SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-2918
ASHLAND OIL, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0122250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Ashland Drive, Russell, Kentucky 41169
(Address of principal executive offices) (Zip Code)
P.O. Box 391, Ashland, Kentucky 41114
(Mailing Address) (Zip Code)
Registrant's telephone number, including area code (606) 329-3333
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange on
Title of each class which registered
------------------- --------------------
Common Stock, par value $1.00 New York Stock Exchange
per share and Chicago Stock Exchange
Rights to Purchase Cumulative New York Stock Exchange
Preferred Stock, and Chicago Stock Exchange
Series of 1987
$3.125 Cumulative Convertible New York Stock Exchange
Preferred Stock
6 3/4% Convertible Subordinated New York Stock Exchange
Debentures, due 2014
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 ]
At October 31, 1994, the aggregate market value of the voting
stock held by non-affiliates of the Registrant was approximately
$1,865,040,000 (which amount does not include $483,909,000 held by
nominees of Society National Bank as Trustee for certain of
Registrant's employee benefit plans) based on the New York Stock
Exchange closing price on October 31, 1994.
At October 31, 1994, there were 60,656,088 shares of
Registrant's Common Stock outstanding. One-half of one Right to
purchase one-tenth of a share of Cumulative Preferred Stock, Series
of 1987, accompanies each outstanding share of Registrant's Common
Stock.
Documents Incorporated by Reference
Portions of Registrant's Annual Report to Shareholders for the
fiscal year ended September 30, 1994 are incorporated by reference
into Parts I and II.
Portions of Registrant's definitive Proxy Statement for its
January 26, 1995 Annual Meeting of Shareholders are incorporated by
reference into Part III.
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . 1
Corporate Developments . . . . . . . . . . . . 1
Petroleum . . . . . . . . . . . . . . . . . . . 2
SuperAmerica . . . . . . . . . . . . . . . . . 6
Valvoline . . . . . . . . . . . . . . . . . . . 6
Chemical . . . . . . . . . . . . . . . . . . . 8
Construction . . . . . . . . . . . . . . . . . 9
Exploration . . . . . . . . . . . . . . . . . . 10
Coal . . . . . . . . . . . . . . . . . . . . . 13
Other Business . . . . . . . . . . . . . . . . 16
Miscellaneous . . . . . . . . . . . . . . . . . 16
Item 2. Properties . . . . . . . . . . . . . . . . . . 19
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 19
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . . 20
Item X. Executive Officers of Ashland . . . . . . . . . 20
PART II
Item 5. Market for Registrant's Common Stock and Related
Security Holder Matters . . . . . . . . . . . 21
Item 6. Selected Financial Data . . . . . . . . . . . . 22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . 22
Item 8. Financial Statements and Supplementary Data . . 22
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . 22
PART III
Item 10. Directors and Executive Officers of the
Registrant. . . . . . . . . . . . . . . . . . . 22
Item 11. Executive Compensation . . . . . . . . . . . . 22
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . 22
Item 13. Certain Relationships and Related Transactions 22
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . 22
<PAGE>
PART I
ITEM 1. BUSINESS
Ashland Oil, Inc. is a Kentucky corporation, organized on
October 22, 1936, with its principal executive offices located at
1000 Ashland Drive, Russell, Kentucky 41169 (Mailing Address: P.O.
Box 391, Ashland, Kentucky 41114) (Telephone: (606) 329-3333). The
terms "Ashland" and the "Company" as used herein include Ashland
Oil, Inc. and its consolidated subsidiaries, except where the
context indicates otherwise.
Ashland's businesses are grouped into six industry segments:
Petroleum, SuperAmerica, Valvoline, Chemical, Construction, and
Exploration. Financial information about these segments for the
five fiscal years ended September 30, 1994, is set forth on Pages
58 and 59 of Ashland's Annual Report to Shareholders for the fiscal
year ended September 30, 1994 ("Annual Report"). In addition,
Ashland is also involved in the coal industry through its 50%
ownership of Arch Mineral Corporation ("Arch") and its 39%
ownership of Ashland Coal, Inc. ("Ashland Coal"). Summarized
financial information for these entities is contained in Note D of
Notes to Consolidated Financial Statements in Ashland's Annual
Report.
Ashland Petroleum is one of the nation's largest independent
petroleum refiners and a leading supplier of petroleum products to
the transportation and commercial fleet industries, other
industrial customers and independent marketers, and to SuperAmerica
for retail distribution. In addition, Ashland Petroleum gathers
and transports crude oil and petroleum products and distributes
petroleum products under the Ashland-R- brand name. SuperAmerica
operates combination gasoline and merchandise stores under the
SuperAmerica-R- and Rich-R- brand names. Valvoline is a marketer of
branded, packaged motor oil and automotive chemicals, filters, rust
preventives and coolants. In addition, Valvoline is engaged in the
"fast oil change" business through outlets operating under the
Valvoline Instant Oil Change-R- and Valvoline Rapid Oil Change-R-
names.
Ashland Chemical distributes industrial chemicals, solvents,
thermoplastics and resins, and fiberglass materials, and
manufactures a wide variety of specialty chemicals and certain
petrochemicals. Construction performs contract construction work,
including highway paving and repair, excavation and grading, and
bridge and sewer construction and produces asphaltic and ready-mix
concrete, crushed stone and other aggregate, concrete block and
certain specialized construction materials in the southern United
States. Exploration explores for, develops, produces and sells
crude oil and natural gas principally in the eastern and Gulf Coast
areas of the United States, explores for and produces crude oil in
Nigeria for export and explores for oil and gas in other
international areas.
Arch, one of the largest producers of low sulfur coal in the
eastern United States, produces steam and metallurgical coal for
sale in the domestic and international markets. Arch's production
comes from surface and deep mines in Illinois, Kentucky, West
Virginia and Wyoming. Ashland Coal produces low-sulfur, bituminous
coal in central Appalachia for sale to domestic and foreign
electric utility and industrial customers. Both Arch and Ashland
Coal market coal mined by independent producers.
At September 30, 1994, Ashland and its consolidated
subsidiaries had approximately 31,600 employees (excluding contract
employees).
CORPORATE DEVELOPMENTS
Ashland recently announced that it has signed an agreement with
Saarbergwerke AG ("Saarberg") granting Ashland the option to
purchase all of the 150 shares of Ashland Coal Class B
Preferred Stock held by Saarberg, and granting Saarberg the option
to require Ashland to purchase such stock. These options are
exercisable during certain periods in February, 1995, and are
subject to the satisfaction of certain conditions, including
appropriate government approvals. The Preferred Stock represents
approximately 15% of the voting power of Ashland Coal and if either
option is exercised, Ashland will own approximately 54% of the
voting stock of Ashland Coal. Ashland currently has no plans to
purchase additional stock of Ashland Coal, other than the Class B
Preferred Stock.
1
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On November 3, 1994, the Board of Directors of Ashland voted,
subject to shareholder approval at the 1995 Annual Meeting of
Shareholders, to amend the Company's Second Restated Articles of
Incorporation to change the name of the Company to Ashland Inc.
This change of name is believed by the Board of Directors to be
desirable and in the best interests of Ashland in order to identify
Ashland in a manner that more clearly reflects its unified network
of refining, energy and chemical businesses and yet retains the
historical name of Ashland.
On November 3, 1994, Ashland's Board of Directors approved the
filing with the Securities and Exchange Commission (the "SEC") of a
universal shelf registration statement to allow for offerings from
time to time of up to an aggregate of $600 million in debt and/or
equity securities. It is anticipated this filing will be made in
late December 1994. Any offering of these securities will be made
only by means of a written prospectus.
In November 1994, Ashland Chemical signed a letter of intent
with Aristech Chemical Corporation to acquire Aristech's
unsaturated polyester resins, polyester distribution and maleic
anhydride businesses. The transaction is subject to a number of
conditions, including the execution and delivery of a definitive
purchase agreement and appropriate governmental approvals.
In February 1994, Ashland completed the sale of APAC-Arizona,
Inc., its Arizona highway construction and construction materials
business. The transaction completed Ashland's previously announced
asset divestiture program.
In November 1993, Ashland filed with the SEC a shelf
registration statement to allow for offerings from time to time of
up to an aggregate of $250 million in medium-term notes. Ashland
had previously filed shelf registration statements for $750 million
in medium-term notes. As of November 15, 1994, Ashland had sold
$826 million in medium-term notes. The remaining $174 million in
notes may be sold from time to time as separate series of senior
debt in amounts and at prices and terms to be determined at the
time of sale. The net proceeds of the offerings will be used to
refinance outstanding debt and for other general corporate
purposes.
PETROLEUM
Ashland Petroleum, a division of Ashland, has responsibility
for the operation of Ashland's refineries, the supply and
transportation of Ashland's crude oil requirements, the
transportation and storage of refined petroleum products and the
marketing of a portion of the refined petroleum products.
PETROLEUM REFINING
Ashland Petroleum owns and operates three refineries located in
Catlettsburg, Kentucky; St. Paul Park, Minnesota; and Canton, Ohio.
The approximate capacities of these refineries at September 30,
1994, were as follows:
Crude Oil Capacity
Location of Refinery (In thousands of barrels
per calendar day)*
-------------------- ----------------------------
Catlettsburg, Kentucky . . . . . 213.4
St. Paul Park, Minnesota . . . . 67.1
Canton, Ohio . . . . . . . . . . 66.0
-----
Total . . . . . . . . 346.5
=====
------------
*The term "barrels" when used herein means barrels of 42 gallons
each.
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<PAGE>
Ashland Petroleum's refineries are equipped with efficient
facilities, including crude oil atmospheric and vacuum
distillation, fluid catalytic cracking, catalytic reforming,
desulfurization and sulfur recovery units. Each of these refineries
has the capability to process a wide variety of crude oils,
including low quality/low price crude oils (i.e., high in residuum
and sulfur contents), and to produce normal refinery products,
including asphalt. With the assistance of a 3,000 barrel-per-day MTBE
unit and a partial ownership in an ethanol plant, Ashland Petroleum is
also able to cost effectively produce reformulated gasoline. In addition,
the Catlettsburg refinery is equipped to manufacture lubricating
oils and a wide range of petrochemicals.
The table below shows the average daily number of barrels of
crude oil and other feedstocks processed and the refined products
produced by Ashland Petroleum for the three fiscal years ended
September 30, 1994:
Years Ended September 30
------------------------
1994 1993 1992
---- ---- ----
Total Input (In thousands of barrels per day)
---------------------------------------------
Crude Oil 329.2 326.0 327.1
Other Feedstocks 12.6 13.7 14.2
Refinery Products Produced (In thousands
of barrels per day)
-----------------------------------------
Gasoline 168.0 166.8 169.9
Distillates and Kerosene 90.6 88.6 84.2
Asphalt 29.3 27.4 25.5
Jet and Turbine Fuel 10.9 12.2 14.0
Heavy Fuel Oils 7.7 9.0 10.6
Lubricants 7.6 7.6 7.1
Other 16.8 17.0 20.1
CRUDE OIL SUPPLY
The crude oil processed in Ashland Petroleum's refineries is
obtained from negotiated lease, contract and spot purchases or
exchanges. During fiscal 1994, Ashland Petroleum's negotiated
lease, contract and spot purchases of United States crude oil for
refinery input (including 111,100 barrels per day acquired through
Ashland's Scurlock Permian subsidiary) averaged 115,200 barrels per
day. Purchases from Canada averaged 57,500 barrels per day during
fiscal 1994. The balance of Ashland Petroleum's crude oil
requirements during fiscal 1994 were met largely through purchases
from various foreign national oil companies and traders. Purchases
of foreign crude oil (including Canada) represented 65% of Ashland
Petroleum's crude oil requirements during fiscal 1994 compared to
58% during fiscal 1993.
Ashland's share of Nigerian production will either be sold,
traded or used to help satisfy part of Ashland Petroleum's fiscal
1995 crude oil requirements, depending upon world crude oil prices
and other economic factors. For further information concerning
Nigerian production, see "Exploration-International Operations."
The balance of Ashland Petroleum's crude oil requirements in fiscal
1995 is expected to be met through contract and spot purchases from
United States independent producers and from various foreign
national oil companies and traders as worldwide availability and
prices dictate.
For further information concerning crude oil prices and
imports, see "Miscellaneous-Governmental Regulation and Action-
General."
3
<PAGE>
MARKETING OF PETROLEUM AND OTHER PRODUCTS
Ashland Petroleum's principal marketing area for gasoline and
fuel oils includes the Ohio River Valley, the upper Midwest, the
upper Great Plains, the East Coast, and a portion of the
southeastern United States. In addition to gasoline and fuel oils,
Ashland also manufactures and markets liquified petroleum gas,
asphalt and asphaltic products, pitch, base lube stocks, kerosene,
petrochemicals, jet fuels, and residual fuels.
Ashland Petroleum's production of gasoline, kerosene, and light
fuel oils is sold at wholesale through wholesale channels of
distribution, company owned and exchange terminals, Ashland branded
bulk plants and at retail through SuperAmerica. The majority of
these products are sold at wholesale through approximately 90
terminal areas in 23 states. Gasoline is sold at wholesale
primarily to independent marketers, jobbers, and chain retailers
who resell through several thousand retail outlets primarily under
their own names, but also to a limited extent under the Ashland-R-
brand name. Gasoline, kerosene, distillates, and aviation products
are also sold to utilities, railroads, river towing companies,
commercial fleet operators, aviation and airline companies,
governmental agencies and other end users.
Ashland Petroleum also markets petroleum products under the
Ashland-R- brand name through a network of 112 (99 owned and 13
leased) bulk plants located in six states. These plants maintain
inventories of gasoline, distillate, kerosene, motor oils, greases
and other related products. Approximately 122 commission agents
deliver products to Ashland customers from these plants, as well as
from terminals or refineries operated by Ashland. Typical customers
include reseller retail outlets, lessee-dealer retail outlets and
numerous consumer, commercial and farm accounts. Ashland supplies
100 (88 owned and 12 leased) Ashland-R- brand lessee-dealers and
639 reseller outlets. Resellers generally own their locations and
Ashland supplies pumps and signs for their use. Lessee-dealer
outlets are owned or leased by Ashland and leased or subleased to
the dealer. For further information on Ashland's retail marketing
of petroleum products, see "SuperAmerica" and "Valvoline."
In addition to providing crude oil for its own refineries,
Ashland Petroleum, through its Scurlock Permian subsidiary, is
actively engaged in purchasing, selling and trading crude oil in 15
states, principally at Midland, Texas; Cushing, Oklahoma; and St.
James, Louisiana, three of the major distribution points for United
States crude oil.
Ashland Petroleum also produces and markets asphalt cements,
polymerized asphalt, asphalt emulsions, and industrial asphalts in
the United States. Ashland Petroleum markets these products from 24
locations to 22 southern and midwestern states. Additionally,
Ashland Petroleum manufactures petroleum pitch, primarily used in
the graphite electrode, clay target and refractory industries.
Ashland Petroleum produces residual fuels at its three
refineries and markets and sells these products in nine states,
primarily to industrial customers as boiler fuel.
The table below shows the average daily consolidated sales of
petroleum products and crude oil by Ashland Petroleum,
SuperAmerica, Valvoline and Exploration for the three fiscal years
ended September 30:
Years Ended September 30
----------------------------
(In thousands of barrels per day)
1994 1993 1992
----- ----- ----
Gasoline 181.9 182.1 186.5
Crude Oil 142.1 150.3 152.3
Distillates and Kerosene 97.0 93.0 87.0
Asphalt 34.3 31.4 30.5
Jet and Turbine Fuel 10.9 11.2 13.6
Heavy Fuel Oils 8.4 9.7 11.1
Lubricants 14.7 15.6 15.8
Other 23.3 21.3 23.5
Sales of gasoline (excluding excise taxes) represented
approximately 18%, 20% and 21% of Ashland's consolidated sales and
operating revenues (excluding excise taxes) in fiscal years 1994,
1993 and 1992, respectively. Sales of crude oil represented
approximately 8%, 10% and 11% of Ashland's consolidated sales and
operating revenues (excluding excise taxes) in fiscal years 1994,
1993 and 1992, respectively.
4
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TRANSPORTATION
Ashland owns, leases, or has an ownership interest in 5,759
miles of active pipeline in 13 states. This network transports
crude oil and refined products to and from terminals, refineries
and other pipelines. This includes 2,256 miles of crude oil
gathering lines, 2,987 miles of crude oil trunk lines, 475 miles of
refined product lines and 41 miles of natural gas liquid lines.
Ashland has an 18.6% stock ownership interest in LOOP INC.
("LOOP"), the only U.S. deep water port facility capable of
receiving crude oil from very large crude carriers and which has a
capacity to off-load 1,000,000 to 1,200,000 barrels per day.
Ashland also has a 21.4% stock ownership interest in LOCAP INC.
("LOCAP") which has a capacity of 1,200,000 barrels per day and a
21.6% undivided ownership interest in the Capline Pipeline System
which has a nominal capacity of 1,175,000 barrels per day. LOCAP
owns a pipeline connecting LOOP and the Capline System that
originates at St. James, Louisiana. These port and pipeline systems
provide Ashland Petroleum with access to common carrier
transportation from the Louisiana Gulf Coast to Patoka, Illinois.
At Patoka, the Capline System connects with other common carrier
pipelines owned or leased by Ashland which provide transportation
to Ashland Petroleum's refineries in Kentucky and Ohio. For
summarized financial statements and information with respect to
advances and transportation payments made by Ashland to LOOP and
LOCAP, see Notes D and G of Notes to Consolidated Financial
Statements in Ashland's Annual Report.
In addition, Ashland owns a 5% undivided ownership interest in
the Rancho Pipe Line System located in Texas and a 33% stock
interest in the Minnesota Pipe Line Company, which owns a crude oil
pipeline in Minnesota. Minnesota Pipe Line Company provides
Ashland Petroleum with access to 270,000 barrels per day of crude
oil common carrier transportation from Clearbrook, Minnesota to
Cottage Grove, Minnesota, which is in the vicinity of Ashland
Petroleum's St. Paul Park, Minnesota refinery.
Ashland Petroleum owns or has an interest in 38 terminal
facilities from which it sells a wide range of petroleum products.
These facilities are supplied by a combination of river barge,
pipeline, truck and rail. Ashland Petroleum also owns or operates
a number of other terminals that are used in connection with the
transportation of petroleum products or crude oil.
Ashland Petroleum's river transportation operations include 8
towboats (6 owned, 2 leased) and 171 barges that transport crude
oil and refined products on the Ohio, Mississippi and Illinois
rivers, their tributaries, and the Intracoastal Waterway.
Ashland Petroleum leases on a long-term basis two 80,000 ton
deadweight tankers which are normally used for third party delivery
of foreign crude oil to the United States. Additional requirements
are met by chartering tankers for individual voyages.
Ashland Petroleum leases rail cars in various sizes and
capacities for movement of petroleum products and chemicals.
Ashland Petroleum also owns a large number of tractor-trailers,
additional trailers, and a large fleet of tank trucks and general
service trucks.
OTHER MATTERS
For information on federal, state and local statutes and
regulations relating to releases into the environment or protection
of the environment, see "Miscellaneous-Governmental Regulation and
Action-Environmental Protection."
For information relating to certain environmental litigation,
see "Legal Proceedings-Environmental Proceedings."
There are traditional seasonal variations in Ashland
Petroleum's sales and operating results. The seasonality that
Ashland Petroleum experiences is due primarily to increased demand
for gasoline during the summer driving season and increased demand
for asphalt from the road paving industry during the last six
months of Ashland's fiscal year. The refining industry experiences
a similar seasonality. For Ashland's fiscal years 1992 to 1994,
refining margins for Ashland Petroleum have averaged $3.86 per
barrel for the six-month periods ended March 31 and $4.12 per
barrel for the six-month periods ended September 30.
5
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SUPERAMERICA
SuperAmerica Group, a division of Ashland, conducts retail
petroleum marketing operations. SuperAmerica has retail outlets in
11 states in the Ohio Valley and Upper Midwest under the
SuperAmerica-R- and Rich-R- names. See also "Petroleum-Marketing
of Petroleum and Other Products."
SuperAmerica-R- Stores - SuperAmerica operates 598 (538 owned
and 60 leased) combination gasoline and merchandise stores in 11
states under the SuperAmerica-R- name. These stores are designed
for high volume sales. SuperAmerica stores offer consumers
gasoline, diesel fuel at select locations and a broad mix of other
goods and services such as fresh-baked goods, automated teller
machines, video rentals, automotive accessories and a line of
private-label items. SuperAmerica is also adding to its one-stop
shopping concept by partnering with fast food chains including Taco
Bell and Subway. During fiscal 1994, 40% of the revenues of the
SuperAmerica stores were derived from the sale of merchandise and
60% of such revenues were derived from the sale of gasoline and
diesel fuel.
The SuperAmerica-R- trademark has been registered since 1963.
Other registered trademarks and servicemarks owned by Ashland and
used by SuperAmerica include SuperMom's-R-, The Fresh Choice-TM-
and SuperSoda-R-, used in connection with food products; Injector
Guard-R-, used in connection with gasoline additives; The Express
Pump-R-, used in conjunction with gasoline dispensing equipment;
SuperCare-R-, used in connection with pharmacy services, personal
care and beauty products; and Yours-R- and Sincerely Yours-R-, used
in connection with cigarettes.
SuperAmerica operates warehouse distribution centers in
Bloomington, Minnesota, and Ashland, Kentucky, that distribute
certain merchandise to the stores. SuperAmerica also operates a
commissary in Russell, Kentucky, that produces fresh sandwiches,
salads and other food products for distribution to stores in the
Ohio Valley. A wholly-owned subsidiary of SuperAmerica also
operates a large bakery and commissary in St. Paul Park, Minnesota,
under the name SuperMom's-R-.
In addition to the 598 owned and leased SuperAmerica stores,
SuperAmerica has 28 jobber/franchisees who operate 37 stores in 3
states in the upper Midwest.
Rich-R- Oil - Rich Oil, a division of Ashland, operates 95 (76
owned and 19 leased) Rich-R- retail gasoline outlets in Kentucky,
Ohio and West Virginia under the Rich-R- name. The Rich Oil outlets
generate lower gasoline volumes than the average SuperAmerica
store, primarily because the Rich Oil outlets are generally smaller
and located in less-densely-populated areas.
OTHER MATTERS
Retail marketing "divorcement" legislation and wholesale and
retail pricing regulations have been adopted in some states. They
are proposed from time to time in other states and at the federal
level. If such legislation were adopted at the federal level or in
the states where SuperAmerica sells petroleum products, it could
have a substantial adverse impact.
For information relating to the regulation of underground
storage tanks containing petroleum products, see "Miscellaneous-
Governmental Regulation and Action-Environmental Protection."
VALVOLINE
The Valvoline Company, a division of Ashland, is a marketer of
automotive and industrial oils, automotive chemicals, and
automotive and environmental services, with sales in more than 140
countries. See also "Petroleum-Marketing of Petroleum and Other
Products." Acquired by Ashland in 1950, Valvoline has diversified
its operations in recent years and is comprised of the following
business units:
Valvoline Branded - Branded is Valvoline's largest business
unit, representing 47% of Valvoline's annual sales dollars.
Branded markets motor oils, greases, gear oils, automatic
transmission fluids, antifreeze and oil and air filters primarily
to the U.S. private passenger car and light truck market through a
network of distributors, retailers and direct market operations.
Valvoline is also one of the leading producers of packaged private
label
6
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motor oils in the United States. The Branded Commercial Fleet
Sales division markets heavy-duty lubricants to the railroad,
trucking, mining and marine industries.
Although competition is severe, Branded plans to improve market
share through a customer-focused strategy, involvement in
motorsports and a marketing campaign stressing high performance,
quality and value.
Branded plants are supplied with base stocks primarily from
Ashland's 8,500 barrels-per-day lube oil refinery in Catlettsburg,
Kentucky.
Ecogard, Inc. - As of September 30, 1994, Ecogard, Inc. through
its First Recovery division, was collecting used motor oil at an
annual rate of 35 million gallons from a network of automotive
aftermarket retailers and service businesses in 41 states.
Utilizing a "total fluid management" approach, First Recovery
provides an environmental service to Branded customers, collecting
used antifreeze and oil filters as well. In fiscal 1995, First
Recovery will transport most of its collected used oil volume to a
new industrial fuel processing plant owned and operated by Texaco
Inc. near New Orleans, Louisiana.
Valvoline Instant Oil Change ("VIOC") - VIOC, a division of
Ashland, is one of the largest companies in the expanding U.S.
"fast oil change" service business, providing Valvoline with a
significant share of the installed segment of the passenger car and
light truck motor oil market. Incorporation of the Valvoline name
and trademark in VIOC's name, store signage and advertising
provides an ongoing Valvoline presence in the communities in which
VIOC stores are located. As of September 30, 1994, 347 company-
owned service centers were open in 13 states: Georgia, Illinois,
Indiana, Kentucky, Michigan, Minnesota, Mississippi, Missouri, New
York, Ohio, Pennsylvania, Tennessee and Wisconsin. Stores in
Minnesota operate as Valvoline Rapid Oil Change-R-.
Valvoline Instant Oil Change Franchising, Inc. - Valvoline
Instant Oil Change Franchising, Inc., a subsidiary of Ashland,
began selling franchises in 1988 to accelerate Valvoline's growth
in the fast oil-change business. As of September 30, 1994, 137
franchised units (75 of which are in operation) had been sold in 15
states: California, Connecticut, Delaware, Florida, Georgia,
Kentucky, Maryland, Massachusetts, Minnesota, Nebraska, New Mexico,
North Carolina, Pennsylvania, Rhode Island and Texas. A franchise
has also been sold in Puerto Rico. All company-owned and
franchised centers collect used motor oil from do-it-yourselfers as
an environmental service.
Car Care Products Group - In late 1994, Valvoline established a
new Car Care Products Group to manage its growing portfolio of
consumer automotive chemical brands. Valvoline acquired the Zerex-
R- antifreeze brand and a long-term antifreeze feedstock supply
agreement from the BASF Corp. in October 1994. Zerex joined
Pyroil, NAPA and Valvoline's other various private label brands of
automotive chemicals to form the Car Care Products Group. Pyroil
is a major U.S. packager and marketer of refrigerants to the
automotive aftermarket and is increasing its sales of consumer and
professional automotive chemicals. Although refrigerants
containing chlorofluorocarbons will be phased out of production by
the end of 1995, Pyroil is actively supporting an industry
transition to ozone-safe refrigerants. An exclusive agreement
provides Pyroil with an assured supply of new-generation DuPont
SUVA-R- refrigerants.
Valvoline International, Inc. - Valvoline International, Inc.,
a subsidiary of Ashland, markets Valvoline branded products and
TECTYL-R- Rust Preventives worldwide and operates company-owned
affiliates in Australia, Canada, Denmark, Great Britain, the
Netherlands, Sweden, Germany, Switzerland, Austria, France, Italy
and Belgium. Licensees and distributors market products in other
parts of Europe, Central and South America, the Far East, the
Middle East and in certain African countries. Packaging and
blending plants and distribution centers in Australia, Canada,
Denmark, Sweden, Great Britain, the Netherlands and the United
States supply international customers. Through a joint-venture
with The Western India Group, Valvoline will construct a blending
and packaging plant in India in 1995 to supply that market.
Lube Refinery Sales - Valvoline's Lube Refinery Sales division
sells excess base stock production from the Catlettsburg, Kentucky
lube refinery to other U.S. motor oil and industrial oil marketers
as well as to fuel and lube additive companies in the United
States. It also markets Slack Wax, a lube byproduct, through a
network of re-sellers and to other refiners for further processing.
The division is also engaged in private label blending and
packaging for other North American refiners. See "Petroleum-
Petroleum Refining."
The Valvoline-R- trademark was federally registered in 1873 and
is the oldest trademark for a lubricating oil in the United States.
Other important trademarks include Valvoline Instant Oil Change-R-,
TECTYL-R-, Pyroil-R- and Zerex-R-.
7
<PAGE>
CHEMICAL
Ashland Chemical Company, a division of Ashland, is engaged in
the manufacture, distribution and sale of a wide variety of
chemical and plastic products. Ashland Chemical owns or leases 42
manufacturing facilities in 10 states and 17 foreign countries and
owns or leases 102 distribution facilities in 34 states and 12
foreign countries.
Ashland Chemical is comprised of the following operations:
DISTRIBUTION
Industrial Chemicals & Solvents ("IC&S") Division - IC&S
markets chemical products and solvents to industrial chemical users
in major markets through distribution centers in the United States,
Canada and Puerto Rico. The division distributes approximately
3,500 chemical products made by many of the nation's leading
chemical manufacturers, a growing number of off-shore producers,
plus petrochemicals from Ashland's refineries. The division
specializes in supplying mixed truckloads and less-than-truckload
quantities to the paint and coatings, industrial and institutional
compounding, automotive, appliance, paper and many other
industries. In addition, the division distributes cosmetic and
pharmaceutical specialty chemicals and food-grade additives and
ingredients. The division also offers customers environmental
services, working in cooperation with major chemical waste disposal
companies.
FRP Supply Division - This division markets to customers in
the reinforced plastics and cultured marble industries mixed
truckload and less-than-truckload quantities of polyester resins,
fiberglass and other specialty reinforcements, catalyst and allied
products from more than 50 distribution locations across the United
States and Mexico.
General Polymers Division - This division markets a broad range
of thermoplastic injection molding and extrusion materials to
processors in the plastics industry through distribution locations
in the United States, Canada, Mexico and Puerto Rico. The division
also provides plastic material transfer and packaging services. The
division represents 22 major plastics producers, with emphasis on
serving customers with mixed truckload and less-than-truckload
quantities of packaged thermoplastics. The basic resins business
unit markets packaged and bulk thermoplastic resins to a variety of
processors in North America.
Ashland Plastics International - This business unit markets a
broad range of thermoplastics to processors outside North America.
Ashland Plastics has distribution centers located in Australia,
Belgium, France, Holland, Ireland, Italy, New Zealand, and the
United Kingdom and exports to Latin America from the United States.
SPECIALTY CHEMICALS
Composite Polymers Division - This division manufactures and
sells a broad range of chemical-resistant, fire-retardant and
general-purpose grades of unsaturated polyester and vinyl ester
resins for the reinforced plastics industry. Key markets include
the automotive, construction and marine industries. The division
has manufacturing plants in Los Angeles, California; Bartow,
Florida; Ashtabula, Ohio; and Philadelphia, Pennsylvania.
Specialty Polymers & Adhesives Division - This division
manufactures and sells specialty liquid AROFENE-R- phenolic resins
and AROTAP-R- phenolic resins for paper impregnation and friction
material bonding; AROSET-R- acrylic polymers for pressure sensitive
adhesives; ISOSET-R- emulsion polymer isocyanate adhesives for
structural wood bonding; PLIOGRIP-R- polyurethane and epoxy
structural adhesives for bonding fiberglass reinforced plastics,
composites, thermoplastics and metals in automotive, recreational,
and industrial applications; EMAWELD-R- induction bonding systems
for thermoplastic materials; PLIOBOND-R- and PLIOSEAL-R-
elastomeric polymer adhesives for commercial roofing applications;
PLIOSEAL-TM- butyl rubber roofing tapes; and VPC-R- vapor curing,
high-performance urethane coatings systems. The division has
manufacturing plants in Calumet City, Illinois; Norwood, New
Jersey; and Ashland, Ohio.
Drew Ameroid Marine Division - This division supplies specialty
chemicals for water and fuel treatment and general maintenance as
well as refrigeration services, sealing products and welding and
refrigerant products to the world's merchant marine fleet. Drew
Ameroid Marine currently provides shipboard technical service for
more than 15,000 vessels from 140 locations serving 800 ports
throughout the world.
8
<PAGE>
Electronic Chemicals Division - This division manufactures and
sells a variety of ultra high-purity chemicals for the worldwide
semiconductor manufacturing industry through various manufacturing
locations. The division also custom blends and packages high-
purity liquid chemicals to customer specifications. The division
has manufacturing plants in Newark, California; Milan, Italy;
Easton, Pennsylvania; and Dallas, Texas. The division also enters
into long-term agreements to provide complete chemical management
services, including purchasing, warehousing and delivering
chemicals for in-plant use, for major facilities of large consumers
of high-purity chemicals.
Foundry Products Division - This division manufactures and
sells foundry chemicals worldwide, including a complete line of
foundry binders, core and mold coatings, sand additives, mold
releases, core pastes, and other specialties. The division has two
domestic manufacturing plants located in Cleveland, Ohio. Eighteen
foreign subsidiaries and affiliates manufacture and/or market
foundry and other chemicals. The division has a metals
applications laboratory as part of the company's technical center,
which is used for test castings and mold and core material testing.
Drew Industrial Division - This division supplies specialized
chemicals and consulting services for the treatment of boiler
water, cooling water, steam, fuel and waste streams. The division
also supplies process chemicals and technical services to the pulp
and paper and mining industries. It also supplies additives used
in the manufacture of latex and paints. This division conducts
operations throughout North America, Europe and the Far East
through subsidiaries, joint venture companies and distributors. The
division has manufacturing plants in Kansas City, Kansas; Kearny,
New Jersey; Houston, Texas; Ajax, Ontario, Canada; and Singapore.
PETROCHEMICALS
Petrochemical Division - This division markets aromatic
hydrocarbons, principally cumene, toluene, xylene, and aromatic and
aliphatic solvents and propylene manufactured at facilities located
at the Catlettsburg, Kentucky refinery. The division manufactures
maleic anhydride at Neal, West Virginia, and methanol near
Plaquemine, Louisiana.
OTHER MATTERS
Melamine Chemicals, Inc. ("MCI") - Ashland owns 23% of the
outstanding common stock of MCI, a publicly owned company
(NASDAQ:MTWO). MCI produces melamine at its Donaldsonville,
Louisiana plant and sells it to customers throughout the world.
Melamine is a specialty chemical having numerous industrial and
commercial applications.
For information relating to the reauthorization of the
Superfund Reauthorization Act of 1986 and the Resource Conservation
and Recovery Act, see "Miscellaneous-Governmental Regulation and
Action-Environmental Protection."
CONSTRUCTION
Ashland's construction operations are conducted primarily by
the APAC group of companies which are located in 13 southern
states. APAC is a major provider of publicly funded highway
construction services, privately financed construction projects,
and construction materials. As prime contractor, subcontractor or
joint venture partner, APAC performs such construction work as
paving, repair and resurfacing of highways, urban streets,
roadways, bus lanes, airports, residential developments, shopping
centers, other commercial parking areas, sidewalks, and driveways;
excavation; grading and base work; and certain other activities in
the construction of bridges and structures, sanitary sewers,
drainage facilities and underground utilities. APAC also produces
and sells construction materials such as asphaltic and ready-mix
concrete, crushed stone and other aggregate, and in certain
markets, concrete block and specialized construction materials,
such as architectural block.
To deliver its services and products, APAC utilizes extensive
aggregate-producing properties and construction equipment. It
currently has 15 permanent operating quarry locations, 31 other
aggregate production facilities, 38 ready-mix concrete plants, 144
hot-mix asphalt plants, and a fleet of over 8,000 mobile equipment
units, including heavy construction equipment and transportation-
related equipment.
9
<PAGE>
Raw aggregate generally consists of sand, gravel, granite,
limestone and sandstone. About 36% of the raw aggregate produced by
APAC is used in the performance of APAC's own contract construction
work and the production of various processed construction
materials. The remainder is sold to third parties. APAC also
purchases substantial quantities of raw aggregate from other
producers whose proximity to the job site render it economically
feasible. Most other raw materials, such as liquid asphalt,
portland cement and reinforcing steel, are purchased from others.
APAC is not dependent upon any one supplier or customer.
Approximately 60% of APAC's revenues are derived from highway
and other public sector sources. The other 40% is derived from
industrial and commercial customers and other private developers
and contractors.
Climate and weather significantly affect revenues in the
construction business. Due to its location, APAC tends to enjoy a
relatively long construction season. Most of APAC's operating
income is generated during the construction period of May to
October.
Total backlog at September 30, 1994 was $554 million, compared
to $495 million (restated to exclude APAC's Arizona operations
which were sold in February 1994) at September 30, 1993. The
backlog orders at September 30, 1994 are considered firm, and a
major portion is expected to be filled during fiscal 1995.
EXPLORATION
Ashland's oil and gas exploration and production activities are
conducted through wholly owned subsidiaries of Ashland
(collectively referred to as "Ashland Exploration"). Ashland
Exploration is currently engaged in the exploration for and
production of oil and gas in the United States, in the exploration
for and production of oil in Nigeria, and in oil and gas
exploration in other international areas.
For information regarding Ashland Exploration's estimated oil
and gas reserves and other financial data, see Supplemental Oil and
Gas Information on Pages 60 and 61 in Ashland's Annual Report.
Since October 1, 1993, no estimates of Ashland Exploration's total
proved net oil or gas reserves have been filed or included in
reports to any federal authority or agency other than the SEC.
DOMESTIC OPERATIONS
Ashland Exploration has concentrated its domestic drilling and
production efforts in two core areas: the Appalachian Basin and the
Gulf Coast. In addition, minor royalty interests are located
primarily in the Southwest and Midcontinent regions of the United
States.
In the Appalachian Basin, Ashland Exploration's activities
consist primarily of shallow gas development drilling on leaseholds
totaling approximately 807,100 acres in eastern Kentucky and West
Virginia. In fiscal 1994, it drilled 58 net gas wells, excluding 29
net wells which were being drilled at year-end.
Ashland Exploration's exploratory efforts are concentrated
along the Gulf Coast. In fiscal 1994, Ashland Exploration
participated in drilling 13 gross exploratory prospects, resulting
in 4 gas discoveries. At fiscal year-end, an additional 2 gross
exploratory wells were in the process of being drilled. Ashland
Exploration's exploratory leasehold position in the Gulf of Mexico
has risen to 160,000 acres, excluding one block from an August 1994
federal lease sale on which a lease is expected to be issued in
early fiscal 1995.
During fiscal 1994, Ashland Exploration's domestic production
averaged 800 net barrels of oil per day and 94.3 million net cubic
feet of natural gas per day. The average price received during
fiscal 1994 was $14.29 per barrel of oil and $2.42 per thousand
cubic feet (MCF) of gas.
Ashland Exploration owned a working interest in 2,942 gross
(2,655 net) domestic producing wells at September 30, 1994.
10
<PAGE>
INTERNATIONAL OPERATIONS
Ashland Exploration currently has rights to international
concessions in Nigeria, Australia, and Morocco. Additional
exploration opportunities are being evaluated in these and other
countries.
In Nigeria, Ashland Exploration's oil production during fiscal
1994 was 18,700 barrels per day from 74,000 acres onshore and
103,000 acres offshore held under a production-sharing contract
with the Nigerian National Petroleum Corporation ("NNPC"), the
Nigerian state-owned petroleum company. The term of this production
sharing contract has been extended until June 12, 1998. Ashland
Exploration plans to initiate exploratory drilling in fiscal 1995
to fulfil the commitment required for the extension of this
production sharing contract. If this exploratory drilling is
successful, the term on this production sharing contract would be
extended until 2013.
Other exploratory efforts in Nigeria will be carried out on two
additional offshore blocks comprising a contract area of
approximately 600,000 acres under another production-sharing
contract with NNPC. The first exploratory well was successful in
fiscal 1994. Additional exploratory drilling is planned for fiscal
1995. Ashland Exploration holds a 50% interest in these blocks.
In other international exploratory activities, Ashland
Exploration has extended its seismic option agreement with ONAREP,
the Moroccan state-owned petroleum company. The agreement covers
1,500,000 acres offshore Morocco, which Ashland Exploration
operates with a 50% interest. In Australia, Ashland Exploration
owns a 50% interest in one exploration permit consisting of 335,000
gross acres and a 25% interest in another exploration permit
consisting of 590,000 gross acres, both of which are located
offshore western Australia. Three unsuccessful exploratory wells
were drilled in Australia in fiscal 1994.
Ashland Exploration's international operations are necessarily
subject to factors beyond its control. Foreign operations may also
be affected by laws and policies of the United States relating to
foreign trade, investment, and taxation.
NET OIL AND GAS PRODUCTION
The following table summarizes net oil and gas production for
the three fiscal years ended September 30, 1994. Net production for
Nigeria is before royalty.
Years Ended September 30
-------------------------
1994 1993 1992
---- ---- -----
Crude Oil (thousand barrels per day)
United States . . . . . . . . . . . .8 1.0 1.0
Nigeria . . . . . . . . . . . . . . 18.7 21.7 25.9
---- ---- ----
Total . . . . . . . . . . 19.5 22.7 26.9
===== ==== ====
Natural Gas (MMCF per day)
United States . . . . . . . . . . . 94.3 99.3 78.3
11
<PAGE>
AVERAGE SALES PRICE AND PRODUCTION COST
Ashland Exploration's average sales price per unit and
production cost per unit for crude oil and natural gas for the
three fiscal years ended September 30, 1994, are set forth in the
table below:
<TABLE>
<CAPTION>
United States Nigeria Total
------------------- ------------------- -------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average sales price
Crude oil (per
barrel)...... $14.29 $17.54 $18.35 $15.01 $17.77 $19.21 $14.98 $17.76 $19.18
Natural gas
(per MCF)..... 2.42 2.45 2.28 - - - 2.42 2.45 2.28
Average production
product cost
(per equivalent
barrel) (1)..... 3.87 3.84 4.83 7.69 7.27 6.39 5.90 5.74 5.84
-----------------
<FN>
(1) Equivalent barrels computed on a six MCF to one barrel ratio.
</TABLE>
GROSS AND NET PRODUCTIVE WELLS
The following table sets forth Ashland Exploration's gross and
net productive wells at September 30, 1994:
Gross Net
------- ------
United States
Oil . . . . . . . . . . . . . . . . . 175 47
Gas . . . . . . . . . . . . . . . . . 2,767 2,608
Nigeria
Oil . . . . . . . . . . . . . . . . . 36 36
----- -----
Total 2,978 2,691
====== ======
These wells include 321 gross wells (308 domestic and 13
international) and 295 net wells (282 domestic and 13
international) which have multiple completions.
TOTAL GROSS AND NET OIL AND GAS PRODUCING AND UNDEVELOPED ACREAGE
The following table sets forth Ashland Exploration's total
gross and net oil and gas producing and undeveloped acreage at
September 30, 1994:
Gross Net Gross Net
Producing Producing Undeveloped Undeveloped
Acreage Acreage Acreage Acreage
--------- --------- --------- ----------
(thousands of acres)
United States. . . . . 1,201 873 726 405
Nigeria. . . . . . . . 177 177 580 290
Morocco. . . . . . . . 1,500 750
Australia. . . . . . . 925 315
----- ----- ----- -----
Total 1,378 1,050 3,731 1,760
===== ===== ===== =====
12
<PAGE>
NET PRODUCTIVE AND DRY WELLS DRILLED
Ashland Exploration's net productive and dry wells drilled during
the three fiscal years ended September 30, 1994, are set forth in
the table below:
1994 1993 1992
---- ---- ----
Net Productive Exploratory Wells Drilled
United States . . . . . . . . . . . 2 1 5
International . . . . . . . . . . . 1 0 0
---- ---- ----
Total . . . . . . . . . . 3 1 5
==== ==== ====
Net Dry Exploratory Wells Drilled
United States . . . . . . . . . . . 4 2 3
International . . . . . . . . . . . 1 0 0
---- ---- ----
Total . . . . . . . . . . 5 2 3
==== ==== ====
Net Productive Development Wells Drilled
United States . . . . . . . . . . . 59 84 182
International . . . . . . . . . . . 0 0 0
---- ---- ----
Total . . . . . . . . . . 59 84 182
==== ==== ====
Net Dry Development Wells Drilled
United States . . . . . . . . . . . 1 1 0
International . . . . . . . . . . . 0 0 0
---- ---- ----
Total . . . . . . . . . . 1 1 0
==== ==== ====
COAL
Arch Mineral Corporation ("Arch") - Ashland currently owns 50%
of Arch and has the right to acquire an additional 1.25% of Arch
pursuant to a Put and Call Agreement with an Arch shareholder.
Through its wholly owned subsidiaries, Arch mines, processes,
markets, and transports bituminous coal in the domestic and export
steam and metallurgical markets. An additional wholly owned
subsidiary of Arch owns, controls and manages mineral-bearing
properties throughout the United States. Arch has mines located in
the Appalachian, Midwestern, and Western coal fields with access to
rail, inland waterway and truck transportation networks, including
several of its own transloading facilities. Arch also controls
undeveloped reserves in the San Juan Basin of New Mexico, the Green
River area in southwest Wyoming, southern Illinois, Indiana,
southeast Kentucky, western Virginia and southern West Virginia.
For its fiscal year ended December 31, 1993, Arch sold 17.6
million tons of coal compared to sales of 20.9 million tons and
21.5 million tons in 1992 and 1991, respectively. In 1993, 79% of
Arch's sales were from the production of its wholly owned
independent operating subsidiaries, compared to 82% and 80% in 1992
and 1991, respectively. The remainder of the coal sold in each of
these periods came from brokerage activities or from independent
contractors operating on property controlled by Arch. Surface mines
accounted for 69% of the production in 1993, as compared to 62% and
65% in 1992 and 1991, respectively. In each of these periods, the
remainder of Arch's production came from its underground and auger
mines. Sales under contracts with a duration of more than one year
accounted for 78% of Arch's sales in 1993, compared with 86% and
80% in 1992 and 1991, respectively. Arch's 1993 operations were
significantly and adversely impacted by the United Mine Workers of
America strike discussed on the following page.
As of September 30, 1994, Arch has 33 coal supply contracts of
one year or longer duration. In the nine-months ended September
30, 1994, Arch sold 20.5 million tons of coal, 69% of which was
sold under contracts with a duration of more than one year. During
this period, 74% of Arch's total sales came from the production of
its subsidiaries, while the remaining coal sold came from brokerage
activities or independent contractors operating on properties
controlled by Arch. During this nine-month period, 53% of Arch's
production was from its surface mines and the remainder was from
its underground and auger mines.
13
<PAGE>
As of December 31, 1993, Arch owned or controlled estimated
recoverable coal reserves in the proven and probable categories of
approximately 1.6 billion tons, based on an estimate prepared by
Arch. Arch believes a majority of these reserves have a sulfur
content of less than 1.6 pounds of sulfur dioxide and a substantial
portion have a sulfur content of less than 1.2 pounds of sulfur
dioxide per million Btu. Ashland has not made an independent
verification of this information.
Apogee Coal Company ("Apogee"), an independent operating
subsidiary of Arch, is a member of the Bituminous Coal Operators
Association ("BCOA") and a signatory to a collective bargaining
agreement with the United Mine Workers of America ("UMWA") that
expires on August 1, 1998. This contract was ratified on December
14, 1993, after a 219-day strike against certain BCOA members,
including Apogee. In the nine months ended September 30, 1994,
Apogee's sales from captive and contractors mines represented
approximately 54% of Arch's total sales. Two other independent
subsidiaries of Arch are signatories to collective bargaining
agreements with independent employees associations. Employees of
the remainder of Arch's operating subsidiaries are not represented
by labor unions.
On January 31, 1994, Catenary Coal Holdings, Inc., a wholly
owned subsidiary of Arch, acquired from Enirisorse S.p.A., the
stock of Agipcoal Holdings USA, Inc. and Agipcoal America, Inc. On
the same date, certain of the subsidiaries and assets of these
companies were sold to subsidiaries of the Norfolk Southern
Corporation, and Neweagle Industries, Inc. The remaining assets
include mining complexes in Kentucky and West Virginia.
Ashland Coal, Inc. ("Ashland Coal") - Ashland owns
approximately 39% of Ashland Coal, a public company (NYSE:ACI)
which is engaged in the production, transportation, processing and
marketing of bituminous coal produced in eastern Kentucky and
southern West Virginia. The primary emphasis and direction of
Ashland Coal is on the acquisition and development of low-sulfur
steam coal reserves.
Saarbergwerke A.G., a coal producer, coal trader, and utility
company owned jointly by the Government of Germany (74%) and the
State of Saarland (26%), owns approximately a 15% interest in
Ashland Coal, and Carboex International Ltd., a subsidiary of
Sociedad Espanola De Carbon Exterior, S.A., a coal supply firm
controlled by entities of the Government of Spain, owns
approximately a 10% interest in Ashland Coal. The remaining 36% of
Ashland Coal is owned by the public.
For its fiscal year ended December 31, 1993, Ashland Coal and
its independent operating subsidiaries sold 16 million tons of
coal, as compared to 19.1 and 14.3 million tons sold in 1992 and
1991, respectively. Of the total number of tons sold during fiscal
1993, approximately 57% was under long-term contracts, as compared
to 66% for 1992 and 67% for 1991, with the balance being sold on
the spot market. In fiscal 1993, Ashland Coal and its independent
operating subsidiaries sold 2.1 million tons of coal in the export
market, compared to 3.9 million tons in 1992 and 3.8 million tons
in 1991. Approximately 61%, 71%, and 71% of total revenues for
1993, 1992, and 1991, respectively, were derived from long-term
contracts. For the year ended December 31, 1993, Ashland Coal's
independent operating subsidiaries produced approximately 14.2
million tons of coal, as compared to 16.7 and 12.2 million tons for
1992 and 1991, respectively. In addition, Ashland Coal purchased
for resale approximately 1.6 million tons of coal during 1993 and
approximately 2.0 million tons of coal during each of 1992 and
1991.
For the nine months ended September 30, 1994, Ashland Coal and
its independent operating subsidiaries sold 14.8 million tons of
coal. Of the total number of tons sold during the nine months ended
September 30, 1994, 63% was under long-term contracts. These sales
accounted for approximately 65% of Ashland Coal's total revenues
for the nine-month period. Of the 14.8 million tons sold during the
nine-month period, 1.4 million tons were sold in the export market.
For the nine months, Ashland Coal's independent operating
subsidiaries produced approximately 13.9 million tons of coal and
purchased approximately 1.0 million tons for resale.
14
<PAGE>
Ashland Coal's consolidated results for 1993 were significantly
affected by a selective strike by the United Mine Workers of
America from May to December 1993 against the operations of two
subsidiaries of Ashland Coal's Dal-Tex Coal Corporation subsidiary
("Dal-Tex") and the operations of Ashland Coal's Hobet Mining, Inc.
subsidiary ("Hobet"). These Dal-Tex subsidiaries and Hobet were
signatories to the National Bituminous Coal Wage Agreement of 1988.
On December 14, 1993, UMWA members ratified the National Bituminous
Coal Wage Agreement of 1993, and thereafter the UMWA miners
returned to work at the Dal-Tex and Hobet operations.
Ashland Coal's Mingo Logan Coal Company subsidiary ("Mingo
Logan"), Mingo Logan's Mountaineer Mining Company and Bearco
divisions and certain contract miners are parties to a proceeding
to determine whether Mingo Logan's employees should be deemed
jointly employed with the contract miners' employees or whether the
Mingo Logan and contract miners' employees are employed by
different employers. The outcome of the proceeding would determine
for purposes of voting on union representation (if such vote is
required by applicable labor law) whether the Mingo Logan employees
may vote separately, or will be required to vote with employees of
Mingo Logan's contract miners.
Substantially all of Ashland Coal's coal properties are in
eastern Kentucky and southern West Virginia and are controlled by
lease. Most of these leases run until the exhaustion of minable and
merchantable coal. The remaining leases have primary terms ranging
from one to 40 years, with many containing options to renew.
Royalties paid to lessors are either on a fixed price per ton basis
or on a percentage of the gross sales price basis.
As of December 31, 1993, Ashland Coal estimates that its
subsidiaries controlled approximately 723 million tons of
recoverable reserves in the proven and probable categories. Based
upon limited information obtained from preliminary prospecting,
drilling and coal seam analysis, Ashland Coal estimates that a
substantial percentage of this coal has a sulfur content of 1% or
less. Ashland has not made an independent verification of this
information. The extent to which reserves will eventually be mined
depends upon a variety of variables, including future economic
conditions and governmental actions affecting both the mining and
marketability of low-sulfur steam coal.
Other Matters - Arch and Ashland Coal are subject to
environmental regulations, including the Surface Mining Control and
Reclamation Act of 1977, the Clean Water Act, the Resource
Conservation and Recovery Act and the Clean Air Act, as well as
related federal environmental regulations and similar state
enactments. In addition, the Federal Mine Safety and Health Act of
1977 ("MSHA") imposes health and safety standards on all mining
operations. Regulations under MSHA are comprehensive and affect
numerous aspects of mining operations, including the training of
mine personnel, mining procedures, blasting and the equipment used
in mining operations. Arch and Ashland Coal believe that they are
in substantial compliance with all applicable environmental and
MSHA requirements. These requirements are not expected to have a
material adverse impact on Arch's or Ashland Coal's competitive
position.
Arch and Ashland Coal are subject to the provisions of the Coal
Industry Retiree Health Benefit Act of 1992. This legislation
provides for the funding of medical and death benefits for certain
retired members of the UMWA through premiums to be paid by assigned
operators, transfers from an overfunded pension trust established
for the benefit of retired UMWA members, and transfers from the
Abandoned Mine Lands Fund, which is funded by a federal tax on coal
production. The effect of this legislation on the earnings and
financial conditions of Arch and Ashland Coal is not expected to be
significant.
For information relating to acid rain legislation, see
"Miscellaneous-Governmental Regulation and Action-Environmental
Protection."
15
<PAGE>
OTHER BUSINESS
Ashland, through a subsidiary, Ashland Ethanol, Inc. ("AEI"),
has a 50% interest in a partnership that owns an ethanol plant
located in South Point, Ohio. The partnership is comprised of AEI
and subsidiaries of Ohio Farm Bureau Federation, Inc., Publicker
Industries Inc. and UGI Corporation. The plant began operation in
September 1982 and is currently producing at an annual rate of
approximately 65 million gallons of ethanol. In addition, the
plant produced about 180 million tons of distillers dried grain in
fiscal 1994. In 1981 the United States Department of Energy entered
into a cooperative agreement with the partnership under which it
advanced approximately $24.5 million in connection with the
construction of this plant which will, except under certain
circumstances, have to be repaid starting in 1996. The partnership
also has a Farmers Home Administration ("FmHA") guaranteed loan and
a working capital loan. Because of past concerns about the
venture's long-term viability, Ashland wrote off its investment in
AEI in fiscal 1986 and provided a reserve for the estimated impact
of expected losses.
AECOM Technology Corporation ("AECOM"), a 25% owned affiliate
of Ashland, provides a wide array of design, engineering,
architectural, planning, operations and maintenance, construction
and construction management, development, environmental and other
technical and professional services to industrial, commercial and
government clients. AECOM is headquartered in Los Angeles,
California, and performs services through offices located
throughout the world.
MISCELLANEOUS
GOVERNMENTAL REGULATION AND ACTION
Ashland's operations are affected by political developments and
laws and regulations, such as restrictions on production,
restrictions on imports and exports, the maintenance of specified
reserves, price controls, tax increases and retroactive tax claims,
expropriation of property, cancellation of contract rights,
environmental protection controls and laws pertaining to workers'
health and safety. As discussed in part below, a number of bills
have been enacted or proposed by the United States Congress and
various state governments which have or could have a significant
impact on Ashland.
General - As a refiner, Ashland is substantially affected by
changes in world crude oil prices. Many world and regional events
can have substantial effects on world crude oil prices and can
increase volatility in world markets. Ashland expects to be able to
acquire adequate supplies of crude oil at competitive prices.
However, Ashland cannot predict whether foreign and United States
petroleum product price levels will permit its refineries to
operate on a profitable basis. Neither can it predict the effect on
its operations and financial condition from possible further
changes in the Organization of Petroleum Exporting Countries
("OPEC") policies or in actions by the President of the United
States and the Congress, from changes in taxes and federal
regulation of the oil and gas business in the United States, or
from other developments that cannot be foreseen.
The stability of Ashland's crude oil supply from foreign
sources is subject to factors beyond its control, such as military
conflict between oil-producing countries, the possibility of
nationalization of assets, embargoes of the type imposed by OPEC in
1973, internal instability in one or more oil-producing countries,
and rapid increases in crude oil prices. Although Ashland will
continue, for economic reasons, to rely upon foreign crude oil
sources for a substantial portion of its crude oil supply, the
extent of operation in the domestic crude oil market afforded by
Scurlock Permian Corporation will assist in offsetting the adverse
effects frequently associated with market volatility. See
"Petroleum-Crude Oil Supply" for Ashland's crude oil processing
requirements.
Imported crude oil is subject at present to payment of duty,
which is 10.5 cents per barrel for crudes over 25 API gravity (2.1 cents
per barrel for Canadian imports) and 5.25 cents per barrel for crudes below
25 API gravity (1.05 cents per barrel for Canadian imports). Imported
crude oil is also subject to a customs users fee of .17% of the
value of the crude oil. For information with respect to tax
assessments on crude oil, see also "Environmental Protection."
16
<PAGE>
Environmental Protection - Federal, state and local statutes
and regulations relating to the protection of the environment have
a significant impact on the conduct of Ashland's businesses.
Ashland's capital and operating expenditures for air, water and
solid waste control facilities are summarized below.
Years Ended September 30
------------------------
(In millions) 1994 1993 1992
---------------- ---- ----- -----
Capital expenditures $ 63 $137 $162
Operating expenditures 140 148 138
At September 30, 1994, Ashland's reserves for environmental
assessment and remediation efforts amounted to $167 million,
reflecting Ashland's most likely estimates of the costs which will
be incurred over an extended period to remediate identified
environmental conditions for which costs are reasonably estimable.
During fiscal 1995 and 1996, based on current environmental
regulations, Ashland estimates capital expenditures for air, water
and solid waste control facilities to be $70 million and $85
million, respectively. Expenditures for investigatory and remedial
efforts in future years are subject to the uncertainties associated
with environmental exposures, including identification of new
environmental sites and changes in laws and regulations and their
application. Such expenditures, however, are not expected to have a
material adverse effect on Ashland's consolidated financial
position, cash flow or liquidity, but could have a material adverse
effect on results of operations in a particular quarter or fiscal
year. With respect to the effect of such expenditures on Ashland's
competitive position in its industries, it is not expected that
Ashland's expenditures will be affected by the legislation and
regulations relating to the environment in a manner that is
significantly different from the anticipated effect on its
competitors in the petroleum or chemical industries.
The United States Environmental Protection Agency ("USEPA") and
the states have adopted regulations and laws concerning underground
storage tanks covering, among other things, registration of tanks,
release detection, corrosion protection, response to releases,
closure of, and financial responsibility for, underground storage
tank systems.
The Superfund Reauthorization Act of 1986 ("Superfund")
provided for the establishment of a fund to be used for a waste
clean-up program administered by the USEPA. The law provides for
five separate taxes: (i) a petroleum tax on domestic crude oil and
on imported crude oil equalized at 9.7 cents per barrel plus a 5 cents per
barrel oil spill tax, as more fully described below, (ii) a
chemical feedstock tax, (iii) a tax on imported chemical
derivatives, and (iv) an "environmental tax" based on corporate
alternative minimum taxable income. Ashland paid approximately $19
million in Superfund taxes during fiscal 1994. Superfund, which
provides for cleanup of certain hazardous waste sites, is expected
to be reauthorized during the 104th Congress. The reauthorized act
is expected to provide for fair-share allocation of liability,
improve cleanup remedy selection, and reduce insurance recovery
litigation all of which should make the program more effective.
However, it is uncertain at this time exactly what the revisions
will be, or if they will result in significant savings.
Effective October 1, 1993, the USEPA reduced by 90 percent,
from 0.5 to 0.05 percent by weight, the allowable sulfur level in
diesel fuel used on highways. The USEPA's action was designed to
provide cleaner fuel that will permit reduced particulate emissions
from truck engines. Ashland has invested more than $250 million in
additional sulfur removal facilities, and is currently producing
and providing such ultra-low-sulfur diesel fuel for on-highway use.
The Oil Pollution Act of 1990 ("OPA 90") established a $1
billion trust fund to cover cleanup-related costs of oil spills
after the responsible party's liability limits have been reached,
or where the responsible party is otherwise unidentifiable or
unable to pay. The trust fund is financed, when depleted below
specified levels, through an excise tax of 5 cents per barrel on
domestic crude oil and imported petroleum oil products (pursuant to
the Superfund Reauthorization Act of 1986). On July 1, 1993, the
oil spill tax was suspended because the Treasury Department
estimated that the spill liability trust fund would reach its
suspension point at the close of the second
17
<PAGE>
quarter of 1993. Effective July 1, 1994, the oil spill tax was
reinstated. OPA 90 subjects spillers to strict liability for removal
costs and damages (including natural resource damages) resulting
from oil spills, and requires the preparation and implementation
of spill-response plans at designated vessels and facilities.
Additionally, OPA 90 requires that new tank vessels entering or
operating in domestic waters be equipped with double hulls, and
that existing tank vessels without double hulls be retrofitted
or removed from domestic service according to a phase-out
schedule. While Ashland does not believe that compliance with
implementing regulations will have a material adverse effect
on the company's results of operations, a complete assessment
of the financial implications of OPA 90 will be performed when
all implementing regulations are final.
On July 1, 1994, the United States Coast Guard issued interim
final regulations dealing with financial responsibility for water
pollution (vessels) under OPA 90 and the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA").
The regulations require self-propelled tank vessel owners and
operators to maintain evidence of financial responsibility,
effective December 28, 1994, sufficient to meet their potential
liability defined under OPA 90 and CERCLA for spills of oil or
hazardous substances. The Director, Coast Guard National Funds
Center has granted permission to Ashland to self-insure the
financial responsibility amount for liability purposes for
Ashland's ocean tankers as provided in OPA 90. Ashland is
currently assessing the impact the regulations will have upon
Ashland and its crude oil purchasing and transportation costs and
strategies.
The Federal Clean Air Act requires the refining industry to
market cleaner-burning, reformulated gasoline ("RFG") beginning
January 1, 1995 in nine specified metropolitan areas across the
country. Ashland does not directly supply gasoline in any of the
nine metropolitan areas. However, several urban locations within
Ashland's marketing area have opted into the RFG program. Ashland
currently believes it will be able to meet expected demand for RFG
in its marketing area. The Clean Air Act also requires the
refining industry to supply 39 carbon monoxide (CO) non-attainment
areas with gasoline containing 2.7 weight percent oxygen for four
winter months each year. Upon being re-designated CO attainment,
several of these areas are seeking to opt-out of the oxygenated
gasoline requirements. Ashland believes it will have a continuing
need to directly supply this fuel only at St. Paul Park, Minnesota,
whose primary market is a CO non-attainment area. Ashland believes
it has or has access to ample oxygenate to meet this requirement.
The Clean Air Act also contains acid rain provisions which
require substantial reductions in sulfur dioxide emissions by power
plants in the United States which should favor low-sulfur coal
producers. Both Ashland Coal and Arch have significant low-sulfur
reserves and should benefit from expected higher demand for low-
sulfur coal.
The Resource Conservation and Recovery Act ("RCRA"), which
requires "cradle to grave" management of hazardous waste, is slated
to be reauthorized by Congress, although timing of such
reauthorization is uncertain. Reauthorization issues may include an
expansion of hazardous waste program coverage, recycling, used oil,
and solid waste management. These same issues may be addressed in
additional USEPA rulemakings unrelated to reauthorization efforts.
It is anticipated that both the reauthorization and other future
rulemakings will result in increased environmental compliance
costs, but the amount of such increase is uncertain at this time.
RESEARCH
Ashland conducts a program of research and development directed
toward the invention and improvement of products and processes and
also toward the improvement of environmental controls for its
existing facilities. It maintains its primary research facilities
in Catlettsburg, Kentucky, and Dublin, Ohio. For information about
research and development costs, see Note A of Notes to Consolidated
Financial Statements in Ashland's Annual Report.
COMPETITION
In all of its operations, Ashland is subject to intense
competition both from companies in the respective industries in
which it operates and from products of companies in other
industries. In all of these segments, competition is based
primarily on price, with factors such as reliability of supply,
service and quality being considered. Ashland Petroleum competes
primarily with other domestic refiners and, to a lesser extent,
with
18
<PAGE>
imported products. However, Ashland Petroleum enjoys a
geographic advantage for products in its primary marketing areas.
While some integrated competitors have sources of controlled crude
production, few competitors in Ashland Petroleum's market areas are
significantly crude self-sufficient. SuperAmerica competes with
major oil companies, independent oil companies and independent
marketers. Virtually all of SuperAmerica's refined products are
supplied by Ashland Petroleum. SuperAmerica maintains one of the
lowest net operating cost structures in the industry and enjoys
gasoline and merchandise sales per store exceeding the convenience
store industry average based on the 1994 National Association of
Convenience Store State of the Industry Survey.
Valvoline competes primarily with domestic oil companies and,
to a lesser extent, with international oil companies on a worldwide
basis. Valvoline's brand recognition and increasing market share
in the fast oil-change market are important competitive factors.
Ashland Chemical competes in a number of chemical distribution,
specialty chemical and petrochemical markets. Its chemicals and
solvents distribution businesses compete with national, regional
and local companies throughout North America. Its plastics
distribution businesses compete worldwide. Ashland Chemical's
specialty chemicals businesses compete globally in selected niche
markets and compete largely on the basis of technology and service
while holding proprietary technology in virtually all their
specialty chemicals businesses. Petrochemicals are largely
commodities, with pricing and quality being the most important
factors. The majority of the business for which APAC competes is
obtained by competitive bidding. An important competitive factor
in Ashland Exploration's domestic production activity is the
ability of its exploration staff to identify potential natural gas
prospects, obtain exploration rights and formulate and complete
plans for the development of properties. Similarly, competitive
factors that are important for Ashland Exploration's international
production include its experience in identifying prospects and
developing and operating properties. The coal industry is highly
competitive, and Arch and Ashland Coal compete (principally in
price, location and quality of coal) with each other and with a
large number of other coal producers, some of which are
substantially larger and have greater financial resources and
larger reserve bases than them.
ITEM 2. PROPERTIES
Ashland's corporate headquarters and the principal offices of
Ashland Petroleum are located in Russell, Kentucky. Principal
offices of other segments are located in Lexington, Kentucky
(SuperAmerica and Valvoline); Dublin, Ohio (Chemical); Atlanta,
Georgia (Construction); and Houston, Texas (Exploration). All of
these offices are leased for various terms ranging from 13 to 72
years, including renewal options. Ashland's principal
manufacturing, marketing and other materially important physical
properties are described under the appropriate segment under Item
1. See also the statistical data included under "Exploration" and
"Coal" in Item 1 and Supplemental Oil and Gas Information on Pages
60 and 61 in Ashland's Annual Report. Additional information
concerning certain leases may be found in Note G of Notes to
Consolidated Financial Statements in Ashland's Annual Report. Such
information is incorporated in this Item by reference.
ITEM 3. LEGAL PROCEEDINGS
Environmental Proceedings - (1) As of September 30, 1994,
Ashland was subject to 72 notices received from the USEPA
identifying Ashland as a "potentially responsible party" ("PRP")
under CERCLA and the Superfund Amendment and Reauthorization Act
("SARA") for potential joint and several liability for cleanup
costs in connection with alleged releases of hazardous substances
from various waste treatment or disposal sites. These sites are
currently subject to ongoing investigation and remedial activities,
overseen by the USEPA in accordance with procedures established
under CERCLA and SARA regulations, in which Ashland may be
participating as a member of various PRP groups. Generally, the
type of relief sought by the USEPA includes remediation of
contaminated soil and/or groundwater, reimbursement for the costs
of site cleanup or oversight expended by the USEPA, and/or long-
term monitoring of environmental conditions at the sites. Ashland
also receives notices from state environmental agencies pursuant to
similar state legislation. Ashland carefully monitors the
investigatory and remedial activity at many of these sites. Based
on its experience with site remediation, its familiarity with
current environmental laws and regulations, its analysis of the
specific hazardous substances at issue, the existence of other
financially viable PRPs and its current estimates of investigatory,
clean-up and monitoring costs at each site, Ashland believes that
its liability at these sites, either individually or
19
<PAGE>
in the aggregate, after taking into account established reserves,
will not have a material adverse effect on Ashland's consolidated
financial position, cash flow or liquidity but could have a material
adverse effect on results of operations in a particular quarter or
fiscal year. Estimated costs for these matters are recognized in
accordance with generally accepted accounting principles governing
probability and the ability to reasonably estimate future costs.
For additional information regarding these matters, see
"Governmental Regulation and Action-Environmental Protection."
(2) Ashland received a Notice of Potential Liability from the
Commonwealth of Pennsylvania regarding a crude oil spill incident
in the Delaware River in July 1994 involving the M/V Kentucky,
which Ashland charters under a long-term bareboat charter.
El Paso Dispute - On March 11, 1993, a complaint was filed by
El Paso Refinery, L.P., against Scurlock Permian Corporation
("SPC"), a wholly owned subsidiary of Ashland, in the District
Court of El Paso County, Texas. El Paso Refinery, L.P., is
currently in Chapter 7 bankruptcy. Plaintiff alleges that SPC
wrongfully breached certain duties under a contract to supply crude
oil. Plaintiff further alleges violations of Texas usury law,
common law fraud and duress and seeks substantial damages. In an
apparent companion case filed the same day by individual plaintiffs
(two officers of El Paso Refining, Inc., the general partner of El
Paso Refinery, L.P.), damages are sought against SPC and others
based upon the execution by plaintiffs of promissory notes in
connection with the financing of the refinery. Ashland and SPC
believe these complaints to be without merit and intend to defend
them vigorously. SPC is a creditor in the El Paso bankruptcy
proceeding and had filed a proof of claim for approximately $39
million against the bankrupt estate. As of November 8, 1994, SPC
had received approximately $20 million from the liquidation of
collateral. Ashland believes its current reserves are adequate to
cover any shortfall that could be sustained in the bankruptcy
proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders through
the solicitation of proxies or otherwise, during the quarter ended
September 30, 1994.
ITEM X. EXECUTIVE OFFICERS OF ASHLAND
The following is a list of Ashland's executive officers, their
ages and their positions and offices during the last five years
(listed alphabetically as to Senior Vice Presidents who are members
of Ashland's core management group, other Senior Vice Presidents,
Administrative Vice Presidents and other executive officers.)
John R. Hall (age 62) is Chairman of the Board of Directors,
Chief Executive Officer and Director of Ashland and has served in
such capacities since 1981, 1981 and 1968, respectively.
Paul W. Chellgren (age 51) is President and Chief Operating
Officer and Director of Ashland and has served in such capacities
since 1992. During the past five years, he has also served as
Senior Vice President and Chief Financial Officer of Ashland.
James R. Boyd (age 48) is Senior Vice President of Ashland and
Group Operating Officer - Ashland Exploration, Inc., Arch Mineral
Corporation, Ashland Services Company and APAC, Inc. Mr. Boyd has
served as Senior Vice President since 1989 and as Group Operating
Officer for the above companies since 1990, with the exception of
APAC for which he assumed responsibility as of October 1, 1993.
During the past five years, he has also served as Vice President of
Ashland and President of Ashland Exploration, Inc.
John A. Brothers (age 54) is Senior Vice President of Ashland
and Group Operating Officer - Ashland Chemical Company,
SuperAmerica Group and The Valvoline Company and has served in such
capacities since 1984 and 1988, respectively.
Thomas L. Feazell (age 57) is Senior Vice President, General
Counsel and Secretary of Ashland and has served in such capacities
since 1992, 1981 and October 1992, respectively. During the past
five years he has also served as Administrative Vice President of
Ashland.
J. Marvin Quin (age 47) is Senior Vice President and Chief
Financial Officer of Ashland and has served in such capacities
since 1992. During the past five years, he has also served as
Administrative Vice President and Treasurer of Ashland.
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<PAGE>
Robert E. Yancey, Jr. (age 49) is Senior Vice President of
Ashland and Group Operating Officer - Ashland Petroleum Company and
South Point Ethanol and President of Ashland Petroleum Company and
has served in such capacities since 1986, 1988, and 1986,
respectively. During the past five years, he also served as Group
Operating Officer of APAC, Inc.
Harry M. Zachem (age 50) is Senior Vice President - Public
Affairs and has served in such capacity since 1988.
John D. Barr (age 47) is Senior Vice President of Ashland and
President of The Valvoline Company and has served in such
capacities since 1989 and 1987, respectively. During the past five
years he has also served as Vice President of Ashland.
David J. D'Antoni (age 49) is Senior Vice President of Ashland
and President of Ashland Chemical Company and has served in such
capacities since 1988.
John F. Pettus (age 51) is Senior Vice President of Ashland and
President of SuperAmerica Group and has served in such capacities
since 1989 and 1988, respectively. During the past five years he
has also served as Vice President of Ashland.
Charles F. Potts (age 50) is Senior Vice President of Ashland
and President of APAC, Inc. and has served in such capacities since
1992. During the past five years he has also served as Senior Vice
President and Chief Operating Officer and Regional Vice President
of APAC.
G. Thomas Wilkinson (age 56) is Senior Vice President of
Ashland and President of Ashland Exploration, Inc. and has served
in such capacities since 1992 and 1990, respectively. During the
past five years he has also served as Vice President of Ashland,
Executive Vice President of Ashland Exploration, Inc. and Senior
Vice President of Ashland Exploration, Inc.
Kenneth L. Aulen (age 45) is Administrative Vice President and
Controller of Ashland and has served in such capacity since 1992.
During the past five years he has also served as Auditor and
Assistant Controller of Ashland.
Philip W. Block (age 47) is Administrative Vice President -
Human Resources of Ashland and has served in such capacity since
1992. During the past five years he has also served as Vice
President - Corporate Human Resources.
John W. Dansby (age 49) is Administrative Vice President and
Treasurer of Ashland and has served in such capacities since 1992.
During the past five years he has also served as Ashland's Vice
President of Planning.
William R. Sawran (age 49) is Vice President of Ashland, Chief
Information Officer and President of Ashland Services Company and
has served in such capacities since 1994 and 1984 respectively.
Fred E. Lutzeier (age 42) is Auditor of Ashland and has served
in such capacity since December 1992. During the past five years he
has also served as Vice President and Controller of Arch Mineral
Corporation.
Each executive officer (other than Vice Presidents who are
appointed by Ashland's management) is elected by the Board of
Directors to a term of one year, or until his successor is duly
elected, at the annual meeting of the Board of Directors, except in
those instances where the officer is elected at other than an
annual meeting of the Board of Directors, in which case his tenure
will expire at the next annual meeting of the Board of Directors
unless he is re-elected.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
There is hereby incorporated by reference the information
appearing under the caption "Management's Discussion and Analysis-
Quarterly Financial Information" on Page 40 in Ashland's Annual
Report.
21
<PAGE>
At September 30, 1994, there were approximately 25,500 holders
of record of Ashland's Common Stock. Ashland Common Stock is listed
on the New York and Chicago stock exchanges (ticker symbol ASH) and
has trading privileges on the Boston, Cincinnati, Pacific,
Philadelphia and Amsterdam stock exchanges.
ITEM 6. SELECTED FINANCIAL DATA
There is hereby incorporated by reference the information
appearing under the caption "Five Year Selected Financial
Information" on Page 57 in Ashland's Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
There is hereby incorporated by reference the information
appearing under the caption "Management's Discussion and Analysis"
on Pages 34 to 40 in Ashland's Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
There is hereby incorporated by reference the consolidated
financial statements appearing on Pages 41 through 55, the
supplemental information appearing on Pages 58 through 61, and the
information appearing under the caption "Management's Discussion
and Analysis-Quarterly Financial Information" on Page 40 in
Ashland's Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There has been no change in Ashland's independent auditors
during the two fiscal years ended September 30, 1994.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information
under the caption "Election of Directors" in Ashland's
definitive Proxy Statement for its January 26, 1995 Annual Meeting
of Shareholders, which was filed with the SEC within 120 days
after September 30, 1994 ("Proxy Statement"). See also the list of
Ashland's executive officers and related information under
"Executive Officers of Ashland" in Item X herein.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information to
appear under the captions "Executive Compensation" and
"Compensation of Directors" in Ashland's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
There is hereby incorporated by reference the information to
appear under the caption "Election of Directors" and the
information regarding the ownership of securities of Ashland in
Ashland's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information to
appear under the caption "Compensation Committee Interlocks and
Insider Participation" in Ashland's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
(1) and (2) Financial Statements and Financial Schedules
The consolidated financial statements and financial schedules
of Ashland presented or incorporated by reference in this report
are listed in the index on Page 27.
(3) Exhibits
3.1 - Second Restated Articles of Incorporation of Ashland,
as amended to May 18, 1993.
22
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3.2 - Bylaws of Ashland, as amended to March 17, 1994.
4.1 - Ashland agrees to provide the SEC, upon request, copies
of instruments defining the rights of holders of long-
term debt of Ashland, and all of its subsidiaries for
which consolidated or unconsolidated financial
statements are required to be filed with the SEC.
4.2 - Indenture, dated as of August 15, 1989, as amended and
restated as of August 15, 1990, between Ashland and
Citibank, N.A., as Trustee (filed as Exhibit 4(a) to
Ashland's 10-K for the fiscal year ended September 30,
1991, and incorporated herein by reference).
The following Exhibits 10.1 through 10.17 are compensatory plans
or arrangements or management contracts required to be filed as
exhibits pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.
10.1 - Amended Stock Incentive Plan for Key Employees of
Ashland Oil, Inc. and its Subsidiaries.
10.2 - Ashland Oil, Inc. Deferred Compensation and Stock
Incentive Plan for Non-Employee Directors (filed as
Exhibit 10(c).18 to Ashland's Form 10-Q for the quarter
ended December 31, 1993, and incorporated herein by
reference).
10.3 - Ashland Oil, Inc. Director Retirement Plan (filed as
Exhibit 10(c).3 to Ashland's Form 10-K for the fiscal
year ended September 30, 1988, and incorporated herein
by reference).
10.4 - Eighth Amended and Restated Ashland Oil, Inc.
Supplemental Early Retirement Plan for Certain Key
Executive Employees (filed as Exhibit 10(c).4 to
Ashland's Form 10-K for the fiscal year ended September
30, 1992, and incorporated herein by reference).
10.5 - Ashland Oil, Inc. Amended Performance Unit Plan.
10.6 - Ashland Oil, Inc. Incentive Compensation Plan (filed as
Exhibit 10(c).6 to Ashland's
10-K for the fiscal year ended September 30, 1993, and
incorporated herein by reference).
10.7 - Ashland Oil, Inc. Deferred Compensation Plan for Key
Employees (filed as Exhibit 10(c).7 to Ashland's Form
10-K for the fiscal year ended September 30, 1988, and
incorporated herein by reference).
10.8 - Ashland Oil, Inc. ERISA Forfeiture Plan (filed as
Exhibit 10(c).8 to Ashland's 10-K for the fiscal year
ended September 30, 1989, and incorporated herein by
reference).
10.9 - Ashland Oil, Inc. Deferred Compensation Plan for ERISA
Forfeitures (filed as Exhibit 10(c).9 to Ashland's 10-K
for the fiscal year ended September 30, 1991, and
incorporated herein by reference).
10.10 - Ashland Oil, Inc. Director Death Benefit Program (filed
as Exhibit 10(c).10 to Ashland's 10-K for the fiscal
year ended September 30, 1990, and incorporated herein
by reference).
10.11 - Ashland Oil, Inc. Salary Continuation Plan (filed as
Exhibit 10(c).11 to Ashland's Form 10-K for the fiscal
year ended September 30, 1988, and incorporated herein
by reference).
10.12 - Forms of Ashland Oil, Inc. Executive Employment
Contract between Ashland Oil, Inc. and certain
executive officers of Ashland (filed as Exhibit
10(c).12 to Ashland's 10-K for the fiscal year ended
September 30, 1989, and incorporated herein by
reference).
10.13 - Form of Indemnification Agreement between Ashland Oil,
Inc. and each member of its Board of Directors (filed
as Exhibit 10(c).13 to Ashland's 10-K for the fiscal
year ended September 30, 1990, and incorporated herein
by reference).
10.14 - Ashland Oil, Inc. Nonqualified Excess Benefit Pension
Plan (filed as Exhibit 10(c).14 to Ashland's Form 10-K
for the fiscal year ended September 30, 1988, and
incorporated herein by reference).
10.15 - Ashland Oil, Inc. Long-Term Incentive Plan.
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10.16 - Ashland Oil, Inc. Directors' Charitable Award Program
(filed as Exhibit 10(c).16 to Ashland's Form 10-K for
the fiscal year ended September 30, 1991, and
incorporated herein by reference).
10.17 - Ashland Oil, Inc. 1993 Stock Incentive Plan.
11 - Computation of Earnings Per Share (appearing on Page 33
of Ashland's Form 10-K for the fiscal year ended
September 30, 1994).
13 - Portions of Ashland's Annual Report to Shareholders,
incorporated by reference herein, for the fiscal year
ended September 30, 1994.
21 - List of Subsidiaries.
23 - Consent of Ernst & Young, independent auditors.
24 - Power of Attorney, including resolutions of the Board
of Directors.
27 - Financial Data Schedule
Upon written or oral request, a copy of the above exhibits will
be furnished at cost.
(b) REPORTS ON FORM 8-K
None
24
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ASHLAND OIL, INC.
(Registrant)
By: /s/ Kenneth L. Aulen
-------------------------------
(Kenneth L. Aulen, Administrative
Vice President and Controller)
Date: December 8, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant, in the capacities indicated, on December
8, 1994.
Signatures Capacity
---------- ---------
/s/ John R. Hall Chairman of the Board of Directors,
--------------------------------- Chief Executive Officer
John R. Hall and Director
/s/ J. Marvin Quin Senior Vice President and
--------------------------------- Chief Financial Officer
J. Marvin Quin
/s/ Kenneth L. Aulen Administrative Vice President,
--------------------------------- Controller and Principal
Kenneth L. Aulen Accounting Officer
* Director
---------------------------------
Thomas E. Bolger
* Director
---------------------------------
Samuel C. Butler
* Director
---------------------------------
Frank C. Carlucci
* Director
---------------------------------
Paul W. Chellgren
* Director
---------------------------------
James B. Farley
* Director
---------------------------------
Edmund B. Fitzgerald
* Director
---------------------------------
Mannie L. Jackson
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* Director
---------------------------------
Patrick F. Noonan
* Director
---------------------------------
Jane C. Pfieffer
* Director
---------------------------------
Michael D. Rose
* Director
---------------------------------
William L. Rouse, Jr.
* Director
---------------------------------
Robert B. Stobaugh
* Director
---------------------------------
James W. Vandeveer
By: /s/ Thomas L. Feazell
----------------------------
Thomas L. Feazell
Attorney-in-Fact
Date: December 8, 1994
26
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES
Page
Consolidated financial statements and supplemental
information:
Statements of consolidated income . . . . . . . . . . . . *
Consolidated balance sheets . . . . . . . . . . . . . . . *
Statements of consolidated common stockholders' equity . . *
Statements of consolidated cash flows . . . . . . . . . . *
Notes to consolidated financial statements . . . . . . . . *
Five year information by industry segment . . . . . . . . *
Supplemental oil and gas information . . . . . . . . . . . *
Management's discussion and analysis-Quarterly financial
information . . . . . . . . . . . . . . . . . . . . . . . *
Consolidated financial schedules:
V- Property, plant and equipment . . . . . . . . . 29
VI- Accumulated depreciation, depletion and
amortization of property, plant and equipment . . 30
VIII- Valuation and qualifying accounts . . . . . . . 31
IX- Short-term borrowings . . . . . . . . . . . . . 32
------------------
*The consolidated financial statements appearing on Pages 41
through 55, the supplemental information appearing on Pages 58
through 61 and the information appearing under the caption
"Management's Discussion and Analysis-Quarterly Financial
Information" on Page 40 in Ashland's Annual Report are incorporated
by reference in this Annual Report on Form 10-K.
Schedules other than those listed above have been omitted because
of the absence of the conditions under which they are required or
because the information required is shown in the consolidated
financial statements or the notes thereto. Separate financial
statements of unconsolidated affiliates are omitted because each
company does not constitute a significant subsidiary using the 20%
tests when considered individually. Summarized financial
information for such affiliates is disclosed in Note D of Notes to
Consolidated Financial Statements in Ashland's Annual Report.
27
<PAGE>
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements and
schedules of Ashland Oil, Inc. and subsidiaries listed in the
accompanying index to financial statements and financial schedules
(Item 14(a)). These financial statements and schedules are the
responsibility of Ashland's management. Our responsibility is to
express an opinion on these financial statements and schedules
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, the financial statements listed in the
accompanying index to financial statements (Item 14(a)) present
fairly, in all material respects, the consolidated financial
position of Ashland Oil, Inc. and subsidiaries at September 30,
1994, and 1993, and the consolidated results of their operations
and their cash flows for each of the three years in the period
ended September 30, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
As discussed in Note A to the consolidated financial statements,
in fiscal 1992 Ashland changed its methods of accounting for
postretirement benefits other than pensions and for income taxes.
Louisville, Kentucky Ernst & Young LLP
November 2, 1994
28
<PAGE>
<TABLE>
<CAPTION>
Ashland Oil, Inc. and Subsidiaries
Schedule V - Property, Plant and Equipment
----------------------------------------------------------------------------------------------------------------
Other additions (deductions)
(In millions) Balance at Retirements ------------------------------------- Balance
beginning and Operations at end
of year Additions transfers acquired Divestitures Other-net of year
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended September 30, 1994
Petroleum $2,790 $155 $ (20) $ 1 $ (15) $ - $2,911
SuperAmerica 440 39 (20) - - - 459
Valvoline 250 25 (3) 1 - - 273
Chemical 573 61 (7) 6 - - 633
Construction 582 45 (4) 12 (107) - 528
Exploration 924 41 (22) - - - 943
Corporate 146 10 (5) - - - 151
----------------------------------------------------------------------------------------------------------------
$5,705 $376 $ (81) $ 20 $(122) $ - $5,898
================================================================================================================
Year ended September 30, 1993
Petroleum $2,662 $230 $ (14) $ - $ (88) $ - $2,790
SuperAmerica 517 25 (22) - (80) - 440
Valvoline 238 21 (7) - - (2) 250
Chemical 547 51 (19) - (6) - 573
Construction 562 43 (20) - (3) - 582
Exploration 894 42 (12) - - - 924
Corporate 145 20 (19) - - - 146
----------------------------------------------------------------------------------------------------------------
$5,565 $432 $ (113) $ - $(177) $(2) $5,705
================================================================================================================
Year ended September 30, 1992
Petroleum $2,432 $273 $ (22) $(1) $ (20) $ - $2,662
SuperAmerica 486 37 (7) 5 - (4) 517
Valvoline 222 19 (3) - - - 238
Chemical 488 47 (13) 25 - - 547
Construction 545 42 (21) 3 (7) - 562
Exploration 835 67 (17) 9 - - 894
Corporate 158 19 (32) - - - 145
----------------------------------------------------------------------------------------------------------------
$5,166 $504 $(115) $41 $ (27) $(4) $5,565
================================================================================================================
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Ashland Oil, Inc. and Subsidiaries
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
------------------------------------------------------------------------------------------------------------------
(In millions) Balance at Depreciation, Retirements Balance
beginning depletion and and at end
Classification of year amortization(1) transfers Divestitures of year
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1994
Petroleum $1,296 $131 $(16) $ (8) $1,403
SuperAmerica 185 27 (15) - 197
Valvoline 79 15 2 - 96
Chemical 280 37 (8) - 309
Construction 412 39 (5) (81) 365
Exploration 610 35 (14) - 631
Corporate 73 11 (3) - 81
------------------------------------------------------------------------------------------------------------------
$2,935 $295 $(59) $(89) $3,082
==================================================================================================================
Year ended September 30, 1993
Petroleum $1,242 $123 $ (9) $(60) $1,296
SuperAmerica 199 28 (15) (27) 185
Valvoline 71 13 (5) - 79
Chemical 260 35 (12) (3) 280
Construction 390 44 (20) (2) 412
Exploration 583 36 (9) - 610
Corporate 73 11 (11) - 73
------------------------------------------------------------------------------------------------------------------
$2,818 $290 $(81) $(92) $2,935
==================================================================================================================
Year ended September 30, 1992
Petroleum $1,138 $121 $(17) $ - $1,242
SuperAmerica 172 31 (4) - 199
Valvoline 60 13 (2) - 71
Chemical 236 35 (11) - 260
Construction 369 44 (19) (4) 390
Exploration 558 42 (17) - 583
Corporate 69 11 (7) - 73
------------------------------------------------------------------------------------------------------------------
$2,602 $297 $(77) $ (4) $2,818
==================================================================================================================
</TABLE>
[FN]
(1) Includes amounts charged to general corporate expenses.
30
<PAGE>
<TABLE>
<CAPTION>
Ashland Oil, Inc. and Subsidiaries
Schedule VIII - Valuation and Qualifying Accounts
---------------------------------------------------------------------------------------------------------------------
(In millions) Balance at Provisions Balance
beginning charged to Reserves Other at end
Description of year earnings utilized changes of year
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1994
Reserves deducted from asset accounts
Accounts receivable $20 $11 $ (8)(1) $ - $23
Inventories 5 3 (2) - 6
---------------------------------------------------------------------------------------------------------------------
Year ended September 30, 1993
Reserves deducted from asset accounts
Accounts receivable $18 $13 $ (9)(1) $(2) $20
Inventories 9 2 (6) - 5
---------------------------------------------------------------------------------------------------------------------
Year ended September 30, 1992
Reserves deducted from asset accounts
Accounts receivable $18 $30 $(30)(1) $ - $18
Inventories 6 6 (3) - 9
---------------------------------------------------------------------------------------------------------------------
<FN>
(1) Uncollected amounts written off, net of recoveries of $2 million in 1994, $3 million in 1993 and $2 million in 1992.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Ashland Oil, Inc. and Subsidiaries
Schedule IX - Short-Term Borrowings
------------------------------------------------------------------------------------------------------------------------
Amount Outstanding
(In millions) Weighted -------------------------- Weighted
average Maximum average
Balance interest at any Average interest
at end rate at end month end during rate during
Category of short-term borrowings of year of year during year year(1) year(2)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1994
Notes payable to banks $ 57 5.1% $ 69 $ 26 4.1%
Commercial paper 15 5.0% 40 6 4.4%
------------------------------------------------------------------------------------------------------------------------
Year ended September 30, 1993
Notes payable to banks $ 42 3.3% $165 $ 87 3.3%
Commercial paper 35 3.4% 111 40 3.3%
------------------------------------------------------------------------------------------------------------------------
Year ended September 30, 1992
Notes payable to banks $146 3.6% $165 $108 4.3%
Commercial paper 89 3.5% 89 45 4.4%
------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Average is based on daily outstanding balances of short-term borrowings.
(2) Weighted average is based on interest expense on short-term borrowings divided by average short-term borrowings
outstanding.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Ashland Oil, Inc. and Subsidiaries
Exhibit 11 - Computation of Earnings (Loss) Per Share
Years Ended September 30
-----------------------------------------------------------------------------------------------------------------------
(In millions except per share data) 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Primary earnings (loss) per share
Income (loss) available to common shares
Net income (loss) $ 197 $ 142 $ (336)
Ashland Coal, Inc. (ACI) equity income and Ashland's share of
ACI's cumulative effect of accounting changes (net of income
taxes) - (25) (4)
Ashland's share of ACI primary earnings
per share (net of income taxes) - 23 4
Dividends on convertible preferred stock (19) (6) -
-----------------------------------------------------------------------------------------------------------------------
$ 178 $ 134 $ (336)
-----------------------------------------------------------------------------------------------------------------------
Average common shares and equivalents outstanding
Average common shares outstanding 60 60 60
Common shares issuable upon exercise of stock options 1 - -
Share adjustment for prepaid contribution to leveraged
employee stock ownership plan (LESOP) - (1) (2)
-----------------------------------------------------------------------------------------------------------------------
61 59 58
-----------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share $2.94 $2.26 $(5.75)
=======================================================================================================================
Earnings (loss) per share assuming full dilution
Income (loss) available to common shares
Net income (loss) $ 197 $ 142 $ (336)
ACI equity income and Ashland's share of ACI's cumulative
effect of accounting changes (net of income taxes) - (25) (4)
Ashland's share of ACI earnings per share assuming
full dilution (net of income taxes) - 21 4
Interest on convertible debentures (net of income taxes) 5 6 -
-----------------------------------------------------------------------------------------------------------------------
$ 202 $ 144 $ (336)
-----------------------------------------------------------------------------------------------------------------------
Average common shares and equivalents outstanding
Average common shares outstanding 60 60 60
Common shares issuable upon
Exercise of stock options 1 1 -
Conversion of debentures 2 3 -
Conversion of preferred stock 9 3 -
Share adjustment for prepaid contribution to LESOP - (1) (2)
-----------------------------------------------------------------------------------------------------------------------
72 66 58
------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share $2.79 $2.20 $(5.75)
========================================================================================================================
</TABLE>
33
[ASHLAND LOGO]
ASHLAND OIL, INC.
SECOND RESTATED ARTICLES
OF INCORPORATION
(INCLUDING ALL AMENDMENTS THERETO)
As Effective May 18, 1993
<PAGE>
TABLE OF CONTENTS
RECORDING DATA
SECOND RESTATED ARTICLES OF INCORPORATION
ASHLAND OIL, INC.
<TABLE>
<CAPTION>
Date Filed In Date
Office of Recorded in Number of
Secretary Office of Shares
of State County Clerk Authorized -
Document of Kentucky Clerk Explanation
_________________ _______________ ______________________ __________________
<S> <C> <C> <C>
1. Second Restated January 29, 1987 Boyd Co., KY - January 30,000,000 shares
Articles of 30, 1987, Arts. of Inc., Cumulative Preferred
Incorporation Book 25, Page 461; Stock, no par value;
Greenup Co., KY - January 150,000,000 shares
30, 1987, Arts. of Inc., Common Stock, $1 par
Book 9, Page 543 value
2. Certificate and January 29, 1987 Boyd Co., KY - January 10,000,000 shares
Statement, etc. 30, 1987, Arts. of Inc., initially issuable
Establishing and Book 25, Page 470;
Designating Greenup Co., KY - January
Cumulative 30, 1987, Arts. of Inc.,
Preferred Stock, Book 9, Page 552
Series of
1987, etc. of AOI
3. Amendment No. 1 January 28, 1988 Boyd Co., KY - January New Article X
29, 1988, Arts. of Inc.,
Book 25, Page 954;
Greenup Co., KY - January
29, 1988, Arts. of Inc.,
Book 10, Page 169
4. Amendment No. 2 January 27, 1989 Boyd Co., KY - January New Article XI
30, 1989, Arts. of Inc.,
Book 26, Page 522;
Greenup Co., KY - January
30, 1989, Arts. of Inc.,
Book 10, Page 423
5. Amendment No. 3 May 18, 1993 Boyd Co., KY - May 6,000,000 shares of
18, 1993, Arts. of Inc., $3.125 Cumulative
Book 30, Page 59; Convertible
Greenup Co., KY - May Preferred Stock,
18, 1993, Arts. of Inc., no par value
Book 12, Page 322
</TABLE>
<PAGE>
[STAMP]
ORIGINAL COPY
FILED
SECRETARY OF STATE OF KENTUCKY
FRANKFORT, KENTUCKY
JANUARY 29, 1987
12:45 PM
SECOND RESTATED ARTICLES OF INCORPORATION
OF
ASHLAND OIL, INC.
Pursuant to Section 271A.320 of the Kentucky Business Corporation Act,
Ashland Oil, Inc., pursuant to a resolution duly adopted by its Board of
Directors, hereby adopts the following Second Restated Articles of
Incorporation (hereinafter called the "Articles of Incorporation"):
ARTICLE I
The name of the corporation is Ashland Oil, Inc. (hereinafter called the
"Company" or the "Corporation").
ARTICLE II
The purpose for which the Company is organized is the transaction of any
or all lawful businesses for which corporations may be organized under the
Kentucky Business Corporation Act, or any act amendatory thereof, supplemental
thereto or substituted therefor (hereinafter called the "Act"), and to do all
things necessary, convenient, proper or desirable in connection with or
incident to any of the Company's businesses.
ARTICLE III
A. The Company shall have all the powers conferred upon a corporation
organized under the Act and shall have all powers necessary, convenient or
desirable in order to fulfill and further the purpose of the Company.
B. The Company shall have the power to purchase shares of the stock of
the Company to the extent of unreserved and unrestricted capital and earned
surplus of the Company and to any greater extent permitted by the Act.
C. The Board of Directors of the Company may distribute to the
shareholders of the Company a portion of the Company's assets, in cash or
property, out of capital surplus of the Company and from any other source
permitted by the Act.
ARTICLE IV
A. The aggregate number of shares which the Company is authorized to
issue is 30,000,000 shares of Cumulative Preferred Stock, without par value
(hereinafter called the "Preferred Stock"), and 150,000,000 shares of Common
Stock, par value $1.00 per share (hereinafter called the "Common Stock").
B. Preferred Stock
(1) To the extent permitted by the Act, the Board of Directors is
authorized, by resolution, to cause the Preferred Stock to be divided
into and issued from time to time in one or more series and to fix and
determine the designation and number of shares, and the relative rights
and preferences of the shares, of each such series, and to change shares
of one series that have been redeemed or reacquired into shares of
another series.
(2) All shares of Preferred Stock shall rank equally and be
identical in all respects except as to the relative rights and
preferences of any series fixed and determined by the Board of
Directors, which may vary to the extent permitted by the Act.
<PAGE>
(3) The Preferred Stock shall be preferred over the Common Stock
as to payment of dividends. Before any dividends or distributions
(other than dividends or distributions payable in Common Stock) on the
Common Stock shall be declared and set apart for payment or paid, the
holders of shares of each series of Preferred Stock shall be entitled to
receive dividends (either in cash, shares of Common Stock or Preferred
Stock, or otherwise) when, as and if declared by the Board of Directors,
at the rate and on the date or dates fixed in the resolution adopted by
the Board of Directors establishing such series, and no more. With
respect to each series of Preferred Stock, the dividends on each share
of such series shall be cumulative from the date of issue of such share
unless some other date is fixed in the resolution adopted by the Board
of Directors establishing such series. Accruals of dividends shall not
bear interest.
(4) The Preferred Stock shall be preferred over the Common Stock
as to assets so that the holders of each series of Preferred Stock shall
be entitled to be paid, upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company and before any distribution is
made to the holders of Common Stock, the amount fixed in the resolution
adopted by the Board of Directors establishing such series, but in such
case the holders of such series of Preferred Stock shall not be entitled
to any other or further payment. If upon any such liquidation,
dissolution or winding up of the Company its net assets shall be
insufficient to permit the payment in full of the respective amounts to
which the holders of all outstanding Preferred Stock are entitled, the
entire remaining net assets of the Company shall be distributed among
the holders of each series of Preferred Stock in amounts proportionate
to the full amounts to which the holders of each such series are
respectively so entitled. For purposes of this paragraph (4), the
voluntary sale, lease, exchange or transfer of all or substantially all
of the Company's property or assets to, or its consolidation or merger
with, one or more corporations shall not be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the Company.
(5) All shares of any series of Preferred Stock shall be
redeemable to the extent permitted by the Act and fixed in the
resolution adopted by the Board of Directors establishing such series.
All shares of any series of Preferred Stock shall be convertible into
shares of Common Stock or into shares of any other series of Preferred
Stock to the extent permitted by the Act and fixed in the resolution
adopted by the Board of Directors establishing such series.
(6) Unless otherwise provided herein or by the Act, or unless
otherwise provided in the resolution adopted by the Board of Directors
establishing any series of Preferred Stock, the holders of shares of
Preferred Stock shall be entitled to one vote for each share of
Preferred Stock held by them on all matters properly presented to
shareholders, the holders of Common Stock and the holders of all series
of Preferred Stock voting together as one class.
(7) So long as any shares of Preferred Stock are outstanding, the
Company shall not:
(a) Redeem, purchase or otherwise acquire any shares of
Common Stock if at the time of making such redemption, purchase or
acquisition, the Company shall be in default with respect to any
dividends accrued on, or any obligation to retire, shares of
Preferred Stock.
(b) Without the affirmative vote or consent of the holders
of at least 66 2/3 percent of the number of shares of Preferred
Stock at the time outstanding, voting or consenting (as the case
may be) separately as a class without regard to series, given in
person or by proxy, either in writing or by resolution adopted at
a meeting called for the purpose, (i) create any class of stock
ranking prior to the Preferred Stock as to dividends or upon
liquidation or increase the authorized number of shares of any
such class of stock or (ii) alter or change any of the provisions
of these Articles of Incorporation so as adversely to affect the
relative rights and preferences of the Preferred Stock or (iii)
increase the authorized number of shares of Preferred Stock.
(c) Without the affirmative vote or consent of the holders
of at least 66 2/3 percent of the number of shares of any series
of Preferred Stock at the time outstanding, voting or consenting
(as the case may be) separately as a series, given in person or by
proxy, either in writing or by resolution adopted at a meeting
called for the purpose, alter or change any of the provisions of
these Articles of Incorporation so as adversely to affect the
relative rights and preferences of such series.
2
<PAGE>
C. Common Stock
(1) The holders of Common Stock of the Company shall be entitled
to one vote for each share of Common Stock held by them on all matters
properly presented to shareholders, except as otherwise provided herein
or by the Act.
(2) Subject to the preferential rights of Preferred Stock set
forth herein or in the resolution adopted by the Board of Directors
establishing any series of Preferred Stock, such dividends (either in
cash, shares of Common Stock or Preferred Stock, or otherwise) as may be
determined by the Board of Directors may be declared and paid on the
Common Stock from time to time in accordance with the Act.
D. No holder of shares of any class of stock of the Company shall have
any preemptive right to subscribe to stock, obligations, warrants,
subscription rights or other securities of the Company of any class, whether
now or hereafter authorized.
ARTICLE V
The Company shall have perpetual existence.
ARTICLE VI
Subject to the restriction that the number of directors shall not be
less than the number required by the laws of the Commonwealth of Kentucky, the
number of directors may be fixed, from time to time, pursuant to the By-laws
of the Company.
The members of the Board of Directors (other than those who may be
elected by the holders of any class or series of capital stock of the Company
having a preference over the Common Stock as to dividends or upon liquidation
pursuant to the terms of these Articles of Incorporation or of such class or
series of stock) shall be classified (so long as the Board of Directors shall
consist of at least nine members pursuant to the By-laws), with respect to the
time for which they severally hold office, into three classes, as nearly equal
in number as possible, as shall be provided in the By-laws of the Company, one
class to be originally elected for a term expiring at the annual meeting of
the shareholders to be held in 1987, another class to be originally elected
for a term expiring at the annual meeting of the shareholders to be held in
1988, and another class to be originally elected for a term expiring at the
annual meeting of the shareholders to be held in 1989, with each class to hold
office until the successors of such class are elected and qualified. At each
annual meeting of the shareholders, the date of which shall be fixed by or
pursuant to the By-laws of the Company, the successors of the class of
directors whose term expires at that meeting shall be elected to hold office
for a term expiring at the annual meeting of shareholders held in the third
year following the year of their election.
Subject to any requirements of law and the rights of any class or series
of capital stock of the Company having a preference over the Common Stock as
to dividends or upon liquidation pursuant to the terms of these Articles of
Incorporation or of such class or series of stock (and notwithstanding the
fact that a lesser percentage may be specified by law, these Articles of
Incorporation or the terms of such class or series), the affirmative vote of
the holders of 80 percent or more of the voting power of the then outstanding
voting stock of the Company, voting together as a single class, shall be
required to remove any director without cause. For purposes of this Article
VI, "cause" shall mean the willful and continuous failure of a director to
substantially perform such director's duties to the Company, other than any
such failure resulting from incapacity due to physical or mental illness, or
the willful engaging by a director in gross misconduct materially and
demonstrably injurious to the Company. As used in these Articles of
Incorporation, "voting stock" shall mean shares of capital stock of the
Company entitled to vote generally in an election of directors.
Subject to any requirements of law and the rights of any class or series
of capital stock of the Company having a preference over the Common Stock as
to dividends or upon liquidation pursuant to the terms of these Articles of
Incorporation or of such class or series of stock, newly created directorships
resulting from any
3
<PAGE>
increase in the number of directors may be filled by the Board of Directors,
or as otherwise provided in the By-laws, and any vacancies on the Board of
Directors resulting from death, resignation, removal or other cause shall only
be filled by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the Board of Directors, or
by a sole remaining director, or as otherwise provided in the By-laws. Any
director elected in accordance with the preceding sentence shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
ARTICLE VII
In furtherance and not in limitation of the powers conferred upon it by
law, the Board of Directors is expressly authorized to:
A. adopt any By-laws that the Board of Directors may deem necessary or
desirable for the efficient conduct of the affairs of the Company, including,
but not limited to, provisions governing the conduct of, and the matters which
may properly be brought before, annual or special meetings of the shareholders
and provisions specifying the manner and extent to which prior notice shall be
given of the submission of proposals to be considered at any such meeting or
of nominations for election of directors to be held at any such meeting; and
B. repeal, alter or amend the By-laws.
In addition to any requirements of law and any other provisions of these
Articles of Incorporation or the terms of any class or series of capital stock
having a preference over the Common Stock as to dividends or upon liquidation
(and notwithstanding the fact that a lesser percentage may be specified by
law, these Articles of Incorporation or the terms of such class or series),
the affirmative vote of the holders of 80 percent or more of the voting power
of the then outstanding voting stock of the Company, voting together as a
single class, shall be required to amend, alter or repeal any provision of the
By-laws.
ARTICLE VIII
A. A higher than majority vote of shareholders for certain Business
Combinations shall be required as follows:
(1) In addition to any affirmative vote otherwise required by law
or these Articles of Incorporation or the terms of any class or series
of capital stock of the Company having a preference over the Common
Stock as to dividends or upon liquidation (and notwithstanding the fact
that a lesser percentage may be specified by law, these Articles of
Incorporation or the terms of such class or series) and except as
otherwise expressly provided in Section B of this Article VIII:
(a) any merger or consolidation of the Company or any
Subsidiary with an Interested Shareholder or with any other
corporation, whether or not itself an Interested Shareholder,
which is, or after such merger or consolidation would be, an
Affiliate of an Interested Shareholder who was an Interested
Shareholder prior to the transaction;
(b) any sale, lease, transfer, or other disposition, other
than in the ordinary course of business, in one transaction or a
series of transactions in any twelve-month period, to any
Interested Shareholder or any Affiliate of an Interested
Shareholder, other than the Company or any Subsidiary, of any
assets of the Company or any Subsidiary having, measured at the
time the transaction or transactions are approved by the Board of
Directors, an aggregate book value as of the end of the Company's
most recently ended fiscal quarter of 5 percent or more of the
total market value of the outstanding stock of the Company or of
its net worth as of the end of its most recently ended fiscal
quarter;
(c) the issuance or transfer by the Company or any
Subsidiary, in one transaction or a series of transactions in any
twelve-month period, of any equity securities of the Company or
any Subsidiary which have an aggregate market value of 5% or more
of the total market value of the outstanding stock
4
<PAGE>
of the Company, determined as of the end of the Company's most
recently ended fiscal quarter prior to the first such issuance or
transfer, to any Interested Shareholder or any Affiliate of any
Interested Shareholder, other than the Company or any Subsidiary,
except pursuant to the exercise of warrants or rights to purchase
securities offered pro rata to all holders of the Company's voting
stock or any other method affording substantially proportionate
treatment to the holders of voting stock;
(d) the adoption of any plan or proposal for the liquidation
or dissolution of the Company in which anything other than cash
will be received by an Interested Shareholder or any Affiliate of
an Interested Shareholder; or
(e) any reclassification of securities, including any
reverse stock split; any recapitalization of the Company; any
merger or consolidation of the Company with any Subsidiary; or any
other transaction which has the effect, directly or indirectly, in
one transaction or a series of transactions, of increasing by 5
percent or more the proportionate amount of the outstanding shares
of any class of equity securities of the Company or any Subsidiary
which is directly or indirectly beneficially owned by any
Interested Shareholder or any Affiliate of any Interested
Shareholder;
shall require the recommendation of the Board of Directors and the
affirmative vote of the holders of at least (i) 80 percent of the voting
power of the then outstanding voting stock of the Company, voting
together as a single class, and (ii) two-thirds of the voting power of
the then outstanding voting stock other than voting stock beneficially
owned by the Interested Shareholder who is, or whose Affiliate is, a
party to the Business Combination or by an Affiliate or Associate of
such Interested Shareholder, voting together as a single class.
(2) The term "Business Combination" as used in this Article VIII
shall mean any transaction which is referred to in any one or more of
clauses (a) through (e) of paragraph (1) of Section A of this Article
VIII.
B. The provisions of Section A of this Article VIII shall not be
applicable to any Business Combination, and such Business Combination shall
require only such affirmative vote (if any) as is required by law, any other
provision of these Articles of Incorporation or the terms of any class or
series of capital stock of the Company having a preference over the Common
Stock as to dividends or upon liquidation, if all conditions specified in
either of the following paragraphs (1) or (2) are met:
(1) The Business Combination shall have been approved by
resolution by a majority of the Continuing Directors at a meeting of the
Board of Directors at which a quorum consisting of at least a majority
of the then Continuing Directors was present; or
(2) All the following five conditions have been met:
(a) The aggregate amount of the cash and the market value as
of the Valuation Date of consideration other than cash to be
received per share by holders of Common Stock in such Business
Combination is at least equal to the highest of the following:
(i) the highest per share price, including any
brokerage commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Shareholder for any
shares of Common Stock (a) within the two-year period
immediately prior to the Announcement Date or (b) in the
transaction in which it became an Interested Shareholder,
whichever is higher;
(ii) the market value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is
higher; and
(iii) the price per share equal to the market value
per share of Common Stock determined pursuant to clause (ii)
immediately preceding, multiplied by the fraction resulting
from (a) the highest per share price, including any
brokerage commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Shareholder for any
shares of Common Stock acquired by it within the two-year
period immediately prior to the Announcement Date, over (b)
the market value per share of Common Stock on the first day
in such two-year period on which the Interested Shareholder
acquired any shares of Common Stock.
5
<PAGE>
(b) The aggregate amount of the cash and the market value as
of the Valuation Date of consideration other than cash to be
received per share by holders of shares of any class or series of
outstanding stock other than Common Stock is at least equal to the
highest of the following, whether or not the Interested
Shareholder has previously acquired any shares of a particular
class or series of stock:
(i) the highest per share price, including any
brokerage commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Shareholder for any
shares of such class of stock acquired by it (a) within the
two-year period immediately prior to the Announcement Date
or (b) in the transaction in which it became an Interested
Shareholder, whichever is higher;
(ii) the highest preferential amount per share to
which the holders of shares of such class of stock are
entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company;
(iii) the market value per share of such class of
stock on the Announcement Date or on the Determination Date,
whichever is higher; and
(iv) the price per share equal to the market value per
share of such class of stock determined pursuant to clause
(iii) immediately preceding, multiplied by the fraction
resulting from (a) the highest per share price, including
any brokerage commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Shareholder for any
shares of any class of voting stock acquired by it within
the two-year period immediately prior to the Announcement
Date over (b) the market value per share of the same class
of voting stock on the first day in such two-year period on
which the Interested Shareholder acquired any shares or the
same class of voting stock.
(c) In making any price calculation under paragraph (2) of
this Section B, appropriate adjustments shall be made to reflect
any reclassification or stock split (including any reverse stock
split), stock dividend, recapitalization, reorganization or any
similar transaction which has the effect of increasing or reducing
the number of outstanding shares of the stock. The consideration
to be received by holders of any class or series of outstanding
stock is to be in cash or in the same form as the Interested
Shareholder has previously paid for shares of the same class or
series of stock. If the Interested Shareholder has paid for shares
of any class of stock with varying forms of consideration, the
form of consideration for such class of stock shall be either in
cash or the form used to acquire the largest number of shares of
such class or series of stock previously acquired by it.
(d) After the Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such
Business Combination:
(i) there shall have been no failure to declare and
pay at the regular date thereof any full periodic dividends,
whether or not cumulative, on any outstanding Preferred
Stock of the Company or other capital stock entitled to a
preference over the Common Stock as to dividends or upon
liquidation;
(ii) there shall have been no reduction in the annual
rate of dividends paid on the Common Stock, except as
necessary to reflect any subdivision of the Common Stock,
and no failure to increase the annual rate of dividends as
necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or
other similar transaction which has the effect of reducing
the number of outstanding shares of Common Stock; and
(iii) the Interested Shareholder did not become the
beneficial owner of any additional shares of stock of the
Company except as part of the transaction which resulted in
such Interested Shareholder or by virtue of proportionate
stock splits or stock dividends.
The provisions of clauses (i) and (ii) immediately preceding shall not
apply if neither an Interested Shareholder nor any Affiliate or Associate of
an Interested Shareholder voted as a director of the Company in a manner
inconsistent with such clauses and the Interested Shareholder, within ten days
after any act or failure to act inconsistent with such clauses, notifies the
Board of Directors of the Company in writing that the Interested Shareholder
disapproves thereof and requests in good faith that the Board of Directors
rectify such act or failure to act.
6
<PAGE>
(e) After the Interested Shareholder has become an
Interested Shareholder, the Interested Shareholder shall not have
received the benefit, directly or indirectly, except
proportionately as a shareholder, of any loans, advances,
guarantees, pledges or other financial assistance provided by the
Company or any Subsidiary, whether in anticipation of or in
connection with such Business Combination or otherwise.
C. For purposes of this Article VIII:
(1) "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 Exchange Act of 1934, as in effect on December 1, 1985
(the term "registrant" in such Rule 12b-2 meaning in this case the Company).
(2) "Announcement Date" means the first general public announcement of
the proposal or intention to make a proposal of the Business Combination or
its first communication generally to shareholders of the Company, whichever is
earlier.
(3) "Beneficial owner" when used with respect to any voting stock, means
a person who, individually or with any Affiliate or Associate has:
(i) the right to acquire voting stock, whether such right is
exercisable immediately or only after the passage of time and whether or
not such right is exercisable only after specified conditions are met
pursuant to any agreement, arrangement, or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise;
(ii) the right to vote voting stock pursuant to any agreement,
arrangement, or understanding; or
(iii) any agreement, arrangements, or understanding for the
purpose of acquiring, holding, voting or disposing of voting stock with
any other person who beneficially owns, or whose Affiliates or
Associates beneficially own, directly or indirectly, such shares of
voting stock.
(4) "Continuing Director" means any member of the Board of Directors who
is not an Affiliate or Associate of an Interested Shareholder or any of its
Affiliates, other than the Company or any Subsidiary, and who was a director
of the Company prior to the time the Interested Shareholder became an
Interested Shareholder, and any other member of the Board of Directors who is
not an Affiliate or Associate of an Interested Director or any of its
Affiliates, other than the Company or any Subsidiary, and was recommended or
elected by a majority of the Continuing Directors at a meeting at which a
quorum consisting of a majority of the Continuing Directors is present.
(5) "Determination Date" means the date on which an Interested
Shareholder first became an Interested Shareholder.
(6) "Equity security" means:
(a) any stock or similar security, certificate of interest, or
participation in any profit-sharing agreement, voting trust certificate,
or certificate of deposit for the foregoing;
(b) any security convertible, with or without consideration, into
an equity security, or any warrant or other security carrying any right
to subscribe to or purchase an equity security; or
(c) any put, call, straddle, or other option, right or privilege
of acquiring an equity security from or selling an equity security to
another without being bound to do so.
(7) "Interested Shareholder" means any person, other than the Company or
any Subsidiary, who:
(a) is the beneficial owner, directly or indirectly, of 10 percent
or more of the voting power of the outstanding voting stock of the
Company; or
(b) is an Affiliate of the Company and at any time within the two-
year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10 percent or more of the voting power
of the then outstanding voting stock of the Company.
7
<PAGE>
For the purpose of determining whether a person is an Interested
Shareholder, the number of shares of voting stock deemed to be outstanding
shall include shares deemed owned by the person through application of
paragraph (3) of this Section C but shall not include any other shares of
voting stock which may be issuable pursuant to any agreement, arrangement, or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise. Furthermore, any such beneficial ownership or voting power arising
solely out of a trustee or custodial relationship of any person in connection
with a Company "employee benefit or stock plan" shall be excluded for purposes
of determining whether or not any such person is an Interested Stockholder.
For purposes hereof, the term "employee benefit or stock plan" of the Company
shall mean any option, bonus, appreciation, profit sharing, retirement,
incentive, thrift, employee stock ownership, dividend reinvestment, savings or
similar plan of the Company.
(8) "Market value" means:
(a) in the case of stock, the highest closing sale price during
the 30 calendar day period immediately preceding the date in question of
a share of such stock on the Composite Tape for New York Stock Exchange
listed stocks, or, if such stock is not quoted on such Composite Tape,
on the New York Stock Exchange, or if such 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 stock is listed,
or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the
30 calendar day period 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 quotation is available, the fair
market value on the date in question of a share of such stock as
determined by a majority of the Continuing Directors at a meeting of the
Board of Directors at which a quorum consisting of at least a majority
of the then Continuing Directors is present; and
(b) in the case of property other than cash or stock, the fair
market value of such property on the date in question as determined by a
majority of the Continuing Directors at a meeting of the Board of
Directors at which a quorum consisting of at least a majority of the
then Continuing Directors is present.
(9) "Subsidiary" means any corporation of which voting stock having a
majority of the votes entitled to be cast is owned, directly or indirectly, by
the Company.
(10) "Valuation Date" means:
(a) for a Business Combination voted upon by shareholders, the
later of the day prior to the date of the shareholders' vote or the date
20 business days prior to the consummation of the Business Combination;
and
(b) for a Business Combination not voted upon by shareholders, the
date of the consummation of the Business Combination.
(11) "Voting Stock" means shares of capital stock of the Company
entitled to vote generally in an election of directors.
D. In addition to any requirements of law and any other provisions of
these Articles of Incorporation or the terms of any class or series of capital
stock of the Company entitled to a preference over the Common Stock as to
dividends or upon liquidation (and notwithstanding the fact that a lesser
percentage may be specified by law, these Articles of Incorporation or the
terms of such class or series), the affirmative vote of
(1) the holders of at least 80 percent of the voting power of the
then outstanding voting stock of the Company, voting together as a
single class, and
(2) the holders of at least two-thirds of the voting power of the
then outstanding voting stock of the Company other than the Interested
Shareholder, voting together as a single class,
shall be required to amend, alter or repeal, or adopt any provision
inconsistent with, this Article VIII.
8
<PAGE>
ARTICLE IX
In addition to any requirements of law and any other provisions of these
Articles of Incorporation or the terms of any class or series of capital stock
of the Company having a preference over the Common Stock as to dividends or
upon liquidation (and notwithstanding the fact that a lesser percentage may be
specified by law, these Articles of Incorporation or the terms of such class
or series), the affirmative vote of the holders of 80 percent or more of the
voting power of the then outstanding voting stock of the Company, voting
together as a single class, shall be required to amend, alter or repeal, or
adopt any provision inconsistent with, this Article IX or Article VI or VII of
these Articles of Incorporation. Subject to the foregoing provisions of this
Article IX and Section D of Article VIII, the Company reserves the right from
time to time to amend, alter, change, add to or repeal any provision contained
in these Articles of Incorporation in any manner now or hereafter prescribed
by law and in these Articles of Incorporation, and all rights and powers at
any time conferred upon shareholders, directors and officers of the Company by
these Articles of Incorporation or any amendment thereof are subject to the
provisions of this Article IX and Section D of Article VIII.
The foregoing Second Restated Articles of Incorporation correctly set
forth without change the corresponding provisions sequentially renumbered of
the Restated Articles of Incorporation as heretofore amended, and supersede
the Restated Articles of Incorporation and all amendments thereto.
Dated: January 29, 1987.
ASHLAND OIL, INC.
/Thomas L. Feazell/
_______________________________
By: Thomas L. Feazell
Vice President
/John P. Ward/
_______________________________
By: John P. Ward
Secretary
COMMONWEALTH OF KENTUCKY )
) SS:
COUNTY OF GREENUP )
I, Teresa F. Gabbard, a notary public, do hereby certify that on this
29th day of January, 1987, personally appeared before me JOHN P. WARD, who,
being duly sworn, declared that he is the Secretary of Ashland Oil, Inc., that
he signed the foregoing document as such, and that the statements contained
therein are true.
My commission expires: October 9, 1989
/Teresa F. Gabbard/
_________________________
Teresa F. Gabbard
Notary Public
Prepared by John P. Ward
1000 Ashland Drive
Russell, Kentucky
/John P. Ward/
_____________________________
John P. Ward
9
<PAGE>
[STAMP] [STAMP]
LODGED FOR RECORD ON LODGED FOR RECORD ON
THE 30 DAY OF JUNE THE 30 DAY OF JANUARY
1987 AT 9:57 AM. RECORDED 1987 AT 10:47 AM. RECORDED
IN ART OF INC. BOOK IN ART OF INC. BOOK
NO. 9 PAGE 552 NO. 25 PAGE 470
TAX ________ FEES $5.50 TAX $________ FEE $5.50
DONALD DAVIDSON, CLERK WILLIAM A. SELBEE, CLERK
GREENUP COUNTY BOYD COUNTY
BY JOAN BURNETT, D.C. BY: DONNA MARCUM, D.C.
<PAGE>
[STAMP]
ORIGINAL COPY
FILED
SECRETARY OF STATE OF KENTUCKY
FRANKFORT, KENTUCKY
JANUARY 29, 1987
12:50 PM
DREXELL R. DAVIS
ASHLAND OIL, INC.
CERTIFICATE AND STATEMENT OF RESOLUTION ESTABLISHING AND
DESIGNATING CUMULATIVE PREFERRED STOCK, SERIES
OF 1987, AND FIXING AND DETERMINING CERTAIN RIGHTS
THEREOF AND THE NUMBER OF SHARES INITIALLY ISSUABLE
KNOW ALL MEN BY THESE PRESENTS, that THOMAS L. FEAZELL, as a Vice
President, and JOHN P. WARD, as the Secretary, of ASHLAND OIL INC., a Kentucky
corporation (the "Company"), do hereby certify that at a meeting of the Board
of Directors of the Company duly called and held in accordance with the laws
of Kentucky and the By-laws of the Company on January 29, 1987, the following
resolution establishing and designating the Series of 1987 of the Cumulative
Preferred Stock of the Company and fixing and determining certain rights
thereof and the number of shares initially issuable was duly adopted.
"RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Company (the "Board of Directors") by
the Second Restated Articles of Incorporation of the Company (the "Articles"),
this Board of Directors hereby establishes and designates a series of
Cumulative Preferred Stock, without par value, of the Company and fixes and
determines the number of shares to be initially issuable in such series and
the relative rights and preferences thereof (in addition to the relative
rights and preferences thereof set forth in the Articles which are applicable
to Cumulative Preferred Stock of all series) as follows:
SECTION 1. Designation, Number of Shares and Stated Value. The shares of
such series shall be designated as "Cumulative Preferred Stock, Series of
1987" (the "Series 1987 Preferred Stock"). The stated value per share of the
Series 1987 Preferred Stock shall be $25. The number of shares initially
issuable and constituting the Series 1987 Preferred Stock shall be 10,000,000.
SECTION 2. Dividends or Distributions. (a) The dividend rate for shares
of the Series 1987 Preferred Stock shall be per share per annum the amount of
cash, securities or other property equal to the sum of the Formula Amounts
with respect to each quarterly dividend payable pursuant to Section 2(b)
hereof on the Series 1987 Preferred Stock. The Formula Amount with respect to
each such quarterly dividend payable shall be the greater of (1) $1.25 or (2)
the Formula Number then in effect times the aggregate per whole share amount
of (x) dividends payable in cash and (y) dividends or distributions payable in
assets, securities or other forms of non-cash consideration (other than
dividends or distributions solely in shares of common stock, par value $1.00
of the Company or any stock into which such common stock may be reclassified
or changed as contemplated by the second proviso of this Section 2(a) (the
"Common Stock")), declared on the Common Stock since the immediately preceding
date on which a quarterly dividend was payable under Section 2(b) hereof on
the Series 1987 Preferred Stock (a "Quarterly Dividend Payment Date") or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series 1987 Preferred Stock. For
purposes of the preceding sentence, the aggregate per whole share amount of
all non-cash dividends or distributions with respect to each quarterly payment
of dividends on the Series 1987 Preferred Stock shall be the cash amount
equivalent to the fair market value of all non-cash dividends or distributions
as determined by the Board of Directors, which determination shall be final
and binding. On or before the record date fixed or determined pursuant to
Section 2(b) hereof for each Quarterly Dividend Payment Date after the date of
issuance of any shares of the Series 1987 Preferred Stock, the Company shall
submit for filing with the Secretary of State of the Commonwealth of Kentucky
a certificate which sets forth the dividend payable for each share of the
Series 1987 Preferred Stock on such Quarterly Dividend Payment Date determined
in accordance with the provisions of this Section 2(a). As used herein, the
"Formula Number" shall be 10; provided, however, that if at any time after
January 29, 1987, the Company shall (i) pay a dividend (regardless of when
declared) or make a distribution, on its outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide (by a stock split or
otherwise) or split the outstanding shares of Common Stock into a larger
number of shares of Common Stock, or (iii) combine (by a reverse stock split
or otherwise) the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then in each such event the Formula Number shall be
adjusted to a number determined by multiplying the Formula Number in effect
immediately prior to such event by a fraction, the numerator of which is the
number of shares of Common Stock that are outstanding immediately after such
event and the denominator of which is the number of shares that are
outstanding
<PAGE>
immediately prior to such event (and rounding the result to the nearest whole
number); and provided further that if at any time after January 29, 1987, the
Company shall reclassify or change the outstanding shares of Common Stock into
some other stock (including any such reclassification or change in connection
with a merger in which the Company is the surviving corporation), then in such
event the Formula Number shall be appropriately adjusted to reflect such
reclassification or change.
(b) Except as otherwise provided in the provisions of Article IV of the
Articles, and unless prohibited by Kentucky law, the Company shall declare a
dividend or distribution on the Series 1987 Preferred Stock as provided in
Section 2(a), out of funds legally available therefor, immediately prior to
the time it declares a dividend or distribution on the Common Stock (other
than a dividend or distribution in shares of Common Stock), and such dividend
or distribution on the Series 1987 Preferred Stock shall (except as otherwise
provided in Article IV of the Articles) be payable on the same date on which
the corresponding dividend or distribution on the Common Stock is payable, to
holders of shares of Series 1987 Preferred Stock of record at the close of
business on the record date fixed by the Board of Directors, which shall
(except as otherwise provided in Article IV of the Articles) be the same as
the record date for the corresponding dividend or distribution on the Common
Stock; provided, however, that, in the event no dividend or distribution
(other than a dividend or distribution in shares of Common Stock) shall have
been declared on the Common Stock during the three month period after any
Quarterly Dividend Payment Date (or with respect to the first Quarterly
Dividend Payment Date during the three month period after the first issuance
of any share or fraction of a share of Series 1987 Preferred Stock), a
dividend of $1.25 per share on the Series 1987 Preferred Stock shall, unless
prohibited by Kentucky law, nevertheless be payable, out of funds legally
available therefor, 30 days after the last day of such three month period to
holders of shares of Series 1987 Preferred Stock of record at the close of
business on the record date, which shall (except as otherwise provided in
Article IV of the Articles) be 5 days after the last day of such three month
period.
SECTION 3. Voting Rights. Except as otherwise provided in the provisions
of Article IV of the Articles and by the provisions of applicable law, the
holders of shares of Series 1987 Preferred Stock shall have the following
voting rights:
(a) Each holder of record of one whole share of the Series 1987
Preferred Stock shall be entitled to a number of votes equal to the
Formula Number then in effect on all matters on which holders of the
Common Stock or stockholders generally are entitled to vote. Each holder
of record of a fraction of a share of the Series 1987 Preferred Stock
shall be entitled, for each one-tenth (1/10th) of a share, to a number
of votes equal to one-tenth (1/10th) of the Formula Number then in
effect on all matters on which holders of the Common Stock or
stockholders generally are entitled to vote; and
(b) The holders of shares of Series 1987 Preferred Stock and the
holders of shares of Common Stock shall vote together as one class for
the election of directors of the Company and on all other matters
submitted to a vote of stockholders of the Company.
SECTION 4. Liquidation Rights. Upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company, and before any
distribution is made to the holders of Common Stock, the holder of each full
share or fraction of a share of Series 1987 Preferred Stock shall be entitled
to be paid an amount equal to the accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
plus an amount per whole share equal to the greater of (1) $25 per share or
(2) the Formula Number then in effect times the aggregate amount to be
distributed per share to holders of Common Stock.
SECTION 5. Consolidation, Merger, etc. Except as otherwise provided in
Article IV of the Articles, in case the Company shall enter into any
consolidation, merger, combination or other transaction in which the
outstanding shares of Common Stock are exchanged for or changed into other
stock or securities, cash or any other property, then in any such case the
then outstanding shares of Series 1987 Preferred Stock shall at the same time
be similarly exchanged or changed in an amount per share equal to the Formula
Number then in effect times the aggregate amount of stock, securities, cash or
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is exchanged or changed.
SECTION 6. No Redemption. Except as otherwise provided in Section 5, the
shares of Series 1987 Preferred Stock shall not be subject to redemption by
the Company or at the option of any holder of Series 1987 Preferred
2
<PAGE>
Stock; provided, however, that the Company may purchase or otherwise acquire
outstanding shares of Series 1987 Preferred Stock in the open market or by
offer to any holder or holders of shares of Series 1987 Preferred Stock.
SECTION 7. Fractional Shares. The Series 1987 Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement
dated as of May 15, 1986, between the Company and The Chase Manhattan Bank,
N.A., as Rights Agent, as amended, (a copy of which is filed with the
Securities and Exchange Commission), in whole shares or, at the option of the
Company, in any fraction of a share that is one-tenth (1/10th) of a share or
any integral multiple of such fraction. At the election of the Company prior
to the first issuance of a share or a fraction of a share of Series 1987
Preferred Stock, either (1) certificates may be issued to evidence any such
authorized fraction of a share of Series 1987 Preferred Stock, or (2) any such
authorized fraction of a share of Series 1987 Preferred Stock may be evidenced
by scrip or warrants in registered form which shall entitle the holder thereof
to receive a certificate for a full share upon the surrender of such scrip or
warrants aggregating a full share. The holders of such scrip or warrants shall
have all the rights, privileges and preferences to which the holders of
fractional shares are entitled. In lieu of such fractional shares or scrip or
warrants, the Company may pay registered holders cash equal to the same
fraction of the current market value of a share of Series 1987 Preferred Stock
(if any are outstanding) or the equivalent number of shares of Common Stock.
SECTION 8. Amendments. The Board of Directors reserves the right by
subsequent amendment of this resolution from time to time to increase and, in
its discretion, to decrease the number of shares issuable in this series and
in other respects to amend this resolution within the limitations provided by
Kentucky law and the Articles.
SECTION 9. Definitions. For purposes of this resolution, all terms
defined in the Articles shall have the same meaning herein, except as
otherwise specifically provided herein."
IN TESTIMONY WHEREOF, witness our signatures this 29th day of January,
1987.
/Thomas L. Feazell/
____________________________
Thomas L. Feazell
Vice President
/John P. Ward/
____________________________
John P. Ward
Secretary
COMMONWEALTH OF KENTUCKY )
) SS:
COUNTY OF GREENUP )
I, Teresa F, Gabbard, a Notary Public, do hereby certify that on this
29th day of January, 1987, personally appeared before me JOHN P. WARD, who
being by me first duly sworn, declared that he is the Secretary of ASHLAND
OIL,INC., and that he signed the foregoing document as Secretary of the
Company and that the statements therein contained are true.
/TERESA F. GABBARD/
______________________________
Notary Public
[STAMP]
Prepared by: TERESA F. GABBARD
John P. Ward My Commission expires October 9,
1989
1000 Ashland Drive
Russell, Kentucky 41169
/John P. Ward/
_______________________________
John P. Ward
3
<PAGE>
[STAMP] [STAMP]
LODGED FOR RECORD ON LODGED FOR RECORD ON
THE 30 DAY OF JANUARY THE 30 DAY OF JANUARY
1987 AT 10:46 AM. RECORDED 1987 AT 9:56 AM. RECORDED
IN ART OF INC. BOOK IN ART OF INC. BOOK
NO. 25 PAGE 461 NO. 9 PAGE 543
TAX ________ FEES $14.50 TAX $________ FEE $14.50
WILLIAM A. SELBEE, CLERK DONALD L. DAVIDSON, CLERK
BOYD COUNTY GREENUP COUNTY
BY: DONNA MARCUM, D.C. BY JOAN BURNETT, D.C.
<PAGE>
[STAMP]
ORIGINAL COPY FILED
SECRETARY OF STATE OF KENTUCKY,
FRANKFORT, KENTUCKY
JAN 28, 1988
11:05 AM
BREMER EHRLER
SECRETARY OF STATE
AMENDMENT TO SECOND RESTATED
ARTICLES OF INCORPORATION
OF ASHLAND OIL, INC.
AMENDMENT NO. 1
KNOW ALL MEN BY THESE PRESENTS, that Thomas L. Feazell, as Vice
President, and John P. Ward, as Secretary of Ashland Oil, Inc., a Kentucky
corporation (the "Company") do hereby certify that, at a meeting on January
28, 1988 of the holders of its issued and outstanding stock, which meeting was
duly called upon notice of the specific purpose, the holders of a majority of
the outstanding stock entitled to vote adopted a new Article X of the Second
Restated Articles of Incorporation (the "Articles") of the Company which reads
in its entirety as follows:
Notwithstanding any right to indemnification provided by the
Act to any director, officer, employee or agent of the Company,
the Company may, but shall not be required to, to the maximum
extent permitted by law, indemnify any such person against costs
and expenses (including but not limited to attorneys' fees) and
any liabilities (including but not limited to judgments, fines,
penalties and settlements) paid by or imposed against any such
person in connection with any actual or threatened claim, action,
suit or proceeding, whether civil, criminal, administrative,
legislative, investigative or other (including any appeal relating
thereto) and whether made or brought by or in the right of the
Company or otherwise, in which any such person is involved,
whether as a party, witness, or otherwise, because he or she is or
was a director, officer, employee or agent of the Company or a
director, officer, partner, trustee, employee or agent of any
other corporation, partnership, employee benefit plan or other
entity.
The indemnification authorized by this Article X shall not
supersede or be exclusive of any other right of indemnification
which any such person may have or hereafter acquire under any
provision of these Articles or the By-laws of the Company,
agreement, vote of shareholders or disinterested directors or
otherwise. The Company may take such steps as may be deemed
appropriate by the Board of Directors to provide indemnification
to any such person, including, without limitation, entering into
contracts for indemnification between the Company and individual
directors, officers, employees or agents which may provide rights
to indemnification which are broader or otherwise different than
the rights authorized by this Article. The Company may take such
steps as may be deemed appropriate by the Board of Directors to
secure, subject to the occurrence of such conditions or events as
may be determined by the Board of Directors, the payment of such
amounts as are required to effect any indemnification permitted or
authorized by this Article, including, without limitation,
purchasing and maintaining insurance, creating a trust fund,
granting security interests or using other means (including,
without limitation, irrevocable letters of credit).
Any amendment or repeal of this Article X shall operate
prospectively only and shall not affect any action taken, or
failure to act, by the Company or any such person prior to such
amendment or repeal.
IN TESTIMONY WHEREOF, witness our signatures this 28th day of January,
1988.
/Thomas L. Feazell/ /John P. Ward/
__________________________________ __________________________________
Thomas L. Feazell, Vice President John P. Ward, Secretary
<PAGE>
COMMONWEALTH OF KENTUCKY )
) SS:
COUNTY OF GREENUP )
I, Valerie J. Parks, Notary Public, do hereby certify that on this 28th
day of January, 1988, personally appeared before me JOHN P. WARD, who being by
me first duly sworn, declared that he is the Secretary of ASHLAND OIL, INC.,
and that he signed the foregoing document as such and that the statements
therein contained are true.
/VALERIE J. PARKS/
__________________________________
VALERIE J. PARKS
[STAMP]
VALERIE J. PARKS
Prepared by John P. Ward My Commission expires November 11,
1000 Ashland Drive, 1990
Russell, Kentucky
/John P. Ward/
________________________________
John P. Ward
[STAMP] [STAMP]
LODGED FOR RECORD ON LODGED FOR RECORD ON
THE 29th DAY OF JANUARY THE 29 DAY OF JANUARY
1988 AT 10:55 AM. RECORDED 1988 AT 10:15 AM. RECORDED
IN ART OF INC. BOOK IN ART OF INC. BOOK
NO. 25 PAGE _________ NO. 10 PAGE 169
TAX ________FEES $5.50 TAX $________ FEE $5.50
WILLIAM A. SELBEE, CLERK DONALD L. DAVIDSON, CLERK
BOYD COUNTY GREENUP COUNTY
BY: D.R. MARCUM, D.C. BY: MARY STULTZ, D.C.
<PAGE>
[STAMP]
DATE: JANUARY 27, 1989
TIME: 2:02 PM
AMOUNT: $40.00
BREMER EHRLER
SECRETARY OF STATE
COMMONWEALTH OF KENTUCKY
ARTICLES OF AMENDMENT
TO
SECOND RESTATED ARTICLES OF INCORPORATION
OF ASHLAND OIL, INC.
AMENDMENT NO. 2
Pursuant to the provisions of Section 271B.10-060 of the Kentucky
Business Corporation Act, the undersigned corporation adopts the following
articles of amendment to its Second Restated Articles of Incorporation:
FIRST: The name of the corporation is Ashland Oil, Inc.
SECOND: At a meeting of the Board of Directors held on November 3, 1988,
the Board of Directors proposed that the Second Restated Articles of
Incorporation be amended by adding a new Article XI, and directed that the
proposed amendment be submitted to the shareholders with the affirmative
recommendation of the Board of Directors at a meeting of the company's
shareholders to be held on January 26, 1989 (the "Meeting"), which Meeting was
duly called upon notice of the specific purpose. The text of the new Article
XI is as follows:
ARTICLE XI
No director shall be personally liable to the Company or its
shareholders for monetary damages for breach of his duties as a
director except to the extent that the applicable law from time to
time in effect shall provide that such liability may not be
eliminated or limited.
Neither the amendment nor repeal of this Article XI shall
affect the liability of any director of the Company with respect
to any act or failure to act which occurred prior to such
amendment or repeal.
This Article XI is not intended to eliminate or limit any
protection otherwise available to the directors of the Company.
THIRD: There were 58,707,121 shares of Ashland Oil, Inc. Common Stock,
each of which was entitled to cast one vote, outstanding at December 8, 1988,
the record date for the Meeting, which represent all of the shares entitled to
vote on such amendment.
FOURTH: There were 50,687,052 shares of Ashland Oil, Inc. Common Stock
indisputably represented at the Meeting.
FIFTH: The total number of votes cast for such amendment was 47,745,995
and the total number of votes cast against such amendment was 2,231,353.
Dated January 27, 1989.
ASHLAND OIL, INC.
/Thomas L. Feazell/
By: _____________________________
Thomas L. Feazell
Administrative Vice President
and General Counsel
and
/John P. Ward/
_____________________________
John P. Ward
Secretary
<PAGE>
COMMONWEALTH OF KENTUCKY )
COUNTY OF GREENUP )
The foregoing instrument was acknowledged before me this 27th day of
January, 1989, by Thomas L. Feazell, Administrative Vice President and General
Counsel, and John P. Ward, Secretary, of ASHLAND OIL, INC., a Kentucky
corporation, on behalf of the corporation.
/Valerie J. Parks/
_______________________________
Valerie J. Parks
Notary Public
[STAMP]
VALERIE J. PARKS
Prepared by John P. Ward My Commission Expires November 11,
1000 Ashland Drive 1990
Russell, Kentucky 41114
/John P. Ward/
_________________________
[STAMP]
LODGED FOR RECORD ON
THE 30 DAY OF JANUARY
1989 AT 9:40 AM. RECORDED
IN ART OF INC. BOOK
NO. 10 PAGE 423
TAX $________ FEE $5.50
DONALD L. DAVIDSON, CLERK
GREENUP COUNTY
BY JOAN BURNETT, D.C.
[STAMP]
NO.
LODGED FOR RECORD
THE 30 DAY OF JAN
1989 AT 10:25 AM RECORDED
IN ART OF INC BOOK
NO. 26 PAGE 522
<PAGE>
[STAMP]
RECEIVED & FILED CH $40.00
MAY 18 10:52 AM 93
BOB BABBAGE
SECRETARY OF STATE
COMMONWEALTH KENTUCKY
ARTICLES OF AMENDMENT
TO
SECOND RESTATED ARTICLES OF INCORPORATION
OF ASHLAND OIL, INC.
AMENDMENT NO. 3
Pursuant to the provisions of Section 271B.10-060 of the Kentucky
Business Corporation Act, the undersigned corporation adopts the following
articles of amendment to set forth the preferences, limitations and relative
rights of a series of shares of its Cumulative Preferred Stock, no par value,
under Article IV of its Second Restated Articles of Incorporation:
FIRST: The name of the Corporation is Ashland Oil, Inc.
SECOND: The text of the amendment determining the terms of the series of
shares of the Cumulative Preferred Stock is as follows:
I. Designation of Series and Number of Shares to be Issuable Therein.
This series of the Cumulative Preferred Stock shall be designated $3.125
Cumulative Convertible Preferred Stock (hereinafter called the "Convertible
Preferred Stock"), of which 6,000,000 shares shall be issuable.
II. Rank. All shares of Convertible Preferred Stock shall rank prior,
both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, to all of the Corporation's now or hereafter issued Common
Stock (the "Common Stock"), to all of the Corporation s Cumulative Preferred
Stock, Series of 1987, when and if issued, and to all of the Corporation s
hereafter issued capital stock ranking junior to the Convertible Preferred
Stock both as to the payment of dividends and as to distributions of assets
upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, when and if issued (the Common Stock, the Cumulative
Preferred Stock, Series of 1987, and any such other capital stock being herein
referred to as "Junior Stock").
III. Dividends. The holders of Convertible Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds at the time legally available therefor, dividends at the rate of $3.125
per annum per share, and no more, which shall be fully cumulative, shall
accrue without interest from the date of the initial issuance of such shares
of Convertible Preferred Stock (on a daily basis whether or not such amounts
would be available at that time for distribution to holders of shares of
Convertible Preferred Stock) and shall be payable in cash quarterly in arrears
on March 15, June 15, September 15 and December 15 of each year commencing
June 15, 1993 (with respect to the period from such date of initial issuance
to June 15, 1993) (except that if any such date is a Saturday, Sunday or legal
holiday, then such dividend shall be payable on the next day that is not a
Saturday, Sunday or legal holiday) to holders of record as they appear upon
the stock transfer books of the Corporation on such record dates, not more
than sixty days nor less than ten days preceding the payment dates for such
dividends, as are fixed by the Board of Directors (or, to the extent permitted
by applicable law, a duly authorized committee thereof). In no event shall any
such dividend record date be fixed less than (a) six business days prior to
any date fixed for the redemption of the Convertible Preferred Stock or (b)
with respect to the dividend payment date occurring on March 15, 1997, less
than ten business days prior to any date fixed for such redemption. For
purposes hereof, the term "legal holiday" shall mean any day on which banking
institutions are authorized to close in New York, New York and the term
"business day" shall mean any day other than a Saturday, Sunday or legal
holiday. Subject to the next paragraph of this Section III, dividends on
account of arrears for any past dividend period may be declared and paid at
any time, without reference to any regular dividend payment date. The amount
of dividends payable per share of Convertible Preferred Stock for each
quarterly dividend period shall be computed by dividing the annual dividend
amount by four. The amount of dividends payable for the initial dividend
period and any period shorter than a full quarterly period shall be computed
on the basis of a 360-day year of twelve 30-day months. No interest shall be
payable in respect of any dividend payment on the Convertible Preferred Stock
which may be in arrears.
No dividends or other distributions, other than dividends payable solely
in shares of Junior Stock, shall be
1
<PAGE>
declared, paid or set apart for payment on shares of Junior Stock or any other
capital stock of the Corporation ranking junior as to dividends to the
Convertible Preferred Stock (the Junior Stock and any such other class or
series of the Corporation's capital stock being herein referred to as "Junior
Dividend Stock"), unless and until all accrued and unpaid dividends on the
Convertible Preferred Stock for all dividend payment periods ending on or
before the payment date of such dividends or other distributions on Junior
Dividend Stock shall have been paid or declared and set apart for payment.
No payment on account of the purchase, redemption, retirement or other
acquisition of shares of Junior Dividend Stock or any other class or series of
the Corporation's capital stock ranking junior to the Convertible Preferred
Stock as to distributions of assets upon liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary (the Junior Stock and
any other class or series of the Corporation's capital stock ranking junior to
the Convertible Preferred Stock as to such distributions being herein referred
to as "Junior Liquidation Stock") shall be made unless and until all accrued
and unpaid dividends on the Convertible Preferred Stock for all dividend
payment periods ending on or before such payment for such Junior Dividend
Stock or Junior Liquidation Stock shall have been paid or declared and set
apart for payment; provided, however, that the restrictions set forth in this
sentence shall not apply to the purchase or other acquisition of Junior
Dividend Stock or Junior Liquidation Stock either (A) pursuant to any employee
or director incentive or benefit plan or arrangement (including any
employment, severance or consulting agreement) of the Corporation or any
subsidiary of the Corporation heretofore or hereafter adopted or (B) in
exchange solely for Junior Stock.
No full dividends shall be declared, paid or set apart for payment on
shares of any class or series of the corporation's capital stock hereafter
issued ranking, as to dividends, on a parity with the Convertible Preferred
Stock (any such class or series of the Corporation's capital stock being
herein referred to as "Parity Dividend Stock") for any period unless full
cumulative dividends have been, or contemporaneously are, paid or declared and
set apart for such payment on the Convertible Preferred Stock for all dividend
payment periods ending on or before the payment date of such dividends on
Parity Dividend Stock. No dividends shall be paid on Parity Dividend Stock
except on dates on which dividends are paid on the Convertible Preferred
Stock. All dividends paid or declared and set apart for payment on the
Convertible Preferred Stock and the Parity Dividend Stock shall be paid or
declared and set apart for payment pro rata so that the amount of dividends
paid or declared and set apart for payment per share on the Convertible
Preferred Stock and the Parity Dividend Stock on any date shall in all cases
bear to each other the same ratio that accrued and unpaid dividends to the
date of payment on the Convertible Preferred Stock and the Parity Dividend
Stock bear to each other.
No payment on account of the purchase, redemption, retirement or other
acquisition of shares of Junior Stock, Parity Dividend Stock or any class or
series of the Corporation's capital stock ranking on a parity with the
Convertible Preferred Stock as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary
(any such class or series of the Corporation's capital stock being herein
referred to as "Parity Liquidation Stock") shall be made, and, other than
dividends to the extent permitted by the preceding paragraph, no distributions
shall be declared, paid or set apart for payment on shares of Parity Dividend
Stock or Parity Liquidation Stock, unless and until all accrued and unpaid
dividends on the Convertible Preferred Stock for all dividend payment periods
ending on or before such payment for, or the payment date of such
distributions on, such Parity Dividend Stock or Parity Liquidation Stock shall
have been paid or declared and set apart for payment; provided, however, that
the restrictions set forth in this sentence shall not apply to the purchase or
other acquisition of Parity Dividend Stock or Parity Liquidation Stock either
(A) pursuant to any employee or director incentive or benefit plan or
arrangement (including any employment, severance or consulting agreement) of
the Corporation or any subsidiary of the Corporation hereafter adopted or (B)
in exchange solely for Junior Stock.
Any reference to "distribution" contained in this Section III shall not
be deemed, except as expressly stated, to include any distribution made in
connection with any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary.
IV. Liquidation Preference. In the event of a liquidation, dissolution
or winding up of the Corporation,
2
<PAGE>
whether voluntary or involuntary, the holders of shares of Convertible
Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to shareholders an amount equal to the
dividends accrued and unpaid on such shares on the date of final distribution
to such holders, whether or not declared, without interest, plus a sum equal
to $50 per share, and no more, before any payment shall be made or any assets
distributed to the holders of shares of Junior Liquidation Stock; provided,
however, that such rights shall accrue to the holders of shares of Convertible
Preferred Stock only with respect to assets (if any) remaining after the
Corporation's payments with respect to the liquidation preferences of the
shares of any class or series of the Corporation capital stock hereafter
issued ranking prior to the Convertible Preferred Stock as to distributions of
assets upon such liquidation, dissolution or winding up ("Senior Liquidation
Stock") are fully met. The entire assets of the Corporation available for
distribution to shareholders after the liquidation preferences of the shares
of Senior Liquidation Stock are fully met shall be distributed ratably among
the holders of the Convertible Preferred Stock and Parity Liquidation Stock in
proportion to the respective preferential amounts to which each is entitled
(but only to the extent of such preferential amounts). After payment in full
of the liquidation preferences of the shares of the Convertible Preferred
Stock, the holders of such shares shall not be entitled to any further
participation in any distribution of assets by the Corporation. The voluntary
sale, lease, exchange or transfer of all or substantially all of the Company's
property or assets to, or its consolidation or merger with, one or more
corporations shall not be deemed to be considered a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
V. Redemption at Option of the Corporation. The Convertible Preferred
Stock may not be redeemed by the Corporation prior to March 25, 1997. On and
after such date, the Convertible Preferred Stock may be redeemed by the
Corporation, at its option on any date set by the Board of Directors, in whole
or in part at any time, subject to the limitations, if any, imposed by the
Kentucky Business Corporation Act, for an amount in cash equal to the
applicable price per share set forth for the date fixed for redemption in the
following table:
Date Fixed for Redemption
Price
On or after March 25, 1997 and on or before March 14,1998. $51.88
After March 14, 1998 and on or before March 14, 1999...... $51.56
After March 14, 1999 and on or before March 14, 2000...... $51.25
After March 14, 2000 and on or before March 14, 2001...... $50.94
After March 14, 2001 and on or before March 14, 2002...... $50.63
After March 14, 2002 and on or before March 14, 2003...... $50.31
Any date after March 14, 2003............................. $50.00
plus, in each case, an amount in cash equal to all per share dividends on the
Convertible Preferred Stock accrued and unpaid thereon, whether or not
declared, to but excluding the date fixed for redemption, such sum being
hereinafter referred to as the "Redemption Price".
In case of the redemption of less than all of the then outstanding
Convertible Preferred Stock, the Corporation shall designate by lot, or in
such other manner as the Board of Directors may determine to be fair, the
shares to be redeemed, or shall effect such redemption pro rata.
Notwithstanding the foregoing, the Corporation shall not redeem less than all
of the Convertible Preferred Stock at any time outstanding until all dividends
accrued and in arrears upon all Convertible Preferred Stock then outstanding
shall have been paid in full for all past dividend periods.
Not more than ninety nor less than thirty days prior to the date fixed
for redemption by the Board of Directors, notice thereof by first class mail,
postage prepaid, shall be given to the holders of record of the shares of
Convertible Preferred Stock to be redeemed, addressed to such holders at their
last addresses as shown upon the stock transfer books of the Corporation. Each
such notice of redemption shall specify the date fixed for redemption, the
Redemption Price, the place or places of payment, that payment will be made
upon presentation and surrender of the shares of Convertible Preferred Stock,
that on and after the date fixed for redemption dividends will cease to accrue
on such shares, the then-effective conversion price pursuant to Section VI and
that the right of holders to convert shares of Convertible Preferred Stock
shall terminate at the close of business on
3
<PAGE>
the fifth business day prior to the date fixed for redemption (unless the
Corporation defaults in the payment of the Redemption Price).
Any notice that is mailed as herein provided shall be conclusively
presumed to have been duly given, whether or not the holder of shares of
Convertible Preferred Stock receives such notice; and failure to give such
notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Convertible Preferred Stock. On or after
the date fixed for redemption as stated in such notice, each holder of the
shares called for redemption shall surrender the certificate evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price. If less than
all the shares evidenced by any such surrendered certificate are redeemed, a
new certificate shall be issued evidencing the unredeemed shares.
No fractional shares of Convertible Preferred Stock shall be issued upon
redemption of less than all Convertible Preferred Stock. If more than one
certificate evidencing shares of Convertible Preferred Stock shall be held at
one time by the same holder, the number of full shares issuable upon
redemption of less than all of such shares of Convertible Preferred Stock
shall be computed on the basis of the aggregate number of shares of
Convertible Preferred Stock so held. Instead of any fractional share of
Convertible Preferred Stock that would otherwise be issuable to a holder upon
redemption of less than all shares of Convertible Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional share in
an amount equal to the same fraction of the fair value per share of
Convertible Preferred Stock (as determined in good faith by the Board of
Directors or in any manner prescribed by the Board of Directors) at the close
of business on the date fixed for redemption.
Notice having been given as aforesaid, if, on the date fixed for
redemption, funds necessary for the redemption shall be available therefor and
shall have been deposited with a bank or trust company with irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Convertible Preferred Stock, then, notwithstanding that the certificates
evidencing any shares so called for redemption shall not have been
surrendered, dividends with respect to the shares so called shall cease to
accrue on and after the date fixed for redemption, such shares shall no longer
be deemed outstanding, the holders thereof shall cease to be shareholders of
the Corporation and all rights whatsoever with respect to the shares so called
for redemption (except the right of the holders to receive the Redemption
Price without interest upon surrender of their certificates therefor) shall
terminate. If funds legally available for such purpose are not sufficient for
redemption of the shares of Convertible Preferred Stock which were to be
redeemed, then the certificates evidencing such shares shall be deemed not to
be surrendered, such shares shall remain outstanding and the right of holders
of shares of Convertible Preferred Stock thereafter shall continue to be only
those of a holder of shares of the Convertible Preferred Stock.
The shares of Convertible Preferred Stock shall not be subject to the
operation of any mandatory purchase, retirement or sinking fund.
VI. Conversion Privilege.
(a) Right of Conversion. Each share of Convertible Preferred Stock shall
be convertible at the option of the holder thereof, at any time prior to the
close of business on the fifth business day prior to the date fixed for
redemption of such share as herein provided, into fully paid and nonassessable
shares of Common Stock, at the rate of that number of shares of Common Stock
for each full share of Convertible Preferred Stock that is equal to $50
divided by the conversion price applicable per share of Common Stock, or into
such additional or other securities, cash or property and at such other rates
as required in accordance with the provisions of this Section VI. For purposes
of this resolution, the "conversion price" applicable per share of Common
Stock shall initially be equal to $32.343 and shall be adjusted from time to
time in accordance with the provisions of this Section VI.
(b) Conversion Procedures. Any holder of shares of Convertible Preferred
Stock desiring to convert such shares into Common Stock shall surrender the
certificate or certificates evidencing such shares of Convertible
4
<PAGE>
Preferred Stock at the office of the transfer agent for the Convertible
Preferred Stock, which certificate or certificates, if the Corporation shall
so require, shall be duly endorsed to the Corporation or in blank, or
accompanied by proper instruments of transfer to the Corporation or in blank,
accompanied by irrevocable written notice to the Corporation that the holder
elects so to convert such shares of Convertible Preferred Stock and specifying
the name or names (with address or addresses) in which a certificate or
certificates evidencing shares of Common Stock are to be issued.
Subject to Section VI(l) hereof, no payments or adjustments in respect
of dividends on shares of Convertible Preferred Stock surrendered for
conversion or on account of any dividend on the Common Stock issued upon
conversion shall be made upon the conversion of any shares of Convertible
Preferred Stock and the holder will lose any right to payment of dividends on
the shares of Convertible Preferred Stock surrendered for conversion.
The Corporation shall, as soon as practicable after such deposit of
certificates evidencing shares of Convertible Preferred Stock accompanied by
the written notice and compliance with any other conditions herein contained,
deliver at such office of such transfer agent to the person for whose account
such shares of Convertible Preferred Stock were so surrendered, or to the
nominee or nominees of such person, certificates evidencing the number of full
shares of Common Stock to which such person shall be entitled as aforesaid,
together with a cash adjustment in respect of any fraction of a share of
Common Stock as hereinafter provided. Such conversion shall be deemed to have
been made as of the date of such surrender of the shares of Convertible
Preferred Stock to be converted, and the person or persons entitled to receive
the Common Stock deliverable upon conversion of such Convertible Preferred
Stock shall be treated for all purposes as the record holder or holders of
such Common Stock on such date.
(c) Adjustment of Conversion Price. The conversion price at which a
share of Convertible Preferred Stock is convertible into Common Stock shall be
subject to adjustment from time to time as follows:
(i) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock exclusively in Common Stock or shall
pay or make a dividend or other distribution on any other class or
series of capital stock of the Corporation which dividend or
distribution includes Common Stock, the conversion price in effect at
the opening of business on the day following the date fixed for the
determination of shareholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such conversion price by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or
other, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination.
(ii) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall
otherwise issue to all holders of its Common Stock, rights or warrants
entitling the holders thereof to subscribe for or purchase shares of
Common Stock at a price per share less than the current market price per
share (determined as provided in subparagraph (vi) of this Section
VI(c)) of the Common Stock on the date fixed for the determination of
shareholders entitled to receive such rights or warrants, the conversion
price in effect at the opening of business on the day following the date
fixed for such determination shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares of
Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase
would purchase at such current market price and the denominator shall be
the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of
shares of Common Stock so offered for subscription or purchase, such
reduction to become effective immediately after the opening of business
on the day following the date fixed for such determination. In case any
rights or warrants referred to in this subparagraph (ii) in respect of
which an adjustment shall have been made shall
5
<PAGE>
expire unexercised within 45 days after the same shall have been
distributed or issued by the Corporation, the conversion price shall be
readjusted at the time of such expiration to the conversion price that
would have been in effect if no adjustment had been made on account of
the distribution or issuance of such expired rights or warrants. For the
purposes of this Section VI(c)(ii), if both (A) a Distribution Date (as
such term is defined in the Rights Agreement) and (B) an event set forth
in Section 11(d)(i) or 13(a) of the Rights Agreement shall have
occurred, then the later to occur of such events shall be deemed to
constitute an issuance of rights to purchase shares of the related
common stock.
(iii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
conversion price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
proportionately reduced, and conversely, in case outstanding shares of
Common Stock shall each be combined into a smaller number of shares of
Common Stock, the conversion price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iv) Subject to the last sentence of this subparagraph (iv), in
case the Corporation shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares of any
class or series of capital stock, cash or assets (including securities,
but excluding any rights or warrants referred to in subparagraph (ii) of
this Section VI(c), any dividend or distribution paid exclusively in
cash and any dividend or distribution referred to in subparagraph (i) of
this Section VI(c)), the conversion price shall be reduced so that the
same shall equal the price determined by multiplying the conversion
price in effect immediately prior to the effectiveness of the conversion
price reduction contemplated by this subparagraph (iv) by a fraction of
which the numerator shall be the current market price per share
(determined as provided in subparagraph (vi) of this Section VI(c)) of
the Common Stock on the date fixed for the payment of such distribution
(the "Reference Date") less the fair market value (as determined in good
faith by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors), on the
Reference Date, of the portion of the evidences of indebtedness, shares
of capital stock, cash and assets so distributed applicable to one share
of Common Stock and the denominator shall be such current market price
per share of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following the
Reference Date. If the Board of Directors determines the fair market
value of any distribution for purposes of this subparagraph (iv) by
reference to the actual or when issued trading market for any securities
comprising such distribution, it must in doing so consider the prices in
such market over the same period used in computing the current market
price per share of Common Stock pursuant to subparagraph (vi) of this
Section VI(c). For purposes of this subparagraph (iv), any dividend or
distribution that includes shares of Common Stock or rights or warrants
to subscribe for or purchase shares of Common Stock shall be deemed
instead to be (1) a dividend or distribution of the evidences of
indebtedness, cash, assets or shares of capital stock other than such
shares of Common Stock or rights or warrants (making any further
conversion price reduction required by this subparagraph (iv)
immediately followed by (2) a dividend or distribution of such shares of
Common Stock or such rights or warrants (making any further conversion
price reduction required by subparagraph (i) or (ii) of this Section
VI(c), except (A) the Reference Date of such dividend or distribution as
defined in this subparagraph (iv) shall be substituted as "the date
fixed for the determination of shareholders entitled to receive such
dividend or other distribution or to exchange such Rights", "the date
fixed for the determination of shareholders entitled to receive such
rights or warrants" and "the date fixed for such determination" within
the meaning of subparagraphs (i) and (ii) of this Section VI(c) and (B)
any shares of Common Stock included in such dividend or distribution
shall not be deemed "outstanding at the close of business on the date
fixed for such determination" within the meaning of subparagraph (i) of
this Section VI(c)).
(v) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding (A) cash
that is part of a distribution referred to in (iv) above and, (B) in the
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case of any quarterly cash dividend on the Common Stock, the portion
thereof that does not exceed the per share amount of the next preceding
quarterly cash dividend on the Common Stock (as adjusted to
appropriately reflect any of the events referred to in subparagraphs
(i), (ii), (iii), (iv) and (v) of this Section VI(c)), or all of such
quarterly cash dividend if the amount thereof per share of Common Stock
multiplied by four does not exceed 15 percent of the current market
price per share (determined as provided in subparagraph (vi) of this
Section VI(c) of the Common Stock on the Trading Day (as defined in
Section VI(i) next preceding the date of declaration of such dividend),
the conversion price shall be reduced so that the same shall equal the
price determined by multiplying the conversion price in effect
immediately prior to the effectiveness of the conversion price reduction
contemplated by this subparagraph (v) by a fraction of which the
numerator shall be the current market price per share (determined as
provided in subparagraph (vi) of this Section VI(c)) of the Common Stock
on the date fixed for the payment of such distribution less the amount
of cash so distributed and not excluded as provided above applicable to
one share of Common Stock and the denominator shall be such current
market price per share of the Common Stock, such reduction to become
effective immediately prior to the opening of business on the day
following the date fixed for the payment of such distribution.
(vi) For the purpose of any computation under subparagraphs (ii),
(iv) and (v) of this Section VI(c), the current market price per share
of Common Stock on any date in question shall be deemed to be the
average of the daily Closing Prices (as defined in Section VI(i)) for
the five consecutive Trading Days prior to and including the date in
question; provided, however, that (1) if the "ex" date (as hereinafter
defined) for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the
conversion price pursuant to subparagraph (i), (ii), (iii), (iv), or (v)
above ("Other Event") occurs after the fifth Trading Day prior to the
day in question and prior to the "ex" date for the issuance or
distribution requiring such computation (the "Current Event"), the
Closing Price for each Trading Day prior to the "ex" date for such Other
Event shall be adjusted by multiplying such Closing Price by the same
fraction by which the conversion price is so required to be adjusted as
a result of such Other Event, (2) if the "ex" date, for any Other Event
occurs after the "ex" date for the Current Event and on or prior to the
date in question, the Closing Price for each Trading Day on and after
the "ex" date for such Other Event shall be adjusted by multiplying such
Closing Price by the reciprocal of the fraction by which the conversion
price is so required to be adjusted as a result of such Other Event, (3)
if the "ex" date for any Other Event occurs on the "ex" date for the
Current Event, one of those events shall be deemed for purposes of
clauses (1) and (2) of this proviso to have an "ex" date occurring prior
to the "ex" date for the other event, and (4) if the "ex" date for the
Current Event is on or prior to the date in question, after taking into
account any adjustment required pursuant to clause (2) of this proviso,
the Closing Price for each Trading Day on or after such "ex" date shall
be adjusted by adding thereto the amount of any cash and the fair market
value on the date in question (as determined in good faith by the Board
of Directors in a manner consistent with any determination of such value
for purposes of paragraph (iv) or (v) of this Section VI(c), whose
determination shall be conclusive and described in a resolution of the
Board of Directors) of the portion of the rights, warrants, evidences of
indebtedness, shares of capital stock or assets being distributed
applicable to one share of Common Stock. For purposes of this
paragraph, the term "ex" date, (1) when used with respect to any
issuance or distribution, means the first date on which the Common Stock
trades regular way on the relevant exchange or in the relevant market
from which the Closing Price was obtained without the right to receive
such issuance or distribution and (2) when used with respect to any
subdivision or combination of shares of Common Stock, means the first
date on which the Common Stock trades regular way on such exchange or in
such market after the time at which such subdivision or combination
becomes effective.
(vii) No adjustment in the conversion price shall be required
unless such adjustment would require an increase or decrease of at least
1 percent in the conversion price; provided, however, that any
adjustments which by reason of this subparagraph (vii) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment.
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(viii) Whenever the conversion price is adjusted as herein
provided:
(1) the Corporation shall compute the adjusted conversion
price and shall prepare a certificate signed by the Treasurer of
the Corporation setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such adjustment
is based, and such certificate shall forthwith be filed with the
transfer agent for the Convertible Preferred Stock; and
(2) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall
forthwith be required, and as soon as practicable after it is
required, such notice shall be mailed by the Corporation to all
record holders of shares of Convertible Preferred Stock at their
last addresses as they shall appear upon the stock transfer books
of the Corporation.
(ix) The Corporation from time to time may reduce the conversion
price by any amount for any period of time if the period is at least
twenty days, the reduction is irrevocable during the period and the
Board of Directors of the Corporation shall have made a determination
that such reduction would be in the best interest of the Corporation,
which determination shall be conclusive. Whenever the conversion price
is reduced pursuant to the preceding sentence, the Corporation shall
mail to holders of record of the Convertible Preferred Stock a notice of
the reduction at least fifteen days prior to the date the reduced
conversion price takes effect, and such notice shall state the reduced
conversion price and the period it will be in effect.
(d) No Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Convertible Preferred Stock. If more than one
certificate evidencing shares of Convertible Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Convertible Preferred Stock so surrendered.
Instead of any fractional share of Common Stock that would otherwise be
issuable to a holder upon conversion of any shares of Convertible Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such
fractional share in an amount equal to the same fraction of the market price
per share of Common Stock (as determined by the Board of Directors or in any
manner prescribed by the Board of Directors, which, so long as the Common
Stock is listed on the New York Stock Exchange, shall be the reported last
sale price regular way on the New York Stock Exchange) at the close of
business on the day of conversion.
(e) Reclassification, Consolidation, Merger or Sale of Assets. In the
event that the Corporation shall be a party to any transaction (including
without limitation any recapitalization or reclassification of the Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination
of the Common Stock), any consolidation of the Corporation with, or merger of
the Corporation into, any other person, any merger of another person into the
Corporation (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Corporation), any sale or transfer of all or substantially all of the
assets of the Corporation or any share exchange) pursuant to which the Common
Stock is converted into the right to receive other securities, cash or other
property, then lawful provisions shall be made as part of the terms of such
transaction whereby the holder of each share of Convertible Preferred Stock
then outstanding shall have the right thereafter to convert such share only
into (i) in the case of any such transaction other than a Common Stock
Fundamental Change and subject to funds being legally available for such
purpose under applicable law at the time of such conversion, the kind and
amount of securities, cash and other property receivable upon such transaction
by a holder of the number of shares of Common Stock of the Corporation into
which such share of Convertible Preferred Stock might have been converted
immediately prior to such transaction, after giving effect, in the case of any
Non-Stock Fundamental Change, to any adjustment in the conversion price
required by the provisions of Section VI(h), and (ii) in the case of a Common
Stock Fundamental Change, common stock of the kind received by holders of
Common Stock as a result of such Common Stock Fundamental Change in an amount
determined pursuant to the provisions of Section VI(h). The Corporation or the
person formed by such consolidation or resulting from such merger or which
acquires such assets or which acquires the Corporation's shares, as the case
may be, shall make provisions in its certificate or articles of incorporation
or other constituent document to
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establish such right. Such certificate or articles of incorporation or other
constituent document shall provide for adjustments which, for events
subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section VI. The
above provisions shall similarly apply to successive transactions of the
foregoing type.
(f) Reservation of Shares; Etc. The Corporation shall at all times
reserve and keep available, free from preemptive rights out of its authorized
and unissued stock, solely for the purpose of effecting the conversion of the
Convertible Preferred Stock, such number of shares of its Common Stock as
shall from time to time be sufficient to effect the conversion of all shares
of Convertible Preferred Stock from time to time outstanding. The Corporation
shall from time to time, in accordance with the laws of the Commonwealth of
Kentucky, in good faith and as expeditiously as possible endeavor to cause the
authorized number of shares of Common Stock to be increased if at any time the
number of shares of authorized and unissued Common Stock shall not be
sufficient to permit the conversion of all the then-outstanding shares of
Convertible Preferred Stock.
If any shares of Common Stock required to be reserved for purposes of
conversion of the Convertible Preferred Stock hereunder require registration
with or approval of any governmental authority under any Federal or State law
before such shares may be issued upon conversion, the Corporation will in good
faith and as expeditiously as possible endeavor to cause such shares to be
duly registered or approved as the case may be. If the Common Stock is listed
on the New York Stock Exchange or any other national securities exchange, the
Corporation will, if permitted by the rules of such exchange, list and keep
listed on such exchange, upon official notice of issuance, all shares of
Common Stock issuable upon conversion of the Convertible Preferred Stock.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash out of its
retained earnings other than any special or nonrecurring or other
extraordinary dividend or (2) declare or authorize a redemption or
repurchase of in excess of 10 percent of the then-outstanding shares of
Common Stock; or
(ii) the Corporation shall authorize the granting to all holders
of Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or series or of any other rights or
warrants; or
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change
in par value, or from par value to no par value, or from no par value to
par value), or of any consolidation or merger to which the Corporation
is a party and for which approval of any shareholders of the Corporation
shall be required, or of the sale or transfer of all or substantially
all of the assets of the Corporation or of any share exchange whereby
the Common Stock is converted into other securities, cash or other
property; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed with the transfer agent for the
Convertible Preferred Stock, and shall cause to be mailed to the holders of
record of the Convertible Preferred Stock, at their last addresses as they
shall appear upon the stock transfer books of the Corporation, at least
fifteen days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record (if any) is to be
taken for the purpose of such dividend, distribution, redemption, repurchase,
rights or warrants or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such dividend,
distribution, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution,
liquidation or winding up (but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of the corporate
action required to be specified in such notice).
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(h) Adjustments in Case of Fundamental Changes. Notwithstanding any
other provision in this Section VI to the contrary, if any Fundamental Change
(as defined in Section VI(i) occurs, then the conversion price in effect will
be adjusted immediately after such Fundamental Change as described below. In
addition, in the event of a Common Stock Fundamental Change (as defined in
Section VI(i), each share of Convertible Preferred Stock shall be convertible
solely into common stock of the kind received by holders of Common Stock as
the result of such Common Stock Fundamental Change.
For purposes of calculating any adjustment to be made pursuant to this
Section VI(h) in the event of a Fundamental Change, immediately after such
Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined in
Section VI(i)), the conversion price of the Convertible Preferred Stock
shall thereupon become the lower of (A) the conversion price in effect
immediately prior to such Non-Stock Fundamental Change, but after giving
effect to any other prior adjustments effected pursuant to this Section
VI, and (B) the result obtained by multiplying the greater of the
Applicable Price (as defined in Section VI(i)) or the then applicable
Reference Market Price (as defined in Section VI(i)) by a fraction of
which the numerator shall be $50 and the denominator shall be (x) the
then-current Redemption Price per share of Convertible Preferred Stock
or (y) for any Non-Stock Fundamental Change that occurs before the
Convertible Preferred Stock becomes redeemable by the Corporation
pursuant to Section V, the applicable price per share set forth for the
date of such Non-Stock Fundamental Change in the following table:
Date of Non-Stock Fundamental Change
Price
After date of original issuance of Convertible
Preferred Stock and on or before March 14,1994................. $53.13
After March 14, 1994 and on or before March 14,1995.......... . $52.81
After March 14, 1995 and on or before March 14,1996. .......... $52.50
After March 14, 1996 and on or before March 24,1997............ $52.19
plus, in any case referred to in this clause (y), an amount equal to all
per share dividends on the Convertible Preferred Stock accrued and
unpaid thereon, whether or not declared, to but excluding the date of
such Non- Stock Fundamental Change; and
(ii) in the case of a Common Stock Fundamental Change, the
conversion price of the Convertible Preferred Stock in effect
immediately prior to such Common Stock Fundamental Change, but after
giving effect to any other prior adjustments effected pursuant to this
Section VI, shall thereupon be adjusted by multiplying such conversion
price by a fraction of which the numerator shall be the Purchaser Stock
Price (as defined in Section VI(i)) and the denominator shall be the
Applicable Price; provided, however, that in the event of a Common Stock
Fundamental Change in which (A) 100 percent by value of the
consideration received by a holder of Common Stock is common stock of
the successor, acquiror or other third party (and cash, if any, is paid
with respect to any fractional interests in such common stock resulting
from such Common Stock Fundamental Change) and (B) all of the Common
Stock shall have been exchanged for, converted into or acquired for
common stock (and cash with respect to fractional interests) of the
successor, acquiror or other third party, the conversion price of the
Convertible Preferred Stock in effect immediately prior to such Common
Stock Fundamental Change shall thereupon be adjusted by multiplying such
conversion price by a fraction of which the numerator shall be one (1)
and the denominator shall be the number of shares of common stock of the
successor, acquiror, or other third party received by a holder of one
share of Common Stock as a result of such Common Stock Fundamental
Change.
(i) Definitions. The following definitions shall apply to terms used in
this Section VI:
(1) "Applicable Price" shall mean (i) in the event of a Non-Stock
Fundamental Change in which the holders of the Common Stock receive only
cash, the amount of cash received by the holder of one share of Common
Stock and (ii) in the event of any other Non-Stock Fundamental Change or
any Common Stock Fundamental Change, the average of the daily Closing
Prices of the Common Stock for the ten consecutive
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Trading Days prior to and including the record date for the
determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Non-Stock
Fundamental Change or Common Stock Fundamental Change, or, if there is
no such record date, the date upon which the holders of the Common Stock
shall have the right to receive such cash, securities, property or other
assets, in each case, as adjusted in good faith by the Board of
Directors of the Corporation to appropriately reflect any of the events
referred to in subparagraphs (i), (ii), (iii), (iv) and (v) of Section
VI(c).
(2) "Closing Price" of any common stock on any day shall mean the
last reported sale price regular way on such day or, in case no such
sale takes place on such day, the average of the reported closing bid
and asked prices regular way of the common stock in each case on the New
York Stock Exchange, or, if the common stock is not listed or admitted
to trading on such Exchange, on the principal national securities
exchange or quotation system on which the common stock is listed or
admitted to trading or quoted, or, if not listed or admitted to trading
or quoted on any national securities exchange or quotation system, the
average of the closing bid and asked prices of the common stock in the
over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similarly generally
accepted reporting service, or, if not so available in such manner, as
furnished by any New York Stock Exchange member firm selected from time
to time by the Board of Directors of the Corporation for that purpose.
(3) "Common Stock Fundamental Change" shall mean any Fundamental
Change in which more than 50 percent by value (as determined in good
faith by the Board of Directors of the Corporation) of the consideration
received by holders of Common Stock consists of common stock that for
each of the ten consecutive Trading Days referred to with respect to
such Fundamental Change in Section VI(i)(1) above has been admitted for
listing or admitted for listing subject to notice of issuance on a
national securities exchange or quoted on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") National Market
System; provided, however, that a Fundamental Change shall not be a
Common Stock Fundamental Change unless either (i) the Corporation
continues to exist after the occurrence of such Fundamental Change and
the outstanding shares of Convertible Preferred Stock continue to exist
as outstanding shares of Convertible Preferred Stock, or (ii) not later
than the occurrence of such Fundamental Change, the outstanding shares
of Convertible Preferred Stock are converted into or exchanged for
shares of convertible preferred stock of a corporation succeeding to the
business of the Corporation, which convertible preferred stock has
powers, preferences and relative, participating, optional or other
rights, and qualifications, limitations and restrictions, substantially
similar to those of the Convertible Preferred Stock.
(4) "Fundamental Change" shall mean the occurrence of any
transaction or event in connection with a plan pursuant to which all or
substantially all of the Common Stock shall be exchanged for, converted
into, acquired for or constitute solely the right to receive cash,
securities, property or other assets (whether by means of an exchange
offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise); provided, however, in
the case of a plan involving more than one such transaction or event,
for purposes of adjustment of the conversion price, such Fundamental
Change shall be deemed to have occurred when substantially all of the
Common Stock of the Corporation shall be exchanged for, converted into,
or acquired for or constitute solely the right to receive cash,
securities, property or other assets, but the adjustment shall be based
upon the highest weighted average of consideration per share which a
holder of Common Stock could have received in such transactions or
events as a result of which more than 50 percent of the Common Stock of
the Corporation shall have been exchanged for, converted into, or
acquired for or constitute solely the right to receive cash, securities,
property or other assets.
(5) "Non-Stock Fundamental Change" shall mean any Fundamental
Change other than a Common Stock Fundamental Change.
(6) "Purchaser Stock Price" shall mean, with respect to any Common
Stock Fundamental Change, the average of the daily Closing Prices of the
Common Stock received in such Common Stock Fundamental Change for the
ten consecutive Trading Days prior to and including the record date for
the determination of the holders of the Common Stock entitled to receive
such common stock, or, if there is no such record date,
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the date upon which the holders of the Common Stock shall have the right
to receive such common stock, in each case, as adjusted in good faith by
the Board of Directors of the Corporation to appropriately reflect any
of the events referred to in subparagraphs (i), (ii), (iii), (iv) and
(v) of Section VI(c); provided, however, if no such Closing Prices of
the common stock for such Trading Days exist, then the Purchaser Stock
Price shall be set at a price determined in good faith by the Board of
Directors of the Corporation.
(7) "Reference Market Price" shall initially mean $17.25 (which is
an amount equal to 66 2/3 percent of the reported last sale price for
the Common Stock on the New York Stock Exchange on May 13, 1993), and in
the event of any adjustment to the conversion price other than as a
result of a Fundamental Change, the Reference Market Price shall also be
adjusted so that the ratio of the Reference Market Price to the
conversion price after giving effect to any such adjustment shall always
be the same as the ratio of $17.25 to the initial conversion price per
share set forth in the last sentence of Section VI(a).
(8) "Trading Day" shall mean a day on which securities traded on
the national securities exchange or quotation system or in the over-the-
counter market used to determine the Closing Price.
(j) Dividend or Interest Reinvestment Plans. Notwithstanding the
foregoing provisions, the issuance of any shares of Common Stock pursuant to
any plan providing for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of additional optional
amounts in shares of Common Stock under any such plan, and the issuance of any
shares of Common Stock or options or rights to purchase such shares pursuant
to any employee benefit plan or program of the Corporation or pursuant to any
option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the Convertible Preferred Stock was first
designated (except as expressly provided in Section VI(c)(1) or VI(c)(ii) with
respect to certain events under the Rights Agreement), and any issuance of
Rights (as hereinafter defined), shall not be deemed to constitute an issuance
of Common Stock or exercisable, exchangeable or convertible securities by the
Corporation to which any of the adjustment provisions described above applies.
There shall also be no adjustment of the conversion price in case of the
issuance of any stock (or securities convertible into or exchangeable for
stock) of the Corporation except as specifically described in this Section VI.
If any action would require adjustment of the conversion price pursuant to
more than one of the provisions described above, only one adjustment shall be
made and such adjustment shall be the amount of adjustment which has the
highest absolute value to holders of Convertible Preferred Stock.
(k) Preferred Share Purchase Rights. So long as Preferred Share Purchase
Rights of the kind declared and distributed by the Corporation's Board of
Directors in May 1986, as the same have been and may hereafter be amended
("Rights"), are attached to the outstanding shares of Common Stock of the
Corporation, each share of Common Stock issued upon conversion of the shares
of Convertible Preferred Stock prior to the earliest of any Distribution Date
(as defined in the Rights Agreement), the date of redemption of the Rights or
the date of expiration of the Rights shall be issued with Rights in an amount
equal to the amount of Rights then attached to each such outstanding share of
Common Stock.
(l) Certain Additional Rights. In case the Corporation shall, by
dividend or otherwise, declare or make a distribution on its Common Stock
referred to in Section VI(c)(iv) or VI(c)(v) (including, without limitation,
dividends or distributions referred to in the last sentence of Section
VI(c)(iv)), the holder of each share of Convertible Preferred Stock, upon the
conversion thereof subsequent to the close of business on the date fixed for
the determination of shareholders entitled to receive such distribution and
prior to the effectiveness of the conversion price adjustment in respect of
such distribution, shall also be entitled to receive for each share of Common
Stock into which such share of Convertible Preferred Stock is converted, the
portion of the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so distributed
applicable to one share of Common Stock; provided, however, that, at the
election of the Corporation (whose election shall be evidenced by a resolution
of the Board of Directors) with respect to all holders so converting, the
Corporation may, in lieu of distributing to such holder any portion of such
distribution not consisting of cash securities of the Corporation, pay such
holder an amount in cash equal to the fair market value thereof (as determined
in good faith by the Board of Directors, whose determination shall be
conclusive and
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described in a resolution of the Board of Directors). If any conversion of a
share of Convertible Preferred Stock described in the immediately preceding
sentence occurs prior to the payment date for a distribution to holders of
Common Stock which the holder of the share of Convertible Preferred Stock so
converted is entitled to receive in accordance with the immediately preceding
sentence, the Corporation may elect (such election to be evidenced by a
resolution of the Board of Directors) to distribute to such holder a due bill
for the shares of Common Stock, rights, warrants, evidences of indebtedness,
shares of capital stock, cash or assets to which such holder is so entitled,
provided that such due bill (i) meets any applicable requirements of the
principal national securities exchange or other market on which the Common
Stock is then traded and (ii) requires payment or delivery of such shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets no later than the date of payment or delivery thereof to
holders of shares of Common Stock receiving such distribution.
VII. Voting Rights.
(a) General. The holders of shares of Convertible Preferred Stock shall
not have any voting rights except as set forth below or as otherwise from time
to time required by law. In connection with any right to vote, each holder of
a share of Convertible Preferred Stock shall have one vote for each share
held. Any shares of Convertible Preferred Stock owned, directly or indirectly,
by any entity of which the Corporation owns, directly or indirectly, a
majority of the shares entitled to vote for directors, shall not have voting
rights hereunder and shall not be counted in determining the presence of a
quorum.
(b) Default Voting Rights. Whenever dividends on the Convertible
Preferred Stock or any other class or series of Parity Dividend Stock shall be
in arrears in an aggregate amount equal to at least six quarterly dividends
(whether or not consecutive), (i) the number of members of the Board of
Directors of the Corporation shall be increased by two, effective as of the
time of election of such directors as hereinafter provided and (ii) the
holders of shares of Convertible Preferred Stock (voting separately as a class
with all other affected classes or series of Parity Dividend Stock upon which
like voting rights have been conferred and are exercisable) shall have the
exclusive right to vote for and elect such two additional directors of the
Corporation who shall continue to serve during the period such dividends
remain in arrears. The right of the holders of shares of Convertible Preferred
Stock to vote for such two additional directors shall terminate when all
accrued and unpaid dividends on the Convertible Preferred Stock and all other
affected classes or series of Parity Dividend Stock have been declared and
paid or set apart for payment. The term of office of all directors so elected
shall terminate immediately upon the termination of the right of the holders
of shares of Convertible Preferred Stock and such Parity Dividend Stock to
vote for such two additional directors, and the number of directors of the
Board of Directors of the Corporation shall immediately thereafter be reduced
by two.
The foregoing right of the holders of shares of Convertible Preferred
Stock with respect to the election of two directors may be exercised at any
annual meeting of shareholders or at any special meeting of shareholders held
for such purpose. If the right to elect directors shall have accrued to the
holders of shares of Convertible Preferred Stock more than ninety days
preceding the date established for the next annual meeting of stockholders,
the President of the Corporation shall, within twenty days after the delivery
to the Corporation at its principal office of a written request for a special
meeting signed by the holders of at least 10 percent of all outstanding shares
of Convertible Preferred Stock, call a special meeting of the holders of
Convertible Preferred Stock to be held within sixty days after the delivery of
such request for the purpose of electing such additional directors.
The holders of shares of Convertible Preferred Stock and any Parity
Dividend Stock referred to above voting as a class shall have the right to
remove without cause at any time and replace any directors such holders shall
have elected pursuant to this Section VII.
VIII. Outstanding Shares. For purposes of this amendment, all shares of
Convertible Preferred Stock issued by the Corporation shall be deemed
outstanding, all shares of Convertible Preferred Stock issued by the
Corporation shall be deemed outstanding except (i) from the date fixed for
redemption pursuant to Section V, all shares of Convertible Preferred Stock
that have been so called for redemption under Section V, to the extent
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provided thereunder; (ii) from the date of surrender of certificates
evidencing shares of Convertible Preferred Stock, all shares of Convertible
Preferred Stock converted into Common Stock; and (iii) from the date of
registration of transfer, all shares of Convertible Preferred Stock owned,
directly or indirectly, by any entity of which the Corporation owns, directly
or indirectly, a majority of the shares entitled to vote for directors.
IX. Partial Payments. Upon an optional redemption by the Corporation, if
at any time the Corporation does not pay amounts sufficient to redeem all
Convertible Preferred Stock, then such funds which are paid shall be applied
to redeem such shares of Convertible Preferred Stock as the Corporation may
designate by lot or in such other manner as the Board of Directors may
determine to be fair, or such redemption shall be effected pro rata.
X. Severability of Provisions. Whenever possible, each provision hereof
shall be interpreted in a manner as to be effective and valid under applicable
law, but if any provision hereof is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or otherwise adversely
affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change
as shall be necessary to render the provision in question effective and valid
under applicable law.
XI. Miscellaneous. (a) The Corporation shall pay any and all stock
transfer and documentary stamp taxes that may be payable in respect of any
issuance or delivery of shares of Convertible Preferred Stock or shares of
Common Stock or other securities issued on account of Convertible Preferred
Stock pursuant hereto or certificates or instruments evidencing such shares or
securities. The Corporation shall not, however, be required to pay any such
tax which may be payable in respect of any transfer involved in the issuance
or delivery of shares of Convertible Preferred Stock or Common Stock or other
securities in a name other than that in which the shares of Convertible
Preferred Stock with respect to which such shares or other securities are
issued or delivered were registered, or in respect of any payment to any
person with respect to any such shares or securities other than a payment to
the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled
to such issuance, delivery or payment has paid to the Corporation the amount
of any such tax or has established, to the satisfaction of the Corporation,
that such tax has been paid or is not payable.
(b) In the event that a holder of shares of Convertible Preferred Stock
shall not by written notice designate the name in which shares of Common Stock
to be issued upon conversion of such shares should be registered or to whom
payment upon redemption of shares of Convertible Preferred Stock should be
made or the address to which the certificates or instruments evidencing such
shares or such payment, should be sent, the Corporation shall be entitled to
register such shares and make such payment, in the name of the holder of such
Convertible Preferred Stock as shown on the records of the Corporation and to
send the certificates or instruments evidencing such shares or such payment,
to the address of such holder shown on the records of the Corporation.
THIRD: The Amendment was adopted on May 18, 1993.
FOURTH: The Amendment was duly adopted by the Board of Directors.
ASHLAND OIL, INC.
/Paul W. Chellgren/
_________________________
Paul W. Chellgren
President
COMMONWEALTH OF KENTUCKY )
COUNTY OF GREENUP )
14
<PAGE>
The foregoing instrument was acknowledged before me this 17th day of
May, 1993, by Paul W. Chellgren, President of ASHLAND OIL, INC., a Kentucky
corporation, on behalf the corporation.
/Mary E. Mell/
_________________________________
Mary E. Mell
Notary Public
[STAMP]
MARY E. MELL
My commission expires: July 3,
1994
Prepared by Thomas L. Feazell
1000 Ashland Drive
Russell, Kentucky 41114
/Thomas L. Feazell/
_________________________________
Thomas L. Feazell
15
<PAGE>
[STAMP]
LODGED FOR RECORD ON
THE 18 DAY OF MAY
19993 AT 3:45 PM RECORDED
IN ART. OF INC. BOOK
NO. 12 PAGE 322
TAX $______ FEES $23.50
DONALD L. DAVIDSON, CLERK
GREENUP COUNTY
BY J. THOMPSON D.C.
NO. ___________
LODGED FOR RECORD
ON THE 18 DAY OF MAY
1993 AT 2:55 PM RECORDED
IN ART. OF INC. BOOK
NO. 30 PAGE 59
BY-LAWS
OF
ASHLAND OIL, INC.
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of the Corporation
in the Commonwealth of Kentucky shall be at Ashland Drive, City of Russell,
Greenup County. The names of the registered agents located thereat shall be
designated by the Board from time to time by a resolution adopted by a
majority of the Board.
SECTION 2. Other Offices. The Corporation may also have offices at other
places either within or without the Commonwealth of Kentucky.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the shareholders for
the election of directors and for the transaction of such other business as
may properly come before the meeting shall be held at the principal office of
the Corporation on the last Thursday of January, annually, at the hour of ten
thirty a.m., or at such other place (within or without the Commonwealth of
Kentucky), date and hour as shall be designated in the notice thereof.
SECTION 2. Annual Meeting Business. To be properly brought before an
annual meeting, business must be (i) specified in the notice of the meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors or (iii) otherwise properly brought before
the meeting by a shareholder. For business to be properly brought before an
annual meeting by a shareholder, the shareholder must have given written
notice thereof, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Corporation, not later than 90 days in
advance of such meeting (provided that if the annual meeting of shareholders
is held earlier than the last Thursday in January, such notice must be given
within 10 days after the first public disclosure, which may include any public
filing with the Securities and Exchange Commission, of the date of the annual
meeting). Any such notice shall set forth as to each matter the shareholder
proposes to bring before the annual 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 and in the event that such business
includes a proposal to amend either the Second Restated Articles of
Incorporation or By-laws of the Corporation, the language of the proposed
amendment, (ii) the name and address of the shareholder proposing such
business, (iii) a representation that the shareholder is a holder of record of
stock of the corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to propose such business, and (iv)
any material interest of the shareholder in such business. No business shall
be conducted at an annual meeting of shareholders except in accordance with
this paragraph and the chairman of any annual meeting of shareholders may
refuse to permit any business to be brought before an annual meeting without
compliance with the foregoing procedures.
SECTION 3. Special Meetings. A special meeting of the shareholders may
be called by the Board of Directors, the Chairman of the Board, any Vice
Chairman of the Board or the President, at such place (within or without the
Commonwealth of Kentucky), date and hour as shall be designated in the notice
thereof. The Secretary shall call a special meeting of the shareholders, to be
held on such date as the Secretary shall determine, on the request in writing
of the holders of shares of capital stock of the Corporation entitled to vote
at such meeting which represent one-third or more of the total votes entitled
to be cast at such meeting. Such request shall set forth: (i) the action
proposed to be taken at such meeting and the reasons for the action; (ii) the
name and address of each of such holders who intends to propose action be
taken at such meeting; (iii) a representation that each is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at such meeting to propose the action specified
in the request; (iv) any material interest of any shareholder in such action;
and (v) in the event that any proposed action consists of or includes a
proposal to amend either the Second Restated Articles of Incorporation or the
By-laws of the Corporation, the language of the proposed amendment. The
Secretary may refuse to call a special meeting unless the request is made in
compliance with the foregoing procedure.
SECTION 4. Notice of Meetings. Except as otherwise expressly required by
law, notice of each meeting of the shareholders shall be given not less than
ten nor more than sixty days before the date of the meeting to each
shareholder entitled to vote at such meeting by mailing such notice, postage
prepaid, directed to the shareholder at his address as it appears on the
records of the Corporation. Every such notice shall state the place, date and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called.
Except as otherwise expressly required by law, notice of any adjourned meeting
of the shareholders need not be given if the date, time and place thereof are
announced at the meeting at which the adjournment is taken, unless the
adjournment is for more than 120 days or after the adjournment a new record
date is fixed for the adjourned meeting.
SECTION 5. Record of Shareholders. It shall be the duty of the officer
or agent of the Corporation who shall have charge of its stock transfer books
to prepare and make a complete record of the shareholders entitled to vote at
any meeting of shareholders or adjournment thereof, arranged by voting group
(and within each voting group by class or series), and showing the address of
each shareholder and the number of shares registered in the name of each
shareholder. Such record shall be produced at the time and place of the
meeting and shall be open to the inspection of any shareholder entitled to
vote at such meeting or any adjournment thereof during the whole time of such
meeting or adjournment for the purposes thereof.
SECTION 6. Quorum. At each meeting of the shareholders or adjournment
thereof, except as otherwise expressly required by law, these By-laws or the
Second Restated Articles of Incorporation, shareholders holding a majority of
the shares of the Corporation issued and outstanding and entitled to be voted
thereat shall be present in person or by proxy to constitute a quorum for the
transaction of business.
The shareholders present at a duly organized meeting can continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
SECTION 7. Organization. At each meeting of the shareholders, one of the
following shall act as chairman of the meeting and preside thereat, in the
following order of precedence:
(a) the Chairman of the Board;
(b) a Vice Chairman of the Board in order of rank of seniority in
office;
(c) the President; or
(d) any other officer of the Corporation designated by the Board or the
Executive Committee to act as chairman of such meeting and to preside thereat
if the Chairman of the Board, each Vice Chairman of the Board and the
President shall be absent from such meeting.
The Secretary or, if he shall be absent from such meeting, the person
(who shall be the Deputy Secretary or an Assistant Secretary of the
Corporation, if one of such officers shall be present thereat) whom the
chairman of such meeting shall appoint, shall act as secretary of such meeting
and keep the minutes thereof.
SECTION 8. Order of Business. The order of business at each meeting of
the shareholders shall be determined by the chairman of such meeting, but such
order of business may be changed by a majority in voting interest of those
present in person or by proxy at such meeting and entitled to vote thereat.
SECTION 9. Voting. Except as otherwise expressly required by law, these
By-laws, or the Second Restated Articles of Incorporation, each shareholder
entitled to vote shall, at each meeting of the shareholders, have one vote
(except that at each election for directors each such shareholder shall have
the right to cast as many votes in the aggregate as he shall be entitled to
vote under the Second Restated Articles of Incorporation multiplied by the
number of directors to be elected at such election; and each shareholder may
cast the whole number of votes for one candidate, or distribute such votes
among two or more candidates), in person or by proxy, for each share of the
Corporation held by him and registered in his name on the books of the
Corporation:
(a) on the date fixed pursuant to the provisions of Section 6 of Article
VIII of these By-laws as the record date for the determination of shareholders
who shall be entitled to receive notice of and to vote at such
meeting, or
(b) if no record date shall have been so fixed, then at the close of
business on the day on which notice of such meeting shall be given.
Shares of the Corporation's stock belonging to a majority-owned
subsidiary of the Corporation shall not be counted in determining the total
number of outstanding shares and shall neither be entitled to vote nor counted
for quorum purposes. Any vote of shares of the Corporation may be given at any
meeting of the shareholders by the shareholders entitled thereto in person or
by proxy appointed by an instrument in writing by the shareholder or his duly
authorized attorney-in-fact. The attendance at any meeting of a shareholder
who may theretofore have given a proxy shall not have the effect of revoking
the same unless he shall in writing so notify the Secretary.
At all meetings of the shareholders each matter, except as otherwise
expressly required by law, these By-laws or the Second Restated Articles of
Incorporation, shall be approved if the votes cast in favor of such matter
exceed the votes cast opposing such matter.
Except as otherwise expressly required by law, the vote at any meeting
of the shareholders on any question need not be by ballot, unless so directed
by the chairman of the meeting. On a vote by ballot each ballot shall be
signed by the shareholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by the Board of Directors.
SECTION 2. Number and Term of Office. Except as otherwise provided by
law, the number of directors which shall constitute the Board of Directors
shall be fixed from time to time by a resolution adopted by a majority of the
Board of Directors. So long as the Board of Directors shall consist of nine or
more members, the directors shall be classified with respect to the time for
which they shall severally hold office, by dividing them into three classes,
as nearly equal in number as possible. Each class shall be elected at the
annual meeting of shareholders held in 1986 for terms which will expire as
follows: one class of directors to be originally elected for a term expiring
at the annual meeting of shareholders to be held in 1987; the second class of
directors to be originally elected for a term expiring at the annual meeting
of shareholders to be held in 1988; and the third class of directors to be
originally elected for a term expiring at the annual meeting of shareholders
to be held in 1989.
At each annual meeting of shareholders beginning in 1987, successors to
the class of directors whose term then expires shall be elected to serve for a
term expiring at the annual meeting of shareholders held in the third year
following the year of their election and until their successors shall have
been elected and qualified; provided, that the successor to a director whose
term expires at such annual meeting because he was elected to fill a vacancy
on the board may, if so specified by the Board of Directors, be elected to
serve for a term expiring at the annual meeting of shareholders held in the
first or second year following the year of his election and until his
successor shall have been elected and qualified. The Board of Directors shall
increase or decrease the number of directors in one or more classes as may be
appropriate whenever it increases or decreases the number of directors in
order to ensure that the three classes remain as nearly equal in number as
possible. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
SECTION 3. Nomination. Nominations for the election of directors may be
made by the Board of Directors or by any shareholder entitled to vote for the
election of directors. Any shareholder entitled to vote for the election of
directors at a meeting may nominate a person or persons for election as
directors only if written notice of such shareholder's intent to make such
nomination is given, either by personal delivery or by United States mail,
postage prepaid, to the Secretary of the Corporation, not later than (i) with
respect to an election to be held at an annual meeting of shareholders, 90
days in advance of such meeting (provided that if the annual meeting of
shareholders is held earlier than the last Thursday in January, such notice
must be given within 10 days after the first public disclosure, which may
include any public filing with the Securities and Exchange Commission, of the
date of the annual meeting) and (ii) with respect to an election to be held at
a special meeting of shareholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to shareholders. Each such notice shall set forth: (a) the name
and address of the shareholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the shareholder
is a holder of record of stock of the Corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the shareholder; (d) such
other information regarding each nominee proposed by such shareholder as would
have been required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission had each nominee been
nominated, or intended to be nominated, by the Board of Directors; and (e) the
consent of each nominee to serve as a director of the Corporation if so
elected. The chairman of any meeting of shareholders to elect directors and
the Board of Directors may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
SECTION 4. Election. Except as otherwise expressly provided in the
Second Restated Articles of Incorporation, at each meeting of the shareholders
for the election of directors at which a quorum is present, the persons
receiving the greatest number of votes, up to the number of directors to be
elected, shall be the directors.
SECTION 5. Resignation, Removal and Vacancies. Any director may resign
at any time by giving written notice of his resignation to the Chairman of the
Board, any Vice Chairman of the Board, the President or the Secretary. Any
such resignation shall take effect at the time specified therein, or, if the
time when it shall become effective shall not be specified therein, then it
shall take effect when accepted by action of the Board. Except as aforesaid,
the acceptance of such resignation shall not be necessary to make it
effective.
Any or all directors may be removed at a meeting of the shareholders
called expressly for that purpose (i) in the case of a removal of a director
for cause, by a vote of the holders of a majority of the voting power of the
then outstanding voting stock of the Corporation, voting together as a single
class, or (ii) in the case of a removal of a director without cause, by a vote
of the holders of at least 80% of the voting power of the then outstanding
voting stock of the Corporation, voting together as a single class. If less
than all the directors are to be removed, no one of the directors may be
removed if the votes cast against his removal would be sufficient to elect him
if then cumulatively voted at an election of the entire Board or, if there be
classes of directors, at an election of the class of directors of which he or
she is a part. For purposes of this Section 5, "cause" shall mean the willful
and continuous failure of a director to substantially perform such director's
duties to the Corporation (other than any failure resulting from incapacity
due to physical or mental illness) or the willful engaging by a director in
gross misconduct materially and demonstrably injurious to the Corporation. As
used in these By-laws, "voting stock" shall mean shares of capital stock of
the Corporation entitled to vote generally in the election of directors.
Any vacancy occurring on the Board may be filled by a majority of the
directors then in office, though less than a quorum, and the director elected
to fill such vacancy shall hold office until the next annual meeting of
shareholders at which directors are elected and until his successor is elected
and qualified.
SECTION 6. Meetings.
(A) Annual Meetings. As soon as practicable after each annual election
of directors, the Board shall meet for the purpose of organization and the
transaction of other business.
(B) Regular Meetings. Regular meetings of the Board shall be held at
such dates, times and places as the Board shall from time to time determine.
(C) Special Meetings. Special meetings of the Board shall be held
whenever called by the Chairman of the Board, any Vice Chairman of the Board,
the President or upon the written request of a majority of the members of the
whole Board filed with the Secretary. Any and all business may be transacted
at a special meeting which may be transacted at a regular meeting of the
Board.
(D) Place of Meeting. The Board may hold its meetings at such place or
places within or without the Commonwealth of Kentucky as the Board may from
time to time by resolution determine or as shall be designated in the
respective notices or waiver of notices thereof.
(E) Notice of Meetings. Notices of regular meetings of the Board or of
any adjourned meeting need not be given.
Notices of special meetings of the Board, or of any meeting of any
committee of the Board which has not been fixed in advance as to time and
place by such committee, shall be mailed by the Secretary to each director, or
member of such committee, addressed to him at his residence or usual place of
business, at least two days before the day on which such meeting is to be
held, or shall be sent to him by telegraph, cable or other form of recorded
communication or be delivered personally or by telephone not later than the
day before the day on which such meeting is to be held. Such notice shall
include the date, time and place of such meeting, but any such notice need not
specify the business to be transacted at, or the purpose of, any such meeting.
Notice of any such meeting need not be given to any director or member of any
committee, however, if waived by him in writing, whether before or after such
meeting shall be held, or if he shall be present at such meeting, unless the
director at the beginning of the meeting (or promptly upon his or her arrival)
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
(F) Quorum and Manner of Acting. A majority of the number of directors
fixed by or in the manner provided in these By-laws or in the Second Restated
Articles of Incorporation shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and the vote of a majority of those directors present at any such
meeting at which a quorum is present shall be necessary for the passage of any
resolution or act of the Board, except as otherwise expressly required by law,
these By-laws or the Second Restated Articles of Incorporation.
(G) Action by Consent. Any action required or permitted to be taken at
any meeting of the Board, or of any committee thereof, may be taken without a
meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and such writing is filed with the minutes of the
proceedings of the Board or committee.
(H) Meeting by Telephone. Any meeting of the Board, or of any committee
thereof may be conducted through the use of any means of communication by
which all persons participating in the meeting can hear and speak to each
other, and the directors' participation in such a meeting shall constitute
presence in person at the meeting for all purposes.
(I) Organization. At each meeting of the Board, one of the following
shall act as chairman of the meeting and preside thereat, in the following
order of precedence:
(a) the Chairman of the Board;
(b) a Vice Chairman of the Board in order of rank of seniority in
office; or
(c) the President.
SECTION 7. Compensation. The Board of Directors may fix such amount per
annum and such fees to be paid by the Corporation to directors for attendance
at meetings of the Board or of any committee, or both, as the Board shall from
time to time determine. The Board may likewise provide that the Corporation
shall reimburse each director or member of a committee for any expenses
incurred by him on account of his attendance at any such meeting. Nothing
contained in this Section shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV
COMMITTEES
SECTION 1. Executive Committee.
(A) Designation and Membership. The Board may, by resolution passed by a
majority of the whole Board, designate an Executive Committee consisting of
the Chairman of the Board, each Vice Chairman of the Board, the President and
such additional number of directors as the Board shall determine. Vacancies
may be filled by the Board at any time and any member of the Executive
Committee shall be subject to removal, with or without cause, at any time by
resolution passed by a majority of the whole Board.
(B) Functions and Powers. The Executive Committee, subject to any
limitations prescribed by the Board, shall possess and may exercise, during
the intervals between meetings of the Board, all the powers and authority of
the Board in the management of the business and affairs of the Corporation;
provided, however, that the Executive Committee shall not have the power or
authority to approve amendments to the Second Restated Articles of
Incorporation, adopt agreements of merger or consolidation, recommend to the
shareholders the sale, lease or exchange of all or substantially all the
property and assets of the Corporation, recommend to the shareholders the
dissolution of the Corporation or the revocation of a dissolution, amend these
By-laws or to take any other action which a committee is prohibited by law
from taking.
At each meeting of the Board the Executive Committee shall make a report
of all action taken by it since its last report to the Board.
(C) Meetings and Quorum. The Executive Committee shall meet as often as
may be deemed necessary and expedient at such times and places as shall be
determined by the members of the Executive Committee. A majority of the
members of the Executive Committee shall constitute a quorum. The Chairman of
the Board shall preside at meetings thereof, and, in his absence, the
Executive Committee may appoint any other member of the Executive Committee to
preside.
SECTION 2. Audit Committee.
(A) The Board may by resolution passed by a majority of the whole Board
designate an Audit Committee consisting of three or more directors. Vacancies
may be filled by the Board at any time and any member of the Audit Committee
shall be subject to removal, with or without cause, at any time by resolution
passed by a majority of the whole Board.
(B) The Audit Committee shall review with the independent public
accountants for the Corporation the scope of their examination, receive copies
of the reports of such accountants, meet with representatives of such
accountants for the purpose of reviewing and considering questions relating to
such accountants' examination and such reports, review, either directly or
through such accountants, the internal accounting and auditing procedures of
the Corporation, report the results of the foregoing to the Board and act upon
such other matters as may be referred to it by the Board.
At each meeting of the Board the Audit Committee shall make a report of
all action taken by it since its last report to the Board.
(C) Meetings and Quorum. The Audit Committee shall meet as often as may
be deemed necessary and expedient at such times and places as shall be
determined by the members of the Audit Committee. A majority of the members of
the Audit Committee shall constitute a quorum. The Audit Committee may appoint
any member to preside at meetings thereof.
SECTION 3. Other Committees. The Board may, by resolution passed by a
majority of the whole Board, designate other committees, each committee to
consist of two or more directors and to have such duties and functions as
shall be provided in such resolution. The Board shall have the power to change
the members of any such committee at any time, to fill vacancies and to
discharge any such committee, either with or without cause, at any time.
ARTICLE V
OFFICERS
SECTION 1. Officers and Executive Officers of the Corporation. The
officers of the Corporation shall
be:
(a) a Chairman of the Board;
(b) one or more Vice Chairmen of the Board;
(c) a President;
(d) one or more Vice Presidents, one or more of whom may be designated
as Executive Vice President, one or more of whom may be designated as Senior
Vice President, and one or more of whom may be designated as Administrative
Vice President;
(e) a Secretary and, as and when designated, a Deputy Secretary and one
or more Assistant Secretaries;
(f) a Treasurer and, as and when designated, a Deputy Treasurer and one
or more Assistant Treasurers;
(g) a Controller and, as and when designated, a Deputy Controller and
one or more Assistant Controllers;
(h) an Auditor and, as and when designated, one or more Assistant
Auditors.
The following officers are hereby designated the Executive Officers of the
Corporation:
Chairman of the Board;
Vice Chairmen of the Board;
President;
Executive Vice Presidents;
Senior Vice Presidents;
Administrative Vice Presidents;
Secretary;
Treasurer;
Controller;
Auditor.
SECTION 2. Election and Appointment and Term of Office. Each Executive
Officer shall be elected by the Board at its annual meeting and hold office
until the next annual meeting of the Board and until his successor is elected
or until his earlier death, resignation or removal in the manner hereinafter
provided.
The Board may elect such other officers and designate such other
Executive Officers as it deems necessary and such other officers shall have
such authority and shall perform such duties as the Board may prescribe.
The Chairman of the Board acting jointly with any Vice Chairman of the
Board or the President, by written designation filed with the Secretary, may
appoint all officers, other than Executive Officers, of the Corporation.
Subject to the authority of the Board, the persons having authority to appoint
an officer shall also have authority to fix the salary of such officer.
If additional officers are elected by the Board during the year, each of
them shall hold office until the next annual meeting of the Board at which
officers are regularly elected and until his successor is elected or appointed
or until his earlier death, resignation or removal in the manner hereinafter
provided.
SECTION 3. Resignation, Removal and Vacancies. Any officer may resign at
any time by giving written notice to the Chairman of the Board, any Vice
Chairman of the Board, the President or the Secretary, and such resignation
shall be effective when the notice is delivered, unless the notice specifies a
later effective date.
All officers and agents elected or appointed shall be subject to removal
at any time by the Board with or without cause. All appointed officers may be
removed at any time by the Chairman of the Board acting jointly with any Vice
Chairman of the Board or the President, by written designation filed with the
Secretary.
A vacancy in any office may be filled for the unexpired portion of the
term in the same manner as provided for election or appointment to such
office.
SECTION 4. Duties and Functions.
(A) Chairman of the Board. The Chairman of the Board, if present, shall
preside at all meetings of the shareholders and the Board. He shall be Chief
Executive Officer of the Corporation, shall be vested with executive control
and management of the business and affairs of the Corporation and shall have
the direction of all other officers, agents and employees. He shall perform
all such other duties as are incident to the office or as may be properly
required of him by the Board, subject in all matters to the control of the
Board.
(B) Vice Chairmen of the Board. The Vice Chairman of the Board with
seniority of office, in the absence of the Chairman of the Board, shall
preside at all meetings of the shareholders and the Board. Each Vice Chairman
of the Board shall have such powers, authority and duties as may be delegated
to him from time to time by the Board or the Chairman of the Board.
(C) The President. The President, in the absence of the Chairman of the
Board and all the Vice Chairmen of the Board, shall preside at all meetings of
the shareholders and the Board. He shall have such powers, authority and
duties as may be delegated to him from time to time by the Board or the
Chairman of the Board.
(D) Executive Vice Presidents. The Executive Vice Presidents shall have
uch powers, authority and duties as may be delegated or assigned to them from
time to time by the Board, the Chairman of the Board, any Vice Chairman of the
Board or the President.
(E) Senior Vice Presidents. The Senior Vice Presidents shall have such
powers, authority and duties as may be delegated or assigned to them from time
to time by the Board, the Chairman of the Board, any Vice Chairman of the
Board or the President.
(F) Administrative Vice Presidents. The Administrative Vice Presidents
shall have such powers, authority and duties as may be delegated or assigned
to them from time to time by the Board, the Chairman of the Board, any Vice
Chairman of the Board or the President.
(G) Vice Presidents. The Vice Presidents shall have such powers,
authority and duties as may be delegated or assigned to them from time to time
by the Board, the Chairman of the Board, any Vice Chairman of the Board or the
President.
(H) Secretary. The Secretary shall attend to the giving and serving of
all notices required by law or these By-laws; shall be the custodian of the
corporate seal and shall affix and attest the same to all papers requiring it;
shall have responsibility for preparing minutes of the meetings of the Board
and shareholders; and shall in general perform all the duties incident to the
office of the Secretary, subject in all matters to the control of the Board.
(I) Treasurer. The Treasurer shall have custody and control of the funds
and securities of the Corporation and shall perform all such other duties as
are incident to his office or that may be properly required of him by the
Board, the Chairman of the Board, any Vice Chairman of the Board or the
President.
(J) Controller. The Controller shall maintain adequate records of all
assets, liabilities and transactions of the Corporation; shall see that
adequate audits thereof are currently and regularly made; shall have general
supervision of the preparation of the Corporation's balance sheets, income
accounts and other financial statements or records; and shall perform such
other duties as shall, from time to time, be assigned to him by the Board, the
Chairman of the Board, any Vice Chairman of the Board or the President. These
duties and powers shall extend to all subsidiary corporations and so far as
the Board, the Chairman of the Board, any Vice Chairman of the Board or the
President may deem practicable, to all affiliated corporations.
(K) Auditor. The Auditor shall review the accounting, financial and
related operations of the Corporation and shall be responsible for measuring
the effectiveness of various controls established for the Corporation. His
duties shall include, without limitation, the appraisal of procedures,
verifying the extent of compliance with formal controls and the prevention and
detection of fraud or dishonesty and such other duties as shall, from time to
time, be assigned to him by the Board, the Chairman of the Board, any Vice
Chairman of the Board or the President. These duties and powers shall extend
to all subsidiary corporations and so far as the Board, any Chairman of the
Board, any Vice Chairman of the Board or the President may deem practicable,
to all affiliated corporations.
ARTICLE VI
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. Borrowing Authority. The Chairman of the Board, any Vice
Chairman of the Board, the President, the Senior Vice President supervising
the law function and any other officer, employee, or agent of the
Corporation designated by the Board (collectively, "Designated Officers")
shall, subject to Section 3 hereof, have the power, acting jointly with any
officer designated by the Board as the Chief Financial Officer, Administrative
Vice President responsible for the treasury function, or the Treasurer
(collectively, the "Financial Officers"), to authorize the establishment of
borrowing facility, the borrowing of money or the guaranteeing of debt
obligations of others on behalf of the Corporation. If the approving
Financial Officer is also one of the Designated Officers, the approval
of another Designated Officer must be obtained.
SECTION 2. Deklegation of Authority. Any Financial Officer of the
Corporation acting jointly with any Designated Officer may delegate the
authority to establish borrowing facilities or to borrow money or to issue debt
obligations or to guarantee the debt obligations of others or any combination
of the foregoing to any person(s) on behalf of the Corporation, provided each
obligation to be incurred under each such authority does not exceed the
equivalent of Ten Million United States Dollars (U.S. $10,000,000). Each
delegated authority may not be redelegated. If the approving Financial
Officer is also one of the Designated Officers, the approval of another
Designated Officer must be obtained.
SECTION 3. Limitation of Authority. The Finance Committee of the Board
of Directors shall, subject to the last sentence of this Section 3, retain
authority for and, in its sole discretion, shall authorize (a) any estab-
lishment of borrowing facilities, borrowing of money or issuance of debt
obligations by the Corporation which exceeds the equivalent of Ten Million
United States Dollars (U.S. $10,000,000) and which has a maturity of one year
or more from the effective date of the issuance or borrowing and (b) any
guarantee of any debt obligation of non-affiliated entities by the Corpora-
tion which guaranty is for an amount exceeding the equivalent of Ten Million
United States Dollars (U.S. $10,000,000) and which underlying obligation has
a maturity of one year or more from the effective date of the issuance or
borrowing. The foregoing limitations shall not apply, however, to those
borrowings, debt issuances, or guaranties of debt obligations made or
delivered, under or in connection with a borrowing facility or program
previously approved by the Board of Directors or the Finance Committee or to
such types of transactions with or on behalf of affiliated entities.
SECTION 4. Execution of Documents. The Designated Officers and any other
officer, employee or agent of the Corporation designated by the Board shall
have power, acting alone, to execute and deliver, in the name and on
behalf of the Corporation, (a) mortgages, bonds, debentures, notes, checks,
drafts and other orders evidencing the borrowing or guaranteeing (when so
authorized as provided in Section 1, 2, or 3) or payment of money and (b)
deeds, leases, contracts and other agreements and documents. Each such
named officer empowered to execute and deliver the aforesaid documents and
any such other officer, employee or agent so designated by the Board
pursuant to the first sentence of this Section 4 may delegate such
power (including authority to redelegate) by written instrument to other
officers, employees or agents of the Corporation.
SECTION 5. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation or
otherwise with such banks or other financial institutions as may be designated
by the Board, any Designated Officer, or any other officer, employee or
agent of the Corporation so designated by the Board. Each such named officer
and any such other officer, employee or agent so authorized by the Board
may delegate such power (including authority to redelegate) by written
instrument to other officers, employees or agents of the Corporation.
SECTION 6. Proxies in Respect of Shares or Other Securities of Other
Corporations. The Chairman of the Board, any Vice Chairman of the Board or the
President, and any other officer of the Corporation designated by the Board,
shall have the authority (a) to appoint from time to time an agent or agents
of the Corporation to exercise in the name and on behalf of the Corporation
the powers and rights which the Corporation may have as the holder of shares
or other securities in any other corporation, (b) to vote or consent in
respect of such shares or securities and (c) to execute or cause to be
executed in the name and on behalf of the Corporation and under its corporate
seal, or otherwise, such written proxies, powers of attorney or other
instruments as he may deem necessary or proper in order that the Corporation
may exercise such powers and rights. Sny Designated Officer, or any such
designated officer may instruct any person or persons appointed as
aforesaid as to the manner of exercising such powers and rights.
ARTICLE VII
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders, the
Board, the Executive Committee, the Audit Committee, and such other committees
of the Board as the Board may by resolution designate and shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its shareholders, giving the names
and addresses of all shareholders, and the number and class of the shares held
by each.
ARTICLE VIII
SHARES AND THEIR TRANSFER; FIXING RECORD DATE
SECTION 1. Certificates for Shares. Every owner of shares of the
Corporation shall be entitled to have a certificate which shall set forth upon
the face or back of such certificate, or shall state that the Corporation will
furnish to any shareholder upon request and without charge, a full statement
of the designations, preferences, limitations and relative rights of the
shares of each class of shares authorized to be issued, and the variations in
the relative rights and preferences between the shares of each series of any
preferred or special class of shares, so far as the same have been fixed and
determined, and the authority of the Board to fix and determine the relative
rights and preferences of subsequent series of such preferred or special
classes of shares.
Each certificate representing shares shall state upon the face thereof
that the Corporation is organized under the laws of the Commonwealth of
Kentucky; the name of the person to whom issued; the number and class of
shares, and the designation of the series, if any, which such certificate
represents; and the par value of each share represented by such certificate,
or a statement that the shares are without par value. Such certificate shall
otherwise be in such form as the Board shall prescribe.
Each such certificate shall be signed by, or in the name of the
Corporation by, the Chairman of the Board, any Vice Chairman of the Board, the
President or a Vice President and by the Secretary, the Deputy Secretary or an
Assistant Secretary of the Corporation and shall be sealed with the corporate
seal or contain a facsimile thereof. In case any officer who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer before such certificate is issued, it may nevertheless be
issued by the Corporation with the same effect as if he were such officer at
the date of issue. Where any such certificate is manually countersigned by a
transfer agent or registrar (other than the Corporation itself or an employee
of the Corporation), any of the other signatures on the certificate may be a
facsimile.
SECTION 2. Record. A record shall be kept of the name of the person,
firm or corporation owning the shares represented by each certificate for
shares of the Corporation issued, the number of shares represented by each
such certificate, and the date thereof, and, in the case of cancellation, the
date of cancellation. Except as otherwise expressly required by law, the
person in whose name shares stand on the books of the Corporation shall be
deemed the owner thereof for all purposes as regards the Corporation.
SECTION 3. Transfer of Shares. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof, or by his attorney thereunto duly authorized by written power of
attorney duly executed and filed with the Secretary or with a transfer agent
appointed as provided in Section 4 of this Article, and on the surrender of
the certificate or certificates for such shares properly endorsed.
SECTION 4. Regulations. The Board may make such rules and regulations as
it may deem expedient, not inconsistent with these By-laws, concerning the
issue, transfer and registration of certificates for shares of the
Corporation. The Board may appoint or authorize any officer or officers to
appoint one or more transfer agents and one or more registrars and may require
all certificates for shares to bear the signature or signatures of any of
them.
SECTION 5. Lost, Stolen, Destroyed or Mutilated Certificates. The holder
of any shares of the Corporation shall immediately notify the Corporation of
any loss, theft or mutilation of the certificate therefor. The Corporation may
issue a new certificate for shares in the place of any certificate theretofore
issued by it and alleged to have been lost, stolen, destroyed or mutilated,
and the Board, the Chairman of the Board, any Vice Chairman of the Board, the
President or the Secretary may, in its or his discretion, require the owner of
the lost, stolen, mutilated or destroyed certificate or his legal
representatives to give the Corporation a bond in such sum, limited or
unlimited, in such form and with such surety or sureties as the Board shall in
its discretion determine, to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss, theft, mutilation or
destruction of any such certificate or the issuance of any such new
certificate.
SECTION 6. Fixing Date for Determination of Shareholders of Record. In
order that the Corporation may determine the shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of shares or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than seventy nor less than ten days before the date of such meeting, nor more
than seventy days prior to any other action. A determination of shareholders
entitled to notice of or to vote at a meeting of the shareholders shall apply
to any adjournment of the meeting; provided, however, that the Board may fix a
new record date for the adjourned meeting.
ARTICLE IX
SEAL
The Board shall provide a corporate seal, which shall be in the form of
a circle and shall bear the full name of the Corporation.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of
October in each year.
ARTICLE XI
INDEMNIFICATION
SECTION 1. Every person who is or was an officer or employee of the
Corporation or of any other corporation or entity in which he served as a
director, officer or employee at the request of the Corporation (hereinafter
collectively referred to as a "Covered Person"), shall be indemnified by the
Corporation against any and all reasonable costs and expenses (including but
not limited to attorney's fees) and any liabilities (including but not limited
to judgments, fines, penalties and reasonable settlements) that may be paid by
or imposed against him in connection with or resulting from any pending,
threatened or completed claim, action, suit or proceeding (whether brought by
or in the right of the Corporation or such other corporation or entity or
otherwise), and whether, civil, criminal, administrative, investigative or
legislative (including any appeal relating thereto), in which he may be
involved, as a party or witness or otherwise, by reason of his being or having
been an officer or employee of the Corporation or a director, officer or
employee of such other corporation or entity, or by reasons of any action
taken or not taken in such capacity, whether or not he continues to be such at
the time such liability or expense shall have been paid or imposed, if the
Covered Person:
(a) has been successful on the merits or otherwise with respect to such
claim, action, suit or proceeding; or
(b) acted in good faith, in what he reasonably believed to be the best
interests of the Corporation or such other corporation or entity, as the case
may be, and in addition, in any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful.
As used in this Article XI, the terms "expense" and "liability" shall include,
but not be limited to, counsel fees and disbursements and amounts of
judgments, fines or penalties against, and reasonable amounts paid in
settlement by, a Covered Person. The termination of any claim, action, suit or
proceeding by judgment, settlement (whether with or without court approval),
conviction or upon a plea of guilty or nolo contendere, or its equivalent,
shall not create a presumption that a Covered Person did not meet the
standards of conduct set forth in paragraph (b) of this Section 1.
SECTION 2. Indemnification under paragraph (b) of Section 1 shall be
made unless it is determined by any of the following that the Covered Person
has not met the standard of conduct set forth in paragraph (b) of
Section 1:
(a) the Board, acting by a quorum consisting of directors who were not
parties to (or who are determined to have been successful with respect to) the
claim, action, suit or proceeding;
(b) a committee of the Board established pursuant to Section 3 of
Article IV of the By-laws consisting of directors who were not parties to (or
who are determined to have been successful with respect to) the claim, action,
suit or proceeding;
(c) any officer or group of officers of the Corporation who, by
resolution adopted by the Board, has been given authority to make such
determinations;
(d) either of the following selected by the Board if a disinterested
committee of the Board (as described in paragraph (b) of this Section 2)
cannot be obtained or by the person(s) designated in paragraphs (a), (b) or
(c) of this Section 2:
(1) independent legal counsel (who may be the regular counsel of the
Corporation) who has delivered to the Corporation a written determination; or
(2) an arbitrator or a panel of arbitrators (which panel may include
directors, officers, employees or agents of the Corporation) who has delivered
to the Corporation a written determination.
SECTION 3. Expenses incurred with respect to any claim, action, suit or
proceeding of the character described in Section 1 of this Article XI shall be
advanced to a Covered Person by the Corporation prior to the final disposition
thereof, but the Covered Person shall be obligated to repay such advances if
it is ultimately determined that he is not entitled to indemnification. As a
condition to advancing expenses hereunder, the Corporation may require the
Covered Person to sign a written instrument acknowledging his obligation to
repay any advances hereunder if it is ultimately determined he is not entitled
to indemnity.
Notwithstanding the preceding paragraph, the Corporation may refuse to
advance expenses or may discontinue advancing expenses to a Covered Person if
such advancement is determined by the Corporation, in its sole and exclusive
discretion, not to be in the best interest of the Corporation.
SECTION 4. Notwithstanding anything in this Article XI to the contrary,
no person shall be indemnified in respect of any claim, action, suit or
proceeding initiated by such person or his personal or legal representative,
or which involved the voluntary solicitation or intervention of such person or
his personal or legal representative (other than an action to enforce
indemnification rights hereunder or an action initiated with the approval of a
majority of the Board).
SECTION 5. The rights of indemnification provided in this Article XI
shall be in addition to any other rights to which any Covered Person may
otherwise be entitled to by contract, vote of shareholders or disinterested
directors, other corporate action or otherwise; and in the event of any such
person's death, such rights shall extend to his heirs and legal
representatives.
ARTICLE XII
AMENDMENTS
Any By-law may be adopted, repealed, altered or amended by the Board at
any regular or special meeting thereof. The shareholders of the Corporation
shall have the power to amend, alter to repeal any By-law only to the extent
and in the manner provided in the Second Restated Articles of Incorporation of
the Corporation.
AMENDED STOCK INCENTIVE PLAN FOR KEY EMPLOYEES
OF ASHLAND OIL, INC. AND ITS SUBSIDIARIES
SECTION 1. PURPOSE
The purpose of this amended Stock Incentive Plan For Key Employees of
Ashland Oil, Inc. And Its Subsidiaries (herein called the "Plan") is to revise
the Incentive Stock Option Plan For Key Employees of Ashland Oil, Inc. And Its
Subsidiaries (1981) (such plan as it existed prior to the effective date of
the Plan hereinafter referred to as the "1981 Plan") and to promote the
interests of Ashland Oil, Inc. (herein called "Ashland") and its shareholders
by providing their officers and key employees with an incentive to continue
service with Ashland and its subsidiaries. Through the grant of stock options,
stock appreciation rights and Restricted Stock awards (collectively referred
to as "Grants"), Ashland seeks to attract and retain in its employ individuals
of training, experience and ability and to furnish additional incentive to
officers and other key employees upon whose judgment, initiative and efforts
the successful conduct of its business largely depends.
SECTION 2. ADMINISTRATION
(a) The Plan shall be administered by the Personnel and Compensation
Committee of the Board of Directors of Ashland (herein called the
("Committee"), consisting of not less than three directors of Ashland who shall
be appointed, from time to time, by the Board of Directors of Ashland. No
person who is (or, within one year prior to his or her appointment as a member
of the Committee, was) eligible to participate in the Plan shall be a member
of the Committee. Subject to the express provisions of the Plan, the Committee
shall have plenary authority to interpret the Plan, to prescribe, amend, and
rescind from time to time rules and regulations relating to the Plan, to
determine the eligible employees to whom Grants shall be made, to determine
whether any option hereunder shall be deemed to be an "incentive stock option"
as provided by Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") (herein referred to as "incentive stock options") or an option
not qualifying as an "incentive stock option" under the Code (herein referred
to as "non-qualified options"), to determine the terms and provisions of the
respective Grants (which terms and provisions need not be the same in each
case), and to make all other determinations deemed necessary or advisable for
the administration of the Plan. In making such determinations, the Committee
may take into account the nature of the services rendered by the respective
employees, their present and potential contributions to Ashland's success and
such other factors as the Committee in its discretion shall deem relevant. The
determinations of the Committee on the matters referred to in this Section 2
shall be conclusive.
(b) All determinations of the Committee shall be made by not less than a
majority of its members. Any decision or determination reduced to writing and
signed by all the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held. No member of the
Committee shall be liable, in the absence of bad faith, for any act or
omission with respect to his or her services on the Committee. Services on the
Committee shall constitute services as a Director of Ashland so that members
of the Committee shall be entitled to indemnification and reimbursement for
their services as members of the Committee to the same extent as for services
as Directors of Ashland.
SECTION 3. STOCK SUBJECT TO THE PLAN
There will be reserved for issuance upon the exercise of options and
stock appreciation rights and upon awards of Restricted Stock (as defined in
Section 13), to be granted from time to time under the Plan, an aggregate of
2,000,000 shares of Ashland Common Stock, par value $1.00 per share ("Common
Stock") (which shares include shares heretofore provided for under the 1981
Plan). Such shares may be in whole or in part, as the Board of Directors of
Ashland (the "Board") shall from time to time determine, authorized and
unissued shares of Common Stock or issued shares of Common Stock which shall
have been reacquired by Ashland. If any option or stock appreciation right
granted under the Plan shall expire or
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terminate for any reason without having been exercised (or considered to have
been exercised as provided in Section 7) in full, the shares subject thereto
shall again be available for the purposes of the Plan.
SECTION 4. ELIGIBILITY
Options and Restricted Stock may be granted only to salaried employees
(which term shall be deemed to include officers) of Ashland and of its present
and future subsidiary corporations as defined in Section 424 of the Code
("subsidiaries"). A director of Ashland or of a subsidiary who is not also
such an employee of Ashland or of one of its subsidiaries will not be eligible
to receive any options or Restricted Stock under the Plan. Options may be
granted to employees who hold or have held options under previous plans. An
employee who has been granted an option may be granted an additional option or
options.
Notwithstanding anything to the contrary contained herein, in the case
of incentive stock options, the maximum aggregate fair market value
(determined at the time each incentive stock option is granted under the Plan)
of the shares of Common Stock for which any individual employee may be granted
incentive stock options under the Plan in any calendar year (and under all
other plans of Ashland or any subsidiary which provide for the granting of
incentive stock options). For purposes of this paragraph, fair market value of
Common Stock shall be the closing price of the Common Stock as reported on the
Composite Tape on the date of the grant of an incentive stock option under the
Plan or, if there is no trading at the Common Stock on the date in question,
then the closing price of the Common Stock, as so reported, on the next
preceding date on which there was trading in the Common Stock.
SECTION 5. PERIOD OF PLAN AND DURATION OF OPTIONS
(a) No options or Restricted Stock awards shall be granted under the
Plan after November 7, 1994.
(b) Every incentive stock option shall provide for a fixed expiration
date of not later than ten years from the date such incentive option is
granted.
SECTION 6. OPTION DESIGNATION AND PRICE
(a) Any option granted under the Plan may be granted as an incentive
stock option or as a non-qualified stock option as shall be designated at the
time of the grant of such option.
(b) The option price per share of the Common Stock underlying each
option shall be fixed by the Committee, but shall not be less than 100% of the
fair market value of the stock at the time of the granting of the options.
Such fair market value shall be determined by the Committee which may use any
reasonable method of valuation, including the closing price of the Common
Stock as reported on the Composite Tape on the date on which the option is
granted.
SECTION 7. EXERCISE OF OPTIONS.
(a) The Committee may in its discretion prescribe in the option grant
the installments, if any, in which an option granted under the Plan shall
become exercisable provided that no option shall be exercisable prior to the
first anniversary of the date of its grant except as provided in Section 12 or
as the Committee otherwise determines. In no case may an option be exercised
at any time for less than 50 shares (or the remaining shares covered by the
option if less than 50 shares) during the term of the option. The specified
number of shares will be issued upon receipt by Ashland of (i) notice from the
optionee of exercise of an option and (ii) either payment to Ashland of the
option price of the number of shares with respect to which the option is
exercised or (with approval of the Committee) a promissory note as provided in
Section 8 hereof. Each such notice and payment shall be delivered or mailed by
postpaid mail, addressed to the Treasurer of Ashland at Ashland's Executive
Offices at 1000 Ashland Drive, Russell, Kentucky, or such other place as
Ashland may designate from time to time.
(b) An incentive stock option shall not be exercisable while there is
outstanding any incentive stock option which was granted before the granting
of such option to such employee to purchase stock of
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Ashland or a subsidiary (determined at the time of granting of such option) or
a predecessor of any of such corporations. An option shall be treated as
outstanding for this purpose until it is exercised in full or expires by
reason of lapse of time.
SECTION 8. PAYMENT FOR SHARES
Except as otherwise provided in this Section 8, the option price shall
be paid in full when the option is exercised. The price may be paid in whole
or in part in (a) cash or (b) whole shares of Common Stock evidenced by
negotiable certificates, valued at their fair market value on the date of
exercise (which shares of Common Stock must have been owned by the employee
six months or longer in the case of the exercise of options which were granted
after May 21, 1992), (c) by a combination of such methods of payment, or (d)
such other consideration as shall be approved by the Committee (including
without limitation, assurance satisfactory to the Committee from a broker
registered under the Securities Exchange Act of 1934, of the delivery of the
proceeds of an imminent sale of the stock to be issued pursuant to the
exercise of such option, such sale to be made at the discretion of the
employee). For these purposes, "fair market value" shall be computed in the
same manner as was the grant. If certificates representing shares of Common
Stock are used to pay all or part of the purchase price of an option, separate
certificates shall be delivered by Ashland representing the same number of
shares as each certificate so used and an additional certificate shall be
delivered representing the additional shares to which the employee is entitled
as a result of exercise of the option. Moreover, an employee may request
Ashland to "pyramid" his shares; that is, to automatically apply the shares
which he is entitled to receive on the exercise of a portion of a stock option
to satisfy the exercise for additional portions of the option, thus resulting
in multiple simultaneous exercises of options by use of whole shares as
payment.
The Committee may in its discretion authorize payment of all or any part
of the option price over a period of not more than five years from the date
the option is exercised. Any unpaid balance of the option price shall be
evidenced by the employee's promissory note payable to the order of Ashland
which shall bear interest at such rate or rates as determined from time to
time by the Committee, but not less than the lower of the prevailing base rate
of interest or the most favorable rate of interest charged to commercial
borrowers as announced by any major U.S. bank on the date the option is
exercised, and shall be payable in full within not later than five years after
the date the option is exercised.
SECTION 9. GOVERNANCE OF PLANS
Notwithstanding any terms or provisions to the contrary all incentive
stock options outstanding prior to November 8, 1984, shall continue to be
governed by the terms and provisions of the 1981 Plan.
SECTION 10. GENERAL STOCK APPRECIATION RIGHTS
The Committee may grant general stock appreciation rights ("SARs")
pursuant to the provisions of this Section 10 to the holder of any option
granted under the Plan (a "related option") with respect to all or a portion
of the shares subject to the related option. An SAR may only be granted
concurrently with the grant of the related option. Subject to the terms and
provisions of this Section 10, each SAR shall be exercisable only at the same
time and to the same extent the related option is exercisable and in no event
after the termination of the related option. SARs shall be exercisable only
when the fair market value (determined as of the date of exercise of the SARs)
of each share of Common Stock with respect to which the SARs are to be
exercised shall exceed the option price per share of Common Stock subject to
the related option. SARs granted under the Plan shall be exercisable in whole
or in part by notice to Ashland. Such notice shall state that the holder of
the SARs elects to exercise the SARs and the number of shares in respect of
which the SARs are being exercised.
Subject to the terms and provisions of this Section 10, upon the
exercise of SARs, the holder thereof shall be entitled to receive from Ashland
consideration (in the form hereinafter provided) equal in value to the excess
of the fair market value (determined as of the date of exercise of the SARs)
of each share of
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Common Stock with respect to which such SARs have been exercised over the
option price per share of Common Stock subject to the related option. Upon the
exercise of an SAR, the holder may specify the form of consideration to be
received by such holder, which shall be in shares of Common Stock (valued at
fair market value on the date of exercise of the SAR), or in cash, or partly
in cash and partly in shares of Common Stock, as the holder shall request;
provided, however, that the Committee, in its sole discretion, may disapprove
the form of consideration requested and instead authorize the payment of such
consideration in shares of Common Stock (valued as aforesaid), or in cash, or
partly in cash and partly in shares of Common Stock, as the Committee shall
determine. For purposes of this Section 10, (a) fair market value of a share
of Common Stock shall be the mean between the high and low sales prices
thereof on the Composite Tape on the date of exercise of an SAR or, if there
is no trading of the Common Stock on the date in question, then the closing
price of the Common Stock, as so reported, on the next preceding date on which
there was trading in the Common Stock, and (b) the date of exercise of an SAR
shall mean the date on which the Company shall have received notice from the
holder of the SAR of the exercise of such SAR.
Upon the exercise of SARs, the related option shall be considered to
have been exercised (a) to the extent of the number of shares of Common Stock
with respect to which such SARs are exercised and (b) to that extent for
purposes of determining the number of shares of Common Stock available for the
grant of options and Restricted Stock under the Plan. Upon the exercise or
termination of the related option, the SARs with respect to such related
option shall be considered to have been exercised or terminated to the extent
of the number of shares of Common Stock with respect to which the related
option was so exercised or terminated.
SECTION 11. NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
No option or SAR granted under the Plan shall be transferable otherwise
than by will or the laws of descent and distribution, and an option or SAR may
be exercised, during the lifetime of the holder thereof, only by him or her.
SECTION 12. CONTINUED EMPLOYMENT AND AGREEMENT TO SERVE
(a) Subject to the provisions of Paragraphs (b), (c) and (e) of this
Section 12, every option shall provide that it may not be exercised in whole
or in part for a period of one year after the date of granting such option and
if the employment of the employee shall be terminated, for any reason other
than death or disability as determined by the Committee, prior to the end of
such one year period, the option granted to such employee shall immediately
terminate.
(b) Every option shall provide that in the event of the death of the
employee while employed by Ashland or one of its subsidiaries or death during
the one-year period of disability described in Paragraph (c) of this section
12 or within three months after cessation of employment for any cause, it
shall be exercisable, at any time or from time to time, prior to the fixed
termination date set forth in the option, by the estate of the decedent, or by
any person who shall acquire the right to exercise such option by bequest or
by the laws of descent and distribution for the full number of optioned shares
or any part thereof, less such number as may have been theretofore acquired
under the option.
(c) Every option shall provide that in the event the employment of any
employee shall cease by reason of total and permanent disability within the
meaning of Section 105(d)(4) of the Code as determined by the Committee at any
time during the term of the option, it shall be exercisable, at any time or
from time to time by such employee prior to the fixed termination date set
forth in the option, during a period of one year of continuing disability
following termination of employment by reason of such disability for the full
number of optioned shares or any part thereof, less such number as may have
been theretofore acquired under the option.
(d) Except as provided in Paragraphs (a), (b), (c) and (e) of this
Section 12, every option shall provide that it shall terminate on the earlier
to occur of the fixed termination date set forth in the option or three
4
<PAGE>
months after cessation of the employee's employment for any cause, and, except
as provided in Paragraph (e) of this Section 12, if exercised after cessation
of such employment, may be exercised only in respect of the number of shares
which the employee could have acquired under the option immediately prior to
such cessation of employment. No option may be exercised after the fixed
termination date set forth in the option.
(e) Notwithstanding any provision of this Section 12 to the contrary,
any option granted pursuant to the Plan and any related SAR may, in the
discretion of the Committee or as provided in the relevant option agreement,
become fully exercisable as to all optioned shares (i) from and after the time
the employee ceases to be an employee of Ashland or any of its subsidiaries as
a result of the sale or other disposition by Ashland of assets or property
(including shares of any subsidiary) in respect of which the employee had
theretofore been employed or as a result of which optionee's continued
employment with Ashland or any subsidiary is no longer required and (ii) in
the case of a change in control (as hereinafter defined) of Ashland from and
after the date of such change in control. For purposes of this Paragraph (e),
the term "change in control" shall be deemed to occur (1) upon the approval by
the Board of Directors of Ashland (or if approval of the Board of Directors of
Ashland is not required as a matter of law, the shareholders of Ashland) of
(A) any consolidation or merger of Ashland in which Ashland is not the
continuing or surviving corporation or pursuant to which shares of Common
Stock would be converted into cash, securities or other property other than a
merger in which the holders of Common Stock immediately prior to the merger
will have the same proportionate ownership of Common Stock of the surviving
corporation immediately after the merger, (B) any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of all
or substantially all the assets of Ashland, or (C) adoption of any plan or
proposal for the liquidation or dissolution of Ashland, or (2) when any
"person" (as defined in Section 13(d) of the Securities Exchange Act of 1934),
other than Ashland or any subsidiary or employee benefit plan or trust
maintained by Ashland or any of its subsidiaries, shall become the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of more than 20% of the Common Stock outstanding at
the time, without the prior approval of the Board of Directors of Ashland.
(f) Each employee granted an option under this Plan shall agree by his
or her acceptance of such option to remain in the service of Ashland or a
subsidiary corporation of Ashland for a period of at least one year from the
date of the option agreement between Ashland and the employee. Such service
shall, subject to the terms of any contract between Ashland or any such
subsidiary and such employee, be at the pleasure of Ashland or such subsidiary
and at such compensation as Ashland or such subsidiary shall reasonably
determine from time to time. Nothing in the Plan or in any option granted
pursuant to the Plan shall confer on any individual any right to continue in
the employment of Ashland or any of its subsidiaries or interfere in any way
with the right of Ashland or any of its subsidiaries to terminate his or her
employment at any time.
(g) Subject to the limitations set forth in Section 422 of the Code, the
Committee may adopt, amend or rescind from time to time such provisions as it
deems appropriate with respect to the effect of leaves of absence approved by
any duly authorized officer of Ashland with respect to any optionee.
(h) The determination by the Committee of any question involving
disability shall be conclusive and binding.
SECTION 13. RESTRICTED STOCK AWARDS
The Committee may grant to employees shares of Common Stock subject to
certain restrictions (herein referred to as "Restricted Stock"). The amount of
Restricted Stock to be granted to any eligible employee and the respective
terms and conditions of such grant (which terms and provisions need not be the
same in each case) shall be determined by the Committee in its sole
discretion. As a condition to any award and the corresponding delivery of
Restricted Stock hereunder, the Committee may require an employee to pay an
amount equal to, or in excess of, the par value of the shares of Restricted
Stock
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<PAGE>
awarded to him or her. Each certificate issued in respect of shares of
Restricted Stock granted to a participant under the Plans shall be registered
in the name of the participant and shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeitures) contained in Section 13 of the Stock Incentive Plan for Key
Employees of Ashland Oil, Inc. and Its Subsidiaries and an Agreement
entered into between the registered owner and Ashland Oil, Inc."
Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered during a "Restricted Period", which shall be determined
by the Committee and which shall not be less than one year nor more than five
years from the date of grant. The Committee may reduce the Restricted Period
with respect to any outstanding shares of Restricted Stock at any time, but in
no event shall the Restricted Period be less than one year. Except for such
restrictions, the employee as the owner of the Common Stock issued as
Restricted Stock shall have all rights of a shareholder including, but not
limited to, the right to vote such Common Stock and to receive dividends
thereon as and when paid.
In the event that an employee's employment is terminated by reason of
death or physical or mental disability, or for such other reasons as the
Committee may provide, the employee (or his or her estate) will receive his or
her Restricted Stock subject to the terms of his or her employment agreement
which agreement shall be in accordance with the terms and provisions set forth
in Section 12(f) herein. In the case of voluntary resignation or any other
termination of employment, an employee's Restricted Stock will be forfeited;
provided, however, that the Committee may limit such forfeiture to that
portion thereof which is proportional to the unelapsed portion of the
Restricted Period. Any forfeited Restricted Stock shall not again be available
for the grant of options and Restricted Stock under the Plan.
At the end of the Restricted Period all shares of Restricted Stock shall
be transferred free and clear of all restrictions to the employee. All such
shares may also be transferred free and clear of all restrictions to the
employee to the same extent provided in Section 12(e) either in the discretion
of the Committee or as provided in the relevant employment agreement.
SECTION 14. WITHHOLDING TAXES
Federal, state or local law may require the withholding of taxes
applicable to gains resulting from the exercise of non-qualified stock options
granted hereunder. Unless otherwise prohibited by the Committee, each
participant may satisfy any such tax withholding obligation by any of the
following means, or by a combination of such means: (i) a cash payment; or
(ii) authorizing Ashland to withhold from the shares of Ashland Common Stock
otherwise issuable to the participant as a result of the exercise of the non-
qualified stock option a number of shares having a fair market value, as of
the date the withholding tax obligation arises (the "Tax Date"), which will
satisfy the amount of the withholding tax obligation. A participant's election
to pay the withholding tax obligation by (ii) above must be made on or before
the Tax Date, is irrevocable, is subject to such rules as the Committee may
adopt, and may be disapproved by the Committee.
SECTION 15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event the market price of Common Stock shall decrease as a result
of any recapitalization, reorganization, merger, consolidation, spinoff,
separation, partial liquidation, or other transaction described in Section
424(a) of the Code, then, in the discretion of the Committee (and subject to
any Internal Revenue Service requirements that may be applicable) the price
per share of Common Stock under each option or Restricted Stock award granted
pursuant to the Plan may be appropriately adjusted (and the number of shares
subject to option or Restricted Stock awards may be appropriately adjusted).
For purposes of the preceding sentence, the decrease in market price of Common
Stock may be determined in any manner the Committee deems reasonable,
including the comparison of such market price immediately before and
immediately after the event giving rise to any such decrease, subject to
internal Revenue Service requirements.
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Adjustments under this Section 14 shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive, and the
Committee in its discretion in making such adjustments may disregard
fractional shares.
SECTION 16. AMENDMENTS AND TERMINATIONS
Unless the Plan shall theretofore have been terminated as hereinafter
provided, the Plan shall terminate on, and no award shall be granted after,
November 7, 1994. The Plan may be terminated, modified or amended by the
shareholders of Ashland. The Board may at any time terminate, modify or amend
the Plan in such respects as it shall deem advisable; provided, however, that
the Board may not, without approval by the holders of a majority of the
outstanding shares of stock present and voting at any annual or special
meeting of shareholders of Ashland, (i) increase (except as provided in
Section 14) the maximum number of shares as to which options or Restricted
Stock may be granted under the Plan, (ii) change the class of employees
eligible to receive options and Restricted Stock awards, (iii) change the
manner of determining the minimum option prices other than to change the
manner of determining the fair market value of the Common Stock as set forth
in Section 6, or (iv) extend the period during which options or Restricted
Stock awards may be granted or exercised. No termination, modification or
amendment of the Plan may, without the consent of the employee to whom any
option or Restricted Stock award shall theretofore have been granted,
adversely affect the rights of such employee under such option or Restricted
Stock award.
SECTION 17. EFFECTIVENESS OF THE PLAN
The Plan shall be effective on November 8, 1984, subject to its
ratification by the holders of a majority of the shares of Ashland stock
present and voting at the Annual Meeting of Shareholders of Ashland on January
31, 1985 or such other date fixed for the next meeting of shareholders or any
adjournment or postponement thereof. The Committee may in its discretion
authorize the granting of options and Restricted Stock awards, the exercise of
which shall be expressly subject to the conditions that (a) the Plan shall
have been approved or ratified as aforesaid by the shareholders of Ashland,
(b) the shares of Common Stock to be issued upon the exercise of options
granted under the Plan shall have been duly listed, upon official notice of
issuance, upon the New York Stock Exchange and (c) a Registration Statement
under the Securities Act of 1933, as amended, with respect to such shares
shall have become effective.
SECTION 18. TIME OF GRANTING OPTIONS AND RESTRICTED STOCK AWARDS
Nothing contained in the Plan or any resolutions adopted or to be
adopted by the Board of Directors of Ashland or the shareholders of Ashland
shall constitute the granting of any option or Restricted Stock award
hereunder. Options and Restricted Stock awards shall be granted hereunder only
by action of or pursuant to the authority of the Committee and the date of
grant shall be the date fixed in the determination thereof by the Committee;
provided, however, that no participant shall have any rights in respect of
such grant unless and until he or she shall have executed and delivered an
option or employment agreement, as the case may be, in form and substance
satisfactory to the Committee.
SECTION 19. USE OF CERTAIN TERMS
Options, SARs and Restricted Stock awards granted under the Plan shall
be binding upon Ashland, its successors and assigns. Unless the context
otherwise requires, the terms used in the Plan which correspond to like terms
defined in Sections 421 through 424, inclusive, of the Code and regulations
and revenue rulings applicable thereto shall have the meanings attributed to
them in said sections of such Code.
As Amended and Restated by the Board on March 17, 1994.
7
ASHLAND OIL, INC.
AMENDED PERFORMANCE UNIT PLAN
1. Purpose. The purpose of this Amended Ashland Oil, Inc.
Performance Unit Plan (herein called the "Plan") is to amend
Ashland's current Performance Unit Plan and to further the long-
term, profitable growth of Ashland Oil, Inc., its subsidiaries
and affiliates (hereinafter collectively called "Ashland") by
offering a long-term incentive in addition to current
compensation to key employees of Ashland who will be largely
responsible for such growth to the benefit of the Ashland
shareholders. It is expected that this plan will encourage such
employees to remain with Ashland and will also encourage
qualified persons to seek and accept employment with Ashland.
2. Stock Subject to this Plan. Any shares of Common Stock,
par value $1 per share ("Common Stock"), of Ashland Oil, Inc.,
used for purposes of this Plan may be in whole or in part, as the
Board of Directors of Ashland Oil, Inc. ("Board of Directors")
may from time to time determine, authorized and unissued shares
of Common Stock or issued shares of Common Stock reacquired by
Ashland.
3. Committee. This Plan shall be administered by the
Personnel and Compensation Committee (the "Committee") which
shall consist of not less than three members of the Board of
Directors who are not eligible to participate in this Plan. The
Committee shall be appointed by the Board of Directors, which may
from time to time appoint members of the Committee in
substitution for members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee shall
select one of its members as its chairman and shall hold its
meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of
the Committee shall be made by not less than the majority of its
members. Any decision or determination reduced to writing and
signed by all the members shall be fully as effective as if it
had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary who shall keep
minutes of its meetings and shall make such rules and regulations
for the conduct of its business as it shall deem advisable.
Subject to the express provisions of this Plan, the
Committee shall have plenary authority to interpret this Plan, to
award performance units, to prescribe, amend and rescind rules
and regulations relating to it, to determine the terms and
provisions of the respective performance unit awards (which need
not be identical) and to make all other determinations necessary
or advisable for its administration.
4. Eligibility. Performance units may be awarded only to
regular salaried employees (which term shall be deemed to include
officers) of Ashland (hereinafter collectively called
"Employees"). Any Employee may receive one or more awards of
performance units as the Committee shall from time to time
determine, and such determinations may be different as to
different Employees and may vary as to different awards. A
director of Ashland who is not also an Employee shall not be
eligible to receive an award. Nothing contained in this Plan
shall be construed to limit the right of Ashland to grant
performance units or other forms of incentive compensation
otherwise than under this Plan. The Plan shall not confer on any
individual any right to continue in employ of Ashland or any of
its subsidiaries or interfere in any way with the right of the
Company or any of its subsidiaries to terminate his or her
employment at any time, with or without cause, notwithstanding
the possibility that the number of performance units exercisable
by an employee under his or her award may thereby be reduced or
eliminated.
5. Award of Performance Units. (a) Performance units shall
be awarded to an Employee contingent upon future performance of
Ashland and/or of his or her division or company. The Committee
shall establish the performance measures applicable to such
performance and the time period over which such performance shall
be measured. Such measures may include, but shall not be limited
to, return on net assets employed; cumulative earnings per share;
or return on shareholder's equity.
The performance measures determined by the Committee shall
be established in writing prior to the beginning of each
performance period. The Committee shall have the discretion to
later revise the performance measures only so as to reduce or
eliminate the amount of compensation otherwise payable upon
attainment of the performance measures. In no event shall the
Committee be able to later revise the performance measures to
increase the amount of compensation otherwise payable.
<PAGE>
(b) In determining the number of performance units to be
awarded, the Committee shall take into account an Employee's
responsibility level, performance, potential, cash compensation
level, incentive compensation awards and such other
considerations as it deems appropriate. Each award shall be
established in dollars and the number of performance units
therein shall be based on the Employee's base salary on the date
of the award. The original amount of any award shall not exceed
400% of the Employee's then base salary; the amount paid out upon
meeting the performance measures shall not exceed the amount of
such award; and the total amount of payment under the Plan for
each award period shall not exceed 2% of stockholders' equity as
shown in the Annual Report to Shareholders at the end of the
fiscal year next preceding the commencement of such award period.
(c) An award of performance units to an Employee shall
terminate for all purposes if he does not remain continuously in
the employ of Ashland at all times during his award period,
except in the case of death, disability or retirement under an
Ashland pension plan (including early retirement at the request
of Ashland), except as may otherwise be determined by the
Committee under particular circumstances. An Employee (or his
estate) whose employment was terminated because of death,
disability or retirement as aforesaid shall be entitled to
receive a pro rata portion of the payment of his award based upon
the portion of the performance period during which he was so
employed, all as the Committee shall determine in each case.
(d) Payment with respect to performance units will be made
to Employees on a date or dates fixed by the Committee but not
earlier than two years nor more than four years after the start
of the performance period established when such units were
awarded. Payment may be made in one or more installments and may
be made wholly in cash, wholly in shares of Common Stock or
partly in cash and partly in such shares, all at the discretion
of the Committee.
If payment of an award of performance units is to be made in
cash or partly in cash, the amount of cash to be paid to an
Employee on any payment date shall be the original dollar amount
(or the part thereof determined by the Committee to be paid in
cash) of such award, adjusted with respect to the meeting of the
performance measures for such award. If payment of an award of
performance units is to be made in shares of Common Stock or
partly in such shares, the number of shares of Common Stock to be
delivered to an Employee on any payment date shall be determined
by dividing (x) the original dollar amount (or the part thereof
determined by the Committee to be delivered in shares) of such
award, adjusted with respect to the meeting of the performance
measures for such award, by (y) the Fair Market Value of one
share of Common Stock on the payment date. Any payment may be
subject to such restrictions and conditions as the Committee may
determine.
For purposes of this Paragraph 5, the term "Fair Market
Value" of a share of Common Stock on any date shall mean the
average of the daily closing prices of such a share for the 30
consecutive trading days commencing 45 trading days before the
date in question, and the term "closing price" for any day shall
mean the last sales price, or, in case no sale takes place on
such day, the average of the closing bid and asked prices, in
either case as officially quoted by the New York Stock Exchange,
Inc., or, if the Common Stock is not then listed or admitted to
trading on such Exchange, the average of the closing bid and
asked prices as furnished by any member firm of the New York
Stock Exchange, Inc. selected from time to time by the Committee
for that purpose.
6. Nontransferability and No Shareholder Rights. No award of
performance units under this Plan shall be transferable otherwise
than by will or the laws of descent and distribution. The holder
of an award of performance units shall have none of the rights of
a shareholder with respect to such units until shares of Common
Stock shall have been registered in the name of the person or
persons receiving payment of such award on the transfer books
upon such payment.
7. Amendment and Termination. Unless this Plan shall
theretofore have been terminated as hereinafter provided, this
Plan shall terminate on, and no awards shall be granted after,
September 30, 1994. This Plan may be terminated, modified or
amended by the shareholders of Ashland Oil, Inc. The Board of
Directors may also terminate this Plan, or modify or amend this
Plan in such respects as it shall deem advisable in order to
conform to any change in any law or regulation applicable
thereto, or in other respects which shall not change (i) the
maximum amount which may be paid out with respect to performance
units awarded under this Plan, (ii) the class of employees
eligible to receive awards, (iii) the period during which awards
may be made or (iv) the
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provisions relating to the administration of this Plan by a
committee consisting of directors not eligible to participate in
this Plan as provided in Paragraph 3. No termination,
modification or amendment of this Plan may, without the consent
of the Employee to whom any performance units shall theretofore
have been awarded, adversely affect the rights of such Employee
under such award.
8. Committee Determinations. The determination of the
Committee with respect to any question arising as to the award of
performance units, the individuals selected for awards, the
amount, terms, form and time of payment of performance units and
the interpretation of this Plan shall be final, conclusive and
binding.
As Amended and Restated by the Board on May 19, 1994.
3
ASHLAND OIL, INC.
LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Ashland Oil, Inc. Long-Term
Incentive Plan is to promote the interests of Ashland Oil,
Inc. and its shareholders by providing its directors,
officers and employees with an incentive to continue service
with Ashland. Accordingly, the Company may grant to selected
officers and employees Stock Options, Stock Appreciation
Rights, Restricted Stock and Performance Share awards in an
effort to attract and retain in its employ qualified
individuals and to provide such individuals with additional
incentive to devote their best efforts to the Company
through ownership of the Company's stock, thus enhancing the
value of the Company for the benefit of shareholders. The
Plan also provides an incentive for qualified persons, who
are not officers or employees of the Company, to serve on
the Board of Directors of the Company and to continue to
work for the best interests of the Company by rewarding such
persons with automatic grants of Restricted Stock of the
Company. Stock Options, Stock Appreciation Rights and
Performance Shares may not be granted to such Outside
Directors under the Plan.
SECTION 2. DEFINITIONS
(A) "Agreement" shall mean a written agreement setting
forth the terms of an Award.
(B) "Ashland" shall mean, collectively, Ashland Oil,
Inc. and its Subsidiaries.
(C) "Award" shall mean an Option (which may be
designated as a Nonqualified or Incentive Stock Option), a
Stock Appreciation Right, a Restricted Stock Award, or a
Performance Share Award, in each case granted under this
Plan.
(D) "Beneficiary" shall mean the person, persons, trust
or trusts designated by an Employee or Outside Director or
if no designation has been made, the person, persons, trust,
or trusts entitled by will or the laws of descent and
distribution to receive the benefits specified under this
Plan in the event of an Employee's or Outside Director's
death.
(E) "Board" shall mean the Board of Directors of the
Company.
(F) "Change in Control" shall be deemed to occur (1)
upon the approval by the Board (or if approval of the Board
is not required as a matter of law, the shareholders of
Ashland) of (A) any consolidation or merger of Ashland in
which Ashland is not the continuing or surviving corporation
or pursuant to which shares of Common Stock would be
converted into cash, securities or other property other than
a merger in which the holders of Common Stock immediately
prior to the merger will have the same proportionate
ownership of Common Stock of the surviving corporation
immediately after the merger, (B) any sale, lease, exchange,
or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of
Ashland, or (C) adoption of any plan or proposal for the
liquidation or dissolution of Ashland, (2) when any "person"
(as defined in Section 13(d) of the Exchange Act), other
than Ashland or any subsidiary or employee benefit plan or
trust maintained by Ashland, shall become the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, or more than 20% of Ashland's Common
Stock outstanding at the time, without the prior approval of
the Board, or (3) at any time during a period of two
consecutive years, individuals who at the beginning of such
period constituted the Board shall cease for any reason to
constitute at least a majority thereof, unless the election
or the nomination for election by Ashland's shareholders of
each new director during such two-year period was approved
by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such two-
year period.
(G) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(H) "Committee" shall mean the Personnel and
Compensation Committee of the Board, as from time to time
constituted, or any successor committee of the Board with
similar functions, which shall consist of
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three or more members, each of whom shall be Disinterested.
(I) "Common Stock" shall mean the Common Stock of the
Company ($1.00 par value), subject to adjustment pursuant to
Section 12.
(J) "Company" shall mean, collectively, Ashland Oil,
Inc. and its Subsidiaries.
(K) "Disinterested" shall mean disinterested within the
meaning of applicable regulatory requirements, including
those promulgated under Section 16 of the Exchange Act.
(L) "Employee" shall mean an officer or employee of the
Company.
(M) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(N) "Exercise Price" shall mean, with respect to each
share of Common Stock subject to an Option, the price fixed
by the Committee at which such share may be purchased from
the Company pursuant to the exercise of such Option, which
price at no time may be less than 100% of the Fair Market
Value of the Common Stock on the date the Option is granted.
(O) "Fair Market Value" shall mean the closing price of
the Common Stock as reported on the Composite Tape, or, if
there is no trading of the Common Stock on the date in
question, then the closing price of the Common Stock, as so
reported, on the next preceding date on which there was
trading in the Common Stock.
(P) "Incentive Stock Option" or "ISO" shall mean an
Option that is intended by the Committee to meet the
requirements of Section 422 of the Code or any successor
provision.
(Q) "Nonqualified Stock Option" or "NQSO" shall mean an
Option granted pursuant to this Plan which does not qualify
as an Incentive Stock Option.
(R) "Option" shall mean the right to purchase Common
Stock at a price to be specified and upon terms to be
designated by the Committee pursuant to this Plan. An Option
shall be designated by the Committee as a Nonqualified Stock
Option or an Incentive Stock Option.
(S) "Outside Director" shall mean a director of the
Company who is not also an Employee of the Company.
(T) "Performance Period" shall mean the period
designated by the Committee during which the performance
objectives shall be measured.
(U) "Performance Share Award" shall mean an award of
shares of Common Stock, the issuance of which is contingent
upon attainment of performance objectives specified by the
Committee.
(V) "Performance Shares" shall mean those shares of
Common Stock issuable pursuant to a Performance Share Award.
(W) "Personal Representative" shall mean the person or
persons who, upon the disability or incompetence of an
Employee or Outside Director, shall have acquired on behalf
of the Employee or Outside Director by legal proceeding or
otherwise the right to receive the benefits specified in
this Plan.
(X) "Plan" shall mean this Ashland Oil, Inc. Long-Term
Incentive Plan.
(Y) "Restricted Period" shall mean the period
designated by the Committee during which Restricted Stock
may not be sold, assigned, transferred, pledged, or
otherwise encumbered, which period in the case of Employees
shall not be less than one year nor more than five years
from the date of grant, and in the case of Outside Directors
is the period set forth in subsection (B) of Section 8.
(Z) "Restricted Stock" shall mean those shares of
Common Stock issued pursuant to a Restricted Stock Award
which are subject to the restrictions, terms, and conditions
set forth in the related Agreement.
(AA) "Restricted Stock Award" shall mean an award of
Restricted Stock.
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(BB) "Retained Distributions" shall mean any securities
or other property (other than regular cash dividends)
distributed by the Company in respect of Restricted Stock
during any Restricted Period.
(CC) "Retirement" shall mean retirement of an Employee
from the employ of the Company at any time as described in
the Ashland Oil, Inc. and Affiliates Pension Plan or in any
successor pension plan, as from time to time in effect.
(DD) "Section 16(b) Optionee" shall mean an Employee or
former Employee who is subject to Section 16(b) of the
Exchange Act.
(EE) "Stock Appreciation Right" or "SAR" shall mean the
right of the holder to elect to surrender an Option or any
portion thereof which is then exercisable and receive in
exchange therefor shares of Common Stock, cash, or a
combination thereof, as the case may be, with an aggregate
value equal to the excess of the Fair Market Value of one
share of Common Stock over the Exercise Price specified in
such Option multiplied by the number of shares of Common
Stock covered by such Option or portion thereof which is so
surrendered. An SAR may be granted as part of an Option or
as a separate right to any holder of any Option theretofore
or then being granted under this Plan. An SAR shall be
exercisable upon any additional terms and conditions
(including, without limitation, the issuance of Restricted
Stock and the imposition of restrictions upon the timing of
exercise) which may be determined as provided in the Plan.
(FF) "Subsidiary" shall mean any present or future
subsidiary corporations, as defined in Section 424 of the
Code, of Ashland.
(GG) "Tax Date" shall mean the date the withholding tax
obligation arises with respect to the exercise of an Award.
SECTION 3. STOCK SUBJECT TO THE PLAN
There will be reserved for issuance under the Plan
(upon the exercise of Options and Stock Appreciation Rights,
upon awards of Restricted Stock and Performance Shares and
for stock bonuses on deferred awards of Restricted Stock and
Performance Shares), an aggregate of 3,000,000 shares of
Ashland Common Stock, par value $1.00 per share. Such shares
shall be authorized but unissued shares of Common Stock.
Except as provided in Sections 7 and 8, if any Award under
the Plan shall expire or terminate for any reason without
having been exercised in full, or if any Award shall be
forfeited, the shares subject to the unexercised or
forfeited portion of such Award shall again be available for
the purposes of the Plan.
SECTION 4. ADMINISTRATION
The Plan shall be administered by the Committee. No
person who is (or, within one year prior to his or her
appointment as a member of the Committee, was) eligible to
participate in the Plan, except as specifically authorized
under subsection (B) of Section 8 herein, or in any other
stock option or stock bonus plan of the Company, shall be a
member of the Committee. The Committee shall have no
authority regarding the granting of Restricted Stock to
Outside Directors, as such grants are fixed pursuant to
subsection (B) of Section 8 of the Plan.
In addition to any implied powers and duties that may
be needed to carry out the provisions of the Plan, the
Committee shall have all the powers vested in it by the
terms of the Plan, including exclusive authority (except as
to Awards of Restricted Stock granted to Outside Directors)
to select the Employees to be granted Awards under the Plan,
to determine the type, size and terms of the Awards to be
made to each Employee selected, to determine the time when
Awards will be granted, and to prescribe the form of the
Agreements embodying Awards made under the Plan. Subject to
the provisions of the Plan specifically governing Awards of
Restricted Stock granted or to be granted to Outside
Directors pursuant to subsection (B) of Section 8 herein,
the Committee shall be authorized to interpret the Plan and
the Awards granted under the Plan, to establish, amend and
rescind any rules and regulations relating to the Plan, to
make any other determinations which it believes necessary or
advisable for the administration of the Plan, and to correct
any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award in the manner and
to the extent the Committee deems desirable to carry it into
effect. Any decision of the Committee in the administration
of the Plan, as described herein, shall be final and
conclusive.
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The Committee may act only by a majority of its
members. Any determination of the Committee may be made,
without notice, by the written consent of the majority of
the members of the Committee. In addition, the Committee may
authorize any one or more of their number or any officer of
the Company to execute and deliver documents on behalf of
the Committee. No member of the Committee shall be liable
for any action taken or omitted to be taken by him or her or
by any other member of the Committee in connection with the
Plan, except for his or her own willful misconduct or as
expressly provided by statute.
The provisions of this Section 4 with respect to
decisions made by, and authority of, the Committee shall be
subject to the provisions of subsection (B) of Section 8
herein.
SECTION 5. ELIGIBILITY
Awards may only be granted (i) to individuals who are
Employees of Ashland, and (ii) as expressly provided in
subsection (B) of Section 8 of the Plan, to individuals who
are duly elected Outside Directors of Ashland.
SECTION 6. STOCK OPTIONS
A. Designation and Price.
(a) Any Option granted under the Plan may be granted as
an Incentive Stock Option or as a Nonqualified Stock Option
as shall be designated by the Committee at the time of the
grant of such Option. Each Option shall be evidenced by an
Agreement between the recipient and the Company, which
Agreement shall specify the designation of the Option as an
ISO or a NQSO, as the case may be, and shall contain such
terms and conditions as the Committee, in its sole
discretion, may determine in accordance with the Plan.
(b) Every Incentive Stock Option shall provide for a
fixed expiration date of not later than ten years from the
date such Incentive Stock Option is granted.
(c) The Exercise Price of Common Stock issued pursuant
to each Option shall be fixed by the Committee at the time
of the granting of the Option; provided, however, that such
Exercise Price shall in no event be less than 100% of the
Fair Market Value of the Common Stock on the date such
Option is granted.
B. Exercise.
The Committee may, in its discretion, provide for
Options granted under the Plan to be exercisable in whole or
in part; provided, however, that no Option shall be
exercisable prior to the first anniversary of the date of
its grant, except as provided in Section 10 or as the
Committee otherwise determines in accordance with the Plan,
and in no case may an Option be exercised at any time for
fewer than 50 shares (or the total remaining shares covered
by the Option if fewer than 50 shares) during the term of
the Option. The specified number of shares will be issued
upon receipt by Ashland of (i) notice from the optionee of
exercise of an Option, and (ii) either payment to Ashland
(as provided in this Section 6, subsection (C) below), of
the Exercise Price for the number of shares with respect to
which the Option is exercised, or with approval of the
Committee, a promissory note as hereinafter provided. Each
such notice and payment shall be delivered or mailed by
postpaid mail, addressed to the Treasurer of Ashland at
Ashland Oil, Inc., 1000 Ashland Drive, Russell, Kentucky,
41169, or such other place as Ashland may designate from
time to time. Separate stock certificates shall be issued by
the Company for those shares acquired pursuant to the
exercise of an ISO and for those shares acquired pursuant to
a NQSO.
C. Payment for Shares.
Except as otherwise provided in this Section 6, the
Exercise Price for the Common Stock shall be paid in full
when the Option is exercised. Subject to such rules as the
Committee may impose, the Exercise Price may be paid in
whole or in part in (i) cash, (ii) whole shares of Common
Stock owned by the Employee six months or longer and
evidenced by negotiable certificates, valued at their Fair
Market Value
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<PAGE>
on the date of exercise, (iii) by a combination of such
methods of payment, or (iv) such other consideration as
shall be approved by the Committee (including without
limitation, assurance satisfactory to the Committee from a
broker registered under the Exchange Act, of the delivery of
the proceeds of an imminent sale of the stock to be issued
pursuant to the exercise of such Option, such sale to be
made at the direction of the Employee). If certificates
representing shares of Common Stock are used to pay all or
part of the Exercise Price of an Option, separate
certificates shall be delivered by Ashland representing the
same number of shares as each certificate so used and an
additional certificate shall be delivered representing any
additional shares to which the Employee is entitled as a
result of exercise of the Option. Moreover, if so provided
in the Agreement, and subject to such restrictions, terms
and conditions as the Committee may impose, an Employee may
request Ashland to "pyramid" his or her shares; that is, to
automatically apply the shares which he or she is entitled
to receive on the exercise of a portion of an Option to
satisfy the exercise for additional portions of the Option,
thus resulting in multiple simultaneous exercises of an
Option by use of whole shares as payment.
The Committee may, in its discretion, authorize payment
of all or any part of the Exercise Price over a period of
not more than five years from the date the Option is
exercised. In such instance any unpaid balance of the
Exercise Price shall be evidenced by the Employee's
promissory note payable to the order of Ashland which shall
bear interest at such rate or rates as determined from time
to time by the Committee.
SECTION 7. STOCK APPRECIATION RIGHTS
The Committee may grant Stock Appreciation Rights
pursuant to the provisions of this Section 7 to any holder
of any Option granted under the Plan with respect to all or
a portion of the shares subject to the related Option. An
SAR may be granted as part of an Option or as a separate
right to any holder of any Option theretofore or then being
granted under this Plan. Subject to the terms and provisions
of this Section 7, each SAR shall be exercisable only at the
same time and to the same extent the related Option is
exercisable and in no event after the termination of the
related Option. An SAR shall be exercisable only when the
Fair Market Value (determined as of the date of exercise of
the SAR) of each share of Common Stock with respect to which
the SAR is to be exercised shall exceed the Exercise Price
per share of Common Stock subject to the related Option. An
SAR granted under the Plan shall be exercisable in whole or
in part by notice to Ashland. Such notice shall state that
the holder of the SAR elects to exercise the SAR and the
number of shares in respect of which the SAR is being
exercised. For purposes of this Section 7, the date of
exercise of an SAR shall mean the date on which the Company
receives such notice.
Subject to the terms and provisions of this Section 7,
upon the exercise of an SAR, the holder thereof shall be
entitled to receive from Ashland consideration (in the form
hereinafter provided) equal in value to the excess of the
Fair Market Value (determined as of the date of exercise of
the SAR) of each share of Common Stock with respect to which
such SAR has been exercised over the Exercise Price per
share of Common Stock subject to the related Option. The
Committee may stipulate in the Agreement the form of
consideration which shall be received upon the exercise of
an SAR. If no consideration is specified therein, upon the
exercise of an SAR, the holder may specify the form of
consideration to be received by such holder, which shall be
in shares of Common Stock (valued at Fair Market Value on
the date of exercise of the SAR), or in cash, or partly in
cash and partly in shares of Common Stock, as the holder
shall request; provided, however, that the Committee, in its
sole discretion, may disapprove the form of consideration
requested and instead authorize the payment of such
consideration in shares of Common Stock (valued as
aforesaid), or in cash, or partly in cash and partly in
shares of Common Stock.
Upon the exercise of an SAR, the related Option shall
be deemed exercised to the extent of the number of shares of
Common Stock with respect to which such SAR is exercised and
to that extent for purposes of determining the number of
shares of Common Stock available for the grant of Awards
under the Plan. Upon the exercise or termination of the
related Option, the SAR with respect thereto shall be
considered to have been exercised or terminated to the
extent of the number of shares of Common Stock with respect
to which the related Option was so exercised or terminated.
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<PAGE>
SECTION 8. RESTRICTED STOCK AWARDS
A. Awards to Employees
The Committee may make an award of Restricted Stock to
selected Employees, evidenced by an Agreement which shall
contain such terms and conditions as the Committee, in its
sole discretion, may determine. The amount of each
Restricted Stock Award and the respective terms and
conditions of each Award (which terms and conditions need
not be the same in each case) shall be determined by the
Committee in its sole discretion. As a condition to any
Award hereunder, the Committee may require an Employee to
pay to the Company an amount equal to, or in excess of, the
par value of the shares of Restricted Stock awarded to him
or her. Any such Restricted Stock Award shall automatically
expire if not purchased in accordance with the Committee's
requirements within thirty (30) days after the date of
grant. Subject to the terms and conditions of each
Restricted Stock Award, the Employee, as the owner of the
Common Stock issued as Restricted Stock, shall have all
rights of a shareholder including, but not limited to,
voting rights as to such Common Stock and the right to
receive dividends thereon when, as and if paid.
In the event that a Restricted Stock Award has been
made to an Employee whose employment or service is
subsequently terminated by reason of death or physical or
mental disability, or for such other reason as the Committee
may provide, such Employee (or his or her estate) will
receive his or her Restricted Stock subject to the terms of
his or her Agreement with the Company, which Agreement shall
be in accordance with the terms and conditions set forth in
this Section 8. In the event that a Restricted Stock Award
has been made to an Employee who subsequently voluntarily
resigns or whose employment is terminated for any reason
other than as referred to above, such Restricted Stock will
be forfeited by such Employee; provided, however, that the
Committee may limit such forfeiture to that portion thereof
which is proportional to the unelapsed portion of the
Restricted Period under such Award.
Employees may be offered the opportunity to defer the
receipt of payment of vested shares of Restricted Stock, and
Common Stock may be granted as a bonus for deferral, under
terms as may be established by the Committee from time to
time; however, in no event shall the Common Stock granted as
a bonus for deferral exceed 20% of the Restricted Stock so
deferred per year over a five-year period.
B. Awards to Outside Directors
Subject to the limitation of the number of shares of
Common Stock available pursuant to Section 3, effective
immediately following the 1989 Annual Meeting of
Shareholders of the Company, each person who at such time
shall be a duly elected Outside Director is hereby granted,
effective on such date, 1,000 shares of Restricted Stock
subject to the terms and conditions set forth in this
subsection (B) and subsection (C) below. Subsequent to the
1989 Annual Meeting of Shareholders of the Company, each
person who has received no previous Award under the Plan and
who is duly appointed or elected as an Outside Director of
the Company is hereby granted, effective on the date of his
or her appointment or election to the Board, 1,000 shares of
Restricted Stock, subject to the terms and conditions set
forth in this subsection (B) and subsection (C) below.
as a condition to any Award hereunder, the Outside
Director will be required to pay to the Company a non-
refundable amount equal to the par value of the shares of
Restricted Stock awarded to him or her. Upon the granting of
the Restricted Stock Award, such Outside Director shall be
entitled to all rights incident to ownership of Common Stock
of the Company with respect to his or her Restricted Stock,
including, but not limited to, the right to vote such shares
of Restricted Stock and to receive dividends thereon when,
as and if paid; provided, however, that in no case may any
shares of Restricted Stock granted to an Outside Director be
sold, assigned, transferred, pledged, or otherwise
encumbered during the Restricted Period which shall not
lapse until the earlier to occur of the following: (i)
normal retirement from the Board at age 70, (ii) the death
or disability of such Outside Director, or (iii) a 50%
change in the beneficial ownership of the Company as defined
in Rule 13d-3 under the Exchange Act. In the case of
voluntary resignation or other termination of service of an
Outside Director prior to the occurrence of any of the
events described in (i), (ii) or (iii) of the preceding
sentence, any grant of Restricted Stock made to him or her
pursuant to this subsection (B) will be forfeited by such
Outside Director.
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C. Transferability
Restricted Stock may not be sold, assigned,
transferred, pledged, or otherwise encumbered during a
Restricted Period, which, in the case of Employees, shall be
determined by the Committee and which shall not be less than
one year nor more than five years from the date such
Restricted Stock was awarded, and, in the case of Outside
Directors, shall be determined in accordance with subsection
(B) of this Section 8. The Committee may at any time, reduce
the Restricted Period with respect to any outstanding shares
of Restricted Stock awarded under the Plan to Employees, but
in no event shall such Restricted Period be less than one
year.
During the Restricted Period, certificates representing
the Restricted Stock and any Retained Distributions shall be
registered in the recipient's name and bear a restrictive
legend to the effect that ownership of such Restricted Stock
(and any such Retained Distributions), and the enjoyment of
all rights appurtenant thereto are subject to the
restrictions, terms, and conditions provided in the Plan and
the applicable Agreement. Such certificates shall be
deposited by the recipient with the Company, together with
stock powers or other instruments of assignment, each
endorsed in blank, which will permit transfer to the Company
of all or any portion of the Restricted Stock and any
securities constituting Retained Distributions which shall
be forfeited in accordance with the Plan and the applicable
Agreement. Restricted Stock shall constitute issued and
outstanding shares of Common Stock for all corporate
purposes. The recipient will have the right to vote such
Restricted Stock, to receive and retain all regular cash
dividends, and to exercise all other rights, powers, and
privileges of a holder of Common Stock with respect to such
Restricted Stock, with the exception that (i) the recipient
will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Stock until the
restrictions applicable thereto shall have expired; (ii) the
Company will retain custody of all Retained Distributions
made or declared with respect to the Restricted Stock (and
such Retained Distributions will be subject to the same
restrictions, terms and conditions as are applicable to the
Restricted Stock) until such time, if ever, as the
Restricted Stock with respect to which such Retained
Distributions shall have been made, paid, or declared shall
have become vested, and such Retained Distributions shall
not bear interest or be segregated in separate accounts;
(iii) the recipient may not sell, assign, transfer, pledge,
exchange, encumber, or dispose of the Restricted Stock or
any Retained Distributions during the Restricted Period; and
(iv) a breach of any restrictions, terms, or conditions
provided in the Plan or established by the Committee with
respect to any Restricted Stock or Retained Distributions
will cause a forfeiture of such Restricted Stock and any
Retained Distributions with respect thereto. Any forfeited
Restricted Stock shall not again be available for the grant
of Awards under the Plan.
SECTION 9. PERFORMANCE SHARES
The Committee may make awards of Common Stock,
evidenced by an Agreement, to selected Employees on the
basis of the Company's financial performance in any given
period. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the
Employees who shall receive such Performance Shares, to
determine the number of such shares to be granted for each
Performance Period, and to determine the duration of each
such Performance Period. There may be more than one
Performance Period in existence at any one time, and the
duration of Performance Periods may differ from each other.
The Committee shall establish performance measures for
each Performance Period on the basis of such criteria and to
accomplish such objectives as the Committee may from time to
time, in its sole discretion, determine. Such measures may
include, but shall not be limited to, return on investments,
cumulative earnings per share, or return on shareholders'
equity. The performance measures determined by the Committee
shall be established prior to the beginning of each
Performance Period but may be subject to such later
revisions as the Committee shall deem appropriate.
Performance Shares may not be sold, assigned, transferred,
pledged, or otherwise encumbered, except as herein provided
and as provided in Section 10(e), during the Performance
Period.
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The Committee shall determine, in its sole discretion,
the manner of payment, which may include (i) cash, (ii)
shares of Common Stock, or (iii) shares of Restricted Stock
in such proportions as the Committee shall determine.
Employees may be offered the opportunity to defer the
receipt of payment of earned Performance Shares, and Common
Stock may be granted as a bonus for deferral under terms as
may be established by the Committee from time to time;
however, in no event shall the Common Stock granted as a
bonus for deferral exceed 20% of the Performance Shares so
deferred per year over a five-year period.
An Employee must be employed by the Company at the end
of a Performance Period in order to be entitled to payment
of Performance Shares in respect of such period; provided,
however, that in the event of an Employee's cessation of
employment before the end of such period, or upon the
occurrence of his or her death, retirement, or disability,
or other reason approved by the Committee, the Committee
may, in its discretion, limit such forfeiture to that
portion of the Performance Shares deemed not earned.
SECTION 10. CONTINUED EMPLOYMENT AND AGREEMENT TO SERVE
(a) Subject to the provisions of paragraphs (b), (c)
and (e) of this Section 10, every Option and SAR shall
provide that it may not be exercised in whole or in part for
a period of one year after the date of granting such Option
and, if the employment of the Employee shall be terminated,
for any reason other than death or disability as determined
by the Committee, prior to the end of such one year period,
the Option granted to such Employee shall immediately
terminate.
(b) Every Option shall provide that in the event the
Employee dies while employed by Ashland during the one-year
period of disability described in paragraph (c) of this
Section 10 or within three months after cessation of
employment for any cause, such Option shall be exercisable,
at any time or from time to time, prior to the fixed
termination date set forth in the Option, by the
Beneficiaries of the decedent for the full number of
optioned shares or any part thereof, less such number as may
have been theretofore acquired under the Option.
(c) Every Option shall provide that in the event the
employment of any Employee shall cease by reason of total
and permanent disability within the meaning of Section
22(e)(3) of the Code, as determined by the Committee at any
time during the term of the Option, such Option shall be
exercisable, at any time or from time to time by such
Employee, during a period of one year of continuing
disability following termination of employment by reason of
such disability for the full number of optioned shares or
any part thereof, less such number as may have been
theretofore acquired under the Option. The determination by
the Committee of any question involving disability shall be
conclusive and binding.
(d) Except as provided in paragraphs (a), (b), (c) and
(e) of this Section 10, every Option shall provide that it
shall terminate on the earlier to occur of the fixed
termination date set forth in the Option or three months
after cessation of the Employee's employment for any cause
except Retirement, in which event the Option shall be
exercisable for a period of three years after such
Retirement date, and, except as provided in paragraph (e) of
this Section 10, if exercised after cessation of such
employment or Retirement, may be exercised only in respect
of the number of shares which the Employee could have
acquired under the Option immediately prior to such
cessation of employment or Retirement; provided, however,
that no Option may be exercised after the fixed termination
date set forth in the Option.
(e) Notwithstanding any provision of this Section 10 to
the contrary, any Award granted pursuant to the Plan, except
a Restricted Stock Award to Outside Directors, which is
governed by Section 8, subsection (B), may, in the
discretion of the Committee or as provided in the relevant
Agreement, become exercisable, at any time or from time to
time, prior to the fixed termination date set forth in the
Award for the full number of awarded shares or any part
thereof, less such numbers as may have been theretofore
acquired under the Award (i) from and after the time the
Employee ceases to be an Employee of Ashland as a result of
the sale or other disposition by Ashland of assets or
property (including shares of any subsidiary) in respect of
which such Employee had theretofore been employed or as a
result of which such Employee's continued employment with
Ashland is no longer required, and (ii) in the case of a
Change in Control of Ashland, from and after the date of
such Change in Control.
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(f) Each Employee granted an Award under this Plan
shall agree by his or her acceptance of such Award to remain
in the service of Ashland for a period of at least one year
from the date of the Agreement respecting the Award between
Ashland and the Employee. Such service shall, subject to the
terms of any contract between Ashland and such Employee, be
at the pleasure of Ashland and at such compensation as
Ashland shall reasonably determine from time to time.
Nothing in the Plan, or in any Award granted pursuant to the
Plan, shall confer on any individual any right to continue
in the employment of or service to Ashland or interfere in
any way with the right of Ashland to terminate the
Employee's employment at any time.
(g) Subject to the limitations set forth in Section 422
of the Code, the Committee may adopt, amend, or rescind from
time to time such provisions as it deems appropriate with
respect to the effect of leaves of absence approved by any
duly authorized officer of Ashland with respect to any
Employee.
SECTION 11. WITHHOLDING TAXES
Federal, state or local law may require the withholding
of taxes applicable to gains resulting from the exercise of
an Award. Unless otherwise prohibited by the Committee, each
Employee may satisfy any such tax withholding obligation by
any of the following means, or by a combination of such
means: (i) a cash payment, (ii) authorizing Ashland to
withhold from the shares of Common Stock otherwise issuable
to the Employee pursuant to the exercise or vesting of an
Award a number of shares having a Fair Market Value, as of
the Tax Date, which will satisfy the amount of the
withholding tax obligation, or (iii) by delivery to Ashland
of a number of shares of Common Stock having a Fair Market
Value as of the Tax Date which will satisfy the amount of
the withholding tax obligation arising from an exercise or
vesting of an Award. An Employee's election to pay the
withholding tax obligation by (ii) or (iii) above must be
made on or before the Tax Date, is irrevocable, is subject
to such rules as the Committee may adopt, and may be
disapproved by the Committee. If the amount requested is not
paid, the Committee may refuse to issue Common Stock under
the Plan.
SECTION 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the outstanding Common
Stock of the Company by reason of any stock split, stock
dividend, recapitalization, merger, consolidation,
reorganization, combination, or exchange of shares, split-
up, split-off, spin-off, liquidation or other similar change
in capitalization, or any distribution to common
stockholders other than cash dividends, the number or kind
of shares that may be issued under the Plan pursuant to
Section 3 and the number or kind of shares subject to, or
the price per share under any outstanding Award shall be
automatically adjusted so that the proportionate interest of
the Employee or Outside Director shall be maintained as
before the occurrence of such event. Such adjustment shall
be conclusive and binding for all purposes of the Plan.
SECTION 13. AMENDMENTS AND TERMINATIONS
Unless the Plan shall have been terminated as
hereinafter provided, the Plan shall terminate on, and no
Award shall be granted after, November 3, 1993. The plan may
be terminated, modified or amended by the shareholders of
the Company. The Board may at any time terminate, modify or
amend the Plan in such respects as it shall deem advisable;
provided, however, that the Board may not, without approval
by the holders of a majority of the outstanding shares of
stock present and voting at any annual or special meeting of
shareholders of Ashland: (i) increase (except as provided in
Section 12) the maximum number of shares which may be issued
pursuant to the Awards granted under the Plan, (ii) change
the class of persons eligible to receive Awards, (iii)
change the manner of determining the minimum Exercise Price
of Options other than to change the manner of determining
the Fair Market Value of the Common Stock as set forth in
Section 2, (iv) extend the period during which Awards may be
granted or exercised, or (v) amend any provision of the Plan
insofar as it applies specifically to Restricted Stock
Awards granted or to be granted to Outside Directors.
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SECTION 14. MISCELLANEOUS PROVISIONS
(a) Except as to Awards to Outside Directors, no
Employee or other person shall have any claim or right to be
granted an Award under the Plan.
(b) An Employee's or Outside Director's rights and
interest under the Plan may not be assigned or transferred
in whole or in part, either directly or by operation of law
or otherwise (except in the event of an Employee's or
Outside Director's death, by will or the laws of descent and
distribution), including, but not by way of limitation,
execution, levy, garnishment, attachment, pledge, bankruptcy
or in any other manner, and no such right or interest of any
Employee or Outside Director in the Plan shall be subject to
any obligation of liability of such individual. An Award
shall be exercisable, during an Employee's lifetime, only by
him or her or his or her Personal Representative. Except as
specified in Section 8, the holder of an Award shall have
none of the rights of a shareholder until the shares subject
thereto shall have been registered in the name of the person
or persons exercising the Award on the transfer books of the
Company.
(c) No Common Stock shall be issued hereunder unless
counsel for the Company shall be satisfied that such
issuance will be in compliance with applicable Federal,
state, and other securities laws.
(d) The expenses of the Plan shall be borne by the
Company.
(e) By accepting any Award under the Plan, each
Employee and Outside Director and each Personal
Representative or Beneficiary claiming under or through him
or her shall be conclusively deemed to have indicated his or
her acceptance and ratification of, and consent to, any
action taken under the Plan by the Company or the Board.
(f) Awards granted under the Plan shall be binding upon
Ashland, its successors, and assigns.
(g) The appropriate officers of the Company shall cause
to be filed any reports, returns, or other information
regarding Awards hereunder or any Common Stock issued
pursuant hereto as may be required by Section 13 or 15(d) of
the Exchange Act, or any other applicable statute, rule, or
regulation.
(h) Nothing contained in this Plan shall prevent the
Board of Directors from adopting other or additional
compensation arrangements, subject to shareholder approval
if such approval is required.
SECTION 15. EFFECTIVENESS OF THE PLAN
The Plan shall be submitted to the shareholders of the
Company for their approval and adoption on January 26, 1989
or such other date fixed for the next meeting of
shareholders or any adjournment or postponement thereof. The
Plan shall not be effective and no Award shall be made
hereunder unless and until the Plan has been so approved and
adopted at a meeting of the Company's shareholders.
SECTION 16. GOVERNING LAW
The provisions of this Plan shall be interpreted and
construed in accordance with the laws of the Commonwealth of
Kentucky.
As Amended and Restated by the Board on March 17, 1994.
10
ASHLAND OIL, INC.
1993 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Ashland Oil, Inc. 1993 Stock
Incentive Plan is to promote the interests of Ashland
Oil, Inc. and its shareholders by providing its
directors, officers and employees with an incentive to
continue service with Ashland. Accordingly, the Company
may grant to selected officers and employees Stock
Options, Stock Appreciation Rights, Restricted Stock,
Merit Awards and Performance Share Awards in an effort to
attract and retain in its employ qualified individuals
and to provide such individuals with incentives to devote
their best efforts to the Company through ownership of
the Company's stock, thus enhancing the value of the
Company for the benefit of shareholders. The Plan also
provides an incentive for qualified persons, who are not
officers or employees of the Company, to serve on the
Board of Directors of the Company and to continue to work
for the best interests of the Company by rewarding such
persons with automatic grants of Restricted Stock of the
Company. Stock Options, Stock Appreciation Rights, Merit
Awards and Performance Shares may not be granted to such
Outside Directors under the Plan.
SECTION 2. DEFINITIONS
(A) "Agreement" shall mean a written agreement
setting forth the terms of an Award.
(B) "Ashland" shall mean, collectively, Ashland
Oil, Inc. and its Subsidiaries.
(C) "Award" shall mean an Option, a Stock
Appreciation Right, a Restricted Stock Award, a Merit
Award, or a Performance Share Award, in each case granted
under this Plan.
(D) "Beneficiary" shall mean the person, persons,
trust or trusts designated by an Employee or Outside
Director or if no designation has been made, the person,
persons, trust, or trusts entitled by will or the laws of
descent and distribution to receive the benefits
specified under this Plan in the event of an Employee's
or Outside Director's death.
(E) "Board" shall mean the Board of Directors of
the Company.
(F) "Change in Control" shall be deemed to occur
(1) upon the approval by the Board (or if approval of the
Board is not required as a matter of law, the
shareholders of Ashland) of (A) any consolidation or
merger of Ashland in which Ashland is not the continuing
or surviving corporation or pursuant to which shares of
Common Stock would be converted into cash, securities or
other property other than a merger in which the holders
of Common Stock immediately prior to the merger will have
the same proportionate ownership of Common Stock of the
surviving corporation immediately after the merger, (B)
any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all
or substantially all the assets of Ashland, or (C)
adoption of any plan or proposal for the liquidation or
dissolution of Ashland, (2) when any "person" (as defined
in Section 13(d) of the Exchange Act), other than Ashland
or any subsidiary or employee benefit plan or trust
maintained by Ashland, shall become the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, or more than 20% of Ashland's
Common Stock outstanding at the time, without the prior
approval of the Board, or (3) at any time during a period
of two consecutive years, individuals who at the
beginning of such period constituted the Board shall
cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for
election by Ashland's shareholders of each new director
during such two-year period was approved by a vote of at
least two-thirds of the directors then still in office
who were directors at the beginning of such two-year
period.
(G) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
<PAGE>
(H) "Committee" shall mean the Personnel and
Compensation Committee of the Board, as from time to time
constituted, or any successor committee of the Board with
similar functions, which shall consist of three or more
members, each of whom shall be Disinterested.
(I) "Common Stock" shall mean the Common Stock of
the Company ($1.00 par value), subject to adjustment
pursuant to Section 13.
(J) "Company" shall mean, collectively, Ashland
Oil, Inc. and its Subsidiaries.
(K) "Disinterested" shall mean disinterested within
the meaning of applicable regulatory requirements,
including those promulgated under Section 16 of the
Exchange Act.
(L) "Employee" shall mean an officer or employee of
the Company.
(M) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(N) "Exercise Price" shall mean, with respect to
each share of Common Stock subject to (i) an Option
(other than a Reload Option), the price fixed by the
Committee at which such share may be purchased from the
Company pursuant to the exercise of such Option, which
price at no time may be less than 100% of the Fair Market
Value of the Common Stock on the date the Option is
granted or (ii) a Reload Option, the price of which is as
fixed pursuant to Section 6 of the Plan.
(O) "Fair Market Value" shall mean the closing
price of the Common Stock as reported on the Composite
Tape, or, if there is no trading of the Common Stock on
the date in question, then the closing price of the
Common Stock, as so reported, on the next preceding date
on which there was trading in the Common Stock.
(P) "Incentive Stock Option" or "ISO" shall mean an
Option that is intended by the Committee to meet the
requirements of Section 422 of the Code or any successor
provision.
(Q) "Long-Term Incentive Plan" shall mean the
Ashland Oil, Inc. Long-Term Incentive Plan approved and
adopted on January 26, 1989 by the shareholders of the
Company.
(R) "Merit Award" shall mean an award of Common
Stock issued pursuant to Section 9 of the Plan.
(S) "Nonqualified Stock Option" or "NQSO" shall
mean an Option granted pursuant to this Plan which does
not qualify as an Incentive Stock Option.
(T) "Option" shall mean the right to purchase
Common Stock at a price to be specified and upon terms to
be designated by the Committee or otherwise determined
pursuant to this Plan. An Option shall be designated by
the Committee as a Nonqualified Stock Option or an
Incentive Stock Option.
(U) "Original Option" shall mean an option as
defined in Subsection (D) of Section 6 of the Plan.
(V) "Outside Director" shall mean a director of the
Company who is not also an Employee of the Company.
(W) "Performance Period" shall mean the period
designated by the Committee during which the performance
objectives shall be measured.
(X) "Performance Share Award" shall mean an award
of shares of Common Stock, the issuance of which is
contingent upon attainment of performance objectives
specified by the Committee.
(Y) "Performance Shares" shall mean those shares of
Common Stock issuable pursuant to a Performance Share
Award.
(Z) "Personal Representative" shall mean the person
or persons who, upon the disability or incompetence of an
Employee or Outside Director, shall have acquired on
behalf of the Employee or Outside Director by legal
proceeding or otherwise the right to receive the benefits
specified in this Plan.
(AA) "Plan" shall mean this Ashland Oil, Inc. 1993
Stock Incentive Plan.
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<PAGE>
(BB) "Reload Option" shall mean an option granted
pursuant to Subsection (D) of Section 6 of the Plan.
(CC) "Restricted Period" shall mean the period
designated by the Committee during which Restricted Stock
may not be sold, assigned, transferred, pledged, or
otherwise encumbered, which period in the case of
Employees shall not be less than one year from the date
of grant, and in the case of Outside Directors is the
period set forth in subsection (B) of Section 8.
(DD) "Restricted Stock" shall mean those shares of
Common Stock issued pursuant to a Restricted Stock Award
which are subject to the restrictions, terms, and
conditions set forth in the related Agreement.
(EE) "Restricted Stock Award" shall mean an award
of Restricted Stock.
(FF) "Retained Distributions" shall mean any
securities or other property (other than regular cash
dividends) distributed by the Company in respect of
Restricted Stock during any Restricted Period.
(GG) "Retirement" shall mean retirement of an
Employee from the employ of the Company at any time as
described in the Ashland Oil, Inc. and Affiliates Pension
Plan or in any successor pension plan, as from time to
time in effect.
(HH) "Section 16(b) Optionee" shall mean an
Employee or former Employee who is subject to Section
16(b) of the Exchange Act.
(II) "Stock Appreciation Right" or "SAR" shall mean
the right of the holder to elect to surrender an Option
or any portion thereof which is then exercisable and
receive in exchange therefor shares of Common Stock,
cash, or a combination thereof, as the case may be, with
an aggregate value equal to the excess of the Fair Market
Value of one share of Common Stock over the Exercise
Price specified in such Option multiplied by the number
of shares of Common Stock covered by such Option or
portion thereof which is so surrendered. An SAR may only
be granted concurrently with the grant of the related
Option. An SAR shall be exercisable upon any additional
terms and conditions (including, without limitation, the
issuance of Restricted Stock and the imposition of
restrictions upon the timing of exercise) which may be
determined as provided in the Plan.
(JJ) "Subsidiary" shall mean any present or future
subsidiary corporations, as defined in Section 424 of the
Code, of Ashland.
(KK) "Tax Date" shall mean the date the withholding
tax obligation arises with respect to the exercise of an
Award.
SECTION 3. STOCK SUBJECT TO THE PLAN
There will be reserved for issuance under the Plan
(upon the exercise of Options and Stock Appreciation
Rights, upon awards of Restricted Stock, Performance
Shares and Merit Awards and for stock bonuses on deferred
awards of Restricted Stock and Performance Shares), an
aggregate of 2,900,000 shares of Ashland Common Stock,
par value $1.00 per share provided; however, that of such
shares, only 1,500,000 shares in the aggregate shall be
available for issuance for Restricted Stock Awards and
Merit Awards. Such shares shall be authorized but
unissued shares of Common Stock. Except as provided in
Sections 7 and 8, if any Award under the Plan shall
expire or terminate for any reason without having been
exercised in full, or if any Award shall be forfeited,
the shares subject to the unexercised or forfeited
portion of such Award shall again be available for the
purposes of the Plan.
SECTION 4. ADMINISTRATION
The Plan shall be administered by the Committee. No
person who is (or, within one year prior to his or her
appointment as a member of the Committee, was) eligible
to participate in the Plan, except as specifically
authorized under subsection (B) of Section 8 herein, or
in any other stock option or stock bonus plan of the
Company, shall be a member of the Committee. The
Committee shall have no authority
3
<PAGE>
regarding the granting of Restricted Stock to Outside
Directors, as such grants are fixed pursuant to
subsection (B) of Section 8 of the Plan.
In addition to any implied powers and duties that
may be needed to carry out the provisions of the Plan,
the Committee shall have all the powers vested in it by
the terms of the Plan, including exclusive authority
(except as to Awards of Restricted Stock granted to
Outside Directors) to select the Employees to be granted
Awards under the Plan, to determine the type, size and
terms of the Awards to be made to each Employee selected,
to determine the time when Awards will be granted, and to
prescribe the form of the Agreements embodying Awards
made under the Plan. Subject to the provisions of the
Plan specifically governing Awards of Restricted Stock
granted or to be granted to Outside Directors pursuant to
subsection (B) of Section 8 herein, the Committee shall
be authorized to interpret the Plan and the Awards
granted under the Plan, to establish, amend and rescind
any rules and regulations relating to the Plan, to make
any other determinations which it believes necessary or
advisable for the administration of the Plan, and to
correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any Award in the
manner and to the extent the Committee deems desirable to
carry it into effect. Any decision of the Committee in
the administration of the Plan, as described herein,
shall be final and conclusive.
The Committee may act only by a majority of its
members. Any determination of the Committee may be made,
without notice, by the written consent of the majority of
the members of the Committee. In addition, the Committee
may authorize any one or more of their number or any
officer of the Company to execute and deliver documents
on behalf of the Committee. No member of the Committee
shall be liable for any action taken or omitted to be
taken by him or her or by any other member of the
Committee in connection with the Plan, except for his or
her own willful misconduct or as expressly provided by
statute.
The provisions of this Section 4 with respect to
decisions made by, and authority of, the Committee shall
be subject to the provisions of subsection (B) of Section
8 herein.
SECTION 5. ELIGIBILITY
Awards may only be granted (i) to individuals who
are Employees of Ashland, and (ii) as expressly provided
in subsection (B) of Section 8 of the Plan, to
individuals who are duly elected Outside Directors of
Ashland.
SECTION 6. STOCK OPTIONS
A. Designation and Price.
(a) Any Option granted under the Plan may be
granted as an Incentive Stock Option or as a Nonqualified
Stock Option as shall be designated by the Committee at
the time of the grant of such Option. Each Option shall
be evidenced by an Agreement between the recipient and
the Company, which Agreement shall specify the
designation of the Option as an ISO or a NQSO, as the
case may be, and shall contain such terms and conditions
as the Committee, in its sole discretion, may determine
in accordance with the Plan.
(b) Every Incentive Stock Option shall provide for
a fixed expiration date of not later than ten years from
the date such Incentive Stock Option is granted. Every
Nonqualified Stock Option shall provide for a fixed
expiration date of ten years and one month from the date
such Nonqualified Stock Option is granted, such period to
be applicable to each Nonqualified Stock Option granted
under this Plan.
(c) The Exercise Price of Common Stock issued
pursuant to each Option (other than a Reload Option)
shall be fixed by the Committee at the time of the
granting of the Option; provided, however, that such
Exercise Price shall in no event be less than 100% of the
Fair Market Value of the Common Stock on the date such
Option is granted.
B. Exercise.
The Committee may, in its discretion, provide for
Options granted under the Plan to be exercisable in
4
<PAGE>
whole or in part; provided, however, that no Option
(other than a Reload Option) shall be exercisable prior
to the first anniversary of the date of its grant, except
as provided in Section 11(e) or as the Committee
otherwise determines, and in no case may an Option be
exercised at any time for fewer than 50 shares (or the
total remaining shares covered by the Option if fewer
than 50 shares) during the term of the Option. The
specified number of shares will be issued upon receipt by
Ashland of (i) notice from the optionee of exercise of an
Option, and (ii) either payment to Ashland (as provided
in this Section 6, subsection (C) below), of the Exercise
Price for the number of shares with respect to which the
Option is exercised, or with approval of the Committee, a
secured promissory note as hereinafter provided. Each
such notice and payment shall be delivered or mailed by
postpaid mail, addressed to the Treasurer of Ashland at
Ashland Oil, Inc., 1000 Ashland Drive, Russell, Kentucky,
41169, or such other place as Ashland may designate from
time to time. Separate stock certificates shall be issued
by the Company for those shares acquired pursuant to the
exercise of an ISO and for those shares acquired pursuant
to a NQSO.
C. Payment for Shares.
Except as otherwise provided in this Section 6, the
Exercise Price for the Common Stock shall be paid in full
when the Option is exercised. Subject to such rules as
the Committee may impose, the Exercise Price may be paid
in whole or in part in (i) cash, (ii) whole shares of
Common Stock owned by the Employee six months or longer
and evidenced by negotiable certificates, valued at their
Fair Market Value on the date of exercise, (iii) by a
combination of such methods of payment, or (iv) such
other consideration as shall constitute lawful
consideration for the issuance of Common Stock and be
approved by the Committee (including without limitation,
assurance satisfactory to the Committee from a broker
registered under the Exchange Act, of the delivery of the
proceeds of an imminent sale of the stock to be issued
pursuant to the exercise of such Option, such sale to be
made at the direction of the Employee). If certificates
representing shares of Common Stock are used to pay all
or part of the Exercise Price of an Option, separate
certificates shall be delivered by Ashland representing
the same number of shares as each certificate so used and
an additional certificate shall be delivered representing
any additional shares to which the Employee is entitled
as a result of exercise of the Option. Moreover, if so
provided in the Agreement, and subject to such
restrictions, terms and conditions as the Committee may
impose, an Employee may request Ashland to "pyramid" his
or her shares; that is, to automatically apply the shares
which he or she is entitled to receive on the exercise of
a portion of an Option to satisfy the exercise for
additional portions of the Option, thus resulting in
multiple simultaneous exercises of an Option by use of
whole shares as payment. The Committee may, in its
discretion, authorize payment of all or any part of the
Exercise Price over a period of not more than five years
from the date the Option is exercised, In such instance
any unpaid balance of the Exercise Price shall be
evidenced by the Employee's promissory note payable to
the order of Ashland which shall be secured by such
collateral and shall bear interest at such rate or rates
as determined from time to time by the Committee.
D. Reload Options.
The Committee shall have the authority to specify
at the time of grant that an Employee shall be granted
another Stock Option (a "Reload Option") in the event
such Employee exercises all or a part of a Stock Option
(an "Original Option") by surrendering in accordance with
Section 6, subsection (C) already owned shares of Common
Stock in full or partial payment of the Exercise Price
under such Original Option, subject to the availability
of shares of Common Stock under the Plan at the time of
exercise. Each Reload Option shall cover a number of
shares of Common Stock equal to the number of shares of
Common Stock surrendered in payment of the Exercise
Price, shall have an Exercise Price per share of Common
Stock equal to the Fair Market Value of the Common Stock
on the date of grant of such Reload Option and shall
expire on the stated expiration date of the Original
Option. A Reload Option shall be exercisable at any time
and from time to time from and after the date of grant of
such Reload Option (or, as the Committee in its sole
discretion shall determine at the time of grant, at such
time or times as shall be specified in the Reload
Option); provided, however, that a Reload Option granted
to a Section 16(b) Optionee shall not be exercisable
during the first six months from the date of grant of
such Reload Option. The first such Reload Option may
provide for the grant, when exercised, of one subsequent
Reload Option
5
<PAGE>
to the extent and upon such terms and conditions,
consistent with this Section 6, subsection (D), as the
Committee in its sole discretion shall specify at or
after the time of grant of such Reload Option. A Reload
Option shall contain such other terms and conditions
which may include a restriction on the transferability of
the number of shares of Common Stock received upon
exercise of the Original Option reduced by a number of
shares equal in value to the tax liability incurred upon
exercise as the Committee in its sole discretion may deem
desirable which may be set forth in the Agreement
evidencing the Reload Option.
SECTION 7. STOCK APPRECIATION RIGHTS
The Committee may grant Stock Appreciation Rights
pursuant to the provisions of this Section 7 to any
holder of any Option (including any Reload Option)
granted under the Plan with respect to all or a portion
of the shares subject to the related Option. An SAR may
only be granted concurrently with the grant of the
related Option. Subject to the terms and provisions of
this Section 7, each SAR shall be exercisable only at the
same time and to the same extent the related Option is
exercisable and in no event after the termination of the
related Option. An SAR shall be exercisable only when the
Fair Market Value (determined as of the date of exercise
of the SAR) of each share of Common Stock with respect to
which the SAR is to be exercised shall exceed the
Exercise Price per share of Common Stock subject to the
related Option. An SAR granted under the Plan shall be
exercisable in whole or in part by notice to Ashland.
Such notice shall state that the holder of the SAR elects
to exercise the SAR and the number of shares in respect
of which the SAR is being exercised. For purposes of this
Section 7, the date of exercise of an SAR shall mean the
date on which the Company receives such notice.
Subject to the terms and provisions of this Section
7, upon the exercise of an SAR, the holder thereof shall
be entitled to receive from Ashland consideration (in the
form hereinafter provided) equal in value to the excess
of the Fair Market Value (determined as of the date of
exercise of the SAR) of each share of Common Stock with
respect to which such SAR has been exercised over the
Exercise Price per share of Common Stock subject to the
related Option. The Committee may stipulate in the
Agreement the form of consideration which shall be
received upon the exercise of an SAR. If no consideration
is specified therein, upon the exercise of an SAR, the
holder may specify the form of consideration to be
received by such holder, which shall be in shares of
Common Stock (valued at Fair Market Value on the date of
exercise of the SAR), or in cash, or partly in cash and
partly in shares of Common Stock, as the holder shall
request; provided, however, that the Committee, in its
sole discretion, may disapprove the form of consideration
requested and instead authorize the payment of such
consideration in shares of Common Stock (valued as
aforesaid), or in cash, or partly in cash and partly in
shares of Common Stock.
Upon the exercise of an SAR, the related Option
shall be deemed exercised to the extent of the number of
shares of Common Stock with respect to which such SAR is
exercised and to that extent a corresponding number of
shares of Common Stock shall not again be available for
the grant of Awards under the Plan. Upon the exercise or
termination of the related Option, the SAR with respect
thereto shall be considered to have been exercised or
terminated to the extent of the number of shares of
Common Stock with respect to which the related Option was
so exercised or terminated.
SECTION 8. RESTRICTED STOCK AWARDS
A. Awards to Employees
The Committee may make an award of Restricted Stock
to selected Employees, evidenced by an Agreement which
shall contain such terms and conditions as the Committee,
in its sole discretion, may determine. The amount of each
Restricted Stock Award and the respective terms and
conditions of each Award (which terms and conditions need
not be the same in each case) shall be determined by the
Committee in its sole discretion. As a condition to any
Award hereunder, the Committee may require an Employee to
pay to the Company an amount equal to, or in excess of,
the par value of the shares of Restricted Stock awarded
to him or her. Any such Restricted Stock Award shall
automatically expire if not purchased in accordance with
the Committee's requirements within thirty (30) days
after the date of grant. Subject to the terms and
conditions of each Restricted Stock Award, the Employee,
as the owner of the
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<PAGE>
Common Stock issued as Restricted Stock, shall have all
rights of a shareholder including, but not limited to,
voting rights as to such Common Stock and the right to
receive dividends thereon when, as and if paid.
In the event that a Restricted Stock Award has been
made to an Employee whose employment or service is
subsequently terminated for any reason prior to the lapse
of all restrictions thereon, such Restricted Stock will
be forfeited in its entirety by such Employee; provided,
however, that the Committee may, in its sole discretion,
limit such forfeiture. Any Restricted Stock so forfeited
by an Employee shall not again be available for the grant
of Awards under the Plan.
Employees may be offered the opportunity to defer
the receipt of payment of vested shares of Restricted
Stock, and Common Stock may be granted as a bonus for
deferral, under terms as may be established by the
Committee from time to time; however, in no event shall
the Common Stock granted as a bonus for deferral exceed
20% of the Restricted Stock so deferred.
B. Awards to Outside Directors
During the term of the Plan, (i) each Outside
Director who was granted an award of restricted stock
under the Long-Term Incentive Plan on January 26, 1989
and who continues to serve as an Outside Director on
January 31, 1994 shall be granted an Award of 1,000
shares of Restricted Stock on January 31, 1994; (ii) each
Outside Director who was granted an award of restricted
stock under such Long-Term Incentive Plan other than
those Outside Directors in (i) above shall be granted an
Award of 1,000 shares of Restricted Stock upon the fifth
anniversary of his or her prior award under the Long-Term
Incentive Plan; and (iii) each person who is hereafter
duly appointed or elected as an Outside Director and who
does not receive an award under the Long-Term Incentive
Plan shall be granted, effective on the date of his or
her appointment or election to the Board, an Award of
1,000 shares of Restricted Stock. All Awards under this
subsection (B) are subject to the limitation on the
number of shares of Common Stock available pursuant to
Section 3 and to the terms and conditions set forth in
this subsection (B) and subsection (C) below.
As a condition to any Award hereunder, the Outside
Director will be required to pay to the Company a
nonrefundable amount equal to the par value of the shares
of Restricted Stock awarded to him or her. Upon the
granting of the Restricted Stock Award, such Outside
Director shall be entitled to all rights incident to
ownership of Common Stock of the Company with respect to
his or her Restricted Stock, including, but not limited
to, the right to vote such shares of Restricted Stock and
to receive dividends thereon when, as and if paid;
provided, however, that in no case may any shares of
Restricted Stock granted to an Outside Director be sold,
assigned, transferred, pledged, or otherwise encumbered
during the Restricted Period which shall not lapse until
the earlier to occur of the following: (i) normal
retirement from the Board at age 70, (ii) the death or
disability of such Outside Director, (iii) a 50% change
in the beneficial ownership of the Company as defined in
Rule 13d-3 under the Exchange Act, or (iv) voluntary
early retirement to take a position in governmental
service. In the case of voluntary resignation or other
termination of service of an Outside Director prior to
the occurrence of any of the events described in (i),
(ii), (iii) or (iv) of the preceding sentence, any grant
of Restricted Stock made to him or her pursuant to this
subsection (B) will be forfeited by such Outside
Director. Any Restricted Stock so forfeited by an
Outside Director shall not again be available for the
grant of Awards under the Plan.
C. Transferability
Restricted Stock may not be sold, assigned,
transferred, pledged, or otherwise encumbered during a
Restricted Period, which, in the case of Employees, shall
be determined by the Committee and which shall not be
less than one year from the date such Restricted Stock
was awarded, and, in the case of Outside Directors, shall
be determined in accordance with subsection (B) of this
Section 8. The Committee may at any time, reduce the
Restricted Period with respect to any outstanding shares
of Restricted Stock awarded under the Plan to Employees,
but in no event shall such Restricted Period be less than
one year.
During the Restricted Period, certificates
representing the Restricted Stock and any Retained
Distributions shall be registered in the recipient's name
and bear a restrictive legend to the effect that
ownership of such Restricted Stock (and any such Retained
Distributions), and the enjoyment of all rights
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appurtenant thereto are subject to the restrictions,
terms, and conditions provided in the Plan and the
applicable Agreement. Such certificates shall be
deposited by the recipient with the Company, together
with stock powers or other instruments of assignment,
each endorsed in blank, which will permit transfer to the
Company of all or any portion of the Restricted Stock and
any securities constituting Retained Distributions which
shall be forfeited in accordance with the Plan and the
applicable Agreement. Restricted Stock shall constitute
issued and outstanding shares of Common Stock for all
corporate purposes. The recipient will have the right to
vote such Restricted Stock, to receive and retain all
regular cash dividends, and to exercise all other rights,
powers, and privileges of a holder of Common Stock with
respect to such Restricted Stock, with the exception that
(i) the recipient will not be entitled to delivery of the
stock certificate or certificates representing such
Restricted Stock until the restrictions applicable
thereto shall have expired; (ii) the Company will retain
custody of all Retained Distributions made or declared
with respect to the Restricted Stock (and such Retained
Distributions will be subject to the same restrictions,
terms and conditions as are applicable to the Restricted
Stock) until such time, if ever, as the Restricted Stock
with respect to which such Retained Distributions shall
have been made, paid, or declared shall have become
vested, and such Retained Distributions shall not bear
interest or be segregated in separate accounts; (iii) the
recipient may not sell, assign, transfer, pledge,
exchange, encumber, or dispose of the Restricted Stock or
any Retained Distributions during the Restricted Period;
and (iv) a breach of any restrictions, terms, or
conditions provided in the Plan or established by the
Committee with respect to any Restricted Stock or
Retained Distributions will cause a forfeiture of such
Restricted Stock and any Retained Distributions with
respect thereto.
SECTION 9. MERIT AWARDS
The Committee may from time to time make an award
of Common Stock under the Plan to selected Employees for
such reasons and in such amounts as the Committee, in its
sole discretion, may determine. As a condition to any
such Merit Award, the Committee may require an Employee
to pay to the Company an amount equal to, or in excess
of, the par value of the shares of Common Stock awarded
to him or her.
SECTION 10. PERFORMANCE SHARES
The Committee may make awards of Common Stock,
evidenced by an Agreement, to selected Employees on the
basis of the Company's financial performance in any given
period. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to
determine the Employees who shall receive such
Performance Shares, to determine the number of such
shares to be granted for each Performance Period, and to
determine the duration of each such Performance Period.
There may be more than one Performance Period in
existence at any one time, and the duration of
Performance Periods may differ from each other.
The Committee shall establish performance measures
for each Performance Period on the basis of such criteria
and to accomplish such objectives as the Committee may
from time to time, in its sole discretion, determine.
Such measures may include, but shall not be limited to,
return on investment, earnings per share, return on
shareholders' equity, or return to shareholders. The
performance measures determined by the Committee shall be
established in writing prior to the beginning of each
performance period. The Committee shall have the
discretion to later revise the performance measures only
so as to reduce or eliminate the amount of compensation
otherwise payable upon attainment of the performance
measures. In no event shall the Committee be able to
later revise the performance measures to increase the
amount of compensation otherwise payable. Performance
Shares may not be sold, assigned, transferred, pledged,
or otherwise encumbered, except as herein provided and as
provided in Section 11(e), during the Performance Period.
The Committee shall determine, in its sole
discretion, the manner of payment, which may include (i)
cash, (ii) shares of Common Stock, or (iii) shares of
Restricted Stock in such proportions as the Committee
shall determine. Employees may be offered the opportunity
to defer the receipt of payment of earned Performance
Shares, and Common Stock may be granted as a bonus for
deferral under terms as may be
8
<PAGE>
established by the Committee from time to time; however,
in no event shall the Common Stock granted as a bonus for
deferral exceed 20% of the Performance Shares so
deferred.
An Employee must be employed by the Company at the
end of a Performance Period in order to be entitled to
payment of Performance Shares in respect of such period;
provided, however, that in the event of an Employee's
cessation of employment before the end of such period, or
upon the occurrence of his or her death, retirement, or
disability, or other reason approved by the Committee,
the Committee may, in its sole discretion, limit such
forfeiture.
SECTION 11. CONTINUED EMPLOYMENT AND AGREEMENT TO SERVE
(a) Subject to the provisions of paragraph (e) of
this Section 11, if the employment of the Employee shall
terminate prior to the time any portion of an Option or
Reload Option first becomes exercisable, the Option
granted to such Employee shall immediately terminate.
(b) Every Option shall provide that in the event
the Employee dies while employed by Ashland, during the
one-year period of disability described in paragraph (c)
of this Section 11 or within three months after cessation
of employment for any cause, such Option shall be
exercisable, at any time or from time to time, prior to
the fixed termination date set forth in the Option, by
the Beneficiaries of the decedent for the number of
shares which the Employee could have acquired under the
Option immediately prior to the Employee's death.
(c) Every Option shall provide that in the event
the employment of any Employee shall cease by reason of
total and permanent disability within the meaning of
Section 22(e)(3) of the Code, as determined by the
Committee at any time during the term of the Option, such
Option shall be exercisable, at any time or from time to
time by such Employee, during a period of one year of
continuing disability following termination of employment
by reason of such disability for the number of shares
which the Employee could have acquired under the Option
immediately prior to the Employee's total and permanent
disability. The one-year period following such
termination of employment during which Options may be
exercisable may be extended at the discretion of the
Committee; provided, however, that no Option may be
exercisable after the fixed termination date set forth in
the Option. The determination by the Committee of any
question involving disability shall be conclusive and
binding.
(d) Except as provided in paragraphs (a), (b), (c)
and (e) of this Section 11, every Option shall provide
that it shall terminate on the earlier to occur of the
fixed termination date set forth in the Option or three
months after cessation of the Employee's employment for
any cause except Retirement, in which event the Option
shall be exercisable for a period of three years after
such Retirement date, which three-year period may be
extended at the discretion of the Committee. If an
Option is exercised after cessation of employment or
Retirement, it may be exercised only in respect of the
number of shares which the Employee could have acquired
under the Option immediately prior to such cessation of
employment or Retirement; provided, however, that no
Option may be exercised after the fixed termination date
set forth in the Option.
(e) Notwithstanding any provision of this Section
11 to the contrary, any Award granted pursuant to the
Plan, except a Restricted Stock Award to Outside
Directors, which is governed by Section 8, subsection
(B), may, in the discretion of the Committee or as
provided in the relevant Agreement, become exercisable,
at any time or from time to time, prior to the fixed
termination date set forth in the Award for the full
number of awarded shares or any part thereof, less such
numbers as may have been theretofore acquired under the
Award (i) from and after the time the Employee ceases to
be an Employee of Ashland as a result of the sale or
other disposition by Ashland of assets or property
(including shares of any subsidiary) in respect of which
such Employee had theretofore been employed or as a
result of which such Employee's continued employment with
Ashland is no longer required, and (ii) in the case of a
Change in Control of Ashland, from and after the date of
such Change in Control.
(f) Each Employee granted an Award under this Plan
shall agree by his or her acceptance of such
9
<PAGE>
Award to remain in the service of Ashland for a period of
at least one year from the date of the Agreement
respecting the Award between Ashland and the Employee.
Such service shall, subject to the terms of any contract
between Ashland and such Employee, be at the pleasure of
Ashland and at such compensation as Ashland shall
reasonably determine from time to time. Nothing in the
Plan, or in any Award granted pursuant to the Plan, shall
confer on any individual any right to continue in the
employment of or service to Ashland or interfere in any
way with the right of Ashland to terminate the Employee's
employment at any time.
(g) Subject to the limitations set forth in Section
422 of the Code, the Committee may adopt, amend, or
rescind from time to time such provisions as it deems
appropriate with respect to the effect of leaves of
absence approved by any duly authorized officer of
Ashland with respect to any Employee.
SECTION 12. WITHHOLDING TAXES
Federal, state or local law may require the
withholding of taxes applicable to gains resulting from
the exercise of an Award. Unless otherwise prohibited by
the Committee, each Employee may satisfy any such tax
withholding obligation by any of the following means, or
by a combination of such means: (i) a cash payment, (ii)
authorizing Ashland to withhold from the shares of Common
Stock otherwise issuable to the Employee pursuant to the
exercise or vesting of an Award a number of shares having
a Fair Market Value, as of the Tax Date, which will
satisfy the amount of the withholding tax obligation, or
(iii) by delivery to Ashland of a number of shares of
Common Stock having a Fair Market Value as of the Tax
Date which will satisfy the amount of the withholding tax
obligation arising from an exercise or vesting of an
Award. An Employee's election to pay the withholding tax
obligation by (ii) or (iii) above must be made on or
before the Tax Date, is irrevocable, is subject to such
rules as the Committee may adopt, and may be disapproved
by the Committee. If the amount requested is not paid,
the Committee may refuse to issue Common Stock under the
Plan.
SECTION 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the outstanding
Common Stock of the Company by reason of any stock split,
stock dividend, recapitalization, merger, consolidation,
reorganization, combination, or exchange of shares,
split-up, split-off, spin-off, liquidation or other
similar change in capitalization, or any distribution to
common stockholders other than cash dividends, the number
or kind of shares that may be issued under the Plan
pursuant to Section 3 and the number or kind of shares
subject to, or the price per share under any outstanding
Award shall be automatically adjusted so that the
proportionate interest of the Employee or Outside
Director shall be maintained as before the occurrence of
such event. Such adjustment shall be conclusive and
binding for all purposes of the Plan.
Section 14. Amendments And Terminations
Unless the Plan shall have been terminated as
hereinafter provided, the Plan shall terminate on, and no
Award (other than Reload Options automatically granted
pursuant to Section 6) shall be granted after January 26,
1998. The plan may be terminated, modified or amended by
the shareholders of the Company. The Board may at any
time terminate, modify or amend the Plan in such respects
as it shall deem advisable; provided, however, that the
Board may not, without approval by the holders of a
majority of the outstanding shares of stock present and
voting at any annual or special meeting of shareholders
of Ashland: (i) increase (except as provided in Section
13) the maximum number of shares which may be issued
pursuant to the Awards granted under the Plan, (ii)
change the class of persons eligible to receive Awards,
(iii) change the manner of determining the minimum
Exercise Price of Options other than to change the manner
of determining the Fair Market Value of the Common Stock
as set forth in Section 2, (iv) extend the period during
which Awards may be granted or exercised, or (v) amend
any provision of the Plan insofar as it applies
specifically to Restricted Stock Awards granted or to be
granted to Outside Directors.
SECTION 15. MISCELLANEOUS PROVISIONS
10
<PAGE>
(a) Except as to Awards to Outside Directors, no
Employee or other person shall have any claim or right to
be granted an Award under the Plan.
(b) An Employee's or Outside Director's rights and
interest under the Plan may not be assigned or
transferred in whole or in part, either directly or by
operation of law or otherwise (except in the event of an
Employee's or Outside Director's death, by will or the
laws of descent and distribution), including, but not by
way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner,
and no such right or interest of any Employee or Outside
Director in the Plan shall be subject to any obligation
of liability of such individual. An Award shall be
exercisable, during an Employee's lifetime, only by him
or her or his or her Personal Representative. Except as
specified in Section 8, the holder of an Award shall have
none of the rights of a shareholder until the shares
subject thereto shall have been registered in the name of
the person receiving or person or persons exercising the
Award on the transfer books of the Company.
(c) No Common Stock shall be issued hereunder
unless counsel for the Company shall be satisfied that
such issuance will be in compliance with applicable
Federal, state, and other securities laws.
(d) The expenses of the Plan shall be borne by the
Company.
(e) By accepting any Award under the Plan, each
Employee and Outside Director and each Personal
Representative or Beneficiary claiming under or through
him or her shall be conclusively deemed to have indicated
his or her acceptance and ratification of, and consent
to, any action taken under the Plan by the Company, the
Board or the Committee.
(f) Awards granted under the Plan shall be binding
upon Ashland, its successors, and assigns.
(g) The appropriate officers of the Company shall
cause to be filed any reports, returns, or other
information regarding Awards hereunder or any Common
Stock issued pursuant hereto as may be required by
Section 13 or 15(d) of the Exchange Act, or any other
applicable statute, rule, or regulation.
(h) Nothing contained in this Plan shall prevent
the Board of Directors from adopting other or additional
compensation arrangements, subject to shareholder
approval if such approval is required.
(i) Each Employee shall be deemed to have been
granted any Award on the date the Committee took action
to grant such Award under the Plan or such later date as
the Committee in its sole discretion shall determine at
the time such grant is authorized; provided, however,
that a Reload Option shall be deemed to have been granted
on the date on which the Original Option is exercised or
such later date as the Committee in its sole discretion
shall determine prior to the date on which such exercise
occurs and a subsequent Reload Option shall be deemed to
have been granted on the date on which the underlying
Reload Option is exercised or such later date as the
Committee in its sole discretion shall determine prior to
the date on which such exercise occurs.
SECTION 16. EFFECTIVENESS OF THE PLAN
The Plan shall be submitted to the shareholders of the
Company for their approval and adoption on January 28, 1993 or
such other date fixed for the next meeting of shareholders or
any adjournment or postponement thereof. The Plan shall not be
effective and no Award shall be made hereunder unless and until
the Plan has been so approved and adopted at a meeting of the
Company's shareholders.
SECTION 17. GOVERNING LAW
The provisions of this Plan shall be interpreted
and construed in accordance with the laws of the
Commonwealth of Kentucky.
As amended and restated by the Board on November 3,
1994.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
ASHLAND OIL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30
----------------------------------
1994 1993 1992
------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
SALES AND OPERATING REVENUES
Petroleum.................................................................. $ 4,666 $ 4,752 $ 4,848
SuperAmerica............................................................... 1,706 1,785 1,888
Valvoline.................................................................. 1,000 938 900
Chemical................................................................... 2,885 2,586 2,488
Construction............................................................... 1,101 1,116 1,043
Exploration................................................................ 199 247 262
Intersegment sales......................................................... (1,223) (1,225) (1,218)
------- ----------- -----------
$10,334 $10,199 $10,211
------- ----------- -----------
------- ----------- -----------
OPERATING INCOME (LOSS)
Petroleum.................................................................. $ 113 $ 56 $ (125)
SuperAmerica............................................................... 59 65 1
Valvoline.................................................................. 52 56 50
------- ----------- -----------
Total Refining and Marketing Group....................................... 224 177 (74)
Chemical................................................................... 125 108 81
Construction............................................................... 70 53 45
Exploration................................................................ 28 36 17
General corporate expenses................................................. (80) (77) (132)
------- ----------- -----------
$ 367 $ 297 $ (63)
------- ----------- -----------
------- ----------- -----------
EQUITY INCOME
Arch Mineral Corporation................................................... $ 7 $ (10) $ 10
Ashland Coal, Inc.......................................................... 6 27 13
Other...................................................................... 9 9 10
------- ----------- -----------
$ 22 $ 26 $ 33
------- ----------- -----------
------- ----------- -----------
OPERATING INFORMATION
Petroleum
Product sales (thousand barrels per day) (1)............................. 357.7 350.3 347.4
Refining inputs (thousand barrels per day) (2)........................... 338.4 335.9 337.4
Value of products manufactured per barrel................................ $ 21.49 $ 23.00 $ 23.81
Input cost per barrel.................................................... 16.76 19.06 20.48
------- ----------- -----------
Refining margin per barrel............................................... $ 4.73 $ 3.94 $ 3.33
SuperAmerica
Product sales (thousand barrels per day)................................. 70.2 73.8 77.1
Merchandise sales (millions)............................................. $ 519 $ 549 $ 587
Valvoline product sales (thousand barrels per day) (1)..................... 17.9 16.3 16.6
Construction backlog at September 30 (millions)............................ $ 554 $ 495(3) $ 500(3)
Exploration
Net daily production
Natural gas (million cubic feet) (1)................................... 94.3 99.3 78.3
Nigerian crude oil (thousand barrels).................................. 18.7 21.7 25.9
Sales price
Natural gas (per thousand cubic feet).................................. $ 2.42 $ 2.45 $ 2.28
Nigerian crude oil (per barrel)........................................ $ 15.01 $ 17.77 $ 19.21
Arch Mineral Corporation (4)
Tons sold (millions)..................................................... 24.3 19.2 21.0
Sales price per ton...................................................... $ 26.35 $ 25.26 $ 25.73
Ashland Coal, Inc. (4)
Tons sold (millions)..................................................... 18.2 18.0 17.2
Sales price per ton...................................................... $ 29.85 $ 29.77 $ 29.80
<FN>
------------------------------
(1) Includes intersegment sales.
(2) Includes crude oil and other purchased feedstocks.
(3) Amounts have been restated to exclude APAC's Arizona operations which were
sold in 1994.
(4) Amounts are reported on a 100% basis for these affiliated companies
accounted for on the equity method.
</TABLE>
34
<PAGE>
RESULTS OF OPERATIONS
Ashland's net income amounted to $197 million in 1994, compared to
$142 million in 1993 and a net loss of $336 million in 1992. However,
comparisons of these results are affected by various unusual items. The
following table shows the effect of unusual items on operating and net
income for the three years ended September 30, 1994.
<TABLE>
<CAPTION>
OPERATING INCOME
(LOSS) NET INCOME (LOSS)
---------------- -----------------
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Income before unusual items............... $356 $282 $145 $190 $115 $ 64
Special charges
Voluntary enhanced retirement program... -- -- (31) -- -- (20)
Asset write-downs....................... -- -- (64) -- -- (41)
Riley-related reserves.................. -- -- (38) -- -- (23)
Environmental provisions................ -- -- (41) -- -- (25)
Accounting changes........................ -- -- (34) -- -- (291)
Other
Litigation matters...................... 11 -- -- 7 -- --
Ashland Coal unusual items.............. -- -- -- -- 18 --
Gain on sale of Petroleum operation..... -- 15 -- -- 9 --
---- ---- ---- ---- ---- -----
Income (loss) as reported................. $367 $297 $(63) $197 $142 $(336)
---- ---- ---- ---- ---- -----
---- ---- ---- ---- ---- -----
</TABLE>
Excluding unusual items, net income amounted to $190 million in 1994,
compared to $115 million in 1993. Operating income from Petroleum was up
significantly, while record results were achieved by Chemical and Construction.
In addition, equity income from Ashland's coal investments showed substantial
improvement since the prolonged strike by the United Mine Workers (UMW) was
settled in December 1993. The increase in net income from $64 million in 1992 to
$115 million in 1993 reflected improvements in most of Ashland's businesses,
other than its coal investments which were adversely affected by the UMW strike.
While Ashland Petroleum was responsible for the majority of the increase in
earnings, SuperAmerica, Valvoline and Chemical each contributed record results.
As a result of difficult conditions in the U.S. economy and the petroleum
refining industry, Ashland implemented a voluntary enhanced retirement program
in July 1992 to reduce employment levels and lower costs, thereby enhancing its
competitive position. In addition, because of lower earnings and the large
capital spending requirements for its refineries, Ashland announced a $200
million asset divestiture program during that same year. Various businesses and
properties were identified for possible sale, resulting in loss provisions of
nearly $24 million, which are included in asset write-downs in the above table.
The remaining asset write-downs were related to discontinued operations and a
re-evaluation of an enhanced oil recovery project. Reserves were also increased
in 1992 for future costs associated with certain custom boilers built by Riley
Stoker and other Riley-related matters. Because of higher contract costs and
certain settlements during that year, the reserves recognized in prior years
were no longer adequate to cover the indemnities provided to the purchaser when
Riley was sold in 1990. The environmental provisions reflect adjustments to
estimated future environmental costs, primarily in the areas of remediation and
replacement of underground storage tanks at older retail marketing locations.
The accounting changes reflected the effect of Ashland's adoption of
Financial Accounting Standards Board (FASB) Statements No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and No. 109,
"Accounting for Income Taxes," both effective as of October 1, 1991 (see Note A
to the Consolidated Financial Statements). During 1993, Ashland amended its
retiree benefit programs and its costs returned to amounts more closely
approximating pre-1992 pay-as-you-go levels.
The following table compares operating income before unusual items by
segment for the three-year period.
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Operating income (loss)
Petroleum........................................................... $ 113 $ 41 $ (36)
SuperAmerica........................................................ 59 65 29
Valvoline........................................................... 52 56 52
Chemical............................................................ 125 108 96
Construction........................................................ 70 53 54
Exploration......................................................... 28 36 33
General corporate expenses.......................................... (91) (77) (83)
--------- --------- ---------
$ 356 $ 282 $ 145
--------- --------- ---------
--------- --------- ---------
</TABLE>
35
<PAGE>
PETROLEUM
Operating income of Ashland Petroleum amounted to $113 million in 1994,
compared to $41 million in 1993 before unusual items. Ashland Petroleum's strong
performance was due to higher margins in its Midwest markets, as well as its
actions to improve crude oil selection and other profit enhancement efforts.
Margins were strong in the first half of 1994, reflecting very favorable
distillate prices concurrent with the implementation of low-sulfur diesel
requirements in the December quarter and reduced crude oil costs in the March
quarter. Most of the last half of 1994 was adversely affected by increasing
crude oil costs, with wholesale product prices not keeping pace. The refineries
performed well with crude oil throughput up slightly despite major scheduled
turnarounds at two of its refineries. Although refining margins were very
volatile for most of the year, such margins did increase from $3.94 a barrel in
1993 to $4.73 a barrel in 1994. This improvement was partially offset, however,
by higher turnaround and depreciation costs. Earnings from Scurlock Permian
improved considerably, as crude oil gathering and handling margins were up
compared to their depressed levels in 1993.
Ashland Petroleum's operating income of $41 million in 1993 excluded a gain
of $15 million on the sale of its TPT inland waterways barge operation. Such
results rebounded from an operating loss of $36 million in 1992 before unusual
items. The improvement reflected an increase in the refining margin from $3.33 a
barrel in 1992 to $3.94 a barrel in 1993, resulting from higher asphalt prices,
stronger regional product markets, and more selective purchases of crude oils to
yield a more profitable product mix. In other operations, results from branded
marketing were up considerably, reflecting higher product margins and reduced
environmental expenses, while earnings from Scurlock Permian declined due to
unusually competitive market conditions that adversely affected gathering and
handling volumes and margins.
SUPERAMERICA
Operating income of $59 million for SuperAmerica in 1994 was second only to
its record earnings of $65 million achieved in 1993. Gasoline and merchandise
margins were at all-time highs and largely offset the volume reductions
associated with last year's sale of 80 SuperAmerica stores. Such stores were
located in Florida and other non-strategic areas outside markets directly
supplied by Ashland Petroleum. At September 30, 1994, 598 SuperAmerica stores
were operating, compared to 588 stores in 1993 and 642 stores in 1992. While the
number of stores is up at year end in 1994, the average number of stores in
operation for the year was actually down 4%, and operations of the newly-opened
stores had not yet fully matured.
SuperAmerica achieved record operating income of $65 million in 1993,
compared to $29 million in 1992 before unusual items. Improvements in margins
for both gasoline and merchandise more than offset the reductions in volumes
resulting from the sale of 80 stores during 1993.
VALVOLINE
Valvoline also had its second best year ever, with operating income of $52
million in 1994, compared to last year's record of $56 million. The major factor
in the decline was reduced margins on automotive refrigerants resulting from
built-up customer inventories. Earnings from Valvoline's branded motor oil
business were relatively unchanged as the effects of volume increases were
largely offset by reduced margins associated with a continuing shift from
packaged products to lower margin bulk sales, and by significant increases in
raw material costs during the last half of 1994. International operations were
up considerably, spurred in part by the acquisition of Valvoline
distributorships in six European countries during 1994. Valvoline Instant Oil
Change (VIOC) achieved higher earnings for the second straight year with
continued improvements in average car counts and ticket prices. At September 30,
1994, VIOC operated 347 company outlets, compared to 341 in 1993 and 315 in
1992. In addition, the VIOC franchising program continued to expand with 75
outlets open at year-end in 1994, compared to 66 in 1993 and 45 in 1992.
Valvoline's operating income of $56 million in 1993 exceeded its previous
record earnings of $52 million in 1992 before unusual items. Improved results
from its automotive chemicals businesses and VIOC more than offset lower
earnings from branded motor oil sales and international operations. While
Valvoline was able to increase its market share slightly in the highly
competitive motor oil market, earnings from its branded motor oil business were
down 20% due to soft demand and higher marketing expenses. In addition, the
results of international operations were adversely affected by currency losses
brought on by a strong U.S. dollar. However, the automotive chemical businesses
achieved record earnings due to better margins on refrigerant sales and other
Pyroil products, while VIOC results improved on the strength of higher average
car counts and ticket prices, as well as additional outlets.
CHEMICAL
For the third consecutive year, Ashland Chemical was the leading earnings
contributor to Ashland's results with operating income of $125 million in 1994.
Such income surpassed Ashland Chemical's previous record earnings of $108
million in 1993, despite incurring higher charges for environmental remediation
costs in 1994. Earnings from the distribution businesses were up 22%,
principally due to higher sales volumes for thermoplastics. Operating income
from the specialty chemicals group increased 25%, with foundry products and
water treatment chemicals leading an across the board improvement. Results from
petrochemicals were up 15%, with improvements in
36
<PAGE>
methanol margins more than offsetting the effects of production and weather-
related problems on cumene results early in 1994.
Operating income of $108 million in 1993 was a record for Ashland Chemical,
exceeding its 1992 earnings of $96 million before unusual items. Earnings from
the distribution businesses returned to more normal levels, reflecting
integration of the 1992 acquisition of Unocal's chemical distribution business,
higher sales volumes and margins for thermoplastics, and increased efficiencies
from its redesigned distribution services organization. Although results from
most of the specialty chemical businesses improved, the favorable effects were
largely offset by lower earnings from water treatment chemicals. Operating
income from petrochemicals declined 20%, as higher natural gas feedstocks
reduced methanol margins and cumene operations suffered from tighter margins, a
temporary shutdown by a major customer and lower sales volumes.
CONSTRUCTION
The APAC construction operations achieved record earnings of $70 million in
1994, compared to $53 million in 1993. Each of its continuing operating regions
achieved improvements on the strength of a higher quality backlog, better
margins on construction materials and more favorable weather conditions. In
addition, APAC's construction operations in Arizona contributed operating income
(including a gain on the sale of those operations) of $9 million, which was up
from $6 million in 1993. APAC's backlog of $554 million at September 30, 1994,
is expected to contain slightly higher margins than last year's backlog of $495
million for its continuing operations.
Operating income from APAC totaled $53 million in 1993, compared to $54
million in 1992 before unusual items. Revenues were up 7%, but the favorable
impact was more than offset by poor weather conditions in most of APAC's
operating regions in the December 1992 quarter and severe flooding in its
Arizona region in the March 1993 quarter.
EXPLORATION
Ashland Exploration's operating income declined from $36 million in 1993 to
$28 million in 1994. However, its contribution to Ashland's net income after
recognition of tax credits was down only slightly. Operating income from
domestic operations was down $19 million, resulting from lower production and
prices for both natural gas and crude oil, increased exploration expenses, and
the favorable effect of a contract settlement that was included in results for
1993. Operating income from foreign operations improved by $11 million,
reflecting lower exploration expenses and improved results from crude oil
trading activities. Such factors more than offset the effects of normal declines
in Nigerian crude oil production as developed reserves continue to be depleted.
Ashland Exploration generated operating income of $36 million in 1993,
compared to $33 million in 1992 before unusual items. Earnings from domestic
operations were up $18 million resulting from a 27% increase in natural gas
production, higher natural gas sales prices and the favorable effect of a
contract settlement. However, results from foreign operations were down $15
million reflecting a decline in crude oil production in Nigeria and additional
expenses associated with seismic activity on two offshore Nigerian blocks.
GENERAL CORPORATE EXPENSES
General corporate expenses amounted to $91 million in 1994 before the net
effects of favorable settlements and reserves for other litigation matters,
compared to $77 million in 1993 and $83 million in 1992. Expenses for 1994
included consulting fees and other expenses related to a corporate-wide cost
control program and higher accruals for performance-based compensation. Expenses
declined from 1992 to 1993 due to the effects of personnel reductions under the
voluntary enhanced retirement program implemented in 1992.
OTHER INCOME (EXPENSE)
Interest expense (net of interest income) amounted to $117 million in 1994,
$123 million in 1993 and $128 million in 1992. Adjusting for capitalized
interest on refinery projects of $9 million in 1993 and $3 million in 1992, net
interest costs incurred amounted to $117 million in 1994, $132 million in 1993
and $131 million in 1992. Average debt levels declined significantly in 1994
compared to 1993. Average debt levels were up in 1993 compared to 1992, but the
effect was largely offset by lower interest rates on floating-rate debt.
Results of Arch Mineral produced equity income of $7 million in 1994, an
equity loss of $10 million in 1993 and equity income of $10 million in 1992. The
major factor in the fluctuations was the prolonged strike by the UMW which
extended from April into December 1993 and had a significant effect on the
comparability of results for both fiscal 1993 and 1994. In addition, equity
income from Arch for 1992 included an insurance gain of $8 million resulting
from a fire at an Illinois mine. Sales tonnage was up significantly in 1994,
largely due to the acquisition of the assets of Agipcoal USA.
Equity income from Ashland Coal for 1993 included a net gain of $20 million
resulting from a favorable adjustment to income tax expense due to tax law
changes, partially offset by a charge to increase the valuation allowance for
certain prepaid royalties. Excluding this unusual gain, equity income from
Ashland Coal amounted to $6 million in 1994, $7 million in 1993 and $13 million
in 1992. The UMW strike (including the related aftereffects) was the major cause
of the reduced earnings for both 1994 and 1993.
37
<PAGE>
FINANCIAL POSITION
LIQUIDITY
Ashland's financial position has enabled it to obtain capital for its
financing needs and maintain investment grade ratings on its senior debt of Baa1
from Moody's and BBB from Standard & Poor's. Ashland has revolving credit
agreements providing for up to $350 million in borrowings, none of which were in
use at September 30, 1994. At that date, Ashland could issue an additional $227
million in medium-term notes under a shelf registration should future
opportunities or needs arise. Ashland also has access to various uncommitted
lines of credit and commercial paper markets, and had short-term notes and
commercial paper of $72 million outstanding at September 30, 1994. While certain
debt agreements contain covenants restricting the amount by which Ashland
can increase its indebtedness, such indebtedness could have been increased by
up to $724 million at September 30, 1994.
Cash and cash equivalents at September 30, 1994, were $40 million, compared
to $41 million for 1993. Cash flows from operations, a major source of Ashland's
liquidity, amounted to $454 million in 1994, $250 million in 1993 and $398
million in 1992. The reduction in 1993 resulted principally from increased
working capital. This increase included higher receivables and inventories
associated with the greater level of business activity in several divisions, as
well as higher than normal payables in 1992 related to capital expenditures and
the voluntary enhanced retirement program. Cash flows from operations provided
over 75% of Ashland's capital requirements for net property additions and
dividends during the last three years. The remainder of its capital requirements
during this period, plus funds for acquisitions, have come from borrowings, the
issuance of convertible preferred stock, and the sale of operations.
Property additions amounted to $1,312 million during the last three years
and are summarized in the Information by Industry Segment on page 59.
Expenditures by Ashland Petroleum amounted to 54% of the combined total for 1992
and 1993, as the refineries were upgraded to produce cleaner-burning fuels and
to meet tougher environmental regulations. Accordingly, capital expenditures by
Ashland's related energy and chemical businesses were curtailed to some extent
during those years to meet the capital needs of the refineries. With the
completion of various refinery units in 1993, investments in these energy and
chemical businesses were accelerated, accounting for nearly 60% of Ashland's
capital expenditures during 1994.
Long-term borrowings provided funds of $664 million during the last three
years, including the issuance of $332 million of medium-term notes and $250
million of 8.80% senior debentures. The proceeds from these debt issues, as well
as $293 million from the issuance of convertible preferred stock in 1993, were
used to retire $600 million of long-term debt (based on their scheduled
maturities or opportunities for lower interest rates) and to partially fund the
capital expenditure program. Cash flows were also supplemented as necessary by
the issuance of short-term notes and commercial paper.
Cash requirements for acquisitions amounted to $172 million since 1991,
related primarily to the acquisition of Unocal's chemical distribution business
in 1992, Valvoline's European distributorships in 1994 and several small
chemical and construction companies. Proceeds from the sale of operations
generated $196 million during the last three years, including divestitures of
APAC's construction operations in Arizona, 80 SuperAmerica stores, various
assets acquired in the acquisition of The Permian Corporation in 1991, and
Ashland Petroleum's TPT inland waterways barge operation.
Investment purchases, sales and maturities relate primarily to the turnover
in the debt securities held by Ashland's captive insurance companies. The net
cash outflow related to these transactions in the last three years reflected the
increase in the investment portfolios of these companies.
Working capital at September 30, 1994, was $483 million and liquid assets
(cash, cash equivalents and accounts receivable) amounted to 81% of current
liabilities at that date. Ashland's working capital is significantly affected by
its use of the LIFO method of inventory valuation, which valued such inventories
at $395 million below their replacement costs at September 30, 1994.
CAPITAL RESOURCES
During fiscal 1995, Ashland anticipates capital expenditures of
approximately $425 million. Ashland Petroleum's capital expenditures are
expected to decline to under 40% of the total, as additional capital is directed
to growth opportunities in Ashland's related energy and chemical businesses. In
addition, dividends are estimated at about $85 million in 1995 based on shares
currently outstanding and the recently announced increase in Ashland's annual
common dividend rate from $1.00 a share to $1.10 a share, effective December 15,
1994. Ashland anticipates meeting over 80% of its 1995 capital requirements for
property additions and dividends from internally generated funds. External
financing will likely be necessary to provide funds for the remainder of such
requirements and for scheduled maturities of $61 million of long-term debt.
However, debt as a percent of Ashland's capitalization is not expected to change
significantly as a result of these capital requirements for 1995.
38
<PAGE>
Ashland's capitalization at September 30, 1994, consisted of debt due within
one year (4%), long-term debt (44%), deferred income taxes (1%), convertible
preferred stock (9%) and common stockholders' equity (42%). At that date,
long-term debt included $87 million of floating-rate debt and the interest rates
on an additional $430 million of fixed-rate debt were converted to floating
rates through interest rate swap agreements. As a result, interest costs for
1995 will fluctuate with short-term interest rates on about 35% of Ashland's
long-term debt, as well as on any short-term notes and commercial paper.
ENVIRONMENTAL MATTERS
Federal, state and local laws and regulations relating to the protection of
the environment have resulted in higher operating costs and capital investments
by the industries in which Ashland operates. Because of the continuing trend
toward greater environmental awareness and increasingly stringent regulations,
Ashland believes that expenditures for environmental compliance will continue to
have a significant effect on the conduct of its businesses. Although it cannot
accurately predict how these developments will affect future operations and
earnings, Ashland does not believe the nature and significance of its costs will
vary significantly from those of its competitors in the petroleum and chemical
industries.
Ashland has invested heavily in its refineries since 1989, primarily to
equip them to make new federally-mandated fuels and to meet tougher
environmental regulations related to air emissions. During 1993, Ashland
completed five major units central to this effort. These units enabled Ashland
to begin producing oxygenated fuels and low-sulfur diesel required for
on-highway use as of October 1, 1993. Furthermore, the new units allow Ashland
to meet the new reformulated gasoline requirements effective as of January 1,
1995, as well as the air emission regulations being phased in over the next few
years.
Capital expenditures for air, water and solid waste facilities amounted to
$63 million in 1994, $137 million in 1993 and $162 million in 1992. Based on
current environmental regulations, Ashland anticipates such capital expenditures
will amount to about $70 million in 1995. Ashland's operating expenditures for
environmental remediation and compliance amounted to $140 million in 1994, $148
million in 1993 and $138 million in 1992, and are expected to be around $160
million in 1995. Compliance expenditures do not include the increased costs of
additives, such as MTBE and ethanol, required to meet the oxygenated fuel
requirements.
Environmental reserves are subject to considerable uncertainties which
affect Ashland's ability to estimate its share of the ultimate costs of required
remediation efforts. Such uncertainties involve the nature and extent of
contamination at each site, the extent of required cleanup efforts under
existing environmental regulations, widely varying costs of alternate cleanup
methods, changes in environmental regulations, the potential effect of
continuing improvements in remediation technology, and the number and financial
strength of other potentially responsible parties at multiparty sites. As a
result, charges to income for environmental liabilities could have a material
effect on results of operations in a particular quarter or fiscal year as
assessments and remediation efforts proceed or as new remediation sites are
identified. However, such charges are not expected to have a material adverse
effect on Ashland's consolidated financial position, cash flow or liquidity.
OUTLOOK
Refinery margins remain very volatile and natural gas prices are currently
depressed. With these factors and the divestiture of APAC's construction
operations in Arizona, it will be difficult to repeat the strong results Ashland
achieved in last year's December quarter. However, the related energy and
chemical businesses are expected to continue showing good results.
Not every refiner has been willing or able to add the expensive
infrastructure needed to produce cleaner-burning fuels. As a result, the
rationalization of the U.S. refining industry will likely continue. In addition,
the implementation of reformulated gasoline and other alternatives for meeting
local air quality goals may move gasoline more toward a specialty, rather than a
commodity product. Furthermore, as gasoline grades proliferate, limitations
imposed by pipelines may create less transparent, more regionalized
marketplaces. With Ashland's efficient transportation system, the ability of its
refineries to upgrade crude oil into higher value products, the regional
advantage usually enjoyed by Midwest markets and the trend toward "designer"
gasolines, the long-term outlook for Ashland's refining margins has improved.
Since regulatory compliance expenditures have peaked for now, Ashland's
discretionary cash flow position has improved. Ashland plans to continue
capitalizing on its cash flow position by substantially increasing its
investment in growth opportunities in Ashland's related energy and chemical
businesses, as well as strengthening its competitive position in Ashland
Petroleum by upgrading refinery streams and improving its marketing and
transportation facilities.
During the next five years, SuperAmerica plans to add up to 200 new stores
in areas supplied by Ashland Petroleum's refineries, increasing its share in
strategic markets where it is already a leader and distributing a growing
percentage of Ashland Petroleum's gasoline production. Valvoline recently
expanded its presence in the $1.7 billion U.S. automotive chemicals market by
acquiring Zerex, the nation's No. 2 brand of antifreeze, and will continue
expanding VIOC and its international operations. Ashland Chemical will emphasize
integrated marketing efforts targeting its North American customers and a
growing international sales base.
39
<PAGE>
Increased infrastructure spending and an expanding economy should benefit
APAC's efforts to build its position in existing markets. Although Ashland
Exploration's earnings may continue to decline until its Nigerian reserves are
replaced, the results were promising for the first well drilled in the two
offshore Nigerian blocks acquired in 1992. Ashland Exploration plans to drill
two additional wells in fiscal 1995 to further appraise the commercial potential
of these blocks.
Efficient operations, access to major markets and a strong reserve base in
central Appalachia position Arch Mineral and Ashland Coal to capitalize on an
improving demand picture for low-sulfur coal. The outlook for continued growth
at both companies is strong and, with the coal strike behind them, represents
one of Ashland's best opportunities for improved earnings in 1995. Ashland
continues to explore opportunities for enhancing the benefits derived from its
coal investments.
EFFECTS OF INFLATION AND CHANGING PRICES
Ashland's consolidated financial statements are prepared on the historical
cost method of accounting and, as a result, do not reflect changes in the
dollar's purchasing power. Although annual inflation rates have been low in
recent years, Ashland's results are still affected by the cumulative
inflationary trend from prior years.
In the capital-intensive industries in which Ashland operates, replacement
costs for its properties would generally exceed their historical costs.
Accordingly, depreciation, depletion and amortization expense would be greater
if it were based on current replacement costs. However, since replacement
facilities would reflect technological improvements and changes in business
strategies, such facilities would be expected to be more productive than
existing facilities, mitigating somewhat the increased depreciation expense.
Ashland uses the last-in, first-out (LIFO) method to value a substantial
portion of its inventories to provide a better matching of revenues with current
costs. However, LIFO values such inventories below their replacement costs.
Monetary assets (such as cash, cash equivalents and accounts receivable)
lose purchasing power as a result of inflation, while monetary liabilities (such
as accounts payable and indebtedness) result in a gain because they can be
settled with dollars of diminished purchasing power. Ashland's monetary
liabilities exceed its monetary assets, which results in net purchasing power
gains and provides a hedge against the effects of future inflation.
QUARTERLY FINANCIAL INFORMATION
The following table presents quarterly financial information and per share
data relative to Ashland's common stock.
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
---------------------- ---------------------- ---------------------- ----------------------
1993 1992 1994 1993 1994 1993 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and operating revenues........ $2,572 $2,555 $2,207 $2,386 $2,703 $2,605 $2,853 $2,653
Operating income.................... 120 57 68 30 (1) 72 105 107 (2) 104
Net income.......................... 58 25 33 1 (1) 44 50 61 (2) 67 (3)
Earnings per share.................. .90 .41 .47 .01 .65 .81 .93 1.00
Common dividends per share.......... .25 .25 .25 .25 .25 .25 .25 .25
Market price per common share
High.............................. 35 5/8 27 3/8 44 1/2 29 1/4 42 3/4 27 3/4 37 7/8 34 3/8
Low............................... 31 23 5/8 34 25 5/8 33 1/2 24 1/4 33 1/4 25 3/8
<FN>
- ------------------------------
(1) A gain on the sale of TPT, an inland waterways barge operation, increased
operating income by $15 million and net income by $9 million in the quarter
ended March 31, 1993.
(2) A net gain related to litigation matters increased operating income by $11
million and net income by $7 million in the quarter ended September 30,
1994.
(3) A net gain for Ashland Coal resulting from a favorable adjustment to income
tax expense due to tax law changes, partially offset by a charge to
increase the valuation allowance for certain prepaid royalties, increased
net income by $18 million in the quarter ended September 30, 1993.
</TABLE>
40
<PAGE>
STATEMENTS OF CONSOLIDATED INCOME
ASHLAND OIL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30
-------------------------------
1994 1993 1992
--------- --------- ---------
(IN MILLIONS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
REVENUES
Sales and operating revenues (including excise taxes)............................ $ 10,334 $ 10,199 $ 10,211
Other............................................................................ 48 57 40
--------- --------- ---------
10,382 10,256 10,251
COSTS AND EXPENSES
Cost of sales and operating expenses............................................. 7,742 7,951 8,210
Excise taxes on products and merchandise......................................... 877 645 659
Selling, general and administrative expenses..................................... 1,021 993 1,023
Depreciation, depletion and amortization......................................... 295 293 290
General corporate expenses....................................................... 80 77 132
--------- --------- ---------
10,015 9,959 10,314
--------- --------- ---------
OPERATING INCOME (LOSS).......................................................... 367 297 (63)
OTHER INCOME (EXPENSE)
Interest expense (net of interest income) -- Notes A and F....................... (117) (123) (128)
Equity income -- Note D.......................................................... 22 26 33
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES AND THE CUMULATIVE EFFECT OF ACCOUNTING
CHANGES......................................................................... 272 200 (158)
Income taxes (credit) -- Note H.................................................. 75 58 (90)
--------- --------- ---------
INCOME (LOSS) BEFORE THE CUMULATIVE EFFECT OF ACCOUNTING CHANGES................. 197 142 (68)
Cumulative effect of accounting changes -- Note A................................ -- -- (268)
--------- --------- ---------
NET INCOME (LOSS)................................................................ $ 197 $ 142 $ (336)
--------- --------- ---------
--------- --------- ---------
EARNINGS (LOSS) PER SHARE -- Note A
Primary
Income (loss) before the cumulative effect of accounting changes............... $ 2.94 $ 2.26 $ (1.18)
Cumulative effect of accounting changes........................................ -- -- (4.57)
--------- --------- ---------
Net income (loss)............................................................ $ 2.94 $ 2.26 $ (5.75)
Assuming full dilution
Income (loss) before the cumulative effect of accounting changes............... $ 2.79 $ 2.20 $ (1.18)
Cumulative effect of accounting changes........................................ -- -- (4.57)
--------- --------- ---------
Net income (loss).............................................................. $ 2.79 $ 2.20 $ (5.75)
AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING
Primary.......................................................................... 61 59 58
Assuming full dilution........................................................... 72 66 58
</TABLE>
See Notes to Consolidated Financial Statements.
41
<PAGE>
CONSOLIDATED BALANCE SHEETS
ASHLAND OIL, INC. AND SUBSIDIARIES
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
1994 1993
--------- ---------
(IN MILLIONS)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents -- Note A........................................................ $ 40 $ 41
Accounts receivable (less allowances for doubtful accounts of $23 million in 1994 and $20
million in 1993).......................................................................... 1,323 1,178
Construction completed and in progress -- at contract prices............................... 55 51
Inventories -- Note A...................................................................... 601 553
Deferred income taxes -- Note H............................................................ 71 78
Other current assets....................................................................... 81 72
--------- ---------
2,171 1,973
INVESTMENTS AND OTHER ASSETS
Investments in and advances to unconsolidated affiliates -- Note D......................... 291 280
Investments of captive insurance companies -- Note A....................................... 181 185
Cost in excess of net assets of companies acquired (less accumulated amortization of $32
million in 1994 and $31 million in 1993).................................................. 80 65
Other noncurrent assets.................................................................... 276 279
--------- ---------
828 809
PROPERTY, PLANT AND EQUIPMENT
Cost
Petroleum................................................................................ 2,911 2,790
SuperAmerica............................................................................. 459 440
Valvoline................................................................................ 273 250
Chemical................................................................................. 633 573
Construction............................................................................. 528 582
Exploration (successful efforts method).................................................. 943 924
Corporate................................................................................ 151 146
--------- ---------
5,898 5,705
Accumulated depreciation, depletion and amortization....................................... (3,082) (2,935)
--------- ---------
2,816 2,770
--------- ---------
$ 5,815 $ 5,552
--------- ---------
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
42
<PAGE>
CONSOLIDATED BALANCE SHEETS
ASHLAND OIL, INC. AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
1994 1993
--------- ---------
(IN MILLIONS)
<S> <C> <C>
CURRENT LIABILITIES
Debt due within one year
Notes payable to banks................................................................... $ 57 $ 42
Commercial paper......................................................................... 15 35
Current portion of long-term debt........................................................ 61 82
Trade and other payables................................................................... 1,520 1,418
Income taxes............................................................................... 35 42
--------- ---------
1,688 1,619
NONCURRENT LIABILITIES
Long-term debt (less current portion) -- Notes E and F..................................... 1,391 1,399
Accrued pension and other postretirement benefits -- Note K................................ 515 511
Reserves of captive insurance companies.................................................... 173 173
Deferred income taxes -- Note H............................................................ 30 44
Other long-term liabilities and deferred credits........................................... 423 351
Commitments and contingencies -- Notes F, G and L..........................................
--------- ---------
2,532 2,478
STOCKHOLDERS' EQUITY -- Notes E, I and J
Preferred stock, no par value, 30 million shares authorized
Convertible preferred stock, 6 million shares issued, $300 million liquidation value..... 293 293
Common stockholders' equity
Common stock, par value $1.00 per share
Authorized -- 150 million shares
Issued -- 61 million shares in 1994 and 60 million shares in 1993...................... 61 60
Paid-in capital.......................................................................... 159 143
Retained earnings........................................................................ 1,126 1,008
Loan to leveraged employee stock ownership plan (LESOP).................................. (33) (33)
Prepaid contribution to LESOP............................................................ -- (6)
Other.................................................................................... (11) (10)
--------- ---------
Total common stockholders' equity.......................................................... 1,302 1,162
--------- ---------
1,595 1,455
--------- ---------
$ 5,815 $ 5,552
--------- ---------
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
43
<PAGE>
STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS' EQUITY
ASHLAND OIL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PREPAID
COMMON PAID-IN RETAINED LOAN TO CONTRIBUTION
STOCK CAPITAL EARNINGS LESOP TO LESOP OTHER TOTAL
------ ------- -------- ------- ------------ ------ -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 1, 1991............................. $60 $130 $1,325 $(34) $(40) $ 3 $1,444
Net loss............................................... (336) (336)
Dividends on common stock, $1.00 a share............... (58) (2) (60)
Increase in equity due to Ashland Coal stock
issuance.............................................. 14 14
Issued common stock under stock incentive plans........ 2 2
Allocation of LESOP shares to participants............. 18 18
Other changes.......................................... 4 4
------ ------- -------- ------- --- ------ -----
BALANCE AT SEPTEMBER 30, 1992.......................... 60 146 931 (34) (24) 7 1,086
Net income............................................. 142 142
Dividends
Preferred stock...................................... (6) (6)
Common stock, $1.00 a share.......................... (59) (1) (60)
Decrease in equity due to change in Ashland Coal
capital structure..................................... (6) (6)
Issued common stock under stock incentive plans........ 2 2
Allocation of LESOP shares to participants............. 19 19
Other changes.......................................... 1 1 (17) (15)
------ ------- -------- ------- --- ------ -----
BALANCE AT SEPTEMBER 30, 1993.......................... 60 143 1,008 (33) (6) (10) 1,162
Net income............................................. 197 197
Dividends
Preferred stock...................................... (19) (19)
Common stock, $1.00 a share.......................... (60) (60)
Issued common stock under stock incentive plans........ 1 16 17
Allocation of LESOP shares to participants............. 6 6
Other changes.......................................... (1) (1)
------ ------- -------- ------- --- ------ -----
BALANCE AT SEPTEMBER 30, 1994.......................... $61 $159 $1,126 $(33) $ -- $ (11) $1,302
------ ------- -------- ------- --- ------ ------
------ ------- -------- ------- --- ------ ------
</TABLE>
See Notes to Consolidated Financial Statements.
44
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
ASHLAND OIL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30
------------------------
1994 1993 1992
----- ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Income (loss) before the cumulative effect of accounting changes.................................... $ 197 $ 142 $ (68)
Expense (income) not affecting cash
Depreciation, depletion and amortization (1)...................................................... 308 305 302
Deferred income taxes............................................................................. 2 14 (147)
Undistributed earnings of unconsolidated affiliates............................................... (14) (12) (22)
Gain on sale of operations -- net of current income taxes......................................... (3) (12) --
Other noncash items............................................................................... 39 (3) 208(2)
Change in operating assets and liabilities (3)...................................................... (75) (184) 125
----- ----- ------
454 250 398
CASH FLOWS FROM FINANCING
Proceeds from issuance of long-term debt............................................................ 77 341 246
Proceeds from issuance of capital stock............................................................. 17 295 2
Repayment of long-term debt......................................................................... (109) (367) (124)
Increase (decrease) in short-term debt.............................................................. (5) (159) 97
Dividends paid...................................................................................... (79) (66) (60)
----- ----- ------
(99) 44 161
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment.......................................................... (376) (432) (504)
Purchase of operations -- net of cash acquired...................................................... (62) (2) (108)
Proceeds from sale of operations.................................................................... 59 107 30
Disposals of property, plant and equipment.......................................................... 23 32 38
Investment purchases (4)............................................................................ (335) (451) (466)
Investment sales and maturities (4)................................................................. 335 440 433
----- ----- ------
(356) (306) (577)
----- ----- ------
DECREASE IN CASH AND CASH EQUIVALENTS............................................................... (1) (12) (18)
Cash and cash equivalents -- beginning of year...................................................... 41 53 71
----- ----- ------
CASH AND CASH EQUIVALENTS -- END OF YEAR............................................................ $ 40 $ 41 $ 53
----- ----- ------
----- ----- ------
DECREASE (INCREASE) IN OPERATING ASSETS (3)
Accounts receivable................................................................................. $(153) $ 26 $ 39
Construction completed and in progress.............................................................. (3) (13) (3)
Inventories......................................................................................... (45) 67 65
Deferred income taxes............................................................................... -- 15 (2)
Other current assets................................................................................ (7) (8) 7
Investments and other assets........................................................................ 15 2 28
INCREASE (DECREASE) IN OPERATING LIABILITIES (3)
Trade and other payables........................................................................... 95 (245) 30
Income taxes....................................................................................... (10) (20) (2)
Noncurrent liabilities............................................................................. 33 (8) (37)
----- ----- ------
CHANGE IN OPERATING ASSETS AND LIABILITIES......................................................... $ (75) $(184) $ 125
----- ----- ------
----- ----- ------
<FN>
- ------------------------------
(1) Includes amounts charged to general corporate expenses.
(2) Includes noncash charges for unusual items totaling $208 million consisting
of provisions for a voluntary enhanced retirement program ($31 million);
various asset write-downs including properties held for sale and assets of
discontinued operations ($64 million); future environmental cleanup costs
($41 million); reserves for future costs associated with certain custom
boilers built by a former engineering subsidiary and other matters ($38
million); and the current year effect of the adoption of a new accounting
standard for postretirement benefits ($34 million).
(3) Excludes changes resulting from operations acquired or sold.
(4) Represents primarily investment transactions of captive insurance
companies.
</TABLE>
See Notes to Consolidated Financial Statements.
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ASHLAND OIL, INC. AND SUBSIDIARIES
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ashland and
its majority-owned subsidiaries. Investments in joint ventures and 20% to 50%
owned affiliates are accounted for on the equity method.
INVENTORIES
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Crude oil................................................................... $ 243 $ 273
Petroleum products.......................................................... 286 258
Chemicals and other products................................................ 421 337
Materials and supplies...................................................... 46 45
Excess of replacement costs over LIFO carrying values....................... (395) (360)
--------- ---------
$ 601 $ 553
--------- ---------
--------- ---------
</TABLE>
Crude oil, petroleum products and chemicals with a replacement cost of
approximately $705 million at September 30, 1994, and $652 million at September
30, 1993, are valued using the last-in, first-out (LIFO) method. The remaining
inventories are stated generally at the lower of cost (using the first-in,
first-out (FIFO) or average cost method) or market.
PROPERTY, PLANT AND EQUIPMENT
The cost of plant and equipment (other than capitalized exploration and
development costs) is depreciated by the straight-line method over the estimated
useful lives of the assets. Oil and gas exploration and development costs are
accounted for using the successful efforts method. Capitalized exploration and
development costs are depleted by the units-of-production method over the
estimated recoverable reserves.
Estimated costs of major refinery turnarounds are accrued, while other
maintenance and repair costs are expensed as incurred. Maintenance and repair
expense amounted to $279 million in 1994, $248 million in 1993 and $246 million
in 1992.
ENVIRONMENTAL COSTS
Accruals for environmental costs are recognized when it is probable that a
liability has been incurred and the amount of that liability can be reasonably
estimated. Such costs are charged to expense if they relate to the remediation
of conditions caused by past operations or are not expected to mitigate or
prevent contamination from future operations. Accruals are recorded at
undiscounted amounts based on experience, assessments and current technology
without regard to any third-party recoveries, and are regularly adjusted as
environmental assessments and remediation efforts proceed.
EARNINGS PER SHARE
Primary earnings per share is based on net income less preferred dividends
divided by the average number of common shares and equivalents outstanding
during the respective years. Average common shares outstanding exclude average
unallocated shares (423,000 shares in 1994, 973,000 shares in 1993 and 1,522,000
shares in 1992) related to the prepaid contribution to the leveraged employee
stock ownership plan. Shares of common stock issuable under stock options are
treated as common stock equivalents when dilutive.
Earnings per share assuming full dilution begins with the primary earnings
per share computation. Shares issuable upon conversion of the preferred stock
and 6.75% subordinated debentures are added to average common shares and
equivalents when dilutive. In such cases, net income is further adjusted by
adding back preferred dividends and interest expense (net of tax) on these
debentures.
DERIVATIVE INSTRUMENTS
Ashland uses commodity futures and option contracts to reduce its exposure
to fluctuations in prices for crude oil, petroleum products and natural gas.
Gains and losses on these contracts are deferred and accounted for as part of
the transactions or activities being hedged.
Ashland uses interest rate swap agreements to obtain greater access to the
lower borrowing costs normally available on floating-rate debt, while minimizing
refunding risk through the issuance of long-term, fixed-rate debt. Settlements
under the swap agreements are recognized as adjustments of interest expense.
46
<PAGE>
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING CHANGES
In 1992, Ashland adopted Financial Accounting Standards (FAS) Board
Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," and FAS 109, "Accounting for Income Taxes," both effective as of
October 1, 1991. FAS 106 requires that the projected future cost of providing
postretirement benefits such as health care and life insurance be recognized as
an expense as employees render service instead of when benefits are paid. The
adoption of FAS 106 resulted in a net charge to income of $279 million ($415
million before tax), or $4.76 per share, for the cumulative effect of the
accounting change for prior periods. FAS 109 superseded FAS 96, which Ashland
adopted effective October 1, 1987, and is less restrictive than FAS 96 in
allowing recognition of deferred tax assets. However, FAS 109 also requires that
such assets be reduced by a valuation allowance unless it is more likely than
not that those benefits will be realized. Ashland's adoption of FAS 109 resulted
in a net credit to income of $11 million, or $.19 per share, for the cumulative
effect of the accounting change for prior periods.
Effective September 30, 1994, Ashland adopted FAS 115, "Accounting for
Certain Investments in Debt and Equity Securities." As a result, investments of
captive insurance companies are now carried at quoted market prices plus accrued
interest. Previously, such investments were carried at cost plus accrued
interest. The adoption did not have a significant effect on Ashland's
consolidated financial statements.
OTHER
Cash equivalents include highly liquid investments maturing within three
months after purchase. Investments of captive insurance companies are primarily
foreign corporate and government debt obligations.
Income related to construction contracts is generally recognized by the
units-of-production method, which is a variation of the percentage-of-completion
method. Any anticipated losses on such contracts are charged against operations
as soon as such losses are estimable.
Costs in excess of net assets of companies acquired are amortized by the
straight-line method over periods generally ranging from 10 to 40 years, with an
average remaining life of 14 years.
Research and development costs are expensed as incurred ($12 million in
1994, $14 million in 1993 and $14 million in 1992).
Interest is capitalized on projects where construction of an asset takes
considerable time and entails substantial expenditures. Capitalized interest
amounted to $9 million in 1993 and was not significant in 1994 and 1992.
The Financial Accounting Standards Board has issued a statement which
Ashland has not yet adopted, regarding accounting for postemployment benefits.
When adopted effective October 1, 1994, this statement will not have a
significant effect on Ashland's consolidated financial statements.
NOTE B -- ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
In February 1992, Ashland completed the acquisition of Unocal's chemical
distribution business for $84 million. The business involves the distribution of
a wide range of chemicals, hydrocarbon solvents and specialty ingredients
through a nationwide network of distribution centers.
This acquisition and several smaller acquisitions completed in various
segments during the last three years did not have a significant effect on
Ashland's consolidated financial statements. All these acquisitions have been
accounted for as purchases.
DIVESTITURES
In 1992, Ashland completed the sale of its Corpus Christi, Texas, marine
terminal, pipelines and gathering systems. These assets were acquired in the
1991 acquisition of The Permian Corporation.
In 1993, Ashland sold various operations, including its TPT inland waterways
barge operation, the Thunderbird crude oil common carrier pipeline system in
Montana and Wyoming, and 80 SuperAmerica stores in Florida and other
non-strategic areas outside markets served by Ashland Petroleum's refineries. In
addition, several other smaller operations engaged in petroleum, chemical and
construction activities were sold. Proceeds from the sale of these operations
totaled $107 million and, except for a pretax gain of $15 million on the sale of
TPT, resulted in no significant gain or loss.
In 1994, Ashland completed the sale of APAC's Arizona operations.
Except as indicated, the divestitures discussed above and several smaller
divestitures completed in various segments during the last three years did not
have a significant effect on Ashland's consolidated financial statements.
47
<PAGE>
NOTE C -- INFORMATION BY INDUSTRY SEGMENT
Ashland's operations are conducted primarily in the United States and are
managed along industry segments, which include Petroleum, SuperAmerica,
Valvoline, Chemical, Construction and Exploration. In addition, Ashland is
involved in the coal industry through equity interests in Arch Mineral
Corporation and Ashland Coal, Inc. (see Note D). Information by industry segment
is shown on pages 58 and 59.
Petroleum operations are conducted by Ashland Petroleum, one of the nation's
largest independent petroleum refiners. In addition to supplying petroleum
products to SuperAmerica, Valvoline, Ashland Chemical and APAC, Ashland
Petroleum is a leading supplier of petroleum products to the transportation and
commercial fleet industries, other industrial customers and independent
marketers (including dealers operating under the Ashland-R- brand name).
Principal products include gasoline, distillates and kerosene, asphalt, jet and
turbine fuel, lubricants, and heavy fuel oils. Ashland Petroleum also gathers
and transports crude oil and petroleum products in connection with its refining
and wholesale marketing operations and markets crude oil through Scurlock
Permian.
SuperAmerica includes Ashland's retail gasoline and merchandise marketing
operations, including the SuperAmerica-R- chain of high-volume retail stores.
Gasoline and merchandise are also sold from outlets operated by SuperAmerica
under the Rich-R- brand name. Operations are conducted primarily in the Ohio
Valley and Upper Midwest.
Valvoline is a marketer of automotive and industrial oils, automotive
chemicals, filters, rust preventives and coolants with sales in more than 140
countries. In addition, Valvoline is engaged in the "fast oil change" business
through outlets operating under the Valvoline Instant Oil Change-R- and
Valvoline Rapid Oil Change-R- names, and provides environmental services for the
collection of used oil, antifreeze and filters.
Chemical businesses are managed by Ashland Chemical, which distributes
industrial chemicals, solvents, thermoplastics and resins, and fiberglass
materials. Ashland Chemical also manufactures a wide variety of specialty
chemicals and certain petrochemicals. Major specialty chemicals include foundry
products, water treatment and marine service chemicals, specialty polymers and
adhesives, unsaturated polyester resins, and high-purity electronic and
laboratory chemicals. Principal petrochemicals include cumene, toluene, xylene,
aromatic and aliphatic solvents, propylene, maleic anhydride and methanol.
Construction operations are conducted by the APAC group of companies, which
perform contract construction work including highway paving and repair,
excavation and grading, and bridge and sewer construction. APAC also produces
asphaltic and ready-mix concrete, crushed stone and other aggregate, concrete
block and certain specialized construction materials in thirteen southern
states.
Exploration operations are conducted by Ashland Exploration, which is
engaged in crude oil and natural gas production in the eastern and Gulf Coast
areas of the United States and crude oil production in Nigeria.
Arch Mineral produces metallurgical and steam coal from surface and deep
mines in Illinois, Kentucky, West Virginia and Wyoming for sale to utility and
steel companies. Ashland Coal produces low-sulfur bituminous coal in central
Appalachia for sale to domestic and foreign electric utility and industrial
markets. Both Arch Mineral and Ashland Coal market coal mined by independent
producers.
Certain information with respect to foreign operations follows.
<TABLE>
<CAPTION>
TOTAL INCOME BEFORE
ASSETS INCOME TAXES
---------- ------------------
1994 1993 1994 1993 1992
---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Foreign operations
Petroleum................................................. $ -- $ -- $ 1 $ 2 $ 2
Valvoline................................................. 150 74 10 6 9
Chemical.................................................. 220 174 28 27 34
Exploration............................................... 46 45 22 14 28
---- ---- ---- ---- ----
$416 $293 $61 $49 $73
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
48
<PAGE>
NOTE D -- UNCONSOLIDATED AFFILIATES
Affiliated companies accounted for under the equity method include: Arch
Mineral Corporation (a 50% owned coal company); Ashland Coal, Inc. (a 39% owned
publicly traded coal company); LOOP INC. and LOCAP INC. (18.6% and 21.4% owned
corporate joint ventures operating a deepwater offshore port
and related pipeline facilities in the Gulf of Mexico); and various other
companies. Summarized financial information reported by these affiliates and a
summary of the amounts recorded in Ashland's consolidated financial statements
follow.
<TABLE>
<CAPTION>
ARCH MINERAL ASHLAND LOOP INC. AND
CORPORATION COAL, INC. LOCAP INC. OTHER TOTAL
------------ ---------- ------------- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1994
Financial position
Current assets.................................. $ 173 $ 119 $ 36 $ 204
Current liabilities............................. (132) (110) (86) (123)
----- ----- ----- -----
Working capital................................. 41 9 (50) 81
Noncurrent assets............................... 797 721 638 203
Noncurrent liabilities.......................... (713) (373) (525) (96)
----- ----- ----- -----
Stockholders' equity............................ $ 125 $ 357 $ 63 $ 188
----- ----- ----- -----
----- ----- ----- -----
Results of operations
Sales and operating revenues.................... $ 641 $ 561 $ 149 $ 701
Gross profit.................................... 60 71 54 172
Net income...................................... 14 17 15 14
Amounts recorded by Ashland
Investments and advances........................ 70 138(1) 12 71 $ 291
Equity income................................... 7 6 3 6 22
Dividends received.............................. -- 3 -- 5 8
SEPTEMBER 30, 1993
Financial position
Current assets.................................. $ 114 $ 133 $ 35 $ 195
Current liabilities............................. (104) (70) (79) (123)
----- ----- ----- -----
Working capital................................. 10 63 (44) 72
Noncurrent assets............................... 738 748 666 199
Noncurrent liabilities.......................... (637) (465) (571) (90)
----- ----- ----- -----
Stockholders' equity............................ $ 111 $ 346 $ 51 $ 181
----- ----- ----- -----
----- ----- ----- -----
Results of operations
Sales and operating revenues.................... $ 485 $ 550 $ 143 $ 654
Gross profit (loss)............................. (13) 58 49 154
Net income (loss)............................... (20) 41(2) 9 17
Amounts recorded by Ashland
Investments and advances........................ 63 132 10 75 $ 280
Equity income (loss)............................ (10) 27 2 7 26
Dividends received.............................. 4 3 1 6 14
SEPTEMBER 30, 1992
Results of operations
Sales and operating revenues.................... $ 540 $ 528 $ 156 $ 599
Gross profit.................................... 31 86 58 148
Net income (loss)............................... (104)(3) 35 21 13
Amounts recorded by Ashland
Equity income................................... 10 13 4 6 $ 33
Dividends received.............................. 4 3 -- 4 11
<FN>
- ------------------------
(1) The market value of Ashland's investment is $214 million based on the
market price of Ashland Coal's common stock.
(2) Includes a net gain of $44 million resulting from a favorable adjustment to
income tax expense due to tax law changes, partially offset by a charge to
increase the valuation allowance for certain prepaid royalties. Also
includes a net charge of $19 million for the cumulative effect of the
adoption of FAS 106 and FAS 109, which was recorded by Ashland in 1992.
(3) Includes a net after-tax charge of $123 million for the adoption of FAS 106
and FAS 109 along with an after-tax gain of $15 million from insurance
proceeds resulting from a fire at an Illinois mine.
</TABLE>
Ashland's retained earnings include $159 million of undistributed earnings
from unconsolidated affiliates accounted for under the equity method.
49
<PAGE>
NOTE E -- LONG-TERM DEBT
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Senior debt
Medium-term notes, due 1995-2023, interest at an average rate of 8.8% at September
30, 1994 (5.8% to 10.4%).......................................................... $ 661 $ 668
8.80% debentures, due 2012......................................................... 250 250
11.125% sinking fund debentures, due 2017.......................................... 200 200
Pollution control and industrial revenue bonds, due 1996 to 2020, interest at an
average rate of 6.3% at September 30, 1994 (3.4% to 8.1%)......................... 162 162
Note payable to bank for financing of leveraged employee stock ownership plan, due
1995-1996, interest at a combination of an adjusted certificate of deposit rate
and 76% of the prime rate (5.2% at September 30, 1994)............................ 33 33
Other.............................................................................. 21 19
--------- ---------
1,327 1,332
Other
6.75% convertible subordinated debentures, due 2014, convertible into common stock
at $51.34 per share............................................................... 124 142
Subsidiary debt not guaranteed by Ashland and other................................ 1 7
--------- ---------
125 149
--------- ---------
1,452 1,481
Current portion of long-term debt.................................................... (61) (82)
--------- ---------
$ 1,391 $ 1,399
--------- ---------
--------- ---------
</TABLE>
Aggregate maturities of long-term debt are $61 million in 1995, $65 million
in 1996, $60 million in 1997, $49 million in 1998 and $49 million in 1999.
Excluded from such maturities are $38 million of floating rate pollution control
and industrial revenue bonds, due between 2003 and 2009. These bonds are subject
to early redemptions at the bondholders' option, but generally not before 1996.
Ashland has various revolving credit agreements totaling $350 million under
which no borrowings were outstanding at September 30, 1994. The agreement
providing for $300 million in borrowings expires on March 9, 1998, while the
agreements providing for $50 million in borrowings expire on February 24, 1995.
Certain debt agreements contain covenants restricting dividends, share
repurchases and other distributions with respect to Ashland's capital stock, as
well as covenants limiting new borrowings. At September 30, 1994, distributions
with respect to Ashland's capital stock were restricted to $873 million.
Interest payments on all indebtedness amounted to $119 million in 1994, $131
million in 1993 and $130 million in 1992.
NOTE F -- FINANCIAL INSTRUMENTS
Ashland uses interest rate swap agreements to obtain greater access to the
lower borrowing costs normally available on floating-rate debt, while minimizing
refunding risk through the issuance of long-term, fixed-rate debt. At September
30, 1994, Ashland had unleveraged agreements with a notional principal amount of
$430 million which were used to convert fixed rates on its 8.80% debentures and
certain medium-term notes to variable rates based on three-month or six-month
London Interbank Offered Rates (LIBOR). At that date, Ashland was receiving a
weighted-average fixed interest rate of 5.8% and paying a weighted-average
variable interest rate of 5%, calculated on the notional amount. Notional
amounts do not quantify risk or represent assets or liabilities of Ashland,
but are used in the determination of cash settlements under the agreements.
The terms remaining on Ashland's swaps range from 14 to 52 months, with a
weighted-average remaining life of 38 months.
Interest expense was reduced by $9 million in 1994, $8 million in 1993 and
$2 million in 1992 resulting from settlements under these agreements. Ashland is
exposed to credit losses from counterparty nonperformance, but does not
anticipate any losses from its agreements, all of which are with major financial
institutions. Due to increasing interest rates, the estimated fair value of
Ashland's swaps amounted to a net liability of $15 million at September 30,
1994, compared to a net asset of $22 million at September 30, 1993. This decline
in value was more than offset by the decline in the fair value of the related
fixed-rate indebtedness. Under its current swap agreements, Ashland's annual
interest expense in 1995 will change by about $4 million for each 1% change in
LIBOR.
50
<PAGE>
NOTE F -- FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and fair values of Ashland's significant financial
instruments at September 30, 1994 and 1993 are shown below. The fair values of
cash and cash equivalents, notes payable to banks and commercial paper
approximate their carrying amounts. The fair values of investments of captive
insurance companies are based on quoted market prices plus accrued interest. The
fair values of long-term debt are based on quoted market prices or, if market
prices are not available, the present values of the underlying cash flows
discounted at Ashland's incremental borrowing rates. The fair values of interest
rate swaps are based on quoted market prices, which reflect the present values
of the difference between estimated future variable-rate payments and future
fixed-rate receipts.
<TABLE>
<CAPTION>
1994 1993
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents.................................... $ 40 $ 40 $ 41 $ 41
Investments of captive insurance companies................... 181 181 185 198
Liabilities
Notes payable to banks and commercial paper.................. 72 72 77 77
Long-term debt (including current portion)................... 1,452 1,517 1,481 1,713
Interest rate swaps.......................................... -- 15 -- (22)
</TABLE>
NOTE G -- LEASES AND OTHER COMMITMENTS
LEASES
Ashland and its subsidiaries are lessees in noncancelable leasing agreements
for office buildings, warehouses, pipelines, transportation and marine
equipment, storage facilities, retail outlets, manufacturing facilities and
other equipment and properties which expire at various dates. Capitalized
lease obligations are not significant and are included in long-term debt. Future
minimum rental payments at September 30, 1994, and rental expense under
operating leases follow.
<TABLE>
<CAPTION>
FUTURE MINIMUM RENTAL PAYMENTS RENTAL EXPENSE 1994 1993 1992
- ---------------------------------- ---------------------------------- --------- --------- ---------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
1995.............................. $ 63
1996.............................. 50 Minimum rentals
1997.............................. 41 (including rentals under
1998.............................. 40 short-term leases)................ $ 113 $ 111 $ 104
1999.............................. 35 Contingent rentals................ 12 11 12
Later years....................... 222 Sublease rental income............ (12) (17) (13)
--------- --------- --------- ---------
$ 451 $ 113 $ 105 $ 103
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
OTHER COMMITMENTS
Under agreements with LOOP and LOCAP (see Note D), Ashland is committed to
advance funds against future transportation charges if these corporate joint
ventures are unable to meet their cash requirements. Such advances are limited
to Ashland's share, based on its equity interests, of the total debt service and
defined operating and administrative costs of these companies. Such advances,
however, are reduced by (1) transportation charges Ashland paid, (2) a pro rata
portion of transportation charges paid by other equity participants in excess of
their required amounts, and (3) a pro rata portion of transportation charges
paid by third parties who are not equity participants. At September 30, 1994,
all advances made to LOOP and LOCAP by Ashland had been applied against
transportation charges. Transportation charges incurred amounted to $24 million
in 1994, $22 million in 1993 and $25 million in 1992. At September 30, 1994,
Ashland's contingent liability for its share of the indebtedness of LOOP and
LOCAP secured by throughput and deficiency agreements amounted to approximately
$100 million.
Ashland is contingently liable under guarantees of certain debt and lease
obligations of Ashland Coal, Inc., an unconsolidated affiliate. At September 30,
1994, such obligations have a present value of approximately $16 million.
Ashland is also contingently liable for up to $16 million of borrowings under a
revolving credit agreement of AECOM Technology Corporation, an unconsolidated
affiliate. Ashland's guaranteed portion of outstanding borrowings under this
agreement amounted to $9 million at September 30, 1994.
51
<PAGE>
NOTE H -- INCOME TAXES
A summary of the provision for income taxes follows. The 1993 provision was
not significantly affected by tax legislation that, among other things,
increased the federal income tax rate 1%, effective January 1, 1993.
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- -----
(IN MILLIONS)
<S> <C> <C> <C>
Current (1)
Federal................................................... $56 $24 $ 41
State..................................................... 8 13 8
Foreign................................................... 9 7 8
---- ---- -----
73 44 57
---- ---- -----
Deferred
Federal and state......................................... 2 14 (145)
Foreign................................................... -- -- (2)
---- ---- -----
2 14 (147)
---- ---- -----
$75 $58 $ (90)
---- ---- -----
---- ---- -----
<FN>
- ------------------------
(1) Income tax payments amounted to $70 million in 1994, $41 million in 1993
and $40 million in 1992.
</TABLE>
Deferred income taxes are provided for significant income and expense items
recognized in different years for tax and financial reporting purposes.
Temporary differences which give rise to significant deferred tax assets
(liabilities) follow.
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Accrued pension and other postretirement benefits...................................... $ 205 $ 202
Environmental, insurance and litigation reserves....................................... 116 103
Alternative minimum tax credit carryforwards........................................... 23 19
Property related items other than depreciation......................................... 23 25
Uncollectible accounts receivable...................................................... 17 18
Other items............................................................................ 75 79
--------- ---------
Total deferred tax assets.............................................................. 459 446
--------- ---------
Accelerated depreciation............................................................... (357) (351)
Intangible drilling costs.............................................................. (38) (33)
Undistributed equity income............................................................ (16) (17)
Other items............................................................................ (7) (11)
--------- ---------
Total deferred tax liabilities......................................................... (418) (412)
--------- ---------
Net deferred tax asset................................................................. $ 41 $ 34
--------- ---------
--------- ---------
</TABLE>
The U.S. and foreign components of income before income taxes and a
reconciliation of the normal statutory federal income tax with the provision for
income taxes follow.
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Income (loss) before income taxes
United States................................................................. $ 211 $ 151 $ (231)
Foreign....................................................................... 61 49 73
--------- --------- ---------
$ 272 $ 200 $ (158)
--------- --------- ---------
--------- --------- ---------
Income taxes computed at U.S. statutory rates................................... $ 95 $ 70 $ (54)
Increase (decrease) in amount computed resulting from
Equity income................................................................. (7) (6) (9)
State income taxes............................................................ 6 9 (10)
Net impact of foreign results................................................. (7) (7) (7)
Non-conventional fuel credit.................................................. (10) (9) (9)
Other items................................................................... (2) 1 (1)
--------- --------- ---------
$ 75 $ 58 $ (90)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Internal Revenue Service (IRS) has examined Ashland's consolidated U.S.
income tax returns through 1989. As a result of its examinations, the IRS has
proposed adjustments, certain of which are being contested by Ashland. Ashland
believes it has adequately provided for any income taxes and related interest
which may ultimately be paid on contested issues.
52
<PAGE>
NOTE I -- CAPITAL STOCK
In May 1993, Ashland completed the sale of six million shares of cumulative
convertible preferred stock priced at $50 per share. Net proceeds, after fees
and expenses, totaled $293 million and were used to reduce debt. The shares have
no voting rights and are entitled to cumulative annual dividends of $3.125 per
share. They have liquidation preferences equal to $50 per share plus accrued and
unpaid dividends, and are convertible at any time at the option of the holders
into 1.546 shares of Ashland common stock. The preferred shares are redeemable
at the option of Ashland at $51.88 per share beginning March 25, 1997, and
declining gradually to $50 per share by March 15, 2003, plus accrued and unpaid
dividends to the redemption date.
Under Ashland's Shareholder Rights Plan, each common share is accompanied by
one-half of a Right to purchase one-tenth share of preferred stock for $120 (the
"Exercise Price"). Each one-tenth share of preferred stock will be entitled to
dividends and to vote on an equivalent basis with two common shares. The Rights
are not exercisable or detachable from the common shares until 10 days after any
party acquires 15% or more (or announces a tender offer for 20% or more) of
Ashland's common stock. If any party acquires 20% or more of Ashland's common
stock or acquires Ashland in a business combination, each Right (other than
those held by the acquiring party) will entitle the holder to purchase stock of
Ashland or the acquiring company having a market value of two times the Exercise
Price. The Rights expire on May 15, 1996, and can be redeemed at any time prior
to becoming exercisable.
At September 30, 1994, 10 million shares of cumulative preferred stock are
reserved for potential issuance under the Shareholder Rights Plan. At September
30, 1994, 16 million common shares are reserved for conversion of debentures and
preferred stock and for issuance under outstanding stock options.
NOTE J -- STOCK OWNERSHIP PLANS
LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN
During 1986, Ashland established a leveraged employee stock ownership plan
(LESOP) to cover the majority of its salaried employees. LESOP purchases of
Ashland common stock that year were generally funded through a loan from
Ashland, of which the remaining principal at September 30, 1986, amounted to
$246 million. In 1987, Ashland contributed excess assets recovered from certain
company pension plans to the LESOP and prepaid $212 million of the remaining
principal. Because one-half of employees' LESOP accounts serve to fund future
benefits paid by certain pension plans, one-half of the funds used to prepay
debt was accounted for by Ashland as a prepaid LESOP contribution.
Ashland common shares held by the LESOP related to the contribution of
excess pension assets were allocated to employees' accounts over an eight-year
period ending September 30, 1994. The remaining shares are allocated as the loan
to the LESOP is repaid. The projected costs of the LESOP (including the prepaid
contribution, projected dividends on the related unallocated shares and
projected future contributions) are being expensed on a pro rata basis as the
original shares are allocated to employees. This expense totaled $18 million
annually in 1994, 1993 and 1992. Additional contributions from Ashland were not
required through September 30, 1994, since dividends on unallocated shares
exceeded interest and administrative costs, with the excess used to prepay
portions of the remaining principal on the loan. Contributions from Ashland will
resume in fiscal 1995 as principal payments on the loan become due.
STOCK INCENTIVE PLANS
Ashland has stock incentive plans under which key employees or directors can
purchase shares of common stock under stock options or restricted stock awards.
Stock options are granted to employees at a price equal to the fair market value
of the stock on the date of grant and become exercisable over periods of one to
three years. Unexercised options lapse 10 years after the date of grant.
Restricted stock awards entitle employees or directors to purchase shares at a
nominal cost, to vote such shares and to receive any dividends thereon. However,
such shares are subject to forfeiture upon termination of service before the
restriction period ends.
<TABLE>
<CAPTION>
1994 1993 1992
------------------------- ------------------------- -------------------------
COMMON PRICE RANGE PER COMMON PRICE RANGE PER COMMON PRICE RANGE PER
SHARES SHARE SHARES SHARE SHARES SHARE
------- ---------------- ------- ---------------- ------- ----------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Options outstanding -- beginning of year
(1)......................................... 4,504 $13 3/8 - 41 3,918 $13 3/8 - 41 3,349 $13 3/8 - 41
Options granted.............................. 860 35 7/8 - 37 1/2 934 24 5/8 - 33 1/8 753 23 7/8 - 30 3/4
Options exercised............................ (639) 13 3/8 - 41 (81) 13 3/8 - 33 3/8 (71) 13 3/8 - 30 3/4
Options canceled............................. (28) 23 7/8 - 41 (267) 23 7/8 - 41 (113) 30 - 41
------- ---------------- ------- ---------------- ------- ----------------
Options outstanding -- end of year (1)....... 4,697 $14 1/4 - 41 4,504 $13 3/8 - 41 3,918 $13 3/8 - 41
------- ---------------- ------- ---------------- ------- ----------------
------- ---------------- ------- ---------------- ------- ----------------
Options exercisable -- end of year........... 3,242 $14 1/4 - 41 3,080 $13 3/8 - 41 2,597 $13 3/8 - 41
------- ---------------- ------- ---------------- ------- ----------------
------- ---------------- ------- ---------------- ------- ----------------
<FN>
- ------------------------------
(1) Shares of common stock available for issuance under options or awards
amounted to 2,295,000 at September 30, 1994, and 2,660,000 at October 1,
1993.
</TABLE>
53
<PAGE>
NOTE K -- EMPLOYEE BENEFIT PLANS
PENSION PLANS
Ashland sponsors pension plans which cover substantially all employees,
other than union employees covered by multiemployer pension plans under
collective bargaining agreements. Benefits under Ashland's plans generally are
based on the employee's years of service and compensation during the years
immediately preceding retirement. For certain plans, such benefits are expected
to come in part from one-half of employees' leveraged employee stock ownership
plan (LESOP) accounts. Ashland determines the level of contributions to its
pension plans annually and contributes amounts within allowable limitations
imposed by Internal Revenue Service regulations. Ashland contributed the
maximum tax-deductible contributions to its pension plans in 1994 and 1993,
while full funding limitations prohibited Ashland from making significant
contributions in 1992. The following tables detail the funded status of the
plans and the components of pension expense. A discount rate of 8% and an
assumed rate of salary increases of 5% were used in determining the actuarial
present value of projected benefit obligations at September 30, 1994 (7% and
5% at September 30, 1993).
<TABLE>
<CAPTION>
1994 1993
-------------------------------- --------------------------------
PLANS WITH PLANS WITH PLANS WITH PLANS WITH
ASSETS IN EXCESS ABO IN EXCESS ASSETS IN EXCESS ABO IN EXCESS
OF ABO OF ASSETS OF ABO OF ASSETS
---------------- ------------- ---------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Plan assets at fair value (primarily listed
stocks and bonds)........................... $ 36 $185 $ 36 $177
--- ----- --- -----
Accumulated benefit obligations (ABO)
Vested..................................... 30 188 31 190
Nonvested.................................. 5 44 5 34
--- ----- --- -----
35 232 36 224
--- ----- --- -----
Plan assets less than (in excess of) ABO..... (1) 47(1) -- 47
Provision for future salary increases........ 12 131 12 146
Deferred pension costs....................... (8) (40) (12) (67)
--- ----- --- -----
Net accrued pension costs (2)................ $ 3 $138 $ -- $126
--- ----- --- -----
--- ----- --- -----
Components of deferred pension costs
Unrecognized transition gain............... $ 3 $ 10 $ 3 $ 15
Unrecognized net loss...................... (10) (63) (14) (88)
Unrecognized prior service costs........... (1) (9) (1) (10)
Recognition of minimum liability........... -- 22 -- 16
--- ----- --- -----
$ (8) $(40) $(12) $(67)
--- ----- --- -----
--- ----- --- -----
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Components of pension expense
Service cost....................................................................... $ 24 $ 26 $ 20
Interest cost...................................................................... 29 28 24
Actual investment loss (gain) on plan assets....................................... 7 (24) (15)
Deferred investment (loss) gain (3)................................................ (27) 10 1
Other amortization and deferral.................................................... 4 5 --
Voluntary enhanced retirement program pension cost................................. -- -- 9
--- --- ---
$ 37 $ 45 $ 39
--- --- ---
--- --- ---
<FN>
- ------------------------
(1) Includes unfunded ABO of $44 million for non-qualified supplemental pension
plans.
(2) Amounts are recorded in various asset and liability accounts on Ashland's
consolidated balance sheets.
(3) The expected long-term rate of return on plan assets was 9% for 1994 and
1993, and 10% for 1992.
</TABLE>
OTHER POSTRETIREMENT BENEFIT PLANS
Ashland sponsors several unfunded benefit plans which provide health care
and life insurance benefits for eligible employees who retire from active
service. The health care plans are contributory, with retiree contributions
adjusted periodically, and contain other cost-sharing features such as
deductibles and coinsurance. The life insurance plans are generally
noncontributory. Ashland's policy is to fund the costs of postretirement plans
on a pay-as-you-go basis. During 1992, Ashland adopted Financial Accounting
Standards Board Statement No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (see Note A).
During 1993, Ashland amended nearly all of its retiree health care plans to
place a cap on the company's contributions and to adopt a cost-sharing method
based upon a retiree's years of service. The cap limits the company's
contribution to average retiree per capita health care costs for 1992 (net of
direct retiree contributions), increasing thereafter by up to 4.5% per year. If
per capita health care costs increase by more than 4.5% per year, the additional
costs will be paid by retirees through higher contributions. As a result, the
accumulated postretirement benefit obligation (APBO) for retiree health care
plans was reduced by $197 million and postretirement health care expense
decreased after 1992 to amounts more closely approximating pre-1992
pay-as-you-go levels.
54
<PAGE>
NOTE K -- EMPLOYEE BENEFIT PLANS (CONTINUED)
The following tables detail the status of the plans and the components of
postretirement benefit expense. The APBO was determined using a discount rate of
8% at September 30, 1994, and 7% at September 30, 1993. Under the amended plan,
the assumed annual rate of increase in the per capita cost was 4.5% beginning in
1993.
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------- -------------------------- --------------------------
LIFE LIFE LIFE
HEALTH CARE INSURANCE HEALTH CARE INSURANCE HEALTH CARE INSURANCE
------ ----------- ------ ----------- ------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Accumulated postretirement benefit
obligations (APBO)
Retirees.............................. $ 93 $ 19 $ 102 $ 20
Fully eligible active plan
participants......................... 38 5 41 5
Other active plan participants........ 86 5 95 5
----- --- ----- ---
217 29 238 30
Unrecognized net loss................... (17) -- (51) (2)
Unrecognized plan amendment credit...... 158 8 180 8
----- --- ----- ---
Accrued other postretirement benefit
costs.................................. $ 358 $ 37 $ 367 $ 36
----- --- ----- ---
----- --- ----- ---
Components of other postretirement
benefit expense
Service cost.......................... $ 7 $ 1 $ 6 $ 1 $ 15 $ 1
Interest cost......................... 16 2 16 2 28 3
Amortization and deferral (principally
plan amendment credit)............... (15) (1) (17) (1) -- --
----- --- ----- --- --- ---
$ 8 $ 2 $ 5 $ 2 $ 43 $ 4
----- --- ----- --- --- --
----- --- ----- --- --- --
</TABLE>
OTHER PLANS
Certain union employees are covered under multiemployer defined benefit
pension plans administered by unions. Amounts charged to pension expense and
contributed to the plans were $1 million annually in 1994, 1993 and 1992.
Ashland sponsors a Thrift Plan to assist eligible employees in providing for
retirement or other future financial needs. Ashland matches employee
contributions up to 6% of their qualified earnings at a rate of 70% (20% for
LESOP participants). Ashland's contributions to the Plan amounted to $7 million
annually in 1994, 1993 and 1992.
NOTE L -- LITIGATION, CLAIMS AND CONTINGENCIES
Ashland is subject to various federal, state and local environmental laws
and regulations which require remediation efforts at multiple locations,
including operating facilities, previously owned or operated facilities, and
Superfund or other waste sites. Consistent with its accounting policy for
environmental costs, Ashland's reserves for environmental assessments and
remediation efforts amounted to $167 million at September 30, 1994, and $139
million at September 30, 1993. Such amounts reflect Ashland's most likely
estimates of the costs which will be incurred over an extended period to
remediate identified environmental conditions for which costs are reasonably
estimable.
Environmental reserves are subject to considerable uncertainties which
affect Ashland's ability to estimate its share of the ultimate costs of required
remediation efforts. Such uncertainties involve the nature and extent of
contamination at each site, the extent of required cleanup efforts under
existing environmental regulations, widely varying costs of alternate cleanup
methods, changes in environmental regulations, the potential effect of
continuing improvements in remediation technology, and the number and financial
strength of other potentially responsible parties at multiparty sites. As a
result, charges to income for environmental liabilities could have a material
effect on results of operations in a particular quarter or fiscal year as
assessments and remediation efforts proceed or as new remediation sites are
identified. However, such charges are not expected to have a material adverse
effect on Ashland's consolidated financial position.
Ashland has numerous insurance policies that provide coverage at various
levels for environmental costs. Ashland is currently involved in negotiations
concerning the amount of insurance coverage for environmental costs under some
of these policies. In addition, various costs of remediation efforts related to
underground storage tanks are eligible for reimbursement from state administered
funds. Probable recoveries related to certain costs incurred or expected to be
incurred in future years are included in other noncurrent assets.
In addition, Ashland and its subsidiaries are parties to numerous claims and
lawsuits (some of which are for substantial amounts) with respect to product
liability and commercial and other matters. While these claims and actions are
being contested, the outcome of individual matters is not predictable with
assurance. Although any actual liability is not determinable as of September 30,
1994, Ashland believes that any liability resulting from these matters involving
Ashland and its subsidiaries, after taking into consideration Ashland's
insurance coverages and amounts provided for, should not have a material adverse
effect on Ashland's consolidated financial position.
55
<PAGE>
FIVE YEAR SELECTED FINANCIAL INFORMATION
ASHLAND OIL, INC. AND SUBSIDIARIES
YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------- ------- ---------- ------- -------
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues
Sales and operating revenues (including excise taxes)............... $10,334 $10,199 $10,211 $ 9,867 $ 9,473
Other............................................................... 48 57 40 56 54
Costs and expenses
Cost of sales and operating expenses................................ (7,742) (7,951) (8,210) (7,725) (7,401)
Excise taxes on products and merchandise............................ (877) (645) (659) (620) (497)
Selling, general and administrative expenses........................ (1,021) (993) (1,023) (926) (949)
Depreciation, depletion and amortization............................ (295) (293) (290) (265) (256)
General corporate expenses.......................................... (80) (77) (132) (93) (93)
------- ------- ---------- ------- -------
Operating income (loss)............................................... 367 297 (63) 294 331
Other income (expense)
Interest expense (net of interest income)........................... (117) (123) (128) (115) (118)
Equity income....................................................... 22 26 33 14 50
------- ------- ---------- ------- -------
Income (loss) before income taxes and the cumulative effect of
accounting changes................................................... 272 200 (158) 193 263
Income taxes (credit)................................................. 75 58 (90) 48 81
------- ------- ---------- ------- -------
Income (loss) before the cumulative effect of accounting changes...... 197 142 (68) 145 182
Cumulative effect of accounting changes............................... -- -- (268) -- --
------- ------- ---------- ------- -------
Net income (loss)..................................................... $ 197 $ 142 $ (336) $ 145 $ 182
------- ------- ---------- ------- -------
------- ------- ---------- ------- -------
BALANCE SHEET INFORMATION
Working capital
Current assets...................................................... $ 2,171 $ 1,973 $ 2,110 $ 2,119 $ 2,143
Current liabilities................................................. 1,688 1,619 2,046 1,823 1,805
------- ------- ---------- ------- -------
$ 483 $ 354 $ 64 $ 296 $ 338
------- ------- ---------- ------- -------
Total assets.......................................................... $ 5,815 $ 5,552 $ 5,668 $ 5,449 $ 5,118
------- ------- ---------- ------- -------
Capitalization
Debt due within one year............................................ $ 133 $ 159 $ 306 $ 195 $ 170
Long-term debt (less current portion)............................... 1,391 1,399 1,444 1,337 1,235
Deferred income taxes............................................... 30 44 59 312 324
Convertible preferred stock......................................... 293 293 -- -- --
Common stockholders' equity......................................... 1,302 1,162 1,086 1,444 1,280
------- ------- ---------- ------- -------
$ 3,149 $ 3,057 $ 2,895 $ 3,288 $ 3,009
------- ------- ---------- ------- -------
------- ------- ---------- ------- -------
CASH FLOW INFORMATION
Cash flows from operations............................................ $ 454 $ 250 $ 398 $ 473 $ 371
Additions to property, plant and equipment............................ 376 432 504 445 446
Dividends............................................................. 79 66 60 58 58
COMMON STOCK INFORMATION
Primary earnings (loss) per share..................................... $ 2.94 $ 2.26 $ (1.18)(1) $ 2.56 $ 3.27
Dividends per share................................................... 1.00 1.00 1.00 1.00 1.00
<FN>
- ------------------------
(1) Excludes the cumulative effect of accounting changes of $(4.57) per share.
</TABLE>
57
<PAGE>
FIVE YEAR INFORMATION BY INDUSTRY SEGMENT
ASHLAND OIL, INC. AND SUBSIDIARIES
YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
----------- ----------- ----------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SALES AND OPERATING REVENUES
Petroleum........................................................ $ 4,666 $ 4,752 $ 4,848 $ 4,877 $ 4,169
SuperAmerica..................................................... 1,706 1,785 1,888 1,948 1,747
Valvoline........................................................ 1,000 938 900 793 701
Chemical......................................................... 2,885 2,586 2,488 2,285 2,245
Construction..................................................... 1,101 1,116 1,043 1,019 1,083
Engineering...................................................... -- -- -- -- 348
Exploration...................................................... 199 247 262 323 399
Intersegment sales (1)
Petroleum...................................................... (1,193) (1,195) (1,182) (1,335) (1,177)
Other.......................................................... (30) (30) (36) (43) (42)
----------- ----------- ----------- ------- --------
$10,334 $10,199 $10,211 $ 9,867 $ 9,473
----------- ----------- ----------- ------- --------
----------- ----------- ----------- ------- --------
OPERATING INCOME (LOSS)
Petroleum........................................................ $ 113 $ 56(2) $ (125) $ 138 $ 211
SuperAmerica..................................................... 59 65 1 30 41
Valvoline........................................................ 52 56 50 39 37
----------- ----------- ----------- ------- --------
Total Refining and Marketing Group............................. 224 177 (74) 207 289
Chemical......................................................... 125 108 81 98 70
Construction..................................................... 70 53 45 41 53
Engineering...................................................... -- -- -- -- (28)(3)
Exploration...................................................... 28 36 17 41 40
General corporate expenses....................................... (80)(4) (77) (132) (93) (93)
----------- ----------- ----------- ------- --------
$ 367 $ 297 $ (63)(5) $ 294 $ 331
----------- ----------- ----------- ------- --------
----------- ----------- ----------- ------- --------
IDENTIFIABLE ASSETS
Petroleum........................................................ $ 2,259 $ 2,240 $ 2,296 $ 2,274 $ 1,862
SuperAmerica..................................................... 398 364 446 437 443
Valvoline........................................................ 532 430 402 377 375
Chemical......................................................... 1,122 958 999 834 856
Construction..................................................... 404 440 437 434 514
Exploration...................................................... 374 375 361 337 324
Coal investments................................................. 208 196 190 231 274
Corporate (6).................................................... 518 549 537 525 470
----------- ----------- ----------- ------- --------
$ 5,815 $ 5,552 $ 5,668 $ 5,449 $ 5,118
----------- ----------- ----------- ------- --------
----------- ----------- ----------- ------- --------
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
----------- ----------- ----------- ------- --------
(IN MILLIONS)
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
<S> <C> <C> <C> <C> <C>
Petroleum........................................................ $ 155 $ 230 $ 273 $ 249 $ 191
SuperAmerica..................................................... 39 25 37 37 67
Valvoline........................................................ 25 21 19 14 27
Chemical......................................................... 61 51 47 41 48
Construction..................................................... 45 43 42 36 46
Engineering...................................................... -- -- -- -- 3
Exploration...................................................... 41 42 67 60 39
Corporate........................................................ 10 20 19 8 25
----------- ----------- ----------- ------- --------
$ 376 $ 432 $ 504 $ 445 $ 446
----------- ----------- ----------- ------- --------
----------- ----------- ----------- ------- --------
DEPRECIATION, DEPLETION AND AMORTIZATION
Petroleum........................................................ $ 134 $ 127 $ 125 $ 103 $ 93
SuperAmerica..................................................... 27 28 31 31 30
Valvoline........................................................ 19 18 17 16 17
Chemical......................................................... 43 42 43 41 39
Construction..................................................... 40 44 45 48 47
Engineering...................................................... -- -- -- -- 5
Exploration...................................................... 33 34 28 26 25
Corporate........................................................ 12 12 13 14 13
----------- ----------- ----------- ------- --------
$ 308 $ 305 $ 302 $ 279 $ 269
----------- ----------- ----------- ------- --------
----------- ----------- ----------- ------- --------
<FN>
- ------------------------
(1) Intersegment sales are accounted for at prices which approximate market
value.
(2) Includes a gain of $15 million on the sale of TPT, an inland waterways
barge operation.
(3) Includes a provision of $15 million for estimated expenditures to correct
problems with certain boiler contracts.
(4) Includes a net gain of $11 million related to litigation matters.
(5) Operating income for 1992 includes charges for unusual items totaling $208
million consisting of provisions for a voluntary enhanced retirement
program ($31 million); various asset write-downs including properties held
for sale and assets of discontinued operations ($64 million); future
environmental cleanup costs ($41 million); reserves for future costs
associated with certain custom boilers built by a former engineering
subsidiary and other matters ($38 million); and the current year effect of
the adoption of a new accounting standard for postretirement benefits ($34
million). The combined effect of all of these items reduced operating
income for each of the segments as follows: Petroleum ($89 million),
SuperAmerica ($28 million), Valvoline ($2 million), Chemical ($15 million),
Construction ($9 million), Exploration ($16 million) and general corporate
expenses ($49 million).
(6) Includes principally cash, cash equivalents, investments in and advances to
unconsolidated affiliates (other than Arch Mineral Corporation and Ashland
Coal, Inc.) and investments of captive insurance companies.
</TABLE>
59
<PAGE>
SUPPLEMENTAL OIL AND GAS INFORMATION
ASHLAND OIL, INC. AND SUBSIDIARIES
YEARS ENDED SEPTEMBER 30
OIL AND GAS RESERVES, REVENUES AND COSTS
The following tables summarize Ashland's (1) crude oil and natural gas
reserves, (2) results of operations from oil and gas producing and marketing
activities, (3) costs incurred, both capitalized and expensed, in oil and gas
producing activities, and (4) capitalized costs for oil and gas producing
activities, along with the related accumulated depreciation, depletion and
amortization. U.S. crude oil and natural gas reserves are reported net of
royalties and interests owned by others. Foreign crude oil reserves relate to
reserves available to Ashland, as producer, under a long-term contract with the
Nigerian National Petroleum Corporation. Reserves reported in the table are
estimated and are subject to future revisions.
<TABLE>
<CAPTION>
1994 1993 1992
----------------------- ----------------------- -----------------------
U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
------ ------- ----- ------ ------- ----- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CRUDE OIL RESERVES (millions of barrels)
Proved developed and undeveloped reserves
Beginning of year.................................... 1.4 7.7 9.1 1.6 13.3 14.9 1.7 15.0 16.7
Revisions of previous estimates...................... (.1) 6.7 6.6 .2 2.3 2.5 .2 7.8 8.0
Extensions and discoveries........................... -- -- -- -- -- -- .2 -- .2
Sale of reserves in place............................ (.1) -- (.1) -- -- -- (.1) -- (.1)
Production........................................... (.3) (6.8) (7.1) (.4) (7.9) (8.3) (.4) (9.5) (9.9)
------ ------- ----- ------ ------- ----- ------ ------- -----
End of year.......................................... .9 7.6 8.5 1.4 7.7 9.1 1.6 13.3 14.9
------ ------- ----- ------ ------- ----- ------ ------- -----
Proved developed reserves
Beginning of year.................................... 1.3 7.7 9.0 1.5 13.3 14.8 1.7 15.0 16.7
End of year.......................................... .9 7.6 8.5 1.3 7.7 9.0 1.5 13.3 14.8
NATURAL GAS RESERVES (billions of cubic feet)
Proved developed and undeveloped reserves
Beginning of year.................................... 455.5 463.9 399.1
Revisions of previous estimates...................... (98.2) 4.9 19.9
Extensions and discoveries........................... 25.9 19.4 67.2
Purchase of reserves in place........................ .4 3.5 6.4
Production........................................... (34.4) (36.2) (28.7)
------ ------ ------
End of year.......................................... 349.2 455.5 463.9
------ ------ ------
Proved developed reserves
Beginning of year.................................... 352.0 346.5 302.9
End of year.......................................... 320.5 352.0 346.5
RESULTS OF OPERATIONS (in millions)
Revenues
Sales to third parties............................... $ 96 $ 99 $ 195 $ 106 $ 135 $ 241 $ 74 $ 182 $ 256
Intersegment sales (1)............................... 4 -- 4 6 -- 6 6 -- 6
------ ------- ----- ------ ------- ----- ------ ------- -----
100 99 199 112 135 247 80 182 262
Costs and expenses
Production (lifting) costs (2)....................... (23) (90) (113) (25) (60) (85) (25) (80) (105)
Exploration expenses................................. (13) (1) (14) (8) (10) (18) (7) (3) (10)
Depreciation, depletion, amortization and valuation
provisions.......................................... (35) (1) (36) (33) (3) (36) (38) (4) (42)
Other costs (3)...................................... (25) (2) (27) (23) (5) (28) (21) (4) (25)
Income and foreign exploration taxes................. 7 19 26 -- (44) (44) 15 (63) (48)
------ ------- ----- ------ ------- ----- ------ ------- -----
$ 11 $ 24 $ 35 $ 23 $ 13 $ 36 $ 4 $ 28 $ 32
------ ------- ----- ------ ------- ----- ------ ------- -----
------ ------- ----- ------ ------- ----- ------ ------- -----
COSTS INCURRED (in millions)
Property acquisition costs
Proved properties.................................... $ 1 $ -- $ 1 $ 3 $ -- $ 3 $ 9 $ -- $ 9
Unproved properties.................................. 2 -- 2 2 -- 2 3 3 6
Exploration costs...................................... 19 1 20 10 10 20 11 6 17
Development costs...................................... 32 2 34 35 2 37 60 -- 60
CAPITALIZED COSTS (in millions)
Proved properties...................................... $ 494 $ 392 $ 886 $ 467 $ 391 $ 858
Unproved properties.................................... 45 1 46 47 3 50
------ ------- ----- ------ ------- -----
539 393 932 514 394 908
Accumulated depreciation, depletion and amortization... (231) (392) (623) (211) (391) (602)
------ ------- ----- ------ ------- -----
$ 308 $ 1 $ 309 $ 303 $ 3 $ 306
------ ------- ----- ------ ------- -----
------ ------- ----- ------ ------- -----
</TABLE>
60
<PAGE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING
TO OIL AND GAS RESERVES
The following tables summarize discounted future net cash flows and changes
in such flows in accordance with Financial Accounting Standards Board Statement
No. 69, "Disclosures about Oil and Gas Producing Activities." Under the
guidelines of the Statement, estimated future cash flows are determined based on
current prices for crude oil and natural gas, estimated production of Ashland's
proved crude oil and natural gas reserves, estimated future production and
development costs of those reserves based on current costs and economic
conditions, and estimated future income and foreign exploration taxes based on
taxing arrangements in effect at year-end. Such cash flows are then discounted
using the prescribed 10% rate.
Many other assumptions could have been made which may have resulted in
significantly different estimates. Ashland does not rely upon these estimates in
making investment and operating decisions. Ashland does not represent this
discounted future net cash flow to be indicative of future cash flow or the
current value of its reserves, nor is it an appropriate value to compare with
reported values of other companies with different fiscal year-ends. Gas prices
utilized in deriving this discounted future net cash flow are based on
conditions that existed at September 30 and are usually different than prices
that exist at calendar year-end due to seasonal fluctuations in the natural gas
market. Prices can also vary significantly at the same point in time from year
to year due to a variety of factors. The average gas price used in the 1994
discounted future net cash flow calculation was based on $1.48 per million BTU
at Henry Hub.
Ashland estimates that using the average NYMEX "12 month strip" futures
price of $1.93 per million BTU as a basis would add 36BCF and $50 million to the
discounted future net cash flow of $197 million at September 30, 1994. The
average gas price used in the 1993 discounted future net cash flow calculation
was based on $2.37 per million BTU at Henry Hub. Using that price as a basis in
this year's calculation would add 101BCF and $102 million to the discounted
future net cash flow at September 30, 1994. Therefore, disregarding price,
Ashland essentially replaced the value of its production in fiscal 1994.
<TABLE>
<CAPTION>
DISCOUNTED FUTURE NET CASH FLOWS U.S. FOREIGN TOTAL
- ---------------------------------------------------------------------------------------- --------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
SEPTEMBER 30, 1994
Future cash inflows..................................................................... $ 691 $ 124 $ 815
Future production (lifting) costs....................................................... (315) (80) (395)
Future development costs................................................................ (22) (9) (31)
Future income and foreign exploration taxes............................................. (17) (24) (41)
--------- ----- ---------
337 11 348
Annual 10% discount..................................................................... (140) (1) (141)
--------- ----- ---------
$ 197 $ 10 $ 207
--------- ----- ---------
--------- ----- ---------
SEPTEMBER 30, 1993
Future cash inflows..................................................................... $ 1,320 $ 121 $ 1,441
Future production (lifting) costs....................................................... (436) (101) (537)
Future development costs................................................................ (92) -- (92)
Future income and foreign exploration taxes............................................. (166) (10) (176)
--------- ----- ---------
626 10 636
Annual 10% discount..................................................................... (318) (1) (319)
--------- ----- ---------
$ 308 $ 9 $ 317
--------- ----- ---------
--------- ----- ---------
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
---------------------- --------------------- ---------------------
CHANGES IN DISCOUNTED FUTURE NET CASH FLOWS U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
- ------------------------------------------------------------ ----- ------- ----- ---- ------- ----- ---- ------- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net change due to extensions and discoveries................ $ 21 $ -- $ 21 $ 20 $ -- $ 20 $ 39 $ -- $ 39
Sales of oil and gas produced -- net of production (lifting)
costs...................................................... (76) (9) (85) (87) (74) (161) (55) (102) (157)
Changes in prices........................................... (186) (3) (189) (35) (25) (60) 121 3 124
Previously estimated development costs incurred............. 24 2 26 38 1 39 45 2 47
Net change due to revisions of previous estimates of
reserves................................................... (17) 34 17 3 7 10 8 68 76
Purchase (sale) of reserves in place........................ -- -- -- 3 -- 3 3 -- 3
Accretion of 10% discount................................... 31 1 32 33 2 35 22 3 25
Other -- net (4)............................................ 33 (11) 22 (16) 1 (15) (17) (2) (19)
Net change in income and foreign exploration taxes.......... 59 (13) 46 14 71 85 (48) 6 (42)
----- ------- ----- ---- ------- ----- ---- ------- -----
(111) 1 (110) (27) (17) (44) 118 (22) 96
Discounted future net cash flows
Beginning of year......................................... 308 9 317 335 26 361 217 48 265
----- ------- ----- ---- ------- ----- ---- ------- -----
End of year............................................... $ 197 $ 10 $ 207 $308 $ 9 $ 317 $335 $ 26 $ 361
----- ------- ----- ---- ------- ----- ---- ------- -----
----- ------- ----- ---- ------- ----- ---- ------- -----
<FN>
- ------------------------------
(1) Intersegment sales are accounted for at prices which approximate market
value.
(2) Includes only costs incurred to operate and maintain wells, related
equipment and facilities.
(3) Includes results of crude oil trading.
(4) Includes changes in future production and development costs and changes in
the timing of future production.
</TABLE>
61
EXHIBIT 21
LIST OF SUBSIDIARIES
Subsidiaries of Ashland ("AOI") at October 1, 1994 included the companies
listed below. Ashland has numerous unconsolidated affiliates, which are
primarily accounted for on the equity method, and majority-owned
consolidated subsidiaries in addition to the companies listed below. Such
affiliates and subsidiaries are not listed below since they would not
constitute a significant subsidiary considered in the aggregate as a
single entity.
Jurisdiction of Immediate
Company Incorporation Parent*
------- ---------------- ----------
AECOM Technology Corporation Delaware ATEC 25%
APAC-Alabama, Inc. Delaware AHI
APAC-Arkansas, Inc. Delaware AHI
APAC-Carolina, Inc. Delaware AHI
APAC-Florida, Inc. Delaware AHI
APAC-Georgia, Inc. Georgia AHI
APAC Holdings, Inc. ("AHI") Delaware AOI
APAC, Inc. Delaware AHI
APAC-Kansas, Inc. Delaware AHI
APAC-Mississippi, Inc. Delaware AHI
APAC-Oklahoma, Inc. Delaware AHI
APAC-Tennessee, Inc. Delaware AHI
APAC-Texas, Inc. Delaware AHI
APAC-Virginia, Inc. Delaware AHI
Arch Mineral Corporation Delaware AOI 50%
Ashland Chemical Canada Ltd. Alberta, Canada AOI
Ashland Coal, Inc. Delaware AOI 39%
Ashland Crude Marketing, Inc. Delaware AOII
Ashland Crude Trading, Inc. Delaware AOI
Ashland Exploration, Inc. Delaware AOI
Ashland Foundry International, Inc. Delaware AOI
Ashland Nigerian Development Company ("ANDC") Delaware AOII
Ashland of Nigeria, Ltd. ("ANL") Delaware AOII
Ashland Oil (Nigeria) Company Ultd. Nigeria ANL 50%-ANDC 50%
Ashland Overseas Investments, Inc. ("AOII") Delaware AOI
Ashland Pipe Line Company ("APL") Ohio AOI
Ashland Plastics International, Inc. Delaware AOI
Ash Property, Inc. Ohio AOI
Ashmont Insurance Company, Inc. ("AIC") Vermont AOI
ATEC, Inc. ("ATEC") Delaware AOI
Bluegrass Insurance Company Limited Bermuda AIC
Bluegrass International Insurance Limited Bermuda AIC
Drew Ameroid International Corporation Liberia DCC
Drew Chemical Corporation ("DCC") Delaware AOI
Iberia Ashland Chemical S. A. Spain AOI 70%
Mid-Valley Supply Co. Kentucky AOI
Ohio River Pipe Line Company Delaware APL
Scurlock Permian Corporation Kentucky AOI
Valvoline (Australia) Pty. Ltd. Australia VII
Valvoline Canada Ltd. Ontario, Canada VII
Valvoline International, Inc. ("VII") Delaware AOI
- --------------------
*100% of the voting securities are owned by the immediate parent except as
otherwise indicated.
Exhibit 23
ERNST & YOUNG LLP
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-52125) pertaining to the Ashland Oil,
Inc. Deferred Compensation and Stock Incentive Plan for Non-
Employee Directors, in the Registration Statement (Form S-8 No.
2-95022) pertaining to the Ashland Oil, Inc. Amended Stock
Incentive Plan for Key Employees, in the Registration Statement
(Form S-8 No. 33-7501) pertaining to the Ashland Oil, Inc.
Employee Thrift Plan, in the Registration Statement (Form S-8 No.
33-26101) pertaining to the Ashland Oil, Inc. Long-Term Incentive
Plan, in the Registration Statement (Form S-8 No. 33-55922)
pertaining to the Ashland Oil, Inc. 1993 Stock Incentive Plan, in
the Registration Statement (Form S-8 No. 33-49907) pertaining to
the Ashland Oil, Inc. Leveraged Employee Stock Ownership Plan,
and the Registration Statement (Form S-3 No. 33-51095) pertaining
to the U.S. $301,627,000 Ashland Oil, Inc. Medium-Term Notes,
Series F, and the related Prospectus, of our report dated
November 2, 1994, with respect to the consolidated financial
statements and schedules of Ashland Oil, Inc. and subsidiaries
included in the Annual Report (Form 10-K) for the year ended
September 30, 1994.
Louisville, Kentucky /s/ Ernst & Young LLP
December 7, 1994
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors
and Officers of ASHLAND OIL, INC., a Kentucky corporation, which is about to
file an Annual Report on Form 10-K with the Securities and Exchange Commission
under the provisions of the Securities Exchange Act of 1934, as amended,
hereby constitutes and appoints JOHN R. HALL, PAUL W. CHELLGREN, THOMAS L.
FEAZELL, JAMES G. STEPHENSON and DAVID L. HAUSRATH, and each of them, his true
and lawful attorneys-in-fact and agents, with full power to act without the
others to sign and file such Annual Report and the exhibits thereto and any
and all other documents in connection therewith with the Securities and
Exchange Commission, and to do and perform any and all acts and things
requisite and necessary to be done in connection with the foregoing as fully
as he or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
Dated: November 3, 1994
/s/ John R. Hall /s/ Mannie L. Jackson
- ------------------------------------ --------------------------------
John R. Hall, Chairman of the Board of Mannie L. Jackson, Director
Directors, Chief Executive Officer and
Director
/s/ Paul W. Chellgren /s/ Patrick F. Noonan
- ------------------------------------ --------------------------------
Paul W. Chellgren, President, Patrick F. Noonan, Director
Chief Operating Officer and Director
/s/ J. Marvin Quin /s/ Jane C. Pfeiffer
- ------------------------------------ --------------------------------
J. Marvin Quin, Chief Financial Jane C. Pfeiffer, Director
Officer and Senior Vice President
/s/ Thomas E. Bolger /s/ Michael D. Rose
- ------------------------------------ --------------------------------
Thomas E. Bolger, Director Michael D. Rose, Director
/s/ Samuel C. Butler /s/ William L. Rouse, Jr.
- ------------------------------------ --------------------------------
Samuel C. Butler, Director William L. Rouse, Jr., Director
/s/ Frank C. Carlucci /s/ Robert B. Stobaugh
- ------------------------------------ --------------------------------
Frank C. Carlucci, Director Robert B. Stobaugh, Director
/s/ James B. Farley /s/ James W. Vandeveer
- ------------------------------------ --------------------------------
James B. Farley, Director James W. Vandeveer, Director
/s/ Edmund B. Fitzgerald
- ------------------------------------
Edmund B. Fitzgerald, Director
<PAGE>
EXCERPT FROM
MINUTES OF DIRECTOR'S MEETING
ASHLAND OIL, INC.
November 3, 1994
RESOLVED, that the Corporation's Annual Report to the Securities
and Exchange Commission ("SEC") on Form 10-K (the "Form 10-K") in
the form previously circulated to the Board in preparation for the
meeting be, and it hereby is, approved with such changes as the
Chairman of the Board, the President, any Vice President, the
Secretary and David L. Hausrath ("Authorized Persons") shall
approve, the execution and filing of the Form 10-K with the SEC to
be conclusive evidence of such approval; provided, however, that
without derogating from the binding effect of the above, it is
understood that an Authorized Person shall cause the distribution
prior to the filing with the SEC, of a copy of such Form 10-K to
the directors in substantially that form which is to be filed with
the SEC and that each director's oral concurrence with respect to
such form shall be obtained prior to the filing with the SEC;
FURTHER RESOLVED, that the Authorized Persons be, and each of them
hereby is, authorized to file with the SEC the Form 10-K and any
amendments thereto on Form 10-K/A and/or any other applicable
form; and
FURTHER RESOLVED, that the Authorized Persons, be and each of them
hereby is, authorized and directed to take such other action as
may be necessary and proper to implement the foregoing
resolutions.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND OIL, INC.'S ANNUAL REPORT TO
SHAREHOLDERS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH ANNUAL REPORT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<CASH> 40
<SECURITIES> 0
<RECEIVABLES> 1,346
<ALLOWANCES> 23
<INVENTORY> 601
<CURRENT-ASSETS> 2,171
<PP&E> 5,898
<DEPRECIATION> 3,082
<TOTAL-ASSETS> 5,815
<CURRENT-LIABILITIES> 1,688
<BONDS> 1,391
<COMMON> 61
0
293
<OTHER-SE> 1,241
<TOTAL-LIABILITY-AND-EQUITY> 5,815
<SALES> 10,334
<TOTAL-REVENUES> 10,382
<CGS> 8,914
<TOTAL-COSTS> 8,914
<OTHER-EXPENSES> 1,101
<LOSS-PROVISION> 11
<INTEREST-EXPENSE> 117
<INCOME-PRETAX> 250
<INCOME-TAX> 75
<INCOME-CONTINUING> 197
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 197
<EPS-PRIMARY> 2.94
<EPS-DILUTED> 2.79
</TABLE>
