Exhibit (10)(n)
THE LUBRIZOL COMPANY
EXECUTIVE COUNCIL
LONG TERM INCENTIVE PAY PLAN
(Amended As of 11/10/03)
INTRODUCTION
The Lubrizol Company ("Company") hereby establishes, effective as of
January 1, 2003, The Lubrizol Company Executive Council Long Term Incentive Pay
Plan ("Plan") in order to provide an award for executive officers, which
reflects the pursuit of superior performance, increased customer satisfaction
and enhancement of shareholder value. Awards for participating officers under
the Plan will depend upon corporate operating earnings performance over a
three-year period ("Plan Period), as determined by the Organization and
Compensation Committee of the Board of Directors of the Company ("Committee")
for the Plan Period.
Except as otherwise provided, the Plan is administered by the Committee.
The Committee has the 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 also has any
additional authority as the Board may determine to be necessary or desirable.
1. Definitions. The following terms shall have the indicated meanings for
purposes of the Plan:
(a) "Board" means the Board of Directors of the Company.
(b) "Chief Executive Officer" means the chief executive officer of the
Company.
(c) "Committee" means the Organization and Compensation Committee of the
Board, or other designated committee of the Board, consisting of
persons who are not employees of the Company.
(d) "Company" means The Lubrizol Company, a Company organized under the
laws of the State of Ohio.
(e) "Director" means a member of the Board.
(f) "Individual Award" means an Individual Cash Award or Individual Share
Award.
(g) "Individual Cash Award" means the amount paid (or to be paid) to a
Participant by the Company pursuant to the Plan that relates to the
Individual LTIP Cash Target.
(h) "Individual Share Award" means the amount paid (or to be paid) to a
Participant by the Company pursuant to the plan that relates to the
Individual LTIP Share Target.
(i) "Individual LTIP Cash Target" means 70% of a percentage of the
Participant's Pay that would be paid at the end of the Plan Period if
100% of the Operating Earnings Target were met.
1
(j) "Individual LTIP Share Target" means 30% of a percentage of the
Participant's Pay that would be paid at the end of the Plan Period if
100% of the Operating Earnings Target were met, divided by the closing
price of a Share on the date the Operating Earnings Target is approved
by the Committee.
(k) "Officer" means an employee of the Company who is a member of the
Executive Council of the Company.
(l) "Operating Earnings" means total earnings for the calendar year less
special items other than gains from patent litigation.
(m) "Operating Earnings Target" means the Operating Earnings per Share
growth rate target set by the Committee for the Plan Period.
(n) "Participant" means all Officers who have been selected by the
Committee pursuant to Section III to participate in the Plan, and have
not for any reason become ineligible to participate in the Plan.
(o) "Pay" for any Plan Period will be determined at the time of
calculating the Operating Earnings Target for that Plan Period and
will be the annual guaranteed pay.
(p) "Plan" means The Lubrizol Company Executive Council Long Term
Incentive Pay Plan.
(q) "Plan Period" means each three-year period commencing January 1 and
ending December 31.
(r) "Share" means a share of outstanding common stock of The Lubrizol
Corporation.
2. Construction. Where necessary or appropriate to the meaning of a word, the
singular is deemed to include the plural, the plural to include the singular,
the masculine to include the feminine, and the feminine to include the
masculine.
3. Participation. All Officers at the beginning of each Plan Period will
participate in the Plan. The Committee may also determine which Officers hired
during a Plan Period will participate in the Plan for that Plan Period. The
Committee's selection of Participants will be made after considering
recommendations presented to it by the Chief Executive Officer.
4. Determination of Operating Earnings Target. Prior to the beginning of each
Plan Period, the Committee will, after consideration of the recommendations of
the Chief Executive Officer, establish, for each Plan Period, the Operating
Earnings Target for that Plan Period.
5. Determination of Individual LTIP Cash Targets and Individual LTIP Share
Targets. Prior to the beginning of the each Plan Period, the Committee will,
after consideration of the recommendations of the Chief Executive Officer,
establish for each Participant an Individual LTIP Cash Target and an Individual
LTIP Share Target, as well as a range of potential payouts depending on actual
Operating Earnings per Share growth for the Plan Period. The Operating Earnings
Target, Individual LTIP Cash Target, Individual LTIP Share Target and range of
potential payouts will be communicated to each Participant promptly after their
establishment by the Committee.
2
Individual LTIP Cash Targets and Individual LTIP Share Targets may be
increased or decreased at any time prior to the determination of the Individual
Award for any Participant at the sole discretion of the Committee.
6. Determination of Individual Awards. In February following the close of the
Plan Period each Participant's Individual Cash Award and Individual Share Award
for a Plan Period will be calculated by multiplying Pay for that Plan Period by
a percentage of the Individual LTIP Cash Target and Individual LTIP Share
Target, respectively, determined in accordance with range of potential payouts
established by the Committee as described in Section 5.
Notwithstanding the foregoing, the Committee in its sole and unrestricted
discretion may increase or decrease the amount of any Individual Award
determined under this Section 6. The adjustment of any Individual Award will not
cause an automatic adjustment of another Individual Award.
No Participant has any vested interest in, or is entitled to, any
Individual Award unless and until payment is authorized by the Committee.
7. Time and Method of Payment of Individual Awards. If the Committee
determines that a Participant is entitled to an Individual Award, the Company
will pay the Individual Cash Award to the Participant in cash as soon after the
close of the Plan Period as may be administratively feasible, and will pay the
Individual Share Award to the Participant in cash or, if an applicable
shareholder approved stock plan is available and in the Committee's sole
discretion, in Shares as soon after the close of the Plan Period as may be
administratively feasible.
If the Individual Share Award is paid in cash, the amount to be paid shall
be determined by multiplying the Individual Share Award by the closing price of
a Share on the date the Individual Share Award is approved by the Committee, as
provided in Section 6. If the Individual Share Award is paid in Shares, the
number of Shares paid to the Participant will be equal to the Individual Share
Award.
8. Retirement, Death and Termination. If the Participant retires, separates
from service or dies prior to the receipt of any Individual Award, the
Participant or his beneficiary will receive a pro-rata Individual Award upon the
end of the Plan Period based on the calculation in Section 6 and the number of
months during the Plan Period prior to the Participant's retirement, separation
from service or death.
9. Designation of Beneficiary. A Participant may at any time specify in
writing a beneficiary to receive the Participant's Individual Award if the
Participant dies before the receipt of an Individual Award. If the Company does
not have a beneficiary election on file at the time of the Participant's death,
the Individual Award will be paid to his spouse or if there is no spouse living
at the time of payment, his children who are living at the time of payment, or
if there are no children who are living at the time of payment, then to his
estate.
10. Effect of Change in Control. In the event a Change in Control of the
Company (as defined in Section 11) 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 Period, the Committee will calculate such Individual Awards
as soon as practicable after the Change in Control. If 12 months have elapsed
for any Plan Period, the Individual Awards for that Plan Period will determined
based on the cumulative performance results as of the most recent year end and
as if the end of the full Plan Period had occurred concurrently with the date of
the Change of Control, but pro-rated for the number of months that have actually
elapsed in the Plan Period as of the date of the Change of Control. Individual
Awards shall be calculated in accordance with Section 6.
3
Payment of such Individual Awards will be made within 30 days of the date on
which the determination is made to compute the payments according to the terms
of this Section 10.
11. Change of Control Defined. For all purposes of the Plan, a "Change in
Control of the Company" will have occurred if any of the following events occur:
(a) The Company is merged, consolidated or reorganized into or with
another Company 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
surviving Company or person entitled to vote, immediately after such
transaction, is held in the aggregate by the holders of Voting Stock
(as hereinafter defined) of the Company immediately prior to such
transaction;
(b) The Company sells all or substantially all of its assets to any other
Company or other legal person, and less than a majority of the
combined voting power of the then-outstanding securities of such
Company or person, immediately after such sale, is 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-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 Company ("Voting
Stock");
(d) The Company files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form
or report or item therein) that a change in control of the Company has
or may have occurred or will or may occur in the future pursuant to
any then-existing contract or transaction; or
(e) If during any period of two consecutive years, individuals who, at the
beginning of any such period constitute the Directors of the Company,
cease for any reason to constitute at least a majority thereof, unless
the election, or the nomination for election by the Company's
stockholders, of each Director of the Company first elected during
such period was approved by a vote of at least two-thirds of the
Directors of the Company then still in office who were Directors of
the Company 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
Company, (ii) an entity in which the Company directly or indirectly beneficially
owns 50% or more of the voting securities 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.
4
12. Changes in Capital Structure. If there is a stock split, reverse stock
split or stock dividend, the Individual LTIP Share Target specified in Section
5, above will be increased or decreased in direct proportion to the increase or
decrease in the number of Shares by reason of the stock split, reverse stock
split or stock dividend.
13. Limitations on Share Distributions. Shares will not be distributed under
this Plan 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 the Participant deliver to the Company a statement in writing 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 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.
14. Taxes. If Shares are distributable pursuant to Section 7, the Company will
withhold a sufficient number of Shares to cover the Participant's withholding
tax obligation.
15. Plan Administrator. The Committee is the Plan Administrator.
16. Duties of Plan Administrator.
(a) The Committee will administer the Plan in accordance with its terms
and has all powers necessary to carry out the provisions of the Plan
including, but not limited to, the following:
(1) Determination of Officers who are eligible for Plan
participation;
(2) Determination of Operating Earnings Targets;
(3) Determination of Individual LTIP Cash Targets;
(4) Determination of Individual LTIP Share Targets; and
(5) Determination of Individual Awards.
(b) The Committee will interpret the Plan and resolve all questions
arising in the administration, interpretation, and application of the
Plan. Any determination of the Committee will be conclusive and
binding on all persons.
5
(c) The Committee will 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.
17. Unfunded Plan. The Company is under no obligation to segregate or reserve
any funds or other assets for purposes relating to this Plan and no Participant
has any rights whatsoever in or with respect to any funds or assets of the
Company.
18. Non-Alienation. Since a Participant does not have any rights to any
Individual Award under the Plan until the time that payment of the Individual
Award is made, no anticipated payment of any Individual Award will 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 anticipated Individual
Award, or if he has filed or will be filing for bankruptcy, the Committee in its
discretion may cause the amounts as would otherwise become payable to the
Participant at various times to be paid to or applied for the benefit of such
one or more of the following as the Committee in its sole and unrestricted
judgment and discretion may designate: the Participant, his spouse, child or
children, or other dependents.
19. Actions or Decisions with Respect to the Plan. Any decision or action of
the Company, 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
sole and unrestricted judgment and discretion, and such decision or action shall
be conclusive and binding upon all Participants.
20. No Employment Rights. Nothing in this Plan will be construed as a
commitment or agreement upon the part of any Participant to continue his
employment with the Company, and nothing in this Plan will be construed as a
commitment on the part of the Company to continue the employment or rate of
compensation of any Participant for any period.
21. Amendment of the Plan. The Company reserves the right, to be exercised by
instruction from the Committee, to amend or terminate this Plan at any time.
6