Exhibit 10.2
THE LUBRIZOL CORPORATION 2005 STOCK INCENTIVE PLAN
(As Amended January 1, 2008)
Section 1. Purpose.
     The purposes of The Lubrizol Corporation 2005 Stock Incentive Plan are to
encourage selected employees of The Lubrizol Corporation and its Subsidiaries
and Outside 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 have the meanings set forth below:
     (a) “Award” means any Option, Stock Appreciation Right, Restricted Stock
Award, Restricted Stock Unit Award, or Stock Award granted pursuant to the
provisions of the Plan.
     (b) “Award Agreement” means a written document evidencing any Award granted
hereunder, signed by the Company and delivered to the Participant or Outside
Director, as the case may be.
     (c) “Board” means the Board of Directors of the Company.
     (d) “Code” means the Internal Revenue Code of 1986, as amended from time to
time.
     (e) “Committee” means a committee of not less than three (3) Outside
Directors of the Board, each of whom must 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; provided, however, that with respect to
Awards granted to non-Section 16 officers, “Committee” may mean the Chair of the
Organization and Compensation Committee of the Board of Directors and at least
one other member of the Organization and Compensation Committee.
     (f) “Company” means The Lubrizol Corporation.
     (g) “Employee” means any employee of the Company or of any Subsidiary.
     (h) “Fair Market Value” means the closing price of a Share on the New York
Stock Exchange on the Grant Date (in the case of a Grant), or any other relevant
date.
     (i) “Full-value Awards” means Awards that result in the Company
transferring the full value of any underlying Share issued in the transaction.
Full-value Awards will include all Restricted Stock Awards, performance shares,
performance rights, Stock-settled SARs, and certain other stock based Awards.

 

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2005 STOCK INCENTIVE PLAN
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     (j) “Grant Date” means the date on which the Board approves the grant of an
Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit
Award or Stock Award, and, with respect to a Restricted Stock Unit Award granted
to an Outside Director, the date specified pursuant to Section 10 on which such
Award is granted.
     (k) “Incentive Stock Option” means an Option that is intended to meet the
requirements of Section 422A of the Code or any successor provision thereto.
     (l) “Non-Statutory Stock Option” means an Option that is not intended to be
an Incentive Stock Option.
     (m) “Option” means an option to purchase Shares granted hereunder.
     (n) “Option Price” means the purchase price of each Share under an Option.
     (o) “Outside Director” means a member of the Board who is not an employee
of the Company or of any Subsidiary.
     (p) “Participant” means an Employee who is selected by the Committee to
receive an Award under the Plan.
     (q) “Plan” means The Lubrizol Corporation 2005 Stock Incentive Plan.
     (r) “Restricted Stock Award” means an award of restricted Shares under
Section 8 hereof.
     (s) “Restricted Stock Unit Award” means an award of restricted stock units
under Section 10 hereof.
     (t) “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) other conditions forth in the
applicable Award Agreement.
     (u) “Shareholders’ Meeting” means the annual meeting of shareholders of the
Company in each year.
     (v) “Shares” means common shares without par value of the Company.
     (w) “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.
     (x) “Stock Award” means the grant of Shares under the Plan.
     (y) “Stock-settled SAR” means the grant of a Stock Appreciation Right
whereby the appreciation of the underlying Shares (the value to the Employee
from the exercise of any

 

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2005 STOCK INCENTIVE PLAN
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Stock Appreciation Right grant) is settled in Shares, either for the full number
of Shares or the appreciation net of any tax obligation.
     (z) “Subsidiary” means a corporation which is at least 80% owned, directly
or indirectly, by the Company.
     (aa) “Voting Stock” means the then-outstanding securities entitled to vote
generally in the election of directors of the Company.
Section 3. Administration.
     The Plan is administered by the Committee. Members of the Committee are
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 will be filled by the appointment of a successor member
by the Board. Subject to the express provisions of this Plan, the Committee has
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 has additional authority as the Board may from
time to time determine to be necessary or desirable. Notwithstanding the
foregoing, the Committee does not have the discretion with respect to Restricted
Stock Awards granted to Outside Directors pursuant to Section 10 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 maximum number of
shares as to which Awards may be granted under this Plan is 4,000,000 Shares, of
which no more than 2,000,000 Shares can be settled as full-value Awards;
provided, however, that no more than 500,000 Shares will be available for grant
to any Participant during a calendar year. In addition to the stated maximums
described above, this Plan provides the Committee with the flexibility to
convert the Shares reserved solely for Options and the grant of Stock
Appreciation Rights into “full value” awards (e.g., restricted stock,
performance shares, etc.). Specifically:
     (i) For every Option or Stock Appreciation Right granted, the number of
Shares available for grant shall be reduced by one Share for every one Share
granted;
     (ii) For each of the first 2,000,000 Shares granted as Awards other than
Options or the grant of a Stock Appreciation Right, the number of Shares
available for grant shall be reduced by one Share for every one Share granted;
     (iii) For any Awards settled as a full-value Award in excess of the
2,000,000 Share limit, the number of Shares available for grant shall be reduced
by three Shares for every one Share granted

 

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2005 STOCK INCENTIVE PLAN
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For example, if we issue 2,000,000 Shares as performance shares prior to
exhausting our pool of shares for Options, the Committee has the flexibility to
convert a portion of the remaining options into other Award types, but it must
be consistent with the 3-to-1 ratio described above.
     The Company believes this provision provides for the maximum equity plan
design flexibility while continuing to protect the long-term interests of
shareholders.
     (b) Any Shares issued hereunder may consist, in whole or in part, of
authorized and unissued Shares or treasury shares. If: (i) any Shares subject to
any Award granted hereunder are forfeited, (ii) any Award otherwise terminates
without the issuance of Shares or payment of other consideration in lieu of
Shares; (iii) Shares are used to pay the exercise price of an Option; or
(iv) Shares are withheld from issuance to pay withholding taxes, the Shares
subject to the Award, to the extent of any such forfeiture, termination or
withholding, will not again be available for issuance under the Plan.
     (c) The number of Shares which remain available for issuance 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 will be appropriately and proportionately
adjusted to reflect such change in capitalization.
Section 5. Eligibility.
     Any Employee is 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 will
be evidenced by an Award Agreement in the form as the Committee may from time to
time approve. Any Option will be subject to the following terms and conditions
and to any additional terms and conditions, not inconsistent with the provisions
of the Plan, as the Committee deems desirable.
     (a) Option Price. The purchase price per Share under an Option will be
fixed by the Committee in its sole discretion; provided that the purchase price
will not be less than one hundred percent (100%) of the Fair Market Value of the
Share on the Grant Date of the Option. Payment of the Option Price may be made
in cash, Shares, or a combination of cash and Shares, as provided in the Award
Agreement relating thereto.
     (b) Option Period. The term of each Option will be fixed by the Committee
in its sole discretion; provided that no Incentive Stock Option may be
exercisable after the expiration of ten years from the Grant Date.
     (c) Exercise of Option. Options may 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

 

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2005 STOCK INCENTIVE PLAN
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provisions respecting the exercisability of Options that may be contained in an
Award Agreement.
     (d) Incentive Stock Options. The aggregate Fair Market Value of the Shares
with respect to which Incentive Stock Options held by any Participant which are
exercisable for the first time by such Participant during any calendar year
under the Plan (and under any other benefit plans of the Company, of any parent
corporation, or Subsidiary) will 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 will comply in all
respects with the provisions of Section 422A of the Code, or any successor
provision, and any regulations promulgated thereunder.
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 will 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 terminates and is no longer 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 will be canceled automatically to the extent of the
Stock Appreciation Rights exercised, and such Shares will not thereafter be
eligible for grant under Section 4(a). The Committee may impose any conditions
or restrictions on the exercise of any Stock Appreciation Right as it deems
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 will be evidenced by an Award
document from the Company which will specify the vesting schedule, any rights of
acceleration and such other terms and conditions as the Board determines, which
need not be the same with respect to each Participant.
     (b) Registration. Shares issued under this Section 8 will 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:

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 6

The sale or other transfer of the common shares represented by this certificate
is subject to certain restrictions set forth in the Award document granted to
___(the registered owner) by The Lubrizol Corporation dated ___, under The
Lubrizol Corporation 2005 Stock Incentive Plan. A copy of the Plan and Award
document may be obtained from the Secretary of The Lubrizol Corporation.
Unless otherwise provided in the Award document from the Company, the
certificates will be retained by the Company until the expiration of the
Restriction Period. Upon the expiration of the Restriction Period, the Company
will (i) have the legend removed from the certificates for the Shares to which a
Participant is entitled in accordance with the Award document from the Company
and (ii) release the Shares to the custody of the Participant.
     (c) Forfeiture. Except as otherwise determined by the Committee at the
Grant Date, upon separation of service of the Participant for any reason during
the Restriction Period, all Shares still subject to restriction will 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 the Participant’s
Shares. In such case, unrestricted Shares will be issued to the Participant at
the time determined by the Committee.
     (d) Rights as Shareholders. At all times during the Restriction Period,
Participants will be entitled to full voting rights with respect to all Shares
awarded under this Section 8 and will be entitled to dividends with respect to
the Shares.
Section 9. Stock Awards.
     Awards of Shares may be granted hereunder to Participants, either
separately or in conjunction with other Awards granted under the Plan. Subject
to the provisions of the Plan, the Committee has the sole and complete authority
to determine (i) the Employees to whom Awards will be granted, (ii) the time or
times at which the Awards will be granted, (iii) the number of Shares to be
granted pursuant to the Awards, and (iv) all other conditions of the Awards.
Conditions may include issuance of Shares at the time of the Award is granted or
issuance of Shares at a time or times subsequent to the time the Award is
granted, which subsequent times may be specifically established by the Committee
and/or may be determined by reference to the satisfaction of one or more
performance measures specified by the Committee. The provisions of Stock Awards
need not be the same with respect to each Participant.
Section 10. Outside Directors’ Restricted Stock Unit Awards.
     On the close of business on the date of each Annual Meeting of
Shareholders, each Outside Director will automatically be granted a number of
Restricted Stock Units equal to an amount calculated by dividing $75,000 by the
Fair Market Value of a Share on the Grant Date, which will be subject to the
following terms and conditions and to any additional terms and conditions, not
inconsistent with the provisions of the Plan, as are contained in the applicable
Award Agreement.

 

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2005 STOCK INCENTIVE PLAN
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     (a) Vesting. Restricted Stock Unit Awards granted pursuant to this
Section 10 will vest upon the earliest to occur of the following dates:
     (i) one year after the Grant Date;
     (ii) separation from service under a retirement plan or policy of the
Company;
     (iii) death while serving as a director; or
     (iv) Change in Control pursuant to Section 11.
Section 11. Change in Control.
     Notwithstanding the provisions of Sections 6(c) and 10(a), outstanding
Options will become 100% exercisable and any other outstanding Awards hereunder
will become fully vested and without any restrictions upon the occurrence of any
Change in Control (as hereafter defined) of the Company; except that no Option
may 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 outstanding Restricted Stock Awards will become fully 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 of the Company” shall
mean the occurrence of any of the following events:

  (a)   The date that any one person, or more than one person acting as a group,
acquires ownership of stock of the Company that, together with the stock held by
such person or group, constitutes more than 50 percent of the total fair market
value or total voting power of the stock of the Company.     (b)   The date any
person, or more than one person acting as a group, acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by
such person or person) ownership of stock of the Company possessing 30% or more
of the total voting power of the stock of the Company.     (c)   The date a
majority of members of the Company’s board of directors is replaced during any
12-month period by directors whose appointment or election is not endorsed by a
majority of the members of the Company’s board of directors before the date of
the appointment or election.     (d)   The date that any person, or more than
one person acting as a group, acquires ( or has acquired during the 12-month
period ending on the date of the most recent acquisition by such person or
persons) assets from the Company that have a total gross fair market value equal
to or more than 40% of the total gross fair market value of all of the assets of
the Company immediately before the acquisition or acquisitions.

 

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2005 STOCK INCENTIVE PLAN
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Section 12. Amendments and Termination.
     The Board may, at any time, amend, alter or terminate the Plan, but no
amendment, alteration, or termination may be made that would impair the rights
of an Outside Director or Participant under an Award previously granted, without
the Outside Director’s or Participant’s consent, or that without the approval of
the shareholders would:
     (a) except as is provided in Sections 4(b) and 13(c) of the Plan, increase
the total number of Shares which may be issued under the Plan;
     (b) change the class of employees eligible to participate in the Plan; or
     (c) materially increase the benefits accruing to Participants under the
Plan;
so long as such approval is required by law or regulation; provided that, as
long as required by law or regulation, the provisions of Section 10 hereof may
not be amended or altered more than once every six (6) months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or the rules thereunder.
     The Committee may amend the terms of any Award heretofore granted (except,
with respect to Restricted Stock Awards 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 may impair the rights of any Participant or Outside Director without
his consent.
Section 13. General Provisions.
     (a) No Option or other Award may 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 lifetime only by the Participant, or, if permissible
under applicable law, by the guardian or legal representative of the
Participant.
     (b) The term of each Award will be for a 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 may 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 will 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 will always be a whole number, and the purchase price per Share
of any outstanding Options will, 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, be

 

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2005 STOCK INCENTIVE PLAN
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proportionately increased. The above adjustment will also apply to any Shares
subject to Restricted Stock Awards granted to Outside Directors pursuant to the
provisions of Section 10.
     (d) No Employee may have any claim to be granted any Award under the Plan
and there is no obligation for uniformity of treatment of Employees or
Participants under the Plan.
     (e) The prospective recipient of any Award under the Plan will not, with
respect to the Award, be deemed to have become a Participant, or to have any
rights with respect to the Award, until and unless the recipient complies with
the then applicable terms and conditions.
     (f) All certificates for Shares delivered under the Plan pursuant to any
Award will be subject to any stock-transfer orders and other restrictions as the
Committee deems 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 document or by the
terms of the Plan, Participants will not be required, under the Plan, to make
any payment other than the rendering of services.
     (h) The Company is authorized to withhold from any payment under the Plan,
whether the payment is in Shares or cash, all withholding taxes due in respect
of the 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 prevents 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 interferes with or limits in any way the right of
the Company or any Subsidiary to terminate any Participant’s employment at any
time, nor does the Plan confer upon any Participant any right to continued
employment with the Company or any Subsidiary.
Section 14. Effective Date of the Plan.
     The Plan will be effective upon adoption of the Plan by the Board of
Directors of the Company. The Plan will be submitted to the shareholders of the
Company for approval within one year after its adoption by the Board of
Directors, and if the Plan is not approved by the shareholders, the Plan will be
void and of no effect. Any Awards granted under the Plan prior to the date the
Plan is submitted for approval by the shareholders will be void if the
shareholders do not approve the Plan.

 

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2005 STOCK INCENTIVE PLAN
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Section 15. Expiration of the Plan.
     Awards may be granted under this Plan at any time prior to April 1, 2010,
on which date the Plan will expire but without affecting any outstanding awards.

 

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2005 STOCK INCENTIVE PLAN
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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
THIS RESTRICTED STOCK AWARD AGREEMENT, dated this ___day of ___, 2___, (being
the date this restricted stock award is granted (the “Grant Date”)) by The
Lubrizol Corporation (hereinafter called the “Company”) to ___(hereinafter
called the “Employee”), an employee of the Company and/or a Subsidiary (as
defined in the Plan).
W I T N E S S E T H :
     That the parties hereto have agreed and do hereby agree as follows:
Section 1. The Company hereby grants to the Employee, under the provisions of
the Company’s 2005 Stock Incentive Plan, as amended (the “Plan”), the number of
Company Common Shares, without par value, set forth below, subject to the
restrictions, terms and conditions as hereinafter set forth. The Company Common
Shares granted hereunder are referred to herein as the “Shares”.
Section 2. The aggregate number of Shares granted hereunder is ___.
Section 3. A certificate or certificates evidencing the Shares will be issued by
the Company in the name of the Employee upon acceptance hereof by the Employee,
but in no event beyond the end of the year of grant. Each certificate evidencing
the Shares shall bear the following legend, and any other legend deemed
necessary or desirable by the Company in order to comply with the applicable
laws or to ensure the enforceability of the provisions of the Plan or this
Agreement:
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 2005 Stock Incentive Plan. A copy of the Plan and Award
Agreement may be obtained from the Secretary of The Lubrizol Corporation.
Section 4.
     (a) Except as otherwise provided in Section 8 hereof, until the expiration
of the Restriction Period (as hereinafter defined), the certificate or
certificates representing the Shares will be held on behalf of the Employee by
the Vice President — Human Resources of the Company, or his/her designee, and
the Employee may not sell, exchange, transfer, pledge, hypothecate or otherwise
dispose of the Shares. For purposes of this Agreement, Restriction Period shall
mean the period beginning on the Grant Date and ending as set forth below:

 

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2005 STOCK INCENTIVE PLAN
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      SHARES   RESTRICTION PERIOD
 
   
          
                                                    
          
                                                    
          
                                                    
          
                                                    

     (b) In the event of termination of the Employee’s employment with the
Company and/or a Subsidiary for any reason prior to the expiration of the
Restriction Period for any Shares, the Employee will forfeit to the Company all
Shares for which the Restriction Period has not expired, provided that in the
event of the Employee’s retirement, permanent disability, death, or in cases of
special circumstances, the Committee (as defined in the Plan) may, in its sole
discretion, when it finds that a waiver would be in the best interests of the
Company, determine that the Restriction Period for any or all of the Shares is
deemed to have expired and new certificates will be issued in accordance with
Section 6.
Section 5. Notwithstanding the provisions of Section 4, the Restriction Period
all be deemed to have expired with respect to all Shares and the Shares will not
be subject to forfeiture upon the occurrence of any Change of Control (as
defined from time to time in the Plan) of the Company.
Section 6. Upon the expiration of the Restriction Period with respect to any
Shares without forfeiture of the Shares by the Employee and the satisfaction of
the withholding obligations set forth in Section 7 of this Agreement, the
Company will cause a new certificate or certificates to be issued without legend
in the name of the Employee in exchange for the certificate evidencing the
Shares within 60 days of the Change in Control.
Section 7. Upon (or immediately prior to) the expiration of the Restriction
Period with respect to any Shares, the Employee agrees to pay the amount, if
any, required to be withheld for federal, state or local tax purposes on account
of the lapse of restrictions of the Shares. The payment of any tax to be
withheld from those Shares otherwise issuable upon the expiration of the
Restriction Period. For purposes of determining the number of Shares that are to
be withheld to provide for the tax withholding, Shares will be valued at the
closing price of Shares on the New York Stock Exchange on the date of the
expiration of the Restriction Period.
Section 8. In the event of a merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate structure such
that Company Common Shares are changed into or become exchangeable for a larger
or smaller number of Company Common Shares, thereafter the number of Shares
subject to this Agreement will be increased or decreased, as the case may be, in
direct proportion to the increase or decrease in the number of Company Common
Shares by reason of the change in corporate structure; provided, however, that
the number of Shares will always be a whole number. In the event that there is
any other change in the number or kind of outstanding Company Common Shares or
other securities of the Company, or of any shares of stock or other securities
into which the Company Common Shares are changed or for which they are
exchanged, then the Committee may make an adjustment in the number or kind of
shares of stock or other securities granted hereunder, as the Committee, in its
sole discretion, may determine is equitably required by the change, and the
adjustment will be effective and binding for all purposes.

 

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2005 STOCK INCENTIVE PLAN
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Section 9. The Restriction Period with respect to the Shares will not expire if
the lapse of restrictions would violate:

  (a)   any applicable state securities law;     (b)   any applicable
registration or other requirements under the Securities Act of 1933, as amended
(the “Securities Act”), the Securities Exchange Act of 1934, as amended, or the
listing requirements of any stock exchange; or     (c)   any similar legal
requirement of any governmental authority regulating the issuance of shares by
the Company.

Furthermore, if a Registration Statement with respect to the Shares is not in
effect or if counsel for the Company deems it necessary or desirable in order to
avoid possible violation of the Securities Act, the Company may require, as a
condition to its issuance and delivery of certificates for the Shares, the
delivery to the Company of a commitment in writing by the Employee that at the
Grant Date and at the time of expiration of the Restriction Period it is the
Participant’s intention to acquire such Shares for his or her own account for
investment only and not with a view to, or for resale in connection with, the
distribution thereof other than in a transaction that does not require
registration under the Securities Act (which may, but will not be required to,
be conclusively determined for the purposes of this Agreement based upon written
advice of counsel for the Company or the Employee); that the Participant
understands the Shares may be “restricted securities” as defined in Rule 144 of
the Securities and Exchange Commission; and that any resale, transfer or other
disposition of said Shares will be accomplished only in compliance with
Rule 144, the Securities Act, or other or subsequent applicable Rules and
Regulations thereunder. In these circumstances (except as aforesaid), the
Company may place on the certificates evidencing such Shares an appropriate
legend reflecting the aforesaid commitment and the Company may refuse to permit
transfer of such certificates until it has been furnished evidence satisfactory
to it that no violation of the Securities Act or the Rules and Regulations
thereunder would be involved in such transfer.
Section 10. The Committee has conclusive authority, subject to the express
provisions of the Plan as in effect from time to time and this Agreement, to
construe this Agreement and the Plan, and to establish, amend and rescind rules
and regulations for the administration of the Plan. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in this
Agreement in the manner and to the extent it deems expedient to carry the Plan
into effect, and it will be the sole and final judge of such expediency. The
Board of Directors of the Company may from time to time grant to the Committee
further powers and authority as the Board determines to be necessary or
desirable. Notwithstanding any other provision of this Agreement to the
contrary, no amendment, construction, establishment, rescission or correction of
the type referenced above which is made or adopted following a Change in
Control, and which amendment, construction, establishment or correction
adversely affects the rights of the Employee hereunder, will be effective
without the express prior written consent of the Employee.
Section 11. Notwithstanding any other provision of this Agreement, the Shares
will be subject to all of the provisions of the Plan in force from time to time.

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 14

IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
as of the day and year first above written.

          THE LUBRIZOL CORPORATION   EMPLOYEE
 
       
By
       
 
       
 
  M. W. Meister, Vice President
Human Resources    

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 15

THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
PERFORMANCE SHARE AWARD
     THIS PERFORMANCE SHARE AWARD, dated this ___day of ___, 2___, (the “Grant
Date”) by The Lubrizol Corporation (the “Company”) to ___, an employee of the
Company and/or a Subsidiary (as defined in the Plan).
     The following terms and provisions apply to this Performance Share Award:
1. The Company hereby grants to you, under the provisions of Section 9 of the
Company’s 2005 Stock Incentive Plan, as amended (the “Plan”), the number of
Company Common Shares, without par value, in accordance with the three-year
performance target approved by the Organization and Compensation Committee. The
Company Common Shares granted hereunder are referred to herein as the “Shares”.
2. If there is a Change in Control, as defined under the Plan, prior to the
receipt of Shares under Section 1, above, you will receive a pro-rata number of
Shares within 60 days after the Change in Control. The pro-rata number of Shares
will be determined as shown on Exhibit A attached to this Award.
3. If you separate from service due to retirement (either normal or early
retirement) prior to the receipt of Shares pursuant to Section 1, above, you
will receive a pro-rata number of Shares between the January 1 and March 15 of
the year following the end of the three-year cycle based on the number of full
months which have elapsed since the date of this Award at the time or your
separation from service or death. In no event will the payment of Shares be made
earlier than six months after your separation from service due to retirement.
     If you separate from service due to death prior to the receipt of Shares
pursuant to Section 1, above, your beneficiary will receive a pro-rata number of
Shares between the January 1 and March 15 of the year following the end of the
three-year cycle based on the number of full months which have elapsed since the
date of this Award at the time or your service or death. If the Company does not
have a beneficiary election on file at the time of your death, the Shares will
be issued to your spouse, or if your spouse is not living at the time of
issuance, your children who are living, or if you have no living children at the
time of issuance, your estate.
     If you separate from service (voluntarily or involuntarily) for any other
reason prior to the receipt of Shares pursuant to Section 1, above, you will
forfeit any Shares under this Award.
4. The Award is not transferable by you during your life.
5. Prior to the issuance of Shares to you, you will not be a shareholder of the
Company and you will have no rights under the Award as a shareholder of the
Company. No dividends or other amount will be allocated or paid to you with
respect to the Award.
6. If there is a stock split, reverse stock split or stock dividend, the number
of Shares specified in Section 1, above will be increased or decreased in direct
proportion to the increase

 

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2005 STOCK INCENTIVE PLAN
  Page 16

or decrease in the number of Company Shares by reason of the stock split,
reverse stock split or stock dividend.
7. Shares will not be distributed under this Award if the issuance of the Shares
would violate:

  (a)   any applicable state securities law;     (b)   any applicable
registration or other requirements under the Securities Act of 1933, as amended
(the “Securities Act”), the Securities Exchange Act of 1934, as amended, or the
listing requirements of any stock exchange on which the Company’s Shares are
listed; or     (c)   any similar legal requirement of any governmental authority
regulating the issuance of shares by the Company.

Further, if a Registration Statement with respect to the Shares to be issued is
not in effect or if counsel for the Company deems it necessary or desirable in
order to avoid possible violation of the Securities Act, the Company may
require, as a condition to its issuance and delivery of certificates for the
Shares, that you deliver to the Company a statement in writing that you
understand the Shares may be “restricted securities” as defined in Rule 144 of
the Securities and Exchange Commission and that any resale, transfer or other
disposition of the Shares will be accomplished only in compliance with Rule 144,
the Securities Act, or other or subsequent applicable Rules and Regulations
thereunder. Further still, the Company may place on the certificates evidencing
the Shares an appropriate legend under Rule 144.

8.   (a) When the Common Shares are distributable to you pursuant to Section 1,
above, you may be subject to income and other taxes on the value of the Shares
on the date of distribution. The Company will withhold a sufficient number of
Shares that will provide for the federal, state and/or local income tax at the
rates then applicable for supplemental wages, unless otherwise requested by you,
but in no event less than the statutory minimums for tax withholding.

(b) For purposes of determining the number of Common Shares that are to be
withheld to provide for the tax withholding pursuant to Section 8(a), Common
Shares will be valued at the closing price of a Common Share on the New York
Stock Exchange on the date Shares are distributable to you. If the determination
of the tax withholding requires the withholding of a fractional Share, the
Company shall withhold the nearest whole number of Shares needed to pay the tax
withholding, rounded up, and remit to you in cash the amount of the excess after
the withholding taxes have been satisfied.
9. Prior to the distribution of Shares pursuant to Section 1, the Committee has
the right in its sole discretion to reduce the amount of this Award.
10. The Committee has conclusive authority, subject to the express provisions of
the Plan, as in effect from time to time, and this Award, to interpret this
Award and the Plan, and to establish, amend and rescind rules and regulations
for the administration of the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in this Award in the manner
and to the extent it deems expedient to carry the Plan into effect, and it is

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 17

the sole and final judge of such expediency. The Board of Directors of the
Company may from time to time grant to the Committee such further powers and
authority as the Board determines to be necessary or desirable.
11. You must hold any Shares that are distributed to you under this Award at
least until you have met your Share ownership guideline.
12. Notwithstanding any other provision of this Award, your Award will be
subject to all of the provisions of the Plan in force from time to time.

              THE LUBRIZOL CORPORATION
 
       
 
  By    
 
       
 
      James L. Hambrick
Chairman, President and CEO

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 18

EXHIBIT A
Determination of Pro-Rata Common Shares Upon a Change in Control Under Section 2
     Pursuant to the terms of Section 2, the number of pro-rata Common Shares
upon a Change in Control will be determined as follows:
1. No payout if 12 months has not elapsed since the date of this Award.
2. If more than 12 months has elapsed since the date of this Award:

  (a)   Determine the measurement growth rate for each full year that has
elapsed in the 3-year period as of the date of the Change in Control,     (b)  
The 3-year cumulative measurement growth will be imputed as either the 1-year
measurement growth (if the Change in Controls occurs during the second year) or
the 2-year cumulative measurement growth (if the Change in Control occurs during
the third year).     (c)   Payout is then pro-rated based on number of full
months that have elapsed since the date of this Award, payable within 60 days
after the Change in Control.

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 19

THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
OUTSIDE DIRECTOR
RESTRICTED STOCK UNIT AWARD
THIS RESTRICTED STOCK UNIT AWARD, dated this ___day of ___, 2___, (the “Grant
Date”) by The Lubrizol Corporation (the “Company”) to ___, a member of the Board
of Directors of the Company who is not a Director of the Company or a Subsidiary
(as defined in the Plan).
The following terms and provisions apply to this Restricted Stock Unit Award:
1. This Award grants to you, under the provisions of the Company’s 2005 Stock
Incentive Plan, as amended (the “Plan”), the number of Stock Units (“Units”)
equal to the amount, set forth in Section 2, which is calculated by dividing
$70,000.00 by the Fair Market Value of a Share of Lubrizol common stock, on the
date of the most recent Annual Meeting of Shareholders, subject to the
restrictions, terms and conditions as hereinafter set forth.
2. The aggregate number of Units granted under this Award is ___.
3. (a) The Restriction Period is one year beginning on the Grant Date and ending
on the first anniversary of the Grant Date.
     (b) If you separate from service as a director of the Company for any
reason prior to the end of the Restriction Period, you will forfeit to the
Company all Units for which the Restriction Period has not expired, provided
that in cases of special circumstances, the Committee (as defined in the Plan)
may, in its sole discretion, when it finds that a waiver would be in the best
interests of the Company, determine that the Restriction Period for any or all
of the Units is deemed to have expired and Share certificates will be issued in
accordance with Section 5.
4. Notwithstanding the provisions of Section 3, the Restriction Period will end
upon: (a) your separation from service in accordance with any retirement plan or
policy of the Company then in effect; (b) your death; or (c) the occurrence of
any Change of Control (as defined in the Plan) of the Company.
5. Within 60 days after the end of the Restriction Period, a Share
certificate(s) will be issued to you in an amount equal to the number of Units
subject to the Restriction Period.
6. If there is a merger, reorganization, consolidation, recapitalization, stock
dividend or other change in corporate structure such that Company Common Shares
are changed into or become exchangeable for a larger or smaller number of
Company Common Shares, the number of Units specified in Section 2, above, will
be increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of Company Common Shares by reason of the
change in corporate structure; provided, however, that the number of Units will
always be a whole number.
7. The Restriction Period will not expire if the lapse of restrictions would
violate:

  (a)   any applicable state securities law;

 

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2005 STOCK INCENTIVE PLAN
  Page 20

  (b)   any applicable registration or other requirements under the Securities
Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of
1934, as amended, or the listing requirements of any stock exchange; or     (c)
  any similar legal requirement of any governmental authority regulating the
issuance of shares by the Company.

In addition, if a Registration Statement with respect to Shares distributable
under this Plan is not in effect or if counsel for the Company deems it
necessary or desirable in order to avoid possible violation of the Securities
Act, the Company may require, as a condition to its issuance and delivery of
certificate(s) for the Shares, the delivery to the Company of a commitment in
writing by you that at the Grant Date and at the time of expiration of the
Restriction Period it is your intention to acquire such Shares for your own
account for investment only and not with a view to, or for resale in connection
with, the distribution thereof other than in a transaction that does not require
registration under the Securities Act (which may, but will not be required to,
be conclusively determined for the purposes of this Agreement based upon written
advice of counsel for the Company or the Director); that you understand the
Shares distributable hereunder may be “restricted securities” as defined in
Rule 144 of the Securities and Exchange Commission; and that any resale,
transfer or other disposition of the Shares will be accomplished only in
compliance with Rule 144, the Securities Act, or other or subsequent applicable
Rules and Regulations thereunder. In these circumstances (except as aforesaid),
the Company may place on the certificate(s) an appropriate legend reflecting the
aforesaid commitment and the Company may refuse to permit transfer of the
certificate(s) until it has been furnished evidence satisfactory to it that no
violation of the Securities Act or the Rules and Regulations thereunder would be
involved in such transfer.
8. The Committee has conclusive authority, subject to the express provisions of
the Plan as in effect from time to time and this Award to interpret this Award
and the Plan, and to establish, amend and rescind rules and regulations for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Award in the manner and to the
extent it deems expedient to carry the Plan into effect, and it is the sole and
final judge of such expediency. The Board of Directors of the Company may from
time to time grant to the Committee further powers and authority as the Board
determines to be necessary or desirable. Notwithstanding any other provision of
this Agreement to the contrary, no amendment, construction, establishment,
rescission or correction of the type referenced above which is made or adopted
following a Change in Control, and which amendment, construction, establishment
or correction adversely affects your rights, will be effective without your
express prior written consent.
9. Notwithstanding any other provision of this Award, the Units will be subject
to all of the provisions of the Plan in force from time to time.

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 21

              THE LUBRIZOL CORPORATION
 
       
 
  By    
 
       
 
      J. L. Hambrick
President and CEO

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 22

THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
NONSTATUTORY STOCK OPTION AWARD AGREEMENT
     THIS STOCK OPTION AWARD AGREEMENT, dated this ___day of ___, 2___, (the
“Grant Date”) by The Lubrizol Corporation (the “Company”) to ___(the
“Employee”), an employee of the Company and/or a Subsidiary (as defined in the
Plan).
     The parties to this Agreement agree to the following terms and provisions:
1. The Company grants to you, under the provisions of Company’s 2005 Stock
Incentive Plan, as amended (the “Plan”), the option of purchasing the number of
Company Common Shares (“Shares”) indicated in Section 2, at the price and
subject to the terms and conditions described in this Agreement. The option
rights described in this Agreement will be called “Option Rights”. This Option
award is not intended to be an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended.
2. The number of Shares you may purchase is ___.
3. The option price is $  per Share.

4.   (a) Except as provided in Sections 4(b), 4(c), 4(d), 4(e), 4(f), 4(g) and 8
hereof, you cannot exercise any of the Option Rights until you have remained
continuously employed by the Company and/or any of its subsidiaries for one year
after the Grant Date. After one year, you can exercise the Option Rights up to
50% of the Shares specified above. After two years you can exercise up to 75% of
the Shares and after three years, you can exercise up to 100% of the Shares.

(b) Notwithstanding Section 4(a), the Option Rights will become, and for the
period specified in Section 6, will remain, 100% exercisable upon any Change in
Control (as defined in the Plan) of the Company.
(c) If you separate from service due to retirement from the Company or any of
its subsidiaries in accordance with any retirement plan or policy of your
employer (1) you, at any time within the period specified in Section 6, may
exercise the Option Rights and (2) if there is a Change in Control within seven
(7) months following your retirement (but within the period specified in
Section 6), you may, in accordance with Section 9, exercise the LSARs (as
defined below), in either case as follows: (A) if you have reached the normal
retirement age you may exercise the Option Rights and LSARs up to 100% of the
Shares, and (B) if you have not reached the normal retirement age but elect to
retire pursuant to “early retirement” provisions of any applicable retirement
plan or policy of your employer, you may exercise the Option Rights and LSARs to
the extent you were entitled to exercise them immediately prior to your early
retirement, or if the Organization and Compensation Committee of the Board of
Directors of Lubrizol (“Committee”), upon the recommendation of the Chief
Executive Officer of Lubrizol, specifically approves, you may exercise the
Option Rights and LSARs up to 100% of the Shares.

 

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2005 STOCK INCENTIVE PLAN
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(d) If you separate from service with Lubrizol or any of its subsidiaries for
any reason other than retirement or death, then you, at any time within three
months following your separation from service (but within the period specified
in Section 6), (1) may exercise the Option Rights and/or (2) may, in accordance
with Section 9, exercise the LSARs, in each case to the extent you were entitled
to exercise them immediately prior to your cessation of employment, or if the
Committee, upon the recommendation of the Chief Executive Officer, specifically
approves, you may exercise the Option Rights and LSARs up to 100% of the Shares.
(e) If you die while employed by Lubrizol or any of its subsidiaries, then
(1) for 12 months following the date of death, (but within the period specified
in Section 6), the executor or administrator of your estate or the person
entitled by will or the applicable laws of descent and distribution may exercise
the Option Rights and (2) if there is Change in Control within seven months
after your death, the person entitled by will or by the applicable laws of
descent and distribution may, in accordance with Section 9, exercise the LSARs,
in each case up to of 100% of the Shares.
(f) If there is a Change in Control and your employment with the Company or any
of its subsidiaries terminates either (1) by your employer other than for Cause
(as defined below), or (2) by you for Good Reason (as defined below) then,
notwithstanding anything in this award to the contrary, you, at any time within
seven months following your termination (but within the period specified in
Section 6), (A) may exercise the Option Rights and/or (B) may, in accordance
with Section 9, exercise the LSARs, in each case up to 100% of the Shares. The
term “Cause” means that, prior to your termination of the employment you
committed: (I) an intentional act of fraud, embezzlement or theft in connection
with your duties or in the course of your employment; (II) intentional wrongful
damage to the property of the Company or any of its subsidiaries; or
(III) intentional wrongful disclosure of secret processes or confidential
information of the Company or any of its subsidiaries; or (IV) intentional
wrongful engagement in any Competitive Activity (as defined below); and any of
these acts was materially harmful to the Company. No act or failure to act on
your part will be considered “intentional” if it was due primarily to an error
in judgment or negligence, but will be considered “intentional” only if done, or
omitted to be done, by you not in good faith and without reasonable belief that
the action or omission was in the best interest of the Company. Notwithstanding
the above, you will not be considered to have been terminated for “Cause” unless
there is delivered to you a copy of a resolution duly adopted by the affirmative
vote of at least three-fourths of the Directors of the Company at a meeting of
the Directors called and held for that purpose (after reasonable notice to you
and an opportunity for you, together with your counsel, to be heard before the
Directors), finding that, in the good faith opinion of the Directors, you had
committed an act described above in this Section 4(f) and specifying the
particulars thereof in detail. Termination of employment by you will be
considered for “Good Reason” if you terminate employment and any of the
following events has occurred (regardless of whether any other reason, other
than for Cause, for the termination exists or has occurred, including without
limitation other employment):
(i). Failure to elect or reelect or otherwise maintain you in the office or in
the position, or a substantially equivalent office or position, which you held
immediately prior to a Change in Control, or your removal as a Director of the

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 24

Company (or any successor thereto) if you were a Director of the Company
immediately prior to the Change in Control;
(ii). A significant adverse change in the nature or scope of the authorities,
powers, functions, responsibilities or duties attached to the position you held
immediately prior to the Change in Control, a reduction in the aggregate of your
annual compensation, or the termination or denial of your rights to employee
benefits in which your similarly situated co-workers participate, or a reduction
in scope or value thereof without your prior written consent, any of which is
not remedied within ten calendar days after receipt by the Company of your
written notice of the change, reduction or termination, as the case may be;
(iii). A determination you made in good faith that as a result of a Change in
Control and a change in circumstances thereafter significantly affecting your
position, including, a change in the scope of the business or other activities
for which you were responsible immediately prior to a Change in Control, you
have been rendered substantially unable to carry out, have been substantially
hindered in the performance of, or have suffered a substantial reduction in, any
of the authorities, powers, functions, responsibilities or duties attached to
the position held by you immediately prior to the Change in Control, which
situation is not remedied within ten calendar days after receipt by the Company
of your written notice of your determination; or
(iv). The Company relocates its principal executive offices, or changes your
principal location of work, to any location which is more than 50 miles from the
location immediately prior to the Change of Control or to travel away from your
office significantly more than was required prior to the Change in Control
without, in either case, your prior written consent.
The term “Competitive Activity” means your participation, without the written
consent of an officer of the Company, in the management of any business
enterprise if that enterprise engages in substantial and direct competition with
the Company and the 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” does 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.
(g) If you, after leaving the employ of the Company, die during one of the
periods described in Section 4(c), (d) or (f), the executor or administrator of
your estate, or the person entitled by will or the applicable laws of descent
and distribution, may exercise the Option Rights held by you at the time of your
death during the applicable period, as follows:
(i). If Section 4(c) was in effect, for one (1) year after your death;

 

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2005 STOCK INCENTIVE PLAN
  Page 25

(ii). If Section 4(d) was in effect, for three (3) months after your death;
(iii). If Section 4(f) was in effect, for one (1) year after your death;
provided that, the Option Rights may not be exercised after the period specified
in Section 6.
5. The Option Rights and LSARs are not transferable other than by will or by the
laws of descent and distribution, and are exercisable during your lifetime only
by you or your guardian or legal representative. In addition, except as
otherwise provided by Sections 4(c), 4(d), 4(e), 4(f), 4(g) and 8, the Option
Rights and/or LSARs can be exercised only if you remain continuously employed by
Lubrizol or any of its subsidiaries from the Grant Date to the date of exercise.
6. Notwithstanding any other provision hereof, the Option Rights expire ten
years after the Grant Date, or earlier as described in Sections 4(c), 4(d),
4(e), 4(f), 4(g) or 8.
7. If there is a merger, reorganization, consolidation, recapitalization, stock
dividend or other change in corporate structure so that Company Common Shares
are changed into or become exchangeable for a larger or smaller number of
Company Common Shares, the number of Shares subject to this award will be
increased or decreased in direct proportion to the increase or decrease in the
number of Company Common Shares by reason of the change in corporate structure;
provided, however, that the purchase price per Share will, 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, be proportionately increased. If there is
any other change in the number or kind of outstanding Company Common Shares or
other Company securities, or of any shares of stock or other securities into
which Company Common Shares have been changed or for which they have been
exchanged, then the Committee may make an adjustment in the number or kind of
shares of stock or other securities purchasable hereunder, and in the manner of
purchasing such stock or other securities and the price to be paid, as the
Committee determines is equitably required by the change, and the adjustment
will be effective and binding for all purposes of the Option Rights.
8. If the Company liquidates or dissolves, the Company will give to you at least
thirty (30) days’ prior written notice, and you will have the right within the
thirty (30) day period (but within the period specified in Section 6) to
exercise the Option Rights to the extent you otherwise are entitled to exercise
the Option Rights. Any Option Rights which have not been exercised before the
effective date of the liquidation or dissolution will terminate.
9. In accordance with the terms described in this Section 9, the Company grants
to you limited stock appreciation rights (“LSARs”) with respect of each of the
Shares to which the Option Rights relate. Upon exercise of the LSARs, (a) you
will be entitled to receive a cash amount equal to the amount by which the Fair
Market Value (as defined below) of a Share exceeds the option price set forth in
Section 3 hereof, multiplied by the number of LSARs exercised, and (b) an equal
number of Option Rights will automatically be canceled. You may

 

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2005 STOCK INCENTIVE PLAN
  Page 26

exercise a LSAR only within sixty (60) days (but within the period specified in
Section 6) after you receive written notice from the Company that there has been
a Change in Control. You may exercise the LSARs by delivering to the Company at
the office of its Vice President, Human Resources, a signed written notice, of
your election to exercise in whole or in part the LSARs. The term “Fair Market
Value” means the higher of (1) the highest daily closing price (as reported on
the New York Stock Exchange Composite Transactions) for a Share during the
period beginning on the 60th day prior to the date on which the LSAR is
exercised and (2) the highest gross price paid or to be paid for a Share in any
Change in Control event described in Section 4(b).

10.   (a) You may exercise the Option Rights by delivering to the Company at the
office of its Vice President, Human Resources, a signed written notice of your
election to exercise the Option Rights. You must include with the notice payment
of the full purchase price of the Shares to be purchased, except as provided in
Section 10(b). You must also pay, within the time period specified by the
Company, the amount, if any, of the tax to be withheld for federal, state or
local tax purposes on account of the exercise of the Option Rights. You may pay
the purchase price and any withholding tax in cash (which may include
withholding from your next salary payment), in Company Common Shares or in any
combination of cash and Company Common Shares. If you use Company Common Shares
to pay the purchase price of Shares being purchased: (1) you may do so either by
actually delivering the share certificates or by attesting as to the ownership
of the Common Shares; and (2) you must have owned them at least for six
(6) months.

(b) You may elect to pay the purchase price upon the exercise of the Option
Rights by authorizing a third party to sell all the Shares (or a sufficient
portion of the Shares) acquired upon the exercise of the Options Rights and to
remit to the Company a sufficient portion of the sale proceeds to pay the entire
purchase price and any tax withholding resulting from the exercise.
(c) All elections must be made in writing and be submitted to the Company’s Vice
President, Human Resources. All elections by officers are irrevocable and are
subject to the approval of the Committee.
(d) The Company will withhold a sufficient number of Shares that will provide
for the federal, state and/or local income tax at the rates then applicable for
supplemental wages, unless otherwise requested by you, but in no event less than
the statutory minimums for tax withholding.
(e) For purposes of determining the number of Company Common Shares that are to
be used in payment of the purchase price or to be withheld to provide for the
tax withholding pursuant to Section 10(a), Company Common Shares will be valued
at the closing price of a Common Share on the New York Stock Exchange on the
date you exercise the Option Rights. If the determination of the tax withholding
would require the withholding of a fractional Share, the Company shall withhold
the nearest whole number of Shares needed to pay the tax withholding, rounded
up, and remit to you in cash the amount of the excess after the withholding
taxes have been satisfied. Upon payment of any tax withholding, as described
above, the Option Rights are considered to be exercised as of the date the
Company received your notice of the election to exercise the Option Rights, or,
if applicable, the date of the sale of Shares as described in Section 10(b).
Upon the proper exercise of the Option Rights, the Company will issue and
deliver to you, a certificate or certificates for the Shares purchased. You
agree that, as a holder of the Option Rights, you have no rights as a
shareholder with respect to any

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 27

of the Shares as to which this Option applies unless you effectively exercise
your Option Rights in accordance with the provisions in this Section 10.

11.   Neither the Option Rights nor the LSARs will be exercisable if the
exercise would violate:

  (a)   any applicable state securities law;     (b)   any applicable
registration or other requirements under the Securities Act of 1933, as amended
(the “Securities Act”), the Securities Exchange Act of 1934, as amended, or the
listing requirements of any stock exchange; or     (c)   any similar legal
requirement of any governmental authority regulating the issuance of
            shares by the Company.

In addition, if a Registration Statement for Shares under this Plan is not in
effect or if the Company’s counsel considers it necessary or desirable in order
to avoid possible violation of the Securities Act, the Company may require the
delivery to the Company of your written commitment that: (1) it is your
intention to acquire the Shares for your own account for investment purposes
only and not with a view to resell the Shares other than in a transaction that
does not require registration under the Securities Act; (2) you understand the
Shares may be “restricted securities” as defined in Rule 144 under the
Securities Act; and (3) that any resale, transfer or other disposition of the
Shares will be accomplished only in compliance with Rule 144 under the
Securities Act. In certain circumstances, the Company may place a legend on the
Shares certificates reflecting the commitment described above, and the Company
may refuse to permit transfer of the Share certificates until the Company has
been furnished with evidence satisfactory to it that the transfer would not
result in a violation of the Securities Act or the Rules and Regulations.
12. Notwithstanding any other provision of this Agreement, if you are terminated
from employment by the Company for Cause (as defined in Section 4(f) above), you
will forfeit all of your vested and non-vested Options granted under this
Agreement that are outstanding on the date of your termination.
13. The Committee has conclusive authority, subject to the express provisions of
the Plan as in effect from time to time and this award, to construe this award
and the Plan, and to establish, amend and rescind rules and regulations for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this award in the manner and to the
extent it considers expedient to carry the Plan into effect. The Board of
Directors of the Company may from time to time grant to the Committee further
powers and authority as the Board determines to be necessary or desirable.
Notwithstanding any other provision of this award to the contrary, no amendment,
construction, establishment, rescission or correction of the type referenced
above which is made or adopted following a Change in Control, and which
amendment, construction, establishment or correction adversely affects your
rights, will be effective without your express prior written consent.
14. You must hold any Shares that are distributed to you upon the exercise of
the Option under this Award, at least until you have met your Share ownership
guideline.

 

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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
  Page 28

15. Notwithstanding any other provision of this award, the Option Rights will be
subject to all of the provisions of the Plan in force from time to time.
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate as of the day and year first above written.

          THE LUBRIZOL CORPORATION   EMPLOYEE
 
       
By
       
 
       
 
  J. L. Hambrick Chairman, President and CEO