City Bank, as Rights Agent (the "Rights Agent"). Until the earlier of (i) 15 days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding Common Shares (unless previously authorized by the Company's shareholders), or (ii) 15 days following the commencement of a tender offer or exchange offer for 20% or more of such outstanding Common Shares (the earlier of such dates being hereinafter called the "Distribution Date"), the Rights will be evidenced, with respect to any of the Common Share certificates outstanding as of the Record Date, by such Common Share certificate with a copy of this Summary of Rights attached thereto. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the Common Shares. Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Share certificates issued after the Record Date upon transfer or new issuance of Common Shares will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any certificates for Common Shares outstanding as of the Record Date, even without a copy of this Summary of Rights attached thereto, will also constitute the transfer of the Rights associated with the Common Shares represented by such certificate. As soon as practicable following the Distribution Date (as defined above), separate certificates evidencing the Rights (the "Right Certificates") will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights. B-1 80 The Rights are not exercisable until the Distribution Date. The Rights will expire on October 12, 1997, unless earlier redeemed by the Company as described below. The Purchase Price payable, and the number of Common Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Common Shares, (ii) upon the grant to holders of the Common Shares of certain rights, options or warrants to subscribe for Common Shares or convertible securities at less than the current market price of the Common Shares, or (iii) upon the distribution to holders of the Common Shares of evidences of indebtedness, cash (excluding regular periodic cash dividends at a rate not in excess of 125% of the rate of the last cash dividend theretofore paid) assets, stock (other than dividends payable in Common Shares) or of subscription rights, options or warrants (other than those referred to above). In the event that an Acquiring Person merges into the Company and the Company's Common Shares are not changed or exchanged, or an Acquiring Person engages in one of a number of self-dealing transactions (other than certain transactions approved by the Company's shareholders) specified in the Rights Agreement, or a person or group of affiliated or associated persons become the beneficial owner of 20% or more of the Company's Common Shares without shareholder consent, proper provision shall be made so that each holder of a Right, other than Rights that are or were beneficially owned by the Acquiring Person after the date upon which the Acquiring Person became such (which will thereafter be void), will thereafter have the right to receive upon exercise thereof at the then current Purchase Price, that number of Common Shares having a market value of two times the Purchase Price (or, under certain circumstances, an amount of cash equal to the Purchase Price). In the event that the Company is acquired by an Acquiring Person in a merger or other business combination transaction or 50% or more of its assets or earning power are sold to an Acquiring Person (other than in a transaction approved by the Company's shareholders), proper provision shall be made so that each holder of a Right, other than Rights that are or were beneficially owned by the Acquiring Person after the date upon which the Acquiring Person became such (which will thereafter be void), shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price, that number of shares of common stock (or, under certain circumstances, an economically equivalent security or securities) of the surviving, resulting or acquiring person which at the time of such transaction would have a market value of two times the Purchase Price (or, under certain circumstances, an amount of cash equal to the Purchase). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an B-2 81 adjustment of at least 1% in such Purchase Price. No fractional shares will be issued (other than fractions which may, at the election of the Company, be evidenced by depositary receipts), and in lieu thereof, a payment in cash will be made based on the market price of the Common Shares on the last trading day prior to the date of exercise. The Company may redeem the Rights in whole, but not in part, at a price of $.05 per Right (the "Redemption Price") at any time prior to the later of (i) the Distribution Date and (ii) a public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 20% or more of the outstanding Common Shares (or such later date as the Directors may specify), and, under certain circumstances, upon a merger or consolidation of the Company with or into a corporation which is not an Acquiring Person. In addition, the Company shall be required to redeem the Rights in whole at the Redemption Price in connection with certain transactions authorized by the Company's shareholders. Immediately upon the action of the Directors of the Company authorizing redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. The Company will give notice of such redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear on the Registry Books of the Rights Agent. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. Prior to the Distribution Date, the Rights Agreement may be amended or supplemented by the Company and the Rights Agent, without the approval of any holders of Rights, in any manner, except for an amendment or supplement which would change the Redemption Price or the Final Expiration Date, or reduce the number of Common Shares for which a Right is then exercisable. After the Distribution Date, the Rights Agreement may be so amended or supplemented to cure ambiguity, correct or supplement defective or inconsistent provisions or otherwise as the Company and the Rights Agent may deem necessary or desirable and shall not adversely affect the interests of the Rights holders. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated September 30, 1987. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is hereby incorporated herein by reference. B-3 EX-4.D 6 EXHIBIT 4.D 1 EXHIBIT (4)(d) THE LUBRIZOL CORPORATION 29400 Lakeland Boulevard Wickliffe, Ohio 44092 October 24, 1988 National City Bank 1900 East Ninth Street Cleveland, Ohio 44114 Attn: Corporate Trust Department Re: Amendment to Rights Agreement Gentlemen: Pursuant to Section 26 of the Rights Agreement (the "Rights Agreement"), dated as of October 6, 1987, by and between The Lubrizol Corporation (the "Company") and National City Bank (the "Rights Agent"), the Company, by resolution adopted by the unanimous vote of its Directors, hereby amends, and directs the Rights Agent to amend, the Rights Agreement as follows: 1. Section 1(a) is amended to read in its entirety as follows: "(a) "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 20% or more of the Common Shares then outstanding, but shall not include (i) the Company, any Subsidiary or any employee benefit or stock ownership plan of the Company or an entity holding Common Shares for or pursuant to the terms of any such plan or (ii) any Person who or which, together with all Affiliates and Associates of such Person, effects one or more Control Share Acquisitions, in each case, after first obtaining the authorization of the Company's shareholders for each such Control Share Acquisition by the action of the Company's shareholders under Article NINTH; provided, however, that solely for purposes of Section 11(a)(ii)(A) hereof, and notwithstanding anything contained in this Section 1(a) to the contrary, the term "Acquiring Person" shall include any Person obtaining authorization of the Company's shareholders in accordance with clause (ii) of this Section 1(a)." 2 National City Bank October 24, 1988 Page 2 2. Section 1(i) is amended to read in its entirety as follows: "(i) "Permitted Transaction" shall mean any Related Party Transaction (as defined in Article SEVENTH of the Company's Amended Articles of Incorporation, or in any successor or replacement Article thereto, if any) which has received the affirmative vote required in such Article SEVENTH, or which is specifically exempted from the provisions of such Article SEVENTH by the terms thereof; provided, however, that the Related Party (as defined in such Article SEVENTH) involved in such Related Party Transaction has not effected one or more Control Share Acquisitions without, in each case, obtaining prior authorization of the Company's shareholders for each such Control Share Acquisition by action of the Company's shareholders under Article NINTH." 3. Subparagraph (C) of Section 11(a)(ii) (which begins with the language, "In the event that . . .") is amended to read in its entirety as follows: "(C) any Person (other than the Company or any Subsidiary of any employee benefit or stock ownership plan of the Company or an entity holder or acquiring Common Shares for or pursuant to the terms of any such plan) who or which, together with all Affiliates and Associates of such Person, shall become the Beneficial Owner of 20% or more of the Common Shares then outstanding, unless the transaction by which such Person, its Affiliates and Associates, become the beneficial owner of 20% or more of the Common Shares then outstanding and each subsequent transaction, if any, by which the number of Common Shares so held is increased have received prior authorization of the Company's shareholders by action of the Company's shareholders under Article NINTH." 4. Section 23(c) is amended to read in its entirety as follows: "(c) In addition, if at any time (including, without limitation, after the Distribution Date), a Person shall obtain prior authorization of the Company's shareholders by action of the Company's shareholders under Article NINTH in connection with a Control Share Acquisition involving a majority of the voting power of the Company in the election of directors, then, in connection with the consummation of such Control Share Acquisition, the Directors of the Company shall redeem all, but not less than all, of the Rights at the Redemption Price." 3 National City Bank October 24, 1988 Page 3 This amendment is effective as of the date first above written (the "Effective Date"), and all references to the Rights Agreement shall, as of and after such date, be deemed to be references to the Rights Agreement as amended hereby. A copy of the Rights Agreement as amended to date is enclosed herewith for your information. Very truly yours, THE LUBRIZOL CORPORATION By Name: W. T. Beargie Title: Sr. Vice President - Finance Accepted and agreed to as of the Effective Date: NATIONAL CITY BANK By Name: Lisa B. Brady Title: Assistant Vice President EX-4.E 7 EXHIBIT 4.E 1 EXHIBIT (4)(e) THE LUBRIZOL CORPORATION and NATIONAL CITY BANK SPECIAL RIGHTS AGREEMENT Dated as of October 31, 1988 2 TABLE OF CONTENTS
PAGE RECITALS 1 Section 1. Certain Definitions 2 Section 2. Appointment of Rights Agent 9 Section 3. Issue of Right Certificates 10 Section 4. Form of Right Certificates 14 Section 5. Countersignature and Registration 14 Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates 16 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights 17 Section 8. Cancellation and Destruction of Right Certificates 21 Section 9. Company Covenants Concerning Shares and Rights 21 Section 10. Record Date 24 Section 11. Adjustment of Number of Rights 25 Section 12. Certain Prohibitions 26 Section 13. Fractional Right Certificates and Fractional Shares 26 Section 14. Rights of Action 30 Section 15. Agreement of Rights Holders 31 Section 16. Right Holder Not Deemed a Shareholder 33 Section 17. Concerning the Rights Agent 33
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PAGE Section 18. Merger or Consolidation or Change of Name of Rights Agent 34 Section 19. Duties of Rights Agent 36 Section 20. Change of Rights Agent 40 Section 21. Redemption 43 Section 22. Notices 44 Section 23. Supplements and Amendments 45 Section 24. Successors 47 Section 25. Benefits of this Agreement 48 Section 26. Action by Directors 48 Section 27. Severability 49 Section 28. Governing Law 49 Section 29. Counterparts 49 Section 30. Descriptive Headings 49 Exhibit A Description of the Rights and Preferences of the Preferred Shares A-1 Exhibit B Form of Right Certificate B-1 Exhibit C Summary of Rights to Purchase Preferred Stock C-1
9828g -ii- 4 SPECIAL RIGHTS AGREEMENT This Special Rights Agreement, dated as of October 31, 1988 (this "Agreement"), is made and entered into by and between The Lubrizol Corporation, an Ohio corporation (the "Company"), and National City Bank, a national banking association headquartered in Cleveland, Ohio (the "Rights Agent"). RECITALS WHEREAS, on October 31, 1988, the Directors of the Company authorized and declared a dividend distribution of one right ("Right") for each Common Share, without par value, of the Company (a "Common Share") outstanding as of the close of business on November 10, 1988 (the "Record Date"), each Right representing the right to purchase one twenty-fifth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and further authorized and directed the issuance of, subject to adjustment, one Right with respect to each Common Share issued or delivered by the Company (whether originally issued or delivered from the Company's treasury) after the Record Date but prior to the Distribution Date (as hereinafter defined); NOW THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: 5 Section 1. Certain Definitions. For purposes of this Agreement, the following terms (in addition to terms defined elsewhere in this Agreement) shall have the meanings indicated when used herein with initial capital letters: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement. (b) 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 Rights or 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 -2- 6 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 (1) 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 -3- 7 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 which the Company is a party until the expiration of 40 calendar days after the date of such acquisition. (c) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of Ohio (or such other state in which the principal office of the Rights Agent may be located) are authorized or obligated by law or executive order to close. (d) "Close of Business" on any given date shall mean 5:00 p.m., Cleveland, Ohio time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 p.m., Cleveland, Ohio time, on the next succeeding Business Day. -4- 8 (e) "Common Shares" shall mean the Common Shares, without par value, of the Company. (f) "Company" shall mean The Lubrizol Corporation, an Ohio corporation. (g) "Distribution Date" shall mean the Close of Business on the fifteenth calendar day after the Share Acquisition Date or, unless the Distribution Date shall have previously occurred, such other date on or prior to the Exercisability Date as may be specified by a majority vote of the Directors of the Company. (h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (i) "Exercisability Date" shall mean the earlier of (i) the sixteenth calendar day following the Share Acquisition Date or such other date as the Directors of the Company may from time to time specify by majority vote for the expiration of their right to cause the Rights to be redeemed (except that any such specification of a later date by the Directors of the Company as aforesaid, but not such later date, must be made by the Directors of the Company not later than the later of (A) the Close of Business on the fifteenth calendar day following the Share Acquisition Date and (B) the Close of Business on the last day previously specified as the Distribution Date by the -5- 9 Directors of the Company) and (ii) the date and time specified in a resolution adopted by majority vote of the Directors of the Company irrevocably relinquishing their right to authorize the Company to redeem the Rights as provided in Section 21(c) hereof as the effective date and time of such relinquishment. (j) "Expiration Date" shall mean the earlier of (i) the Close of Business on the Final Expiration Date and (ii) the time at which the Rights are redeemed as provided in Section 21 hereof. (k) "Final Expiration Date" shall mean November 8, 1991. (l) "Other Rights" shall mean the rights outstanding under the Rights Agreement, dated October 6, 1987, as from time to time amended, between the Company and the Rights Agent. (m) "Person" shall mean any individual, firm, corporation, partnership or other legal entity, and shall include any successor (by merger or otherwise) of such entity. (n) "Preferred Shares" shall mean shares of Serial Preferred Stock, Series A, without par value, of the Company having the rights and preferences set forth in Exhibit A hereto. -6- 10 (o) "Prohibited Transferee" shall mean, at the time any determination is to be made (i) any Person (other than the Company or any Related Person) who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 20% or more of the Common Shares then outstanding; provided, however, that a Person shall not be deemed to have become a Prohibited Transferee solely as a result of a reduction in the number of Common Shares outstanding, unless subsequent to such reduction such Person or any Affiliate or Associate of such Person shall become the Beneficial Owner of any additional Common Shares other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all shareholders are treated equally and (ii) any Person (other than the Company 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 (as determined by reference to Rule 14d-2(a) under the Exchange Act) the consummation of which would result in beneficial ownership by such Person of 20% or more of the Common Shares then outstanding or (B) announces its intention otherwise to purchase or acquire 20% or more of the Common Shares then outstanding. -7- 11 (p) "Purchase Price" shall mean $1.00 for each whole Preferred Share purchased pursuant to the exercise of a Right (equivalent to $0.04 for each one twenty-fifth of a Preferred Share), payable in lawful money of the United States of America. (q) "Related Person" shall mean (i) any Subsidiary of the Company, (ii) any employee benefit or stock ownership plan of the Company or any entity holding Common Shares for or pursuant to the terms of any such plan, or (iii) any Person who acquires voting stock from the Company 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 Company prior to the Exercisability Date; provided, however, that if any Person who becomes a Related Person solely by virtue of subsection (iii) 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 so approved by the Directors of the Company (other than upon exercise of the Other Rights), 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. -8- 12 (r) "Right" shall have the meaning set forth in the Recitals to this Agreement. (s) "Right Certificates" shall mean certificates evidencing the Rights, in substantially the form of Exhibit B attached hereto, or such other form as may be adopted in accordance with Section 4 hereof. (t) "Rights Agent" shall mean National City Bank and its successors and assigns. (u) "Securities Act" shall mean the Securities Act of 1933, as amended. (v) "Share Acquisition Date" shall mean the first date of public announcement by the Company or a Prohibited Transferee (by press release, filing made with the Securities and Exchange Commission or otherwise) that a Prohibited Transferee has become such. (w) "Subsidiary" of any Person shall mean any corporation or other legal entity of which a majority of the voting power of the voting equity securities or equity interests is owned, directly or indirectly, by such Person. (x) "Summary of Rights" shall mean the Summary of Rights to Purchase Preferred Shares in substantially the form attached hereto as Exhibit C. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the -9- 13 Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall also be, prior to the Distribution Date, the holders of the Common Shares) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment and hereby certifies that it complies with the requirements of the New York Stock Exchange governing transfer agents and registrars. The Company may from time to time act as Co-Rights Agent or appoint such Co-Rights Agents as it may deem necessary or desirable. Any actions which may be taken by the Rights Agent pursuant to the terms of this Agreement may be taken by any such Co-Rights Agent. Section 3. Issue of Right Certificates. (a) Until the Distribution Date or, if earlier, the Expiration Date, (i) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates representing Common Shares registered in the names of the record holders thereof (which certificates representing Common Shares shall also be deemed to be Right Certificates) and not by separate Right Certificates, (ii) the Rights will be transferable only in connection with the transfer of the underlying Common Shares, and (iii) the transfer of any certificates evidencing Common Shares in respect of which Rights have been issued, with or without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the -10- 14 Common Shares evidenced by such certificates. As soon as practicable after the Distribution Date, the Rights Agent shall send, by first-class, insured, postage prepaid mail, to each record holder of Common Shares as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, evidencing (subject to adjustment as herein provided) one Right for each Common Share so held. As of and after the Distribution Date, the Rights shall be evidenced solely by such Right Certificates. (b) Notwithstanding anything contained in this Section 3 to the contrary, any Right beneficially owned by a Prohibited Transferee, and any Right Certificate issued at any time upon the transfer of beneficial ownership of any Right to such Prohibited Transferee or to any nominee of such Prohibited Transferee, and any Right Certificate issued pursuant to Sections 6 or 11 hereof upon transfer, exchange, replacement or adjustment of any other Right Certificate referred to in this sentence, shall be null and void and each such Right Certificate, if submitted to the Company or the Rights Agent, will be subject to and contain the following legend or such similar legend as the Company may deem appropriate and as is not inconsistent with this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any -11- 15 stock exchange or transaction reporting system on which the Rights may from time to time be listed or quoted, or to conform to usage: The Rights represented by this Right Certificate were issued or transferred to a Person who was a Prohibited Transferee (as such term is defined in the Rights Agreement). This Right Certificate and the Rights represented hereby are null and void. (c) Neither the Rights Agent nor the Company shall, nor be obligated to, take any action whatsoever with respect to the transfer of any Right Certificate surrendered for transfer by any Person until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Right Certificate to the effect that such Person is not a Prohibited Transferee and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall request relating to such matter. (d) On the Record Date or as soon as practicable thereafter, the Company will send a copy of the Summary of Rights, by first-class, postage prepaid mail, to each record holder of Common Shares as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company as of such date. With respect to certificates representing Common Shares outstanding as of the Record Date, -12- 16 until the Distribution Date, the Rights will be evidenced by such certificates for Common Shares registered in the names of the holders thereof together with a copy of the Summary of Rights. (e) Certificates for Common Shares issued (including without limitation any certificates for Common Shares issued upon conversion of any convertible securities or upon exercise of stock options) or surrendered for transfer or exchange after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date, shall bear the following legend or such similar legend as the Company may deem appropriate and as is not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or transaction reporting system on which the Common Shares or the Rights may from time to time be listed or quoted, or to conform to usage: This Certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Special Rights Agreement between The Lubrizol Corporation and National City Bank, dated as of October 31, 1988 (as from time to time amended or supplemented, the "Rights Agreement"), the terms of which are incorporated herein by this reference and a copy of which is on file at the principal executive offices of The Lubrizol Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be evidenced by separate certificates and no longer be -13- 17 evidenced by this Certificate. The Lubrizol Corporation will mail to the holder of this Certificate a copy of the Rights Agreement without charge within five business days after receipt of a written request therefor. Rights beneficially owned by a Prohibited Transferee (as such term is defined in the Rights Agreement), and any subsequent holder of such Rights, are null and void. Section 4. Form of Right Certificates. The Right Certificates (including the forms of election to purchase and of assignment to be printed on the reverse thereof) shall be substantially in the form set forth as Exhibit B hereto with such changes, marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or transaction reporting system on which the Rights may from time to time be listed or quoted, or to conform to usage. The Right Certificates shall be dated as of the Distribution Date, and on their face shall entitle the holders thereof to purchase such number of Preferred Shares as shall be set forth therein. Section 5. Countersignature and Registration. (a) The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, President or any Vice President, -14- 18 either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent, and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. (b) Following the Distribution Date, the Rights Agent shall keep, or cause to be kept, at the principal office of the Rights Agent designated for such purpose and at such other offices as may be required to comply with any applicable law or -15- 19 with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or any transaction reporting system on which the Rights may from time to time be listed or quoted, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on the face of each of the Right Certificates and the date of each of the Right Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a) Subject to Sections 3(b), 12 and 13 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Business Day immediately preceding the Expiration Date, any Right Certificate or Right Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of Preferred Shares as the Right Certificate or Right Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the -16- 20 Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent designated for such purpose. Thereupon, the Rights Agent shall countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. (b) Subject to Sections 3(b) and 12 hereof, upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will execute and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) The registered holder of any Right -17- 21 Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time from and after the Exercisability Date and prior to the Close of Business on the Business Day immediately preceding the Expiration Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at an office of the Rights Agent designated for such purpose, together with payment of the Purchase Price for each Preferred Share as to which such surrendered Rights are exercised and an amount in cash equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9(d) hereof. The Purchase Price shall be payable in lawful money of the United States of America by certified check or bank draft payable to the order of the Company. (b) Subject to Sections 3(b), 7(d), 7(e), 12 and 13 hereof, upon receipt of a Right Certificate and payment as described above, the Rights Agent shall promptly (i) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent) certificates representing the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or, if the Company shall have elected to deposit the total number of -18- 22 Preferred Shares issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing the number of Preferred Shares as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company shall direct the depositary agent to comply with such request, (ii) promptly after receipt of such certificates (or depositary receipts, as the case may be), cause the same to be delivered to, or upon the order of, the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder, (iii) if appropriate, requisition from the Company the amount of cash to be paid in lieu of the issuance of fractional shares in accordance with Section 13 hereof, and (iv) if appropriate, after receipt, promptly cause such cash to be delivered, or upon the order of, the registered holder of such Right Certificate. (c) If the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to Sections 9(d) or 15 hereof. -19- 23 (d) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to any purported transfer of any Rights Certificate pursuant to Section 6 hereof or exercise of a Right Certificate as set forth in this Section 7 unless the registered holder of such Right Certificate shall have (i) completed and signed the certificate following the form of assignment or election to purchase set forth on the reverse side of the Right Certificate surrendered for such transfer or exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. (e) Notwithstanding anything in this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if, in the opinion of counsel to the Company appointed by majority vote of the Directors of the Company prior to the Exercisability Date, the requisite qualification or registration in such jurisdiction shall not have been effected or the exercise of the Rights shall not be permitted under applicable law. Neither the Company nor any of its Directors, officers, employees, agents or such counsel nor any of the Affiliates or Associates of any of the foregoing will have any liability or obligation to any holder of any Right -20- 24 relating to any claimed loss, damage, cost or expense incurred by such holder relating to any such period during which Rights are not exercisable under this Section 7(e) or Section 9(e) hereof. Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its stock transfer agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Right Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Right Certificates and deliver a certificate of destruction thereof to the Company. Section 9. Company Covenants Concerning Shares and Rights. The Company covenants and agrees that: (a) It will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred -21- 25 Shares held in its treasury the number of Preferred Shares that shall be sufficient to permit the exercise pursuant to Section 7 hereof of all outstanding Rights not beneficially owned by a Prohibited Transferee; such number of Preferred Shares reserved and kept available shall be adjusted from time to time, if and to the extent required, upon the occurrence of any of the events described in Section 11 hereof and pursuant to Section 23(a) hereof. (b) So long as the Preferred Shares issuable and deliverable upon the exercise of the Rights may be listed on a national securities exchange, it will endeavor to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance. (c) It will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights, at the time of delivery of the certificates for such shares, shall be (subject to payment of the Purchase Price) duly and validly authorized and issued, fully paid and nonassessable shares, free and clear of any liens, encumbrances or other adverse claims and not subject to any rights of call or first refusal. (d) It will pay when due and payable any and all federal and state transfer taxes and charges that may be payable in -22- 26 respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights; provided, however, it will not be required to pay any transfer tax or charge which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts representing Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise, or to issue or deliver any certificates for Preferred Shares upon the exercise of any Rights until any such tax or charge shall have been paid (any such tax or charge being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. (e) It will use its best efforts to (i) file on an appropriate form, as soon as is required by law following the Distribution Date, a registration statement under the Securities Act with respect to the securities purchasable upon exercise of the Rights, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) at all times at which any Rights are -23- 27 outstanding and exercisable pursuant to the provisions of this Agreement. The Company will also use its best efforts to ensure compliance with the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights; provided, however, that the Company may, in accordance with Section 7(e) hereof, suspend the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective and, upon any such suspension, the Company will issue a public announcement stating that the exercisability of the Rights has been suspended, as well as a public announcement at such time as the suspension is no longer in effect. (f) Following the Exercisability Date, the Directors of the Company will have, in addition to such other duties as they otherwise would have, fiduciary obligations to all holders of Preferred Shares equivalent to their fiduciary duties to holders of Common Shares. Section 10. Record Date. Upon the proper exercise of Rights, each Person in whose name any certificate representing Preferred Shares is issued shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby as of, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price -24- 28 (and all applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Share transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such securities on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Share or Common Share transfer books of the Company are open or, if there shall be no such succeeding Business Day, the date specified by such Person. Prior to the exercise of the Rights evidenced thereby in accordance with the Right Certificate, the holder of a Right Certificate shall not be entitled to any rights of a shareholder of the Company with respect to securities for which the Rights shall be exercisable, including without limitation the right to vote, receive dividends or other distributions and shall not be entitled to receive any notice of any proceedings of the Company, except as provided in this Agreement. Section 11. Adjustment of Number of Rights. Notwithstanding anything in this Agreement to the contrary, in the event that the Company shall at any time after the date of this Agreement and prior to the Distribution Date (i) declare a dividend on the outstanding Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares into a greater number of shares, (iii) combine the outstanding Common -25- 29 Shares into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of the Common Shares, the number of Rights associated with each Common Share then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each Common Share following any such event shall equal the result obtained by multiplying the number of Rights associated with each Common Share immediately prior to such event by a fraction the numerator of which shall be the total number of Common Shares outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of Common Shares outstanding immediately following the occurrence of such event. Section 12. Certain Prohibitions. Without limiting the generality or effect of Section 3(b) hereof, the Rights shall not be exercisable by a Prohibited Transferee, and any Rights beneficially owned by a Prohibited Transferee shall be null and void. Accordingly, any such Rights shall not be transferable to or exercisable by any Person, including without limitation any purported subsequent holder thereof. Section 13. Fractional Right Certificates and Fractional Shares. (a) The Company shall not be required to issue or to distribute Right Certificates which evidence fractional -26- 30 Rights. In lieu of such fractional Rights, the Company shall pay as promptly as practicable to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable on or after the Exercisability Date, an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this Section 13(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day (as such term is hereinafter defined) immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low -27- 31 asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by majority vote of the Directors of the Company shall be used and shall be conclusive for all purposes. The term "Trading Day" shall mean any day on which the principal national securities exchange on which the Common Shares are listed or admitted to trading is open for the transaction of business or, if the Common Shares are not listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of Ohio (or such other state in which the principal office of the Rights Agent may be located) are not authorized or obligated by law or executive order to close. (b) The Company shall not be required to issue fractions of Preferred Shares upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares. In lieu of fractional Preferred Shares, the Company -28- 32 shall either (i) make arrangements for the Rights Agent to sell Preferred Shares attributable to fractional shares otherwise issuable on account of exercised Rights and remit the net proceeds of such sales to the holders entitled thereto or (ii) pay to each registered holder of a Right on or as soon as practicable after such holder exercises any Right an amount in cash equal to the same fraction of the current market value of a whole Preferred Share. For purposes of the foregoing clause (ii) of this Section 13(b), the current market value of a whole Preferred Share shall be the closing price of the Preferred Shares for the Trading Day immediately prior to the date on which such fractional Preferred Shares would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Preferred Shares are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Preferred Shares are listed or admitted to trading or, if the Preferred Shares are -29- 33 not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Preferred Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Preferred Shares selected by the Directors of the Company. If on any such date no such market maker is making a market in the Preferred Shares, the fair value of the Preferred Shares on such date as determined in good faith by majority vote of the Directors of the Company shall be used and shall be conclusive for all purposes. (c) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional Preferred Shares, except as otherwise provided by this Section 13. Section 14. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 17 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares), other than a Prohibited Transferee; and any registered holder of any Right Certificate (or, prior to the -30- 34 Distribution Date, any Common Shares), other than a Prohibited Transferee, without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Shares), may in his own behalf and for his own benefit enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate or his rights under the express terms of the Preferred Shares. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights, other than a Prohibited Transferee, would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under this Agreement, and injunctive relief against actual or threatened violations of the obligations of any Person subject to this Agreement. Section 15. Agreement of Rights Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) Prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares; -31- 35 (b) After the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer; (c) The Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Share certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificate or the associated Common Share certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; and (d) Notwithstanding anything in this Agreement to the contrary, none of the Company, the Rights Agent or their respective directors, officers, employees or agents, shall have any liability to any holder of a Right or other Person as a result of their inability to perform any of their obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or -32- 36 commission which in any such case prohibits or otherwise restrains performance of such obligation; provided, however, the Company shall use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 16. Right Holder Not Deemed a Shareholder. No holder of any Right, as such, shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable upon the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders, or to receive dividends or subscription rights, or otherwise, until such holder shall have exercised such Right in accordance with the provisions of this Agreement. Section 17. Concerning the Rights Agent. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, -33- 37 on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, suit, action, proceeding or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Right Certificate or certificate evidencing Preferred Shares or other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document reasonably believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person. Section 18. Merger or Consolidation or Change of Name of Rights Agent. (a) Any corporation into which the Rights Agent -34- 38 or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 20 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. -35- 39 (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Section 19. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or -36- 40 desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the President or any Vice President of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Right -37- 41 Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of stock or other securities to be issued pursuant to this Agreement or any Right Certificate or as to whether any shares of stock or other securities will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. -38- 42 (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or -39- 43 accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. The Rights Agent shall not be under any duty or responsibility to insure compliance with any applicable federal or state securities laws in connection with the issuance, transfer or exchange of Right Certificates. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) The Rights Agent shall promptly remit to the Company any funds paid to it upon exercise of each Right pursuant to Section 7 hereof. Section 20. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 calendar days' notice in writing mailed to the Company and to each transfer agent of the Common Shares and Preferred Shares by registered or -40- 44 certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 calendar days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 calendar days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of the States of Ohio or New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the States of Ohio or New -41- 45 York), in good standing, having a principal office in the States of Ohio or New York, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million and which shall otherwise meet any requirements imposed by the New York Stock Exchange on transfer agents and registrars. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 20, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. -42- 46 Section 21. Redemption. (a) Subject to Section 21(c) hereof, the Directors of the Company, by majority vote, may, at their option, at any time prior to 5:00 p.m., Cleveland, Ohio time on the earlier of (i) the calendar day immediately preceding the Exercisability Date and (ii) the Final Expiration Date, authorize the Company to redeem all but not less than all of the then-outstanding Rights at a redemption price of $0.05 per Right (the "Redemption Price"). (b) Immediately upon the action of the Directors of the Company ordering the redemption of the Rights, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. Promptly after the action of the Directors ordering the redemption of the Rights, the Company shall publicly announce such action, and within 10 calendar days thereafter, the Company shall give notice of such redemption to the holders of the then-outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption -43- 47 will state the method by which the payment of the Redemption Price will be made. (c) A majority of the Directors of the Company may irrevocably relinquish the right to authorize the Company to redeem the Rights under Section 21(a) hereof by duly adopting a resolution to that effect. Promptly after adoption of such a resolution, the Company shall publicly announce such action. Upon adoption of such resolution, the rights of the Company to redeem the Rights under the portions of Section 21(a) hereof specified in such resolution shall irrevocably terminate without further action and without any notice. Section 22. Notices. (a) Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: The Lubrizol Corporation 29400 Lakeland Boulevard Wickliffe, Ohio 44092 Attention: Secretary (b) Subject to the provisions of Section 20 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until -44- 48 another address is filed in writing with the Company) as follows: National City Bank 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Corporate Trust Department (c) Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to or on the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Rights Agent. Section 23. Supplements and Amendments. Prior to the Exercisability Date, if the Company so directs, the Company, upon approval by a majority of the Directors of the Company, and the Rights Agent shall supplement or amend any provision of this Agreement in any manner which the Company may deem desirable without the approval of any holders of Rights or Common Shares, including without limitation any amendment which increases the number of Rights required to purchase one whole Preferred Share in the event that the number of Common Shares (excluding Common Shares beneficially owned by any Prohibited Transferee) outstanding shall at any time exceed 50,000,000. From and after the Exercisability Date, if the Company so directs, the Company, upon approval by a majority of the Directors of the Company, and the Rights Agent shall supplement -45- 49 or amend this Agreement without the approval of any holders of Right Certificates or certificates representing Common Shares and Rights in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or (iii) to change or supplement the provisions hereunder in any manner which the Company, upon such approval, may deem desirable, which change, amendment or supplement shall not adversely affect the interests of the holders of Rights or Preferred Shares (other than a Prohibited Transferee). Upon the delivery of a notice executed by an officer of the Company which states that the proposed supplement or amendment has been adopted under this Section 23, the Rights Agent shall execute such supplement or amendment; provided, however, that, notwithstanding any other provision of this Agreement, the failure or refusal of the Rights Agent to execute such supplement or amendment will not affect the validity or effective date of any supplement or amendment authorized by the Directors pursuant to this Section 23. Notwithstanding anything in this Agreement to the contrary, no supplement or amendment shall be made which decreases the Redemption Price or makes unexercisable or redeemable Rights which have previously become exercisable or nonredeemable by reason of the prior occurrence of the Exercisability Date. -46- 50 Section 24. Successors. (a) All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. (b) The Company covenants and agrees that it 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, to any Prohibited Transferee or any Affiliate or Associate thereof, or (iv) liquidate, dissolve or otherwise wind up the affairs of the Company, 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 Company'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 or the payments to be made upon redemption of the Preferred Shares in accordance with Section 3 of Exhibit A hereto, without proper provision being made for the redemption of the Preferred Shares in accordance with Section 3 of Exhibit A hereto. The -47- 51 Company shall not consummate any such consolidation, merger, sale, liquidation, dissolution or winding up unless prior thereto the Company and such other Person shall have executed and delivered to the Rights Agent a supplemental agreement evidencing compliance with this Section 24. Section 25. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent, the registered holders of the Right Certificates and, prior to the Distribution Date, the Common Shares (other than any Prohibited Transferee) any legal or equitable right, remedy or claim under this Agreement; this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent, the registered holders of the Right Certificates and, prior to the Distribution Date, the Common Shares (other than any Prohibited Transferee). Section 26. Action by Directors. Whenever any action hereunder or in connection with the Rights is required or permitted to be taken by the Directors of the Company, prior to the Exercisability Date such action may be taken by the Executive Committee of the Directors or by any other duly authorized committee thereof a majority of the members of which are not employees of the Company or any Subsidiary of the Company. -48- 52 Section 27. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 28. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the internal substantive laws of the State of Ohio and for all purposes shall be governed by and construed in accordance with the internal substantive laws of such State applicable to contracts to be made and performed entirely within such State. Section 29. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 30. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -49- 53 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. [SEAL] THE LUBRIZOL CORPORATION Attest: By /s/ J. I. Rue By /s/ W. T. Beargie Title: Secretary Title: Senior Vice President/Finance and Chief Financial Officer [SEAL] NATIONAL CITY BANK Attest: By /s/ John G. White By /s/ Lisa B. Brady Title: Trust Officer Title: Assistant Vice President 9827g/5890G/1016f -50- 54 Exhibit A DESCRIPTION OF THE RIGHTS AND PREFERENCES OF THE PREFERRED SHARES of THE LUBRIZOL CORPORATION 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 A-1 55 "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 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 A-2 56 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 A-3 57 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 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 from 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 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 A-4 58 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 payments shall have been 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. A-5 59 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 A-6 60 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 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 or 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. A-7 61 (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 herein 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 so 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 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 A-8 62 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 or the operation or disposition of the aforesaid assets; and provided, further, that the Corporation may provide that the interests so 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 other than 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) or the Series A Stock, and no shares of Series A Stock not issuable pursuant to and in accordance with the Rights Agreement, may be issued by the Corporation. (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; A-9 63 (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 (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. (E) 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. (F) 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 A-10 64 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 or the Series A Stock, without proper provision being made for the redemption of the Series A Stock in accordance with Section 3 of this Division C. Section 8. Prohibitions on 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 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 A-11 65 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 A-12 66 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 (1) 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 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. 1017f A-13 67 Exhibit B [Form of Right Certificate] Certificate No. SR- Rights [DISTRIBUTION DATE] THE RIGHTS EVIDENCED BY THIS CERTIFICATE ARE NOT EXERCISABLE AFTER 5:00 P.M., CLEVELAND, OHIO TIME, ON NOVEMBER 8, 1991, OR EARLIER IF REDEEMED. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.05 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE WERE ISSUED OR TRANSFERRED TO A PERSON WHO WAS A PROHIBITED TRANSFEREE (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT). THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY ARE NULL AND VOID.]* Right Certificate This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Special Rights Agreement, dated as of October 31, 1988 (as from time to time amended or supplemented, the "Rights Agreement"), between The Lubrizol Corporation, an Ohio corporation (the "Company"), and National City Bank, a national banking association headquartered in Cleveland, Ohio (the "Rights Agent"), to * The portion of the legend in brackets shall be inserted only if applicable. B-1 68 purchase from the Company at any time after the Exercisability Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m., Cleveland, Ohio time, on November 8, 1991, at the principal office of the Rights Agent or at its office designated for such purpose, or at the office of its successors as Rights Agent, one twenty-fifth of a fully paid nonassessable share of Serial Preferred Stock, Series A, without par value (the "Series A Stock"), of the Company, at a purchase price of $1.00 per whole share of Series A Stock (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. No Right is exercisable at any time prior to the Exercisability Date. This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates. Copies of the Rights Agreement are on file at the above-mentioned offices of the Rights Agent. Subject to the terms of the Rights Agreement, this Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent or such B-2 69 other office designated for that purpose, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of shares of Series A Stock as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. Subject to the terms of the Rights Agreement, if this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the terms of the Rights Agreement, (i) the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $0.05 per Right and (ii) the Rights Agreement, and thereby the Rights, may be amended or supplemented, in either case without the vote, consent or approval of the holders of the Rights. The Company is not obligated to issue fractional shares of Series A Stock, and, in lieu thereof, upon the exercise of any Right, may either make a payment in cash to the holder thereof based on the market price of the Series A Stock on the last trading day prior to the date of such exercise or arrange for the Rights Agent to sell shares of Series A Stock attributable to Rights otherwise exercisable for fractional shares and to remit the net proceeds thereof to the holders entitled thereto. B-3 70 No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the shares of Series A Stock, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of , 19 . B-4 71 THE LUBRIZOL CORPORATION ATTEST: By Secretary Title: Countersigned: NATIONAL CITY BANK By Authorized Signature B-5 72 [Form of Reverse Side of Right Certificate] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Right Certificates.) FOR VALUE RECEIVED hereby sells, assigns and transfers unto (Please print name and address of transferee) this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution. Dated: , 19 Signature Signature Guaranteed: B-6 73 CERTIFICATE The undersigned hereby certifies that the Rights evidenced by this Rights Certificate are not being sold, assigned or transferred by or on behalf of a Person who is or was a Prohibited Transferee or an Affiliate or Associate of any such Prohibited Transferee (as such terms are defined pursuant to the Rights Agreement). Dated: , 19 Signature Signature Guaranteed: NOTICE The signature to the foregoing Assignment must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. B-7 74 FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise the Right Certificate) To The Lubrizol Corporation: The undersigned hereby irrevocably elects to exercise Rights represented by this Right Certificate to purchase the Preferred Shares issuable upon the exercise of such Rights and requests that certificates for such shares be issued in the name of: Please insert social security or other identifying number (Please print name and address) If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number (Please print name and address) Dated: , 19 Signature (Signature must conform in all respects to name of holder as specified on the face of this Right Certificate) Signature Guaranteed: B-8 75 CERTIFICATE The undersigned hereby certifies that (i) the Rights evidenced by this Rights Certificate are not being exercised by or on behalf of a Person who is or was a Prohibited Transferee or an Affiliate or Associate of any such Prohibited Transferee (as such terms are defined pursuant to the Rights Agreement), (ii) the undersigned will furnish such information as the Company or the Rights Agreement may request, whether before or after the issuance of shares of Series A Stock to the undersigned, relating to the foregoing, and (iii) the undersigned, on behalf of himself and his Affiliates and Associates (as such terms are defined in the Rights Agreement) agrees that the issuance of certificates representing Series A Stock will not limit or otherwise affect the provisions of Sections 3 or 12 of the Rights Agreement or Section 8 of Division C of the Company's Amended and Restated Articles of Incorporation. Dated: , 19 Signature Signature Guaranteed: 1018f B-9 76 NOTICE The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. B-10 77 Exhibit C SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES The Rights On October 31, 1988, the Directors of The Lubrizol Corporation (the "Company") declared a distribution of one Right (a "Right") for each outstanding share of Common Stock, without par value (the "Common Shares"), of the Company. The distribution is payable to shareholders of record as of the close of business on November 10, 1988 (the "Record Date"). Each Right entitles the registered holder to purchase from the Company one twenty-fifth of a share of Serial Preferred Stock, Series A, without par value, of the Company (the "Series A Stock") at a price of $1.00 per whole share ($0.04 per one twenty-fifth of a share) (the "Purchase Price"). The description and terms of the Rights are set forth in 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 Company and National City Bank, as Rights Agent (the "Rights Agent"). Until the earlier to occur of the close of business on the fifteenth calendar day (or such later day as may be specified in certain circumstances by a majority of the Directors of the Company) following a public announcement that a person or group of affiliated or associated persons (a "Prohibited Transferee") C-1 78 (i) has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding Common Shares or (ii) has commenced or intends to commence a tender or exchange offer the consummation of which would result in beneficial ownership by such person or group of persons of 20% or more of the Common Shares, or otherwise intends to acquire 20% or more of the Common Shares (the earlier of such dates being hereinafter called the "Distribution Date"), the Rights will be evidenced, with respect to any of the Common Share certificates outstanding as of the Record Date, by such Common Share certificates with a copy of this Summary of Rights attached thereto. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the Common Shares. Until the Distribution Date (or earlier redemption or expiration of the Rights), new certificates issued after the Record Date upon transfer of Common Shares will contain a notation incorporating the Rights Agreement by reference, and the surrender for transfer of any certificates for Common Shares outstanding as of the Record Date, even without such notation or a copy of this Summary of Rights being attached thereto, will also constitute the transfer of the Rights associated with the Common Shares represented by such certificate. As soon as practicable following the Distribution C-2 79 Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date. As of and after the Distribution Date, the Rights will be evidenced solely by the separate Rights Certificates. No Right is exercisable until the earlier of (i) the sixteenth calendar day following the date of the first public announcement by the Company or a Prohibited Transferee that a Prohibited Transferee has become such (the "Share Acquisition Date") or such other date as the Directors of the Company may, in certain circumstances, from time to time specify for the expiration of their right to redeem the Rights or (ii) the date and time specified in a resolution adopted by a majority vote of the Directors of the Company relinquishing their right to authorize the Company to redeem the Rights (the earlier of such dates being hereinafter called the "Exercisability Date"). The Company may, however, suspend the exercisability of the Rights in order to make all necessary filings with the Securities and Exchange Commission and state securities agencies and to ensure compliance with applicable securities laws. The Rights will expire as of 5:00 p.m., Cleveland, Ohio time, on November 8, 1991, unless earlier redeemed by the Company as described below. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder C-3 80 of the Company, including without limitation the right to vote or to receive dividends. Any Rights beneficially owned by a Prohibited Transferee shall be null and void and of no force or effect and as a result will not be exercisable or transferable by the Prohibited Transferee or any purported subsequent holder of such Rights. Prior to the Exercisability Date, if the Company so directs, the Company, upon approval of a majority of the Directors then in office, may amend or supplement the Rights Agreement in any manner without the approval of any holders of Rights, except for an amendment or supplement which would decrease the Redemption Price (as defined below) and certain other amendments or supplements. After the Exercisability Date, if the Company so directs, the Company, upon approval of a majority of the Directors then in office, may amend or supplement the Rights Agreement to cure any ambiguity, to correct or supplement defective or inconsistent provisions or otherwise as the Company may deem desirable and which shall not adversely affect the interests of the Rights holders. The Rights are redeemable, at a redemption price of $0.05 per Right (the "Redemption Price"), at any time prior to the Exercisability Date. Immediately upon the action of the Directors of the Company ordering the redemption of the Rights, C-4 81 the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights will be to receive the Redemption Price. The Series A Stock The terms of the Series A Stock have been structured, generally, so that the after-tax amounts realizable from the patent litigation against Exxon Corporation and related actions specified by majority vote of the Company's Directors (collectively, the "Covered Cases") are for the benefit of the Company and its shareholders, other than any Prohibited Transferee. From the date of issuance, holders of Series A Stock will be entitled to receive, as and when declared, cumulative cash dividends payable quarterly. The dividend rate on the Series A Stock is 8% per annum of the Cash Redemption Amount (defined, generally, as the per share after-tax amount of cash and the value of any other assets which as of a particular date have been collected as a result of the Covered Cases). Subject to certain restrictions set forth in the terms of the Series A Stock, the Series A Stock is redeemable in whole or in part, at the option of the Company, at any time after the proceeds of the Covered Cases exceed $50 million. The Company is not obligated to issue fractional shares of Series A Stock, and, in lieu thereof, upon exercise of a Right, C-5 82 may either make a payment in cash to the holder thereof based on the market price of the Series A Stock on the last trading day prior to the date of such exercise or arrange for the Rights Agent to sell shares of Series A Stock attributable to Rights otherwise exercisable for fractional shares and to remit the net proceeds thereof to the holders entitled thereto. Starting with the second anniversary date of the first issuance of shares of Series A Stock, and annually thereafter until fully redeemed, the Company will redeem 25% of the greatest number of shares of Series A Stock at any time outstanding. All remaining shares of Series A Stock, if any, will be redeemed by the Company on the fifth anniversary date of the first issuance of shares of Series A Stock. In addition, the Company will redeem shares of Series A Stock, at the option of the holders thereof, during a specified period preceding the adoption of any resolution for the dissolution of the Company. In each case, the redemption price for the Series A Stock will be, generally, equal to the proportionate interest in the Cash Redemption Amount plus $1.00 and any accrued but unpaid dividends. In addition, any holders of shares of Series A Stock which are redeemed prior to the final adjudication or settlement of the Covered Cases will receive the right to receive their proportionate interest in any additional amounts collected. C-6 83 General A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A, dated November 7, 1988. A copy of the Rights Agreement is available free of charge to shareholders from the Company upon written request therefor. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, including the Description of the Rights and Preferences of the Series A Stock set forth in Exhibit A thereto, which Rights Agreement and Exhibit A are hereby incorporated herein by this reference. C-7 EX-4.F 8 EXHIBIT 4.F 1 EXHIBIT (4)(f) THE LUBRIZOL CORPORATION 29400 Lakeland Boulevard Wickliffe, Ohio 44092 October 28, 1991 National City Bank 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Corporate Trust Department Re: Amendment No. 2 to Rights Agreement Gentlemen: Pursuant to Section 26 of the Rights Agreement, dated as of October 6, 1987, between The Lubrizol Corporation, an Ohio corporation (the "Company"), and National City Bank (the "Rights Agent"), as amended by an Amendment to Rights Agreement, dated October 24, 1988, between the Company and the Rights Agent (as amended, the "Rights Agreement"), the Company, by resolutions adopted by the unanimous vote of its Board of Directors, hereby amends the Rights Agreement as follows (this Amendment No. 2 to Rights Agreement is hereinafter referred to as "this Amendment"): 1. To amend clause (ii) of the Recitals to read in its entirety as follows: "(ii) the Expiration Date, or" 2. To amend Section 1(a) to add the following at the end of Section 1(a): "; and provided, further, that a Person shall not be deemed to have become an Acquiring Person solely as a result of a reduction in the number of Common Shares outstanding unless and until (i) such time as such Person or any Affiliate or Associate of such Person shall thereafter become the Beneficial Owner of any additional Common Shares, other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Common Shares are treated equally, or (ii) any other Person who is the 2 2 Beneficial Owner of any Common Shares shall thereafter become an Affiliate or Associate of such Person." 3. To renumber Sections 1(i) and 1(j) as Sections 1(m) and 1(n), respectively, to reflect the addition of Sections l(i), 1(j), 1(k), 1(l) and 1(o) pursuant to item 5 of this Amendment. 4. To renumber Sections 1(k) and 1(1) as Sections 1(p) and 1(q), respectively, to reflect the addition of Section 1(o) pursuant to item 5 of this Amendment. 5. To add new Sections 1(i), 1(j), 1(k), 1(l), 1(o) and 1(r) to read in their entirety as follows: "(i) "Distribution Date" shall have the meaning ascribed to such term in Section 3 hereof. (j) "Expiration Date" shall mean the earlier of (i) the date on which the Rights are redeemed as provided in Section 23 hereof or (ii) the time at which all exercisable Rights are exchanged as provided in Section 11(p) hereof. (k) "Flip-In Event" shall mean any event described in clauses (A), (B) or (C) of Section 11(a)(ii) hereof. (l) "Flip-Over Event" shall mean any event described in clauses (i), (ii) or (iii) of Section 11(d) hereof. (o) "Redemption Price" shall mean $.05 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof. (r) "Triggering Event" shall mean any Flip-In Event or Flip-Over Event. 6. To amend the first sentence of Section 3(a) to read in its entirety as follows: "Until the earliest of (i) the Close of business on the tenth Business Day (or, unless the Distribution Date shall have previously occurred, such later date as may be specified by the Directors of the Company) after the Share Acquisition Date, (ii) the Close of business on the tenth Business Day (or, unless the Distribution Date shall have previously occurred, such later date as may be specified by the Directors of the Company) after the date of the commencement of a tender or exchange offer by any Person (other than the Company or any Subsidiary or any employee benefit or stock ownership plan of the Company or of any Subsidiary or any entity holding Common Shares for or pursuant to the terms of any such plan), if upon the consummation thereof such Person would be the Beneficial Owner of 20% or more of the outstanding Common Shares, and 3 3 (iii) the Close of business on the tenth Business Day after the first date of public announcement by the Company or an Acquiring Person (by press release, filing made with the Securities and Exchange Commission or otherwise) of the first occurrence of a Triggering Event (the earliest of such dates being herein referred to as the "Distribution Date"), the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for Common Shares registered in the names of the record holders thereof (which certificates for Common Shares shall also be deemed to be Right Certificates) and not by separate Right Certificates, and the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares in the stock transfer books of the Company maintained by the Company or its appointed transfer agent." 7. To amend the last sentence of Section 3(a) to delete the following clause: "Section 11(a)(ii) or Section 11(d)" 8. To amend the second sentence of Section 4 to delete the following clause: "shall be dated as of the Record Date, and" 9. To amend Section 7(a) to read in its entirety as follows: "(a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date and at or prior to the Close of business on the earlier of the Expiration Date or the Final Expiration Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at an office of the Rights Agent designated for such purpose, together with an amount in cash, in lawful money of the United States of America, by certified check or bank draft payable to the order of the Company, equal to the Purchase Price for each Common Share as to which such surrendered Rights are exercised, or, if applicable, the exercise price per Right specified in Sections 11(a)(ii) or 11(d) hereof, as the case may be, together with an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof; provided, however, that after the later of the first occurrence of a Triggering Event and the Distribution Date, in lieu of the cash payment payable to the Company referred to in this sentence, the registered holder of a Right Certificate evidencing exercisable Rights (which shall not include Rights that have become void pursuant to Section 11(a)(ii) hereof) may, at its option, exercise the Rights evidenced thereby in whole or in part in accordance with this Section 7(a) upon 4 4 surrender of the Right Certificate as described above, together with the election to exercise such Rights without payment of cash on the reverse side thereof duly completed. With respect to any Rights as to which such an election to exercise without payment of cash is made, the holder shall receive, upon exercise, a number of Common Shares or other securities, as the case may be, having a current per share market price (determined pursuant to Section 11(e) hereof as of the date of the first occurrence of any Triggering Event) equal to the excess of (i) the aggregate current per share market price of the Common Shares or other securities (determined pursuant to Section 11(e) hereof as of the date of the first occurrence of any Triggering Event) that would have been issuable upon payment of the cash amount as described above over (ii) the amount of cash that would have been payable to the Company upon exercise absent such election." 10. To amend Section 7(b) to read in its entirety as follows: "(b) The Purchase Price for each Common Share pursuant to exercise of a Right shall initially be $150 (equivalent to $75 for each one-half of a Common Share), and shall be subject to adjustment from time to time as provided in Section 11 hereof." 11. To amend Section 7(c) to read in its entirety as follows: "(c) Subject to Sections 7(d), 11(a)(ii), and 11(d) hereof, upon receipt of a Right Certificate representing exercisable Rights with the form of election to purchase duly executed, accompanied by either payment as described above or a duly completed election to exercise without payment of cash, the Rights Agent shall promptly (i) requisition from any transfer agent of the Common Shares (or make available, if the Rights Agent is the transfer agent) certificates representing the number of whole Common Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, (ii) promptly after receipt of such certificates, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder, (iii) if appropriate, requisition from the Company the amount of cash to be paid or depository receipts to be issued in lieu of the issuance of fractional shares in accordance with Section 14 hereof or in lieu of the issuance of Common Shares in accordance with Section 11(a)(iii) or 11(d) hereof, and (iv) if appropriate, after receipt, promptly deliver such cash (or depository receipts, when appropriate) to or upon the order of the registered holder of such Right Certificate." 12. To add new Section 7(e) to read in its entirety as follows: "(e) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be 5 5 obligated to undertake any action with respect to any purported transfer, split up, combination or exchange of any Right Certificate pursuant to Section 6 hereof or exercise of a Right Certificate as set forth in this Section 7 unless the registered holder of such Right Certificate shall have (i) completed and signed the certificate following the form of assignment or the form of election to purchase, as applicable, set forth on the reverse side of the Right Certificate surrendered for such transfer, split up, combination, exchange or exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall have reasonably requested." 13. To amend paragraph 3 of Section 9 to add at the end of the parenthetical that reads "subject to payment of the Purchase Price" the following: "if required" 14. To amend Section 9 to add the following at the end of Section 9: "The Company further consents and agrees to use its best efforts to (i) file on an appropriate form, as soon as practicable following the later to occur of a Triggering Event or the Distribution Date, a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities issuable upon exercise of the Rights, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earliest of (A) the date as of which the Rights are no longer exercisable for such securities, (B) the Expiration Date, and (C) the Final Expiration Date. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective and upon any such suspension, the Company will issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding anything in this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite registration or qualification in such jurisdiction shall not have been effected or the exercise of the Rights shall not be permitted under applicable law. Notwithstanding anything in this Agreement to the contrary, the Company covenants and agrees that, after the Distribution 6 6 Date, it will not, except as permitted by Section 23 or Section 26 hereof, take any action if at the time such action is taken it is reasonably foreseeable that such action will diminish or otherwise eliminate the benefits intended to be afforded by the Rights. In the event that the Company is obligated to pay cash and/or distribute other property pursuant to Sections 11, 13, and 14 hereof, it will make all arrangements necessary so that such cash and/or property are available for distribution by the Rights Agent, if and when appropriate." 15. To amend the first sentence of Section 10 to add at the end of the clause that reads "payment of the Purchase Price" the following: "if required" 16. To amend clause (C) of Section 11(a)(ii) to add at the end of clause C of Section 11(a)(ii) the following: "; provided, however, that a Person shall not be deemed to have become the Beneficial Owner of 20% or more of the Common Shares then outstanding for the purposes of this Section 11(a)(ii)(C) solely as a result of a reduction in the number of Common Shares outstanding unless and until such time as (1) such Person or any Affiliate or Associate of such Person shall thereafter become the Beneficial Owner of any additional Common Shares other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Common Shares are treated equally, or (2) any other Person who is the Beneficial Owner of any Common Shares shall thereafter become an Affiliate or Associate of such Person," 17. To amend Section 11(a)(ii) by deleting the language following Section 11(a)(ii) (C) (as amended pursuant to item 16 of this Amendment) in its entirety and replacing such language with the following: "then, and in each such case, the Company shall make adjustments in the terms of the Rights so that each holder of a Right, except as provided below, shall thereafter have a right to receive, upon exercise thereof in accordance with the terms of this Agreement, at an exercise price per Right equal to the product of two times the then-current Purchase Price multiplied by the number of Common Shares for which a Right was exercisable immediately prior to the first occurrence of a Triggering Event, such number of Common Shares as shall equal the result obtained by (x) multiplying the product of two times the then-current Purchase Price by the number of Common Shares for which a Right was exercisable immediately prior to the first occurrence of a Triggering Event and dividing that product by (y) 50% of the current per share market price of the 7 7 Common Shares (determined pursuant to Section 11(e) hereof) on the date of the first occurrence of a Triggering Event. Notwithstanding anything in this Agreement to the contrary, from and after the later of the Distribution Date and the first occurrence of a Flip-In Event, (1) any Rights that are or were acquired or beneficially owned by any Acquiring Person (or any Affiliate or Associate of such Acquiring Person) shall be void and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement, (2) no Right Certificate shall be issued pursuant to this Agreement that represents Rights that are beneficially owned by an Acquiring Person or any Affiliate or Associate thereof, (3) no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person or any Affiliate or Associate thereof or to any nominee of such Acquiring Person or Affiliate or Associate thereof, and (4) any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person or any Affiliate or Associate thereof shall be cancelled. Notwithstanding anything to the contrary set forth herein, the provisions of this Section 11(a)(ii) shall not apply to any Permitted Transaction." 18. To amend Section 11(a)(iii) to read in its entirety as follows: "(iii) Upon the occurrence of a Flip-In Event, if there shall not be sufficient authorized but unissued Common Shares or authorized and issued Common Shares held in treasury to permit the exercise in full of the Rights in accordance with the foregoing subsection (ii), the Directors of the Company shall use their best efforts promptly to authorize and, subject to the provisions of Section 9 hereof, make available for issuance additional Common Shares; provided, however, that if at any time after 90 calendar days after the first occurrence of a Flip-In Event, there shall not be sufficient Common Shares available for issuance upon the exercise of a Right, then the Company shall deliver, upon the surrender of such Right and without requiring payment of the Purchase Price, Common Shares (to the extent available), and then cash (to the extent permitted by applicable law and any agreements or instruments to which the Company is a party in effect immediately prior to the first occurrence of any Flip-In Event), which Common Shares and cash shall have an aggregate value equal to the excess of (x) the aggregate current per share market price (determined pursuant to Section 11(e) hereof) of all the Common Shares issuable in accordance with subsection (ii) of this Section 11(a) upon the exercise of a Right over (y) the product of the then-current Purchase Price multiplied by the number of Common Shares for which a Right was exercisable immediately prior to the first occurrence of a Triggering Event. To the extent that any legal or contractual restrictions 8 8 prevent the Company from paying the full amount of cash payable in accordance with the foregoing sentence, the Company shall pay to holders of the Rights as to which such payments are being made all amounts which are not then restricted on a pro rata basis. The Company shall continue to make payments on a pro rata basis as funds become available until such payments have been paid in full." 19. To amend Section 11(d) to read in its entirety as follows: "(d) In the event that, following the Share Acquisition Date, directly or indirectly: (i) the Company shall consolidate with, or merge with or into, any other Person and the Company shall not be the continuing or surviving corporation of such merger or consolidation; or (ii) any Person shall consolidate with the Company, or merge with or into the Company and the Company shall be the continuing or surviving corporation of such merger or consolidation and, in connection with such merger or consolidation, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property; or (iii) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power (including, without limitation, securities creating any obligation on the part of the Company and/or any of its Subsidiaries) representing in the aggregate more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons; then, and in each such case, proper provision shall be made so that (A) each holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof in accordance with the terms of this Agreement at an exercise price per Right equal to the product of two (2) times the then-current Purchase Price multiplied by the number of Common Shares for which a Right was exercisable immediately prior to the first occurrence of a Triggering Event, such number of validly authorized and issued, fully paid, nonassessable and freely tradeable Common Shares of the Issuer (as such term is hereinafter defined), free and clear of any liens, encumbrances and other adverse claims and not subject to any rights of call or first refusal, as shall be equal to the result obtained by (x) multiplying the product of two 9 9 (2) times the then-current Purchase Price by the number of Common Shares for which a Right is exercisable immediately prior to the first occurrence of a Triggering Event and dividing that product by (y) 50% of the current per share market price of the Common Shares of the Issuer (determined pursuant to Section 11(e) hereof), on the date of consummation of such Flip-Over Event; (B) the Issuer shall thereafter be liable for, and shall assume, by virtue of the consummation of such Flip-Over Event, all the obligations and duties of the Company pursuant to this Agreement; (C) the term "Company" shall thereafter be deemed to refer to the Issuer; and (D) the Issuer shall take such steps (including, without limitation, the reservation of a sufficient number of its Common Shares to permit the exercise of all outstanding Rights) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be possible, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights. For purposes of this Section 11(d), "Issuer" shall mean (A) in the case of any Flip-Over Event described in Sections 11(d)(i) or (ii) above, the Person that is the continuing, surviving, resulting or acquiring Person (including the Company as the continuing or surviving corporation of a transaction described in Section 11(d)(ii) above), and (B) in the case of any Flip-Over Event described in Section 11(d)(iii) above, the Person that is the party receiving the greatest portion of the assets or earning power (including, without limitation, securities creating any obligation on the part of the Company and/or any of its Subsidiaries) transferred pursuant to such transaction or transactions; provided, however, that, in any such case, (x) if (1) no class of equity security of such Person is, at the time of such merger, consolidation or transaction and has been continuously over the preceding 12-month period, registered pursuant to Section 12 of the Exchange Act, and (2) such Person is a Subsidiary, directly or indirectly, of another Person, a class of equity security of which is and has been so registered, the term "Issuer" shall mean such other Person; and (y) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, a class of equity security of two or more of which are and have been so registered, the term "Issuer" shall mean whichever of such Persons is the issuer of the equity security having the greatest aggregate market value. Notwithstanding the foregoing, if the Issuer in any of the Flip-Over Events listed above is not a corporation or other legal entity having outstanding equity securities, then, and in each such case, (A) if the Issuer is directly or indirectly wholly owned by a corporation or other legal entity having outstanding equity securities, then all references to Common Shares of the Issuer shall be deemed to be 10 10 references to the Common Shares of the corporation or other legal entity having outstanding equity securities which ultimately controls the Issuer, and (B) if there is no such corporation or other legal entity having outstanding equity securities, (1) proper provision shall be made so that the Issuer shall create or otherwise make available for purposes of the exercise of the Rights in accordance with the terms of this Agreement, a kind or kinds of security or securities having a fair market value at least equal to the economic value of the Common Shares which each holder of a Right would have been entitled to receive if the Issuer had been a corporation or other legal entity having outstanding equity securities; and (2) all other provisions of this Agreement shall apply to the issuer of such securities as if such securities were Common Shares. The Company shall not consummate any Flip-Over Event unless the Issuer shall have a sufficient number of authorized Common Shares (or other securities as contemplated above) which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 11(d), and unless prior to such consummation the Company and the Issuer shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in Section 11(d) and further providing that as promptly as practicable after the consummation of any Flip-Over Event, the Issuer shall: (A) prepare and file a registration statement under the Securities Act, with respect to the Rights and the securities issuable upon exercise of the Rights on an appropriate form, and shall use its best efforts to cause such registration statement to (1) become effective as soon as practicable after such filing and (2) remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of the Expiration Date and the Final Expiration Date; (B) take all such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights; and (C) deliver to holders of the Rights historical financial statements for the Issuer and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act. The provisions of this Section 11(d) shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Flip-Over Event occurs at any time after the occurrence of a Flip-In Event, the 11 11 Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in this Section 11(d). In the event that the Company shall be the continuing or surviving corporation in a merger or consolidation referred to in subparagraph (ii) above and Common Shares of the Company are required to be issued upon exercise of the Rights following such merger or consolidation, and if there shall not be sufficient authorized but unissued Common Shares or authorized and issued Common Shares held in treasury to permit the exercise in full of the Rights in accordance with the foregoing, the Directors of the Company shall use their best efforts promptly to authorize and, subject to the provisions of Section 9 hereof, make available for issuance additional Common Shares; provided, however, that if at any time after 90 calendar days after the first occurrence of a Flip-In Event, there shall not be sufficient Common Shares available for issuance upon the exercise of a Right, then the Company shall deliver, upon the surrender of such Right and without requiring payment of the Purchase Price, Common Shares (to the extent available), and then cash (to the extent permitted by applicable law and any agreements or instruments to which the Company is a party in effect immediately prior to the first occurrence of any Flip-In Event), which Common Shares and cash shall have an aggregate value equal to the excess of (x) the aggregate current per share market price (determined pursuant to Section 11(e) hereof) of all the Common Shares issuable in accordance with this Section 11(d) upon the exercise of a Right over (y) the product of the then-current Purchase Price multiplied by the number of Common Shares for which a Right was exercisable immediately prior to the occurrence of the merger or consolidation referred to in subparagraph (ii) above. To the extent that any legal or contractual restrictions prevent the Company from paying the full amount of cash payable in accordance with the foregoing sentence, the Company shall pay to holders of the Rights as to which such payments are being made all amounts which are not then restricted on a pro rata basis. The Company shall continue to make payments on a pro rata basis as funds become available until such payments have been paid in full." 20. To amend Section 11(o) to replace the clause "shares of Common Stock" with the following: "Common Shares" 21. To add new Section 11(p) to read in its entirety as follows:. "(p) Notwithstanding the provisions of Sections 11(a) (ii) and 11(d) hereof, the Directors of the Company may, at 12 12 their option, at any time after the later of the Distribution Date and the first occurrence of a Triggering Event, exchange all or part of the then-outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Directors of the Company shall not be empowered to effect such exchange at any time after any Person (other than the Company or any Subsidiary or any employee benefit plan of the Company or of any Subsidiary or any entity holding Common Shares for or pursuant to the terms of any such plan) together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares then outstanding. Immediately upon the action of the Directors of the Company ordering the exchange of any Rights pursuant to this Section 11(p), and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right with respect to such Rights thereafter of the holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. Promptly after the action of the Directors of the Company ordering the exchange of any Rights pursuant to this Section 11(p), the Company shall publicly announce such action, and within 10 calendar days thereafter shall give notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange shall state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii)) held by each holder of Rights. In any exchange pursuant to this Section 11(p), the Company, at its option, may substitute for any Common Share exchangeable for a Right, (i) cash, (ii) debt securities of the Company, (iii) other assets, or (iv) any combination of the foregoing, in any event having an aggregate value which the Directors of the Company shall have determined in good faith to be equal to the current per share market price of one Common Share (determined pursuant to Section 11(e) hereof) on the Trading Day 13 13 immediately preceding the date of exchange pursuant to this Section 11(p). The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares upon the exchange of a Right. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current per share market price of a whole Common Share (determined pursuant to Section 11(e) hereof) on the Trading Day immediately preceding the date of exchange pursuant to this Section 11(p)." 22. To amend Section 17 to add at the end of the first sentence thereof the following: "or exchanged pursuant to the provisions of Section 11(p) hereof" 23. To amend Section 23(a) to read in its entirety as follows: "(a) Prior to the earlier of the Expiration Date and the Final Expiration Date, the Directors of the Company may, at their option, redeem all but not less than all of the then-outstanding Rights at the Redemption Price at any time prior to the Close of business on the later of (i) the Distribution Date and (ii) the Share Acquisition Date." 24. To delete Sections 23(b) and 23(f) in their entirety, and to renumber Sections 23(c), 23(d) and 23(e) as Sections 23(b), 23(c) and 23(d), respectively. 25. To delete the last two sentences of Section 23(c) (as renumbered by item 24 of this Amendment) and to add at the end of Section 23(c) the following: "; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of the redemption of the Rights. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. The notice of redemption mailed to the holders of Rights shall state the method by which the payment of the Redemption Price will be made. The Company may, at its option, pay the Redemption Price in cash, Common Shares (based upon the current per share market price of the Common Shares (determined pursuant to Section 11(e) hereof) at the time of redemption) or any other form of consideration deemed appropriate by the Directors of the Company (based upon the fair market value of such other consideration, determined by the Directors of the Company in good faith) or any combination thereof." 14 14 26. To amend Section 23(d) (as renumbered by item 24 of this Amendment) to replace the clause "paragraphs (a) or (b) above, or both," with the following: "paragraph (a) above" 27. The form of Right Certificate attached as Exhibit A to the Rights Agreement and the form of Summary of Rights attached as Exhibit B to the Rights Agreement are hereby amended to reflect the provisions of this Amendment. 28. This Amendment is effective as of October 28, 1991, and all references to the Rights Agreement shall, as of such date, be deemed to be references to the Rights Agreement, as amended by this Amendment. Very truly yours, THE LUBRIZOL CORPORATION By: Name: L. E. Coleman Title: Chairman & CEO Agreed to and Accepted: NATIONAL CITY BANK By: Name: Title: EX-4.G 9 EXHIBIT 4.G 1 EXHIBIT (4)(g) THE LUBRIZOL CORPORATION 29400 Lakeland Boulevard Wickliffe, Ohio 44092 October 28, 1991 National City Bank 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Corporate Trust Department Re: Amendment No. 1 to Special Rights Agreement Gentlemen: Pursuant to Section 23 of the Special Rights Agreement, dated as of October 31, 1988 ("Special Rights Agreement"), between The Lubrizol Corporation (the "Company") and National City Bank (the "Rights Agent"), the Company, by resolution adopted by unanimous vote of its Directors, hereby amends the Special Rights Agreement as follows (this Amendment No. 1 to the Special Rights Agreement is hereinafter referred to as "this Amendment"). 1. To amend Section 1(k) of the Special Rights Agreement to read in its entirety as follows: "(k) "Final Expiration Date" shall mean November 8, 1996." 2. To amend Section 7(A) of Exhibit A to the Special Rights Agreement to read in its entirety as follows: "(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." 2 2 3. The form of Right Certificate attached as Exhibit A to the Special Rights Agreement and the form of Summary of Rights attached as Exhibit B to the Special Rights Agreement are hereby amended to reflect the provisions of this Amendment. 4. This Amendment is effective as of October 28, 1991, and all references to the Special Rights Agreement shall, as of such date, be deemed to be references to the Rights Agreement, as amended by this Amendment. Very truly yours, THE LUBRIZOL CORPORATION By: Name: L. E. Coleman Title: Chairman & CEO Agreed to and Accepted: NATIONAL CITY BANK By Name: Title: -2- EX-10.A 10 EXHIBIT 10.A 1 EXHIBIT (10)(a) THE LUBRIZOL CORPORATION 1975 EMPLOYEE STOCK OPTION PLAN 1. Purpose of Plan. The purpose of this Plan is to advance the interest of The Lubrizol Corporation (hereinafter called the "Corporation") and its share- holders by providing a means whereby employees of the Corporation and its sub- sidiaries may be given an opportunity to purchase Common Shares (hereinafter called "shares") of the Corporation under options granted under the Plan which may be (i) options which are intended to qualify as "qualified stock options" under Section 422 of the Internal Revenue Code of 1954, as amended, (hereinafter called a "qualified stock option"), and (ii) options which are not intended so to qualify under the Internal Revenue Code (hereinafter called a "nonstatutory stock option"), to the end that the Corporation may retain present personnel upon whose judg- ment, initiative and efforts the successful conduct of the business of the Corporation largely depends, and may attract new personnel. 2. Shares Subject to the Plan. The aggregate number of shares of the Corpo- ration for which options may be granted under this Plan shall be 300,000; provided, however, that whatever number of said shares shall not have been issued pursuant to the exercise of options at the time of any stock split, stock dividend or other change in the Corporation's capitalization shall be appropriately and proportionately adjusted to reflect such stock dividend, stock split or other change in capitalization. Such shares shall be made available from authorized but unissued or reacquired shares of the Corporation. If an option shall expire or terminate for any reason without being exercised in full, the unpurchased shares shall become available for other options to be granted under this Plan. 3. Stock Option Committee. This Plan shall be administered under the supervision of a Stock Option Committee (hereinafter called the "Committee"), composed of not less than three directors of the Corporation appointed by the Board of Directors. The members of the Committee shall not be eligible, and shall not have been eligible for a period of at least one year prior to their appointment, to participate in this Plan or any other plan of the Corporation or of any affiliate (as defined under the Securities Exchange Act of 1934) of the Corporation- entitling 1 2 the participants therein to acquire stock or qualified, restricted or employee stock purchase plan options (as respectively defined in Sections 422, 423 and 424 of the Internal Revenue Code) of the Corporation or any affiliate of the Corporation. Members of the Committee shall serve at the pleasure of the Board of Directors, and may resign by written notice filed with the Chairman of the Board or the Secretary of the Corporation. A vacancy in the membership of the Committee shall be filled by the appointment of a successor member by the Board of Directors. Until such vacancy is filled, the remaining members shall constitute a quorum and the action at any meeting of a majority of the entire Committee, or an action unanimously approved in writing, shall constitute action of the Committee. Subject to the express provisions of this Plan. the Committee shall have conclusive authority to construe and interpret the Plan and any stock option agreement entered into there- under and to establish, amend, and rescind rules and regulations for its administra- tion and shall have such additional authority as the Board of Directors may from time to time determine to be necessary or desirable. 4. Granting of Options. The Committee from time to time shall designate from among the full-time key employees of the Corporation and its subsidiaries those employees to whom qualified and nonstatutory stock options to purchase shares shall be granted under this Plan and the number of shares which shall be subject to each option so granted. The Committee shall direct an appropriate officer of the Corporation to execute and deliver option agreements to employees reflecting the grant of options. All actions of the Committee under this Paragraph shall be conclusive; provided, however, that the aggregate number of shares for which an option or options may be granted to any one employee under this Plan shall not exceed 15,000 (subject to appropriate and proportionate adjustment in accord- ance with Paragraph 2 hereof) and no qualified stock option shall be granted to any employee if, after the granting of such option, the aggregate of the shares specified by such option together with the shares then owned by the employee, would constitute more than five percent (5%) of the total combined voting power or value of all classes of shares of the Corporation or of a parent or subsidiary of the Corporation. For the purpose of the preceding sentence, an employee shall be deemed to own all shares which are attributable to him under Sections 422(c) (3) and 425(d) of the Internal Revenue Code (including, without limiting the generality of the foregoing, shares which are owned by his brothers, sisters, spouse, ancestors and lineal descendants). 2 3 5. Option Period. The option rights granted under this Plan to any employee shall expire on a date not later than five years in the case of a qualified stock option and not later than ten years in the case of a nonstatutory stock option after the date on which the option rights are so granted to him. 6. Option Price. The option price shall be fixed by the Committee and set forth in the Option Agreement, which price in no case shall be less than the per share fair market value of the outstanding shares of the Corporation at the time that the option is granted, as determined by the Committee. The Committee may fix such option price in terms of a formula and authorize one or more officers of the Corporation to compute the price in accordance with that formula. The date on which the Committee approves the granting of an option shall be deemed the date on which the option is granted. 7. Option Agreement. The Option Agreement in which option rights are granted to an employee shall be in the applicable form (consistent with this Plan) from time to time approved by the Committee and shall be signed on behalf of the Corporation by the Chairman of the Board, the President or any Vice President of the Corporation, other than the employee who is a party thereto, and shall be dated as of the date of the granting of the option, as determined in Paragraph 6 hereof. 8. Amendment and Termination of the Plan. The Corporation, by action of its Board of Directors, reserves the right to amend, modify or terminate at any time this Plan, or, by action of the Committee with the consent of the optionee, to amend, modify or terminate any outstanding option agreement, except that the Corporation may not, without further shareholder approval, increase the total number of shares as to which options may be granted under the Plan (except increases attributable to the adjustments authorized in Paragraph 2 hereof) or change the employees or class of employees eligible to receive options, and no action shall be taken by the Corporation which will impair the validity of any option then outstanding or which, with regard to qualified stock options, will prevent such options issued or to be issued under this Plan from being "qualified stock options" under Section 422 of the Internal Revenue Code, or subsequent comparable statute, or prevent such options issued pursuant to this Plan from meeting the requirements for exemption from Section 16(b) of the Securities Exchange Act of 1934, or sub- 3 4 sequent comparable statute, as set forth in Rule 16b-3 under said Act or subsequent comparable rule. 9. Subsidiary. The term "subsidiary" as used herein shall mean any corpora- tion in an unbroken chain of corporations beginning with the Corporation and ending with the employer corporation if, at the time of the granting of the option, each of the corporations other than the employer corporation owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 10. Effective Date of Plan. The Plan shall be effective upon adoption of the Plan by the Board of Directors of the Corporation. The Plan shall be submitted to the shareholders of the Corporation for approval within one year after its adoption by the Board of Directors, and if the Plan shall not be approved by the shareholders within said period, the Plan shall be void and of no effect. Any options granted under the Plan prior to the date of approval by the shareholders shall be void if such shareholders' approval is not obtained. 11. Expiration of Plan. Options may be granted under this Plan at any time prior to January 26, 1985, on which date the Plan shall expire but without affecting any options then outstanding. 4 5 RESOLUTIONS OF THE ORGANIZATION AND COMPENSATION COMMITTEE OF THE LUBRIZOL CORPORATION BOARD OF DIRECTORS June 19, 1989 WHEREAS, The Lubrizol Corporation 1975 Employee Stock Option Plan ("the plan") was adopted by the Board of Directors of the Corporation on January 27, 1975 and approved by the shareholders of the Corporation on April 28, 1975; WHEREAS, Nonstatutory options have been granted under the Plan pursuant to a Nonstatutory Stock Option Agreement in a form previously approved by this Committee; WHEREAS, The Plan provides that it shall be administered under the supervision of a committee (the "Committee") composed of not less than three directors of the Corporation appointed by the Board of Directors; WHEREAS, The current form of Nonstatutory Stock Option Agreement provides for the payment by cash or check upon exercise of an option; WHEREAS, The current form of Nonstatutory Stock Option Agreement provides for the payment of applicable withholding taxes due on account of the exercise of an option by remittance of cash to the Corporation and/or withholding of salary by the Corporation; WHEREAS, The Committee desires to allow for payment of applicable with- holding taxes through retention by the Corporation of Lubrizol Common Shares which would otherwise be received by an optionee upon exercise of an option; The following resolutions are hereby adopted: RESOLVED, Pursuant to the authority granted to this Committee in Paragraph 8 of the Plan, that the form of Nonstatutory Stock Option Agreement for the Plan be amended by deleting Section 12 in its entirety and substituting therefor a new Section 12 in the form attached hereto; RESOLVED, That all elections that may be made by optionees who are officers of the Corporation to use Lubrizol Common Shares to satisfy their tax withholding obligations arising from the exercise of options granted under the plan are hereby approved, subject to the right of this Committee to disapprove any particular election or revoke this advance approval; and RESOLVED, That the Chairman of the Board, the President, any Vice President, and any one of them is authorized to execute amendments to outstanding Nonstatutory Stock Option Agreements, to modify the form of Exercise of Option, and to take such other actions as they deem necessary or appropriate, in order to effectuate the modification described in, and carry out the intent and purpose of, the foregoing resolutions. 6 Section 12. Subject to the terms and conditions hereof, this option may be exercised by delivering to Lubrizol at the office of its Chief Financial Officer a written notice, signed by the person entitled to exercise the option, of the election to exercise in whole or in part such option and stating the number of Shares to be purchased. Such notice shall, as an essential part thereof, be accompanied by the payment of the full purchase price of the Shares then to be purchased. Optionee shall also pay, within the time period specified by the Corporation, the amount, if any, required to be withheld for Federal, state and local tax purposes on account of the exercise of the option. Such payment may be made in cash (which may include withholding from the optionee's next salary payment), in Lubrizol Common Shares, or in any combination of cash and Lubrizol Common Shares, at the election of the optionee; provided, however, that if any officer of the Corporation desires to use Lubrizol Common Shares for payment of any portion of this withholding tax, such officer may not make an election to do so within six (6) months after the option is granted and must make any such election either (i) during the period beginning on the third business day following the release of the Corporation's quarterly or annual financial statements and ending on the twelfth business day following such date, or (ii) no less than six (6) months prior to the date such withholding tax must be determined (the "Tax Date"). The Tax Date for an officer who exercises an option will be six (6) months after the date of exercise of the option, unless he elects, pursuant to Section 83 of the Internal Revenue Code, to have his Tax Date be the date of exercise of the option. All elections must be made in writing and be submitted to the Corporation's Chief Financial Officer. All such elections by officers are irrevocable and are subject to the approval of the Committee. If an optionee who is not an officer of the Corporation elects to satisfy his withholding tax obligation with Lubrizol Common Shares, or if an optionee who is an officer so elects and has a Tax Date that is the date of exercise of the option, then such optionee may request that the Corporation withhold such number of Shares from those Shares otherwise issuable upon his exercise of the option. In the case of in optionee who is an officer with a Tax Date six (6) 7 months after the date of exercise of the option, then such officer shall receive the full number of Shares otherwise due upon exercise of the option, but shall be unconditionally obligated to surrender to the Corporation, within the time specified by the Corporation, such number of Lubrizol Common Shares as is necessary to satisfy the withholding tax obligation when it is determined. For purposes of determining the number of Lubrizol Common Shares that are required to be withheld or surrendered to satisfy the withholding tax obligation, Lubrizol Common Shares shall be valued at the average of the high and low trading prices on the New York Stock Exchange on the date of exercise of the option, or in the case of an officer, on the applicable Tax Date. If the determination of the withholding tax would require the withholding or surrender of a fractional Lubrizol Common Share, an electing optionee shall remit cash in lieu of such fractional Share. Upon payment of any required tax withholding, as described above, the option shall be deemed exercised as of the date the Corporation received the notice of the election to exercise the option. Payment of the full purchase price may be made, at the election of the Optionee, (a) in cash, (b) in Lubrizol Common Shares, or (c) in any combination of cash and Lubrizol Common Shares. Lubrizol Common Shares used in payment of the purchase price shall be valued at the average of the high and low trading prices on the New York Stock Exchange on the date of exercise. Upon the proper exercise of the option, Lubrizol shall issue in the name of the person exercising such option, and deliver to him a certificate or certificates for the Shares purchased. The Optionee agrees that as holder of the option he shall have no rights as a shareholder or otherwise in respect of any of the Shares as to which this option shall not have been effectively exercised as herein provided. - 2 - EX-10.B 11 EXHIBIT 10.B 1 EXHIBIT (10)(b) THE LUBRIZOL CORPORATION 1985 EMPLOYEE STOCK OPTION PLAN 1. Purpose of Plan. The purpose of this Plan is to advance the interests of The Lubrizol Corporation (hereinafter called the "Corporation") and its shareholders by providing a means whereby employees of the Corporation and its subsidiaries may be given an opportunity to purchase Common Shares (hereinafter called "shares") of the Corporation under options and stock appreciation rights granted under the Plan, to the end that the Corporation may retain present personnel upon whose judgment, initiative and efforts the successful conduct of the business of the Corporation largely depends, and may attract new personnel. Some of the options granted under this Plan may be options which are intended to qualify as "incentive stock options" under Section 422A of the Internal Revenue Code of 1954, as amended (the "Code"), or any successor provision and are hereinafter sometimes called "incentive stock options." 2. Shares Subject to the Plan. The aggregate number of shares of the Corporation for which options may be granted under this Plan shall be 1,500,000; provided, however, that whatever number of said shares shall remain reserved for issuance pursuant to this Plan at the time of any stock split, stock dividend or other change in the Corporation's capitalization shall be appropriately and proportionately adjusted to reflect such stock dividend, stock split or other change in capitalization. Shares issued pursuant to the exercise of options granted hereunder shall be made available from authorized but unissued shares of the Corporation or shares held by the Corporation as treasury shares. Any shares for which an option is granted hereunder that are released from such option for any reason other than the exercise of stock appreciation rights granted hereunder shall become available for other options to be granted under this Plan. 3. Administration of the Plan. This Plan shall be administered under the supervision of a committee (hereinafter called the "Committee") composed of not less than three directors of the Corporation appointed by the Board of Directors. The members of the Committee shall not be eligible, and shall not have been eligible for a period of at least one year prior to their appointment, to participate in this Plan or any other plan of the Corporation or any affiliate (as defined under the Securities Exchange Act of 1934) of the Corporation entitling the participants therein to acquire stock, stock options or stock appreciation rights of the Corporation or any affiliate of the Corporation. Members of the Committee shall serve at the pleasure of the Board of Directors, and may resign by written notice filed with the Chairman of the Board or the Secretary of the Corporation. A vacancy in the membership of the Committee shall be filled by the appointment of a successor member by the Board of Directors. Until such vacancy is filled, the remaining members shall constitute a quorum and the action at any meeting of a majority of the entire Committee, or an action unanimously approved in writing, shall constitute action of the Committee. Subject to the express provisions of this Plan, the Committee shall have conclusive authority to construe and interpret the Plan, any stock option agreement entered into hereunder, and any stock 2 appreciation right granted hereunder and to establish, amend, and rescind rules and regulations for the administration of this Plan and shall have such additional authority as the Board of Directors may from time to time determine to be necessary or desirable. 4. Granting of Options. The Committee from time to time shall designate from among the full-time employees of the Corporation and its subsidiaries those employees to whom options to purchase shares shall be granted under this Plan, the type of option to be granted and the number of shares which shall be subject to each option so granted. The Committee shall direct an appropriate officer of the Corporation to execute and deliver Option Agreements to employees reflecting the grant of options. All actions of the Committee under this Paragraph shall be conclusive; provided, however, that the aggregate fair market value (determined as of the date the option is granted) of the stock with respect to which incentive stock options are exercisable for the first time by any individual during any calendar year (under this Plan or any other plan of the Corporation or any of its sub- sidiaries) may not exceed $100,000. Any incentive stock option that is granted to any employee who is, at the time the option is granted, deemed for purposes of Section 422A of the Code, or any successor provision, to own shares of the Corporation possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Corporation or of a parent or subsidiary of the Corporation, shall have an option price that is at least 110 percent (110%) of the fair market value of the shares and shall not be exercisable after the expiration of 5 years from the date it is granted. 5. Granting of Stock Appreciation Rights. The Committee shall have the discretion to grant to optionees stock appreciation rights in connection with options to purchase shares on such terms and conditions as it deems appropriate. The Committee shall direct an appropriate officer of the Corporation to execute and deliver a Grant of Stock Appreciation Rights to optionees reflecting the grant of stock appreciation rights. A stock appreciation right will allow an optionee to surrender an option or portion thereof and to receive payment from the Corporation in an amount equal to the excess of the aggregate fair market value of the shares with respect to which options are surrendered over the aggregate option price of such shares. A stock appreciation right shall be exercisable no sooner than six months after it is granted and thereafter at any time prior to its stated expiration date, but only to the extent the related stock option right may be exercised. Payment shall be made in shares, cash or a combination of shares and cash, as provided in the Grant of Stock Appreciation Rights. Shares as to which any option is so surrendered shall not be available for future option grants hereunder. The Committee may grant stock appreciation rights concurrently with the grant of an option or, in the case of an option which is not an incentive stock option, with respect to an outstanding option. 6. Option Period. No option granted under this Plan may be exercised later than ten years from the date of grant. 7. Option Price. The option price shall be fixed by the Committee and set forth in the Option Agreement, which price in no case shall be less than the per share fair market value of the outstanding shares of the - 2 - 3 Corporation on the date that the option is granted, as determined by the Committee. The Committee may fix such option price in terms of a formula and authorize one or more officers of the Corporation to compute the price in accordance with that formula. Payment of the option price may be made in cash, shares, or a combination of cash and shares, as provided in the Option Agreement in effect from time to time. The date on which the Committee approves the granting of an option shall be deemed the date on which the option is granted. 8. Option Agreement. The Option Agreement pursuant to which option rights are granted to an employee shall be in the applicable form (consistent with this Plan) from time to time approved by the Committee and shall be signed on behalf of the Corporation by the Chairman of the Board, the President or any Vice President of the Corporation, other than the employee who is a party thereto. The Option Agreement shall set forth the number of shares which are subject to the option to purchase, the type of option granted, the option price to be paid upon exercise, the manner in which the option is to be exercised and the option price is to be paid, and the option period, and may include such other terms not inconsistent with this Plan as are from time to time approved by the Committee. 9. Grant of Stock Appreciation Rights. The Grant of Stock Appreciation Rights pursuant to which stock appreciation rights are granted shall be in the applicable form (consistent with this Plan) from time to time approved by the Committee and shall be signed on behalf of the Corporation by the Chairman of the Board, the President or any Vice President of the Corporation, other than the employee to whom the grant is made. The Grant of Stock Appreciation Rights shall set forth the option or options to which the grant relates, the manner in which exercise and payment shall be made and the period during which the stock appreciation rights are exercisable, and may include such other terms not inconsistent with this Plan as are from time to time approved by the Committee. 10. Transferability. No option or stock appreciation right shall be transferable by the optionee except by will or the laws of descent and distribution, and options and stock appreciation rights may be exercised during the employee's lifetime only by him or his guardian or legal representative. 11. Amendment and Termination of the Plan. The Corporation, by action of its Board of Directors, reserves the right to amend, modify or terminate at any time this Plan, or, by action of the Committee with the consent of the optionee, to amend, modify or terminate any outstanding Option Agreement or Grant of Stock Appreciation Rights, except that the Corporation may not, without further shareholder approval, increase the total number of shares as to which options may be granted under this Plan (except increases attributable to the adjustments authorized in Paragraph 2 hereof), change the employees or class of employees eligible to receive options or materially increase the benefits accruing to participants under this Plan. Moreover, no action shall be taken by the Corporation which will impair the validity of any option or stock appreciation right then outstanding, or which will prevent the options issued and stock appreciation rights granted pursuant to this Plan from meeting the requirements for exemption from Section 16(b) of the Securities Exchange Act of 1934, or subsequent comparable statute, as set - 3 - 4 forth in Rule 16b-3 under said Act or subsequent comparable rule, or which will prevent any incentive stock option issued or to be issued under this Plan from being an "incentive stock option" under Section 422A of the Code, or any successor provision. 12. Subsidiary. The term "subsidiary" as used herein shall mean any corporation in an unbroken chain of corporations beginning with the Corpora- tion and ending with the employer corporation if, at the time of the granting of the option, each of the corporations other than the employer corporation owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 13. Effective Date of Plan. The Plan shall be effective upon adoption of the Plan by the Board of Directors of the Corporation. The Plan shall be submitted to the shareholders of the Corporation for approval within one year after its adoption by the Board of Directors, and if the Plan shall not be approved by the shareholders within said period, the Plan shall be void and of no effect. Any options granted under the Plan prior to the date of approval by the shareholders shall be void if such shareholders' approval is not obtained. 14. Expiration of Plan. Options may be granted under this Plan at any time prior to January 27, 1995, on which date the Plan shall expire but without affecting any options then outstanding. -4- 5 FIRST AMENDMENT TO THE LUBRIZOL CORPORATION 1985 EMPLOYEE STOCK OPTION PLAN WHEREAS, The Lubrizol Corporation 1985 Employee Stock Option Plan ("the Stock Option Plan") was adopted on January 28, 1985; and WHEREAS, the Stock Option Plan permits the Corporation to grant options to purchase stock which are intended to qualify as "Incentive stock options" under Section 422A of the Internal Revenue Code; and WHEREAS, Section 422A of the Internal Revenue Code was amended by the Tax Reform Act of 1986 and the Corporation desires to amend the Stock Option Plan to conform to the changes made to Section 422A of the Internal Revenue Code; NOW, THEREFORE, pursuant to the provisions of Section 11 of the Stock Option Plan and pursuant to the authority duly granted to the Board of Directors, effective on the date hereof the Stock Option Plan shall be amended in the following respect: Section 4 is hereby amended and restated to read in its entirety as follows: 4. Granting of Options. The Committee from time to time 6 shall designate from among the full-time employees of the Corporation and its subsidiaries those employees to whom options to purchase shares shall be granted under this Plan, the type of option to be granted and the number of shares which shall be subject to each option so granted. The Committee shall direct an appropriate officer of the Corporation to execute and deliver Option Agreements to employees reflecting the grant of options. All actions of the Committee under this Paragraph shall be conclusive; provided, however, that the aggregate fair market value (determined as of the date the option is granted) of the stock with respect to which incentive stock options are exercisable for the first time by any individual during any calendar year (under this Plan or any other plan of the Corporation or any of its subsidiaries) may not exceed $100,000. Any incentive stock option that is granted to any employee who is, at the time the option is granted, deemed for purposes of Section 422A of the Code, or any successor provision, to own shares of the Corporation possessing more than ten percent (10%) of the total combined voting Power of all classes of shares of the Corporation or of a parent or subsidiary of the Corporation, shall have an option price that is at least 110 percent (110%) of the fair market value of the shares and shall not be exercisable after the expiration of 5 years from the date it is granted. 7 Pursuant to a Resolution of its Board of Directors dated June 22, 1987, The Lubrizol Corporation hereby amends the Stock Option Plan this 22nd day of June, 1987. The Lubrizol Corporation By: J. I. Rue Secretary EX-10.C 12 EXHIBIT 10.C 1 EXHIBIT (10)(c) THE LUBRIZOL CORPORATION 1981 KEY EMPLOYEE INCENTIVE STOCK OPTION PLAN 1. Purpose of Plan. The Purpose of this Plan is to advance the interest of The Lubrizol Corporation (hereinafter called the "Corporation") and its shareholders by providing a means whereby employees of the Corporation and its subsidiaries may be given an opportunity to purchase Common Shares (hereinafter called "shares") of the Corporation under options and stock appreciation rights granted under the Plan, to the end that the Corporation may retain present personnel upon whose judgment, initiative and efforts the successful conduct of the business of the Corporation largely depends, and may attract new personnel. The options granted under the Plan shall be options which are intended to qualify as "incentive stock options" under Section 422A of the Internal Revenue Code of 1954, as amended (the "Code"), or any successor provision, and are hereinafter sometimes called "incentive stock options". 2. Shares Subject to the Plan. The aggregate number of shares of the Corporation for which options may be granted under this Plan shall be 400,000; provided, however, that whatever number of shares shall remain reserved for issuance pursuant to the Plan at the time of any stock split, stock dividend or other change in the Corporation's capitalization shall be appropriately and proportionately adjusted to reflect such stock dividend, stock split or other change in capitalization. Such shares shall be made available from autho- rized but unissued or reacquired shares of the Corporation. Any shares for which an option is granted hereunder that are released from such option for any reason other than the exercise of stock appreciation rights granted hereunder shall become available for other options to be granted under this Plan. 3. Administration of the Plan. This Plan shall be administered under the supervision of an Officer Nomination and Compensation Committee (hereinafter called the "Committee"), composed of not less than three directors of the Corporation appointed by the Board of Directors. The members of the Committee shall not be eligible, and shall not have been eligible for a period of at least one year prior to their appointment, to participate in this Plan or any other plan of the Corporation or of any affiliate (as defined under the Securities Exchange Act of 1934) of the Corporation entitling the participants therein to acquire stock, stock options or stock appreciation rights of the Corporation or an affiliate of the Corporation. Members of the Committee shall serve at the pleasure 2 of the Board of Directors and may resign by written notice filed with the Chairman of the Board or the Secretary of the Corporation. A vacancy in the membership of the Committee shall be filled by the appointment of a successor member of the Board of Directors. Until such vacancy is filled, the remaining members shall constitute a quorum and the action at any meeting of a majority of the entire Committee, or an action unanimously approved in writing, shall constitute action of the Committee. Subject to the express provisions of this Plan, the Committee shall have conclusive authority to construe and interpret the Plan, any stock option agreement entered into thereunder, and any stock appreciation right granted thereunder and to establish, amend, and rescind rules and regulations for its administration and shall have such additional authority as the Board of Directors may from time to time determine to be necessary or desirable. 4. Granting of Options. The Committee from time to time shall designate from among the full-time key employees of the Corporation and its subsidiaries those employees to whom incentive stock options to purchase shares shall be granted under this Plan and the number of shares which shall be subject to each option so granted. The Committee shall direct an appropriate officer of the Corporation to execute and deliver option agreements to employees reflecting the grant of options. All actions of the Committee under this Paragraph shall be conclusive; provided, however, the aggregate fair market value (determined as of the date the option is granted) of shares for which incentive stock options are granted to an employee in any calendar year (under this Plan or any other plan of the Corporation which provides for the granting of incentive stock options) may not exceed $100,000 plus any unused limit carryover to such year permitted by Section 422A of the Code, or any successor provision, and provided further that no incentive stock option shall be granted to any employee who is, at the time the option is granted, deemed for purposes of Section 422A of the Code, or any successor provision, to own shares of the Corporation possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Corporation or of a parent or subsidiary of the Corporation. 5. Granting of Stock Appreciation Rights. The Committee shall have the discretion to grant to optionees, concurrently with the grant of an option, stock appreciation rights in connection with incentive stock options on such terms and conditions as it deems appropriate. The Committee shall direct an appropriate officer of the Corporation to execute and deliver stock appreciation right grants to optionees reflecting the grant of stock appreciation rights. A stock appreciation right will allow an optionee to surrender an option or portion thereof and to receive payment from the Corporation in an amount equal to the excess of the aggregate fair market value of the optioned shares that are 3 surrendered over the aggregate option price of such shares. Payment may be made in shares, cash or a combination of shares and cash, as provided in the grant. Shares as to which any option is so surrendered shall not be available for future options. The Committee may select employees to whom stock appreciation rights will be granted and determine the number of stock appreciation rights to be granted to each such employee. 6. Option Period. No option granted under this Plan may be exercised later than ten years from the date of grant. 7. Option Price. The option price shall be fixed by the Committee and set forth in the Option Agreement, which price in no case shall be less than the per share fair market value of the outstanding shares of the Corporation on the date that the option is granted, as determined by the Committee. The Committee may fix such option price and authorize one or more officers of the Corporation to compute the price. The date on which the Committee approves the granting of an option shall be deemed the date on which the option is granted. 8. Option Agreement. The Option Agreement in which option rights are granted to an employee shall be in the applicable form (consistent with this Plan) from time to time approved by the Committee and shall be signed on behalf of the Corporation by the Chairman of the Board, the President or any Vice President of the Corporation, other than the employee who is a party thereto, and shall be dated as of the date of the granting of the option, as determined in Paragraph 7 hereof. 9. Exercise of Stock Appreciation Rights. A stock appreciation right shall be exercisable no sooner than six months after it is granted and thereafter at any time prior to its stated expiration date; but only to the extent the related stock option right may be exercised. No option or stock appreciation right shall be transferable by the optionee except by will or the laws of descent and distribution, and the options and stock appreciation rights may be exercised during the employee's lifetime only by him or his guardian or legal representative. 10. Amendment and Termination of the Plan. The Corporation, by action of its Board of Directors, reserves the right to amend, modify or terminate at any time this Plan, or, by action of the Committee with the consent of the optionee, to amend, modify or terminate any outstanding option agreement or grant of stock appreciation rights, except that the Corporation may not, without further shareholder approval, increase the total number of shares as to which options may be granted under the Plan (except increases 4 attributable to the adjustments authorized in Paragraph 2 hereof), change the employees or class of employees eligible to receive options or materially increase the benefits accruing to participants under the Plan. Moreover, no action may be taken by the Corporation which will impair the validity of any option or stock appreciation right then outstanding or which will prevent the options issued or to be issued under this Plan from being "incentive stock options" under Section 422A of the Code, or any successor provision, or prevent options issued and stock appreciation rights granted pursuant to this Plan from meeting the requirements for exemption from Section 16(b) of the Securities Exchange Act of 1934, or subsequent comparable statute, as set forth in Rule 16b-3 under said Act or subsequent comparable rule. 11. Subsidiary. The term "subsidiary" as used herein shall mean any corporation in any unbroken chain of corporations beginning with the Corporation and ending with the employer corporation if, at the time of the granting of the option, each of the corporations other than the employer corporation owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 12. Effective Date of Plan. The Plan shall be effective upon adoption of the Plan by the Board of Directors of the Corporation. The Plan shall be submitted to the shareholders of the Corporation for approval within one year after its adoption by the Board of Directors and, if the Plan shall not be approved by the shareholders within said period, the Plan shall be void and of no effect. Any options granted under the Plan prior to the date of approval by the shareholders shall be void if such shareholders' approval is not obtained. 13. Expiration of Plan. Options may be granted under this Plan at any time prior to September 28, 1991, on which date the Plan shall expire but without affecting any options then outstanding. EX-10.D 13 EXHIBIT 10.D 1 EXHIBIT (10)(d) THE LUBRIZOL CORPORATION AMENDED DEFERRED COMPENSATION PLAN FOR DIRECTORS 1. Purpose. The purpose of this Amended Deferred Compensation Plan For Directors (the "Plan") is to permit any member of the Board of Directors (the "Participant") of The Lubrizol Corporation (the "Company") to defer all or a portion of the compensation to be received as a director until after the Participant ceases to be a director, all as provided in this Plan. 2. Administration. The Plan shall be administered by the Organization and Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee's interpretation and construction of all provisions of this Plan shall be binding and conclusive. In the event that a Participant is a member of the Committee, such Participant shall not participate in any decision of the Committee relating to that Participant's participation in this Plan. 3. Right to Defer Compensation. Any director of the Company may, at any time, elect to defer under this Plan all, or such portion as the director may designate, of (i) that director's annual retainer fee and/or (ii) the attendance fees for attending directors' meetings or committees thereof. The annual retainer fee, for this purpose, shall be deemed to be earned equally and ratably on a calendar quarterly basis during the calendar year. Attendance fees are deemed to be earned when the director attends the meeting for which the attendance fee is paid. The election under this paragraph 3 shall take effect on the first day of the calendar quarter following the month in which the election is made. Such election under this Plan shall be made by written notice delivered to the Chief Financial Officer of the Company specifying (i) the length of time, not less than one year, during which the election shall apply, (ii) the portion of the retainer fee and/or the attendance fee to be deferred for such year or years, and (iii) the periodic payment schedule selected subject to the installment period limitation and the computation of each installment payment to the Participant pursuant to, and in accordance with, paragraph 5. A director may designate that the election shall remain in effect until the director, on a prospective basis, withdraws the election or changes the amount to be deferred; provided that, if the director changes only the amount to be deferred, the periodic payment schedule selected under clause (iii) of the preceding sentence shall continue to apply. Any notice of withdrawal of the election or change in the amount to be deferred shall be effective on the first day of the calendar quarter following the month in which such notice is given to the Company's Chief Financial Officer. 4. Deferred Compensation Accounts. On the last day of each calendar month in which compensation deferred under this Plan 2 would have been payable to a Participant in the absence of an election under this Plan to defer payment thereof, the amount of such deferred compensation shall be credited to a Deferred Compensation Account (the "Participant's Account") which shall be established and maintained for such Participant as a special ledger account on the Company's books. Interest shall accrue during each calendar quarter on the month-end balance in each Participant's Account at the Federal Reserve 90-Day Composite Rate in effect for the previous calendar quarter and such interest amount so determined shall be credited monthly to such Participant's Account. 5. Payment of Deferred Compensation. The total amount credited to a Participant's Account shall be payable to the Participant, either in a lump sum or in periodic installments, over such period, not exceeding ten years, as the Participant shall have selected pursuant to clause (iii) of paragraph 3. Such periodic payments shall begin or the lump sum payment shall be made, as the case may be, at such time, not more than twelve (12) months after the Participant ceased to be a director of the Company, as the Participant may have selected pursuant to paragraph 3 at the time of entering the Plan. The amount of any installment payable to a Participant shall be determined by dividing the balance of such Participant's Account by the number of periodic installments (including the current installment) remaining to be paid. Until a Participant's Account has been completely distributed, the balance thereof shall bear interest calculated as provided in paragraph 4 above. In the event a Participant dies prior to receiving payment of the entire amount of that Participant's Account, the unpaid balance shall be paid to such beneficiary as the Participant may have designated in writing to the Chief Financial Officer of the Company as the beneficiary to receive any such post-death distribution under this Plan or, in the absence of such written designation, to the Participant's legal representative or beneficiary designated in the Participant's last will to receive such distributions. Distributions subsequent to the death of a Participant may be made either in a lump sum or in periodic installments in such amounts and over such period, not exceeding ten years from the date of death, as the Committee may direct and the amount of each installment shall be computed as provided in the third sentence of this paragraph 5. 6. Acceleration of Payments. The Committee may accelerate the distribution of a Participant's Account for reasons of severe financial hardship. For purposes of this Plan, severe financial hardship shall be deemed to exist in the event the Committee determines that a Participant needs a distribution to meet immediate and heavy financial needs resulting from a sudden or unexpected illness or accident of the Participant or a member of his/her family, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstance arising as a result of events beyond the control of the -2- 3 Participant. A distribution based on financial hardship shall not exceed the amount required to meet the immediate financial need created by the hardship. 7. Non-assignability. None of the rights or interests in the Participant's Account shall, prior to actual payment or distribution pursuant to this Plan, be assignable or transferable in whole or in part, either voluntarily or by operation of law or otherwise, and shall not be subject to payment of debts by execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner; provided that, upon the occurrence of any such assignment or transfer or attempted assignment or transfer, all payments under paragraph 5 shall be payable in the sole and unrestricted judgment and discretion of the Committee, as to time and amount, and shall be distributable to the person who would have received the payment but for this paragraph 7 only at such time or times and in such amounts as the Committee, from time to time, shall determine. 8. Plan to be Unfunded. The Company shall be under no obligation to segregate or reserve any funds or other assets for purposes relating to this Plan and no Participant shall have any rights whatsoever in or with respect to any funds or other assets held by the Company for purposes of this Plan or otherwise. Participants' Accounts maintained for purposes of this Plan shall merely constitute bookkeeping entries on records of the Company and shall not constitute any allocation whatsoever of any assets of the Company or be deemed to create any trust or special deposit with respect to any of the Company's assets. 9. Amendment. The Board of Directors of the Company may, from time to time, amend or terminate this Plan, provided that no such amendment or termination of the Plan shall adversely affect the Participant's Account as it existed immediately before such amendment or termination or the manner of distribution thereof, unless such Participant shall have consented thereto in writing. -END- -3- EX-10.E 14 EXHIBIT 10.E 1 EXHIBIT (10)(e) AMENDED AND RESTATED EMPLOYMENT AGREEMENT This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement"), originally entered into as of July 27, 1987 and as amended and restated effective as of July 24, 1989, by and between The Lubrizol Corporation, an Ohio corporation (the "Company"), and (the "Executive"); WITNESSETH: WHEREAS, the Executive is a senior executive of the Company and has made and is expected to continue to make major contributions to the profitability, growth and financial strength of the Company; WHEREAS, the Company recognizes that, as is the case for most publicly held companies, the possibility of a Change in Control (as that term is hereafter defined) exists; WHEREAS, the Company desires to assure itself of both present and future continuity of management in the event of a Change in Control and desires to establish certain minimum compensation rights of its key senior executive officers, including the Executive, applicable in the event of a Change in Control; WHEREAS, the Company wishes to ensure that its senior executives are not practically disabled from discharging their duties upon a Change in Control; WHEREAS, this Agreement is not intended to alter materially the compensation and benefits which the Executive could reasonably expect to receive from the Company absent a Change in Control and, accordingly, although effective and binding as of the date hereof, this Agreement shall become operative only upon the occurrence of a Change in Control; and WHEREAS, the Executive is willing to render services to the Company on the terms and subject to the conditions set forth in this Agreement; NOW, THEREFORE, the Company and the Executive agree as follows: 1. Operation of Agreement: (a) This Agreement shall be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, this Agreement shall not be operative unless and until there 2 shall have occurred a Change in Control. For purposes of this Agreement, a "Change in Control" shall have occurred if at any time during the Term (as that term is hereafter defined) any of the following events shall occur: (i) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and immediately after such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock (as that term is hereafter defined) of the Company immediately prior to such transaction; (ii) The Company sells all or substantially all of its assets to any other corporation or other legal person, less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale; (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner, is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Company ("Voting Stock"); (iv) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or -2- 3 (v) If during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Company cease for any reason to constitute at least a majority thereof, provided, however, that for purposes of this clause (v), each Director who is first elected, or first nominated for election by the Company's stockholders by a vote of at least two-thirds of the Directors of the Company (or a committee thereof) then still in office who were Directors of the Company at the beginning of any such period will be deemed to have been a Director of the Company at the beginning of such period. Notwithstanding the foregoing provisions of Section l(a)(iii) or 1(a)(iv) hereof, unless otherwise determined in a specific case by majority vote of the Board of Directors of the Company (the "Board"), a "Change in Control" shall not be deemed to have occurred for purposes of this Agreement solely because (i) the Company, (ii) an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities (a "Subsidiary"), or (iii) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20% or otherwise, or because the Company reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership. (b) Upon the occurrence of a Change in Control at any time during the Term, this Agreement shall become immediately operative. (c) The period during which this Agreement shall be in effect (the "Term") shall commence as of the date hereof and shall expire as of the later of (i) the close of business on December 31, 1994 and (ii) the expiration of the Period of Employment (as that term is hereinafter defined); provided, however, that (A) commencing on January 1, 1990 and each January 1 thereafter, the term of this Agreement shall automatically be extended for an additional year unless, not later than September 30 of the immediately preceding year, the Company or the Executive shall have given notice that it or he, as the case may be, does not wish to have the Term extended and -3- 4 (B) subject to Section 10 hereof, if, prior to a Change in Control, the Executive ceases for any reason to be an employee of the Company and any Subsidiary, thereupon the Term shall be deemed to have expired and this Agreement shall immediately terminate and be of no further effect. 2. Employment; Period of Employment: (a) Subject to the terms and conditions of this Agreement, upon the occurrence of a Change in Control, the Company shall continue the Executive in its employ and the Executive shall remain in the employ of the Company and/or a Subsidiary, as the case may be, for the period set forth in Section 2(b) hereof (the "Period of Employment"), in the position and with substantially the same duties and responsibilities that he had immediately prior to the Change in Control, or to which the Company and the Executive may hereafter mutually agree in writing. Throughout the Period of Employment, the Executive shall devote substantially all of his time during normal business hours (subject to vacations, sick leave and other absences in accordance with the policies of the Company as in effect for senior executives immediately prior to the Change in Control) to the business and affairs of the Company, but nothing in this Agreement shall preclude the Executive from devoting reasonable periods of time during normal business hours to (i) serving as a director, trustee or member of or participant in any organization or business so long as such activity would not constitute Competitive Activity (as that term is hereafter defined) if conducted by the Executive after the Executive's Termination Date (as that term is hereafter defined), (ii) engaging in charitable and community activities, or (iii) managing his personal investments. (b) The Period of Employment shall commence on the date of an occurrence of a Change in Control and, subject only to the provisions of Section 4 hereof, shall continue until the earliest of (i) the expiration of the third anniversary of the occurrence of the Change in Control, (ii) the Executive's death, or (iii) the Executive's attainment of age 65; provided, however, that commencing on each anniversary of the Change of Control, the Period of Employment shall automatically be extended for an additional year unless, not later than 90 calendar days prior to such anniversary date, either the Company or the Executive shall have given written notice to the other that the Period of Employment shall not be so extended. 3. Compensation During Period of Employment: (a) Upon the occurrence of a Change in Control, the Executive shall receive during the Period of Employment (i) annual base -4- 5 salary at a rate not less than the Executive's annual fixed or base compensation (payable monthly or otherwise as in effect for senior executives of the Company immediately prior to the occurrence of a Change in Control) or such higher rate as may be determined from time to time by the Board or the Compensation Committee thereof (which base salary at such rate is herein referred to as "Base Pay") and (ii) an annual amount equal to not less than the highest aggregate annual bonus, incentive or other payments of cash compensation in addition to the amounts referred to in clause (i) above made or to be made in regard to services rendered in any calendar year during the three calendar years immediately preceding the year in which the Change in Control occurred pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded) of the Company or any successor thereto providing benefits at least as great as the benefits payable thereunder prior to a Change in Control ("Incentive Pay"); provided, however, that (A) with the prior written consent of the Executive, nothing herein shall preclude a change in the mix between Base Pay and Incentive Pay so long as that the aggregate cash compensation received by the Executive in any one calendar year is not reduced in connection therewith or as a result thereof, (B) in no event shall any increase in the Executive's aggregate cash compensation or any portion thereof in any way diminish any other obligation of the Company under this Agreement, and (C) no duplicate payment hereunder will be made in respect of any amount actually paid to the Executive pursuant to any such agreement, policy, plan, program or arrangement. (b) For his service pursuant to Section 2(a) hereof, during the Period of Employment the Executive shall be a full participant in, and shall be entitled to the perquisites, benefits and service credit for benefits as provided under, any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which senior executives of the Company participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be -5- 6 adopted hereafter by the Company providing perquisites, benefits and service credit for benefits at least as great as are payable thereunder prior to a Change in Control (collectively, "Employee Benefits"); provided, however, that except as expressly provided in, and subject to the terms of, Section 3(a) hereof, the Executive's rights thereunder shall be governed by the terms thereof and shall not be enlarged hereunder or otherwise affected hereby. If and to the extent such perquisites, benefits or service credit for benefits are not payable or provided under any such policy, plan, program or arrangement as a result of the amendment or termination thereof, then the Company shall itself pay or provide therefor. Nothing in this Agreement shall preclude improvement or enhancement of any such Employee Benefits, provided that no such improvement shall in any way diminish any other obligation of the Company under this Agreement. 4. Termination Following a Change in Control: (a) In the event of the occurrence of a Change in Control, the Executive's employment may be terminated by the Company during the Period of Employment and the Executive shall not be entitled to the benefits provided by Sections 5 and 6 hereof only upon the occurrence of one or more of the following events: (i) The Executive's death; (ii) If the Executive shall become permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for senior executives of the Company immediately prior to the Change in Control; or (iii) "Cause", which for purposes of this Agreement shall mean that, prior to any termination pursuant to Section 4(b) hereof, the Executive shall have committed: (A) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company and/or any Subsidiary; (B) intentional wrongful damage to property of the Company and/or any Subsidiary; -6- 7 (C) intentional wrongful disclosure of secret processes or confidential information of the Company and/or any Subsidiary; or (D) intentional wrongful engagement in any Competitive Activity; and any such act shall have been materially harmful to the Company. For purposes of this Agreement, no act, or failure to act, on the part of the Executive shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the Board then in office at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive had committed an act set forth above in Section 4(a)(iii) and specifying the particulars thereof in detail. Nothing herein shall limit the right of the Executive or his beneficiaries to contest the validity or propriety of any such determination. (b) In the event of the occurrence of a Change in Control, this Agreement may be terminated by the Executive during the Period of Employment with the right to severance compensation as provided in Sections 5 and 6 hereof upon the occurrence of one or more of the following events (regardless of whether any other reason, other than Cause as hereinabove provided, for such termination exists or has occurred, including without limitation other employment): (i) Any termination by the Company of the employment of the Executive prior to the date upon which the Executive shall have attained age 65, which termination shall be for any reason other than for Cause or as a result of the death of the Executive or by reason of the Executive's disability and the actual -7- 8 receipt of disability benefits in accordance with Section 4(a)(ii) hereof; or (ii) Termination by the Executive of his employment with the Company and any Subsidiary within three years after the Change in Control upon the occurrence of any of the following events: (A) Failure to elect or reelect or otherwise to maintain the Executive in the office or the position, or a substantially equivalent office or position, of or with the Company and/or a Subsidiary, as the case may be, which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a Director of the Company (or any successor thereto) if the Executive shall have been a Director of the Company immediately prior to the Change in Control; (B) A significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Company and any Subsidiary which the Executive held immediately prior to the Change in Control, a reduction in the aggregate of the Executive's Base Pay and Incentive Pay received from the Company and any Subsidiary, or the termination or denial of the Executive's rights to Employee Benefits as herein provided, any of which is not remedied within 10 calendar days after receipt by the Company of written notice from the Executive of such change, reduction or termination, as the case may be; (C) A determination by the Executive made in good faith that as a result of a Change in Control and a change in circumstances thereafter significantly affecting his position, including without limitation a change in the scope of the business or other activities for which he was responsible immediately prior to a Change in Control, he has been rendered substantially unable to carry out, has been substantially hindered in the performance of, or has suffered a substantial reduction in, any of the authorities, powers, functions, responsibilities or duties attached to the position held by the Executive -8- 9 immediately prior to the Change in Control, which situation is not remedied within 10 calendar days after written notice to the Company from the Executive of such determination; (D) The liquidation, dissolution, merger, consolidation or reorganization of the Company or transfer of all or a significant portion of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization or otherwise) to which all or a significant portion of its business and/or assets have been transferred (directly or by operation of law) shall have assumed all duties and obligations of the Company under this Agreement pursuant to Section 12 hereof; (E) The Company shall relocate its principal executive offices, or require the Executive to have his principal location of work changed, to any location which is in excess of 25 miles from the location thereof immediately prior to the Change of Control or to travel away from his office in the course of discharging his responsibilities or duties hereunder significantly more (in terms of either consecutive days or aggregate days in any calendar year) than was required of him prior to the Change of Control without, in either case, his prior written consent; or (F) Without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto. (c) A termination by the Company pursuant to Section 4(a) hereof or by the Executive pursuant to Section 4(b) hereof shall not affect any rights which the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company providing Employee Benefits (except as provided in Section 5(a)(ii) hereof), which rights shall be governed by the terms thereof. If this Agreement or the employment of the Executive is terminated under circumstances in which the Executive is not entitled to any payments under Sections 3, 5 or 6 hereof, the Executive shall have no further obligation or liability to the Company hereunder with respect to his prior or any future employment by the Company. -9- 10 5. Severance Compensation: (a) If, following the occurrence of a Change in Control, the Company shall terminate the Executive's employment during the Period of Employment other than pursuant to Section 4(a) hereof, or if the Executive shall terminate his employment pursuant to Section 4(b) hereof, the Company shall continue to provide the following benefits and shall further pay to the Executive the following amounts within five business days after the date (the "Termination Date") that the Executive's employment is terminated (the effective date of which shall be the date of termination, or such other date that may be specified by the Executive if the termination is pursuant to Section 4(b) hereof): (i) In lieu of any further payments to the Executive for periods subsequent to the Termination Date, but without affecting the rights of the Executive referred to in Section 5(b) hereof, a lump sum payment (the "Severance Payment") in an amount equal to the present value (using a discount rate required to be utilized for purposes of computations under Section 280G of the Code or any successor provision thereto, or if no such rate is so required to be used, a rate equal to the then-applicable interest rate prescribed by the Pension Benefit Guarantee Corporation for benefit valuations in connection with non-multiemployer pension plan terminations assuming the immediate commencement of benefit payments (the "Discount Rate")) of the sum of (A) the aggregate Base Pay (at the highest rate in effect for any period prior to the Termination Date) for each remaining year or partial year of the Period of Employment which the Executive would have received had such termination or breach not occurred, plus (B) the aggregate Incentive Pay (determined in accordance with the standards set forth in Section 3(a)(ii) hereof), which the Executive would have received pursuant to this Agreement or any agreement, policy, plan, program or arrangement referred to therein during the remainder of the Period of Employment had his employment continued for the remainder of the Period of Employment (in which event the Executive will no longer be entitled to Incentive Pay under any such agreement, policy, plan, program or arrangement except for Incentive Pay to which he was entitled for service prior to the Termination Date). -10- 11 (ii) For the remainder of the Period of Employment, the Company shall arrange to provide the Executive with Employee Benefits that are welfare benefits, but not stock option, stock purchase, stock appreciation, or similar compensatory benefits, substantially similar to those which the Executive was receiving or entitled to receive immediately prior to the Termination Date (and if and to the extent that such benefits shall not or cannot be paid or provided under any policy, plan, program or arrangement of the Company or any Subsidiary, as the case may be, then the Company shall itself pay or provide for the payment to the Executive, his dependents and beneficiaries, such Employee Benefits). Without otherwise limiting the purposes or effect of Section 7 hereof, Employee Benefits otherwise receivable by the Executive pursuant to the first sentence of this Section 5(a)(ii) shall be reduced to the extent comparable welfare benefits are actually received by the Executive from another employer during such period following the Executive's Termination Date, and any such benefits actually received by the Executive shall be reported by the Executive to the Company. Notwithstanding the foregoing, the remainder of the Period of Employment shall be considered service with the Company for the purpose of determining service credits and benefits due and payable to the Executive under the Company's retirement income, supplemental executive retirement and other benefit plans of the Company applicable to the Executive or his beneficiaries immediately prior to the Termination Date. (b) Upon written notice given by the Executive to the Company prior to the occurrence of a Change in Control, the Executive, at his sole option, without reduction to reflect the present value of such amounts as aforesaid, may elect to have all or any of the Severance Payment payable pursuant to Section 5(a)(i) hereof paid to him on a quarterly or monthly basis during the remainder of the Period of Employment. (c) There shall be no right of set-off or counterclaim in respect of any claim, debt or obligation against any payment to or benefit for the Executive provided for in this Agreement, except as expressly provided in Section 5(a)(ii) hereof. -11- 12 (d) Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment required to be made hereunder on a timely basis, the Company shall pay interest on the amount thereof at an annualized rate of interest equal to the then-applicable Discount Rate. (e) Notwithstanding any other provision hereof, the parties' respective rights and obligations under this Section 5 will survive any termination or expiration of this Agreement or the termination of the Executive's employment for any reason whatsoever. 6. Certain Additional Payments by the Company: (a) Anything in this Agreement to the contrary notwithstanding, in the event that this Agreement shall become operative and it shall be determined (as hereafter provided) that any payment or distribution by the Company or any of its affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (individually and collectively a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being considered "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto), or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (individually and collectively, a "Gross-Up Payment"). The Gross-Up Payment shall be in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the Provisions of Section 6(e) hereof, all determinations required to be made under this Section 6, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, if any, shall be made by a nationally recognized accounting firm (the "Accounting Firm") -12- 13 selected by the Executive in his sole discretion. The Executive shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within 30 calendar days after the Termination Date, if applicable, and any such other time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to the Executive within five business days after receipt of such determination and calculations with respect to any Payment to the Executive. The federal tax returns filed by the Executive shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Company and the Executive an opinion that the Executive has substantial authority not to report any Excise Tax on his federal income tax return. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 6(e) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (c) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Section 6(b) hereof. (d) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Section 6(b) hereof shall be borne -13- 14 by the Company. If such fees and expenses are initially paid by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his payment thereof. (e) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as promptly as practicable but no later than 10 business days after the Executive actually receives notice of such claim and the Executive shall further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by the Executive). The Executive shall not pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (ii) the date that any payment of amount with respect to such claim is due. If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company; (iii) cooperate with the Company in good faith in order effectively to contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and shall indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without -14- 15 limiting the foregoing provisions of this Section 6(e), the Company shall control all proceedings taken in connection with the contest of any claim contemplated by this Section 6(e) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that the Executive may participate therein at his own cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay the tax claimed and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (f) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6(e) hereof, the Executive receives any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 6(e) hereof) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6(e) hereof, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of any such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to the Executive pursuant to this Section 6. -15- 16 7. No Mitigation Obligation: The Company hereby acknowledges that it will be difficult, and may be impossible, for the Executive to find reasonably comparable employment following the Termination Date and that the noncompetition covenant contained in Section 8 hereof will further limit the employment opportunities for the Executive. In addition, the Company acknowledges that its severance pay plans applicable in general to its salaried employees do not provide for mitigation, offset or reduction of any severance payment received thereunder. Accordingly, the parties hereto expressly agree that the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement will be liquidated damages, and that the Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise, except as expressly provided in Section 5(a)(ii) hereof. 8. Competitive Activity: During a period ending one year following the Termination Date, if the Executive shall have received or shall be receiving benefits under Section 5 hereof and, if applicable, Section 6 hereof, the Executive shall not, without the prior written consent of the Company, which consent shall not be unreasonably withheld, engage in any Competitive Activity. For purposes of this Agreement, the term "Competitive Activity" shall mean the Executive's participation, without the written consent of an officer of the Company, in the management of any business enterprise if such enterprise engages in substantial and direct competition with the Company and such enterprise's sales of any product or service competitive with any product or service of the Company amounted to 25% of such enterprise's net sales for its most recently completed fiscal year and if the Company's net sales of said product or service amounted to 25% of the Company's net sales for its most recently completed fiscal year. "Competitive Activity" shall not include (i) the mere ownership of securities in any such enterprise and exercise of rights appurtenant thereto or (ii) participation in management of any such enterprise other than in connection with the competitive operations of such enterprise. 9. Legal Fees and Expenses: (a) It is the intent of the Company that the Executive not be required to incur legal fees and the related expenses associated with the enforcement or defense of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would -16- 17 substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Executive's entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' and related fees and expenses incurred by the Executive in connection with any of the foregoing. (b) Without limiting the generality or effect of Section 9(a) hereof, in order to ensure the benefits intended to be provided to the Executive under Section 9(a) hereof, the Company will promptly use its best efforts to secure an irrevocable standby letter of credit (the "Letter of Credit"), issued by National City Bank or another bank having combined capital and surplus in excess of $500 million (the "Bank") for the benefit of the Executive and certain other of the officers of the Company and providing that the fees and expenses of counsel selected from time to time by the Executive pursuant to this Section 9 shall be paid, or reimbursed to the Executive if paid by the Executive, on a regular, periodic basis upon presentation by the Executive to the Bank of a statement or statements prepared by such counsel in accordance with its customary practices. The Company shall pay all amounts and take all action necessary to maintain the Letter of Credit during the Period of Employment and for two years thereafter and if, notwithstanding the Company's complete discharge of such obligations, such Letter of Credit shall be terminated or -17- 18 not renewed, the Company shall obtain a replacement irrevocable clean letter of credit drawn upon a commercial bank selected by the Company and reasonably acceptable to the Executive, upon substantially the same terms and conditions as contained in the Letter of Credit, or any similar arrangement which, in any case, assures the Executive the benefits of this Agreement without incurring any cost or expense in connection therewith. (c) Notwithstanding any other provision hereof, the parties' respective rights and obligations under this Section 9 will survive any termination or expiration of this Agreement or the termination of the Executive's employment for any reason whatsoever. 10. Employment Rights: Nothing expressed or implied in this Agreement shall create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company prior to any Change in Control; provided, however, that any termination of employment of the Executive or the removal of the Executive from his office or position in the Company or any Subsidiary following the commencement of any discussion with a third person that ultimately results in a Change in Control shall be deemed to be a termination or removal of the Executive after a Change in Control for purposes of this Agreement. 11. Withholding of Taxes: The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or government regulation or ruling. 12. Successors and Binding Agreement: (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement shall be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement), but shall not otherwise be assignable, transferable or delegable by the Company. -18- 19 (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and/or legatees. (c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 12(a) and 12(b) hereof. Without limiting the generality of the foregoing, the Executive's right to receive payments hereunder shall not be assignable, transferable or delegable, whether by pledge, creation of a security interest or otherwise, other than by a transfer by his will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 12(c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated. (d) The Company and the Executive recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained herein and, in the event of any such breach, the Company and the Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus or other appropriate remedy to enforce performance of this Agreement. 13. Notice: For all purposes of this Agreement, all communications including without limitation notices, consents, requests or approvals, provided for herein shall be in writing and shall be deemed to have been duly given when delivered or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of change of address shall be effective only upon receipt. 14. Governing Law: The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio, without giving effect to the principles of conflict of laws of such State. 15. Validity: If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise -19- 20 illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances shall not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to the extent) necessary to make it enforceable, valid and legal. 16. Miscellaneous: No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. 17. Counterparts: This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement. 18. Prior Agreement: This Agreement amends and restates the Agreement, dated as of July 27, 1987 (the "Prior Agreement"), between the Company and the Executive, which Prior Agreement shall, without further action, be superseded as of the date hereof. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. THE LUBRIZOL CORPORATION By -20- EX-10.F 15 EXHIBIT 10.F 1 EXHIBIT (10)(f) THE LUBRIZOL CORPORATION EXCESS DEFINED BENEFIT PLAN 2 TABLE OF CONTENTS ARTICLE I DEFINITIONS AND CONSTRUCTION 1 1.1 Definitions 1 1.2 Additional Definitions 2 ARTICLE II SUPPLEMENTAL PENSION BENEFIT 2 2.1 Eligibility 2 2.2 Amount 2 2.3 Payment 2 ARTICLE III PAYMENT OF BENEFITS 3 3.1 Payment to Participant 3 3.2 Payment in the Event of Death Prior to Commencement of Distribution 3 ARTICLE IV ADMINISTRATION 3 ARTICLE V AMENDMENT AND TERMINATION 4 ARTICLE VI MISCELLANEOUS 4 6.1 Non-Alienation of Retirement Rights or Benefits 4 6.2 Plan Non-Contractual 5 6.3 Trust 5 6.4 Interest of a Participant 5 6.5 Controlling Status 6 6.6 Claims of Other Persons 6 6.7 Severability 6 6.8 Governing Law 6
3 THE LUBRIZOL CORPORATION EXCESS DEFINED BENEFIT PLAN The Lubrizol Corporation hereby establishes, effective as of January 1, 1986, The Lubrizol Corporation Excess Defined Benefit Plan (the "Plan") for the purpose of providing supplemental benefits to certain employees, as permitted by Section 3(36) of the Employee Retirement Income Security Act of 1974. ARTICLE I DEFINITIONS AND CONSTRUCTION 1.1 Definitions. For the purposes hereof, the following words and phrases shall have the meanings indicated, unless a different meaning is plainly required by the context:. (a) Code. The term "Code" shall mean the Internal Revenue Code as amended from time to time. Reference to a section of the Code shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section. (b) Company. The term "Company" shall mean The Lubrizol Corporation, an Ohio corporation, its corporate successors and the surviv- ing corporation resulting from any merger of The Lubrizol Corporation with any other corporation or corporations. (c) Lubrizol Pension Plan. The term "Lubrizol Pension Plan" shall mean The Lubrizol Corporation Revised Pension Plan as the same shall be in effect on the date of a Participant's retirement, death, or other termination of employment. (d) Participant. The term "Participant" shall mean any person employed by the Company who is designated by the Board of Directors of the Company to participate in the Plan and who has not waived participation in the Plan. (e) Plan. The term "Plan" shall mean the excess defined benefit pension plan as set forth herein, together with all amendments hereto, which Plan shall be called "The Lubrizol Corporation Excess Defined Benefit Plan." 4 (f) Trust. The term "Trust" shall mean The Lubrizol Corporation Excess Defined Benefit Plan Trust established pursuant to the Trust Agreement. (g) Trust Agreement. The term "Trust Agreement" shall mean The Lubrizol Corporation Excess Defined Benefit Plan Trust Agreement. 1.2. Additional Definitions. All other words and phrases used herein shall have the meanings given them in the Lubrizol Pension Plan, unless a different meaning is clearly required by the context. ARTICLE II SUPPLEMENTAL PENSION BENEFIT 2.1 Eligibility. A Participant who retires, dies, or otherwise terminates his employment with the Company under conditions which make such Participant eligible for a benefit under the Lubrizol Pension Plan and whose benefits under the Lubrizol Pension Plan are limited by Section 415 of the Code, shall be eligible for a supplemental pension benefit determined in accordance with the provisions of Section 2.2. 2.2 Amount. Subject to the provisions of Article III, the monthly supplemental pension benefit payable to an eligible Participant shall be such an amount which when added to the monthly pension payable (before any reduction applicable to an optional method of payment) to such Participant under the Lubrizol Pension Plan, equals the monthly pension benefit which would have been payable (before any reduction applicable to an optional method of payment) under the Lubrizol Pension Plan to the Participant, if the limita- tions of Section 415 of the Code were not in effect. 2.3 Payment. The terms of payment of the supplemental pension benefit shall be identical to those specified in the Lubrizol Pension Plan for the type of benefit the Participant receives under the Lubrizol Pension Plan. - 2 - 5 ARTICLE III PAYMENT OF BENEFITS 3.1 Payment to Participant. Payment of a supplemental pension benefit under the Plan to a Participant shall be made in the same manner and form applicable to the benefit payable to him under the Lubrizol Pension Plan. The amount of the supplemental pension benefit payable to a Participant shall be adjusted to reflect the method of payment, pursuant to the assumptions then in use under the Lubrizol Pension Plan. 3.2 Payment in the Event of Death Prior to Commencement of Distribution. If a Participant dies prior to commencement of benefits under the Plan, his surviving spouse, if any, shall be eligible for a survivor bene- fit which is equal to one-half of the reduced monthly benefit the Participant would have received under the Plan if the Participant had retired on the day before his death and had elected to receive his benefit under the Lubrizol Pension Plan in a 50 percent joint and survivor annuity form. In making the determinations and reductions required in this Section 3.2, the Company shall apply the assumptions then in use under the Lubrizol Pension Plan. For pur- poses hereof, a surviving spouse shall only be eligible for a benefit under this Section 3.2, if such spouse had been married to the deceased Participant for at least one year as of the date of the Participant's death. ARTICLE IV ADMINISTRATION The Company shall be responsible for the general administration of the Plan, for carrying out the provisions hereof, and for making, or - 3 - 6 causing the Trust to make, any required supplemental benefit payments. The Company shall have all such powers as may be necessary to carry out the provi- sions of the Plan, including the power to determine all questions relating to eligibility for and the amount of any supplemental pension benefit and all questions pertaining to claims for benefits and procedures for claim review; to resolve all other questions arising under the Plan, including any questions of construction; and to take such further action as the Company shall deem advisable in the administration of the Plan. The Company may delegate any of its powers, authorities, or responsibilities for the operation and administra- tion of the Plan to any person or committee so designated in writing by it and may employ such attorneys, agents, and accountants as it may deem necessary or advisable to assist it in carrying out its duties hereunder. The actions taken and the decisions made by the Company hereunder shall be final and bind- ing upon all interested parties. ARTICLE V AMENDMENT AND TERMINATION The Company reserves the right to amend or terminate the Plan at any time by action of its Board of Directors or its representative or deleg- ate; provided, however, that no such action shall adversely affect any Parti- cipant who is receiving supplemental pension benefits under the Plan, unless an equivalent benefit is provided under the Lubrizol Pension Plan or another plan sponsored by the Company. ARTICLE VI MISCELLANEOUS 6.1 Non-Alienation of Retirement Rights or Benefits. No Par- ticipant shall encumber or dispose of his right to receive any payments - 4 - 7 hereunder, which payments or the right thereto are expressly declared to be non-assignable and non-transferable. If a Participant attempts to assign, transfer, alienate or encumber his right to receive any payment hereunder or permits the same to be subject to alienation, garnishment, attachment, execu- tion, or levy of any kind, then thereafter during the life of such Partici- pant, and also during any period in which any Participant is incapable in the judgment of the Company of attending to his financial affairs, any payments which the Company is required to make hereunder may be made, in the discretion of the Company, directly to such Participant or to any other person for his use or benefit or that of his dependents, if any, including any person fur- nishing goods or services to or for his use or benefit or the use or benefit of his dependents, if any. Each such payment may be made without the inter- vention of a guardian, the receipt of the payee shall constitute a complete acquittance to the Company with respect thereto, and the Company shall have no responsibility for the proper allocation thereof. 6.2 Plan Non-Contractual. Nothing herein contained shall be construed as a commitment or agreement on the part of any person employed by the Company to continue his employment with the Company, and nothing herein contained shall be construed as a commitment on the part of the Company to continue the employment or the annual rate of compensation of any such person for any period, and all Participants shall remain subject to discharge to the same extent as if the Plan had never been established. 6.3 Trust. In order to provide a source of payment for its obligations under the Plan, the Company has established the Trust, the terms of which are governed by the Trust Agreement. 6.4 Interest of a Participant. Subject to the provisions of the Trust Agreement, the obligation of the Company under the Plan to provide a - 5 - 8 Participant with a supplemental pension benefit constitutes the unsecured promise of the Company to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Company. 6.5 Controlling Status. No Participant shall be eligible for a benefit under the Plan unless such Participant is a Participant on the date of his retirement, death, or other termination of employment. 6.6 Claims of Other Persons. The provisions of the Plan shall in no event be construed as giving any person, firm or corporation any legal or equitable right as against the Company, its officers, employees, or direc- tors, except any such rights as are specifically provided for in the Plan or are hereafter created in accordance with the terms and provisions of the Plan. 6.7 Severability. The invalidity or unenforceability of any particular provision of the Plan shall not affect any other provision hereof, and the Plan shall be construed in all respects as if such invalid or unen- forceable provision were omitted herefrom. 6.8 Governing Law. The provisions of the Plan shall be governed and construed in accordance with the laws of the State of Ohio. * * * EXECUTED at Wickliffe, Ohio, this 4th day of December , 1986. THE LUBRIZOL CORPORATION By Title: President And Title: Secretary - 6 - 9 FIRST AMENDMENT TO THE LUBRIZOL CORPORATION EXCESS DEFINED BENEFIT PLAN WHEREAS, the Lubrizol Corporation Excess Defined Benefit Plan (hereinafter referred to as the "Plan") was established effective as of January 1, 1986, by The Lubrizol Corporation (hereinafter referred to as the "Company") for the benefit of certain eligible employees of the Company whose benefits under The Lubrizol Corporation Pension Plan (hereinafter referred to as the "Lubrizol Pension Plan") were limited by law; and WHEREAS, the Company desires to amend the Plan to reflect further limits on benefits under the Lubrizol Pension Plan imposed by the Tax Reform Act of 1986, as amended; NOW, THEREFORE, effective as of January 1, 1989, the Plan is hereby amended in the respects hereinafter set forth. 1. Paragraph (d) of Section 1.1 of the Plan is hereby amended to provide as follows: (d) Participant. The term "Participant" shall mean any person employed by the Company who is listed on Appendix A attached hereto or who is designated by the Board of Directors of the Company to participate in the Plan, and who has not waived participation in the Plan. 2. Section 2.1 of the Plan is hereby amended to provide as follows: 2.1 Eligibility. A Participant who retires, dies, or otherwise terminates his employment with the Company and its subsidiaries and (i) whose benefits under the Lubrizol Pension Plan are limited by the provisions of Section 401(a)(17) or 415 of the Code, or (ii) who either was a Participant on January 1, 1989 or had attained age 55 on January 1, 1989 and thereafter became a Partici- pant, and whose benefits under the Lubrizol Pension Plan are curtailed due to the revision of the pension benefit formula, effective as of January 1, 1989, to comply with the requirements of the Tax Reform Act of 1986, as amended, shall be eligible for a supplemental pension benefit determined in accordance with the provisions of Section 2.2. 10 3. Section 2.2 of the Plan is hereby amended to provide as follows: 2.2 Amount. Subject to the provisions of Article III, the monthly supplemental pension benefit payable to an eligible Participant shall be an amount which when added to the monthly pension payable to such Participant under the Lubrizol Pension Plan (prior to any reduction applicable to an optional method of payment) equals the monthly pension benefit which would have been payable under the Lubrizol Pension Plan (prior to any reduction applicable to an optional method of payment and adjusted for any amount payable under The Lubrizol Corporation Excess Defined Contribution Plan which is attributable to The Lubrizol Corporation Employees' Profit-Sharing Plan and which would have affected the benefit that the Participant would have received under the Lubrizol Pension Plan had it been payable from The Lubrizol Corporation Employees' Profit-Sharing Plan) if the limitations of Sections 401(a)(17) and 415 of the Code were not in effect and if he is a Participant described in Section 2.1 (ii)), and his benefit had not been curtailed due to the revision of the Lubrizol Pension Plan effective as of January 1989, to comply with the provisions of the Tax Reform Act of 1986, as amended. 4. Section 3.1 of the Plan is hereby amended to provide as follows: 3.1 Payment to Participant. Payment of a supplemental pension benefit under the Plan to a Participant shall be made in the same manner and form applicable to the benefit payable to him under the Lubrizol Pension Plan. The amount of the supplemental pension benefit payable to a Participant shall be adjusted to reflect the method of payment, pursuant to the assumptions then in use under the Lubrizol Pension Plan; provided, however, that in the event that a Participant's supplemental pension benefit is to be distributed as a single sum amount, the interest rate used to discount the liability of such benefit shall be the arithmetic average of the 7-day compound yield rates for the six full calendar months prior to the month as of which the benefit is payable as published in Donoghue's Tax-Free MONEY FUND AVERAGE which is reported weekly in Barron's. The rate with respect to any month shall be the rate reported in the first issue of Barron's published during such month. - 2 - 11 5. The Plan is hereby amended by adding Appendix A attached hereto at the end thereof. EXECUTED at Wickliffe, Ohio, this 27th day of February , 1991. THE LUBRIZOL CORPORATION Title: CEO AND CHAIRMAN OF THE BOARD And Title: 12 APPENDIX A Officers of the Company who are Participants in the Plan. 1. L. E. Coleman 7. W. R. Jones 2. W. G. Bares 8. J. R. Cooper 3. W. D. Manning 9. R. A. Andreas 4. R. Y. K. Hsu 10. J. R. Senz 5. G. R. Hill 11. J. R. Ahern 6. R. W. Scher 12. K. H. Hopping
13 SECOND AMENDMENT TO THE LUBRIZOL CORPORATION EXCESS DEFINED BENEFIT PLAN WHEREAS, The Lubrizol Corporation Excess Defined Benefit Plan (the "Plan") was established effective as of January 1, 1986, by The Lubrizol Corporation (the "Company") for the benefit of certain eligible employees of the Company whose benefits under The Lubrizol Corporation Pension Plan (the "Pension Plan") were limited by law; and WHEREAS, The Company desires to amend the Plan to expand the definition of Participant. NOW, THEREFORE, the Plan is hereby amended in the respects hereinafter set forth. 1. Effective June 22, 1992, paragraph (d) of Section 1.1 of the Plan is hereby amended to provide as follows: (d) Participant. The term "Participant" shall mean any person employed by the Company who is listed on Appendix A attached hereto, or who is designated by the Board of Directors as an officer for the purposes of Section 16 of the Securities Exchange Act of 1934, or whose benefits under the Lubrizol Pension Plan are limited by the application of Section 401(a)(17) of the Internal Revenue Code of 1986, as amended. 2. Effective as of the date of execution of this Amendment Appendix A is replaced by the Appendix A attached hereto. EXECUTED at Wickliffe, Ohio, this 28th day of June , 1993. THE LUBRIZOL CORPORATION Title:Chairman and Chief Executive Officer And By: Title: Vice President and Chief Financial Officer 14 APPENDIX A TO THE LUBRIZOL CORPORATION EXCESS DEFINED BENEFIT PLAN
Participant Effective Date 1. L. E. Coleman December 31, 1986 2. W. G. Bares December 31, 1986 3. P. L. Krug (R) December 31, 1986 4. W. T. Beargie (R) December 31, 1986 5. W. D. Manning December 31, 1986 6. R. Y. K. Hsu December 31, 1986 7. G. R. Hill December 31, 1986 8. R. W. Scher December 31, 1986 9. J. P Arzul (D) December 31, 1986 10. W. R. Jones December 31, 1986 11. R. A. Andreas December 31, 1986 12. J. R. Cooper (R) December 31, 1986 13. J. I. Rue (R) December 31, 1986 14. R. J. Senz April 1, 1989 15. J. R. Ahern April 1, 1990 16. K. H. Hopping April 21, 1991 17. J. W. Bauer April 27, 1992 18. D. A. Muskat April 27, 1992 19. V. E. Luoma June 22, 1992 20. J. G. Bulger June 22, 1992 21. S. F. Kirk April 26, 1993 22. Y. Le Couedic April 26, 1993 23. J. E. Hodge April 26, 1993 24. M. W. Meister April 26, 1993 25. S. A. DiBiase April 26, 1993 R = Retired D = Deceased
15 THIRD AMENDMENT TO THE LUBRIZOL CORPORATION EXCESS DEFINED BENEFIT PLAN WHEREAS, The Lubrizol Corporation Excess Defined Benefit Plan (the "Plan") was established effective as of January 1, 1986, by The Lubrizol Corporation (the "Company") for the benefit of certain eligible employees of the Company whose benefits under The Lubrizol Corporation Pension Plan (the "Pension Plan") were limited by law; and WHEREAS, The Company desires to add provisions to the Plan which clarify the vesting under the Plan. NOW, THEREFORE, Article II of the Plan is hereby amended effective January 1, 1986, by adding at the end thereto a new Section 2.4 which shall read as follows: 2.4 Vesting. Each Participant as of December 31, 1993, shall be 100 percent vested in his supplemental pension benefit determined in accordance with the provisions of Section 2.2. Each new Participant after December 31, 1993, shall be vested in his supplemental pension benefit under this Plan as determined in accordance with the vesting provisions of the Lubrizol Pension Plan. EXECUTED at Wickliffe, Ohio, this day of , 1993. THE LUBRIZOL CORPORATION By: Title: By: Title: EX-10.G 16 EXHIBIT 10.G 1 EXHIBIT (10)(g) THE LUBRIZOL CORPORATION EXCESS DEFINED CONTRIBUTION PLAN 2 TABLE OF CONTENTS ARTICLE DEFINITIONS 1 1.1 Definitions 1 1.2 Additional Definitions 2 ARTICLE II SUPPLEMENTAL CONTRIBUTIONS 2 2.1 Eligibility 2 2.2 Supplemental Company Contributions 3 2.3 Deposit of Contributions 3 2.4 Allocation of Contributions 3 2.5 Separate Accounts 3 ARTICLE III DISTRIBUTION 4 3.1 Vesting 4 3.2 Distribution 4 3.3 Distribution in the Event of Death 4 ARTICLE IV ADMINISTRATION 5 ARTICLE V AMENDMENT AND TERMINATION 6 ARTICLE VI MISCELLANEOUS 6 6.1 Non-Alienation of Retirement Rights or Benefits 6 6.2 Plan Non-Contractual 7 6.3 Trust 7 6.4 Interest of a Participant 7 6.5 Controlling Status 7 6.6 Claims of Other Persons 7 6.7 Severability 8 6.8 Governing Law 8
3 THE LUBRIZOL CORPORATION EXCESS DEFINED CONTRIBUTION PLAN The Lubrizol Corporation hereby establishes, effective as of December 31, 1986, The Lubrizol Corporation Excess Defined Contribution Plan (the "Plan") for the purpose of supplementing the benefits of certain employees, as permitted by Section 3(36) of the Employee Retirement Income Security Act of 1974. ARTICLE DEFINITIONS 1.1 Definitions. For the purposes hereof, the following words and phrases shall have the meanings indicated, unless a different meaning is plainly required by the context: (a) Beneficiary. The term "Beneficiary" shall mean the person or persons who shall be designated by a Participant to receive distribution of such Participant's interest under the Plan in the event such Participant dies before full distribution of his interest. (b) Code. The term "code" shall mean the Internal Revenue Code as amended from time to time. Reference to a section of the Code shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section. (c) Company. The term "company" shall mean The Lubrizol Corporation, an Ohio corporation, Its corporate successors and the surviving corporation resulting from any merger of The Lubrizol Corpor- ation with any other corporation or corporations. (d) Fund. The term "Fund" shall mean each separate Invest- ment fund established and maintained under the Trust Agreement. (e) Lubrizol Profit-Sharing Plan. The term "Lubrizol Profit-Sharing Plan" shall mean The Lubrizol Corporation Employees' Profit-Sharing Plan as the same shall be in effect on the date of a Participant's retirement, death, or other termination of employment. (f) Participant. The term "Participant" shall mean any person employed by the Company who is designated by the Board of Directors of the Company to participate in the Plan and who has not waived participation in the Plan. 4 (g) Plan. The term "Plan" shall mean the excess defined contribution retirement plan as set forth herein, together with all amendments hereto, which Plan shall be called "The Lubrizol Corporation Excess Defined Contribution Plan." (h) Plan Year. The term "Plan Year" shall mean the calendar year. (i) Supplemental Company Contributions. The term "Supple- mental Company Contributions" shall mean the contribution made by the Company in accordance with the provisions of Section 2.2. (j) Trust Agreement. The term "Trust Agreement" shall mean The Lubrizol Corporation Excess Defined Contribution Plan Trust Agree- ment. (k) Trust Assets. The term "Trust Assets" shall mean all Property held by the Trustee pursuant to the Trust Agreement. (l) Trustee. The term "Trustee" shall mean the trustee of The Lubrizol Corporation Excess Defined Contribution Trust. (m) Valuation Date. The term "Valuation Date" shall mean the last day of each Plan Year and any other date as may be agreed upon by the Company and the Trustee. 1.2 Additional Definitions. All other words and phrases used herein shall have the meanings given them in the Lubrizol Profit- Sharing Plan, unless a different meaning is clearly required by the context. ARTICLE SUPPLEMENTAL CONTRIBUTIONS 2.1 Eligibility. A Participant whose benefits under the the Lubrizol Profit-Sharing Plan have been limited by Section 415 of the Code, shall be eligible to have contributions made with respect to him under the Plan in accordance with the provisions of this Article II. - 2 - 5 2.2 Supplemental Company Contributions. In the event Company contributions under the Lubrizol Profit-Sharing Plan with respect to a Participant are limited due to the provisions of Section 415 of the Code, the amounts by which such contributions are limited shall be contri- buted to the Plan by the Company and shall be designated as Supplemental Company Contributions. 2.3 Deposit of Contributions. The Company shall cause any Supplemental Company Contributions under the Plan to be delivered to the Trustee not less frequently than annually. 2.4 Allocation of Contributions. The Supplemental Company Contributions deposited with the Trustee shall be allocated among the Separate Accounts of the Participants on whose behalf such contributions are made. 2.5 Separate Accounts. Each Participant shall have estab- lished in his a name Separate Account to which Supplemental Company Contributions shall be allocated in accordance with the provisions of Section 2.4. Such Separate Accounts shall be adjusted as of each Valuation Date to reflect any increase or decrease in the value of the Fund in which such Separate Account is invested in the following manner: (a) The Trustee shall value all of the Trust Assets at fair market value. (b) The Company shall then, on the basis of the valuation provided under paragraph (a) above, and after making appropriate adjustments for any dis- tributions, withdrawals, disbursements, as well as one-half of any contributions made since the immediately preceding Valuation Date, ascertain the net increase or decrease in the value of the Trust Assets in each Fund since the immediately preceding Valuation Date. - 3 - 6 (c) The Company shall then allocate the net increase or decrease in the net worth of each fund to the Separate Accounts of Participants in the ratio that the balance of each Separate Account on the day immediately preceding such Valuation Date bears to the aggregate of the balances of all such accounts on the day immediately preceding such Valuation Date and shall credit or charge, as the case may be, each such Separate Account with the amount of its allocated share. (d) The Company shall then credit each Separate Account with the Supplemental Company Contributions allocated Pursuant to Section 2.4. ARTICLE III DISTRIBUTION 3.1 Vesting . Each Participant shall be 100 percent vested in the value of his Separate Accounts. 3.2 Distribution. Each Participant who terminates employ- ment with the Company and its related corporations shall receive the balance in his Separate Account as soon as reasonably practicable in the same manner and time Period as his interest in the Lubrizol Profit-Sharing Plan is distributed. 3.3 Distribution in the Event of Death. In the event of the death of a Participant Prior to distribution in full of his interest under the Plan, his Beneficiary shall receive distribution of such interest. Such Beneficiary shall be the Person designated as the Participant's bene- ficiary under the Lubrizol Profit-Sharing Plan. If no Beneficiary survives such Participant or if no Beneficiary has been designated by such Partici- Pant, the estate of such Participant shall be the Beneficiary and receive distribution thereof. If any Beneficiary dies after becoming entitled to receive distribution hereunder and before such distribution is made in - 4 - 7 full, and if no other person or persons have been designated to receive the balance of such distribution upon the happening of such contingency, the estate of such deceased Beneficiary shall become the Beneficiary as to such balance. Distribution under this Section 3.3 shall be made in the same manner and time Period as the deceased Participant's interest in the Lubrizol Profit-Sharing Plan is distributed. ARTICLE IV ADMINISTRATION The Company shall be responsible for the general administra- tion of the Plan, for carrying out the provisions hereof, and for making any required supplemental benefit payments. The Company shall have all such powers as may be necessary to carry out the provisions of the Plan, including the power to determine all questions relating to eligibility for and the amount of any supplemental retirement benefits and all questions pertaining to claims for benefits and procedures for claim review; to resolve all other questions arising under the Plan, including any questions of construction; and to take such further action as the Company shall deem advisable in the administration of the Plan. The Company may delegate any of its powers, authorities, or responsibilities for the operation and administration of the Plan to any person or committee so designated in writing by it and may employ such attorneys, agents, and accountants as it may deem necessary or advisable to assist it in carrying out its duties hereunder. The actions taken and the decisions made by the Company here- under shall be final and binding upon all interested parties. - 5 - 8 ARTICLE V AMENDMENT AND TERMINATION The Company reserves the right to amend or terminate the Plan at any time by action of its Board of Directors or its representative or delegate; provided, however, that no such action shall adversely affect any Participant or Beneficiary who is receiving supplemental benefits under the Plan, unless an equivalent benefit is provided under another plan or program sponsored by the Company. ARTICLE VI MISCELLANEOUS 6.1 Non-Alienation of Retirement Rights or Benefits. No Participant shall encumber or dispose of his right to receive any payments hereunder, which payments or the right thereto are expressly declared to be non-assignable and non-transferable. If a Participant or Beneficiary attempts to assign, transfer, alienate or encumber his right to receive any payment under the Plan or permits the same to be subject to alienation, garnishment, attachment, execution, or levy of any kind, then thereafter during the life of such Participant or Beneficiary and also during any period in which any Participant or Beneficiary is incapable in the judgment of the Company of attending to his financial affairs, any payments which the Company is required to make hereunder may be made, in the discretion of the Company, directly to such Participant or Beneficiary or to any other person for his use or benefit or that of his dependents, if any, including any person furnishing goods or services to or for his use or benefit or the use or benefit of his dependents, if any. Each such payment may be made - 6 - 9 without the intervention of a guardian, the receipt of the payee shall constitute a complete acquittance to the Company with respect thereto, and the Company shall have no responsibility for the proper allocation thereof. 6.2 Plan Non-Contractual. Nothing herein contained shall be construed as a commitment or agreement on the part of any person employed by the Company to continue his employment with the Company, and nothing herein contained shall be construed as a commitment on the part of the Company to continue the employment or the annual rate of compensation of any such person for any period, and all Participants shall remain subject to discharge to the same extent as if the Plan had never been established. 6.3 Trust. In order to provide a source of payment for its obligations under the Plan, the Company has established The Lubrizol Corporation Excess Defined Contribution Plan Trust. 6.4 Interest of a Participant. Subject to the provisions of the Trust Agreement, the obligation of the Company under the Plan to provide a Participant or Beneficiary with supplemental retirement benefits merely constitutes the unsecured promise of the Company to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Company. 6.5 Controlling Status. No Participant shall be eligible for a benefit under the Plan unless such Participant is a Participant on the date of his retirement, death, or other termination of employment. 6.6 Claims of Other Persons. The provisions of the Plan shall in no event be construed as giving any person, firm or corporation any legal or equitable right as against the Company, its officers, - 7 - 10 employees, or directors, except any such rights as are specifically provided for in the Plan or are hereafter created in accordance with the terms and provisions of the Plan. 6.7 Severability. The invalidity or unenforceability of any particular provision of the Plan shall not affect any other provision hereof, and the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted herefrom. 6.8 Governing Law. The provisions of the Plan shall be governed and construed in accordance with the laws of the State of Ohio. EXECUTED at Wickliffe, Ohio this 4th day of December , 1986. THE LUBRIZOL CORPORATION Title: President And Title: Secretary -8- 11 FIRST AMENDMENT TO THE LUBRIZOL CORPORATION EXCESS DEFINED CONTRIBUTION PLAN WHEREAS, the Lubrizol Corporation Excess Defined Contribution Plan (hereinafter referred to as the "Plan") was established effective as of December 31, 1986, by The Lubrizol Corporation (hereinafter referred to as the "Company") for the benefit of certain eligible employees of the Company whose benefits under The Lubrizol Corporation Employees' Profit-Sharing Plan (hereinafter referred to as the "Lubrizol Profit-Sharing Plan") were limited by law; and WHEREAS, the Company desires to amend the Plan to reflect further limits on benefits under the Lubrizol Profit-Sharing Plan imposed by the Tax Reform Act of 1986, as amended, as well as limits imposed by law on benefits under The Lubrizol Corporation Employees' Stock Purchase and Savings Plan; NOW, THEREFORE, effective as of January 1, 1989, the Plan is hereby amended in the respects hereinafter set forth. 1. Paragraph (f) of Section 1.1 of the Plan is hereby amended to provide as follows: (f) Participant. The term "Participant" shall mean any person employed by the Company who is listed on Appendix A attached hereto or who is designated by the Board of Directors of the Company to participate in the Plan and who has not waived participation in the Plan. 2. Paragraph (i) of Section 1.1 of the Plan is hereby amended to provide as follows: (i) Supplemental Company Contributions. The term "Supplemental Company Contributions" shall mean the the Supplemental Matching Contributions and the Supplemental Profit-Sharing Contributions made by the Company under the Plan in accordance with the provisions of Section 2.2. 3. Section 1.1 of the Plan is hereby amended by the addition of Paragraphs (n), (o), (p), and (q) to provide as follows: (n) Lubrizol EMP/ACT. The term "Lubrizol EMP/ACT" shall mean The Lubrizol Corporation Employees' Stock Purchase and Savings Plan is the same shall be in effect on the date of a Participant's retirement, death or other termination of employment. (o) Separate Accounts. The term "Separate Accounts" shall mean each account established on 12 behalf of a Participant under the Plan and credited with Supplemental Profit-Sharing Contributions, Supplemental Matching Contributions, or Supplemental Tax Contributions. (p) Supplemental Matching Contributions. The term "Supplemental Matching Contributions" shall mean the Supplemental Contributions made by the Company for a Participant whose benefits under the Lubrizol EMP/ACT are limited with respect to any Plan Year by the provisions of Section 401(a)(17) or 415 of the Code. (q) Supplemental Profit-Sharing Contributions. The term "Supplemental Profit- Sharing Contributions" shall mean the Supplemental Contribution made by the Company for a Participant whose benefits under the Lubrizol Profit-Sharing Plan are limited with respect to any Plan Year by the provisions of Section 401(a)(17) or 415 of the Code. 4. Section 1.2 of the Plan is hereby amended to provide as follows: 1.2 Additional Definitions. All other words and phrases used herein shall have the meanings given them in the Lubrizol Profit-Sharing Plan and the Lubrizol EMP/ACT, unless a different meaning is clearly required by the context. 5. Section 2.1 of the Plan is hereby amended to provide as follows: 2.1 Eligibility. A Participant whose benefits under the Lubrizol Profit-Sharing Plan or the Lubrizol EMP/ACT are limited with respect to any Plan Year by Section 401(a)(17) or 415 of the Code, shall be eligible to have contributions made with respect to him under the Plan in accordance with the provisions of this Article II. 6. Section 2.2 of the Plan is hereby amended to provide as follows: 2.2 Supplemental Company Contributions. In the event that Company contributions under the Lubrizol Profit-Sharing Plan and/or Matching Contributions under the Lubrizol EMP/ACT with respect to a Participant are limited for any Plan Year due to the provisions of Section 401(a)(17) or 415 of the Code, the amounts by which such contributions are limited shall be credited under the Plan by the Company and shall be designated as - 2 - 13 Supplemental Profit-Sharing Contributions, and Supplemental Matching Contributions, respectively; provided, however, that for purposes of determining the amount of Supplemental Matching Contributions for any Participant it shall be deemed that such Participant made CODA Contributions under the Lubrizol EMP/ACT at the Matched Percentage level with respect to his Compensation irrespective of the limitations under Sections 401(a)(17) and 415 of the Code. Supplemental Matching Contributions shall be credited to a Participant's Supplemental Matching Account and Supplemental Profit-Sharing Contributions shall be credited to a Participant's Supplemental Profit-Sharing Account. 7. Section 2.3 of the Plan is hereby amended to provide as follows: 2.3 Allocation of Contributions. Supplemental Profit-Sharing Contributions shall be allocated to a Participant's Supplemental Profit Sharing Account and Supplemental Matching Contributions shall be allocated to a Participant's Supplemental Matching Account. 8. Section 2.4 of the Plan is hereby amended to provide as follows: 2.4 Administration of Separate Accounts. Each Supplemental Profit-Sharing Account and each Supplemental Matching Account to which contributions under Sections 2.2 and 2.3 are credited and allocated shall be credited monthly with the net monthly increase experienced by the General Fund of the Lubrizol Profit-Sharing Plan. 9. Section 2.5 of the Plan is hereby deleted. 10. Section 3.2 of the Plan is hereby amended to provide as follows: 3.2 Distribution. Each Participant who terminates employment with the Company and its related corporations shall receive the balance in his Supplemental Profit-Sharing Account as soon as reasonably practicable in the same manner and time period as his interest in the Lubrizol Profit- Sharing Plan is distributed and shall receive the balance in his Supplemental Matching Account as soon as reasonably practicable in the same manner and time period as his interest in the Lubrizol EMP/ACT is distributed. - 3 - 14 11. Section 3.3 of the Plan is hereby amended to provide as follows: 3.3 Distribution in the Event of Death. In the event of the death of a Participant prior to distribution in full of his interest under the Plan, his Beneficiary or Beneficiaries shall receive distribution of such Participant's remaining interest. The Beneficiary of his interest in his Supplemental Profit-Sharing Account shall be the person designated as beneficiary under the Lubrizol Profit-Sharing Plan and the Beneficiary of his interest in his Supplemental Matching Account shall be the person designated as his beneficiary under the Lubrizol EMP/ACT. If no Beneficiary survives such Participant or if no Beneficiary has been designated by such Participant, the estate of such Participant shall be the Beneficiary and receive distribution thereof. If any Beneficiary dies after becoming entitled to receive distribution hereunder and before such distribution is made in full, and if no other person or persons have been designated to receive the balance of such distribution upon the happening of such contingency, the estate of such deceased Beneficiary shall become the Beneficiary as to such balance. Distribution under this Section 3.3 of a deceased Participant's Supplemental Profit-Sharing Account shall be made in the same manner and time period as the deceased Participant's interest in the Lubrizol Profit- Sharing Plan is distributed and distribution under this Section 3.3 of a deceased Participant's Supplemental Matching Account shall be made in the same manner and time period as the deceased Participant's interest in the Lubrizol EMP/ACT is distributed. 12. The Plan is hereby amended by adding Appendix A attached hereto at the end thereof. EXECUTED at Wickliffe, Ohio, this 27th day of February , 1991. THE LUBRIZOL CORPORATION By: Title: CEO AND CHAIRMAN OF THE BOARD And Title: - 4 - 15 APPENDIX A Officers of the Company who are Participants in the Plan. 1. L. E. Coleman 7. W. R. Jones 2. W. G. Bares 8. J. R. Cooper 3. W. D. Manning 9. R. A. Andreas 4. R. Y. K. Hsu 10. J. R. Senz 5. G. R. Hill 11. J. R. Ahern 6. R. W. Scher 12. K. H. Hopping
16 SECOND AMENDMENT TO THE LUBRIZOL CORPORATION EXCESS DEFINED CONTRIBUTION PLAN WHEREAS, The Lubrizol Corporation Excess Defined Contribution Plan (the "Plan") was established effective as of December 31, 1986, by The Lubrizol Corporation (the "Company") for the benefit of certain eligible employees of the Company whose benefits under The Lubrizol Corporation Employees' Profit-Sharing Plan (the "Profit-Sharing Plan") and, effective January 1, 1989, The Lubrizol Corporation Employees' Stock Purchase and Savings Plan ("EMP/ACT"), were limited by law; and WHEREAS, The Company desires to amend the Plan to expand the definition of Participant. NOW, THEREFORE, the Plan is hereby amended in the respects hereinafter set forth. 1. Effective June 22, 1992, paragraph (f) of Section 1.1 of the Plan is hereby amended to provide as follows:. (f) Participant. The term "Participant" shall mean any person employed by the Company who is listed on Appendix A attached hereto, or who is designated by the Board of Directors as an officer for the purposes of Section 16 of the Securities Exchange Act of 1934, or whose benefits under the Profit-Sharing Plan or EMP/ACT are limited by the application of Section 401(a)(17) of the Internal Revenue Code of 1986, as amended. 2. Effective as of the date of execution of this Amendment Appendix A is replaced by the Appendix A attached hereto. EXECUTED at Wickliffe, Ohio, this 28th day of June 1993. THE LUBRIZOL CORPORATION By: Title:Chairman and Chief Executive Officer And By: Title:Vice President and Chief Financial Officer 17 APPENDIX A TO THE LUBRIZOL CORPORATION EXCESS DEFINED CONTRIBUTION PLAN
Participant Effective Date 1. L. E. Coleman December 31, 1986 2. W. G. Bares December 31, 1986 3. P. L. Krug (R) December 31, 1986 4. W. T. Beargie (R) December 31, 1986 5. W. D. Manning December 31, 1986 6. R. Y. K. Hsu December 31, 1986 7. G. R. Hill December 31, 1986 8. R. W. Scher December 31, 1986 9. J. P Arzul (D) December 31, 1986 10. W. R. Jones December 31, 1986 11. R. A. Andreas December 31, 1986 12. J. R. Cooper (R) December 31, 1986 13. J. I. Rue (R) December 31, 1986 14. R. J. Senz April 1, 1989 15. J. R. Ahern April 1, 1990 16. K. H. Hopping April 21, 1991 17. J. W. Bauer April 27, 1992 18. D. A. Muskat April 27, 1992 19. V. E. Luoma June 22, 1992 20. J. G. Bulger June 22, 1992 21. S. F. Kirk April 26, 1993 22. Y. Le Couedic April 26, 1993 23. J. E. Hodge April 26, 1993 24. M. W. Meister April 26, 1993 25. S. A. DiBiase April 26, 1993
R = Retired D = Deceased 18 THIRD AMENDMENT TO THE LUBRIZOL CORPORATION EXCESS DEFINED CONTRIBUTION PLAN WHEREAS, The Lubrizol Corporation Excess Defined Contribution Plan (the "Plan") was established effective as of December 31, 1986, by The Lubrizol Corporation (the "Company") for the benefit of certain eligible employees of the Company whose benefits under The Lubrizol Corporation Employees' Profit-Sharing Plan (the "Profit-Sharing Plan") and, effective January 1, 1989, The Lubrizol Corporation Employees, Stock Purchase and Savings Plan ("EMP/ACT") were limited by law; and WHEREAS, The Company desires to amend the vesting provisions of the Plan to more closely align this Plan with The Lubrizol Corporation Excess Defined Benefit Plan. NOW, THEREFORE, Effective January 1, 1993, Section 3.1 of the Plan is hereby amended in its entirety to read as follows: 3.1 Vesting. Each Participant as of December 31, 1993, shall be 100 percent vested in the value of his Separate Accounts. Each new Participant after December 31, 1993, shall be vested in the value of his Separate Accounts under this Plan as determined in accordance with the vesting provisions of the underlying qualified plans. EXECUTED at Wickliffe, Ohio, this day of , 1993. THE LUBRIZOL CORPORATION By: Title: By: Title: EX-10.H 17 EXHIBIT 10.H 1 EXHIBIT (10)(h) THE LUBRIZOL CORPORATION VARIABLE AWARD PLAN 2 2 INTRODUCTION The Lubrizol Corporation (hereinafter referred to as the "Corporation") hereby establishes, effective as of January 1, 1990, The Lubrizol Corporation Variable Award Plan (hereinafter referred to as the "Plan") in order to provide an award for employees which reflects the pursuit of superior performance, increased customer satisfaction and enhancement of shareholder value. Awards for participating employees under the Plan shall depend upon corporate performance in terms of net income for the Plan Year. Except as otherwise provided, the Plan shall be administered by the Organization and Compensation Committee (hereinafter referred to as the "Committee") of the Board of Directors of the Corporation. The Committee shall have conclusive authority to construe and interpret the Plan and any agreements entered into under the Plan and to establish, amend, and rescind rules and regulations for its administration. The Committee shall also have any additional authority as the Board may from time to time determine to be necessary or desirable. 3 3 ARTICLE I DEFINITIONS 1.01 Definitions. The following terms shall have the indicated meanings for purposes of the Plan: a. "Base Pay" shall mean a Participant's current bi-weekly salary multiplied by 26. b. "Board" shall mean the board of Directors of the Corporation. c. "Chief Executive Officer" shall mean the chief executive officer of the Corporation. d. "Committee" shall mean the Organization and Compensation Committee of the Board, consisting of persons who are not Employees. e. "Corporation" shall mean The Lubrizol Corporation, a corporation organized under the laws of the State of Ohio. f. "Director" shall mean a director of the Corporation. g. "Employee" shall mean any person who is employed by the Corporation or a domestic Subsidiary with the exception of persons employed by the Agrigenetics division. However, any Officer of the Corporation who is employed by the Agrigenetics division shall be 4 4 deemed to be an Employee within the meaning of this definition. h. "Individual Award" shall mean the amount paid to a Participant by the Corporation pursuant to the Plan. i. "Individual Performance Shares" shall have the definition set forth in Section 3.02 herein. j. "Officer" shall mean a chief executive officer, president, vice president, secretary, treasurer or principal financial officer, controller or principal accounting officer and any other person designated as an officer of the Corporation by the Board. k. "Participant" shall mean Officers, and any Employee who has been selected by the Committee pursuant to Article II of the Plan, and who has not for any reason become ineligible to participate in the Plan. l. "Plan" shall mean The Lubrizol Corporation Variable Award Plan, effective January 1, 1990 as herein set forth. m. "Plan Year" shall mean the twelve-month period commencing each January 1 and ending each subsequent December 31. n. "President" shall mean the president of the Corporation. o. "Subsidiary" shall mean any other domestic company wholly or partially owned by the Corporation. 5 5 1.02 Construction. Where necessary or appropriate to the meaning of a word, the singular shall be deemed to include the plural, the plural to include the singular, the masculine to include the feminine, and the feminine to include the masculine. ARTICLE II ELIGIBILITY AND PARTICIPATION 2.01 Eligibility. All Employees shall be eligible to participate in the Plan. 2.02 Participation. The Committee shall determine which Employees shall participate in the Plan for each Plan Year. The Committee's selection of Participants shall be made after considering recommendations presented to it by the Chief Executive Officer. ARTICLE III INDIVIDUAL PERFORMANCE SHARES 3.01 In General. At the time the Committee selects Participants for any Plan Year, the Committee shall, after consideration of the recommendations of the Chief Executive Officer, establish for each Plan Year Individual Performance Shares for each Participant. 3.02 Calculation of Individual Performance Shares. Individual Performance Shares shall be calculated in the following manner: 6 6 (a) The Base Pay of each eligible Participant shall be multiplied by a designated percentage which shall take into account the Participant's position in the Corporation. Such percentage shall be determined by the Committee. (b) The amount produced for each Participant pursuant to the calculation in (a) above shall be divided by the sum of all such amounts produced for all Participants calculated in accordance with (a) above in order to produce a second percentage. (c) The percentage for each Participant derived in the manner set forth in paragraph (b) above shall be multiplied by 100 and rounded to the highest whole number to produce the number of each Participant's Individual Performance Shares. Individual Performance Shares may be adjusted, either increased or decreased, for any Participant at the discretion of the Chief Executive Officer and the President in order to reflect individual contribution not taken into account under the formulae described above. ARTICLE IV DETERMINATION OF FUND 4.01 Fund. A fund will be accrued for each Plan Year equal to a percentage of the Corporation's consolidated net income for such Plan Year (the "Fund"). Such accruals shall be made on a monthly basis and the accrual percentage shall be determined for each Plan Year by the Chief Executive Officer of the Corporation. 7 7 The Fund shall consist of bookkeeping accruals and no cash or other property shall be set aside by the Corporation for these purposes. The Committee may, in its discretion, increase or decrease the Fund. ARTICLE V INDIVIDUAL AWARDS 5.01 Allocation. Each Participant's Individual Award for a Plan Year shall be an amount calculated by multiplying the amount of the Fund by a fraction, the numerator of which shall be the number of the Participant's Individual Performance Shares and the denominator of which shall be the total number of all Participants' Individual Performance Shares. The maximum amount of any Participant's Individual Award shall be at the discretion of the Committee. No Participant shall have any vested interest in or be entitled to any Individual Award until or unless such payment is made by the Committee. Any amounts remaining in the Fund after Individual Awards are made for any Plan Year shall be returned to earnings and not carried over to any subsequent Plan Year. 5.02 Time and Method of Payment of Individual Awards. In the event the Committee determines that a Participant is entitled to an Individual Award, the Corporation shall pay such Individual Award to that Participant (in cash with appropriate tax withholding) as soon after the close of the Plan Year as may be feasible, but in no event later than 30 days after the public announcement of the Corporation's earnings for such Plan Year. A Participant who leaves the Corporation's employ prior to the issuance of Individual Award checks, except in the case of retirement under the provisions of a qualified defined benefit 8 8 plan maintained by the Corporation, disability or death, will not be eligible for any payment under this Plan. However, an Individual Award may be made in those instances where recommendation for such a payment has been made by the Chief Executive Officer and approved by the Committee. In the event a Participant dies prior to the payment of any Individual Award with respect to any Plan Year, any Individual Award determined to be payable by the Committee shall be paid by the Corporation to the Participant's estate. 5.03 Conditions. Notwithstanding anything contained herein to the contrary, the payment of Individual Awards to Participants with respect to any Plan Year is conditioned upon the availability of adequate corporate profits for the Corporation's fiscal year coinciding with any Plan Year. The determination of whether adequate corporate profits exist shall be made solely by the Board and such determination shall be conclusive and binding. ARTICLE VI CHANGE OF CONTROL 6.01 For all purposes of the Plan, a "Change in Control of the Corporation" shall have occurred if any of the following events shall occur: a. The Corporation is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate 9 9 by the holders of Voting Stock (as hereinafter defined) of the Corporation immediately prior to such transaction; b. The Corporation sells all or substantially all of its assets to any other corporation or other legal person, less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale are held in the aggregate by the holders of Voting Stock of the Corporation immediately prior to such sale; c. There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13(d)(3) or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Corporation ("Voting Stock"); d. The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Corporation has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or e. If during any period of two consecutive years, individuals who at the beginning of any such period 10 10 constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Corporation's stockholders, of each Director of the Corporation first elected during such period was approved by a vote of at least two-thirds of the Directors of the Corporation then still in office who were Directors of the Corporation at the beginning of any such period. Notwithstanding the foregoing provisions, a "Change in Control" shall not be deemed to have occurred for purposes of the Plan solely because (i) the Corporation, (ii) an entity in which the Corporation directly or indirectly beneficially owns 50% or more of the voting securities or (iii) any Corporation-sponsored employee stock ownership plan or any other employee benefit plan of the Corporation, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20% or otherwise, or because the Corporation reports that a change in control of the Corporation has or may have occurred or will or may occur in the future by reason of such beneficial ownership. 6.02 Effect of Change in Control. In the event a Change in Control of the Corporation occurs prior to final determination by the Committee of the amounts of Individual Awards to be paid under the Plan with respect to any Plan Year, the Committee shall calculate such Individual Awards as soon as practicable after such Change in Control. The Fund from which Individual Awards are to be made shall be based upon accruals by the Corporation up to the time of such Change in Control and Individual Awards shall be calculated in accordance with Section 3.02 herein. Payment of 11 11 such Individual Awards shall be made within thirty (30) days of the date on which the determination is made to compute the payments according to the terms of this provision. ARTICLE VII ADMINISTRATION 7.01 Plan Administrator. The Committee shall be the Plan administrator. 7.02 Duties of Plan Administrator. a. The Committee shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan including, but not limited to, the following: (1) Determination of Employees of the Corporation who are eligible for Plan participation; (2) Determination of the amount of the Fund to be distributed to Participants for each Plan Year; and (3) Determination of Officer's actual Individual Awards. b. The Committee shall interpret the Plan and shall resolve all questions arising in the administration, interpretation, and application of the Plan. Any such determination of the Committee shall be conclusive and binding on all persons. 12 12 c. The Committee shall establish such procedures and keep such records or other data as the Committee in its discretion determines necessary or proper for the administration of the Plan. d. The Committee may delegate administrative responsibilities to such person or persons as the Committee deems necessary or desirable in connection with the administration of the Plan. ARTICLE VIII MISCELLANEOUS 8.01 Unfunded Plan. The Corporation shall be under no obligation to segregate or reserve any funds or other assets for purposes relating to this Plan and no Participant shall have any rights whatsoever in or with respect to any funds or assets of the Corporation. 8.02 Non-Alienation. Since a Participant does not have any rights to any Individual Award under the Plan until payment of such Individual Award is made, no anticipated payment of any Individual Award shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, garnishment or encumbrance of any kind. If a Participant attempts to alienate, sell, transfer, assign, pledge or otherwise encumber any such anticipated Individual Award, or if he has filed or will be filing for bankruptcy, the Committee in its discretion may cause such amounts as would otherwise become payable to such Participant at such time or times to be paid to or applied for the benefit of such one or more of the following as the Committee 13 in its discretion may designate: the Participant, his spouse, child or children, or other dependents. 8.03 Unclaimed Payments. Should the whereabouts of any Participant entitled to receive any Individual Award be unknown to the Corporation, and unascertainable after reasonable inquiry by the Corporation, for a period of two years, the right of such person to receive payments hereunder shall be terminated, and the amounts which would otherwise have been payable to such person shall be forfeited. 8.04 Actions or Decisions with Respect to the Plan. Any decision or action of the Corporation, the Board, or the Committee, arising out of or in connection with the administration and operation of this Plan, may be made or taken in their absolute discretion, and such decision or action shall be conclusive and binding upon all Participants. 8.05 No Employment Rights. Nothing herein contained shall be construed as a commitment or agreement upon the part of any Participant or Employee hereunder to continue his employment with the Corporation or a Subsidiary, and nothing herein contained shall be construed as a commitment on the part of the Corporation or a Subsidiary to continue the employment or rate of compensation of any Participant hereunder or any Employee for any period. 8.06 Amendment of the Plan. The Corporation reserves the right, to be exercised by instruction from the Committee, to modify or amend this Plan at any time. 8.07 Duration and Termination of the Plan. The Corporation also reserves the right, to be exercised by action of the Board, 14 14 to discontinue or terminate the Plan. Any such termination shall not be retroactive. IN WITNESS WHEREOF, the Corporation has executed the Plan as of the day and year first above written. THE LUBRIZOL CORPORATION By: Title: By: Title: EX-10.I 18 EXHIBIT 10.I 1 EXHIBIT (10)(i) THE LUBRIZOL CORPORATION EXECUTIVE DEATH BENEFIT PLAN The Lubrizol Executive Death Benefit Plan (hereinafter referred to as the "Plan") shall provide death benefits to the designated beneficiaries of certain executives of The Lubrizol Corporation (hereinafter referred to as the "Corporation") in accordance with the provisions hereinafter set forth. Section 1. Eligibility. Participation in the Plan shall be limited to those executives of the Corporation who are designated by the Organization and Compensation Committee of the Board of Directors of the Corporation (hereinafter referred to as the "Committee") to participate in the Plan; who complete a physical examination to the satisfaction of the Corporation as soon as reasonably possible after being so designated; and who waive participation and benefits in The Lubrizol Corporation Term Life Insurance Program in a form satisfactory to the Corporation. Any executive so designated shall hereinafter be referred to as a "Participant". Section 2. Benefits. Upon the death of a Participant, a death benefit shall be made to the Participant's Beneficiary (as defined in Section 5) equal to a percentage of the Participant's bi-weekly salary multiplied by 26, plus quarterly pay, at the time that the Participant is designated by the Committee to participate in the Plan (hereinafter referred to as "Covered Pay"). Covered Pay for the Participants designated by the Board to participate in the Plan as of June 1, 1990 shall mean 1990 Covered Pay. The Committee will periodically review the Plan and may, at its discretion, change the level of Covered Pay for any Participant. A death benefit shall be calculated in accordance with Paragraph (a) or (b) below, whichever is applicable. (a) The amount of the death benefit payable with respect to a Participant, who at the time of his death, (i) is employed by the Corporation, or (ii) has retired under the normal retirement provisions of a qualified defined- benefit plan maintained by the Corporation, shall be as follows: 2 Age of Participant at Death Death Benefit Less than age 70 250% of Covered Pay At least age 70, but less than age 75 150% of Covered Pay Age 75 and over 100% of Covered Pay (b) The amount of the death benefit payable with respect to a Participant who (i) has retired under the early retirement provisions of a qualified defined benefit plan maintained by the Corporation, or (ii) has voluntarily terminated his employment with the Corporation but has not obtained competitive employment with another employer, shall be as follows: Years after Early Retirement or Voluntary Termination Death Benefit 0 through 5 250% of Covered Pay 6 through 10 150% of Covered Pay 11 or more 100% of Covered Pay Section 3. Funding. The obligation of the Corporation to pay benefits provided hereunder shall be satisfied by the Corporation out of its general funds. In order to provide a source of payment for its obligations under the Plan, the Corporation will cause a trust fund to be maintained and/or arrange for insurance contracts. Subject to the provisions of the trust agreement governing any such trust fund or the insurance contract, the obligation of the Corporation under the Plan to provide a benefit shall nonetheless constitute the unsecured promise of the Corporation to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Corporation. Section 4. Payment of Benefits. Payment of any death benefit under the Plan shall be made to the deceased Participant's 2 3 beneficiary in a single lump sum as soon as practicable after the Participant's death. Section 5. Beneficiaries. A Participant may designate any person or persons as a beneficiary (hereinafter referred to as a "Beneficiary") to receive payment of the death benefit provided under the Plan. Such designation shall be made in writing in the form prescribed by the plan administrator and shall become effective only when filed by the Participant with the Corporation. A Participant may change or revoke his Beneficiary designation at any time by completing and filing with the Corporation a new Beneficiary designation. If at the time of the Participant's death there is no Beneficiary designation on file with the Corporation, or the beneficiary does not survive to the date of distribution, the death benefit provided hereunder shall be paid to the Participant's estate. Section 6. Plan Administrator. The Corporation shall be the administrator of the Plan. The plan administrator shall perform all ministerial functions with respect to the Plan. The plan administrator shall employ such advisors or agents as it may deem necessary or advisable to assist it in carrying out its duties hereunder. The plan administrator shall have full power and authority to interpret and construe the Plan and shall determine all questions arising in the administration, interpretation, and application of the Plan. Any such determination shall be conclusive and binding on all persons. Section 7. Reduction or Termination of Benefits. The Committee reserves the right to reduce or eliminate the benefit of any Participant who is dismissed for cause, or who voluntarily terminates employment to obtain competitive employment. For Plan purposes, "Cause" means (i) willful violation of a Corporation policy, or (ii) willful misconduct or gross negligence in the performance of duties, as determined by the Corporation in good faith consistently, if applicable, with its existing personnel practices. For Plan purposes, "Competitive employment" shall include employment with any employer (firm, business, or individual) 3 4 engaged in selling or furnishing any product similar to that available from the Corporation at the time of termination of employment with the Corporation. Section 8. Employment. This Plan shall not constitute a contract of employment. Section 9. Severability. In the event any provision of the Plan is deemed invalid, such provision shall be deemed to be severed from the Plan, and the remainder of the Plan shall continue to be in full force and effect. Section 10. Governing Law. The provisions of the Plan shall be construed and enforced in accordance with the laws of the State of Ohio. Section 11. Effective Date. The Plan is effective as of June 1, 1990. Executed at Wickliffe, Ohio, this day of , 1991. THE LUBRIZOL CORPORATION By: Title: 4 5 FIRST AMENDMENT TO THE LUBRIZOL CORPORATION EXECUTIVE DEATH BENEFIT PLAN WHEREAS, The Lubrizol Corporation Executive Death Benefit Plan (hereinafter referred to as the "Plan") was established effective as of June 1, 1990, by The Lubrizol Corporation (hereinafter referred to as the "Corporation") for the benefit of certain executives of The Lubrizol Corporation; and WHEREAS, The Corporation desires to amend the Plan to clarify the eligibility requirements; NOW, THEREFORE, Effective as of June 1, 1990, the Plan is hereby amended in the respect hereinafter set forth. 1. Section 1 of the Plan is hereby amended in its entirety to read as follows: Section 1. Eligibility. Participation in the Plan shall be limited to those executives of the Corporation who are designated by the Organization and Compensation Committee of the Board of Directors of the Corporation (hereinafter referred to as the "Committee") to participate in the Plan; who complete a physical examination to the satisfaction of the Corporation as soon as reasonably possible after being so designated; and who waive participation and benefits in the basic term-life insurance coverage sponsored by the Corporation or any of its affiliates, in a form satisfactory to the Corporation. Any executive so designated shall hereinafter be referred to as a "Participant". EXECUTED at Wickliffe Ohio this day of , 1992. THE LUBRIZOL CORPORATION By: L. E. Coleman Title: Chief Executive Officer 6 SECOND AMENDMENT TO THE LUBRIZOL CORPORATION EXECUTIVE DEATH BENEFIT PLAN WHEREAS, effective June 1, 1990, The Lubrizol Corporation (the "Company") established The Lubrizol Corporation Executive Death Benefit Plan (the "Plan") for the benefit of certain executives of the Company; and WHEREAS, The Corporation desires to amend the Plan to update the definition of Covered Pay and to provide for an Appendix A to the Plan which shall list the current Participants in the Plan from time to time. NOW, THEREFORE, Effective as of January 1, 1993, the Plan is hereby amended in the respects hereinafter set forth. 1. Section 1 of the Plan is hereby amended by changing the last sentence to read as follows: Any executive so designated shall be listed in Appendix A attached hereto, and shall hereinafter be referred to as a "Participant". 2. Section 2 of the Plan is hereby amended by changing the first paragraph to read as follows: Upon the death of a Participant, a death benefit shall be made to the Participant's Beneficiary (as defined in Section 5) equal to a percentage of the Participant's bi- weekly salary multiplied by 26, plus quarterly (hereinafter referred to as "Covered Pay") rounded to the nearest $1,000.00. Covered Pay for the Participants designated by the Board to participate in the Plan shall have the meaning as described in Appendix A, attached hereto. The Committee will periodically review the plan and may, at its discretion, change the level of Covered Pay for any Participant. A death benefit shall be calculated in accordance with Paragraph (a) or (b) below, whichever is applicable. EXECUTED at Wickliffe, Ohio this day of , 1993. THE LUBRIZOL CORPORATION By: L. E. Coleman Title: Chief Executive Officer 7 THE LUBRIZOL CORPORATION EXECUTIVE DEATH BENEFIT PLAN APPENDIX A January 1, 1993 PARTICIPANT COVERED PAY 1 R. A. Andreas January 1, 1993 Covered Pay 2. W. G. Bares January 1, 1993 Covered Pay 3. L. E. Coleman January 1, 1993 Covered Pay 4. G. R. Hill January 1, 1993 Covered Pay 5. R. Y. K. Hsu January 1, 1993 Covered Pay 6. W. D. Manning January 1, 1993 Covered Pay 7 R J Senz January 1 1993 Covered Pay 8. W. T. Beargie June 1, 1990 Covered Pay 9. P. L. Krug June 1, 1990 Covered Pay 10. J. A. Studebaker June 1, 1990 Covered Pay EX-10.L 19 EXHIBIT 10.L 1 EXHIBIT (10)(l) THE LUBRIZOL CORPORATION 1991 STOCK INCENTIVE PLAN (As Amended April 27, 1992) SECTION 1. PURPOSE. The purposes of The Lubrizol Corporation 1991 Stock Incentive Plan are to encourage selected employees of The Lubrizol Corporation and its Subsidiaries and directors of the Company to acquire a proprietary and vested interest in the growth and performance of the Company, to generate an increased incentive to contribute to the Company's future success and prosperity, thus enhancing the value of the Company for the benefit of shareholders, and to enhance the ability of the Company and its Subsidiaries to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability of the Company depends. SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall have the meanings set forth below: (a) "Award" means any Option, Stock Appreciation Right, Restricted Stock Award, or Stock Award granted pursuant to the provisions of the Plan. (b) "Award Agreement" means a written agreement evidencing any Award granted hereunder and signed by both the Company and the Participant or by both the Company and an Outside Director. (c) "Board" means the Board of Directors of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (e) "Committee" means a committee of not less than three (3) Outside Directors of the Board, each of whom shall be a "disinterested person" within the meaning of Rule 16b-3(d)(3) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor rule or statute. (f) "Company" means The Lubrizol Corporation. (g) "Employee" means any employee of the Company or of any Subsidiary. (h) "Fair Market Value" means the average of the high and low price of a Share on the New York Stock Exchange on the Grant Date (in the case of a Grant), or any other relevant date. 2 (i) "Grant Date" means the date on which the Board approves the grant of an Option, Stock Appreciation Right, Restricted Stock Award, or Stock Award, and, with respect to an Option granted to an Outside Director pursuant to Section 10, the date of the Shareholders' Meeting on which such Option is granted. (j) "Incentive Stock Option" means an Option that is intended to meet the requirements of Section 422A of the Code or any successor provision thereto. (k) "Non-Statutory Stock Option" means an Option that is not intended to be an Incentive Stock Option. (l) "Option" means an option to purchase Shares granted hereunder. (m) "Option Price" means the purchase price of each Share under an Option. (n) "Outside Director" means a member of the Board who is not an employee of the Company or of any Subsidiary. (o) "Participant" means an Employee who is selected by the Committee to receive an Award under the Plan. (p) "Plan" means The Lubrizol Corporation 1991 Stock Incentive Plan. (q) "Restricted Stock Award" means an award of restricted Shares under Section 8 hereof. (r) "Restriction Period" means the period of time specified in an Award Agreement during which the following conditions remain in effect: (i) certain restrictions on the sale or other disposition of Shares awarded under the Plan, (ii) subject to the terms of the applicable Award Agreement, the continued employment of the Participant, and ( iii ) such other conditions as may be set forth in the applicable Award Agreement. (s) "Shareholders' Meeting" means the annual meeting of shareholders of the Company in each year. (t) "Shares" means common shares without par value of the Company. (u) "Stock Appreciation Right" means the right to receive a payment in cash or in Shares, or in any combination thereof, from the Company equal to the excess of the Fair Market Value of a stated number of Shares at the exercise date over a fixed price for such Shares. 2 3 (v) "Stock Award" means the grant of unrestricted Shares under the Plan. (w) "Subsidiary" means a corporation which is at least 80% owned, directly or indirectly, by the Company. (x) "Voting Stock" means the then-outstanding securities entitled to vote generally in the election of directors of the Company. SECTION 3. ADMINISTRATION. The Plan shall be administered by the Committee. Members of the Committee shall be appointed by and serve at the pleasure of the Board, and may resign by written notice filed with the Chairman of the Board or the Secretary of the Company. A vacancy on the Committee shall be filled by the appointment of a successor member by the Board. Subject to the express provisions of this Plan, the Committee shall have conclusive authority to select Employees to be Participants for Awards and determine the type and number of Awards to be granted, to construe and interpret the Plan, any Award granted hereunder, and any Award Agreement entered into hereunder, and to establish, amend, and rescind rules and regulations for the administration of this Plan and shall have such additional authority as the Board may from time to time determine to be necessary or desirable. Notwithstanding the foregoing, the Committee shall not have discretion with respect to Options granted to Outside Directors pursuant to Section 10 such as to prevent any Award granted under this Plan from meeting the requirements for exemption from Section 16(b) of the Exchange Act, as set forth in Rule 16b-3 thereunder or any successor rule or statute. SECTION 4. SHARES SUBJECT TO THE PLAN. (a) Subject to adjustment as provided in the Plan, the total number of Shares available under the Plan in each calendar year shall be one percent (1%) of the total outstanding Shares as of the first day of any year for which the Plan is in effect; provided that such number shall be increased in any year by the number of Shares available for grant hereunder in previous years but not covered by Awards granted hereunder in such previous years; and provided further, that a total of no more than two million (2,000,000) Shares shall be available for the grant of Incentive Stock Options Under the Plan. Settlement of an Award, whether by the issuance of Shares or the payment of cash, shall not be deemed to be the grant of an Award hereunder. In addition, any Shares issued by the Company through the assumption or substitution of outstanding grants from an acquired company shall not reduce the Shares available for grants under the Plan. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued Shares or treasury shares. If any Shares subject to any Award granted hereunder are forfeited or if such Award otherwise 3 4 terminates without the issuance of such Shares or payment of other consideration in lieu of such Shares, the Shares subject to such Award, to the extent of any such forfeiture or termination, shall again be available for grant under the Plan as if such Shares had not been subject to an Award. (b) The number of Shares which remain available for grant pursuant to this Plan, together with Shares subject to outstanding Awards, at the time of any change in the Company's capitalization, including stock splits, stock dividends, mergers, reorganizations, consolidations, recapitalizations, or other changes in corporate structure, shall be appropriately and proportionately adjusted to reflect such change in capitalization. SECTION 5. ELIGIBILITY. Any Employee shall be eligible to be selected as a Participant. SECTION 6. STOCK OPTIONS. Non-Statutory Stock Options and Incentive Stock Options may be granted hereunder to Participants either separately or in conjunction with other Awards granted under the Plan. Any Option granted to a Participant under the Plan shall be evidenced by an Award Agreement in such form as the Committee may from time to time approve. Any such Option shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable. (a) OPTION PRICE. The purchase price per Share under an Option shall be one hundred percent (100%) of the Fair Market Value of the Share on the Grant Date of the Option. Payment of the Option Price may be made in cash, Shares, or a combination of cash and Shares, as provided in the Award Agreement relating thereto. (b) OPTION PERIOD. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Incentive Stock Option shall be exercisable after the expiration of ten years from the Grant Date. (c) EXERCISE OF OPTION. Options shall be exercisable to the extent of fifty percent (50%) of the Shares subject thereto after one year from the Grant Date, seventy-five percent (75%) of such Shares after two years from the Grant Date, and one hundred percent (100%) of such Shares after three years from the Grant Date, subject to any provisions respecting the exercisability of Options that may be contained in an Award Agreement. (d) INCENTIVE STOCK OPTIONS. The aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options held by 4 5 any Participant which are exercisable for the first time by such Participant during any calendar year under the Plan (and under any other benefit plans of the Company, of any parent corporation, or Subsidiary) shall not exceed $100,000 or, if different, the maximum limitation in effect at the Grant Date under Section 422A of the Code, or any successor provision, and any regulations promulgated thereunder. The terms of any Incentive Stock Option granted hereunder shall comply in all respects with the provisions of Section 422A of the Code, or any successor provision, and any regulations promulgated thereunder. (e) RELOAD. In the event that a Participant or an Outside Director exercises an Option and pays some or all of the Option Price with Shares, such Participant or Outside Director shall be granted a reload Option to purchase the number of Shares equal to the number of Shares used as payment of the Option Price, such reload Option to be granted at the time and subject to the limitation described below. The Grant Date for the reload Option shall be the next date on which the Committee otherwise grants Options under this Plan to employees generally, whether or not during the same calendar year in which the original Option is exercised. Options granted to Participants pursuant to this Section 6(e) shall have terms and conditions as described in this Section 6 and Options granted to Outside Directors pursuant to this Section 6(e) shall have terms and conditions as described in Section 10. Options granted pursuant to this Section 6(e) shall be of the same character (i.e., Non- Statutory Stock Options or Incentive Stock Options) as the Option that is exercised to give rise to the grant of the reload Option, provided that if an Incentive Stock Option cannot be granted under this Section 6(e) in compliance with Section 422A of the Code, then a Non-Statutory Stock Option shall be granted in lieu thereof. Options shall be granted pursuant to this Section 6(e) only to the extent that the number of Shares covered by such Option grants does not, when added to the number of Shares covered by Awards previously granted during such calendar year, exceed the limitation set forth in Section 4(a). If such limitation would otherwise be exceeded by the operation of this Section 6(e), each Participant or Outside Director entitled to receive an Option under this Section 6(e) shall have the number of Shares subject to such Option reduced appropriately and proportionately (i.e., by the same percentage) so that the limitation set forth in Section 4(a) will not be exceeded. Shares received upon the exercise of an Option granted pursuant to this Section 6(e) may not be sold or otherwise transferred (i) by a Participant until such Participant ceases to be employed by the Company or a Subsidiary, or (ii) by an Outside Director until such Outside Director ceases to be an Outside Director, provided, however, that a Participant or Outside Director may use such Shares as payment of the Option Price of Options granted under this Plan to the extent permitted by the applicable Award Agreement, in which case a number of the Shares (equal to the 5 6 number of Shares used for such payment) purchased by the exercise of such Options also shall be subject to the same restrictions upon transferability. Certificates for such Shares with a transferability restriction shall bear a legend referencing such restriction. SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted hereunder to Participants either separately or in conjunction with other Awards granted under the Plan and may, but need not, relate to a specific Option granted under Section 6. The provisions of Stock Appreciation Rights need not be the same with respect to each Participant. Any Stock Appreciation Right related to a Non-Statutory Stock Option may be granted at the same time such Option is granted or at any time thereafter before exercise or expiration of such Option. Any Stock Appreciation Right related to an Incentive Stock Option must be granted at the same time such Option is granted. Any Stock Appreciation Right related to an Option shall be exercisable only to the extent the related Option is exercisable. In the case of any Stock Appreciation Right related to any Option, the Stock Appreciation Right or applicable portion thereof shall terminate and no longer be exercisable upon the termination or exercise of the related Option. Similarly, upon exercise of a Stock Appreciation Right as to some or all of the Shares covered by a related Option, the related Option shall be canceled automatically to the extent of the Stock Appreciation Rights exercised, and such Shares shall not thereafter be eligible for grant under Section 4(a). The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it shall deem appropriate. SECTION 8. RESTRICTED STOCK AWARDS. (a) ISSUANCE. Restricted Stock Awards may be issued hereunder to Participants, either separately or in conjunction with other Awards granted under the Plan. Each Award under this Section 8 shall be evidenced by an Award Agreement between the Participant and the Company which shall specify the vesting schedule, any rights of acceleration and such other terms and conditions as the Board shall determine, which need not be the same with respect to each Participant. (b) REGISTRATION. Shares issued under this Section 8 shall be evidenced by issuance of a stock certificate or certificates registered in the name of the Participant bearing the following legend and any other legend required by, or deemed appropriate under, any federal or state securities laws: 6 7 The sale or other transfer of the common shares represented by this certificate is subject to certain restrictions set forth in the Award Agreement between (the registered owner) and The Lubrizol Corporation dated , under The Lubrizol Corporation 1991 Stock Incentive Plan. A copy of the Plan and Award Agreement may be obtained from the Secretary of The Lubrizol Corporation. Unless otherwise provided in the Award Agreement between the Participant and the Company, such certificates shall be retained by the Company until the expiration of the Restriction Period. Upon the expiration of the Restriction Period, the Company shall (i) cause the removal of the legend from the certificates for such Shares as to which a Participant is entitled in accordance with the Award Agreement between the Participant and the Company and (ii) release such Shares to the custody of the Participant. (c) FORFEITURE. Except as otherwise determined by the Committee at the Grant Date, upon termination of employment of the Participant for any reason during the Restriction Period, all Shares still subject to restriction shall be forfeited by the Participant and retained by the Company; provided that in the event of a Participant's retirement, permanent disability, death, or in cases of special circumstances, the Committee may, in its sole discretion, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to such Participant's Shares. In such case, unrestricted Shares shall be issued to the Participant at such time as the Committee determines. (d) RIGHTS AS SHAREHOLDERS. At all times during the Restriction Period, Participants shall be entitled to full voting rights with respect to all Shares awarded under this Section 8 and shall be entitled to dividends with respect to such Shares. SECTION 9. STOCK AWARDS. (a) Awards of Shares may be granted hereunder to Participants, either separately or in conjunction with other Awards granted under the Plan. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine (i) the Employees to whom such Awards shall be granted, (ii) the time or times at which such Awards shall be granted, (iii) the number of Shares to be granted pursuant to such Awards, and (iv) all other conditions of the Awards. The provisions of stock awards need not be the same with respect to each Participant. SECTION 10. OUTSIDE DIRECTORS' OPTIONS. On the close of business on the date of the 1991 Shareholders' Meeting, each Outside Director shall automatically be granted an 7 8 Option to purchase 1,000 Shares, and on the close of business on the date of each subsequent Shareholders' Meeting, each Outside Director shall automatically be granted an Option to purchase 1,000 Shares. All such Options shall be Non-Statutory Stock Options and shall be subject to the following terms and conditions and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as are contained in the applicable Award Agreement. (a) OPTION PRICE. The purchase price per Share shall be one hundred percent (100%) of the Fair Market Value of the Share on the Grant Date. Payment of the Option Price may be made in cash, Shares, or a combination of cash and Shares, as provided in the Award Agreement in effect from time to time. (b) OPTION PERIOD. The term during which Options granted under this Section 10 shall be exercisable shall be ten (10) years from the Grant Date. (c) EXERCISE OF OPTIONS. Subject to the provisions of this Section 10(c), Options shall be exercisable to the extent of fifty percent (50%) of the Shares subject thereto after one year from the Grant Date, seventy-five percent (75%) of such Shares after two years from the Grant Date, and one hundred percent (100%) of such Shares after three years from the Grant Date. Options may be exercised by an Outside Director during the period that the Outside Director remains a member of the Board and under the circumstances described below. If an Outside Director retires under a retirement plan or policy of the Company, then Options held by such Outside Director may be exercised for a period of thirty-six (36) months following retirement, to the extent of 100% of the Shares covered by such Options (notwithstanding the extent to which the Outside Director otherwise would have been entitled to exercise such Options at the date of retirement), provided that in no event shall an Option be exercisable more than ten ( 10) years after the Grant Date. In the event of the death of an Outside Director, Options held by such Outside Director may be exercised for a period of twelve ( 12) months following the date of death, (i) to the extent of 100% of the Shares covered by such Options (notwithstanding the extent to which the Outside Director otherwise would have been entitled to exercise the Option at the date of death), and (ii) only by the executor or administrator of the Outside Director's estate or by the person or persons to whom the Outside Director's rights under the Options shall pass by the Outside Director's will or the laws of descent and distribution, provided that in no event shall an Option be exercisable more than ten (10) years after the Grant Date. 8 9 If an Outside Director shall cease to be a director for any reason other than retirement under a retirement plan or policy of the Company or death, Options held by such Outside Director may be exercised for a period of three (3) months following such cessation, to the extent of 100% of the Shares covered by such Options (notwithstanding the extent to which the Outside Director otherwise would have been entitled to exercise such Options at the date of such cessation), provided that in no event shall an Option be exercisable more than ten (10) years after the Grant Date. SECTION 11. CHANGE IN CONTROL. Notwithstanding the provisions of Sections 6(c) and 10(c), Options shall become exercisable with respect to 100% of the Shares upon the occurrence of any Change in Control (as hereafter defined) of the Company; except that no Options shall be exercised prior to the end of six months from the Grant Date. Notwithstanding the provisions of Section 8 and the applicable Award Agreement, any restricted Shares shall be 100% vested and without any restrictions upon the occurrence of any Change in Control of the Company. For all purposes of the Plan, a "Change in Control" shall have occurred if any of the following events shall occur: (a) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and immediately after such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such transaction; (b) The Company sells all or substantially all of its assets to any other corporation or other legal person, and less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale; (c) There is a report filed on Schedule 13D or Schedule 14D-l (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13(d)(3) or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the Voting Stock; 9 10 (d) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or (e) If during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Company cease for any reason to constitute at least a majority thereof, provided, however, that for purposes of this Section 11 (e), each Director who is first elected, or first nominated for election by the Company's stockholders, by a vote of at least two thirds of the Directors of the Company (or a committee thereof) then still in office who were Directors of the Company at the beginning of any such period will be deemed to have been a Director of the Company at the beginning of such period. Notwithstanding the foregoing provisions of Section 11(c) or 11(d) hereof, unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of the Plan solely because (i) the Company, (ii) an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities, or (iii) any employee stock ownership plan or any other employee benefit plan sponsored by the Company, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-l, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20% or otherwise, or because the Company reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership. SECTION 12. AMENDMENTS AND TERMINATION. The Board may, at any time, amend, alter or terminate the Plan, but no amendment, alteration, or termination shall be made that would impair the rights of an Outside Director or Participant under an Award theretofore granted, without the Outside Director's or Participant's consent, or that without the approval of the shareholders would: (a) except as is provided in Sections 4(b) and 13(c) of the Plan, increase the total number of Shares which may be issued under the Plan; (b) change the class of employees eligible to participate in the Plan; or 10 11 (c) materially increase the benefits accruing to Participants under the Plan; so long as such approval is required by law or regulation. The Committee may amend the terms of any Award heretofore granted (except, with respect to Options granted pursuant to Section 10 hereof, only to the extent not inconsistent with Rule 16b-3 under the Exchange Act or any successor rule or statute), prospectively or retroactively, but no such amendment shall impair the rights of any Participant or Outside Director without his consent. SECTION 13. GENERAL PROVISIONS. (a) No Option, Stock Appreciation Right, or Restricted Stock Award shall be assignable or transferable by a Participant or an Outside Director otherwise than by will or the laws of descent and distribution, and Options and Stock Appreciation Rights may be exercised during the Participant's or Outside Director's lifetime only by the Participant or the Outside Director or, if permissible under applicable law, by the guardian or legal representative of the Participant or Outside Director. (b) The term of each Award shall be for such period of months or years from its Grant Date as may be determined by the Committee or as set forth in the Plan; provided that in no event shall the term of any Incentive Stock Option or any Stock Appreciation Right related to any Incentive Stock Option exceed a period of ten (10) years from the Grant Date. (c) In the event of a merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure such that Shares are changed into or become exchangeable for a larger or smaller number of Shares, thereafter the number of Shares subject to outstanding Awards granted to Participants and to any Shares subject to Awards to be granted to Participants pursuant to this Plan shall be increased or decreased, as the case may be, in direct proportion to the increase or decrease in the number of Shares by reason of such change in corporate structure; provided, however, that the number of Shares shall always be a whole number, and the purchase price per Share of any outstanding Options shall, in the case of an increase in the number of Shares, be proportionately reduced, and, in the case of a decrease in the number of Shares, shall be proportionately increased. The above adjustment shall also apply to any Shares subject to Options granted to Outside Directors pursuant to the provisions of Section 10. (d) No Employee shall have any claim to be granted any Award under the Plan and there is no obligation for uniformity of treatment of Employees or Participants under the Plan. 11 12 (e) The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed an Award agreement, and otherwise complied with the then applicable terms and conditions. (f) All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (g) Except as otherwise required in any applicable Award Agreement or by the terms of the Plan, Participants shall not be required, under the Plan, to make any payment other than the rendering of services. (h) The Company shall be authorized to withhold from any payment under the Plan, whether such payment is in Shares or cash, all withholding taxes due in respect of such payment hereunder and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. (i) Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. (j) Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment at any time, nor shall the Plan confer upon any Participant any right to continued employment with the Company or any Subsidiary. SECTION 14. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall be effective as of April 22, 1991, and shall continue in effect until terminated by the Board. 12 EX-10.M 20 EXHIBIT 10.M 1 EXHIBIT (10)(m) THE LUBRIZOL CORPORATION DEFERRED STOCK COMPENSATION PLAN FOR OUTSIDE DIRECTORS September 17, 1991 PURPOSE 1. The Lubrizol Corporation (the "Company") hereby establishes its Deferred Stock Compensation Plan for Outside Directors (the "Plan") in order to promote the interests of the Company and its shareholders by having a portion of the total compensation payable to its outside directors be deferred and paid in the form of common shares of the Company, thereby increasing each Director's beneficial ownership of Company common shares as well as each Director's proprietary interest in the Company. EFFECTIVE DATE 2. The effective date of the plan is October 1, 1991. COMMON SHARE UNITS 3. In addition to the cash compensation otherwise payable to each outside director of the Company, the Company shall establish and maintain a Deferred Stock Account for and in the name of each outside director. Subject to the provisions of Section 10, on the first day of October in each calendar year, the Company shall credit 100 common share units ("Units") to the Deferred Stock Account of each person who is an outside director of the Company on said date. DIVIDEND EQUIVALENTS 4. As of each dividend record date declared with respect to the Company's common shares, the Company shall credit the Deferred Stock Account of each director with an additional number of Units equal to: (a) the product of (i) the dividend per common share of the Company which is payable with respect to such dividend record date, multiplied by (ii) the number of Units credited to the director's Deferred Stock Account as of such dividend record date; divided by (b) the closing price of a common share of the Company on the dividend record date (or if such stock was not traded on that date, on the next preceding date on which such common shares were traded), as 2 reported by the New York Stock Exchange - Composite Transactions Reporting System. DISTRIBUTION OF COMMON SHARES 5. (a) Each director, or, in the event of death, his/her beneficiary, shall be entitled to receive one common share of the Company (a "Share" or "Shares") for each Unit credited to his Deferred Stock Account, payable at such time or times as hereinafter provided. Once a Share has been distributed with respect to a Unit, that Unit shall be canceled. (b) Unless otherwise elected by the director in accordance with the provisions of Section 5(c), all Shares shall be distributed to the director or beneficiary, as the case may be, on the first day of the month following the date on which the director ceases to be a director for any reason. (c) At any time prior to the first time that the Company credits Units to the director's Deferred Stock Account, the director may irrevocably elect to have all Shares to which the director will be entitled under this Plan distributed to him/her (or in the event of his/her death, the director's designated beneficiary) in ten or fewer annual installments commencing on the first day of the month following the date on which such director ceases to be a director of the Company for any reason. The number of Shares to be distributed with each installment shall be equal to the nearer whole number obtained by dividing the number of Units then credited to the director's Deferred Stock Account by the number of unpaid installments. (d) Units with respect to which no distribution of Shares has yet occurred shall continue to be held in the director's Deferred Stock Account and credited with dividend equivalents in accordance with Section 4. BENEFICIARY DESIGNATION 6. (a) Each director may, from time to time, by writing filed with the Company, designate any legal or natural person or persons (who may be designated -2- 3 contingently or successively) to whom Shares attributable to the director's Units are to be distributed if the director dies prior to having received all of such Shares to which he/she is entitled under Section 5. A beneficiary designation will be effective only if the signed form is filed with the Company while the director is alive and will cancel all beneficiary designation forms filed earlier. (b) To the extent that a director fails to designate a beneficiary or beneficiaries as provided in this Section 6, or if all designated beneficiaries die before the director or before the distribution of all Shares attributable to the director's Units, all remaining Shares attributable to such Units shall be distributed to the estate of the director as soon as practicable after such death. ACCELERATION OF SHARE DISTRIBUTIONS 7. The Company may accelerate the distribution of Shares with respect to Units credited to the Deferred Stock Account of any director for reasons of severe financial hardship. For purposes of this Plan, severe financial hardship shall be deemed to exist in the event the Company determines that a director needs a distribution to meet immediate and heavy financial needs resulting from a sudden or unexpected illness or accident of the director or a member of his/her family, loss of the director's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the director. A distribution based on financial hardship shall not exceed the amount required to meet the immediate financial need created by the hardship. TRANSFERABILITY 8. The interests of any director or beneficiary under the Plan are not subject to the claims of the director's creditors and may not otherwise be voluntarily or involuntarily assigned, alienated or encumbered. SHAREHOLDER STATUS 9. Prior to the date that Shares are distributed to a director (or beneficiary), the director (or beneficiary) shall have no rights of a shareholder with respect to the Units. The director's rights under this Plan are solely that of an unsecured creditor of the Company and the Company shall not be obligated to hold any Shares in trust or as a segregated fund. -3- 4 CHANGES IN SHARES 10. In the event of any change in the number of outstanding Shares by reason of any stock dividend, stock split up, recapitalization, merger, consolidation, exchange of shares or other similar corporate change, the number of Units to be credited in accordance with Section 3, the number of Units held in the director's Deferred Stock Account and the Shares to be distributed in accordance with this Plan shall be appropriately adjusted to take into account any such event. SUCCESSORS 11. This Plan shall be binding upon any assignee or successor in interest to the Company whether by merger, consolidation or sale of all or substantially all of the Company's assets. AMENDMENT AND TERMINATION 12. The Board of Directors of the Company may, from time to time, amend or terminate the Plan; provided, however, that no such amendment or termination shall adversely affect the rights of any director or beneficiary without his/her consent with respect to Units credited prior to such amendment or termination. -ooOoo- -4- 5 FIRST AMENDMENT TO THE LUBRIZOL CORPORATION DEFERRED STOCK COMPENSATION PLAN FOR OUTSIDE DIRECTORS RECITALS A. On September 23, 1991, by action of its Board of Directors, The Lubrizol Corporation (the "Company") established its Deferred Stock Compensation Plan for Outside Directors (the "Plan"). B. The Plan became effective on October 1, 1991. C. Effective August 10, 1992, the annual award of 100 common share units ("Units") under the Plan to each outside director became 200 Units, to reflect the effect of the 100% stock dividend declared on the Common Shares of the Company effective August 10, 1992. D. It is appropriate, at this time, to amend the Plan, pursuant to Section 12 of the Plan, increasing the number of Units awarded on the first day of October in each calendar year to 300 Units; accordingly: AMENDMENT 1. Section 3 of the Plan is hereby amended by changing the last sentence thereof to read as follows: "Subject to the provisions of Section 10, on the first day of October in each calendar year, the Company shall credit 300 common share units ("Units") to the Deferred Stock Account of each person who is an outside director of the Company on said date." 2. In all other respects, all provisions of the Plan shall remain in full force and effect. -ooOoo- EX-10.N 21 EXHIBIT 10.N 1 EXHIBIT (10)(n) THE LUBRIZOL CORPORATION 29400 LAKELAND BOULEVARD WICKLIFFE OHIO 440922298 TELEPHONE 216/943-4200 October 1, 1992 Dr. R.Y.K. Hsu The Lubrizol Corporation 29400 Lakeland Boulevard Wickliffe, Ohio 44092 Dear Dr. Hsu: This letter will set forth our amendment (the "Amendment") to the agreement (the "Agreement") of February 23, 1987, as amended December 28, 1989, concerning your employment by and consulting arrangement with The Lubrizol Corporation ("Corporation") and your acceptance of that employment. This Amendment is being entered into in order to secure to the Corporation the benefits of your services as an employee or consultant during the remainder of your expected business career. The Corporation desires that you remain an active employee or consultant of the Corporation until age 70, notwithstanding that you stepped down as an officer of the Corporation in April of 1992 because of the Corporation's mandatory policy that senior corporate officers relinquish their elected positions at age 65. The Corporation recognizes that this Agreement will require you to forego your goals of continuing in the practice of law and of consulting in international business development and operations subsequent to your retirement from, and completion of any period of consulting with, the Corporation. 2 Dr. R.Y.K. Hsu October 1, 1992 Page 2 The Corporation recognizes that you are accommodating your future career goals to its needs, and are prepared to continue to forego certain opportunities which are very attractive to you, both financially and professionally. In addition, you have further accommodated your personal desires to the needs of the Corporation by deferring your retirement as an employee. Accordingly, in consideration of the premises and the receipt of $1.00 and other valuable consideration, the sufficiency of which is acknowledged, the Corporation is pleased to set forth the following amended terms relating to your continued employment by and consulting agreement with it, by amending the Agreement as follows: 1. Paragraph 2(b) of the Agreement shall be amended to read as follows: (b) Notwithstanding the provisions of Paragraph 2(a) above, you may, by 60 days prior written notice to the Corporation, elect to end the Employment Term on or after December 31, 1992 and commence the Consulting Period at the end of the Employment Term. 2. Paragraph 3 of the Agreement shall be amended to read as follows: Your principal duties and authority during the Employment Term after April 27, 1992 will be to serve in the position of Counselor to the 3 Dr. R.Y.K. Hsu October 1, 1992 Page 3 Chairman of the Corporation, as Chairman, Lubrizol International, Inc., and as a member of the management committee of the Corporation as if a senior corporate officer. You will continue to be a corporate representative on various other boards of affiliates of the Corporation. Your duties and responsibilities will not require you to relocate outside the greater Cleveland area without your consent, and will give appropriate consideration to your age, health and skills, and will be commensurate with your status and stature with the Corporation. 3. Paragraph 4 of the Agreement shall be amended by adding the words "and grants of stock options" to the last sentence thereof after the words "merit raises." 4. Paragraph 5(a)(i) of the Agreement shall be amended to read as follows: (i) a "quarterly amount," payable on the first day of the Consulting Period (prorated for the balance of the calendar quarter) and on the first day of each subsequent calendar quarter in advance, equal to the product of 400 times the "hourly rate." The initial hourly rate shall be 4 Dr. R.Y.K. Hsu October 1, 1992 Page 4 one one thousand eight hundredth (1/1800th) of the annualized economic value to you (without considering the impact of federal, state or local income or other taxes) of the compensation and benefits provided to you by the Corporation for the calendar year in which the Employment Term ends, as determined in this paragraph 5(a)(i), but in no event less than the value of such compensation and benefits for the calendar year 1992. The initial hourly rate shall be increased or decreased on each January 1 commencing in the year after the year in which the Employment Term ends by the "inflation adjustment." The inflation adjustment shall mean an adjustment as of such January 1 to reflect, on a cumulative basis, the increase or decrease, in the Gross National Product Price Deflator published by the Bureau of Economic Analysis of the U.S. Department of Commerce as of the September 30 immediately preceding each such January 1 compared to the amount so published as of September 30 in the year prior to the year in which the Employment Term ends; provided that the hourly rate shall never be less than that set forth in the second preceding sentence. Should 5 Dr. R.Y.K. Hsu October 1, 1992 Page 5 publication of such index cease, there shall be substituted such alternative index as you, with our concurrence, determine most closely approximates the Gross National Product Price Deflator. The determination of the economic value to you of your compensation and benefits for the calendar year in which the Employment Term ends shall equal the economic value of such compensation and benefits for the calendar year 1992, which value has been agreed upon by the Corporation and you, increased on a compound annual basis by the percentage increase in your base compensation from the Corporation for each calendar year subsequent to 1992 to and including the calendar year in which the Employment Term ends. 5. Paragraph 5(b)(ii) of the Agreement shall be amended to read as follows: (ii) Notwithstanding Paragraph 5(b)(i), (A) you may by giving not less than 60 days prior written notice to the Corporation, reduce the number of days you will make yourself available 6 Dr. R.Y.K. Hsu October 1, 1992 Page 6 for advice and counsel during the remaining calendar quarters of the Consulting Period to the equivalent of thirty-seven and one-half (37-1/2) eight hour days per calendar quarter, and (B) if in your judgment the mental or physical health of you or your wife necessitates the reduction described in this clause (B) of this sentence, you may by giving not less than 60 days prior written notice to the Corporation (which notice may be given in conjunction with a notice under clause (A) of this sentence), reduce the number of days you will make yourself available for advice and counsel during the remaining calendar quarters of the Consulting Period to the equivalent of twenty-five (25) eight hour days per calendar quarter. If the Corporation challenges your determination of health necessity, the determination shall be made by a physician or physicians selected by you and acceptable to the Corporation. Any such reduction or reductions shall commence with the calendar quarter next following the giving of such notice, and the quarterly amount for such quarter and all subsequent calendar quarters shall be reduced as provided in Paragraph 5(a)(ii). 7 Dr. R.Y.K. Hsu October 1, 1992 Page 7 6. Paragraph 5(c) of the Agreement shall be amended to read as follows: (c) During the Consulting Period the Corporation shall reimburse you monthly for travel and other expenses in connection with your services as a consultant, such reimbursement to be in accordance with its standard reimbursement practices. In addition, the Corporation shall reimburse you monthly for your reasonable expenses in establishing an office (or, if the Corporation and you so agree, the Corporation shall provide an office for your use suitable to your status and responsibilities), including rent, utilities, furniture and equipment and the services of one employee; provided, however, that if you perform consulting services for any person or entity other than the Corporation or any of its affiliates, you shall prorate your expenses based on the number of hours you perform consulting services for such other person or entity and for the Corporation. 7. Paragraph 7 of the Agreement shall be amended to read: During the Employment Term, you will receive all perquisites (financial and social) called for by 8 Dr. R.Y.K. Hsu October 1, 1992 Page 7 our prevailing policy for officers of the Corporation in effect from time to time, as if you were then a senior corporate officer. 8. The last sentence of Paragraph 8 is amended by inserting the word "and" between the word "compensation" and the word "benefits." 9. Paragraph 11 of the Agreement is amended to read as follows: This Agreement supplements the Amended and Restated Severance Agreement between the Corporation and you, dated July 24, 1989, as amended December 28, 1989. If this letter accurately reflects your understanding of the Amendment to our Agreement, please so indicate by signing and dating the original of this letter and returning it to me. Sincerely, THE LUBRIZOL CORPORATION By: L. E. Coleman, Chairman The terms of the foregoing Amendment to the Agreement are agreed to this day of October, 1992. Dr. R.Y.K Hsu EX-10.O 22 EXHIBIT 10.O 1 EXHIBIT (10)(o) EARLY RETIREMENT AGREEMENT and GENERAL RELEASE 1. The Parties to this Early Retirement Agreement and General Release are The Lubrizol Corporation ("Lubrizol") and William D. Manning ("WDM"). This General Release will also be binding on WDM's heirs, successors, and assigns. This General Release releases Lubrizol as well as its successors, assigns, divisions, related or affiliated companies, officers, directors, shareholders, members, employees, agents and counsel, including without limitation any and all management and supervisory employees (hereinafter collectively termed the "Released Parties"). 2. Lubrizol advises WDM to consult with an attorney prior to executing this General Release. WDM agrees that he has had the opportunity to consult counsel, if he chose to do so and, that he has had adequate time to read and consider this General Release before executing it (at least 45 days, if needed). WDM acknowledges that he is responsible for any costs and fees resulting from his attorney reviewing this General Release. WDM agrees that he has carefully read this General Release and knows its contents, and that he signs this General Release voluntarily, with a full understanding of its significance, and intending to be bound by its terms. 3. As consideration for the promises in this Early Retirement Agreement and General Release, and for the purpose of securing the release of any and all claims against the Released Parties (including personal injury claims), it is agreed: A. WDM will continue to serve, subject to removal for cause, as an officer of the corporation until the election of officers following the annual meeting of shareholders in April, 1994. He will retire at that time. B. WDM will hold his current title until the President of the corporation determines that the transition into the reorganized corporate management structure has been essentially completed, at which time WDM will assume the new title of Senior Vice President and Assistant to the President until his retirement in April, 1994. C. Management will recommend that WDM be granted stock options during the normal process for option grant consideration in 1993 and 1994, and will recommend to the Organization and Compensation Committee of the Board of Directors that it accelerate the vesting of any outstanding options granted to WDM by the date of his retirement in April, 1994. D. Management will recommend that WDM be included for participation in the company's variable compensation award plan applicable to fiscal year 1993. 2 E. Management will recommend that WDM be awarded a financial planning grant in May, 1993 under the standard terms of the plan applicable to such grants. F. Management will recommend that WDM's participation in the executive death benefit program be continued following his retirement, under the terms of the plan. G. In addition to any benefits payable under the company's various retirement plans at the date of his actual retirement, the company will pay to WDM on or about the date of his actual retirement a lump sum equal to the estimated present day value of the difference between the benefits then payable and the amount which would be payable to him at age 65, assuming continuous employment until that age and certain compensation and interest rate assumptions. It is agreed that this lump sum payment shall be in the amount of $349,000. Additionally, the company will provide to WDM on or about his actual retirement date the lump sum of $19,600, which the parties agree reflects an amount equal to the estimated monthly social security benefits he would receive at age 62 for the period between his actual retirement and his attaining age 62. H. WDM will be able to participate in all other post-retirement benefits which are available to retirees, pursuant to their plan terms and insofar as they are maintained by the company, including the Health Care Plan. I. For a period of three (3) years following his actual retirement, WDM will provide exclusive consulting services to Lubrizol and will not provide services to or be employed, directly or indirectly, including as a consultant, by any other company which is or may become a competitor of Lubrizol. As compensation for the promise contained in this paragraph, WDM will be paid $100,000 for each of the three years, payable May 1, 1994; May 1, 1995; and May 1, 1996. For services under the consulting arrangement, to be set forth with more particularity in a separate consulting services agreement, WDM will be paid an additional $50,000 for each of the three years. 4. WDM agrees to release and discharge forever Lubrizol from all causes of action, claims, demands, costs and expenses for damages which he now has, whether known or unknown, on account of his employment with Lubrizol and/or his termination of employment with Lubrizol. This release includes, but is not limited to, any claim of discrimination on any basis, including race, color, national origin, religion, sex, age or handicap arising under any federal, state, or local statute, ordinance, order or law, including the Age Discrimination in Employment Act; and any claim that the Released Parties, jointly or severally, breached any contract or promise, express or implied, or any term or condition of WDM's employment; and any claim for promissory estoppel arising out of WDM's employment with Lubrizol; and any other issue arising out of his employment with Lubrizol. 5. WDM agrees that he will return all Lubrizol property in his possession at or about the time of his actual retirement. 3 6. WDM acknowledges that the payment of the consideration enumerated in Paragraph 3 of this Early Retirement Agreement and General Release is solely in exchange for the promises in this Early Retirement Agreement and General Release. WDM further acknowledges that such payment does not constitute an admission by the Released Parties of liability or of violation of any applicable law or regulation. 7. WDM agrees that all provisions, terms and conditions of this General Release are and shall remain CONFIDENTIAL (except his attorney and immediate family) and shall not be disclosed to any person not a party hereto under any circumstances, except as required by law. 8. WDM acknowledges that by reason of his position with Lubrizol, he has had access to confidential materials and information concerning Lubrizol's business affairs. WDM represents that he has held all such materials and information CONFIDENTIAL and will continue to do so. 9. WDM agrees that in the event that he breaches any of the terms of this agreement, he will forfeit the settlement amount plus pay any expenses or damages incurred as a result of the breach. 10. WDM agrees that no promises or agreements have been made to him except those contained in this Early Retirement Agreement and General Release. 11. WDM may revoke and cancel this General Release by providing written notice of such revocation to Lubrizol to the attention of Mark W. Meister. Such written notice must be received by Lubrizol within seven (7) days after WDM's execution of this General Release. If he does so revoke, this General Release will be null and void and Lubrizol shall have no obligation to make the payments provided in Paragraph 3. This General Release shall not become effective and enforceable until after the expiration of this 7-day revocation period; after such time, if there has been no revocation, the General Release shall be fully effective and enforceable. 12. If any provision of this Early Retirement Agreement and General Release is declared invalid or unenforceable, the remaining portions shall not be affected thereby and shall be enforced. 13. This Early Retirement Agreement and General Release shall be governed under the Laws of the State of Ohio. The Lubrizol Corporation /s/ William D. Manning ----------------------------- William D. Manning By: /s/ Mark W. Meister Date: 4-12-93 ------------------------- ------------------------ Mark W. Meister Date: 4-14-93 ----------------------- EX-10.P 23 LUBRIZOL EXHIBIT 10.P 1 Exhibit (10)(p) THE LUBRIZOL CORPORATION OFFICERS' SUPPLEMENTAL RETIREMENT PLAN The Lubrizol Corporation hereby establishes, effective as of January 1, 1993, The Lubrizol Corporation Officers' Supplemental Retirement Plan (the "Plan") for the purpose of providing deferred compensation benefits to a select group of management or highly compensated employees. SECTION 1. DEFINITIONS. For the purposes hereof, the following words and phrases shall have the meanings indicated, unless a different meaning is plainly required by the context: A. BENEFICIARY. The term "Beneficiary" shall mean a person who is designated by a Participant to receive benefits payable upon his death pursuant to the provisions of Section 7. B. CODE. The term "Code" shall mean the Internal Revenue Code as amended from time to time. Reference to a section of the Code shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section. C. COMPANY. The term "Company" shall mean The Lubrizol Corporation, an Ohio corporation, its corporate successors and the surviving corporation resulting from any merger of The Lubrizol Corporation with any other corporation or corporations. D. CREDITED SERVICE. The term "Credited Service" shall mean a Participant's years of service with the Company equal to the number of full and fractional years of service (to the nearest twelfth of a year) beginning on the date the Participant first performed an hour of service for the Company and ending on the date he is no longer employed by the Company. E. FINAL AVERAGE PAY. The term "Final Average Pay" shall mean the aggregate amount of Basic Compensation (as that term is defined in the Lubrizol Pension Plan) received by the Participant during the three consecutive calendar years during which such Participant received the greatest aggregate amount of Basic Compensation within the most recent ten years of employment, divided by 36. F. LUBRIZOL PENSION PLAN. The term "Lubrizol Pension Plan" shall mean The Lubrizol Corporation Pension Plan as the same shall 2 be in effect on the date of a Participant's retirement, death, or other termination of employment. G. NORMAL RETIREMENT DATE. The term "Normal Retirement Date" shall mean the first day of the month following the date on which a Participant attains age sixty-five (65). H. PARTICIPANT. The term "Participant" shall mean the Chief Executive Officer, the Chief Operating Officer and any other officer of the Company who is designated by the Board of Directors of the Company and the Chief Executive Officer to participate in the Plan, and who has not waived participation in the Plan. I. PLAN. The term "Plan" shall mean a deferred compensation plan set forth herein, together with all amendments hereto, which Plan shall be called "The Lubrizol Corporation Officers' Supplemental Retirement Plan." SECTION 2. VESTING. The Participant shall be 100 percent vested in his accrued supplemental retirement benefit hereunder. SECTION 3. NORMAL RETIREMENT BENEFIT. Each Participant who retires from employment with the Company on or after his Normal Retirement Date shall receive, subject to the provisions of Sections 6, 7 and 8, a monthly supplemental retirement benefit which shall be equal to two percent (2%) of his Final Average Pay multiplied by his Credited Service (up to 30 years) offset by the following amounts: a. Benefits payable to the Participant under the Lubrizol Pension Plan; b. Benefits payable to the Participant under The Lubrizol Corporation Employees' Stock Purchase and Savings Plan, including benefits attributable to Matching Contributions, but excluding benefits attributable to CODA Contributions, Supplemental Contributions, Rollover Contributions or Transferred Contributions, as defined thereunder; c. Benefits payable to the Participant under The Lubrizol Corporation Employees' Profit-Sharing Plan; d. Benefits payable to the Participant under The Lubrizol Corporation Excess Defined Contribution Plan; e. Benefits payable to the Participant under The Lubrizol Corporation Excess Defined Benefit Plan; f. The Participant's Social Security benefits; 3 g. Any other employer-provided benefits not specifically excluded herein which are payable to the Participant pursuant to any qualified or nonqualified retirement plan maintained by the Company. Such offsets shall be determined using the actuarial factors provided in the Lubrizol Pension Plan. SECTION 4. EARLY RETIREMENT ELIGIBILITY AND DETERMINATION OF BENEFIT. Each Participant who retires from employment with the Company at or after age 55, but prior to his Normal Retirement Date, shall receive a percentage of his supplemental retirement benefit determined under Section 3, in accordance with the early retirement schedule provided in the Lubrizol Pension Plan. SECTION 5. TERMINATION OF EMPLOYMENT. If a Participant terminates employment prior to age 55, he shall receive the actuarial equivalent of his supplemental retirement benefit determined under Section 3 in a single lump-sum payment; such actuarial equivalent of which shall be calculated using the same actuarial factors and interest rates used in the Lubrizol Pension Plan as in effect on the date the Participant terminates employment in accordance with this Section 5. SECTION 6. STANDARD FORM OF BENEFIT. The Participant shall be paid his supplemental retirement benefit under this Plan in the form of a monthly retirement benefit payable to such Participant for his lifetime following his retirement under Sections 3 or 4, with the continuance to his Beneficiary of such amount after his death for the remainder, if any, of the 120-month term commencing with the date as of which the first payment of such monthly benefit is made, and with any such monthly benefits remaining unpaid upon the death of the survivor of the Participant and his Beneficiary to be made to the estate of such survivor. SECTION 7. OPTIONAL FORMS OF BENEFIT. Upon becoming eligible to receive a supplemental retirement benefit under this Plan, the Participant may elect to receive the actuarial equivalent of the standard form of benefit provided in Section 6, in accordance with any one of the following options: a. a single lump-sum payment; b. a reduced monthly retirement benefit payable to a Participant for his lifetime following his retirement under Sections 3 or 4, with the continuance of a monthly benefit equal to fifty percent (50%) of such reduced amount after his death to his Beneficiary, provided that such Beneficiary is living at the time of such Participant's retirement or termination and survives him; 4 c. a reduced monthly retirement benefit payable to such Participant for his lifetime following his retirement under Sections 3 or 4, with the continuance of a monthly benefit equal to one hundred percent (100%) of suchreduced amount after his death to his Beneficiary during the lifetime of the Beneficiary, provided such Beneficiary is alive at the time of such Participant's retirement or termination and survives him; or d. annual installments of up to ten payments, the first of which shall be paid within 30 days of the Participant's retirement under Sections 3 or 4, or termination under Section 5, and subsequent installments of which shall be paid on the anniversary date of the payment of the first installment. Such installments shall be determined by dividing the commuted lump-sum equivalent of the supplemental retirement benefit (determined in the same manner as under the Lubrizol Pension Plan) by the number of installments to be paid and adjusting for interest based on the interest rate used to determine the commuted lump-sum payment. Installments after the first installment shall include such interest which accrues during the 12-month period occurring since the date the prior installment was paid. SECTION 8. PAYMENT IN THE EVENT OF DEATH PRIOR TO COMMENCEMENT OF DISTRIBUTION. If a Participant dies prior to commencement of benefits under the Plan, his surviving spouse, if any, shall be eligible for a survivor benefit which is equal to one-half of the reduced monthly benefit the Participant would have received under the Plan if the Participant had terminated employment on the day before his death and had elected to receive his benefit hereunder in the form of a 50 percent joint and survivor annuity. In making the determinations and reductions required in this Section 8, the Company shall apply the assumptions then in use under the Lubrizol Pension Plan. For purposes hereof, a surviving spouse shall only be eligible for a benefit under this Section 8, if such spouse had been married to the deceased Participant for at least one year as of the date of the Participant's death. SECTION 9. ACTUARIAL FACTORS. All actuarial assumptions and factors used in this Plan shall be the same as those used in the Lubrizol Pension Plan. SECTION 10. FUNDING. The obligation of the Company to pay benefits provided hereunder shall be unfunded and unsecured and such benefits shall be paid by the Company out of its general funds. In order to provide a source of payment for its obligations under the Plan, the Company may cause a trust fund to be maintained and/or arrange for insurance contracts. Subject to the provisions of the trust agreement governing any such trust fund or the 5 insurance contract, the obligation of the Company under the Plan to provide a Participant with a benefit shall nonetheless constitute the unsecured promise of the Company to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Company. SECTION 11. PLAN ADMINISTRATOR. The Company shall be the plan administrator of the Plan. The plan administrator shall perform all ministerial functions with respect to the Plan. Further, the plan administrator shall have full power and authority to interpret and construe the Plan and shall determine all questions arising in the administration, interpretation, and application of the Plan. Any such determination shall be conclusive and binding on all persons. The plan administrator shall employ such advisors or agents as it may deem necessary or advisable to assist it in carrying out its duties hereunder. SECTION 12. NOT A CONTRACT OF CONTINUING EMPLOYMENT. Nothing herein contained shall be construed as a commitment or agreement on the part of the Participant to continue his employment with the Company, and nothing herein contained shall be construed as a commitment or agreement on the part of the Company to continue the employment or the annual rate of compensation of the Participant for any period, and the Participant shall remain subject to discharge to the same extent as if this Plan had never been put into effect. SECTION 13. RIGHT OF AMENDMENT AND TERMINATION. The Company reserves the right to amend or to terminate the Plan in whole or in part at any time and to suspend operation of the Plan, in whole or in part, at any time. SECTION 14. TERMINATION AND DISTRIBUTION OF ACCRUED BENEFITS. The Plan may be terminated at any time by the Company, and in that event the amount of the accrued benefits as of the date of such termination shall remain an obligation of the Company and shall be payable as if the Plan had not been terminated. SECTION 15. CONSTRUCTION. Where necessary or appropriate to the meaning hereof, the singular shall be deemed to include the plural, the plural to include the singular, the masculine to include the feminine, and the feminine to include the masculine. SECTION 16. SEVERABILITY. In the event any provision of the Plan is deemed invalid, such provision shall be deemed to be severed from the Plan, and the remainder of the Plan shall continue to be in full force and effect. 6 SECTION 17. GOVERNING LAW. Except as otherwise provided, the provisions of the Plan shall be construed and enforced in accordance with the laws of the State of Ohio. EXECUTED at Wickliffe, Ohio, this ____ day of ______________, 1993. THE LUBRIZOL CORPORATION By: ---------------------- Title: ------------------- And By: ------------------- Title: -------------------- EX-11 24 LUBRIZOL CORP 10-K EX-11 1 EXHIBIT 11 THE LUBRIZOL CORPORATION Computation of Per Share Earnings (Note A) (In Thousands, Except Per Share Data) The computation of primary earnings per share and fully diluted earnings per share is as follows:
For the Year Ended December 31 --------------------------------- 1993 1992 1991 ------ ------ ------ Average shares outstanding for computation of primary earnings per share 67,706 68,966 69,260 Add adjustment to treat shares for options exercised as if such shares were out- standing during the entire year 257 234 124 Add equivalent shares for unexercised options at end of year (B) 550 626 587 ------ ------ ------ Average shares outstanding for computation of fully diluted earnings per share 68,513 69,826 69,971 ====== ====== ====== Primary earnings per share $ .67 $ 1.81 $ 1.79 ====== ====== ====== Fully diluted earnings per share (C) $ .67 $ 1.79 $ 1.77 ====== ====== ====== NOTES: (A) Share and per share data have been restated to reflect 2-for-1 stock split effected on August 31, 1992. (B) Computed under the "Treasury Stock Method" using the higher of quoted ending or average market price. (C) Fully diluted earnings per share have not been presented in the consolidated statements of income because the dilutive effect is less than 3%.
EX-13 25 LUBRIZOL CORP 10-K EX-13 1 Exhibit 13 THE LUBRIZOL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Lubrizol Corporation is a full service supplier of performance chemicals to diverse markets worldwide. These specialty chemical products are created through the application of advanced chemical, mechanical and biological technologies to enhance the performance and quality of the customer products in which they are used. The company develops, produces and sells chemical additives for transportation and industrial lubricants and functional fluids, fuel additives and diversified specialty chemical products. Prior to December 1, 1992, the company had a separately reportable Agribusiness segment. That segment included traditional operations which develop, produce and market planting seeds and specialty vegetable oils, and also included strategic biotechnology research and development. As described in Note 16 to the financial statements, on December 1, 1992, the company transferred substantially all of its Agribusiness segment, other than the specialty vegetable oil operations, to Mycogen Corporation and a joint venture partnership formed with Mycogen. The transferred assets were related to the seed business activities of the company's former Agrigenetics division and are referred to in the following discussion as "Agrigenetics." The agribusiness assets and operations retained by the company are not reportable as a separate industry segment after 1992. 1993 RESULTS OF OPERATIONS In 1993, consolidated revenues were $1.53 billion. Consolidated revenues for 1992 were $1.55 billion which included $88.6 million of revenues from Agrigenetics. Excluding the Agrigenetics revenues from 1992, consolidated revenues increased $61.9 million or 4% in 1993. Higher selling prices of 4% and favorable product mix of 1% were partially offset by unfavorable currency effects of 2% and volume decreases of 1%. Revenues of Langer & Company, which was acquired in January 1993, accounted for the remaining 2% revenue increase.
1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- Revenues by Segment(millions) Specialty Chemicals $1,124.4 $1,335.5 $1,348.8 $1,433.4 $1,525.5 Agribusiness $103.5 $117.2 $127.5 $118.9 -
The increase in 1993 selling prices resulted from price increases which were implemented in the fourth quarter of 1992 and from the introduction late in 1993 of higher performing products to meet new passenger car motor oil standards in the U.S. market. The company is implementing additional price increases of 3.5% to 6% on a worldwide basis in the first quarter of 1994 to more fully recover the costs of its product technology as well as the costs resulting from increased environmental regulations at its facilities. North American volume decreased 9% in 1993 from the record levels of volume in 1992 as a result of a decrease in market share. The revenue impact of this volume decrease was offset by an increase in sales of more profitable products. International volume increased 6% over 1992 and accounts for approximately 60% of revenues.
1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- Gross Profit by Segment(millions) Specialty Chemicals $320.8 $398.2 $429.9 $451.0 $485.4 Agribusiness $35.0 $40.2 $45.7 $39.3 -
Gross profit (sales less cost of sales) was $485.4 million in 1993 compared to $490.3 million in 1992. Excluding the impact of Agrigenetics ($35.3 million in 1992), gross profit increased by $30.4 million or 7% primarily as a result of higher average selling prices. Gross profit as a percentage of sales was 32.0% in 1993 compared to 31.2% (excluding Agrigenetics) in 1992. Selling and administrative expenses decreased $22.8 million to $158.5 million. Excluding Agrigenetics ($29.1 million in 1992), selling and administrative expenses increased $6.3 million or 4%. This increase primarily resulted from the inclusion of Langer's expenses in 1993.
1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- Research Testing and Development by Segment (millions) Specialty Chemicals $94.1 $107.4 $127.7 $139.8 $171.5 Agribusiness $18.3 $16.6 $16.3 $15.0 -
Research, testing and development (technology) expenses increased $16.8 million to $171.5 million. Excluding Agrigenetics ($13.5 million in 1992), technology expenses increased $30.3 million or 21%. This increase is a result of higher testing costs associated with customer test programs to meet new industry performance standards for passenger car and diesel engine oils and automatic transmission fluids. These standards change periodically as engine and transmission designs are improved by the equipment manufacturers to meet new requirements for fuel economy, emissions, efficiency, durability and other performance factors. The frequency of these performance upgrades is compressing the time cycles for new product development and has been increasing the company's technology expenses. This high level of technology expense is likely to continue in the first half of 1994 before beginning to ease as customer test programs are completed and new products are introduced into the market. As a result of the above factors and increased royalties, after excluding Agrigenetics from 1992, total cost and expenses increased $5.9 million more than revenues in 1993. As discussed in Note 17 to the financial statements, the company recorded a special pretax charge of $86.3 million in the third quarter of 1993 in connection with manufacturing rationalization and organizational realignment initiatives. These initiatives were developed, formalized and presented by management to the Board of Directors during the third quarter. The plans will be implemented over the next several years and through consolidation 25 2 THE LUBRIZOL CORPORATION are expected to result in savings from a reduced number of employees, lower operating costs and a one third reduction in the number of manufacturing units used to produce intermediate products. When the plans are fully implemented, annual expense savings are estimated to be approximately $50 million. During the last half of the year, the company sold approximately one million shares of Genentech common stock resulting in a pretax gain of $42.4 million. The net proceeds of these sales were used to repurchase common shares of the company as described under Working Capital, Liquidity and Capital Resources below. Other income-net was $.5 million in 1993 compared to $11.9 million in 1992. Other income includes the company's share of equity losses in Mycogen and the agribusiness joint venture. Mycogen recorded restructuring charges and incurred weather-related problems in the Midwest which adversely affected agribusiness results. The reduction in other income was attributable to increased equity losses of $18.3 million in Mycogen and the agribusiness joint venture, partially offset by increased gains on the sale of investments, excluding Genentech, of $6.7 million. The equity losses related to Mycogen and the agribusiness joint venture, net of preferred stock dividends and a gain on the sale of investment, were $4.1 million less in 1993 than the Agrigenetics operating loss and equity losses recorded in 1992. The company conducts a significant amount of its business and has a number of operating facilities in countries outside the United States. As a result, the company is subject to business risks inherent in non-U.S. activities, including political uncertainty, import and export limitations, exchange controls and currency fluctuations. The company believes risks related to its foreign operations are mitigated due to the political and economic stability of the countries in which its largest foreign operations are located. While changes in the dollar value of foreign currencies will affect earnings from time to time, the longer term economic effect of these changes should not be significant given the company's net asset exposure, currency mix and pricing flexibility. Generally, the income statement effect of changes in the dollar value of foreign currencies is partially or wholly offset by the company's ability to make corresponding price changes in local currency. The company's consolidated net income will generally benefit (decline) as foreign currencies increase (decrease) in value compared to the U.S. dollar. In 1993, European currencies weakened and the Japanese yen strengthened resulting in an insignificant net earnings effect. Interest income decreased $3.2 million due to lower average balances of cash and short-term investments. An increase in borrowings resulted in slightly higher interest expense in 1993. As a result of the above factors, income before income taxes was $119.7 million in 1993, a decrease of $57.5 million from 1992. Net income in 1993, excluding the special charge, Genentech gain and the accounting changes discussed below, decreased 9% to $113.5 million or $1.67 per share, from $124.6 million or $1.81 per share in 1992. ACCOUNTING CHANGES As described in Note 10 to the financial statements, effective January 1, 1993, the company adopted SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The company recorded the cumulative effect of this accounting change of $79.9 million before taxes ($51.5 million or $.76 per common share after taxes) in the first quarter of 1993. As a result of this accounting change, postretirement health care and life insurance costs increased $8.1 million ($.08 per share after taxes) in 1993. This expense is allocated among the various cost and expense categories in the consolidated statements of income. SFAS 106 has no effect on cash flows since the company continues to pay claims as incurred. As described in Note 8 to the financial statements, effective January 1, 1993, the company also adopted SFAS 109, "Accounting for Income Taxes." The cumulative effect of this accounting change reduced net deferred tax liabilities and increased net income in 1993 by $12.1 million or $.18 per share. The positive effect of adopting SFAS 109 was primarily attributable to more favorable treatment of the deferred income taxes on intercompany profit in inventory. SFAS 109 has no effect on cash flows. RETURN ON AVERAGE SHAREHOLDERS' EQUITY was 6% in 1993 (14% excluding the special charge, the Genentech gain and accounting changes), 15% in 1992 and 16% in 1991. 1992 AND 1991 RESULTS OF OPERATIONS
1989 1990* 1991 1992 1993 ---- ---- ---- ---- ---- Return on Equity(percent) 14% 27% 16% 15% 6% * Return on equity is 18% before Genentech gain.
Following is a discussion of the results of operations for 1992 and 1991, first on a summary consolidated basis and then as the company historically reported its business segments. IN 1992, consolidated revenues increased $75.9 million or 5% compared to 1991 primarily as a result of record volume in the Specialty Chemicals segment. The increased revenues were partially offset by increased manufacturing costs in Specialty Chemicals, and higher specialty vegetable oil production costs, with the result that gross profit increased $14.7 million or 3%. Gross profit as a percentage of sales was 31.7% in 1992, compared to 32.4% in 1991. Selling, administrative and technology expenses increased $19.7 million or 6% (all in the Specialty Chemicals segment), more than offsetting the higher gross profit. As a result of these factors and reduced royalties, total cost and expenses increased $5.8 million more than revenues. Other income-net increased $2.4 million in 1992, primarily as a result of a gain on sales of investments of $6.5 million, partially offset by the company's share of losses related to the agribusiness joint venture formed in December 1992, and expenses related to closing facilities in the mining chemicals market. Accordingly, combined segment income 26 3 THE LUBRIZOL CORPORATION was $3.4 million lower in 1992 than in 1991. As explained in the segment discussions, this consisted of a $6.0 million increase in Specialty Chemicals and a $9.4 million decrease in Agribusiness. Net interest income increased $2.4 million primarily as a result of the repayment of debt early in the year. As a result of the above factors, income before income taxes was $1 million or 1% lower than 1991. However, the company had a lower income tax rate in 1992 than in 1991, due principally to increased tax benefits from foreign dividends, and net income in 1992 increased $1.0 million or 1% over 1991. IN 1991, consolidated revenues increased $23.6 million or 2% compared to 1990 with both of the company's business segments achieving record revenues. Gross profit increased $37.2 million or 8% over 1990 primarily due to higher average selling prices in Specialty Chemicals. Selling, administrative and technology expenses, predominantly in the Specialty Chemicals segment, increased $34.4 million or 12% in 1991 and largely offset the higher gross profit. Other income-net increased $9 million in 1991 primarily because the prior year included an asset write-off of $9.7 million in the Agribusiness segment. Net interest income decreased by $3.5 million in 1991 due to lower interest rates and lower average investment balances during the year. Income before income taxes increased $3.7 million or 2% in 1991, after excluding a $101.9 million gain in 1990 on the exchange of Genentech stock as a result of the merger between Genentech and Roche Holdings, Inc., net of $5.1 million of related expenses. However, the company had a higher effective income tax rate in 1991 compared to 1990 because of benefits in 1990 from settlements of tax audits. As a result, net income in 1991 decreased $3.4 million or 3% from 1990, after excluding the effects of the Genentech transaction. SPECIALTY CHEMICALS SEGMENT IN 1992, the Specialty Chemicals segment accounted for 92% of consolidated revenues. The segment's revenues increased $84.6 million or 6% in 1992 as a volume increase of 8% and favorable currency effects of 2% were partially offset by unfavorable product and geographic mix of 4%. Volume was at a record level for the year. North American volume was up 21% for the year as a result of market share gains and a comparatively weak first half of 1991. International volume, which accounts for approximately 60% of revenues, was flat for the year. Average selling prices declined slightly during the first three quarters. In the fourth quarter, the company announced price increases which increased revenues for part of the period. Gross profit increased $21.1 million or 5% compared to 1991. The increase in gross profit resulting from higher revenues was partially offset by higher manufacturing costs that reflected the effects of higher volume, increased pension and health care costs, certain product recovery costs and environmental costs. As a percentage of sales, gross profit decreased in 1992 to 31.6% from 32.1% in 1991. Selling and administrative expenses increased $7.7 million or 6% primarily due to higher international selling expenses and higher pension and health care costs. Technology expenses increased $12.1 million or 10% as a result of increased operating and staffing levels necessary to meet customer and product development needs relating to new performance standards for gasoline engine oil effective in July 1993, and diesel engine oils in 1994. In 1992, the U.S. dollar weakened against other currencies, resulting in a net favorable effect on the company when international transactions were translated into U.S. dollars. The increase in gross profit was greater than the increase in expenses, and when combined with a $5.6 million increase in other income-net, Specialty Chemicals segment income was $6 million or 3% higher than in 1991. IN 1991, Specialty Chemicals revenues increased 1% as higher average selling prices (net of mix and currency effects) of 4% were partially offset by volume decreases of 3%. Selling prices were favorably affected by price increases implemented during 1990 in response to higher raw material costs associated with the Middle East crisis. The volume decreases were solely in international markets as shipments in North America for 1991 were at the same level as 1990. The worldwide recession weakened product demand and, during the first half of the year, customers reduced inventory levels which had been built up in the last half of 1990 during the Middle East crisis. Gross profit increased $31.7 million or 8% because of higher selling prices, lower cost of sales due to the volume decrease and a $5.0 million provision in 1990 for the closure of a manufacturing facility in Spain. As a percentage of sales, gross profit improved to 32.1% in 1991 from 30.0% in 1990. Selling and administrative expenses increased $12.7 million or 10% primarily due to increases in personnel, higher international selling expenses and legal expenses associated with protection of proprietary technology and potential acquisitions. Technology expenses increased $20.2 million or 19%. This was a result of increases in testing and new product development costs relating to changing lubricant standards and testing procedures as well as customer programs related to new business opportunities. In 1991, foreign currencies weakened slightly against the U.S. dollar resulting in a net unfavorable effect on the company due to decreased revenues and expenses when international transactions were translated into U.S. dollars. Increased gross profit was offset by the higher expenses discussed previously, with the result that Specialty Chemicals segment income was approximately the same as 1990. AGRIBUSINESS SEGMENT IN 1992, Agribusiness revenues decreased $8.6 million or 7% as a result of lower specialty vegetable oil volume due to more competition in international markets and a fire at a customer's plant in Asia. Gross profit decreased $6.4 million or 14% as a result of the lower sales, costs associated with inventory market adjustments and higher storage costs, all of which related to specialty vegetable oil operations. Gross profit as a percent of sales decreased in 1992 to 33.1% compared to 35.9% in 1991. 27 4 THE LUBRIZOL CORPORATION Selling, administrative and research expenses were approximately the same as 1991. Lower specialty vegetable oil selling expenses and lower research expenses offset costs associated with the company's partnership with Mycogen. Agribusiness segment loss increased $9.4 million due to the lower gross profit and the company's share of losses in Mycogen and the agribusiness joint venture. IN 1991, Agribusiness revenues increased 9% to $128 million due to increased specialty vegetable oil volume. Gross profit increased 14% to $45.7 million due to higher revenues and improved margins. Gross profit as a percentage of sales was 35.9% in 1991 compared to 34.3% in 1990. Higher gross profit was partially offset by a 3% increase in expenses, primarily marketing. Traditional operations in the Agribusiness segment contributed $7.5 million to segment income in 1991. Strategic activities, mostly research, had net expense of $9.5 million, resulting in an Agribusiness segment loss of $2.0 million compared to a loss of $14.5 million in 1990. Included in 1990 was a $9.7 million write-off of receivables and inventory in the traditional operations relating to the company's former affiliate in Italy which was unable to meet its financial obligations to the company. Excluding this write-off, Agribusiness improved $2.8 million in 1991 compared to 1990.
1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- Cash Provided from Operating Activities (millions) Cash Provided $124.9 $114.3 $192.1 $135.2 $162.5
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES The company's cash flows for the years 1991 through 1993 are presented in the consolidated statements of cash flows. Cash provided from operating activities during 1993 was $162.5 million, an increase of $27.3 million compared to 1992 primarily due to increased cash flows from higher selling prices and the exclusion of Agrigenetics, which generated negative cash flows from operations in 1992. The net investing activities increased from $88.2 million in 1992 to $106.8 million in 1993. Capital expenditures increased $32.0 million or 33% in 1993. The increase in spending over 1992 was equally attributable to improvements and additions at the company's Wickliffe facility, environmental projects and increases in manufacturing expenditures. During 1993, the company expended $40.3 million to acquire Langer and certain commercial and technology assets of Great Lakes Chemical, S.A. Cash proceeds from the sale of Genentech common stock and the sale of a portion of the company's interest in its agribusiness joint venture were $44.5 million and $7.0 million, respectively. In addition, the company received $10.0 million when Mycogen Preferred Stock was mandatorily redeemed on December 1, 1993. In 1993, the net proceeds from the sale of Genentech common stock as well as cash generated from operations were used to repurchase common shares of the company. The company repurchased 2,076,000, or 3%, of its common shares for $67.1 million compared to the repurchase of 835,000 common shares for $23.0 million in 1992. At December 31, 1993, there was Board authorization remaining for the repurchase of 3.0 million common shares. Other financing activities in 1993 included additional long-term borrowing related to the acquisition of Langer and to finance a technical facility expansion in Japan. As a result of the activities discussed above, cash and short-term investments at December 31, 1993, decreased by $52.4 million compared to December 31, 1992. The company has continued to sell Genentech stock during the first quarter of 1994 and expects sales to continue during the balance of the year. The company held approximately 2.0 million shares of Genentech common stock as of December 31, 1993.
1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- Capitalization(millions) Equity $663.3 $736.2 $794.5 $819.4 $732.2 Long-term Debt $53.2 $54.0 $35.0 $23.3 $55.3
The company's financial position continues to be strong. The ratio of current assets to current liabilities was 2.5:1 at December 31, 1993, compared to 2.9:1 at December 31, 1992. The decrease is primarily attributable to lower cash and short-term investment balances. Aggregate debt as a percent of total capitalization (shareholders' equity plus short-term and long-term debt) was approximately 9% at the end of 1993 compared to 6% at the end of 1992. The company's share repurchase program, which reduces shareholders' equity, is the primary reason for this increase. At December 31, 1993, the company had unused revolving credit agreements and other credit lines aggregating $55 million. Under a currently effective shelf registration statement, the company has the ability to offer to the public up to $100 million of debt securities. Management believes the company's internally generated funds as well as its credit facilities and shelf registration will be sufficient to meet its cash requirements. Capital expenditures, primarily to provide manufacturing, administrative and technical support, are anticipated to approximate $140 million in 1994, including approximately $20 million for environmental projects. A special charge of $86.3 million recorded in the third quarter of 1993 (see Note 17 to the financial statements) will involve cash outlays of approximately $36 million over the next three years. Partially offsetting the cash outlays will be cash savings which are expected to grow 28 5 THE LUBRIZOL CORPORATION to approximately $40 million annually when the plans are fully implemented. The after-tax impact of the special charge on the balance sheet at December 31, 1993, was to reduce working capital by $6.7 million, reduce noncurrent assets by $19.6 million and increase noncurrent liabilities by $25.4 million. The Financial Accounting Standards Board has issued SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," which is effective for fiscal years beginning after December 15, 1993. Refer to Note 3 to the financial statements for the effects on the company's consolidated financial statements of adopting SFAS 115. The company is involved in patent litigation with Exxon Corporation in various countries. Determinations of liability against the company in the U.S., which is subject to appeal, and against Exxon in Canada have been made by the courts. Management is unable to predict the eventual outcomes of this litigation and, therefore, their impact on future cash flows is not known. If Exxon prevails in the U.S. case, management believes the company has sufficient financial resources to meet any resulting obligation and, other than a potential one-time charge against income, the litigation would not have a material adverse effect on future results of operations. Refer to Note 18 for further information regarding this litigation. OPERATING RESULTS BY BUSINESS SEGMENT *
(IN THOUSANDS OF DOLLARS) 1992 1991 - -------------------------------------------------------------------------- Revenues: Specialty Chemicals $1,433,358 $1,348,804 Agribusiness 118,890 127,502 ---------- ---------- Total $1,552,248 $1,476,306 ========== ========== Gross profit: Specialty Chemicals $ 450,967 $ 429,902 Agribusiness 39,327 45,724 ---------- ---------- Total $ 490,294 $ 475,626 ========== ========== Selling and administrative expenses: Specialty Chemicals $ 147,653 $ 139,947 Agribusiness 33,673 32,471 ---------- ---------- Total $ 181,326 $ 172,418 ========== ========== Research, testing and development expenses: Specialty Chemicals $ 139,810 $ 127,675 Agribusiness 14,952 16,308 ---------- ---------- Total $ 154,762 $ 143,983 ========== ========== Segment income (loss): Specialty Chemicals $ 185,148 $ 179,160 Agribusiness (11,459) (2,030) ---------- ---------- Total $ 173,689 $ 177,130 ========== ========== Identifiable assets: Specialty Chemicals $ 871,401 $ 862,235 Agribusiness 104,339 158,747 Corporate investments 151,380 150,701 ---------- ---------- Total $1,127,120 $1,171,683 ========== ========== * Agribusiness is no longer reportable as a separate industry segment after 1992. Segment income is before interest and income taxes.
29 6 THE LUBRIZOL CORPORATION C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E
Year Ended December 31 ---------------------------------------------- (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------------ Net sales $1,517,631 $1,544,670 $1,467,901 Royalties and other revenues 7,869 7,578 8,405 ----------- ----------- ----------- Total revenues 1,525,500 1,552,248 1,476,306 Cost of sales 1,032,199 1,054,376 992,275 Selling and administrative expenses 158,506 181,326 172,418 Research, testing and development expenses 171,540 154,762 143,983 ----------- ----------- ----------- Total cost and expenses 1,362,245 1,390,464 1,308,676 Special charge (86,303) Gain on sale of Genentech 42,443 Other income - net 537 11,905 9,500 Interest income 3,873 7,070 8,748 Interest expense (4,154) (3,615) (7,738) ---------- ---------- ---------- Income before income taxes 119,651 177,144 178,140 Provision for income taxes 34,676 52,498 54,481 ---------- ---------- ---------- Income before accounting changes 84,975 124,646 123,659 Cumulative effect of accounting changes (39,375) ---------- ---------- ---------- Net income $ 45,600 $ 124,646 $ 123,659 ========== ========== ========== Per Common Share: Income before accounting changes $1.25 $1.81 $1.79 Cumulative effect of accounting changes (.58) ------ ----- ----- Net income per share $ .67 $1.81 $1.79 ====== ===== ===== Dividends per share $ .85 $ .81 $ .77 ====== ===== ===== The accompanying notes to financial statements are an integral part of these statements.
30 7 THE LUBRIZOL CORPORATION C O N S O L I D A T E D B A L A N C E S H E E T S
December 31 -------------------------------- (IN THOUSANDS OF DOLLARS) 1993 1992 - ------------------------------------------------------------------------------------------------------ ASSETS Cash and short-term investments $ 24,220 $ 76,593 Receivables 225,603 221,094 Inventories 284,537 272,418 Other current assets 34,553 20,911 ---------- ---------- Total current assets 568,913 591,016 ---------- ---------- Property and equipment - at cost 1,089,106 958,692 Less accumulated depreciation 651,471 583,105 ---------- ---------- Property and equipment - net 437,635 375,587 ---------- ---------- Investments in nonconsolidated companies 103,246 139,660 Other assets 72,786 20,857 ---------- ---------- TOTAL $1,182,580 $1,127,120 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Short-term debt $ 14,590 $ 25,140 Accounts payable 116,775 105,237 Income taxes and other current liabilities 92,883 75,871 ---------- ---------- Total current liabilities 224,248 206,248 ---------- ---------- Long-term debt 55,298 23,258 Postretirement health care obligation 89,423 Noncurrent liabilities 70,022 41,217 Deferred income taxes 11,353 37,035 ---------- ---------- Total liabilities 450,344 307,758 ---------- ---------- Contingencies and commitments Preferred stock without par value - unissued Common shares without par value - Outstanding 66,590,028 shares in 1993 and 68,450,586 shares in 1992 80,830 80,274 Retained earnings 683,269 759,906 Accumulated translation adjustment (31,863) (20,818) ---------- ---------- Total shareholders' equity 732,236 819,362 ---------- ---------- TOTAL $1,182,580 $1,127,120 ========== ========== The accompanying notes to financial statements are an integral part of these statements.
31 8 THE LUBRIZOL CORPORATION C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
Year Ended December 31 -------------------------------------------- (IN THOUSANDS OF DOLLARS) 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED FROM (USED FOR): OPERATING ACTIVITIES: Received from customers $1,509,270 $1,549,848 $1,480,776 Paid to suppliers and employees (1,293,189) (1,361,971) (1,265,058) Income taxes paid (61,199) (62,576) (55,116) Interest and dividends received 6,616 12,071 9,960 Interest paid (3,886) (5,245) (7,129) Tax refund received, including interest 20,418 Other - net 4,899 3,036 8,266 ------- ------- -------- Total operating activities 162,511 135,163 192,117 INVESTING ACTIVITIES: Proceeds from sale or redemption of investments 61,494 8,512 Capital expenditures (127,855) (95,814) (82,398) Acquisitions and investments in nonconsolidated companies (40,346) (2,402) (1,143) Other - net (87) 1,541 3,589 ------- ------- -------- Total investing activities (106,794) (88,163) (79,952) FINANCING ACTIVITIES: Short-term borrowing (repayment) 168 (3,837) 2,587 Long-term borrowing 36,048 3,690 18,400 Long-term repayment (23,146) (20,000) (18,660) Dividends paid (57,608) (55,883) (53,322) Common shares purchased, net of options exercised (64,073) (19,235) (10,327) ------- ------- -------- Total financing activities (108,611) (95,265) (61,322) Effect of exchange rate changes on cash 521 (1,289) (796) ------- ------- -------- Net increase (decrease) in cash and short-term investments (52,373) (49,554) 50,047 Cash and short-term investments at the beginning of year 76,593 126,147 76,100 ------- ------- -------- CASH AND SHORT-TERM INVESTMENTS AT THE END OF YEAR $24,220 $76,593 $126,147 ======= ======= ======== The accompanying notes to financial statements are an integral part of these statements.
32 9 THE LUBRIZOL CORPORATION C O N S O L I D A T E D S T A T E M E N T S O F S H A R E H O L D E R S ' E Q U I T Y
Shareholders' Equity ------------------------------------- Number of Accumulated Shares Common Retained Translation Outstanding Shares Earnings Adjustment - ----------------------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS OF DOLLARS) BALANCE, DECEMBER 31, 1990 69,396,748 $75,651 $654,991 $ 5,569 Net income for 1991 123,659 Cash dividends (53,322) Translation adjustment for 1991 (1,755) Common shares - Treasury: Shares purchased (570,000) (651) (12,099) Shares issued upon exercise of stock options 204,716 2,423 ---------- ------- -------- --------- BALANCE, DECEMBER 31, 1991 69,031,464 77,423 713,229 3,814 Net income for 1992 124,646 Cash dividends (55,883) Translation adjustment for 1992 (24,632) Common shares - Treasury: Shares purchased (835,200) (957) (22,086) Shares issued upon exercise of stock options 254,322 3,808 ---------- ------- -------- --------- BALANCE, DECEMBER 31, 1992 68,450,586 80,274 759,906 (20,818) Net income for 1993 45,600 Cash dividends (57,608) Translation adjustment for 1993 (11,045) Common shares - Treasury: Shares purchased (2,075,645) (2,479) (64,629) Shares issued upon exercise of stock options 215,087 3,035 ---------- ------- -------- --------- BALANCE, DECEMBER 31, 1993 66,590,028 $80,830 $683,269 $(31,863) ========== ======= ======== ========= The accompanying notes to financial statements are an integral part of these statements.
33 10 THE LUBRIZOL CORPORATION N O T E S T O F I N A N C I A L S T A T E M E N T S (IN THOUSANDS OF DOLLARS UNLESS OTHERWISE INDICATED) NOTE 1 -- ACCOUNTING POLICIES CONSOLIDATION -- The consolidated financial statements include the accounts of The Lubrizol Corporation and its majority-owned subsidiaries. For nonconsolidated companies (affiliates), the equity method of accounting is used when ownership exceeds 20% or when the company has the ability to exercise significant influence over the policies of the investee. Other affiliates are carried at cost. Refer to Note 16 regarding changes in Agribusiness. ACCOUNTING CHANGES -- Effective January 1, 1993, the company changed its method of accounting for postretirement benefits to conform with Statement of Financial Accounting Standards (SFAS) 106 (see Note 10) and its method of accounting for income taxes to conform with SFAS 109 (see Note 8). The cumulative effect of these changes in accounting principles, net of tax, is separately reported on the Consolidated Statements of Income. INVENTORIES -- Inventories are stated at cost which is not in excess of market. Cost of inventories is determined by the last-in, first-out (LIFO) method in the United States and the first-in, first-out (FIFO) method elsewhere. The average cost method is used for specialty vegetable oil and, prior to December 1, 1992, other agribusiness inventory. DEPRECIATION AND AMORTIZATION -- Accelerated depreciation methods are used in computing depreciation on approximately 69% of the depreciable assets. The remaining assets are depreciated using the straight-line method. Effective January 1, 1993, the company changed to the straight-line method for newly acquired machinery and equipment in the United States. Management believes that straight-line depreciation provides for a better matching of costs and revenues over the lives of the newly acquired assets and conforms to predominant industry practices. The new depreciation method did not have a material effect on 1993 net income. Amortization of intangible and other assets is on a straight-line method over periods ranging from 5 to 25 years. For income tax purposes, different methods and rates are used in certain instances. FOREIGN CURRENCY TRANSLATION -- The assets and liabilities of most non-U.S. subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Operating results are translated at weighted average exchange rates in effect during the period. Net unrealized translation adjustments are recorded as a separate component of shareholders' equity. PER SHARE AMOUNTS -- Net income per share has been computed by dividing net income by the average number of common shares outstanding during the period. Net income per share has not been adjusted for the effect of stock options as the dilution effect would be less than 3% in any year. All share and per share data have been restated to reflect the 2-for-1 stock split effective August 31, 1992. RESEARCH, TESTING AND DEVELOPMENT -- Research, testing and development costs are expensed when incurred. Research and development expenses, excluding testing, were $88.5 million, $91.2 million and $80.0 million in 1993, 1992 and 1991, respectively. NOTE 2 -- INVENTORIES
1993 1992 --------- --------- Finished products $ 89,817 $ 97,221 Products in process 92,067 85,640 Raw materials and supplies 102,653 89,557 --------- --------- $ 284,537 $ 272,418 ========= =========
Inventories on the LIFO method at December 31, 1993 and 1992 were 25% of consolidated inventories. The current replacement cost of these inventories exceeded the LIFO cost at December 31, 1993 and 1992 by $43.0 million and $46.3 million, respectively. NOTE 3 -- INVESTMENTS IN NONCONSOLIDATED COMPANIES
1993 1992 --------- --------- Investments carried at equity $ 59,909 $ 92,265 Investments carried at cost 43,337 47,395 --------- --------- $ 103,246 $ 139,660 ========= =========
Investments carried at equity exceeded the company's equity in the underlying book values by $8.9 million at December 31, 1992. Included within investments in nonconsolidated companies are marketable equity securities having a book carrying value of $45.3 million in 1993 and $31.2 million in 1992. The fair value of these securities based upon quoted market prices exceeded the book carrying value by $136.7 million and $138.9 million at December 31, 1993 and 1992, respectively. The Financial Accounting Standards Board has issued SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," which is effective for 1994. SFAS 115 requires that certain investments in debt and equity securities be reported at fair value, rather than historical cost. When the company adopts SFAS 115 on January 1, 1994, certain of its marketable equity securities will be classified as available-for-sale. Unrealized gains and losses will be excluded from earnings and reported net of tax as a separate component of shareholders' equity until realized. If the company adopted SFAS 115 as of December 31, 1993, its available-for-sale securities would have a fair value of $105.6 million, and gross unrealized gains of $99.2 million would increase shareholders' equity, net of tax, by $64.5 million. There are no unrealized losses. 34 11 NOTE 4 -- SHORT-TERM AND LONG-TERM DEBT
Long-term debt consists of: 1993 1992 ------- ------- 7.875% Industrial development revenue bonds, due 2000 $ 1,000 $ 1,000 6.5% Marine terminal refunding revenue bonds, due 2000 18,375 18,375 Term loans: Yen denominated, at 3.8% to 5.8%, due 1993-2002 24,210 19,516 Deutschmark denominated, at 6.78%, due 1996 13,825 Other (various rates) 184 109 ------- ------- 57,594 39,000 ------- ------- Less current portion (2,296) (15,742) ------- ------- $55,298 $23,258 ======= ======= Short-term debt consists of: 1993 1992 ------- ------- Current portion of long-term debt $2,296 $15,742 Loans with terms less than one year 12,294 9,398 ------- ------- $14,590 $25,140 ======= =======
The Marine Terminal Refunding Revenue Bonds have a variable interest rate. The company has entered into an interest rate swap agreement that effectively fixes the interest rate at 6.5%. The bondholders may put the bonds back to the company; however, the bonds are classified as noncurrent due to a remarketing agreement and credit facilities which permit the company to refinance for a period beyond one year. Amounts due on long-term debt are $2.3 million in 1994, $2.3 million in 1995, $16.1 million in 1996, $2.3 million in 1997, $10.7 million in 1998 and $23.9 million thereafter. The company has available $55 million under revolving credit agreements and other credit lines which would permit the company to borrow at or below the U.S. prime rate. These facilities, which were unused at December 31, 1993, may be used to support commercial paper borrowing. The company filed a Form S-3 with the Securities and Exchange Commission which permits the company to offer up to $100 million of debt securities in amounts, at prices and on terms to be determined at the time of offering. The shelf registration became effective January 12, 1994. The debt securities would be unsecured senior securities ranking equal with all other unsecured senior securities of the company. NOTE 5 -- OTHER BALANCE SHEET INFORMATION
Receivables: 1993 1992 -------- -------- Customers $200,218 $191,451 Affiliates 10,459 9,141 Other 14,926 20,502 -------- -------- $225,603 $221,094 ======== ========
Receivables are net of allowance for doubtful accounts of $2.1 million in 1993 and $2.8 million in 1992.
Other Current Assets: 1993 1992 ------- ------- Deferred income taxes $28,453 $ 7,228 Other 6,100 13,683 ------- ------- $34,553 $20,911 ======= =======
Property and Equipment: 1993 1992 ---------- ----------- Land and improvements $ 80,669 $ 75,997 Buildings and improvements 181,618 153,232 Machinery and equipment 727,409 659,574 Construction in progress 99,410 69,889 ---------- ----------- $1,089,106 $ 958,692 ========== ===========
Depreciation expense was $59.6 million in 1993, $58.4 million in 1992 and $54.6 million in 1991.
Other Assets: 1993 1992 ------- ------- Goodwill and other intangibles $36,609 $15,595 Deferred income taxes 25,821 Other 10,356 5,262 ------- ------- $72,786 $20,857 ======= =======
Accumulated amortization of intangible and other assets was $14.3 million and $10.2 million at December 31, 1993 and 1992, respectively.
Accounts Payable: 1993 1992 -------- -------- Trade $106,005 $ 98,662 Affiliates 10,770 6,575 -------- -------- $116,775 $105,237 ======== ========
Income Taxes and Other Current Liabilities: 1993 1992 ------- ------- Employee compensation $30,369 $28,524 Income taxes 25,714 19,184 Taxes other than income 9,793 8,893 Other 27,007 19,270 ------- ------- $92,883 $75,871 ======= =======
Noncurrent Liabilities: 1993 1992 ------- ------- Employee benefits $35,070 $24,194 Other 34,952 17,023 ------- ------- $70,022 $41,217 ======= =======
35 12 NOTES CONTINUED NOTE 6 -- SHAREHOLDERS' EQUITY The company has 147 million authorized shares consisting of 2 million shares of Serial Preferred Stock, 25 million shares of Serial Preference Shares and 120 million Common Shares, each of which is without par value. The outstanding Common Shares shown on the balance sheets exclude Common Shares held in treasury of 19,605,866 and 17,745,308 at December 31, 1993 and 1992, respectively. The company effected a two-for-one stock split effective August 31, 1992. The company has a shareholder rights plan under which one right to buy one-half Common Share has been distributed for each Common Share held. The rights may become exercisable under certain circumstances involving actual or potential acquisitions of 20% or more of the Common Shares by a person or affiliated persons who acquire such stock without complying with the requirements of the company's articles of incorporation. The rights would entitle shareholders, other than such person or affiliated persons, to purchase Common Shares of the company or of certain acquiring persons at 50% of then current market value. At the option of the directors, the rights may be exchanged for Common Shares, and may be redeemed in cash, securities or other consideration. The rights will expire in 1997 unless earlier redeemed. Under another shareholder rights plan, each holder of Common Shares has one right to buy shares of Serial Preferred Stock for each Common Share held. The rights may become exercisable under certain circumstances involving actual or potential acquisitions of 20% or more of the company's Common Shares by a person or affiliated persons. The rights would entitle shareholders, other than such person or affiliated persons, to purchase shares of Serial Preferred Stock at the purchase price of $1 plus 25 rights per share. The dividend and redemption value of the Serial Preferred Stock would be determined in relation to after-tax amounts which have been or may be recovered by the company from Exxon or its affiliates as a result of certain patent claims. The rights will expire in November 1996 unless earlier redeemed. NOTE 7 -- OTHER INCOME AND GENENTECH GAIN During 1993, the company sold 1.0 million shares of Genentech, Inc. redeemable common stock for cash. The gain realized on these transactions was $42.4 million and, after tax, contributed $.41 cents per share to net income. At December 31, 1993, the company held 2.0 million shares of Genentech redeemable common stock. Genentech, at its option, may redeem the common stock in whole, but not in part, at various redemption prices per share ranging from $53.75 at January 1, 1994, to $60 at June 30, 1995.
Other income - net consists of the following: 1993 1992 1991 ------- ------- ------ Gain on sales of investments - excluding Genentech $13,174 $6,484 Equity earnings (losses) of non- consolidated companies (15,966) 1,798 $4,791 Other - net 3,329 3,623 4,709 ------- ------- ------ $ 537 $11,905 $9,500 ======= ======= ======
Included in other income - net for 1993 are gains on sale of investments of $13.2 million and equity losses of $21.0 million related to agribusiness investments. See Note 16. NOTE 8 -- INCOME TAXES Effective January 1, 1993, the company adopted SFAS 109, which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the company's financial statements and tax returns. In estimating future tax consequences, SFAS 109 generally considers all expected future events other than tax law or rate changes not yet enacted. Previously, the company accounted for income taxes under SFAS 96, which gave no recognition to future events other than the recovery of assets and settlement of liabilities at their carrying value. As permitted under SFAS 109, the company elected not to restate the financial statements of any prior years. The cumulative effect of adopting SFAS 109 at January 1, 1993 increased net income by $12.1 million, or $.18 per share. The effects of the change on both income before income taxes and the effective tax rate for the year ended December 31, 1993, were not material.
Income before income taxes consists of the following: 1993 1992 1991 -------- -------- -------- United States $ 68,673 $ 80,248 $ 93,088 Foreign 50,978 96,896 85,052 -------- -------- -------- Total $119,651 $177,144 $178,140 ======== ======== ========
The provision for income taxes consists of the following: 1993 1992 1991 ------- ------- ------- Current: United States $ 31,560 $ 13,981 $ 25,169 Foreign 34,774 37,791 31,755 ------- ------- ------- 66,334 51,772 56,924 ------- ------- ------- Deferred: United States (15,306) 1,603 (2,084) Foreign (16,352) (877) (359) ------- ------- ------- (31,658) 726 (2,443) ------- ------- ------- Total $34,676 $52,498 $54,481 ======= ======= =======
Foreign taxes include withholding taxes. The United States tax provision includes the U.S. tax on foreign income distributed to the company. U.S. and foreign income tax rate changes occurring during 1993 did not have a material effect on the company's provision for income taxes. The differences between the provision for income taxes at the U.S. statutory rate (35% for 1993 and 34% for 1992 and 1991) and the tax shown in the consolidated statements of income are summarized as follows:
1993 1992 1991 ------- ------- ------- Tax at statutory rate $41,878 $60,229 $60,568 Foreign sales corporation earnings (2,964) (3,702) (4,042) Equity income (1,551) (1,955) (2,405) Other - net (2,687) (2,074) 360 ------- ------- ------- Provision for income taxes $34,676 $52,498 $54,481 ======= ======= =======
36 13 The components of deferred tax assets (liabilities) as of December 31 are as follows:
1993 1992 1991 ------- -------- -------- Accrued compensation and benefits $ 42,425 $ 2,791 $ 4,424 Intercompany profit in inventory 11,208 3,829 3,084 Equity investments 7,541 978 553 Net operating losses carried forward 6,668 Depreciation and other basis differences (28,238) (32,555) (33,126) Partnership allocations (4,841) (4,615) (4,572) Other - net 5,312 (1,593) (3,173) ------- -------- -------- Net deferred tax assets (liabilities) $40,075 $(31,165) $(32,810) ======= ======== ========
At December 31, 1993, certain foreign subsidiaries have net operating loss carry forwards of $16 million for income tax purposes, of which $11 million expires in years 1994 through 2002 and $5 million has no expiration. After evaluating tax planning strategies and historical and projected profitability, the tax benefit of these net operating loss carry forwards has been recognized as a deferred tax asset. U.S. income taxes or foreign withholding taxes are not provided on undistributed earnings of foreign subsidiaries which are considered to be indefinitely reinvested in the operations of such subsidiaries. The amount of such earnings was approximately $248 million at December 31, 1993. Determination of the net amount of unrecognized U.S. income tax with respect to these earnings is not practicable. If such earnings were to be repatriated, foreign withholding taxes of approximately $16 million would be incurred. A portion or all of such withholding taxes may be offset by credits in the United States. NOTE 9 -- SUPPLEMENTAL CASH FLOW INFORMATION The company generally invests its excess cash in short-term investments with various banks and financial institutions. Short-term investments are cash equivalents as they are part of the cash management activities of the company and are comprised primarily of investments having maturities of less than three months.
The following is a reconciliation of net income to net cash provided by (used for) operating activities: 1993 1992 1991 -------- -------- -------- Net income $ 45,600 $ 124,646 $ 123,659 Depreciation and amortization 61,674 62,013 59,473 Deferred income taxes (32,751) (37) (2,716) Equity (earnings) losses, net of distributions 18,138 2,792 (3,743) Special charge 86,303 Gain on sale of investments (55,617) (6,484) Cumulative effect of changes in accounting principles 39,375 Change in current assets and liabilities: Receivables (16,066) (2,400) 4,470 Inventories (14,043) (30,807) (14,187) Accounts payable and accrued expenses 16,056 (13,693) 1,780 Other current assets 7,359 (316) 15,304 Increase in noncurrent liabilities 12,370 714 1,554 Other items - net (5,887) (1,265) 6,523 -------- -------- -------- Net cash provided by operating activities $162,511 $135,163 $192,117 ======== ======== ======== See Note 16 which describes transactions with Mycogen involving an exchange of nonmonetary assets.
NOTE 10 -- POSTRETIREMENT BENEFITS The company has retirement plans, including non-contributory defined benefit pension plans and a profit sharing plan, covering most full-time employees in the United States and at non-U.S. subsidiaries. Pension benefits are based on years of service and the employee's compensation. The company's funding policy in the United States is to contribute amounts to satisfy the Internal Revenue Service funding standards and elsewhere to fund amounts in accordance with local regulations. Several defined benefit plans are unfunded. Plan assets are invested principally in listed equity securities and fixed income instruments. Expense for all retirement plans was $25.1 million in 1993, $20.0 million in 1992 and $13.3 million in 1991, including profit sharing contributions in the U.S. of $3.8 million in 1993, $3.9 million in 1992 and $4.7 million in 1991. 37 14 NOTES CONTINUED
Net periodic pension cost of the U.S. and significant international defined benefit plans consists of: 1993 1992 1991 -------- -------- -------- Service cost - benefits earned during period $ 10,107 $ 9,814 $ 7,820 Interest cost on projected benefit obligation 16,115 14,787 11,480 Actual return on plan assets (24,830) (17,926) (28,630) Net amortization and deferral 16,363 5,779 15,830 -------- -------- -------- Net periodic pension cost $ 17,755 $ 12,454 $ 6,500 ======== ======== ========
The increase in net periodic pension cost for 1993 results largely from the company's realignment and early retirement programs accounted for in the special charge (see Note 17).
The weighted average assumptions used at December 31 were: 1993 1992 1991 ---- ---- ---- Assumed discount rate 7.2% 8.0% 8.1% Assumed rate of compen- sation increase 5.1% 5.8% 5.8% Expected rate of return on plan assets 8.5% 8.9% 8.9%
The funded status of such defined benefit pension plans and the amounts recognized in the consolidated balance sheets at December 31 are as follows: 1993 1992 ----------------------- ------------------------ Assets Accum. Assets Accum. Exceed Benefits Exceed Benefits Accum. Exceed Accum. Exceed Benefits Assets Benefits Assets -------- -------- -------- -------- Fair value of plan assets $133,755 $ 48,142 $165,152 $ 4,229 Projected benefit obligation (140,363) (79,541) (160,675) (26,914) -------- -------- -------- -------- Plan assets in excess of (less than) pro- jected benefit obligation (6,608) (31,399) 4,477 (22,685) Unrecognized net transition obliga- tion (asset) (12,794) 119 (19,297) 2,907 Unrecognized net loss (gain) (446) 12,049 (2,728) 5,282 Unrecognized prior service cost 17,566 3,179 20,205 2,126 Minimum liability adjustment (3,177) (2,478) -------- -------- -------- -------- Accrued pension asset (liability) $ (2,282) $ (19,229) $2,657 $(14,848) ======== ======== ======== ======== Accumulated bene- fit obligation $ 88,735 $ 70,608 $119,099 $ 17,600 ======== ======== ======== ======== Vested benefits $ 83,543 $ 67,344 $115,239 $ 14,675 ======== ======== ======== ========
The company provides certain postretirement benefits other than pensions, primarily health care, for retired employees. Currently, substantially all of the company's full-time employees in the U.S. become eligible for these benefits after five years of service and attainment of age 55 at retirement. Participants currently contribute 25% to 50% of the cost of such benefits. The company's postretirement health care plans are not funded. Effective January 1, 1993, the company adopted SFAS 106 which requires the company to accrue the estimated cost of retiree benefit payments during the years the employee provides services. The company previously expensed the cost of these benefits as claims were incurred. The company has elected to immediately recognize the cumulative effect of this change in accounting principle. The cumulative effect at January 1, 1993 of adopting SFAS 106 was to record an increase in a noncurrent liability for the accumulated postretirement benefit obligation of $79.9 million, an increase in deferred income tax assets of $28.4 and a decrease in net income of $51.5 million after taxes ($.76 per share).
The status of the plans at December 31, 1993, is as follows: Accumulated postretirement benefit obligation: Retirees $32,885 Fully eligible active plan participants 20,866 Other active plan participants 38,198 ------- 91,949 Unrecognized net loss (2,526) ------- Accrued postretirement health care costs $89,423 =======
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 11.25% in 1993, with subsequent annual decrements of .75% to an ultimate trend rate of 6%. A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation by approximately 19% and net postretirement benefit costs by approximately 15%. The discount rate used in determining the accumulated postretirement benefit obligation was 7.5%.
Net postretirement health care cost for the year ended December 31, 1993, consisted of the following components: Service cost - benefits earned during the year $2,620 Interest cost on accumulated postretirement benefit obligation 6,724 ------ Net postretirement health care cost $9,344 ======
The postretirement health care costs increased $8.1 million ($.08 per share after taxes) as a result of adopting SFAS 106. Postretirement health care expense on a pay-as-you-go basis was $1.8 million in 1992 and $1.5 million in 1991. NOTE 11 -- LEASES The company has commitments under operating leases primarily for office space, terminal facilities, land and various office equipment. Rental expense was $19.0 million in 1993, $18.3 million in 1992 and $16.5 million in 1991. Future minimum rental commitments under operating leases having initial or remaining non-cancelable lease terms exceeding one year are $14.3 million in 1994, $9.1 million in 1995, $5.6 million in 1996, $4.4 million in 1997, $2.9 million in 1998 and $21.2 million thereafter. 38 15 NOTE 12 -- OPERATIONS IN GEOGRAPHIC AREAS
Financial data by geographic area, based on the location of the subsidiary which shipped and billed the product, is as follows: 1993 1992 1991 ---------- ---------- ---------- Revenues from customers: United States $ 660,674 $ 734,273 $ 687,654 Europe 501,551 472,982 446,699 Far East 203,327 178,702 173,351 Other 159,948 166,291 168,602 ---------- ---------- ---------- 1,525,500 1,552,248 1,476,306 Intercompany transfers: United States 290,487 258,673 273,037 Europe 22,276 20,657 10,004 Far East 496 Other 26,707 32,674 23,554 ---------- ---------- ---------- 339,966 312,004 306,595 ---------- ---------- ---------- Gross revenues 1,865,466 1,864,252 1,782,901 Less: Intercompany transfers (339,966) (312,004) (306,595) ---------- ---------- ---------- Consolidated revenues $1,525,500 $1,552,248 $1,476,306 ========== ========== ========== Operating profit: United States $ 105,591 $ 94,800 $ 123,058 Europe 58,781 63,141 67,630 Far East 14,374 9,493 7,927 Other 11,392 13,640 4,675 Eliminations (129) 6,500 (7,718) ---------- ---------- ---------- 190,009 187,574 195,572 General corporate expenses (26,754) (25,790) (27,942) Special charge (86,303) Gain on sale of Genentech 42,443 Other income - net 537 11,905 9,500 Interest - net (281) 3,455 1,010 ---------- ---------- ---------- Income before income taxes $ 119,651 $ 177,144 $ 178,140 ========== ========== ========== Identifiable assets: United States $ 637,919 $ 548,601 $ 650,410 Europe 289,649 248,723 283,526 Far East 143,542 124,132 132,038 Other 71,651 73,836 80,144 Eliminations (88,012) (88,619) (159,027) ---------- ---------- ---------- 1,054,749 906,673 987,091 Corporate assets 127,831 220,447 184,592 ---------- ---------- ---------- Total assets $1,182,580 $1,127,120 $1,171,683 ========== ========== ========== NOTES: A. Intercompany transfers are made at prices comparable to normal unaffiliated customer sales for similar products. B. Affiliated companies are not allocated to geographic segments. C. Corporate assets consist of short-term investments and investments in affiliated companies.
Export sales from the United States to customers, primarily in Latin America, the Middle East and Asia, were $119 million in 1993, $136 million in 1992 and $161 million in 1991. Net assets of non-U.S. subsidiaries at December 31, 1993 and 1992 were $326 million and $310 million, respectively. Net income of these subsidiaries was $42 million in 1993, $59 million in 1992 and $50 million in 1991; and dividends received from the subsidiaries were $34 million, $26 million and $12 million, respectively. NOTE 13 -- FAIR VALUE OF FINANCIAL INSTRUMENTS The company has various financial instruments, including cash and short-term investments, investments in nonconsolidated companies, forward exchange contracts for currencies, interest rate swaps and short- and long-term debt. The company has determined the estimated fair value of these financial instruments by using available market information and appropriate valuation methodologies which require judgment. Accordingly, the use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. Except for investments in marketable equity securities and investments in nonconsolidated companies as described in Note 3, the company believes that the carrying values of financial instruments approximate their fair values. The company periodically enters into forward exchange contracts to manage currency exposure. At December 31, 1993, the company had short-term forward contracts to sell currencies at various dates during 1994 for $15.4 million. The value of these contracts is adjusted monthly to reflect market value, and the gains or losses are recognized immediately and offset the exchange adjustment related to the exposed currency position. NOTE 14 -- BUSINESS SEGMENT INFORMATION As a result of the company's agribusiness transactions as discussed in Note 16, the company's agribusiness activities are not reportable as an industry segment after December 1, 1992. A description of the company's segments and a summary of operating results and identifiable assets by segment prior to December 1, 1992, are contained on pages 25 and 29. Following is additional industry segment information:
Capital Depreciation Expenditures & Amortization ------------ -------------- 1992 Specialty Chemicals $89,172 $55,024 Agribusiness 6,642 6,989 ------- ------- $95,814 $62,013 ======= ======= 1991 Specialty Chemicals $76,547 $51,791 Agribusiness 5,851 7,682 ------- ------- $82,398 $59,473 ======= =======
The company has a concentration of sales and receivables in the oil and chemical industries. The ten largest customers, most of which are international oil companies and a number of which are groups of affiliated entities, accounted for approximately 44% of consolidated sales in 1993 and 1992, and 43% in 1991. Although the largest single group accounted for 9% of sales in 1993, 10% in 1992 and 11% in 1991, this group is made up of a number of separate entities that the company believes make independent purchasing decisions. 39 16 NOTES CONTINUED NOTE 15 -- STOCK OPTIONS The 1991 Stock Incentive Plan provides for granting of options to buy Common Shares intended either to qualify as "incentive stock options" under the Internal Revenue Code or "non-statutory stock options" not intended to so qualify, up to an amount equal to one percent of the outstanding Common Shares at the beginning of any year, plus any unused amount from prior years. Under the 1991 Plan, options generally become exercisable 50% one year after grant, 75% after two years, and 100% after three years, and expire up to ten years after grant. The 1985 Employee Stock Option Plan and the 1991 Plan also provide for "reload options," which are options to purchase additional shares if a grantee uses already-owned shares to pay for an option exercise. The 1991 Plan generally supersedes the 1985 Plan, which replaced the 1981 Incentive Stock Option Plan. A 1975 Employee Stock Option Plan expired by its terms in 1985. Options remain outstanding and exercisable under the 1975 Plan, the 1981 Plan and the 1985 Plan. The option price under all plans is the fair market value of the shares on the date of grant. All plans permit or permitted the granting of stock appreciation rights in connection with the grant of options, and the 1991 Plan also permits the grant of restricted and unrestricted shares. In addition, the 1991 Plan provides for an automatic annual grant to each outside director of the company of an option to purchase 2,000 Common Shares, with terms generally comparable to employee stock options.
Information regarding these option plans is as follows: Number of Shares ----------------------------------------- 1993 1992 1991 --------- --------- --------- Outstanding, January 1 2,147,263 1,970,446 1,671,602 Granted at $28.13 to $33.75 per share 624,546 596,290 620,380 Exercised at $10.97 to $32.81 per share (394,178) (407,697) (313,796) Surrendered at $16.66 to $33.34 per share (38,756) (11,776) (7,740) --------- --------- --------- Outstanding, December 31 2,338,875 2,147,263 1,970,446 ========= ========= ========= Exercisable, December 31 1,341,767 1,210,767 1,014,556 ========= ========= ========= Available for grant, December 31 1,816,751 1,718,036 1,612,230 ========= ========= =========
Both the 1975 and 1981 Plan options expire through November 1994, with an average option price of $11.06. The 1985 Plan options expire June 1995 to November 2003, with an average option price of $23.09. The 1991 Plan options expire April 2001 to April 2003, with an average option price of $31.05. NOTE 16 -- TRANSACTIONS WITH MYCOGEN CORPORATION In separate transactions, the company transferred on December 1, 1992, certain of its Agribusiness assets to Mycogen Corporation in exchange for 2,294,590 shares of Mycogen Common Stock and $39.4 million par value of Mycogen Series A Preferred Stock. The remainder of its Agribusiness assets, plus cash of $4.6 million, and exclusive of specialty vegetable oil operations, was transferred to Agrigenetics, L.P., a partnership with Mycogen, in exchange for a 49% partnership interest. There was no gain or loss resulting from the transaction. The company's investment in the partnership was recorded at $40.8 million, which represented 49% of the net assets transferred. The investment in Preferred Stock was recorded at $39.4 million par value, which was its fair value as agreed by the parties at the transaction date. The investment in Mycogen Common Stock was recorded at $13.1 million which was equivalent to the remaining book value of net assets transferred. On December 31, 1993, the company sold 29.54% of Agrigenetics, L.P. to Mycogen in exchange for cash of $7.0 million and 2,000,000 shares of Mycogen Common Stock. The additional shares of Common Stock were valued at $20.5 million and increased the company's ownership of the outstanding Mycogen Common Stock from 25% to 32%. Mycogen liquidated Agrigenetics, L.P. into a successor corporation named Agrigenetics Inc. ("AGI") and issued to the company AGI common shares representing a 19.46% ownership interest. The company has the right to convert, at any time, some or all of its interest in AGI into Mycogen Common Stock. In addition, on or after November 30, 2000, the company may require Mycogen to purchase, and Mycogen may require the company to sell, some or all of its then remaining interest in AGI for cash. The company and Mycogen have agreed the value for the conversion or sale of the company's interest in AGI will not be less than $21.4 million nor more than $26.3 million. On December 1, 1993, Mycogen mandatorily redeemed $10 million of the Preferred Stock for cash. Effective December 31, 1993, the company transferred $3.0 million of Mycogen Preferred Stock to AGI to settle claims regarding the asset values of the Agribusiness transferred assets. On December 31, 1993, Mycogen Preferred Stock was amended to eliminate the mandatory redemption feature, to change the preferential dividend rights and to change the rights for conversion into Mycogen Common Stock. As a result, the Preferred Stock held by the company pays cumulative dividends of 5% per year through November 30, 1996; 8.5% from December 1, 1996 through November 30, 2000; and the higher of 10% or prime plus 3% per annum thereafter. At Mycogen's option, dividends may be paid in cash or additional shares of Preferred Stock through November 30, 1997 and, thereafter, are payable in cash. The company, at its option, may convert the Preferred Stock into Mycogen Common Stock at the lower of $17.96 per share or 125% of the market price. 40 17 The company uses the equity method of accounting for its investment in the Common Stock of Mycogen which includes AGI (formerly Agrigenetics, L.P.). In 1991, Mycogen was accounted for by the cost method. Other income - net includes the following amounts related to these investments.
1993 1992 ------- ------- Equity losses $(20,997) $(2,708) Preferred dividends 1,975 164 Gain on sale of investments 13,174 ------- ------- $(5,848) $(2,544) ======= =======
At December 31, 1993, the book carrying values of the company's investments aggregated $41.3 million for Mycogen and AGI Common Stock and $28.5 million for Mycogen Preferred Stock.
The consolidated financial statements include the following summary results of operations of the agribusiness transferred assets for 1992 (eleven months) and 1991: 1992 1991 ------- ------- Total revenues $88,575 $87,616 Total cost and expenses (95,903) (95,435) Other income (expense) - net (1,021) 1,025 ------- ------- (8,349) (6,794) Intercompany items 2,204 5,050 ------- ------- Segment loss $(6,145) $(1,744) ======= =======
The company has a Technology and Development Agreement with AGI whereby the company has a commitment to provide a minimum of $9 million of funding over the next four year period to support the development of plant varieties to produce specialty oils. The company retains exclusive commercial rights with respect to the resulting specialty oils. NOTE 17 -- SPECIAL CHARGE The company recorded a special charge of $86.3 million ($.83 per share after tax) in the third quarter of 1993 in connection with manufacturing rationalization and organizational realignment initiatives. The manufacturing rationalization plan will be implemented over the next several years and through consolidation is expected to result in cost savings from a reduced number of employees, lower operating costs and fewer manufacturing units used to produce intermediate products. Approximately $56 million of the special charge is related to the manufacturing rationalization of which $33 million relates to asset write-downs, including $25 million for the shutdown of manufacturing units used to produce intermediate products. The remainder of the manufacturing rationalization portion of the special charge relates to expected employee reductions at manufacturing locations through early retirements, equipment cleanup and dismantling, employee relocation and other transitional costs. The organizational realignment relates to the consolidation of the company's nonmanufacturing activities. This portion of the special charge is approximately $30 million and includes $15 million for employee relocation and early retirement. The remainder of this portion of the special charge relates to asset write-downs of $13 million, primarily in the company's agribusiness investments, and accruals for transitional costs. The special charge will involve outlays of cash of approximately $36 million, primarily for the early retirements and employee relocation expenses of which approximately $4 million was expended during 1993, and approximately $14 million will be expended in 1994. NOTE 18 -- LITIGATION On November 18, 1993, a federal court jury in Houston, Texas, awarded Exxon Corporation $48 million in damages in a patent case brought, in 1989, against the company. The damages award relates to a December 1992 verdict that the company willfully infringed an Exxon patent pertaining to an oil soluble copper additive component. On February 18, 1994, the trial court judge doubled the damages amount and awarded prejudgment interest, court costs and additional attorneys' fees to Exxon. The total amount of the judgment, including previously awarded attorneys' fees, is $129 million. The company has obtained a bond to stay enforcement of the judgment pending the company's appeal discussed below. The original December 1992 finding of willful infringement, as well as that jury's determination that the patent is valid, remains on appeal to the United States Court of Appeals for the Federal Circuit Court in Washington, D.C., which has jurisdiction over all patent cases. Oral arguments on this appeal were held on December 6, 1993, and a decision may be forthcoming in 1994. This decision could reverse or modify the judgment against the company. In addition, the company has the right to appeal the February 1994 damages award to the same court in Washington, D.C. The company's management continues to believe that it has not infringed the Exxon patent and that the patent is invalid. Based on the advice of legal counsel, management believes that the December 1992 trial court judgment will not be upheld on appeal. Therefore, no amount related to the judgment has been recorded in the company's financial statements. The company has prevailed in a separate case brought in Canada against Exxon's Canadian affiliate, Imperial Oil, Ltd., for infringement of the company's patent pertaining to dispersant, the largest additive component used in motor oils. A 1990 trial court verdict in favor of the company regarding the issue of liability was upheld by the Federal Court of Appeals of Canada in December 1992, and in October 1993, the Supreme Court of Canada dismissed Imperial Oil's appeal of the Court of Appeals decision. The case has returned to the trial court for an assessment of damages, which management believes should take 9 to 12 months. A reasonable estimation of the company's potential recovery cannot be made at this time. 41 18 THE LUBRIZOL CORPORATION Deloitte & I N D E P E N D E N T A U D I T O R S ' R E P O R T Touche ------------ To the Shareholders and Board of Directors of The Lubrizol Corporation We have audited the accompanying consolidated balance sheets of The Lubrizol Corporation and its subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The Lubrizol Corporation and its subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Notes 8 and 10 to the financial statements, in 1993 the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards ("SFAS") No. 109 and its method of accounting for postretirement benefits to conform with SFAS No. 106. /s/ Deloitte & Touche Cleveland, Ohio February 18, 1994 42 19 THE LUBRIZOL CORPORATION
Q U A R T E R L Y F I N A N C I A L D A T A ( U N A U D I T E D ) Three Months Ended -------------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 -------------------------------------------------------- (In Thousands of Dollars Except Per Share Data) 1993 Net sales $365,580 $392,236 $390,819 $368,996 ======== ======== ======== ======== Gross profit $118,168 $121,625 $129,225 $116,414 ======== ======== ======== ======== Income before accounting changes $ 35,431 $ 31,342 $(15,905) $ 34,107 ======== ======== ======== ======== Net income $ (3,944) $ 31,342 $(15,905) $ 34,107 ======== ======== ======== ======== Net income per share: Before accounting change $.52 $.46 $(.24) $.51 Net income $(.06) $.46 $(.24) $.51 1992 Net sales: Specialty Chemicals $357,868 $369,932 $354,801 $343,179 Agribusiness 57,033 44,783 7,576 9,498 -------- -------- -------- -------- Total $414,901 $414,715 $362,377 $352,677 ======== ======== ======== ======== Gross profit: Specialty Chemicals $121,568 $123,824 $103,394 $102,181 Agribusiness 23,917 16,164 (468) (286) -------- -------- -------- -------- Total $145,485 $139,988 $102,926 $101,895 ======== ======== ======== ======== Net income $ 44,096 $ 44,806 $ 19,019 $ 16,725 ======== ======== ======== ======== Net income per share $.64 $.65 $.28 $.24 In the third quarter of 1993, the company recorded a special charge decreasing net income $56.1 million ($.83 per share). In the third and fourth quarters of 1993, the company recorded Genentech gains increasing net income $13.1 million ($.19 per share) and $14.5 million ($.22 per share) respectively. Most of the sales of the Agribusiness segment were made during the first half of the year, and operating losses were recorded in the third and fourth quarters as a result of incurring operating expenses with low sales. Agribusiness' cost of sales includes certain period costs and, therefore, may exceed sales in a quarter which has low volume. All share and per share data have been restated to reflect the 2-for-1 stock split effected on August 31, 1992.
43 20 THE LUBRIZOL CORPORATION
H I S T O R I C A L S U M M A R Y (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA) 1993 1992 ---------- ---------- Summary of Operations Revenues $1,525,500 $1,552,248 Cost of sales 1,032,199 1,054,376 Selling, administrative, research, testing and development expenses 330,046 336,088 ---------- ---------- Total cost and expenses 1,362,245 1,390,464 Other income (charges) (43,604) 15,360 ---------- ---------- Income before income taxes 119,651 177,144 Provision for income taxes 34,676 52,498 Changes in accounting principles (39,375) ---------- ---------- Net income $45,600 $124,646 ========== ========== For the Year: Net income per share $.67 $1.81 Dividends declared per share .85 .81 Average Common Shares outstanding (in thousands) 67,706 68,966 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Current assets $ 568,913 $ 591,016 Current liabilities 224,248 206,248 ---------- ---------- Working capital 344,665 384,768 Property - net 437,635 375,587 Other assets 176,032 160,517 ---------- ---------- Total 958,332 920,872 Less: Long-term debt 55,298 23,258 Noncurrent liabilities 159,445 41,217 Deferred income taxes 11,353 37,035 ---------- ---------- Net assets - Shareholders' equity $ 732,236 $ 819,362 ========== ========== OTHER DATA Return on average shareholders' equity 6% 15% Total assets $1,182,580 $1,127,120 Capital investments 168,201 98,216 Depreciation 59,595 58,435 At End of Year: Number of employees 4,613 4,609 Number of shareholders 6,616 6,822 Common Shares outstanding (in thousands) 66,590 68,451 Shareholders' equity per share $ 11.00 $ 11.97 All share and per share data have been restated to reflect the 2-for-1 stock split effected on August 31, 1992.
44 21
1991 1990 1989 1988 1987 1986 1985 1984 1983 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $1,476,306 $1,452,701 $1,227,910 $1,125,731 $1,022,277 $985,182 $913,351 $844,175 $800,303 992,275 1,006,341 864,576 783,113 713,152 695,068 659,130 627,378 588,266 316,401 282,050 245,132 226,776 203,236 180,650 158,358 114,501 113,363 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 1,308,676 1,288,391 1,109,708 1,009,889 916,388 875,718 817,488 741,879 701,629 10,510 106,902 19,544 69,908 23,310 19,200 7,582 12,788 15,032 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 178,140 271,212 137,746 185,750 129,199 128,664 103,445 115,084 113,706 54,481 81,166 43,766 54,544 47,864 50,479 43,221 47,353 48,962 8,751 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $ 123,659 $ 190,046 $ 93,980 $ 139,957 $ 81,335 $ 78,185 $ 60,224 $ 67,731 $ 64,744 ========== ========== ========== ========== ========== ========== ========== ========== ========== $1.79 $2.67 $1.26 $1.81 $1.03 $.99 $.74 $.87 $.83 .77 .73 .69 .65 .61 .59 .58 .56 .54 69,260 71,121 74,665 77,391 79,117 79,356 80,817 78,276 78,390 $ 701,571 $ 668,810 $ 543,166 $ 573,002 $ 513,342 $ 462,982 $447,441 $376,050 $361,964 262,162 248,351 180,908 184,888 169,166 162,797 182,543 132,252 129,766 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 439,409 420,459 362,258 388,114 344,176 300,185 264,898 243,798 232,198 380,030 353,551 316,493 298,670 297,573 289,078 290,298 251,735 274,337 90,082 92,235 100,525 98,999 128,463 125,847 116,706 74,189 46,563 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 909,521 866,245 779,276 785,783 770,212 715,110 671,902 569,722 553,098 34,982 54,023 53,180 55,339 56,138 52,616 73,444 30,416 27,213 41,979 39,663 29,320 26,851 23,952 16,806 13,161 11,480 10,038 38,094 36,348 33,512 39,285 68,489 73,009 65,999 53,483 44,326 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $ 794,466 $ 736,211 $ 663,264 $ 664,308 $ 621,633 $ 572,679 $ 519,298 $ 474,343 $471,521 ========== ========== ========== ========== ========== ========== ========== ========== ========== 16% 27% 14% 22% 14% 14% 12% 14% 14% $1,171,683 $1,114,596 $ 960,184 $ 970,671 $ 939,378 $ 877,907 $ 854,445 $ 701,974 $ 682,864 83,541 92,231 82,720 71,891 56,460 52,986 103,990 49,001 27,961 54,614 53,960 48,682 46,598 47,229 42,591 44,605 38,723 37,038 5,299 5,169 5,030 4,781 4,817 4,802 5,205 4,176 4,165 6,767 6,692 7,370 7,782 8,335 9,240 10,803 10,804 11,277 69,031 69,397 74,016 76,020 77,922 79,382 79,321 78,221 78,390 $ 11.51 $ 10.61 $ 8.96 $ 8.74 $ 7.98 $ 7.21 $ 6.55 $ 6.06 $ 6.02
45 EX-21 26 LUBRIZOL CORP 10-K EX-21 1 EXHIBIT 21 THE LUBRIZOL CORPORATION
% OF STATE/COUNTRY PRINCIPAL SUBSIDIARIES OWNERSHIP OF INCORPORATION Lubrizol A.G. 100% Switzerland Lubrizol do Brasil Aditivos, Ltda. 100% Brazil Lubrizol Canada Limited 100% Canada Lubrizol de Chile Limitada 100% Chile Lubrizol Espanola, S.A. 100% Spain Lubrizol France S.A. 99.992% France Lubrizol Gesellschaft m.b.H. 100% Austria Lubrizol G.m.b.H. 100% Germany Lubrizol Great Britain Limited 100% United Kingdom Lubrizol International Inc. 100% Cayman Islands Lubrizol International Management Corporation 100% Nevada Lubrizol Italiana, S.p.A. 100% Italy Lubrizol Japan, Limited 100% Japan Lubrizol Limited 100% United Kingdom Lubrizol de Mexico, S. de R.L. 100% Mexico Lubrizol Overseas Trading Corporation 100% Delaware Lubrizol Scandinavia AB 100% Sweden Lubrizol Servicios Tecnicos S. de R.L. 100% Mexico Lubrizol South Africa (Pty.) Limited 100% South Africa Lubrizol Southeast Asia (Pte.) Ltd. 100% Singapore Lubrizol de Venezuela C.A. 99.9% Venezuela Gate City Equipment Company, Inc. 100% Delaware Langer & Company G.m.b.H. 100% Germany SVO Specialty Products, Inc. 100% Delaware AFFILIATES Lubrizol India Limited 40% India Industrais Lubrizol S.A. de C.V. 40% Mexico Lubrizol Transarabian Company Limited 49% Saudi Arabia C.A. Lubricantes Quimicos L.Q. 49% Venezuela Solub Product Application Laboratory 40% Russia
EX-23 27 LUBRIZOL CORP 10-K EX-23 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT THE LUBRIZOL CORPORATION We consent to the incorporation by reference in Post-Effective Amendment No. 1 to Registration Statement No. 2-67385 on Form S-8, in Registration Statement No. 2-78019 on Form S-8, in Registration Statement No. 2-95120 on Form S-8, in Registration Statement No. 2-99983 on Form S-8, in Registration Statement No. 33-430 on Form S-8, in Registration Statement No. 33-2842 on Form S-8, in Registration Statement No. 33-29409 on Form S-8, in Registration Statement No. 33-42211 on Form S-8 and in Registration Statement No. 33-68246 on Form S-3 of our reports dated February 18, 1994, appearing and incorporated by reference in this Annual Report on Form 10-K of The Lubrizol Corporation for the year ended December 31, 1993. /s/Deloitte & Touche - ---------------------------------- DELOITTE & TOUCHE Cleveland, Ohio March 28, 1994 -----END PRIVACY-ENHANCED MESSAGE-----