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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
Commission file number 1-2918
ASHLAND INC.
(a Kentucky corporation)
I.R.S. No. 61-0122250
1000 Ashland Drive
Russell, Kentucky 41169
Telephone Number: (606) 329-3333
Securities Registered Pursuant to Section 12(b):
Name of each exchange
Title of each class on which registered
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Common Stock, par value $1.00 per share New York Stock Exchange
and Chicago Stock Exchange
Rights to Purchase Series A Participating New York Stock Exchange
Cumulative Preferred Stock and Chicago Stock Exchange
$3.125 Cumulative Convertible Preferred Stock New York Stock Exchange
6 3/4% Convertible Subordinated Debentures, due 2014 New York Stock Exchange
Securities Registered Pursuant to Section 12(g): 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. [ ]
At October 31, 1996, based on the New York Stock Exchange closing
price, the aggregate market value of voting stock held by non-affiliates of
the Registrant was approximately $2,595,905,440. In determining this
amount, Ashland Inc. has assumed that directors, certain of its executive
officers, and persons known to it to be the beneficial owners of more than
five percent of its common stock are affiliates. Such assumption shall not
be deemed conclusive for any other purpose.
At October 31, 1996, there were 64,599,228 shares of Registrant's
common stock outstanding.
Documents Incorporated by Reference
Portions of Registrant's Annual Report to Shareholders for the fiscal
year ended September 30, 1996 are incorporated by reference into Parts I
and II.
Portions of Registrant's definitive Proxy Statement for its January
30, 1997 Annual Meeting of Shareholders are incorporated by reference into
Part III.
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<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Business ........................................... 1
Recent Developments................................. 1
Petroleum........................................... 2
SuperAmerica........................................ 5
Valvoline........................................... 6
Chemical............................................ 7
APAC................................................ 8
Coal................................................ 9
Exploration......................................... 11
Other Business...................................... 15
Miscellaneous....................................... 15
Item 2. Properties.......................................... 18
Item 3. Legal Proceedings................................... 18
Item 4. Submission of Matters to a
Vote of Security Holders........................... 19
Item X. Executive Officers of Ashland....................... 19
PART II
Item 5. Market for Registrant's Common Stock and Related
Security Holder Matters............................ 20
Item 6. Selected Financial Data............................. 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 20
Item 8. Financial Statements and Supplementary Data......... 20
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............. 20
PART III
Item 10. Directors and Executive Officers of the Registrant.. 20
Item 11. Executive Compensation...............................20
Item 12. Security Ownership of Certain Beneficial
Owners and Management...............................21
Item 13. Certain Relationships and Related Transactions.......21
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.........................................21
<PAGE>
PART I
ITEM 1. BUSINESS
Ashland 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 Inc. and its consolidated
subsidiaries, except where the context indicates otherwise.
Ashland's businesses are grouped into seven industry segments:
Petroleum, SuperAmerica, Valvoline, Chemical, APAC, Coal and
Exploration. Financial information about these segments for the five
fiscal years ended September 30, 1996 is set forth on Pages 60 and 61 of
Ashland's Annual Report to Shareholders for the fiscal year ended
September 30, 1996 ("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, antifreeze, 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. APAC
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.
Ashland's coal operations are conducted by 56% owned, publicly traded
Ashland Coal, Inc. ("Ashland Coal"), a producer of low-sulfur,
bituminous coal in central Appalachia for sale to domestic and foreign
electric utility and industrial customers. Ashland also holds a 50%
interest in Arch Mineral Corporation ("Arch"), a producer of low sulfur
coal and steam and metallurgical coal in Illinois, Kentucky, Virginia,
West Virginia and Wyoming. Ashland Exploration explores for, develops,
produces and sells crude oil and natural gas principally in the
Appalachian Basin and Gulf Coast areas of the United States and also
crude oil in Nigeria for export.
At September 30, 1996, Ashland and its consolidated subsidiaries had
approximately 36,100 employees (excluding contract employees).
RECENT DEVELOPMENTS
In a press release issued on December 9, 1996, Ashland announced a
plan to improve profitability and shareholder returns. The following are
some of the key elements of the plan:
o Establish a Petroleum Group, consisting of Ashland Petroleum,
SuperAmerica and Valvoline. J. A. (Fred) Brothers has been named Group
Operating Officer for the new Petroleum Group and will be responsible
for these businesses.
o Reduce capital employed in refining. As part of this effort, 1997
capital expenditures for Ashland Petroleum are being reduced from $175
million to $150 million. Capital expenditures for refining will be
limited to $100 million, well below Ashland Petroleum's annual
depreciation of $122 million. The remaining $50 million in Ashland
Petroleum's 1997 capital budget will be earmarked for value-added
petrochemical and Ashland(R) branded marketing expansions. Future
capital spending for refining will remain materially less than Ashland
Petroleum's annual depreciation.
o Review options for strategic alliances. In view of recent
developments in the refining and marketing industry, Ashland will
continue to assess and actively explore strategic options regarding
alignments or partnering with others to enhance returns from this
business.
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o Retain CS First Boston Corporation to evaluate strategic
alternatives including mergers and spin-offs, regarding Ashland
Exploration, Inc. The goal is to complete an evaluation and any
resulting business transaction before the end of calendar 1997, subject
to regulatory approvals, tax rulings and market conditions.
o Redirect capital freed as a result of reducing capital in the
refining and exploration segments to growth businesses, including
Ashland Chemical Company, the APAC highway construction group and
Valvoline.
o Terminate the shelf registration statement providing for the
offering from time to time of up to $100 million in Ashland common
stock. To date, approximately $50 million of common stock has been sold
under this program.
o Implement a common stock repurchase program. This program will
authorize the repurchase of up to 1 million shares of Ashland common
stock annually.
o Initiate a program to evaluate corporate general and administrative
expenses. Activities directly related to business unit support will be
allocated to those business units. Corporate G&A costs that are not
allocated to business units will be reassessed.
o Continue to encourage the ongoing discussions between Ashland Coal,
Inc. and Arch Mineral Corporation, in which Ashland has separate equity
ownership positions. The two coal companies previously announced they
are discussing a possible business combination.
PETROLEUM
Ashland Petroleum, a division of Ashland, has responsibility for
obtaining Ashland's crude oil requirements, operating Ashland's
refineries, marketing the refined petroleum products and transporting
and storing crude oil and refined products.
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 1996, Ashland Petroleum's negotiated lease, contract and spot
purchases of United States crude oil for refinery input averaged 114,062
barrels per day (1 barrel = 42 United States gallons), including 97,206
barrels per day acquired through Ashland's Scurlock Permian subsidiary.
During fiscal 1996, Ashland Petroleum's foreign crude oil requirements
were met largely through purchases from various foreign national oil
companies, producing companies and traders, as well as purchases of an
average of 85,989 barrels per day during fiscal 1996 from Canada through
Scurlock Permian's Canadian subsidiary. Purchases of foreign crude oil
(including Canada) represented 68% of Ashland Petroleum's crude oil
requirements during fiscal 1996 as well as in fiscal 1995.
Ashland Petroleum's crude oil requirements in fiscal 1997 are
expected to be met through lease, contract and spot purchases from
United States independent producers and from various foreign national
oil companies, producing companies and traders as worldwide availability
and prices dictate. Ashland Exploration's share of Nigerian production
will either be sold, traded or used to help satisfy part of Ashland
Petroleum's fiscal 1997 crude oil requirements, depending upon world
crude oil prices and other economic factors. For further information
concerning Nigerian production, see "Exploration-International
Operations."
In addition to providing crude oil for Ashland Petroleum's
refineries, Scurlock Permian and its Canadian subsidiary are actively
engaged in purchasing, selling and trading crude oil, principally at
Midland, Texas, Cushing, Oklahoma, and St. James, Louisiana, three of
the major distribution points for United States crude oil, as well as in
western Canada.
Refining and Marketing
Ashland Petroleum owns and operates three refineries located in its
key markets with an aggregate refining capacity of 354,200 barrels of
crude oil per calendar day. The Catlettsburg, Kentucky refinery has a
refining capacity of 219,300 barrels per day and the St. Paul Park,
Minnesota and Canton, Ohio refineries have refining capacities of 69,000
barrels and 65,900 barrels per day, respectively. Ashland Petroleum's
refineries are complex and include crude oil atmospheric and vacuum
distillation, fluid catalytic cracking, catalytic reforming,
desulfurization and sulfur recovery units. Each has the capability to
process a wide variety of crude oils and to
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produce normal refinery products, including reformulated gasoline. In
addition, the Catlettsburg refinery is equipped to manufacture
lubricating oils and a wide range of petrochemicals.
Ashland Petroleum's principal marketing area for gasoline and fuel
oils includes the Ohio River Valley, the upper Midwest, the upper Great
Plains and 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 in 21 states through wholesale channels of distribution
(including company owned and exchange terminals and Ashland brand bulk
plants) and at retail through Ashland(R) brand distributor locations and
SuperAmerica. 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, and also 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 28 (26 owned and 2 leased)
bulk plants located in 5 states. These plants maintain inventories of
gasoline, distillate, kerosene, motor oils, greases and other related
products. During fiscal 1996, Ashland Petroleum continued the program
announced in 1994 to modernize and upgrade Ashland Brand retail
marketing primarily through an independent jobber network. As of
September 30, 1996, 36 jobbers with 631 retail outlets have committed to
the new program, and Ashland Petroleum has sold or transferred company
owned or leased bulk plants and stations to some of these jobbers.
Retail outlets are being reimaged, including the use of the new
Ashland(R) brand logo to improve customer recognition. Ashland Petroleum
currently plans to continue expanding the Ashland(R) brand through
jobbers, and company owned or leased bulk plants will continue to be
sold to jobbers in the process. It had 485 units reimaged by September
30, 1996. Ashland also supplies 23 (21 owned and 2 leased) Ashland(R)
brand lessee-dealers and 61 reseller outlets using the Ashland(R) brand
name.
Ashland Petroleum also produces and markets asphalt cements,
polymerized asphalt, asphalt emulsions and industrial asphalts in the
United States. Ashland Petroleum markets asphalt products in 19 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 Ashland's refining operations for the last
three fiscal years.
<TABLE>
<CAPTION>
Years Ended September 30
-------------------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Refinery Input (In thousands of barrels per day) 372.3 353.8 341.8
------------------------------------------------
Refinery Production (In thousands of barrels per day)
-----------------------------------------------------
Gasoline 183.5 176.8 168.0
Distillates and Kerosene 102.1 92.5 90.6
Asphalt 30.4 31.5 29.3
Jet and Turbine Fuel 11.4 11.1 10.9
Heavy Fuel Oils 7.1 6.7 7.7
Lubricants 7.7 7.7 7.6
Other 20.0 16.8 16.8
</TABLE>
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The table below shows the average daily consolidated sales of
petroleum products and crude oil by Ashland Petroleum, SuperAmerica,
Valvoline and Exploration (excluding intercompany sales) for the last
three fiscal years. Sales of gasoline (excluding excise taxes)
represented approximately 17%, 17% and 18% of Ashland's consolidated
sales and operating revenues (excluding excise taxes) in fiscal years
1996, 1995 and 1994, respectively.
<TABLE>
<CAPTION>
Years Ended September 30
-------------------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Consolidated Product Sales (In thousands of barrels per day)
------------------------------------------------------------
Gasoline 197.6 193.7 181.9
Crude Oil 134.4 131.8 142.1
Distillates and Kerosene 112.8 102.8 97.0
Asphalt 37.0 36.8 34.3
Jet and Turbine Fuel 9.6 9.6 10.9
Heavy Fuel Oils 7.0 7.1 8.4
Lubricants 14.8 15.0 14.7
Other 28.0 28.3 23.3
</TABLE>
Transportation and Storage
Ashland owns, leases or has an ownership interest in 5,790 miles of
pipeline in 13 states. This network transports crude oil and refined
products to and from terminals, refineries and other pipelines. This
includes 2,287 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% ownership interest in LOOP LLC ("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% 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 C and H of Notes to Consolidated Financial
Statements in Ashland's Annual Report.
In addition, Ashland owns 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's river transportation operations include 8 towboats
(6 owned, 2 leased) and 166 barges that transport crude oil and refined
products on the Ohio, Mississippi and Illinois rivers, their
tributaries, and the Intracoastal Waterway. In 1995, Ashland entered
into an agreement with Jeffboat, a division of American Commercial
Marine Service Company, to construct 42 new double-hulled inland river
tank barges. As of September 30, 1996, construction on 14 of the new
double-hulled units has been completed and these barges have been added
to Ashland's barge fleet. These barges will replace current
single-hulled barges owned and operated by Ashland in order to comply
with requirements of the Oil Pollution Act of 1990. Displaced
single-hulled units will be divested or recycled into dock floats within
Ashland's system. See also "Miscellaneous - Governmental Regulation and
Action - Environmental Protection."
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.
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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.
Ashland Petroleum owns or has an interest in 34 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.
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, higher demand for distillate during the winter
heating 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 1994 to 1996, refining margins for Ashland Petroleum have
averaged $4.12 per barrel for the six-month periods ended March 31 and
$4.74 per barrel for the six-month periods ended September 30.
SUPERAMERICA
SuperAmerica Group, a division of Ashland, conducts retail petroleum
marketing operations under the SuperAmerica(R) and Rich(R) names. See
also "Petroleum-Refining and Marketing."
SuperAmerica(R) Stores - SuperAmerica operates 624 (484 owned and
140 leased) combination gasoline and merchandise stores in 10 states in
the Ohio Valley and upper Midwest under the SuperAmerica(R) name. These
stores are designed for high volume sales. SuperAmerica stores
(exclusing excise taxes) offer consumers gasoline, diesel fuel at
selected 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, Subway, TCBY, Arby's, Blimpies, Baskin
Robbins, A&W and Pizza Hut. During fiscal 1996, 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.
SuperAmerica operates warehouse distribution centers in Bloomington,
Minnesota, and Ashland, Kentucky, that distribute certain merchandise to
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
Ashland also operates a large bakery and commissary in St. Paul Park,
Minnesota, under the name SuperMom's(R) Inc.
In addition to the 624 SuperAmerica stores, SuperAmerica has 26
jobber/franchisees who operate 40 stores in 2 states in the upper
Midwest. During fiscal 1996, 44 new and rebuilt SuperAmerica retail
outlets were opened.
Rich(R) Oil - SuperAmerica also operates 118 (103 owned and 15
leased) retail gasoline outlets in Kentucky, Ohio and West Virginia
under the Rich(R) Oil name. These outlets generate lower gasoline
volumes than the average SuperAmerica store, primarily because the
outlets are generally smaller and located in less-densely-populated
areas. During fiscal 1996, 16 new and rebuilt Rich retail outlets were
opened.
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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. The
Valvoline(R) trademark was federally registered in 1873 and is the
oldest trademark for a lubricating oil in the United States. See also
"Petroleum-Refining and Marketing." Valvoline has diversified its
operations in recent years and is comprised of the following business
units:
Valvoline Domestic - Valvoline's largest division, Valvoline
Domestic, markets automotive, commercial, and industrial lubricants and
automotive chemicals to a broad network of U.S. customers. Valvoline
branded motor oil is one of the top selling brands in the U.S. private
passenger car and light truck market. Valvoline DuraBlend(R) Motor Oil
was the leading semi-synthetic brand of motor oil for all of 1996.
Valvoline Domestic also markets Zerex(R) antifreeze and Pyroil(R)
automotive chemicals. Zerex(R) is the second-leading antifreeze brand in
the U.S. During 1996, Valvoline Domestic managed a dwindling inventory
of R-12, an automotive refrigerant that was phased out of production in
1995. R-12 is being replaced in the market by new-generation
refrigerants. It is anticipated that R-12 inventory is sufficient to
supply customers through 1997.
The domestic commercial/fleet group continued a strategic alliance
relationship with the Cummins Engine Company to distribute heavy-duty
lubricants to the commercial market.
Valvoline International - Valvoline International markets
Valvoline(R) branded products and TECTYL(R) rust preventives worldwide
through company-owned affiliates or divisions in Australia, Canada,
Denmark, Great Britain, the Netherlands, Sweden, Germany, Switzerland,
Austria, France, Italy, Belgium and South Africa. Licensees and
distributors market products in other parts of Europe, Central and South
America, the Far East, the Middle East and 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.
Valvoline Instant Oil Change(R) ("VIOC") - VIOC is one of the
largest competitors 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, 1996,
374 company-owned and 100 franchise service centers were operating in 12
and 18 states, respectively.
In 1996, the "MVP" (Maximum Vehicle Performance) program continued
VIOC's industry leadership in customer-service innovation. MVP is a
computer-based program that maintains service records on all customer
vehicles, system-wide. MVP also contains a database on all car makes and
models which allows service recommendations based on vehicle owner's
manual recommendations.
First Recovery - As of September 30, 1996, Ecogard, Inc., through
its First Recovery division, was collecting used motor oil at an annual
rate of 52 million gallons from a network of automotive aftermarket
retailers and service businesses in 48 states. Completing Valvoline's
"total fluid management" approach to customer service, First Recovery
provides an environmental service to Valvoline U.S.A. customers,
collecting used antifreeze and oil filters as well.
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 resellers and
to other refiners for further processing. The division is also engaged
in private label blending and packaging for other North American
refiners. See also "Petroleum-Refining and Marketing."
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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 operates 48 manufacturing facilities,
most of which are owned, in 11 states and 15 foreign countries and owns
or leases approximately 100 distribution facilities in 33 states and 11
foreign countries. Ashland Chemical is comprised of the following
operations:
Distribution
Industrial Chemicals & Solvents Division ("IC&S") - IC&S markets
chemical products, ingredients and solvents to industrial chemical users
in major markets through distribution centers in the United States,
Canada, Mexico and Puerto Rico. It 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. It specializes in supplying
mixed truckloads and less-than-truckload quantities to many industries
including the paint and coatings, inks, adhesives, polymer, rubber,
industrial and institutional compounding, automotive, appliance and
paper industries. In addition, IC&S distributes cosmetic and
pharmaceutical specialty chemicals and foodgrade additives and
ingredients. It also offers customers chemical waste collection,
disposal and recycling services, working in cooperation with major
chemical waste services 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, catalysts and allied products from more than
50 distribution locations throughout North America.
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. It also provides plastic
material transfer and packaging services and less-than-truckload
quantities of packaged thermoplastics. The basic resins business unit
markets bulk thermoplastic resins to a variety of proprietary processors
in North America.
Ashland Plastics Division - This division markets a broad range of
thermoplastics to processors outside North America. Ashland Plastics has
distribution centers located in Australia, Belgium, France, Italy, the
Netherlands, Ireland, Spain, and the United Kingdom. It also exports to
Latin America from the United States. It also has a compounding
manufacturing plant located in Italy. In September 1996, Ashland
Plastics and Borealis, a joint venture between Statoil and Neste, signed
a Memorandum of Understanding, under which Ashland Plastics will become
the Pan-European distributor for all small-volume sales of
Borealis-produced polyolefins. In October 1996, Ashland Plastics
acquired Exter Plasticos, S.A., a Spanish thermoplastics distribution
business.
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 transportation,
construction and marine industries. It has manufacturing plants in
Jacksonville, Arkansas; Colton and Los Angeles, California; Bartow,
Florida; Ashtabula, Ohio; Philadelphia and Neville Island, Pennsylvania.
In March 1996, Ashland Chemical acquired the shares of Sociedad
Italo-Espanola d Resinas, S.A., an unsaturated polyester resins
manufacturer located in Spain. It has a manufacturing facility in
Benicarlo, Spain.
Specialty Polymers & Adhesives Division - This division manufactures
and sells specialty phenolic resins for paper impregnation and friction
material bonding; acrylic polymers for pressure sensitive adhesives;
emulsion polymer isocyanate adhesives for structural wood bonding;
polyurethane and epoxy structural adhesives for bonding fiberglass
reinforced plastics, composites, thermoplastics and metals in
automotive, recreational, and industrial applications; induction bonding
systems for thermoplastic materials; elastomeric polymer adhesives and
butyl rubber roofing tapes for commercial roofing applications; and
vapor curing, high-performance urethane coatings systems. It 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, welding and refrigerant
products and fire
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fighting and safety services to the world's merchant marine fleet. Drew
Ameroid Marine currently provides shipboard technical service for more
than 10,000 vessels from more than 30 locations serving 700 ports
throughout the world.
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 and also
custom blends and packages high-purity liquid chemicals to customer
specifications. It has manufacturing plants in Newark, California;
Milan, Italy; Easton, Pennsylvania; Dallas, Texas and Campbell,
California. In addition, it 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. In July 1996,
Ashland Chemical signed a letter of intent with the Pueblo, Colorado,
Economic Development Corporation to purchase property to build a new,
ultra-high purity manufacturing and packaging facility in Pueblo,
Colorado.
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, die lubes and other specialties. It has two domestic
manufacturing plants located in Cleveland, Ohio and 18 foreign
subsidiaries and affiliates manufacturing and/or marketing foundry and
other chemicals. It also 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. It also supplies process
chemicals and technical services to the pulp and paper and mining
industries and also supplies additives used in manufacturing latex and
paints. It 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; Singapore; Sydney and
Perth, Australia; and Auckland, New Zealand.
Petrochemicals
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. It manufactures maleic anhydride at Neal, West Virginia and
Neville Island, Pennsylvania and methanol near Plaquemine, Louisiana.
Other Matters
Melamine Chemicals, Inc. ("MCI") - Ashland owns 23% of the
outstanding common stock of MCI, a public 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 Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA") and the Superfund Amendment
and Reauthorization Act of 1986 ("SARA") (CERCLA and SARA hereinafter
sometimes referred to collectively as "Superfund"), and the Resource
Conservation and Recovery Act ("RCRA"), see "Miscellaneous-Governmental
Regulation and Action-Environmental Protection."
APAC
The APAC group of companies, which are located in 13 southern
states, perform construction work such as paving, repair and resurfacing
highways, streets, airports, residential and commercial developments,
sidewalks, and driveways; grading and base work; and excavation and
related 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.
8
<PAGE>
To deliver its services and products, APAC utilizes extensive
aggregate-producing properties and construction equipment. It currently
has 17 permanent operating quarry locations, 32 other aggregate
production facilities, 33 ready-mix concrete plants, 141 hot-mix asphalt
plants, and a fleet of over 8,900 mobile equipment units, including
heavy construction equipment and transportation-related equipment.
Raw aggregate generally consists of sand, gravel, granite, limestone
and sandstone. About 28% 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, 1996 was $647 million, compared to
$672 million at September 30, 1995. The backlog orders at September 30,
1996 are considered firm, and a major portion is expected to be filled
during fiscal 1997.
COAL
Ashland Coal, Inc. ("Ashland Coal") - Ashland owns approximately 56%
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. 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 34% of Ashland Coal is owned by the public. The primary
emphasis and direction of Ashland Coal is on the acquisition and
development of low-sulfur steam coal reserves for sale to electric
utility customers in the U.S. and abroad.
For its fiscal year ended December 31, 1995, Ashland Coal and its
independent operating subsidiaries sold 22.5 million tons of coal, as
compared to 20.2 and 16.0 million tons sold in 1994 and 1993,
respectively. Of the total number of tons sold during fiscal 1995,
approximately 60% was under long-term contracts, as compared to 62% for
1994 and 57% for 1993, with the balance being sold on the spot market.
In fiscal 1995, Ashland Coal and its independent operating subsidiaries
sold 3.3 million tons of coal in the export market, compared to 1.7
million tons in 1994 and 2.1 million tons in 1993. Approximately 62%,
54%, and 61% of total revenues for 1995, 1994, and 1993, respectively,
were derived from long-term contracts. For the year ended December 31,
1995, Ashland Coal's independent operating subsidiaries produced
approximately 20.9 million tons of coal, as compared to 19.2 and 14.2
million tons for 1994 and 1993, respectively. In addition, Ashland Coal
purchased for resale approximately 1.4 million tons of coal during 1995
and approximately 1.3 and 1.6 million tons of coal during 1994 and 1993.
Ashland Coal's consolidated results for 1993 were significantly
affected by a selective strike by the United Mine Workers of America
("UMWA") 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"). 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. Dal-Tex's
subsidiaries were merged into Dal-Tex, and Dal-Tex was merged into
Hobet, in each case effective March 1, 1996.
For the nine months ended September 30, 1996, Ashland Coal and its
independent operating subsidiaries sold 16.0 million tons of coal. Of
the total number of tons sold during the nine months ended September 30,
1996, 63% was under long-term contracts. These sales accounted for
approximately 62% of Ashland Coal's total
9
<PAGE>
revenues for the nine-month period. Of the 16.0 million tons sold during
the nine-month period, 1.7 million tons were sold in the export market.
For the nine months, Ashland Coal's independent operating subsidiaries
produced approximately 14.8 million tons of coal and purchased
approximately 1.3 million tons for resale.
Ashland Coal's 1996 earnings have been significantly adversely
affected by the expiration at the end of 1995 of favorable sales
contracts with Cincinnati Gas & Electric Company and by price reopeners
under other supply contracts. On October 27, 1995, Ashland Coal's Board
of Directors authorized the repurchase, from time to time, of up to one
million shares of Ashland Coal's Common Stock. As of September 30, 1996,
256,000 shares have been purchased.
Recently, the National Labor Relations Board ruled that ballots cast
in an election by employees at Mingo Logan Coal Company to determine
whether they would be represented by the UMWA should be destroyed and
following that ruling, the UMWA withdrew its petition for an election.
Substantially all of Ashland Coal's coal properties are in eastern
Kentucky and southern West Virginia and are controlled by lease.
Royalties paid to lessors are either on a fixed price per ton basis or
on a percentage of the gross sales price basis. 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 from the date of
their execution, with many containing options to renew. Those term
leases covering principal reserves under Ashland Coal's current mining
plans are not scheduled to expire prior to expiration of those plans in
2003 ( at Ashland Coal's Coal Mac operations) and 2006 (at the balance
of Ashland Coal's operations). Mining plans are not necessarily
indicative of the life of the mine.
As of December 31, 1995, Ashland Coal estimates that its
subsidiaries controlled approximately 640 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.
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 steam market and 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 coal 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, 1995, Arch sold 26.7 million
tons of coal compared to sales of 27.9 million tons and 17.6 million
tons in 1994 and 1993, respectively. In 1995, 78% of Arch's sales were
from the production of its wholly-owned independent operating
subsidiaries, compared to 73% and 79% in 1994 and 1993, 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 60% of the
production in 1995, as compared to 52% and 69% in 1994 and 1993,
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 72% of
Arch's sales in 1995, compared with 69% and 78% in 1994 and 1993,
respectively.
As of September 30, 1996, Arch had 33 coal supply contracts of one
year or longer duration. In the nine-months ended September 30, 1996,
Arch sold 21.7 million tons of coal, 70% of which was sold under
contracts with a duration of more than one year. During this period, 81%
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, 67% of Arch's production was from its
surface mines and the remainder was from its underground and auger
mines.
10
<PAGE>
As of December 31, 1995, Arch owned or controlled estimated
recoverable coal reserves in the proven and probable categories of
approximately 1.3 billion tons, based on an estimate prepared by Arch.
Arch estimates that a majority of these reserves have a sulfur content
of less than 1.6 pounds of sulfur dioxide per million Btu 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.
During 1996, Arch acquired roughly 58,000 acres in the Carbon Basin
Reserve area of Wyoming consisting of approximately 96 million tons of
reserves in the proven and probable categories having a sulfur content
of less than 1.2 pounds of sulfur dioxide per million Btu. Additionally,
during 1996, the reserves associated with the idled Pilot Butte mine in
Sweetwater County, Wyoming and the assets associated with the Corbin
Preparation Plant in Knox and Whitley Counties, Kentucky were sold in
unrelated transactions for cash consideration and the assumption of the
reclamation liabilities of these operations.
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 five year collective bargaining agreement with the
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. This strike significantly affected Apogee's
performance in 1993. In August 1996, the UMWA exercised its right to
reopen the contract to discuss wages and pensions. The BCOA and the UMWA
reached an agreement on these reopener issues, including an agreement
that the UMWA would not exercise its reopener rights in 1997. In the
nine months ended September 30, 1996, Apogee's production represented
approximately 50% 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.
Other Matters - Ashland Coal and Arch have resumed discussions of
options for combining their businesses and operations. However, there
can be no assurances that the discussions will result in progress toward
a combination of the companies.
Ashland Coal and Arch are subject to environmental regulations,
including the Surface Mining Control and Reclamation Act of 1977, the
Clean Water Act, RCRA 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. These laws, regulations and
requirements are not expected to have a material adverse impact on
Ashland Coal's or Arch's competitive position.
Ashland Coal and Arch 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 Clean Air Act contains acid rain provisions which require
substantial reductions in sulfur dioxide emissions by power plants in
the United States. Both Ashland Coal and Arch have significant
low-sulfur coal reserves.
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 crude oil and natural
gas in the United States and in the exploration for and production of
crude oil in Nigeria. Limited exploration activity continues in
Australia.
For information regarding Ashland Exploration's estimated oil and
gas reserves and other financial data, see Supplemental Oil and Gas
Information on Pages 62 and 63 in Ashland's Annual Report. Since October
1, 1995,
11
<PAGE>
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 900,000 acres in eastern Kentucky, Virginia and West
Virginia. In fiscal 1996, it completed 79 net gas wells, excluding 13
net wells which were being drilled at year-end.
During fiscal 1996, Ashland Exploration's domestic production averaged
564 net barrels of oil per day and 108.4 million net cubic feet of
natural gas per day. The average price received during fiscal 1996 was
$18.22 per barrel of oil and $2.39 per thousand cubic feet (MCF) of gas.
Ashland Exploration's exploratory efforts are concentrated in the Gulf
of Mexico. In fiscal 1996, Ashland Exploration participated in drilling
7 gross exploratory prospects. Ashland Exploration's exploratory
leasehold position in the Gulf of Mexico was 155,000 net acres at
September 30, 1996.
Ashland Exploration owned a working interest in 4,247 gross (3,858
net) domestic producing wells at September 30, 1996.
International Operations
Ashland Exploration's oil production in Nigeria during fiscal 1996 was
17,520 barrels per day (before royalty obligations) from 103,000 acres
onshore ("OPL 118") and 74,000 acres offshore ("OPL 98") held under a
production-sharing contract ("PSC") with the Nigerian National Petroleum
Corporation ("NNPC"), the Nigerian state-owned petroleum company.
Ashland Exploration holds a 100% working interest in these blocks. Three
successful horizontal development wells were drilled on OPL 98. The Akam
#15 and Ebughu #5 wells are currently producing a combined 2,255 barrels
per day. The Adanga SW #1 well is currently waiting on pipeline hook-up
which is expected in early fiscal 1997. The appraisal well Adanga North
#2 was drilled in September 1996 on OPL 98. The well was tested at 661
barrels per day and has been suspended pending further evaluation.
Ashland Exploration plans to drill one additional horizontal development
well on OPL 98 during fiscal 1997.
Other exploratory efforts in Nigeria occurred on two additional
offshore blocks ("OPL's 90/225") comprising a contract area of
approximately 580,000 gross acres under another production-sharing
contract with NNPC. Ashland Exploration holds a 50% working interest and
is operator in these blocks. Two appraisal wells were successfully
drilled in fiscal 1996 as confirmation to a 1994 discovery. The Okwori
South #2 encountered 297 net feet of oil pay and is currently suspended.
The Okwori South #3 encountered 378 net feet of oil pay and is also
currently suspended. Ashland Exploration and its partner are currently
evaluating the commercial potential of the Okwori field.
In Australia, Ashland Exploration owns a 50% working 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. Ashland Exploration
expects to fulfill its remaining seismic commitment in fiscal 1997.
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.
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<PAGE>
Operating Statistics
Acreage and Wells
The following table sets forth the gross and net productive wells and
acreage at September 30, 1996:
<TABLE>
<CAPTION>
Productive wells - Gas Gross Net
----- ---
<S> <C> <C>
United States* ...................................... 4,211 3,836
Productive wells - Oil
United States........................................ 36 22
Nigeria ............................................. 36 36
-- --
Total*.......................................... 72 58
== ==
</TABLE>
<TABLE>
<CAPTION>
Developed Undeveloped
Acreage Acreage
Acreage (in thousands) Gross Net Gross Net
----- --- ----- ---
<S> <C> <C> <C> <C>
United States........................................ 1,263 936 748 410
Nigeria ............................................. 177 177 580 290
Australia............................................ 925 315
--------- --------- ------ ------
Total........................................... 1,440 1,113 2,253 1,015
===== ===== ===== =====
-----------------
* These wells include 331 gross wells (317 domestic and 14 international) and 293 net wells (279 domestic
and 14 international) which have multiple completions.
</TABLE>
13
<PAGE>
The following table summarizes the exploration and production activities
for the last three fiscal years:
<TABLE>
<CAPTION>
Years Ended September 30
---------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C> <C>
Net Natural Gas Production (MMCF per day)
United States........................................ 108.4 102.9 94.3
Net Crude Oil Production (average barrels per day)
United States........................................ 564 609 822
Nigeria (1) ......................................... 17,520 18,791 18,707
------ ------ ------
Total........................................... 18,084 19,400 19,529
====== ====== ======
Average Sales Prices - Natural Gas (per MCF)
United States........................................ $2.39 $ 1.89 $2.42
Average Sales Prices - Crude Oil (per barrel)
United States........................................ $18.22 $15.96 $14.29
Nigeria ............................................. 18.46 16.17 15.01
Average Production Product Cost (per equivalent barrel) (2)
United States........................................ $4.37 $4.09 $3.87
Nigeria ............................................. 9.70 9.17 7.69
Net Exploratory Wells Drilled - United States
Net Productive Wells................................. 1 2 2
Net Dry Wells ....................................... 1 5 4
--- --- ---
Total.......................................... 2 7 6
=== === ===
Net Exploratory Wells Drilled - International
Net Productive Wells................................. 2 1 1
Net Dry Wells ....................................... 0 2 1
--- --- ---
Total.......................................... 2 3 2
=== === ===
Net Development Wells Drilled
Net Productive Wells
United States........................................ 79 88 59
International ....................................... 3 0 0
--- --- ---
Total........................................... 82 88 59
== == ==
Net Dry Wells
United States........................................ 0 0 1
International ....................................... 0 0 0
--- --- ---
Total........................................... 0 0 1
=== === ===
-----------------
(1)Net production for Nigeria is before royalty.
(2)Equivalent barrels computed on a six MCF to one barrel ratio.
</TABLE>
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OTHER BUSINESS
AECOM Technology Corporation ("AECOM"), which is 12% owned by
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. Under an agreement between
AECOM and Ashland, AECOM is obligated to repurchase all of Ashland's
equity interest in AECOM with the repurchase scheduled to be completed
in stages through 1998.
Ashland, through a special purpose 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
but discontinued operations due to low margins in August 1995. Because
of concerns about the venture's long-term viability, Ashland wrote off
its investment in AEI in fiscal 1986. The partnership is in default
under a loan with the U.S. Department of Agriculture-Rural Economic and
Community Development Services (formerly known as the Farmers Home
Administration) with a balance due of approximately $14.7 million plus
interest and has an unpaid balance of $24.5 million plus interest under
a Department of Energy cooperative agreement. A liquidation auction of
the plant, property and assets is scheduled for December 1996.
MISCELLANEOUS
Forward Looking Statements
This Form 10-K, and the documents incorporated by reference, contain
forward-looking statements within the meaning of Section 27A of the
Securities and Exchange Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including various information within the Capital
Resources and Outlook sections in Management's Discussion and Analysis
in Ashland's Annual Report. Although Ashland believes that its
expectations are based on reasonable assumptions, it cannot assure that
the expectations contained in such statements will be achieved.
Important factors which could cause actual results to differ materially
from those contained in such statements are discussed immediately below,
as well as in other portions of this Form 10-K and in Note A to the
Consolidated Financial Statements under risks and uncertainties in
Ashland's Annual Report.
Ashland's operations are affected by domestic and international
political, legislative, regulatory and legal actions. Such actions may
include changes in the policies of the Organization of Petroleum
Exporting Countries ("OPEC") or other developments involving or
effecting oil-producing countries, including military conflict,
embargoes, internal instability or actions or reactions of the
government of the United States in anticipation of or in response to
such developments.
Domestic and international economic conditions, such as recessionary
trends, inflation, interest and monetary exchange rates, as well as
changes in the availability and market prices of crude oil, natural gas,
coal and petroleum products, can also have a significant effect on
Ashland's operations. While Ashland maintains reserves for anticipated
liabilities and carries various levels of insurance, Ashland could be
affected by civil, criminal, regulatory or administrative actions,
claims or proceedings. In addition, climate and weather can
significantly affect Ashland in several of its operations such as its
construction, natural gas, heating oil and coal businesses.
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,
15
<PAGE>
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 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 its Scurlock Permian subsidiary assists 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(cent) per barrel for crudes over 25(degree) API gravity
(2.1(cent) per barrel for Canadian imports) and 5.25(cent) per barrel
for crudes below 25(degree) API gravity (1.05(cent) 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."
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.
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) 1996 1995 1994
- --------------------------------- ----- ----- -----
Capital expenditures $ 40 $ 44 $ 63
Operating expenditures 158 151 140
At September 30, 1996, Ashland's reserves for environmental
assessments and remediation efforts were $173 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.
Based on current environmental regulations, Ashland estimates
capital expenditures for air, water and solid waste control facilities
to be $25 million in 1997. 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. For information
regarding inspections being conducted by the United States Environmental
Protection Agency with respect to Ashland Petroleum's three refineries,
see Note K of Notes to Consolidated Financial Statements in Ashland's
Annual Report.
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.
Superfund provided for the establishment of a fund to be used for a
waste clean-up program administered by the USEPA. The law previously
provided for the following separate taxes: (i) a petroleum tax on
domestic crude oil and on imported crude oil equalized at 9.7(cent) per
barrel plus a 5(cent) per barrel oil spill tax, as more fully described
below, (ii) a chemical feedstock tax, (iii) a tax on imported chemical
derivatives, (iv) an "environmental tax" based on corporate alternative
minimum taxable income, and (v) the motor fuel tax to finance the new
Underground Storage Tank Trust Fund. During 1996, the tax provisions of
Superfund expired which resulted in Ashland paying approximately $5
million in Superfund taxes during fiscal 1996 as compared to $19 million
in fiscal 1995. Superfund, which provides for cleanup of certain
hazardous waste sites, is undergoing consideration
16
<PAGE>
for significant amendments, including reauthorization of taxing
provisions as well as a reevaluation of the liability allocation
provisions and improved cleanup remedy selection. However, it is
uncertain at this time exactly what the revisions will be, or if they
will in fact be adopted.
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(cent) per barrel on domestic crude oil and imported
petroleum oil products (pursuant to Superfund). 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 double-hulled, and
that existing tank vessels that are not double-hulled be retrofitted or
removed from domestic service according to a phase-out schedule.
On July 1, 1994, the United States Coast Guard issued interim final
regulations dealing with financial responsibility for water pollution
under OPA 90 and 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 Pollution 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.
The Federal Clean Air Act required 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 and Ashland has been able to meet expected
demand for RFG in its marketing area. The Clean Air Act also required
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.
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. Research and development costs
are expensed as incurred ($27 million in 1996, $24 million in 1995 and
$23 million in 1994).
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 most 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 imported products. However, Ashland Petroleum
typically 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 strives to provide high
quality and efficient service and enjoys gasoline and merchandise sales
per store exceeding the convenience store industry average based on the
1995 National Association of Convenience Store State of the Industry
Survey.
17
<PAGE>
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 Ashland Coal and Arch compete
(principally in price, location and quality of coal) with a large number
of other coal producers, some of which are substantially larger and have
greater financial resources and larger reserve bases than Ashland Coal
and Arch.
ITEM 2. PROPERTIES
Ashland's corporate headquarters, which is leased, and the principal
offices of Ashland Petroleum, which are owned, are located in Russell,
Kentucky. Principal offices of other segments are located in Lexington,
Kentucky (SuperAmerica and Valvoline); Dublin, Ohio (Chemical); Atlanta,
Georgia (APAC); Huntington, West Virginia (Ashland Coal) and Houston,
Texas (Exploration), all of which are leased. 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 62 and 63 in
Ashland's Annual Report. Additional information concerning certain
leases may be found in Note H of Notes to Consolidated Financial
Statements in Ashland's Annual Report.
ITEM 3. LEGAL PROCEEDINGS
EnvironmentalProceedings -(1) As of September 30, 1996, Ashland was
subject to 77 notices received from the USEPA and similar state agencies
identifying Ashland as a "potentially responsible party" ("PRP") under
Superfund or similar state laws 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 or a state agency in accordance with
procedures established under regulations, in which Ashland may be
participating as a member of various PRP groups. Generally, the type of
relief sought includes remediation of contaminated soil and/or
groundwater, reimbursement for the costs of site cleanup or oversight
expended, and/or long-term monitoring of environmental conditions at the
sites. 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 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 Superfund, see "Miscellaneous Governmental Regulation and
Action-Environmental Protection."
(2) On March 19, 1996, after consultation with the USEPA, the
Kentucky Division for Air Quality issued a finding that Ashland had not
demonstrated compliance with certain air regulations regarding volatile
organic compounds at its Catlettsburg, Kentucky refinery, and referred
the matter to USEPA - Region IV for formal enforcement action. Ashland
filed a petition requesting a hearing before a Kentucky administrative
hearing officer on the merits of the matter, which has now been
rescheduled for July 1997. Separately, the USEPA issued a Notice of
Violation to Ashland regarding this matter.
18
<PAGE>
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, 1996.
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 63) Effective October 1, 1996, Mr. Hall retired as
Chief Executive Officer of Ashland, a position he has held since 1981.
He will remain as Chairman and Director until Ashland's Annual Meeting
on January 30, 1997 and has served in such capacities since 1981 and
1968, respectively.
PAUL W. CHELLGREN (age 53) was elected as Chief Executive Officer
effective October 1, 1996 and is President and Director of Ashland,
having served in such capacities since 1992. He is expected to be
elected Chairman of the Board upon Mr. Hall's retirement from such
position on January 30, 1997. During the past five years, he has also
served as Chief Operating Officer, Senior Vice President and Chief
Financial Officer of Ashland.
JAMES R. BOYD (age 50) 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.
JOHN A. BROTHERS (age 56) is Senior Vice President of Ashland and
Group Operating Officer - Ashland Petroleum Company, SuperAmerica Group
and The Valvoline Company and has served in such capacities since 1984
and 1996, respectively. During the last five years, he was Group
Operating Officer - Ashland Chemical Company, SuperAmerica Group and The
Valvoline Company.
THOMAS L. FEAZELL (age 59) is Senior Vice President, General Counsel
and Secretary of Ashland and has served in such capacities since 1992,
1981 and 1992, respectively. During the past five years he has also
served as Administrative Vice President of Ashland.
J. MARVIN QUIN (age 49) 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.
ROBERT E. YANCEY, JR. (age 51) is Senior Vice President of Ashland
and President of Ashland Petroleum Company and has served in such
capacities since 1986. During the past five years, he also served as
Group Operating Officer of APAC, Inc. and Ashland Petroleum.
HARRY M. ZACHEM (age 52) is Senior Vice President - Public Affairs
and has served in such capacity since 1988.
DAVID J. D'ANTONI (age 51) is Senior Vice President of Ashland and
President of Ashland Chemical Company and has served in such capacities
since 1988.
JOHN F. PETTUS (age 53) is Senior Vice President of Ashland and
President of SuperAmerica Group and has served in such capacities since
1989 and 1988, respectively.
CHARLES F. POTTS (age 52) 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 of APAC.
G. THOMAS WILKINSON (age 58) 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.
KENNETH L. AULEN (age 47) 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 of Ashland.
PHILIP W. BLOCK (age 49) 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.
19
<PAGE>
JOHN W. DANSBY (age 51) 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 51) is Vice President and Chief Information
Officer of Ashland, and President of Ashland Services Company and has
served in such capacities since 1984, with the exception of Chief
Information Officer which he assumed in 1994.
JAMES J. O'BRIEN (age 42) is Vice President of Ashland and President
of The Valvoline Company and has served in such capacities since October
1995. During the past five years he has also served as Vice President of
Ashland Petroleum Company, Executive Assistant to the Chief Executive
Officer and Regional Manager of Ashland Chemical's General Polymers
division.
FRED E. LUTZEIER (age 44) 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 the 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 the tenure will expire at the next annual
meeting of the Board of Directors unless the officer 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
in Note G of Notes to Consolidated Financial Statements in Ashland's
Annual Report.
At September 30, 1996, there were approximately 23,100 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 64
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 36 to 42 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 43 through 58 and the supplemental
information appearing on Pages 60 through 63 in Ashland's Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information to appear
under the caption "Election of Directors" in Ashland's definitive Proxy
Statement for its January 30, 1997 Annual Meeting of Shareholders, which
will be filed with the SEC within 120 days after September 30, 1996
("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.
20
<PAGE>
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 Schedule
The consolidated financial statements and financial schedule of
Ashland presented or incorporated by reference in this report are listed
in the index on Page 25.
(3) Exhibits
3.1 - Second Restated Articles of Incorporation of
Ashland, as amended to May 16, 1996 (filed as
Exhibit 3.1 to Ashland's Form 8-K dated May 16,
1996, and incorporated herein by reference).
3.2 - Bylaws of Ashland, as amended to September 19,
1996 (filed as Exhibit 3.2 to Ashland's Form 8-K
dated September 20, 1996, and incorporated herein
by reference).
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 Form10-K for
the fiscal year ended September 30, 1991, and
incorporated herein by reference).
4.3 - Rights Agreement, dated as of May 16, 1996,
between Ashland Inc. and Harris Trust and Savings
Bank, together with Form of Right Certificate
(filed as Exhibits 4(a) and 4(c), respectively, to
Ashland's Form8-A filed with the SEC on May 16,
1996, and incorporated herein by reference).
The following Exhibits 10.1 through 10.20 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 Inc. and its Subsidiaries.
10.2 - Ashland Inc. Deferred Compensation and Stock
Incentive Plan for Non-Employee Directors.
10.3 - Ashland 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 - Ninth Amended and Restated Ashland Inc.
Supplemental Early Retirement Plan for Certain Key
Executive Employees.
10.5 - Ashland Inc. Amended Performance Unit Plan
(filed as Exhibit 10(c).5 to Ashland's Form 10-K
for the fiscal year ended September 30, 1994, and
incorporated herein by reference).
10.6 - Ashland Inc. Incentive Compensation Plan (filed
as Exhibit 10(c).6 to Ashland's Form10-K for the
fiscal year ended September 30, 1993, and
incorporated herein by reference).
10.7 - Ashland Inc. Director Death Benefit Program
(filed as Exhibit 10(c).10 to Ashland's Form 10-K
for the fiscal year ended September 30, 1990, and
incorporated herein by reference).
10.8 - Ashland 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).
10.9 - Forms of Ashland Inc. Executive Employment
Contract between Ashland Inc. and certain
executive officers of Ashland (filed as Exhibit
10(c).12 to Ashland's Form 10-K for the fiscal
year ended September 30, 1989, and incorporated
herein by reference).
21
<PAGE>
10.10 - Form of Indemnification Agreement between
Ashland Inc. and each member of its Board of
Directors (filed as Exhibit 10(c).13 to Ashland's
Form 10-K for the fiscal year ended September 30,
1990, and incorporated herein by reference).
10.11 - Ashland Inc. Nonqualified Excess Benefit Pension
Plan.
10.12 - Ashland Inc. Long-Term Incentive Plan.
10.13 - Ashland Inc. Directors' Charitable Award Program.
10.14 - Ashland Inc. 1993 Stock Incentive Plan.
10.15 - Ashland Inc. 1995 Performance Unit Plan.
10.16 - Ashland Inc. Incentive Compensation Plan for Key
Executives.
10.17 - Ashland Inc. Deferred Compensation Plan.
11 - Computation of Earnings Per Share (appearing on
Page 28 of Ashland's Form 10-K for the fiscal year
ended September 30, 1996).
12 - Computation of Ratios of Earnings to Fixed Charges
and Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
13 - Portions of Ashland's Annual Report to
Shareholders, incorporated by reference herein,
for the fiscal year ended September 30, 1996.
21 - List of Subsidiaries.
23 - Consent of 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
A report on Form 8-K was filed on September 20, 1996 to announce that
Paul W. Chellgren was formally elected by the Board of Directors as
Chief Executive Officer. The report also noted that Ashland's Board of
Directors had amended Ashland's Bylaws at its meeting on September 19,
1996.
A report on Form 8-K was filed on November 14, 1996 to announce that
Providence Capital, Inc., a New York-based financial firm and a
stockholder of record of 100 Ashland Inc. (NYSE:ASH) common shares, had
given formal notice to Ashland that it had nominated three
individuals for election to Ashland's board of directors at the 1997
annual shareholders' meeting, to be held on January 30, 1997.
A report on Form 8-K was filed on December 9, 1996 announcing several
steps to improve the Company's profitability and enhance returns to
Ashland's shareholders. Ashland also announced that Providence Capital,
which had proposed nominating three directors to Ashland's board at
Ashland's annual shareholders' meeting, has agreed to withdraw its
nominations.
22
<PAGE>
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 INC.
(Registrant)
By: /s/ Kenneth L. Aulen
--------------------------------
(Kenneth L. Aulen, Administrative
Vice President and Controller)
Date: December 10, 1996
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 10, 1996.
Signatures Capacity
/s/ Paul W. Chellgren Chief Executive Officer, President
------------------------- and Director
Paul W. Chellgren
/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
-------------------------
Jack S. Blanton
* Director
-------------------------
Thomas E. Bolger
* Director
-------------------------
Samuel C. Butler
* Director
-------------------------
Frank C. Carlucci
* Director
-------------------------
James B. Farley
* Director
-------------------------
Ralph E. Gomory
*
------------------------- Chairman of the Board of Directors
John R. Hall and Director
23
<PAGE>
*
------------------------- Director
Mannie L. Jackson
*
------------------------- Director
Patrick F. Noonan
* Director
-------------------------
Jane C. Pfeiffer
* Director
-------------------------
James R. Rinehart
* Director
-------------------------
Michael D. Rose
* Director
-------------------------
William L. Rouse , Jr.
* Director
-------------------------
Robert B. Stobaugh
* By: /s/ Thomas L. Feazell
------------------------
Thomas L. Feazell
Attorney-in-Fact
Date: December 10, 1996
24
<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 *
Consolidated financial schedule:
II - Valuation and qualifying accounts 27
-----------
*The consolidated financial statements appearing on Pages 43
through 58 and the supplemental information appearing on Pages 60
through 63 in Ashland's Annual Report are incorporated by reference in
this Annual Report on Form 10-K.
Schedules other than that 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 C of Notes to Consolidated Financial Statements in
Ashland's Annual Report.
25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements and schedule
of Ashland Inc. and subsidiaries listed in the accompanying index to
financial statements and financial schedules (Item 14(a)). These
financial statements and schedule are the responsibility of Ashland's
management. Our responsibility is to express an opinion on these
financial statements and schedule 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 Inc.
and subsidiaries at September 30, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three
years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note A to the consolidated financial statements, in
fiscal 1995 Ashland changed its method of accounting relative to
impairments of long-lived assets.
Louisville, Kentucky ERNST & YOUNG LLP
November 6, 1996
26
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Ashland Inc. and Subsidiaries
SCHEDULE II - 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, 1996
Reserves deducted from asset accounts
Accounts receivable $25 $10 $(8) (1) $ - $27
Inventories 6 6 (2) - 10
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995
Reserves deducted from asset accounts
Accounts receivable $23 $ 9 $(7) (1) $ - $25
Inventories 6 3 (3) - 6
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1994
Reserves deducted from asset accounts
Accounts receivable $20 $11 $(8) (1) $ - $23
Inventories 5 3 (2) - 6
================================================================================================================================
(1) Uncollected amounts written off, net of recoveries of $2 million in 1996, $1 million in 1995 and $2 million in 1994.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Ashland Inc. and Subsidiaries
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
Years Ended September 30
- ----------------------------------------------------------------------------------------------------------------------------------
(In millions except per share data) 1996 1995 1994
===================================================================================================================================
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Income available to common shares
Net income $ 211 $ 24 $ 197
Dividends on convertible preferred stock (19) (19) (19)
- -----------------------------------------------------------------------------------------------------------------------------------
$ 192 $ 5 $ 178
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares and equivalents outstanding
Average common shares outstanding 64 62 60
Common shares issuable upon exercise of stock options 1 - 1
- -----------------------------------------------------------------------------------------------------------------------------------
65 62 61
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings per share $2.97 $.08 $2.94
===================================================================================================================================
EARNINGS PER SHARE ASSUMING FULL DILUTION
Income available to common shares
Net income $ 211 $ 24 $ 197
Interest on convertible debentures (net of income taxes) 5 - 5
Dividends on convertible preferred stock - (19) -
- -----------------------------------------------------------------------------------------------------------------------------------
$ 216 $ 5 $ 202
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares and equivalents outstanding
Average common shares outstanding 64 62 60
Common shares issuable upon
Exercise of stock options 1 1 1
Conversion of debentures 3 - 2
Conversion of preferred stock 9 - 9
- -----------------------------------------------------------------------------------------------------------------------------------
77 63 72
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings per share $2.82 $.08 $2.79
===================================================================================================================================
</TABLE>
28
Exhibit 10.1
AMENDED STOCK INCENTIVE PLAN FOR KEY EMPLOYEES
OF ASHLAND INC. AND ITS SUBSIDIARIES
(Amended as of September 19, 1996)
SECTION 1. PURPOSE
The purpose of this amended Stock Incentive Plan For Key Employees
of Ashland Inc. And Its Subsidiaries (herein called the "Plan") is to
revise the Incentive Stock Option Plan For Key Employees of Ashland 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 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 terminate for any
reason without having been exercised (or
<PAGE>
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
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) shall not exceed $100,000 plus the
amount of any unused limit carry over to such year. If $100,000 exceeds the
aggregate fair market value (determined at the time each incentive stock
option is granted) of the Common Stock for which an employee was granted
incentive stock options in any calendar year under the Plan (and under all
other plans of Ashland or any subsidiary which provides for the granting of
incentive stock options), one half of such excess shall be an unused limit
carry over to each of the three succeeding calendar years, under the rules
of Section 422A(c)(4) of the Code as it existed before December 31, 1986.
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 November7, 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
<PAGE>
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
holder thereof of the 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 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 (a) in cash or (b) in whole shares of Common Stock
evidenced by negotiable certificates, valued at their fair market value
(which shares of Common Stock must have been owned by the employee six
months or longer and not used to effect a stock option exercise within the
preceding six months, in the case of an exercise of options which were
granted after May 21, 1992, unless the Committee specifically provides
otherwise), (c) by Attestation, (d) by a combination of such methods of
payment, or (e) by such other consideration as shall be approved by the
Committee (including without limitation, effecting a "cashless exercise,"
with a broker, of the option). "Attestation" means the delivery to Ashland
of a completed Attestation Form prescribed by Ashland setting forth the
whole shares of Common Stock owned by the employee which the employee
wishes to utilize to pay the option price. In the case of an exercise of
stock options granted after May 21, 1992, the Common Stock listed on the
Attestation Form must have been owned by the employee six months or longer
and not have been used to effect a stock option exercise within the
preceding six months, unless the Committee specifically provides otherwise.
Moreover, in the case of an exercise of stock options granted prior to
May 21, 1992, 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 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 November8, 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
<PAGE>
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 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. TRANSFER OF OPTIONS, STOCK APPRECIATION RIGHTS, AND RESTRICTED
STOCK
Options and SARs granted under the Plan shall be transferable by
will, by the laws of descent and distribution, and, subject to the
discretion and direction of the Committee, may be made transferable by the
employee-holder thereof during his or her lifetime. Restricted Stock may be
made transferable at the discretion and direction of the Committee.
SECTION 12. CONTINUED EMPLOYMENT, AGREEMENT TO SERVE AND EXERCISE PERIODS
(a) Subject to the provisions of Paragraph (b), (c) and (f) 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 period in which options may be exercised by an employee
determined to be disabled as provided 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
<PAGE>
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 disability 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 for the full
number of optioned shares or any part thereof, less such number as may have
been theretofore acquired under the option. Options held by an employee
determined by the Committee to be disabled prior to September 19, 1996
shall be exercisable during a period of one year of continuing disability
following termination of employment by reason of such disability. Options
held by an employee determined by the Committee to be disabled on or after
September 19, 1996 shall be exercisable at any time prior to the fixed
termination date set forth in the option. As used herein, an employee will
be deemed "disabled" when he or she becomes unable to perform the functions
required by his or her regular job due to a physical or mental illness and,
in connection with the grant of an incentive stock option, shall be deemed
disabled if he or she falls within the meaning of that term as provided in
Section 22(e)(3) of the Code. The determination by the Committee of any
question involving disability shall be conclusive and binding.
(d) Every option shall provide that in the event the employment of
any employee shall cease by reason of retirement, such option may be
exercised only in respect of the number of shares which the employee could
have acquired under the option immediately prior to such retirement.
Options held by an employee who retires prior to September 19, 1996 shall
be exercisable until the earlier to occur of the fixed termination date set
forth in the option or three months after such retirement. Options held by
an employee who retires on or after September 19, 1996 shall be exercisable
until the fixed termination date set forth in the option.
(e) Except as provided in Paragraphs (a), (b), (c), (d) and (f) 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 months after cessation of the employee's employment for any cause,
and except as provided in Paragraph (f) 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.
(f) 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 of control (as hereinafter
defined) of Ashland from and after the date of such change in control. For
purposes of this Paragraph (f), the term "change in control" shall be
deemed to occur (1) upon the approval of the shareholders of Ashland (or if
such approval is not required, upon the approval of the Board of Directors
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 3(a)(9) or 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 15% of the Common Stock outstanding at the time,
without the approval of the Board of Directors of Ashland, or (3) at any
time during a period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of Ashland
shall cease for any reason to constitute at least a majority thereof,
unless the election or the
<PAGE>
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) 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.
(h) 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.
(i) 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 at 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 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 Inc. and Its
Subsidiaries and an Agreement entered into between the registered
owner and Ashland Inc."
Subject to Section 11 hereof, 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 disability (as defined in Paragraph (c) of Section 12 hereof),
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 Paragraph (g) of
Section 12 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.
<PAGE>
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 Paragraph (f) of Section 12
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 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.
Adjustments under this Section 15 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 15) 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.
<PAGE>
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
January31, 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 and 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 September 19, 1996.
ASHLAND INC.
DEFERRED COMPENSATION AND
STOCK INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
(Amended as of September 19, 1996)
ARTICLE I. GENERAL PROVISIONS
1. PURPOSE
The purpose of this Ashland Inc. Deferred Compensation and Stock
Incentive Plan For Non-Employee Directors (the "Plan") is to provide each
Director with an opportunity to defer some or all of the Director's Fees as
a means of saving for retirement or other purposes. In addition, the Plan
provides Directors with the ability to increase their proprietary interest
in the Company's long-term prospects by permitting Directors to receive all
or a portion of their Fees in Ashland Common Stock and providing for the
grant of options to purchase Ashland Common Stock to Directors.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
(a) "Accounting Date" means the last day of a quarter or if a weekend or
holiday, the next preceding business day.
(b) "Act" means the Securities Act of 1933, as amended from time to
time.
(c) "Agreement" means a written agreement setting forth the terms of an
Option.
(d) "Beneficiary" means the person(s) who, upon the death of a
Participant, shall have acquired by will, laws of descent and distribution
or by other legal proceedings, the right to receive the benefits specified
under this Plan in the event of a Director's death.
(e) "Board" means the Board of Directors of Ashland Inc.
(f) "Cash Account" means an account by that name established pursuant to
Article III, Section 1.
(g) "Change in Control" shall be deemed to occur (1) upon the approval
of the shareholders of the Company (or if such approval is not required,
upon the approval of the Board) of (A) any consolidation or merger of the
Company in which the Company 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 the Company, or (C) adoption of any plan or
proposal for the liquidation or dissolution of the Company, (2) when any
"person" (as defined in Section 3(a)(9) or 13(d) of the Exchange Act),
other than the Company or any subsidiary or employee benefit plan or trust
maintained by the Company, shall become the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than
15% of the Common Stock outstanding at the time, without the approval of
the Board, or (3) if 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 the Company'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.
<PAGE>
(h) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(i) "Committee" means the Personnel and Compensation Committee of the
Board.
(j) "Common Stock" means the common stock, $1.00 par value, of Ashland
Inc.
(k) "Company" means Ashland Inc., its divisions and subsidiaries.
(l) "Director" means any non-employee director of the Company.
(m) "Disability" means a Director's incapacity, due to physical or
mental illness, resulting in an inability to attend to his or her duties
and responsibilities as a member of the Board.
(n) "Election" means a Participant's delivery of a written notice of
election to the Secretary of the Company electing to defer payment of his
or her Fees or to receive such Fees in the form of Common Stock.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(p) "Exercise Price" means, with respect to each share of Common Stock
subject to an Option, the price at which such share may be purchased from
the Company pursuant to the exercise of such Option.
(q) "Fair Market Value" means the price of a share of Common Stock, as
reported on the Composite Tape on the date and at the time designated by
the Company.
(r) "Fees" mean the annual retainer and meeting fees, as well as any per
diem compensation for special assignments, earned by a Director for his or
her service as a member of the Board during a calendar year or portion
thereof.
(s) "Nonqualified Stock Option" means any Option that does not comply
with the provisions of Section 422 of the Code.
(t) "Option" means the right to purchase Common Stock as provided in
Article IV.
(u) "Participant" means a Director who has elected to defer payment of
all or a portion of his or her Fees and/or to receive all or a specified
portion of his or her Fees in shares of Common Stock.
(v) "Payment Commencement Date" means the date payments of amounts
deferred begin pursuant to Article III, Section 6.
(w) "Personal Representative" means the person or persons who, upon the
disability or incompetence of a Director, shall have acquired on behalf of
the Director, by legal proceeding or otherwise, the right to receive the
benefits specified in this Plan.
(x) "Plan" means this Ashland Inc. Deferred Compensation and Stock
Incentive Plan For Non-Employee Directors.
(y) "Prime Rate of Interest" means the rate of interest quoted by
Citibank, N.A. as its prime commercial lending rate on the subject date.
(z) "Stock Account" means an account by that name established pursuant
to Article III, Section 1.
(aa) "Stock Unit(s)" means the share equivalents credited to a
Participant's Stock Account pursuant to Article III, Sections 1 and 3.
(bb) "Termination" means retirement from the Board or termination of
service as a Director for any other reason.
<PAGE>
3. SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION
(a) Shares Authorized for Issuance. There shall be reserved for issuance
under the Plan 500,000 shares of Common Stock, subject to adjustment
pursuant to subsection (b) below; provided, however, that of such shares,
only 150,000 shares shall be available for issuance in connection with the
award of Options. Such shares shall be authorized but unissued shares of
Common Stock. If any Option shall expire without having been exercised in
full, the shares subject to the unexercised portion of such Option shall
again be available for the purposes of the Plan.
(b) Adjustments in Certain Events. 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 shareholders other than cash dividends, the number or kind of
shares that may be issued under the Plan shall be automatically adjusted so
that the proportionate interest of the Directors shall be maintained as
before the occurrence of such event. Such adjustment shall be conclusive
and binding for all purposes of the Plan.
4. ELIGIBILITY
Any non-employee Director of the Company shall be eligible to
participate in the Plan.
5. ADMINISTRATION
Full power and authority to construe, interpret and administer the Plan
shall be vested in the Committee. Decisions of the Committee shall be
final, conclusive and binding upon all parties. Day-to-day administration
of the Plan shall be the responsibility of the Company's Corporate Human
Resources Department. This Department may authorize new or modify existing
forms for use under this Plan so long as any such modified or new forms are
not inconsistent with the terms of the Plan.
ARTICLE II. COMMON STOCK PROVISION
Each Director may elect to receive all or a portion of his or her Fees
in shares of Common Stock by making an Election pursuant to Article III,
Section 4. Shares shall be issued to the Director at the end of each
quarter beginning in the quarter the Election is effective. The number of
shares of Common Stock so issued shall be equal to the amount of Fees which
otherwise would have been payable to such Director during the quarter
divided by the Fair Market Value. Only whole number of shares of Common
Stock will be issued, with any fractional shares to be paid in cash.
ARTICLE III. DEFERRED COMPENSATION
1. PARTICIPANT ACCOUNTS
(a) A Participant may elect to have deferred amounts credited to a Cash
Account, a Stock Account, or a combination of both such Accounts. The
Company shall maintain such Accounts in the name of the Participant.
(b) The Cash Account of a Participant shall be credited on each
Accounting Date with the dollar amount of such deferred compensation
otherwise payable to the Participant during the quarterly period ending on
the Accounting Date and as to which a cash deferral election has been made.
The Cash Account shall be adjusted and increased on each Accounting Date as
if interest were credited thereon, based on the Prime Rate of Interest on
such Accounting Date.
(c) The Stock Account of a Participant shall be credited on each
Accounting Date with Stock Units equal to the number of shares of Common
Stock (including fractions of a share) that could have been purchased with
the amount of such deferred Fees as to which a stock deferral election has
been made at the Fair Market Value on the Accounting Date. As of the date
of any dividend distribution date for the Common Stock, the Participant's
Stock Account shall be credited with additional Stock Units equal to the
number of shares of Common Stock (including fractions of a share) that
could have been purchased, at the Fair Market Value on such date, with the
amount which would have been paid as dividends on that number of shares
(including fractions of a share) of Common Stock which is equal to the
number of Stock Units then credited to the Participant's Stock Account.
2. FINANCIAL HARDSHIP
Upon the written request of a Participant or a Participant's legal
representative and a finding that continued deferral will result in
financial hardship to the Participant, the Committee (in its sole
discretion) may authorize (a) the payment of all or a part of a
Participant's account(s) in a single installment prior to his or her
ceasing to be a Director, or (b) the acceleration of payment of any
multiple installments hereof; provided, however, that if, in the sole
discretion of the Committee, a six-month delay in any distribution pursuant
to this Section 2 of this Article shall be necessary to avoid liability of
the Participant under Section 16 of the Act, any such distribution shall be
so postponed.
3. INITIAL CONVERSION
A Participant may make a special election on or before December 31, 1993
to convert (effective as of June 30, 1994) all or any portion of (i) his or
her Cash Account to his or her Stock Account, or (ii) his or her Stock
Account to his or her Cash Account. The number of Stock Units to be
credited to such Participant's Stock Account in the event of a conversion
under (i) shall be obtained by dividing the portion of the cash balance
credited to his or her Cash Account as specified in his or her election by
the Fair Market Value of Ashland Common Stock on June 30, 1994. The amount
to be credited to such Participant's Cash Account in the event of a
conversion under (ii) shall be determined by multiplying the number of
Stock Units specified in his or her election by the Fair Market Value on
June 30, 1994.
4. MANNER OF ELECTION
(a) Any Director wishing to participate in the Plan must deliver to the
Secretary of the Company a written notice, (i) electing to defer to a
period following his or her Termination payment of all or a portion (in 25%
increments) of his or her Fees, and/or (ii) to receive all or a portion (in
25% increments) of his or her Fees in shares of Common Stock (an
"Election"). The timing of the filing of the appropriate form with the
Secretary of the Company shall be determined by the Committee.
Notwithstanding the foregoing, a Director may choose to participate in the
Plan beginning in 1994 by filing an Election to so participate on or before
December 31, 1993 (the "1994 Election"). Pursuant to the 1994 Election, if
a Director chooses to defer payment of any portion of his or her Fees into
the Stock Account, such Fees will be deemed deferred into the Cash Account
until June 30, 1994 at which time such deferred Fees (together with accrued
earnings thereon) will be automatically transferred to the Stock Account.
The number of Stock Units to be credited to such Participant's Stock
Account upon the transfer of such amount shall be obtained by dividing such
amount by the Fair Market Value of Ashland Common Stock on June 30, 1994.
In addition, if a Participant chooses to receive all or a portion of Fees
in shares of Common Stock, such 1994 Election will not take effect until
June 30, 1994.
(b) With respect to Directors' Fees payable for all or any portion of a
calendar year after such person's initial election to the office of
Director of the Company, any such person wishing to participate in the Plan
may file a proper Election within 30 days after such election to office.
Any such Election shall be effective upon filing or as soon as possible
thereafter with respect to such Fees.
(c) An effective Election may not be revoked or modified with respect to
Fees payable for a calendar year or portion of a calendar year for which
such Election is effective except as otherwise determined by the Committee
or stated herein. Such Election, unless terminated or modified as described
below, shall apply to Fees payable with respect to each subsequent calendar
year. An effective Election may be terminated or modified for any
subsequent calendar year by the filing of an Election, with the timing of
the filing of the appropriate form with the Secretary of the Corporation to
be determined by the
<PAGE>
Committee. A Participant will be allowed to change the Election as to the
applicable payment period for all amounts deferred pursuant to such
Election, subject to approval by the Committee. Such change must be made by
the earlier of:
(i) the date six months prior to the first day of the month
following the Participant's Termination; or
(ii) the December 31 immediately preceding the first day of
the month following the Participant's Termination.
If the Participant making such change is a member of the Committee, such
Participant shall abstain from the Committee's decision to approve or
disapprove such change.
(d) A Participant may elect to convert all or a portion of (i) his or
her existing Cash Account to his or her Stock Account, or (ii) his or her
existing Stock Account to his or her Cash Account (in 25% increments or in
other increments prescribed by the Committee) one (1) time during any
three-month period by filing with the Secretary of the Company a new
Election at least fifteen (15) days prior to the commencement of the
quarter in which the Participant desires the change to become effective;
provided however, than an inter-Account conversion must occur at least six
months after the last "opposite-way" inter-Account conversion. An
"opposite-way" inter-Account conversion occurs when a conversion into the
Stock Account is followed by a conversion out of the Stock Account, or a
conversion out of the Stock Account is followed by a conversion into the
Stock Account. Such election will be effective as of the first business day
of the next quarter subsequent to the filing of such Election.
5. MANNER OF PAYMENT UPON TERMINATION
In accordance with the Participant's Election and subject to Committee
approval upon payout, amounts credited to a Participant's Cash and/or Stock
Account will be paid in a lump sum or in the form of annual, semi-annual or
quarterly installments in shares of Common Stock or cash, or a combination
of both to the Participant following his or her Termination or, in the
event of his or her death, to a Beneficiary. If a Participant elects to
receive payments in installments, the entire Cash and/or Stock Account must
be paid out within forty years following the date of a Participant's
Termination. A Participant may provide for different payment periods and
forms of payment before and after his or her death.
The amount of any cash distribution to be made in installments with
respect to the Cash Account will be determined by dividing the current cash
balance in such Cash Account by the number of installments in which
distributions remain to be made (including the current distribution). The
amount of any cash distribution to be made in installments with respect to
Stock Units will be determined by multiplying the number of Stock Units
attributable to such installment (determined as hereinafter provided) by
the closing price of the Common Stock on each Accounting Date immediately
prior to the date on which such installment is to be paid. The number of
Stock Units attributable to an installment shall be determined by dividing
the current number of Stock Units in such Stock Account by the number of
installments in which distributions remain to be made (including the
current distribution).
The amount of any stock distribution to be made in installments with
respect to the Stock Account shall be determined by dividing the current
number of Stock Units in such Stock Account by the number of installments
in which distributions remain to be made (including the current
distribution). The amount of any stock distribution to be made in
installments with respect to the Cash Account shall be determined by
dividing the amount of cash attributable to such installment (determined as
hereinafter provided) by the closing price of the Common Stock on each
Accounting Date immediately prior to the date on which such installment is
to be paid. The amount of cash attributable to an installment shall be
determined by dividing the current cash balance in such Cash Account by the
number of installments in which distributions remain to be made (including
the current distribution). Only whole number of shares of Common Stock will
be issued, with the value of any fractional shares to be paid in cash.
<PAGE>
6. PAYMENT COMMENCEMENT DATE
Payments of amounts deferred pursuant to a valid Election shall commence
after a Participant's Termination in accordance with his or her Election.
If a Participant dies prior to the first deferred payment specified in an
Election, payments shall commence to the Participant's Beneficiary on the
first payment date so specified.
7. CHANGE IN CONTROL
Notwithstanding any provision of this Plan to the contrary, in the event
of a "Change in Control" (as defined in Section 2(g) of Article I), each
Participant in the Plan shall receive an automatic lump sum cash
distribution of all amounts accrued in the Participant's Cash and/or Stock
Account(s) (including interest at the Prime Rate of Interest through the
business day immediately preceding the date of distribution) not later than
fifteen (15) days after the date of the "Change in Control." For this
purpose, the balance in the Stock Account shall be determined by
multiplying the number of Stock Units by the higher of (a) the highest
closing price of a share of Common Stock during the period commencing 30
days prior to such Change in Control or (b) if the Change in Control of the
Company occurs as a result of a tender or exchange offer or consummation of
a corporate transaction, then the highest price paid per share of Common
Stock pursuant thereto. Any consideration other than cash forming a part or
all of the consideration for Common Stock to be paid pursuant to the
applicable transaction shall be valued at the valuation price thereon
determined by the Board.
In addition, the Company shall reimburse a Director for the legal fees
and expenses incurred if the Director is required to seek to obtain or
enforce any right to distribution. In the event that it is determined that
such Director is properly entitled to a cash distribution hereunder, such
Director shall also be entitled to interest thereon at the Prime Rate of
Interest from the date such distribution should have been made to and
including the date it is made. Notwithstanding any provision of this Plan
to the contrary, Article I, Section 2(g) and Section 7 of this Article may
not be amended after a "Change in Control" occurs without the written
consent of a majority in number of Directors.
8. ADMINISTRATIVE CONVENIENCE
Notwithstanding any provision of this Plan to the contrary, a
Participant may not defer Fees in an amount less than $1,000 and no payment
or payments under the Plan may be made to the Participant or any
Beneficiary of the Participant in an amount that would annually total less
than $1,000, unless the amount remaining in a Cash Account and/or Stock
Account totals less than $1,000, in which event the entire amount remaining
in such account(s) shall be paid to the Participant or his or her
Beneficiary. The Committee reserves the right, in its sole and absolute
discretion, to further modify the terms of the Plan or payments made to
Participants under the Plan for the Company's administrative convenience.
ARTICLE IV. OPTIONS
1. OPTION GRANT
On the first business day following the Company's Annual Meeting of
Shareholders in 1994 and each year thereafter until 2004, or, if no such
meeting is held, on January 31 or the first business day thereafter, and
each year thereafter (such day hereinafter referred to as the "Effective
Date"), each person who is a Director of the Company on the Effective Date
shall be automatically granted an Option to purchase 1,000 shares of Common
Stock if, but only if, the return on average common stockholders' equity of
the Company for the immediately preceding fiscal year as set forth in the
Company's Annual Report to Shareholders is equal to or greater than 10%.
2. OPTION TERMS
Options granted under the Plan shall be subject to the following terms
and conditions:
<PAGE>
(a) Option Designation and Agreement. Any Option granted under the Plan
shall be granted as a Nonqualified Stock Option. Each Option shall be
evidenced by an Agreement between the recipient and the Company containing
the terms and conditions of the Option.
(b) Option Price. The Exercise Price of Common Stock issued pursuant to
each Option shall be equal to Fair Market Value of the Common Stock on the
Effective Date.
(c) Term of Option. No Option shall be exercisable more than ten years
after the date the Option is granted.
(d) Vesting. Options granted under the Plan shall vest six months after
the date of grant.
(e) Exercise. Options, to the extent they are vested, may be exercised
in whole or in part at any time during the option period; provided,
however, that an Option may not 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 the Company of (i) notice from the optionee
of exercise of an Option, and (ii) payment to the Company (as provided in
(f) below), of the Exercise Price for the number of shares with respect to
which the Option is exercised. Each such notice and payment shall be
delivered or mailed by postpaid mail, addressed to the Treasurer of the
Company at, Ashland Inc., 1000 Ashland Drive, Russell, Kentucky, 41169, or
such other place as the Company may designate from time to time.
(f) Payment for Shares. The Exercise Price for the Common Stock shall be
paid in full when the Option is exercised. The Exercise Price may be paid
in whole or in part (i) in cash, (ii) in whole shares of Common Stock
(which shares of Common Stock must have been owned by the Director six
months or longer, and not used to effect a stock option exercise within the
preceding six months, unless the Committee specifically provides otherwise)
and evidenced by negotiable certificates, valued at their Fair Market
Value, (iii) Attestation or (iv) by a combination of such methods of
payment. In addition, a Director may exercise the Option by effecting a
"cashless exercise," with a broker, of the Option. "Attestation" means the
delivery to the Company of a completed Attestation Form prescribed by the
Company setting forth the whole shares of Common Stock owned by the
Director which the Director wishes to utilize to pay the Option price. The
Common Stock listed on the Attestation Form must have been owned by the
Director six months or longer, and not have been used to effect an Option
exercise within the preceding six months, unless the Committee specifically
provides otherwise.
(g) Termination . If a Director's service on the Board terminates by
reason of (i) normal retirement from the Board at age 70, (ii) the death or
Disability of such Director, (iii) a Change of Control of the Company, or
(iv) voluntary early retirement to take a position in governmental service,
any Option held by such Director may thereafter be exercised by the
Director, or in the event of death, by his or her Beneficiary to the extent
it was vested and exercisable at the time of Termination, (i) for a period
equal to the number of years of completed Board service as of the date of
Termination of the Director on whose behalf the Option is exercised, or
(ii) until the expiration of the stated term of such Option, whichever
period is the shorter. In the event of Termination for any reason other
than those set forth above, any Option held by such Director may thereafter
be exercised by the Director to the extent it was vested and exercisable at
the time of Termination (i) for a period of one year from the date of such
Termination or (ii) until the expiration of the stated term of such Option,
whichever period is the shorter.
(h) Term. No Option shall be granted pursuant to the Plan on or after
the tenth anniversary of the date of shareholder approval, but Option
awards granted prior to such tenth anniversary may extend beyond that date
until the expiration of their terms.
<PAGE>
3. TRANSFER OF OPTIONS
Options granted under the Plan shall be transferable by will, by the
laws of descent and distribution, and, subject to the discretion and
direction of the Committee, may be made transferable by the Director-holder
thereof during his or her lifetime.
ARTICLE V. MISCELLANEOUS PROVISIONS
1. BENEFICIARY DESIGNATION
A Director may designate one or more persons (including a trust) to whom
or to which payments are to be made if the Director dies before receiving
payment of all amounts due hereunder. A designation of Beneficiary will be
effective only after the signed Election is filed with the Secretary of the
Company while the Director is alive and will cancel all designations of a
Beneficiary signed and filed earlier. If the Director fails to designate a
Beneficiary as provided above or if all of a Director's Beneficiaries
predecease him or her and he or she fails to designate a new Beneficiary,
remaining unpaid amounts shall be paid in one lump sum to the estate of
such Director. If all Beneficiaries of the Director die before the Director
or before complete payment of all amounts due hereunder, the remaining
unpaid amounts shall be paid in one lump sum to the estate of the last to
die of such Beneficiaries.
2. INALIENABILITY OF BENEFITS
The interests of the Directors and their Beneficiaries under the Plan
may not in any way be voluntarily or involuntarily transferred, alienated
or assigned, nor be subject to attachment, execution, garnishment or other
such equitable or legal process. Subject to Section 3 of Article IV of this
Plan, any Option shall be exercisable, during a Director's lifetime, only
by him or her or his or her Personal Representative.
3. GOVERNING LAW
The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the Commonwealth of Kentucky.
4. AMENDMENTS
The Committee may amend, alter or terminate this Plan at any time
without the prior approval of the Directors; provided, however, that the
Committee may not, without approval by the shareholders:
(a) materially increase the number of securities that may be issued
under the Plan (except as provided in Article I, Section 3),
(b) materially modify the requirements as to eligibility for
participation in the Plan,
(c) otherwise materially increase the benefits accruing to participants
under the Plan, or
(d) amend any provision relating to the amount, price, timing or vesting
of the Options, other than to comport with changes in the Code or the rules
and regulations promulgated thereunder.
5. COMPLIANCE WITH RULE 16b-3
It is the intention of the Company that the Plan comply in all respects
with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and
that Plan Participants remain non-employee directors ("Non-Employee
Directors") for purposes of administering other employee benefit plans of
the Company and having such other plans be exempt from Section 16(b) of the
Exchange Act. Therefore, if any Plan provision is found not to be in
compliance with Rule 16b-3 or if any Plan provision would disqualify Plan
participants from remaining Non-Employee Directors, that provision shall be
deemed amended so that the Plan does so comply and the Plan participants
remain Non-Employee Directors, to the extent permitted by law and deemed
advisable by the Committee, and in all events the Plan shall be construed
in favor of its meeting the requirements of Rule 16b-3.
<PAGE>
6. EFFECTIVE DATE
The Plan was approved by the shareholders of the Company on January 27,
1994, and originally became effective as of November 9, 1993, and has been
restated in this document effective September 19, 1996.
Exhibit 10.4
NINTH AMENDED AND RESTATED
ASHLAND INC.
SUPPLEMENTAL EARLY RETIREMENT PLAN
FOR CERTAIN KEY EXECUTIVE EMPLOYEES
September 19, 1996
ARTICLE I. PURPOSE AND EFFECTIVE DATE.
1.01 The purpose of the Plan is to allow designated senior executive
employees to retire prior to their sixty-fifth birthday without an
immediate substantial loss of income. This Plan is a supplemental
retirement arrangement for a select group of management.
1.02 The Plan as described herein shall amend and supersede, as of
September 19, 1996, all provisions of the Eighth Amended and
Restated Ashland Inc. Supplemental Early Retirement Plan for
Certain Key Executive Employees. However, the rights and
obligations of Employees who were selected by the Board or
approved for participation pursuant to the eligibility
requirements of the Plan to receive a benefit under the Plan, or
who were receiving benefits under a prior plan, prior to September
19, 1996 (irrespective of the Effective Retirement Date(s) of such
Employee(s)), shall be governed by the terms of the Plan in effect
at the time of such retirement.
ARTICLE II. DEFINITIONS.
The following terms used herein shall have the following meanings
unless the context otherwise requires:
2.01 "Age" - means the age of an Employee as of his or her last birthday.
2.02 "Annual Retirement Income" - means the annual income payable under
this Plan by Ashland for the lifetime
of a Participant commencing on such Participant's Effective
Retirement Date and ending on his or her date of death, subject to
the provisions of Section 5.04.
2.03 "Ashland" - means Ashland Inc. and its present or future subsidiary
corporations.
2.04 "Board of Directors" - means the Board of Directors of Ashland.
<PAGE>
2.05 "Change in Control" - shall be deemed to occur (1) upon the
approval of the shareholders of Ashland (or
if such approval is not required, the approval of the Board) of
(A) any consolidation or merger of Ashland in which Ashland is not
the continuing or surviving corporation or pursuant to which
shares of Ashland common stock would be converted into cash,
securities or other property other than a merger in which the
holders of Ashland 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 3(a)(9) or 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 15% of the Ashland common stock
outstanding at the time, without the approval of the Board, or (3)
if 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 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.
2.06 "Committee" - means the Personnel and Compensation Committee of the
Board.
2.07 "Effective Retirement Date" - means the date upon which a
Participant retires under this Plan which shall be the first day
of the month following the Participant's 62nd birthday or, at
Ashland's discretion or as otherwise provided in Article VI, any
earlier age. Upon Board or Chief Executive Officer and/or Chief
Operating Officer approval, as applicable, the "Effective
Retirement Date" of a Participant may occur after the Employee
reaches age 62.
<PAGE>
2.08 "Employee" - means an executive employee of Ashland who (i) is at
least 55 years of age; and (ii) holds a position classified at the
level of 1,000 Hay Points or above (and who is deemed on the
Effective Retirement Date to be a Level V or above employee under
the Incentive Compensation Plan).
2.09 "Employment Contracts" - means those contractual agreements, in
effect from time to time, which are approved by the Board and
which provide an Employee with a specified period of employment
and other benefits.
2.10 "Final Average Bonus" - means the Participant's average bonus paid
under the Incentive Compensation Plan (including amounts that may
have been accrued, but deferred in payment under such plan) during
the highest thirty-six (36) months out of the final sixty-month
(60) period. For these purposes, the "bonus accruedpaid" for a
particular month contained within a particular fiscal year related
to payments under such plan shall be equal to the amount of such
bonus actually paid (regardless of the date paid, but excluding
any adjustment for the deferral of such payment) to such
Participant on account of such fiscal year divided by the number
of months contained in such fiscal year which were used in
determining the amount of such bonus actually paid to such
Participant.
2.11 "Final Average Compensation" - means the Participant's average
base compensation paid during the highest thirty-six months (36)
out of the final sixty-month (60) period plus the Final Average
Bonus. For these purposes, the base the average total compensation
paid during the highest thirty-six months (36) out of the final
sixty-month (60) period. For these purposes, "total compensation
paid" is the sum of the "compensation paid" and the "bonus paid"
during a particular month. compensation paid with respect to any
particular calendar month, "Compensation paid" shall be the base
rate of compensation for such Participant in effect on the first
day of such calendar month. "Bonus paid" shall have the same
meaning as set forth in Section 2.10.
2.12 "Incentive Compensation Plan" - means the Ashland Inc. Incentive
Compensation Plan or the Ashland Inc.
Incentive Compensation Plan for Key Executives, as applicable.
<PAGE>
2.13 "Participant" - means an Employee who has been approved for
participation in the Plan pursuant to Article III or Section 5.06.
2.14 "Plan" - means the Ninth Amended and Restated Ashland Inc.
Supplemental Early Retirement Plan for Certain Key Executive
Employees as set forth herein.
2.15 "Service" - means the number of years and fractional years of
employment by Ashland of an Employee, measured from the first day
of the month coincident with or next succeeding his or her initial
date of employment up to and including such Employee's Effective
Retirement Date. For purposes of this Section 2.142.15, Service
shall include an Employee's employment with a subsidiary or an
affiliate of Ashland determined in accordance with rules from time
to time adopted or approved by the Board.
ARTICLE III. PARTICIPATION IN PLAN.
Eligibility for benefits shall be determined as follows:
3.01 Except as otherwise provided in Section 3.03, an Employee who on
the Effective Retirement Date holds a position classified at the
level of 2,000 Hay Points or above (and who is deemed to be a
Level I or II Participant under the Incentive Compensation Plan)
shall require Board approval to participate in this Plan.
3.02 An Employee who on the Effective Retirement Date holds a position
classified at the level of less than 2,000 Hay Points (and who is
deemed to be a Level III, IV, or V Participant under the Incentive
Compensation Plan) shall require the approval of either Ashland's
Chief Executive Officer or Chief Operating Officer to participate
in this Plan.
3.03 Subject to the provisions of Article VI, in the event of a "Change
in Control" (as defined in Section 2.05), an Employee who who has
2,000 or more Hay Points (and who is deemed to be a Level I or II
Participant under the Incentive Compensation Plan) shall
automatically be deemed to
<PAGE>
be approved by the Board for participation under this Plan.
3.04 The Board or Chief Executive Officer or Chief Operating Officer,
as applicable, may approve such key executives for participation
in the Plan as they deem to be appropriate, all in its sole
discretion.
3.05 Ashland reserves the right to terminate any Participant for
"Cause" prior to his or her Effective Retirement Date, with a
resulting forfeiture of the payment of benefits under the Plan.
Ashland also reserves the right to terminate any Participant's
participation in the Plan for "Cause" subsequent to his or her
Effective Retirement Date. For purposes of this Section 3.05,
"Cause" shall mean the willful and continuous failure of a
Participant to substantially perform his or her duties to Ashland
(other than any such failure resulting from incapacity due to
physical or mental illness), or the willful engaging by a
Participant in gross misconduct materially and demonstrably
injurious to Ashland, each to be determined by Ashland in its sole
discretion.
ARTICLE IV. INTERACTION WITH EMPLOYMENT CONTRACTS.
4.01 Notwithstanding any provision of this Plan to the contrary, an
Employee who has entered into an Employment Contract with Ashland
and who is either terminated without "Cause" prior to a "change in
control of Ashland" or is terminated without "Cause" or resigns
for "Good Reason" following a "change in control of Ashland" (each
quoted term as defined in the applicable employment agreement)
shall be entitled to receive the benefits as provided pursuant to
this Plan. Benefits payable hereunder in such a situation shall be
calculated in accordance with the payment option selected by the
Employee at such time.
4.02 Benefits Prior to "Change in Control."
If the Employee's termination is without "Cause" prior to a
"change in control of Ashland," benefits payable hereunder shall
not include those benefits which would have been payable to the
Employee during the first two (2) years of his or her retirement
under the Plan. The benefits payable hereunder shall commence no
earlier than as of the first day of the calendar month coincident
with or next following the second anniversary following the
Employee's "Date of Termination" (as defined in the applicable
employment agreement); however, if the Employee elects to receive
such benefits in a lump sum as provided in Section 5.04(b)(1),
such benefits shall commence and be payable as therein specified.
<PAGE>
4.03 Benefits Subsequent to a "Change in Control."
If the Employee's termination is without "Cause" or he or she
resigns for "Good Reason" following a "change in control of
Ashland," benefits payable hereunder shall not include those
benefits which would have been payable to the Employee during the
first three (3) years of his or her retirement under the Plan. The
benefits payable hereunder shall commence no earlier than as of
the first day of the calendar month coincident with or next
following the third anniversary following the Employee's "Date of
Termination" (as defined in the applicable employment agreement);
however, if the Employee elects to receive such benefits in a lump
sum as provided in Section 5.04(b)(1), such benefits shall
commence and be payable as therein specified.
4.04 If a Participant accepts, during a period of five (5) years
subsequent to his or her Effective Retirement Date, any consulting
or employment activity which is in direct conflict with the
business of Ashland at such time (such determination regarding
conflicting activity to be made in the sole discretion of the
Board), he or she shall not be entitled to the receipt of any
further payments of Annual Retirement Income under this Plan;
provided, however, he or she shall not be restricted in any manner
with respect to any other nonconflicting activity in which he or
she is engaged. If a Participant wishes to accept employment or
consulting activity which may be prohibited under this Section
4.04, such Participant may submit to Ashland written notice
(Attention: Administrative Vice President, Human Resources) of his
or her wish to accept such employment or consulting activity. If
within ten (10) business days following receipt of such notice
Ashland does not notify the Participant in writing of Ashland's
objection to his or her accepting such employment or consulting
activity, then such Participant shall be free to accept such
employment or consulting activity for the period of time and upon
the basis set forth in his or her written request.
ARTICLE V. ANNUAL RETIREMENT INCOME AND OTHER BENEFITS.
5.01 LEVELS I AND II.
<PAGE>
The Annual Retirement Income of a Participant who retired from a
position which was assigned a Hay Point rating equal to or
exceeding 2,000 points (and who is deemed to be a Level I or II
Participant under the Incentive Compensation Plan) shall be equal
to: (a) Pre-Age 62 Benefit
A Participant who retires under this Plan shall receive
an Annual Retirement Income from and after the first day
of the calendar month next following his or her Effective
Retirement Date until the end of the month in which he or
she attains age 62 equal to the greater of (1) the
amounts provided in the following schedule; or (2) 50% of
Final Average Compensation; provided, however, that in
the event such Participant retired with less than 20
years of Service, such Annual Retirement Income shall be
50% of Final Average Compensation multiplied by a
fraction (A) the numerator of which is such Participant's
years of and fractional years of Service, and (B) the
denominator of which is twenty (20).
% of
Retirement Compensation
---------- ------------
1st - Year After Effective 75%
Retirement Date
2nd - ( 70%
3rd - ( 65%
4th - ( 60%
5th - ( 55%
6th - Year and thereafter 50%
to Age 62
For purposes of this Section 5.01(a), "% of Compensation"
shall mean the annualized average of the Participant's
base monthly compensation rates (excluding incentive
awards, bonuses, and any other form of extraordinary
compensation) in effect with respect to Ashland on the
first day of the thirty-six (36) consecutive calendar
months which will give the highest average out of the
one-hundred twenty (120) consecutive calendar month
period ending on the Participant's Effective
<PAGE>
Retirement Date.
(b) Age 62 Benefit and Thereafter
From and after the first day of the calendar month next
following his or her Effective Retirement Date, or the
attainment of age 62, whichever is later, the
Participant's Annual Retirement Income shall be equal to
50% of Final Average Compensation; provided, however,
that in the event such Participant retired with less than
20 years of Service, such Annual Retirement Income shall
be 50% of Final Average Compensation multiplied by a
fraction (A) the numerator of which is such Participant's
years of and fractional years of Service, and (B) the
denominator of which is twenty (20).
(c) Benefit Reduction
The amount of benefit provided in paragraphs (a) and (b) of
this Section 5.01 shall be reduced by the sum of the
following:
(1) the Participant's benefit under the Ashland Inc.
and Affiliates Pension Plan (the
"Pension Plan") (assuming 50% of such
Participant's account under the Ashland Inc.
Leveraged Employee Stock Ownership Plan were
transferred to the Pension Plan, as allowed under
the terms of each of the said plans), determined
on the basis of a single life annuity form of
benefit;
(2) the Participant's benefit under any other defined
benefit pension plan qualified under Section
401(a) of the Internal Revenue Code of 1986, as
amended which is maintained by Ashland, determined
on the basis of a single life annuity form of
benefit (said plans referred to in sub-paragraphs
(1) and (2) of this paragraph (c) are hereinafter
referred to jointly and severally as the "Affected
Plans");
(3) the Participant's benefit under the Ashland Inc.
Non-qualified Excess Benefit Pension Plan, deter-
mined on the basis of a single life annuity form
of benefit; and
(4) the Participant's benefit under the Ashland Inc.
ERISA Forfeiture Plan attributable to amounts
which were forfeited under the Ashland Inc.
Leveraged Employee Stock Ownership Plan,
multiplied by 50%, and determined on the basis of
a single life annuity benefit.
In the event a Participant's benefit hereunder is paid as
a lump sum pursuant to an election under Section
5.04(b)(1), the reduction to such benefit shall be
calculated based upon the lump sum actuarial present
present actuarial value of the benefits referred to in
sub-paragraphs (1)-(4) of this paragraph (c) to which the
Participant would be entitled at age 62, regardless of
the date payments actually commence. In the event the
Participant's benefit hereunder is paid in any form of
periodic payments, the reduction shall apply from and
after the date the Participant actually commences
payments under the plans referred to under sub-paragraphs
(1) or, (2) or (3) of this paragraph (c).
5.02 LEVELS III, IV AND V.
The Annual Retirement Income of a Participant who retired from a
position which was assigned a Hay Point rating of less than 2,000
points (and who on his or her Effective Retirement Date was deemed
to be a Level III, IV, or V Participant under the Incentive
Compensation Plan) shall, from and after the first day of the
calendar month next following his or her 62nd birthday, be equal
to 50% of Participant's Final Average Bonus; provided, however,
that in the event such Participant retired with less than 20 years
of Service, such Annual Retirement Income after age 62 shall be
50% of Final Average Bonus multiplied by a fraction (A) the
numerator of which is such Participant's years of and fractional
years of Service, and (B) the denominator of which is twenty (20).
Although a Participant may elect to commence benefits under this
Plan upon his or her Effective Retirement Date, there shall be an
actuarial adjustment (consistent with that applied under Ashland's
qualified pension plan, as from time to time in effect) for
Participants receiving benefits under this Section 5.02 whose
Effective Retirement Date is retire prior to age 62.
5.03 Annual Retirement Income benefits payable under Sections 5.01 and
5.02 for
<PAGE>
a period of less than 12 months due to a Participant's
attainment of age 62 or death will be payable on a pro-rata basis,
with months taken as a fraction of a year.
5.04 Payment Options.
(a) Election.
A Participant shall, subject to Sections 5.05 and 5.06,
elect the form in which such benefit shall be paid from
among those identified in this Section 5.04 and such
election shall be made at the time and in the manner
prescribed by Ashland, from time to time, provided that
the election is made before the date as of which such
Participant is entitled to have the benefit
commenceParticipant's Effective Retirement Date. Such
election, including the designation of any contingent
annuitant or alternate recipient under Sections
5.04(b)(4) or (5), shall be irrevocable except as
otherwise set forth herein. . Notwithstanding anything in
the foregoing to the contrary, any Participant approved
for participation in the Plan pursuant to Sections 3.01,
3.01 3.02 and 3.04 who makes an election under Section
5.04(b)(2) shall make such election by the later of -
(1) the 60th day following such Participant's
approval to participate in in this Plan; or
(2) the earlier of -
(A) the date six months prior to Participant's
termination from employment Effective Retirement
Date; or
(B) the December 31 immediately preceding the
first day of the month following such Participant's
termination from employment. Participant's
Effective Retirement Date.
Such deferral election shall be made in the
manner prescribed by Ashland, from time to time,
and shall be irrevocable as of the applicable
time identified under Sections 5.04(a)(1) or
(2).
Until the time at which such an election becomes
irrevocable, an Participant shall be able to change it.
<PAGE>
(b) Optional Forms of Payment.
(1) Lump Sum Option. A Participant may elect to
receive the benefit under Article V as a lump
sum distribution, subject to the discretion of
the Committee as described below. A lump sum
benefit payable under the Plan to a Participant
shall be computed on the basis of the present
actuarially equivalent present value of such
Participant's benefit under Article V based upon
the applicable actuarial assumptions and other
relevant provisions used for the same in the
Pension Plan and any other applicable plan as
described in 5.01(c)(2) (all such plans
hereafter referred to jointly and severally as
the "Affected Plans"). (1) the 1971 Group
Annuity Mortality Table for males, regardless of
whether the Participant is male or female and
(2) the average of the monthly published Pension
Benefit Guaranty Corporation ("PBGC") interest
rates for the six-month period which ends on the
January 1 or July 1, which immediately precedes
the date as of which this calculation is made
(hereinafter called the "Applicable PBGC Rate").
The Applicable PBGC Rate is the one, used for
the valuation of benefits paid as annuities from
terminating single-employer plans for the first
20 years following the valuation date. Such lump
sum shall be payable within thirty (30) days
following the later of the Participant's
Effective Retirement Date, or at such later date
as Ashland or its delegate may determine, in its
sole discretion. designated retirement date or
the date the required election form is executed
and filed with Ashland The Committee shall have
the sole discretion to provide a lump sum
benefit option to a class of retirees for a
given calendar year. The decision as to whether
to provide a lump sum benefit option shall
generally be made by the Committee at the last
Committee meeting prior thereto. The option
shall be made available to a Participant
contingent upon various considerations,
<PAGE>
including, but not limited to, the following:
The tax status of Ashland, including without
limitation, the corporate and individual tax
rate then applicable and whether or not Ashland
has or projects a net operating loss; the
current and projected liquidity of Ashland,
including cash flow, capital expenditures and
dividends; Ashland `s borrowing requirements and
debt leverage; applicable book charges;
organizational issues, including succession
issues; security of the retirement payment(s)
with respect to the retiree; and the
Participant's preference.
(2) Lump Sum Deferral Option. A Participant who is
eligible to receive a lump sum distribution
under 5.04(b)(1) and who was part of a select
group of management or a highly compensated
employee, shall be able to elect to defer all or
a any portion of the receipt of the elected lump
sum (in increments of 25%), by having the
obligation to distribute such amount transferred
to the Ashland Inc. Deferred Compensation Plan
to be held thereunder in a notional account and
paid pursuant to the applicable provisions of
such Plan, as they may be amended from time to
time; provided, however, that the election to
defer such distribution shall be made at the
time and in the manner prescribed in Section
5.04(a)(1) and (2). The amount deferred under
this sub-paragraph (2) shall not be less than
$1,000.
(3) Single Life Annuity. A Participant may elect to
have such benefit paid in the form of equal
monthly payments for and during such
Participant's life, with such payments ending at
such Participant's death. The election of this
option is irrevocable on the date as of which
the benefit payments commence. Before that date,
the Participant may change the option elected,
subject to the applicable limitations and
conditions applied to elections for
<PAGE>
the options described under Section 5.04(a)(1)
and (2). Payments under this option shall
commence effective as of the date on which
payments to such Participant commence under the
Affected Plans and shall be actuarially equivalent
to the benefit provided under Section 5.01 or 5.02,
whichever is applicable, determined on the basis
of the applicable actuarial assumptions and
other relevant provisions used for the same in
the Pension Plan.
(4) Joint and Survivor Income Option. A Participant
may elect to receive an actuarially reduced
benefit payable monthly during the Participant's
lifetime with payments to continue after his or
her death to the person he designates
(hereinafter called "contingent annuitant"), in
an amount equal to (1) 100% of such actuarially
reduced benefit, (2) 66 2/3% of such actuarially
reduced benefit, or (3) 50% of such actuarially
reduced benefit. Benefit payments under this
option shall terminate with the monthly payment
for the month in which occurred the date of
death of the later to die of the Participant and
his or her contingent annuitant. The following
additional limitations and conditions apply to
this option:
(A) The contingent annuitant shall be desig-
nated by the Participant in writing in
such form and at such time as Ashland
may from time to time prescribe..
Before the Participant's Effective
Retirement Date, the Participant may
change the contingent annuitant
elected.(B) The election of an option
and designation of a contingent
annuitant under this sub-paragraph (4)
is irrevocable on the date as of which
the benefit payments commence. Before
that date, the Participant may change
the contingent annuitant or change the
option elected, subject to the
applicable limitations and conditions
applied to
<PAGE>
elections for the options described
under 5.04(a)(1) and (2).
(B) In the event of the death of the
contingent annuitant prior to the date
as of which the election is
irrevocable, the Participant's
selection of this option shall be void
and the Participant may change the
contingent annuitant or change the
option elected, subject to the
applicable limitations and conditions
applied to elections for the options
described under 5.04(a)(1) and (2).
(C) In the event of the death of the
contingent annuitant prior to the date
as of which the election is
irrevocable, the Participant's
selection of this option shall be void
and the Participant may change the
contingent annuitant or change the
option elected, subject to the
applicable limitations and conditions
applied to elections for the options
described under under 5.04(a)(1) and
(2).
(D) In the event of the death of the
Participant prior to the date as of
which the election is irrevocable, the
election of this option shall be void
and all rights to any benefit under
this Plan shall cease except as
otherwise provided in Section 5.06.
(EC) Actuarial equivalence under this
sub-paragraph (4) shall be determined
on the basis of the applicable
actuarial assumptions and other
relevant provisions used for the same
in the Pension Plan. Payments under
this option shall commence effective as
of the date on which payments to such
Participant commence under the Affected
Plans.
(5) Period Certain Income Option. A Participant may
elect to receive an actuarially reduced benefit
payable monthly during his or her lifetime and
terminating with the monthly payment for the
month in which his or her death occurs, with the
provision that not less
<PAGE>
than a total of 120 monthly payments shall be
made in any event to him or her and/or the person
designated by him or her to receive payments
under this sub-paragraph (5) in the event of his
or her death (hereinafter called "alternate
recipient"). Such alternate recipient shall be
designated in writing by the Participant in such
form and at such time as Ashland may from time
to time prescribe. If a Participant and his or
her alternate recipient die after the Effective
Retirement Date, date as of which payments have
commenced but before the total specified monthly
payments have been made to such Participant
and/or his or her alternate recipient, the
commuted value of the remaining unpaid payments
shall be paid in a lump sum to the estate of the
later to die of the Participant or his or her
alternate recipient. The following additional
limitations and conditions shall apply to this
option:
(A) The election of this option and the
designation of an alternate recipient
under this sub-paragraph (5) is
irrevocable on the date as of which the
benefit payments commence; provided,
however, a The alternate recipient
shall be designated in writing by the
Participant in such form and at such
time as Ashland may from time to time
prescribe. The designation of an
alternate recipient under this
sub-paragraph (5) is irrevocable after
the Effective Retirement Date,
provided, however, a Participant may
designate a new alternate recipient if
the one first designated dies before
the Participant and after the Effective
Retirement Date the date as of which
the benefit commenced. Before the date
on which the election becomes
irrevocable, the Participant may change
the alternate recipient or change the
option elected, subject to the
applicable limitations and conditions
applied to
<PAGE>
elections for the options
described under 5.04(a)(1) and (2).
(B) In the event of the death of the
alternate recipient prior to the date
as of which the election is
irrevocable, the Participant's
selection of this option shall be void
and the Participant may change the
alternate recipient or change the
option elected, subject to the
applicable limitations and conditions
applied to elections for the options
described under 5.04(a)(1) and (2). (B)
In the event of the death of the
alternate recipient prior to the date
as of which the election is
irrevocable, the Participant's
selection of this option shall be void
and the Participant may change the
alternate recipient or change the
option elected, subject to the
applicable limitations and conditions
applied to elections for the options
described under 5.04(a)(1) and (2).
(C) In the event of the death of the
Participant prior to the date as of
which the election is irrevocable, the
election of this option shall be void
and all rights to any benefit under
this Plan shall cease except as
otherwise provided in Section 5.06(b).
(DC) Actuarial equivalence under this sub-paragraph (5) shall
be determined on the basis of the applicable actuarial
assumptions and other relevant provisions used for the
same in the Pension Plan. Payments under this option
shall commence effective as of the date on which payments
to such Participant commence under the Affected Plans.
5.05. Payment of Small Amounts.
Unless such Participant elects to receive his or her
benefit in a lump sum as provided in Section 5.04, in the
event a monthly benefit under this Plan, payable to
either a Participant or to his or her contingent
annuitant, alternate recipient or surviving spouse, is
too small (in the sole judgment of Ashland) to be paid
monthly, such benefit may be paid quarterly,
semi-annually, or annually, as determined by Ashland to
be
<PAGE>
administratively convenient.
5.06. Surviving Benefits.
(a) Except as otherwise provided in Section 5.04 of
or this Plan, in the event that a Participant receiving
Annual Retirement Income benefits shall die after his o
her Effective Retirement Date, no additional benefits shall
be payable by Ashland under this Plan to such
deceased Participant's beneficiaries, survivors,
or estate.
(b)If an Employee diesdies while in active service with
Ashland
(1) prior to approval for participation in the
Plan and said Employee is a Level I or II participant
under the Incentive Compensation Plan and at least 55
years of age; or
(2) after approval for participation in the Plan
but prior to making an election pursuant to Section
5.04(a) and said Employee is a Level I -V participant
under the Incentive Compensation Plan; (1) before his or
her Effective Retirement Date, or (2) prior to his or her
approval or nomination for participation in the Plan but
meets all of the following requirements on the date of
his or her death: (A) such Employee dies in active
service with Ashland on or after his or her 55th
birthday; and (B) such Employee holds a position
classified at 2,000 Hay Points or more (and who is deemed
to be a Level I or II participant under Ashland's
Incentive Compensation Plan), then such Employee shall be
deemed:
(ai) to be a Participant under the Plan in the
case of Section 5.06 (b)(1);
(bii) to have commenced participation one (1)
day prior to the date of the Employee's death;
and
(ciii) if no election has been previously made,
such Employee shall be
<PAGE>
deemed to have elected to receive his or her
benefits in the form of the 100% Joint & Survivor
retirement income option and shall be deemed
to have designated his or her spouse as the
beneficiary thereunder.
(c) In the event an Employee is approved for
participation under the Plan and dies after having made an
election under Section 5.04(a) but prior to his or her Effective
Retirement Date, then such Employee shall be deemed to have
commenced participation one (1) day prior to the date of the
Employee's death and payment shall be made under this Plan in
accordance with the Employee's election.
5.07 After a Participant's reaches his or her Effective Retirement Date
and retires under this Plan, he or she shall continue to
participate in Ashland's Group Life Insurance, Medical and Dental
programs in the same manner and under the same terms and
conditions as provided for retirees as a class under the
provisions of such programs, as from time to time in effect.
Except as otherwise expressly provided in this Plan, a
Participant's active participation in all employee benefit
programs maintained by Ashland derived from his or her employment
status with Ashland shall be discontinued.
ARTICLE VI. CHANGE IN CONTROL.
Notwithstanding any provision of this Plan to the contrary, in the
event of a Change in Control, an Employee with 2,000 or more Hay
Points (and who is deemed to be a Level I or II Participant under
Ashland's Incentive Compensation Plan), shall automatically be
deemed to be approved by the Board for participation under this
Plan and may, in his or her sole discretion, elect to retire prior
to the date the Employee reaches age 62. In addition, Ashland
shall reimburse an Employee for legal fees and expenses incurred
by such Employee if he or she is required to, and is successful
in, seeking to obtain or enforce any right to payment pursuant to
the Plan. In the event that it shall be determined that such
Employee is properly entitled to the payment of benefits
hereunder, such Employee shall also be entitled to interest
thereon payable in an amount equivalent to the prime rate of
interest (quoted by Citibank, N.A. as its prime commercial lending
rate on the latest date practicable prior to the date of the
actual commencement of payments) from the date such payment(s)
should have been made to and including the date it is made.
Notwithstanding any provision of this Plan to the contrary, the
provisions of this Plan may not be amended after a Change in
Control occurs without the written consent of a majority of the
Board who were directors prior to the Change in Control.
ARTICLE VII. MISCELLANEOUS.
7.01 The obligations of Ashland hereunder constitute merely the promise
of Ashland to make the payments provided for in this Plan. No
employee, his or her spouse or the estate of either of them shall
have, by reason of this Plan, any right, title or interest of any
kind in or to any property of Ashland. To the extent any
Participant has a right to receive payments from Ashland under
this Plan, such right shall be no greater than the right of any
unsecured general creditor of Ashland.
7.02 Full power and authority to construe, interpret and administer
this Plan shall
<PAGE>
be vested in the Board or its delegate. Decisions
of the Board or its delegate shall be final, conclusive and
binding upon all parties.
7.03 This Plan shall be binding upon Ashland and any successors to the
business of Ashland and shall inure to the benefit of the
Participants and their beneficiaries, if applicable. Except as
otherwise provided in Article VI, the Board or its delegate may,
at any time, amend this Plan, retroactively or otherwise, but no
such amendment may adversely affect the rights of any Participant
who has been approved for participation in the Plan except to the
extent that such action is required by law.
7.04 Except as otherwise provided in Section 5.04, no right or interest
of the Participants under this Plan shall be subject to voluntary
or involuntary alienation, assignment or transfer of any kind.
7.05 This Plan shall be governed for all purposes by the laws of the
Commonwealth of Kentucky.
Exhibit 10.11
ASHLAND INC. NONQUALIFIED EXCESS BENEFIT
PENSION PLAN - 1996 RESTATEMENT
as adopted on September 19, 1996
- ------------------------------------------------------------------------------
WHEREAS, the Employee Retirement Income Security Act of 1974
("ERISA") establishes maximum limitations on benefits and contributions for
retirement plans which meet the requirements of Section 401(a) of the
Internal Revenue Code of 1986, as amended ("Code");
WHEREAS, Ashland Inc. ("Ashland" or the "Company") maintains
certain pension plans which are subject to the aforesaid limitations on
benefits and contributions;
WHEREAS, Ashland adopted the Ashland Oil, Inc. Nonqualified
Pension Plan as of September 24, 1975 (which is now called the Ashland Inc.
Nonqualified Excess Benefit Pension Plan, otherwise referred to as the
"Plan"), for the purpose of providing benefits for certain employees in
excess of the aforesaid limitations;
WHEREAS, the Plan was amended and completely restated as of July
21, 1977;
WHEREAS, the Plan was amended and completely restated as of
October 1, 1982;
WHEREAS, the Plan was amended and completely restated as of
November 3, 1988;
WHEREAS, Ashland has retained the authority to make additional
amendments to or terminate the Plan;
WHEREAS, Ashland desires to further amend and restate the Plan
and, as so amended, to continue the Plan in full force and effect;
NOW, THEREFORE, effective September 19, 1996, Ashland does hereby
further amend and restate the Plan in accordance with the following terms
and conditions:
1. Designation and Purpose of Plan. The Plan is designated the
"Ashland Inc. Nonqualified Excess Benefit Pension Plan" ("Plan"). The
purpose of the Plan is to provide benefits for certain employees in excess
of the limitations on contributions, benefits, and compensation imposed by
Sections 415 and 401(a)(17) of the Code (including successor provisions
thereto) on the plans to which those Sections apply. The portion of the
Plan providing benefits in excess of the Section 415 limits is an "excess
benefit plan" as that term is defined in Section 3(36) of ERISA. It is
intended that the portion, if any, of the Plan which is not an excess
benefit plan shall be maintained primarily for a select group of management
or highly compensated employees.
2. Eligibility. Subject to Section 11, the Plan shall apply to
those employees -(i) who have retired as an early, normal, or deferred
normal retiree under the provisions of the Ashland Inc. and Affiliates
Pension Plan ("Ashland Pension Plan"), as it may be amended, from time to
time, or under provisions of any other retirement plan, as such other plan
may be amended from time to time, which, from time to time, is specifically
designated by Ashland for purposes of
<PAGE>
eligibility and benefits under the Plan (all such plans are hereinafter
referred to jointly and severally as "Affected Plans"); and (ii) who have
been approved for participation in this Plan by Ashland or its delegate,
and such approval may, in the discretion of Ashland, be made (A) before an
employee's actual early, normal or deferred retirement; or (B) posthumously
in the event of a benefit potentially available under Section 6 of the
Plan.
Notwithstanding anything to the contrary contained herein, any
employee who would be entitled to participate in this Plan, but who is not
a member of a select group of management or a highly compensated employee,
shall be entitled to a benefit amount payable under the Plan based solely
on the limitations on benefits imposed under Section 415 of the Code.
3. Benefit Amount.
(i) Computation. At any particular time, the benefit payable to a
retiree eligible to participate in this Plan pursuant to the provisions in
Section 2 shall be computed by subtracting from (A) the sum of (B) and (C)
where -
(A) shall be the single life annuity that would be
payable at age 62 to such retiree under the Affected Plans prior to any
reductions made because of the limits imposed by Sections 415 and
401(a)(17) of the Code, provided that the single life annuity that would be
so payable under the Ashland Pension Plan shall be computed without
applying any offset attributable to the Ashland Inc. Leveraged Employee
Stock Ownership Plan ("LESOP"), and such single life annuity shall be
actuarially adjusted to be equivalent to a single life annuity payable at
the particular time applicable based upon the applicable actuarial
assumptions and other relevant provisions used for the same in the Affected
Plans;
(B) shall be the single life annuity that would be
payable at age 62 to such retiree under the Affected Plans after reducing
the amount so payable for the limits imposed by Sections 415 and 401(a)(17)
of the Code, provided that such single life annuity that would be so
payable under the Ashland Pension Plan shall be computed after first
applying the offset attributable to the Offset Account (as that term is
defined under the LESOP) in the LESOP, and each such single life annuity
shall be actuarially adjusted to be equivalent to a single life annuity
payable at the particular time applicable based upon the applicable
actuarial assumptions and other relevant provisions used for the same in
the Affected Plans; and
(C) shall be the single life annuity that would be
actuarially equivalent to such retiree's nonforfeitable portion of the
Offset Account under the LESOP as of the valuation date thereunder
coincident with or next preceding such retiree's termination of employment
using the actuarial assumptions prescribed for this purpose in the Ashland
Pension Plan.
(ii) Commencement. Subject to Section 6, the benefit computed
under paragraph (i) of this Section 3 shall commence or otherwise be paid
or transferred pursuant to the provisions in Sections 4 or 5, effective as
of the date as of which payments to such retiree commence under the
Affected Plans.
<PAGE>
4. Payment Options.
(i) Election. A retiree eligible under Section 2 for the benefit under
Section 3 shall, subject to Sections 5 and 6, elect the form in which such
benefit shall be paid from among those identified in this Section 4 and
such election shall be made at the time and in the manner prescribed by
Ashland, from time to time, provided that the election is made before the
first day of the month following such retiree's termination from
employment. Such election, including the designation of any contingent
annuitant or alternate recipient under sub-paragraphs (D) or (E) of
paragraph (ii) of this Section 4, shall be irrevocable except as otherwise
set forth herein. Notwithstanding anything in the foregoing to the
contrary, any retiree who makes an election under sub-paragraph (B) of
paragraph (ii) of this Section 4 shall make such election by the later of -
(A) the 60th day following such retiree's approval to
participate in this Plan as provided under Section 2; or
(B) by the earlier of -
(1) the date six months prior to the first day
of the month following such retiree's termination from employment; or
(2) the December 31 immediately preceding the
first day of the month following such retiree's termination from
employment.
Such election under sub-paragraph (B) of paragraph (ii) of this Section 4
shall be made in the manner prescribed by Ashland, from time to time, and
shall be irrevocable as of the applicable time identified under (A) or (B)
of this paragraph (i) of Section 4. Until the time at which such election
becomes irrevocable, an eligible retiree shall be able to change it.
(ii) Optional Forms of Payment.
(A) Lump Sum Option. Notwithstanding any provisions of
Section 3 to the contrary, a retiree in an eligible class may elect to
receive all of the benefit under Section 3 as a lump sum distribution,
subject to the discretion of the Committee as described below. A lump sum
benefit payable under the Plan to a retiree in an eligible class shall be
computed on the basis of the actuarially equivalent present value of such
retiree's benefit under Section 3 of the Plan payable at the particular
time applicable based upon (1) the 1971 Group Annuity Mortality Table for
males, regardless of whether the retiree is male or female and (2) the
average of the monthly published Pension Benefit Guaranty Corporation
("PBGC") interest rates for the six-month period which ends on the January
1 or July 1 which immediately precedes the date as of which this
calculation is made (hereinafter called the "Applicable PBGC Rate"). The
Applicable PBGC Rate is the one used for the valuation of benefits paid as
annuities from terminating single-employer plans for the first 20 years
following the valuation date. Such lump sum shall be payable within thirty
(30) days of the retiree's retirement date, or at such later date as
Ashland or its delegate may determine, in its sole discretion. The
Personnel and Compensation Committee of Ashland's Board of Directors shall
have the sole discretion to provide a lump sum benefit option to a class of
retirees for a given calendar year. The decision as to whether to provide a
lump sum benefit option shall generally be
<PAGE>
made by the Committee at the last committee meeting prior thereto. The
option shall be made available to a retiree contingent upon various
considerations, including, but not limited to, the following:
The tax status of the Company, including without limitation, the
corporate and individual tax rate then applicable and whether or
not the Company has or projects a net operating loss; the current
and projected liquidity of the Company, including cash flow,
capital expenditures and dividends; Company borrowing requirements
and debt leverage; applicable book charges; organizational issues,
including succession issues; security of the retirement payment(s)
with respect to the retiree; and the retiree's preference.
(B) Lump Sum Deferral Option. A retiree who is eligible
to receive a lump sum distribution under sub-paragraph (A) of this
paragraph (ii) of Section 4 and who was part of a select group of
management or a highly compensated employee, shall be able to elect to
defer all or a portion of the receipt of the elected lump sum (in
increments of 25%), by having the obligation to distribute such amount
transferred to the Ashland Inc. Deferred Compensation Plan to be held
thereunder in a notional account and paid pursuant to the applicable
provisions of such Plan, as they may be amended from time to time;
provided, however, that the election to defer such distribution shall be
made at the time and in the manner prescribed in paragraph (i) of this
Section 4. The amount deferred under this sub-paragraph (B) shall not be
less than $1,000.
(C) Single Life Annuity. A retiree eligible under Section
2 for the benefit under Section 3 may elect to have such benefit paid in
the form of equal monthly payments for and during such retiree's life, with
such payments ending at such retiree's death. Before such election becomes
irrevocable as provided under paragraph (i) of Section 4, the retiree may
change the option elected, subject to the applicable limitations and
conditions applied to elections for the options described under
sub-paragraphs (A) and (B) of this paragraph (ii) of Section 4. Payments
under this option shall be actuarially equivalent to the benefit provided
under Section 3, determined on the basis of the applicable actuarial
assumptions and other relevant provisions used for the same in the Ashland
Pension Plan.
(D) Joint and Survivor Income Option. A retiree eligible
under Section 2 for the benefit under Section 3 may elect to receive an
actuarially reduced benefit payable monthly during the retiree's lifetime
with payments to continue after his death to the person he designates
(hereinafter called "contingent annuitant"), in an amount equal to (1) 100%
of such actuarially reduced benefit, (2) 66 2/3% of such actuarially
reduced benefit, or (3) 50% of such actuarially reduced benefit. Benefit
payments under this option shall terminate with the monthly payment for the
month in which occurred the date of death of the later to die of the
retiree and his contingent annuitant. The following additional limitations
and conditions apply to this option:
(a) The contingent annuitant shall be
designated by the retiree in writing in such form and at such time as
Ashland may from time to time prescribe.
<PAGE>
(b) In the event the contingent annuitant dies
prior to the date the election of this optional form of benefit becomes
irrevocable as provided under paragraph (i) of Section 4, the retiree's
selection of this option shall be void. Before the date the election of
this optional form of benefit becomes irrevocable as provided under
paragraph (i) of Section 4, the retiree may change the contingent annuitant
or change the option elected, subject to the applicable limitations and
conditions applied to elections for the options described under
sub-paragraphs (A) and (B) of this paragraph (ii) of Section 4.
(c) In the event of the death of the retiree
prior to the date the election is irrevocable as provided under paragraph
(i) of Section 4, such retiree shall be deemed to have terminated
employment on the day before his death (for reasons other than death) and
survived until the day after the date as of which the benefit he elected
under this sub-paragraph (D) would have commenced.
(d) Actuarial equivalence under this
sub-paragraph (D) shall be determined on the basis of the applicable
actuarial assumptions and other relevant provisions used for the same in
the Ashland Pension Plan.
(E) Period Certain Income Option. A retiree eligible
under Section 2 for the benefit under Section 3 may elect to receive an
actuarially reduced benefit payable monthly during his lifetime and
terminating with the monthly payment for the month in which his death
occurs, with the provision that not less than a total of 120 monthly
payments shall be made in any event to him and/or the person designated by
him to receive payments under this sub-paragraph (E) in the event of his
death (hereinafter called "alternate recipient"). Such alternate recipient
shall be designated in writing by the retiree in such form and at such time
as Ashland may from time to time prescribe. If a retiree and his alternate
recipient die after the date as of which payments have commenced but before
the total specified monthly payments have been made to such retiree and/or
his alternate recipient, the commuted value of the remaining unpaid
payments shall be paid in a lump sum to the estate of the later to die of
the retiree or his alternate recipient. The following additional
limitations and conditions shall apply to this option:
(a) A retiree may designate a new alternate
recipient if the one first designated dies before the retiree and after the
date the election of this optional form of benefit became irrevocable under
paragraph (i) of Section 4. In the event the alternate recipient dies prior
to the date the election becomes irrevocable as provided under paragraph
(i) of Section 4, the retiree's selection of this option shall be void.
Before the date the election of this optional form of benefit becomes
irrevocable as provided under paragraph (i) of Section 4, the retiree may
change the alternate recipient or change the option elected, subject to the
applicable limitations and conditions applied to elections for the options
described under sub-paragraphs (A) and (B) of this paragraph (ii) of
Section 4.
(b) In the event of the death of the retiree
prior to the date the election is irrevocable as provided under paragraph
(i) of Section 4, such retiree shall be deemed to have
<PAGE>
terminated employment on the day before his death (for reasons other than
death) and survived until the day after the date as of which the benefit he
elected under this sub-paragraph (E) would have commenced.
(c) Actuarial equivalence under this
sub-paragraph (E) shall be determined on the basis of the applicable
actuarial assumptions and other relevant provisions used for the same in
the Ashland Pension Plan.
(F) Death Before Payment. Subject to Section 6, in the
event a retiree eligible under Section 2 for the benefit under Section 3
dies after having made an election of an optional form of payment under
this paragraph (ii) of Section 4 before the date such election became
irrevocable as provided under paragraph (i) of Section 4, such retiree
shall be deemed to have terminated employment on the day before his death
(for reasons other than death) and survived until the day after the date as
of which the optional form of payment he elected would have commenced and
payment shall then be made under the Plan in accordance with such retiree's
election.
5. Payment of Small Amounts. Unless such retiree elects to receive
his or her benefit in a lump sum as provided in Section 4, in the event a
monthly benefit under this Plan, payable to either a retiree or to his
contingent annuitant, alternate recipient or surviving spouse, is too small
(in the sole judgment of Ashland) to be paid monthly, such benefit may be
paid quarterly, semi-annually, or annually, as determined by Ashland to be
administratively convenient.
6. Surviving Spouse Benefit. In the event a retiree who was
eligible under Section 2 for the benefit under Section 3 dies, leaving a
surviving spouse, before electing an optional form of payment under
paragraph (ii) of Section 4 and before the date such an election would have
become irrevocable under paragraph (i) of Section 4, then such retiree
shall be deemed to have -(i) elected the joint and 100% survivor income
option under sub-paragraph (D) of paragraph (ii) of Section 4; (ii) named
his spouse as the 100% contingent annuitant; (iii) terminated employment on
the day before his death (for reasons other than death); and (iv) survived
until the day after the date as of which such benefit would have commenced.
7. Costs. In appropriate cases, Ashland may cause an affiliate to
make the payment (or an allocable portion thereof) called for by the Plan
directly to the person eligible to receive such payments.
8. Confidentiality and No Competition All benefits under the Plan
shall be forfeited by anyone who discloses confidential information to
others outside of Ashland's organization without the prior written consent
of Ashland or who accepts, during a period of five (5) years following his
or her retirement, any employment or consulting activity which is in direct
conflict with the business of Ashland at such time. Such determination
shall be made in the sole discretion of Ashland. A breach of this Section 8
shall result in an immediate forfeiture of benefits payable to any retiree
under the Plan.
<PAGE>
9. Lost Participant/Beneficiary. In the event Ashland, after
reasonable effort, is unable to locate a person to whom a benefit is
payable under the Plan, such benefit shall be forfeited; provided, however,
that such benefit shall be reinstated (in the same amount and form as that
of the benefit forfeited without any obligation to pay amounts which would
otherwise have previously come due) upon proper claim made by such person
prior to termination of the Plan.
10. Miscellaneous.
(i) The obligations of Ashland and any affiliate thereof with respect to
benefits under this Plan constitute merely the unsecured promise of Ashland
and/or its affiliates, as the case may be, to make the payments provided
for in this Plan. No property of Ashland or any affiliate is or shall, by
reason of the Plan, be held in trust or be deemed to be held in trust for
any person and any participant or beneficiary under the Plan, the estate of
either of them and any person claiming under or through them shall not
have, by reason of the Plan, any right, title or interest of any kind in or
to any property of Ashland and its affiliates. To the extent any person has
a right to receive payments under the Plan, such right shall be no greater
than the right of any unsecured general creditor of Ashland/ or its
affiliates.
(ii) Ashland shall administer the Plan. Ashland shall have full power and
authority to amend, modify, or terminate the Plan and shall have all powers
and the discretion necessary and convenient to administer the Plan in
accordance with its terms, including, but not limited to, all necessary,
appropriate, discretionary and convenient power and authority to interpret,
administer and apply the provisions of the Plan with respect to all persons
having or claiming to have any rights, benefits, entitlements or
obligations under the Plan. This includes, without limitation, the ability
to construe and interpret provisions of the Plan, make determinations
regarding law and fact, reconcile any inconsistencies between provisions in
the Plan or between provisions of the Plan and any other statement
concerning the Plan, whether oral or written, supply any omissions to the
Plan or any document associated with the Plan, and to correct any defect in
the Plan or in any document associated with the Plan. All such
interpretations of the Plan and documents associated with the Plan and
questions concerning its administration and application, as determined by
Ashland, shall be binding on all persons having an interest under the Plan.
Ashland may delegate (and may give to its delegatee the power and authority
to redelegate) to any person or persons any responsibility, power or duty
under the Plan. Decisions of Ashland or its delegatee shall be final,
conclusive, and binding on all parties.
(iii) Except as expressly allowed pursuant to Sections 3 and 4 of this Plan
in regard to the form of benefit option, no right or interest of any person
entitled to a benefit under the Plan shall be subject to voluntary or
involuntary alienation, assignment, transfer, hypothecation, pledge, or
encumbrance of any kind; provided, however, Ashland or any affiliate may
offset or cause an offset to be made against any payment to be made under
the Plan in regard to amounts due and owing from such person to Ashland or
any affiliate. Notwithstanding anything to the contrary in this paragraph
(iii), legally required tax withholding on benefit payments, the recovery,
by any means, of previously made overpayments of Plan benefits, or the
direct deposit of Plan benefit payments in a bank or similar account,
provided that such direct deposits are allowed by Ashland in the
administration of the Plan and provided that such direct deposit is not
part of an arrangement constituting an assignment or alienation, shall not
be considered to be prohibited under this paragraph (iii).
<PAGE>
(iv) No amount paid or payable under the Plan shall be deemed salary or
other compensation to any employee for the purpose of computing benefits to
which such employee or any other person may be entitled under any employee
benefit plan of Ashland or any affiliate.
(v) To the extent that state law shall not have been preempted by ERISA or
any other law of the United States, the Plan shall be governed by the laws
of the Commonwealth of Kentucky.
(vi) The Plan described herein shall amend and supersede, as of September
19, 1996, all provisions in the Ashland Oil, Inc. Nonqualified Pension Plan
as Amended, dated as of November 3, 1988, except as otherwise provided
herein and further excepting that the rights of former employees who
terminated employment, retired, or became disabled prior to the day before
the effective date hereof shall be governed by the terms of the Plan as in
effect at the time of such termination of employment, retirement, or
disability, unless otherwise provided herein.
11. Change in Control. Notwithstanding any provision of this Plan
to the contrary, in the event of a Change in Control (as defined
hereinafter in this Section 11), any employee who would or will meet the
requirements of Section 2, except that such employee has not been approved
to participate as provided under paragraph (ii) of Section 2, shall be
deemed to be approved for participation hereunder, regardless of when such
employee actually retires and commences benefits under an Affected Plan and
such entitlement shall be vested from and after the time of such Change in
Control. Ashland shall reimburse an employee for legal fees and expenses
incurred if he or she is required to, and is successful in, seeking to
obtain or enforce any right to payment pursuant to the Plan after a Change
in Control. In the event that it shall be determined that such employee is
properly entitled to the payment of benefits hereunder, such employee shall
also be entitled to interest thereon payable in an amount equivalent to the
prime rate of interest (quoted by Citibank, N.A. as its prime commercial
lending rate on the latest date practicable prior to the date of the actual
commencement of payments) from the date such payment(s) should have been
made to and including the date it is made. Notwithstanding any provision of
this Plan to the contrary, the Plan may not be amended after a Change in
Control without the written consent of a majority of the Board of Directors
of Ashland (hereinafter "Board") who were directors prior to the Change in
Control. For purposes of this Section 11, a Change of Control shall be
deemed to occur (1) upon the approval of the shareholders of Ashland (or if
such approval is not required, upon approval of the Board) of (A) any
consolidation or merger of Ashland in which Ashland is not the continuing
or surviving corporation or pursuant to which shares of Ashland common
stock would be converted into cash, securities or other property other than
a merger in which the holders of Ashland 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 3(a)(9) or Section
13(d) of the Securities Exchange Act of 1934), other than Ashland or any
subsidiary or
<PAGE>
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 15% of the Ashland common stock outstanding at the time, without the
approval of the Board, or (3) if 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 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.
Exhibit 10.12
ASHLAND INC.
LONG-TERM INCENTIVE PLAN
(Amended as of September 19, 1996)
SECTION 1. PURPOSE
The purpose of the Ashland Inc. Long-Term Incentive Plan is to
promote the interests of Ashland 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 Inc. and its
Subsidiaries.
(C) "Award" shall mean an Option (which may be 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 approval
of the shareholders of Ashland (or if such approval is not required, upon
the approval of the Board) 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
3(a)(9) or 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 3(a)(9) or 13d-3 under the Exchange
Act), directly or indirectly, of more than 15% of Ashland's Common Stock
outstanding at the time, without the 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 a Non-Employee Director.
(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 Inc. and its
Subsidiaries.
(K) "Employee" shall mean an officer or employee of the Company.
(L) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(M) "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.
(N) "Fair Market Value" shall mean the price of the Common Stock
as reported on the Composite Tape on the date and at the time designated by
the Company.
(O) "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.
(P) "Nonqualified Stock Option" or "NQSO" shall mean an Option
granted pursuant to this Plan which does not qualify as an Incentive Stock
Option.
(Q) "Non-Employee Director" shall mean a non-employee director
within the meaning of applicable regulatory requirements, including those
promulgated under Section 16 of the Exchange Act.
(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 Inc. Long-Term Incentive Plan.
<PAGE>
(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.
(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 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
<PAGE>
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.
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 its 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.
<PAGE>
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 holder thereof of the 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 Inc., 1000 Ashland Drive, Russell,
Kentucky, 41169, or such other place as Ashland may designate from time to
time.
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 (i) in cash, (ii) in whole shares of Common
Stock (which shares of Common Stock must have been owned by the Employee
six months or longer, and not used to effect an Option exercise within the
preceding six months, in the case of an exercise of an Option which was
granted after May21, 1992, unless the Committee specifically provides
otherwise) evidenced by negotiable certificates, valued at their Fair
Market Value on the date of exercise, (iii) by Attestation; (iv) by a
combination of such methods of payment, or (v) by such other consideration
as shall be approved by the Committee (including without limitation, by
effecting a "cashless exercise," with a broker, of the Option).
"Attestation" means the delivery to Ashland of a completed Attestation Form
prescribed by Ashland setting forth the whole shares of Common Stock owned
by the Employee which the Employee wishes to utilize to pay the Exercise
Price. In the case of an exercise of an Option granted after May21, 1992,
the Common Stock listed on the Attestation Form must have been owned by the
Employee six months, unless the Committee specifically provides otherwise.
Moreover, in the case of an exercise of an Option granted prior to May 21,
1992, 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
<PAGE>
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.
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 disability (as defined in subsection (C) of Section 10 hereof),
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
<PAGE>
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, subject to
subsection (B) of Section 14 hereof, 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. As used herein, an Outside Director shall be
deemed"disabled" when he or she is unable to attend to his or her duties
and responsibilities as a member of the Board because of incapacity due to
physical or mental illness.
C. Transferability
Subject to subsection (B) of Section 14 hereof, 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 hereto 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
<PAGE>
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.
Subject to subsection (B) of Section 14 hereof, Performance Shares may not
be sold, assigned, transferred, pledged, or otherwise encumbered, except as
herein provided and as provided in subsection (F) of Section 10 hereof,
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 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, AGREEMENT TO SERVE AND EXERCISE PERIODS
(A) Subject to the provisions of subsections (B), (C) and (F) 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 (unless otherwise determined by the Committee) 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.
<page
(B) Every Option shall provide that in the event the Employee dies
while employed by Ashland; during the period in which Options may be
exercised by an Employee determined to be disabled as provided in
subsection (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 disability 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 for the full
number of optioned shares or any part thereof, less such number as may have
been theretofore acquired under the Option. An Option held by an Employee
determined by the Committee to be disabled prior to September 19, 1996
shall be exercisable during a period of one year of continuing disability
following termination of employment by reason of such disability. An Option
held by an Employee determined by the Committee to be disabled on or after
September 19, 1996 shall be exercisable at any time prior to the fixed
termination date set forth in the Option. As used herein, an Employee will
be deemed "disabled" when he or she becomes unable to perform the functions
required by his or her regular job due to a physical or mental illness and,
in connection with the grant of an Incentive Stock Option, shall be deemed
disabled if he or she falls within the meaning of that term as provided in
Section 22(e)(3) of the Code. The determination by the Committee of any
question involving disability shall be conclusive and binding.
(D) Every Option shall provide that in the event the employment of
any Employee shall cease by reason of Retirement, such Option may be
exercised only in respect of the number of shares which the Employee could
have acquired under the Option immediately prior to such Retirement.
Options held by an Employee who retires prior to September 19, 1996 shall
be exercisable until the earlier to occur of the fixed termination date set
forth in the Option or three years after such Retirement. Options held by
an Employee who retires on or after September 19, 1996 shall be exercisable
until the fixed termination date set forth in the Option.
(E) Except as provided in subsections (A), (B), (C), (D) and (F)
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,
and, except as provided in subsection (F) of this Section 10, 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; provided, however, that
no Option may be exercised after the fixed termination date set forth in
the Option.
(F) 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.
(G) 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
<PAGE>
right of Ashland to terminate the Employee's employment at any time.
(H) 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.
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
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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;
provided, however, that an Employee's or Outside Director's rights and
interest under the Plan may, subject to the discretion and direction of the
Committee, be made transferable by such Employee or Outside Director during
his or her lifetime. 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 September 19, 1996.
Exhibit 10.13
ASHLAND INC.
DIRECTORS' CHARITABLE AWARD PROGRAM
1. Purpose . The purpose of the Ashland Inc. Directors' Charitable Award
Program (the "Program") is to enhance the competitiveness of the Company's
Director benefits program, thereby aiding Ashland Inc. ("Ashland" or the
"Company") in the attraction and retention of Board members of the highest
caliber. The Program also provides a cost-effective means to recognize the
mutual interest of the Company and its Directors in supporting worthy
charitable and educational institutions, thereby advancing the social and
charitable goals and objectives of the Company and its Directors.
2. Definitions .
(a) "Ashland" - means Ashland Inc.
(b) "Board" or "Board of Directors" - means the Board of Directors
of Ashland.
(c) "Change in Control" - shall be deemed to occur (1) upon the
approval of 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 Ashland Common Stock would be converted into cash,
securities or other property other than a merger in which the holders of
Ashland 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 3(a)(9) or 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 15% of the Ashland
Common Stock outstanding at the time, without the prior approval of the
Board of Directors of Ashland, or (3) if at any time during a period of two
consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of Ashland shall cease for any reason to
constitute at least a majority thereof, unless the election or 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.
(d) "Director" - means a member of Ashland's Board of Directors.
(e) "Director Retirement Plan" - means the Ashland Inc. Director
Retirement Plan in effect from time to time.
(f) "Disability" - means a Director's incapacity due to physical
or mental illness for a period of six (6) months or more during which
period the Director is unable to attend to his or her duties and
responsibilities as a member of the Board.
(g) "Donation" - means a charitable contribution made under the
terms of this Program.
(h) "Program" - means the Ashland Inc. Directors' Charitable Award
Program.
3. Eligibility Criteria .
All current and future Directors of Ashland shall be eligible to
participate in the Program. However, former directors (whose service has
ceased prior to the effective date of the Program) shall not be eligible to
participate.
4. Grant Procedure .
(a) Each eligible Director will become a participant in
the Program upon submission of a form approved by Ashland for this purpose
(the "Beneficiary Recommendation Form") to the Administrative Vice
President, Human Resources (the "Human Resources Department") of Ashland
designating that one or more organization(s) be considered for a grant of
all or part of $1,000,000, payable following the death of the director.
However, no more than ten (10) organizations may be recommended by any
Director and the amount of the recommended Donation must not be less than
$100,000 to any one organization.
(b) In order to qualify for a grant under this Program,
the designated charity must be a tax-exempt organization under Section
501(c)(3) of the Internal Revenue Code of 1986, as amended (i.e., civic,
religious, educational or medical/health care organizations), and the
designated charity's activities or purposes must be compatible with the
goals and objectives of Ashland's charitable programs.
(c) Each organization recommended by a Director to
receive a Donation is subject to the review and initial approval of
Ashland's Human Resources Department, with the final determination as to
whether an organization meets the eligibility requirements at the time a
Donation is to be made to be decided jointly by the Chairman and Chief
Executive Officer of Ashland and the Chairman of the Personnel and
Compensation Committee of the Board.
(d) The recommendation of a beneficiary may be revoked or
revised by a Director at any time before his or her death by the completion
of a new Beneficiary Recommendation Form, unless a Director elects to make
a recommendation irrevocable.
(e) A Director can make the recommendation of a
beneficiary irrevocable as to all or a portion of the recommended Donation
for the organization. An irrevocable recommendation cannot be changed by
the Director unless the recommended organization ceases to meet the
eligibility requirements of Section 4(b) under the Program.
(f) A Director may request Ashland to notify an
organization that it has been selected by the Director to receive a
Donation by so advising Ashland on the Beneficiary Recommendation Form.
(g) If any organization recommended by a Director to
receive a Donation ceases to meet the requirements of Section 4(b), the
Director will be advised of such and given an opportunity to revise his or
her Beneficiary Recommendation Form. If a revised Beneficiary
Recommendation Form is not submitted by the Director before his or her
death, the amount recommended for that particular organization shall be
divided among the Director's remaining recommended qualified organizations
on a prorated basis. If all the organizations selected by a Director cease
to qualify, Ashland will, in its sole discretion, select the
organization(s) to receive the Donation(s) on behalf of the Director.
(h) No Donation will be made on behalf of a Director if a
Director's termination from Board service is for any reason other than: (1)
mandatory retirement at age 70 under the Ashland Inc. Director Retirement
Plan; (2) death; (3) Disability; (4) voluntary early retirement to take a
position in public governmental services; or (5) a Change in Control of
Ashland; however, the Board of Directors shall have plenary authority to
authorize that a Donation be made on behalf of a retiring Director,
provided that the Director has a minimum of ten (10) years of service as a
Director with Ashland.
(i) Any Donation made under this Program shall generally
be made as soon as practicable following the eligible Director's death. The
payment shall be identified as a gift in honor of the service of the
Director on Ashland's Board of Directors. Payment shall be contingent upon
presentation to the Human Resources Department of proof of the Director's
death and the continued approval of the Director's recommendations.
5. Miscellaneous Provisions .
(a) An eligible Director's rights and interest under the Program
may not be assigned or transferred in whole or in part. Nothing contained
in this Program shall create, or be deemed to create, a trust (actual or
constructive) for the benefit of a Director or any organization recommended
by a Director to receive a Donation.
(b) In order to financially support the Program, Ashland may elect
to purchase a life insurance policy or policies insuring the lives of the
Directors. Ashland will be the sole owner and beneficiary thereof. Neither
the Directors not the charitable organizations recommended by the Directors
will have any rights or beneficial ownership interests in any such policy
or policies acquired by Ashland. Directors may be asked to provide certain
medical and other information to assist Ashland in acquiring such policy or
policies.
(c) The expenses of the Program shall be borne by Ashland.
(d) The Program shall be administered and interpreted by the
Personnel and Compensation Committee of the Board (the "Committee"). The
Committee shall have plenary authority to prescribe, amend, suspend or
terminate the Program (or any rules, regulations, and procedures relating
to the Program at any time in its sole discretion without the consent of
the Directors participating in the Program. The determinations of the
Committee shall be conclusive and binding on all interested parties. The
Human Resources Department of Ashland, or its designee, shall be delegated
the responsibility of preparing and distributing periodic reports, making
disbursements, and administering the Program.
(e) The provisions of this Program shall be interpreted and
construed in accordance with the laws of the Commonwealth of Kentucky.
(f) Benefits payable under this Program shall be binding upon
Ashland, its successors and assigns.
(g) The effective date of the Program shall be December 1, 1990.
Amended effective as of:
September 19, 1996
Exhibit 10.14
ASHLAND INC.
1993 STOCK INCENTIVE PLAN
(Amended as of September 19, 1996)
SECTION 1. PURPOSE
The purpose of the Ashland Inc. 1993 Stock Incentive Plan is to
promote the interests of Ashland 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 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 approval of
the shareholders of Ashland (or if such approval is not required, upon
the approval of the Board) 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 3(a)(9) or 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, of more than
15% of Ashland's Common Stock outstanding at the time, without the
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 a Non-Employee Director.
(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 Inc. and its
Subsidiaries.
(K) "Employee" shall mean an officer or employee of the Company.
(L) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(M) "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.
(N) "Fair Market Value" shall mean the price of the Common Stock as
reported on the Composite Tape on the date and at the time selected by
the Company.
(O) "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.
(P) "Long-Term Incentive Plan" shall mean the Ashland Inc. Long-Term
Incentive Plan approved and adopted on January 26, 1989 by the
shareholders of the Company, as it now exists or as it may hereafter be
amended.
(Q) "Merit Award" shall mean an award of Common Stock issued pursuant
to Section 9 of the Plan.
(R) "Non-Employee Director" shall mean a non-employee director within
the meaning of applicable regulatory requirements, including those
promulgated under Section 16 of the Exchange Act.
(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 Inc. 1993 Stock Incentive Plan.
(BB) "Reload Option" shall mean an option granted pursuant to
Subsection (D) of Section 6 of the Plan.
<PAGE>
(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 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 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
<PAGE>
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.
(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 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 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
holder thereof of the 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
<PAGE>
Ashland at Ashland Inc., 1000 Ashland Drive, Russell, Kentucky, 41169, or
such other place as Ashland may designate from time to time.
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 (i) in cash, (ii) in whole shares of Common
Stock owned by the Employee and evidenced by negotiable certificates,
valued at their Fair Market Value (which shares of Common Stock must have
been owned by the Employee six months or longer, and not used to effect a
stock Option exercise within the preceding six months, unless the
Committee specifically provides otherwise), (iii) by Attestation, (iv) by
a combination of such methods of payment, or (v) by such other
consideration as shall constitute lawful consideration for the issuance
of Common Stock and be approved by the Committee (including, without
limitation, effecting a "cashless exercise," with a broker, of the
Option). "Attestation" means the delivery to Ashland of a completed
Attestation Form prescribed by Ashland setting forth the whole shares of
Common Stock owned by the Employee which the Employee wishes to utilize
to pay the Exercise Price. The Common Stock listed on the Attestation
Form must have been owned by the Employee six months or longer, and not
have been used to effect an Option exercise within the preceding six
months, unless the Committee specifically provides otherwise. 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 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
<PAGE>
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, or
in cash, or partly in cash and partly in shares of Common Stock (valued
at Fair Market Value on the date of exercise of the SAR) , 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 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.
<PAGE>
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 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, (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. As used herein, a
director shall be deemed "disabled" when he or she is unable to attend to
his or her duties and responsibilities as a member of the Board because
of incapacity due to physical or mental illness.
C. Transferability
Subject to subsection (B) of Section 15 hereof, 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 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
<PAGE>
become vested, and such Retained Distributions shall not bear interest or
be segregated in separate accounts; (iii) subject to subsection (B) of
Section 15 hereof, 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 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 subsection (E) of Section 11 and subject to
subsection (B) of Section 15, 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 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, AGREEMENT TO SERVE AND EXERCISE PERIODS
(A) Subject to the provisions of subsection (F) of this Section 11,
every Option (other than a Reload 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 (unless otherwise determined by the
Committee) and, if the employment of the Employee shall terminate, for
any reason other than death or disability (as defined in subsection (C)
of this Section 11) as determined by the Committee, prior to the end of
such one year period or with respect to any Reload Option such other
period as may be
<PAGE>
specified by the Committee within which such Reload Option may not be
exercised, 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 period in which Options may be
exercised by an Employee determined to be disabled as provided in
subsection (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 disability, 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 for the
number of shares which the Employee could have acquired under the Option
immediately prior to the Employee's disability. An Option held by an
Employee determined by the Committee to be disabled prior to September
19, 1996 shall be exercisable during a period of one year of continuing
disability following termination of employment by reason of such
disability. An Option held by an Employee determined by the Committee to
be disabled on or after September 19, 1996 shall be exercisable at any
time prior to the fixed termination date set forth in the Option. As used
herein, an Employee will be deemed "disabled" when he or she becomes
unable to perform the functions required by his or her regular job due to
physical or mental illness and, in connection with the grant of an
Incentive Stock Option, shall be deemed disabled if he or she falls
within the meaning of that term as provided in Section 22(e)(3) of the
Code. The determination by the Committee of any question involving
disability shall be conclusive and binding.
(D) Every Option shall provide that in the event the employment of
any Employee shall cease by reason of Retirement, such Option may be
exercised only in respect of the number of shares which the Employee
could have acquired under the Option immediately prior to such
Retirement. Options held by an Employee who retires prior to September
19, 1996 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. Options held by an Employee who retires on
or after September19, 1996 shall be exercisable until the fixed
termination date set forth in the Option.
(E) Except as provided in subsections (A), (B), (C) (D) and (F) 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 only in respect of the number of shares which the Employee
could have acquired under the Option immediately prior to such cessation
of employment; provided, however, that no Option may be exercised after
the fixed termination date set forth in the Option.
(F) 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.
(G) 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.
<PAGE>
(H) 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
(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,
<PAGE>
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;
provided, however, that an Employee's or Outside Director's rights and
interest under the plan may, subject to the discretion and direction of
the Committee, be made transferable by such Employee or Outside Director
during his or her lifetime. 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 September 19, 1996.
Exhibit 10.15
ASHLAND INC.
1995 PERFORMANCE UNIT PLAN
(As amended September 19, 1996)
1. PURPOSE
The purpose of this Ashland Inc. 1995 Performance Unit Plan (the
"Plan") is to further the long-term profitable growth of Ashland by
offering a long-term incentive in addition to current compensation to
eligible employees 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. DEFINITIONS
Terms not otherwise defined herein shall have the following
meanings:
(a) "Ashland" means Ashland Inc., its divisions and subsidiaries.
(b) "Board" means the Board of Directors of Ashland Inc.
(c) "Change in Control" shall be deemed to occur (1) upon the
approval of the shareholders of Ashland (or if such approval is not
required, upon the approval of the Board) 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 3(a)(9) or 13(d) of the Exchange Act),
other than Ashland Inc. or any subsidiary or employee benefit plan or trust
maintained by Ashland Inc. or any of its subsidiaries, shall become the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 15% of the Common Stock outstanding at
the time, without the approval of the Board, or (3) if 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.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" means the Personnel and Compensation Committee of the
Board.
(f) "Common Stock" means the common stock, $1.00 par value, of Ashland
Inc.
(g) "Employee" means an employee selected for participation in the
Plan as set forth in Section 5.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means, as of any specified date (or, if a
weekend or holiday, the next preceding business day), the closing price of
a share of Common Stock, as reported on the Composite Tape for New York
Stock Exchange issues.
(j) "Participant" means any Employee who receives a Performance Unit
Award under the Plan for a Performance Period.
<PAGE>
(k) "Performance Goals" mean performance goals as may be
established in writing by the Committee which may be based on earnings,
stock price, return on equity, return on investment, total return to
shareholders, economic value added, debt rating or achievement of business
or operational goals, such as drilling or exploration targets or profit per
barrel. Such goals may be absolute in their terms or measured against or in
relationship to other companies comparably or otherwise situated. Such
performance goals may be particular to an Employee or the division,
department, branch, line of business, subsidiary or other unit in which the
Employee works and/or may be based on the performance of Ashland generally.
(l) "Performance Period" means the period of time designated by
the Committee applicable to a Performance Unit Award during which the
Performance Goals shall be measured.
(m) "Performance Unit Award" means an award made pursuant to the
provisions of this Plan, the payment of which is contingent upon attainment
of Performance Goals.
3. SHARES: ADJUSTMENTS IN THE EVENT OF CHANGES IN CAPITALIZATION
(a) Shares Authorized for Issuance. There shall be reserved for
issuance under the Plan 2,200,000 shares of Common Stock, subject to
adjustment pursuant to subsection (b) below. Such shares shall be
authorized but unissued shares of Common Stock.
(b) Adjustments in Certain Events. In the event of any change in
the outstanding Common Stock by reason of any stock split, share dividend,
recapitalization, merger, consolidation, reorganization, combination, or
exchange or reclassification of shares, split-up, split-off, spin-off,
liquidation or other similar change in capitalization, or any distribution
to common shareholders other than cash dividends, the number or kind of
shares that may be issued under the Plan shall be automatically adjusted to
that the proportionate interest of the Employees shall be maintained as
before the occurrence of such event.
4. ADMINISTRATION
Subject to the express provisions of this Plan, the Committee
shall have full authority to construe, interpret and administer this Plan,
to prescribe, amend and rescind rules and regulations relating to the Plan,
to make Performance Unit Awards, to determine the terms, provisions and
conditions of the respective Performance Unit Awards (which need not be
identical) and to make all other determinations necessary or advisable for
the Plan's administration. Decisions of the Committee shall be final,
conclusive and binding upon all parties.
5. ELIGIBILITY
Performance Unit Awards may be made only to regular, full-time,
salaried employees of Ashland as selected by the Committee. Any Employee
may receive one or more Performance Unit Awards 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. Nothing contained
in this Plan shall be construed to limit the right of Ashland to grant
other forms of incentive compensation otherwise than under this Plan. The
Plan or the receipt of a Performance Unit Award shall not confer on any
individual any right to continue in the employ of Ashland or interfere in
any way with the right of Ashland to terminate his or her employment at any
time, with or without cause, despite the fact that such termination may
have an adverse impact on the Participant's receipt of payment of a
Performance Unit Award.
<PAGE>
6. PERFORMANCE UNIT AWARDS
(a) The Performance Goals and Performance Period applicable to a
Performance Unit Award shall be set forth in writing by the Committee no
later than 90 days after the commencement of the Performance Period and
shall be communicated to the Employee. The Committee shall have the
discretion to later revise the Performance Goals solely for the purpose of
reducing or eliminating the amount of compensation otherwise payable upon
attainment of the Performance Goals; provided that the Performance Goals
and the amounts payable upon attainment of the Performance Goals may be
adjusted during any Performance Period to reflect promotions, transfers or
other changes in an Employee's employment so long as such changes are
consistent with the Performance Goals established for other Employees in
the same or similar positions.
(b) In making a Performance Unit Award, the Committee may take
into account an Employee's responsibility level, performance, cash
compensation level, incentive compensation awards and such other
considerations as it deems appropriate. Each Performance Unit Award shall
be established in dollars or shares of Common Stock, or a combination of
both, as determined by the Committee, and shall be based on the Employee's
base salary on the date of the Performance Unit Award. The original amount
of any Performance Unit Award shall not exceed 400% of the Employee's then
annual base salary; the amount paid out upon meeting the Performance Goals
shall not exceed the amount of such Performance Unit Award; and the total
amount of all Performance Unit Awards for a Performance Period shall not
exceed 2% of shareholders' equity as shown in Ashland's Annual Report to
Shareholders at the end of the fiscal year next preceding the commencement
of such Performance Period. In determining the amount of any Performance
Unit Award made, in whole or in part, in shares of Common Stock, the value
thereof shall be based on the Fair Market Value on the first day of the
Performance Period or on such other date as the Board shall determine.
(c) A Performance Unit Award shall terminate for all purposes if
the Employee does not remain continuously employed and in good standing
with Ashland until payment of such Performance Unit Award. An Employee (or
his or her beneficiaries or estate) whose employment was terminated because
of death, disability or retirement will receive a pro rata portion of the
payment of his or her award based upon the portion of the Performance
Period during which he or she was so employed so long as the Performance
Goals are subsequently achieved.
(d) Payment with respect to Performance Unit Awards will be made
to Employees on a date or dates fixed by the Committee. The amount of such
payment shall be determined by the Committee and shall be based on the
original amount of such Performance Unit Award adjusted to reflect the
attainment of the Performance Goals during the Performance Period. 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.
In addition, Employees may be offered the opportunity to defer the
receipt of payment of a Performance Unit Award. Common Stock may be granted
(i) as a bonus for deferral, or (ii) as a bonus for retaining for a
specified period of time, Common Stock received in payment of a Performance
Unit Award, all under such terms as may be established by the Committee
from time to time. Notwithstanding, in no event shall the value of the
Common Stock granted as a bonus for deferral or retention exceed 20% of the
value of the Performance Unit Award so deferred or retained. Any and all
payments made under the Plan shall be subject to the applicable federal,
state or local taxes required by law to be withheld.
If payment of a Performance Unit Award established in dollars 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 amount payable by (y) the Fair
Market Value on the date the Board approves the Committee's decision to pay
the Performance Unit Award or on such other date as the Board shall
determine.
<PAGE>
If payment of a Performance Unit Award established in shares of
Common Stock 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 determined by
multiplying (x) the number of shares of Common Stock to be paid in cash on
such payment date with respect to such Performance Unit Award, by (y) the
Fair Market Value on the date the Board approves the Committee's decision
to pay the Performance Unit Award or on such other date as the Board shall
determine. Any payment may be subject to such restrictions and conditions
as the Committee may determine.
7. NONTRANSFERABILITY AND NO SHAREHOLDER RIGHTS
The right to receive payment of a Performance Unit Award shall not
be assigned or transferred in whole or in part, either directly or by
operation of law or otherwise (except by will or the laws of descent and
distribution) including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or any other manner. The holder
of a Performance Unit Award payable in whole or in part in shares of Common
Stock shall have none of the rights of a shareholder with respect to such
award 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 of Ashland upon such payment.
8. CHANGE IN CONTROL
Upon a Change in Control, in order to maintain a Participant's
rights under the Plan, there shall be an acceleration of any Performance
Period relating to any Performance Unit Award, and payment of any
Performance Unit Award shall be made in cash as soon as practicable after
such Change in Control based upon achievement of the Performance Goals
applicable to such award up to the date of the Change in Control. If such
Performance Unit Award was established in shares of Common Stock, the
amount of cash to be paid to an Employee with respect to the Performance
Unit Award shall be determined by multiplying (x) the number of shares of
Common Stock relating to such Performance Unit Award, by (y) the Fair
Market Value on the date of the Change in Control. Further, Ashland's
obligation with respect to such Performance Unit Award shall be assumed, or
new obligations substituted therefor, by the acquiring or surviving
corporation after such Change in Control. In addition, prior to the date of
such Change in Control, the Committee, in its sole judgment may make
adjustment to any Performance Unit Award as may be appropriate to reflect
such Change in Control.
9. GOVERNING LAW
The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the Commonwealth of Kentucky.
10. AMENDMENT AND TERMINATION
The Plan shall be submitted to the shareholders for approval and
adoption on January 26, 1995 or such other date fixed for the next meeting
of shareholders or any adjournment or postponement thereof. Upon
shareholder approval, the Plan will become effective as of October 1, 1994.
Unless terminated sooner by the Committee, to the extent necessary to
ensure that Performance Unit Award payments be deductible under the Code,
this Plan shall terminate on, and no Performance Unit Awards shall be
granted after, the first meeting of shareholders occurring in calendar year
2000. Termination of the Plan shall not affect any awards made hereunder
which are outstanding on the date of termination and such awards shall
continue to be subject to the terms of the Plan notwithstanding its
termination. The Committee may amend, alter or terminate this Plan at any
time without the prior approval of the Board; provided, however, that the
Committee may not, without approval by the Board and the shareholders:
(i) increase the amount of securities that may be issued under the
Plan (except as provided in Section 3(b));
(ii) materially modify the requirements as to eligibility for
participation in the Plan; or
(iii) otherwise materially increase the benefits accruing the
Employees under the Plan.
Exhibit 10.16
ASHLAND INC.
INCENTIVE COMPENSATION PLAN FOR KEY EXECUTIVES
(As amended September 19, 1996)
1. PURPOSE
The principal purposes of the Ashland Inc. Incentive Compensation Plan
for Key Executives (the "Plan") are to provide to Eligible Officers
incentives to earn annual incentive compensation through the achievement of
performance goals and to assist the Company in attracting, motivating and
retaining key employees on a competitive basis.
2. DEFINITIONS
Terms not otherwise defined herein shall have the following meanings:
(a) "Board" means the Board of Directors of Ashland Inc.
(b) "Change in Control" shall be deemed to occur (1) upon the approval
of the shareholders of the Company (or if such approval is not required,
upon the approval of the Board) of (A) any consolidation or merger of the
Company in which the Company 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 the Company or (C) adoption of any plan or
proposal for the liquidation or dissolution of the Company, (2) when any
"person" (as defined in Section 3(a)(9) or 13(d) of the Exchange Act),
other than the Company or any subsidiary or employee benefit plan or trust
maintained by the Company or any of its subsidiaries, shall become the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 15% of the Common Stock outstanding at
the time, without the approval of the Board, or (3) if 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 the Company'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.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" means the Personnel and Compensation Committee of the
Board.
(e) "Common Stock" means the common stock, $1.00 par value, of Ashland
Inc.
(f) "Company" means Ashland Inc., its divisions and subsidiaries.
(g) "Eligible Officer" means an executive officer described in Section
4.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Executive Officer" means an executive officer as defined in Rule
3b-7 under the Exchange Act.
(j) "Fair Market Value" means, as of any specified date (or, if a
weekend or holiday, the next preceding business day), the closing price of
a share of Common Stock, as reported on the Composite Tape for New York
Stock Exchange issues.
<PAGE>
(k) "Hurdle" means the minimum Performance Goal(s) that must be
reached in order for the Eligible Officer to receive any Incentive Award.
(l) "Incentive Award" means the amount determined by the Committee to
be payable to a Participant upon the achievement of the Performance Goals
for the particular Performance Period.
(m) "Participant" means any Eligible Officer who receives an Incentive
Award under the Plan for a Performance Period.
(n) "Performance Goals" mean performance goals as may be established
in writing by the Committee which may be based on earnings, stock price,
return on equity, return on investment, total return to shareholders,
economic value added, debt rating or achievement of business or operational
goals, such as drilling or exploration targets or profit per barrel. Such
goals may be absolute in their terms or measured against or in relationship
to other companies comparably or otherwise situated. Such performance goals
may be particular to an Eligible Officer or the division, department,
branch, line of business, subsidiary or other unit in which the Eligible
Officer works and/or may be based on the performance of the Company
generally.
(o) "Performance Period" means an annual period based upon the
Company's fiscal year, except to the extent the Committee determines
otherwise.
(p) "Target" means the Performance Goal(s) that must be reached in
order for the Eligible Officer to receive the maximum Incentive Award. The
maximum Incentive Award is a fixed percentage of the midpoint of the salary
range for the position held by the Eligible Officer and is based upon the
Eligible Officer's level of employment. No Eligible Officer may receive a
maximum Incentive Award more than 150% of their salary range midpoint.
3. SHARES; ADJUSTMENTS IN THE EVENT OF CHANGES IN CAPITALIZATION
(a) Shares Authorized for Issuance. There shall be reserved for
issuance under the Plan 150,000 shares of Common Stock, subject to
adjustment pursuant to subsection (b) below. Such shares shall be
authorized but unissued shares of Common Stock.
(b) Adjustments in Certain Events. In the event of any change in the
outstanding Common Stock by reason of any stock split, share dividend,
recapitalization, merger, consolidation, reorganization, combination, or
exchange or reclassification of shares, split-up, split-off, spin-off,
liquidation or other similar change in capitalization, or any distribution
to common shareholders other than cash dividends, the number or kind of
shares that may be issued under the Plan shall be automatically adjusted so
that the proportionate interest of the Eligible Officers shall be
maintained as before the occurrence of such event.
4. ELIGIBILITY
The Chief Executive Officer and the Chief Operating Officer of the
Company, plus any other Executive Officers chosen by the Committee, shall
be eligible to participate in the Plan. An individual who becomes eligible
to participate in the Plan during the Plan Year may be approved by the
Committee for a partial year of participation.
5. ADMINISTRATION
Full power and authority to construe, interpret and administer the
Plan shall be vested in the Committee. Decisions of the Committee shall be
final, conclusive and binding upon all parties.
<PAGE>
6. AWARDS; PAYMENT
(a) No later than 90 days after the commencement of each Performance
Period, the Committee shall establish in writing one or more Performance
Goals, including the Hurdle and Target, that must be reached by an Eligible
Officer in order to receive an Incentive Award for such Performance Period.
The Committee shall have the discretion to later revise the Performance
Goals and the amount to be paid out upon the attainment of these goals
solely for the purpose of reducing or eliminating the amount of
compensation otherwise payable upon attainment of the Performance Goals;
provided that the Performance Goals and the amounts payable upon attainment
of the Performance Goals may be adjusted during any Performance Period to
reflect promotions, transfers or other changes in a Participant's
employment so long as such changes are consistent with the Performance
Goals established for other Participants in the same or similar positions.
(b) The amount payable to a Participant shall be based upon the
achievement of the Performance Goals and the Participant achieving the
highest possible individual performance rating for the Performance Period.
To the extent that a Participant does not achieve the highest possible
individual performance rating for the Performance Period, the Committee
shall have the discretion to reduce the amount payable to such Participant;
provided, however, that no payment for individual performance shall be made
unless the Performance Goals are achieved.
(c) Payment of Incentive Awards shall be made on a date or dates fixed
by the Committee. Payment may be made in one or more installments and may
be made wholly in cash, wholly in shares of Common Stock or a combination
thereof as determined by the Committee.
In addition, Participants may be offered the opportunity to defer the
receipt of payment of an Incentive Award. Common Stock may be granted (i)
as a bonus for deferral or (ii) as a bonus for retaining, for a specified
period of time, Common Stock received in payment of an Incentive Award, all
under such terms as may be established by the Committee from time to time.
Notwithstanding, in no event shall the value of the Common Stock granted as
a bonus for deferral or retention exceed 20% of the value of the Incentive
Award so deferred or retained. Any and all payments made under the Plan
shall be subject to applicable federal, state or local taxes required by
law to be withheld.
If payment of an Incentive Award shall be made all or partially in
shares of Common Stock, the number of shares of Common Stock to be
delivered to a Participant on any payment date shall be determined by
dividing (x) the original dollar amount to be paid on the payment date (or
the part thereof determined by the Committee to be delivered in shares of
such Incentive Award) by (y) the Fair Market Value on the date the Board
approves the Committee's decision to pay an Incentive Award.
(d) An Incentive Award shall terminate for all purposes if the
Participant does not remain continuously employed and in good standing with
the Company until the date of payment of such award. In the event an
Eligible Officer's employment is terminated because of death, disability or
retirement, the Eligible Officer (or his or her beneficiaries or estate)
shall receive a pro rata portion of the payment of an Incentive Award for
which the Eligible Officer would have otherwise been eligible based upon
the portion of the Performance Period during which he or she was so
employed so long as the Performance Goals are subsequently achieved.
7. INALIENABILITY OF BENEFITS
Incentive Awards may not be assigned or transferred in whole or in
part, either directly or by operation of law or otherwise (except by will
or pursuant to the laws of descent and distribution) including, but not by
way of limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or any other manner.
<PAGE>
8. GOVERNING LAW
The provisions of this Plan shall be interpreted and construed in
accordance with laws of the Commonwealth of Kentucky.
9. AMENDMENTS
The Committee may amend, alter or terminate this Plan at any time
without the prior approval of the Board; provided, however, that the
Committee may not, without approval by the Board and the shareholders of
the Company:
(a) increase the amount of securities that may be issued under the
Plan (except as provided in Section 3(b));
(b) materially modify the requirements as to eligibility for
participation in the Plan; or
(c) otherwise materially increase the benefits accruing to
participants under the Plan.
10. CHANGE IN CONTROL
Upon a Change in Control, in order to maintain an Eligible Officer's
rights under the Plan, there shall be an acceleration of any Performance
Period relating to any Incentive Award, and payment of any Incentive Award
shall be made in cash as soon as practicable after such Change in Control
based upon achievement of the Performance Goals applicable to such award up
to the date of the Change in Control. Further, the Company's obligation
with respect to such Incentive Award shall be assumed, or new obligations
substituted therefor, by the acquiring or surviving corporation after such
Change in Control. In addition, prior to the date of such Change in
Control, the Committee, in its sole judgment, may make adjustment to any
Incentive Award as may be appropriate to reflect such Change in Control.
11. EFFECTIVE DATE; TERM OF THE PLAN
This Plan shall be submitted to the shareholders of the Company for
their approval and adoption on January 26, 1995 or such other date fixed
for the next meeting of shareholders or any adjournment or postponement
thereof. If approved and adopted by the shareholders, the Plan will become
effective as of September 14, 1994. Unless terminated sooner by the
Committee, to the extent necessary to ensure that Incentive Award payments
be deductible under the Code, the Plan shall terminate on, and no Incentive
Awards shall be granted after, the first meeting of shareholders occurring
in calendar year 2000.
Exhibit 10.17
ASHLAND INC.
DEFERRED COMPENSATION PLAN
(Amended as of September 19, 1996)
1. PURPOSE
The purpose of this Ashland Inc. Deferred Compensation Plan (the
"Plan"), is to provide eligible key employees of the Company with an
opportunity to defer compensation to be earned by them from the Company as
a means of saving for retirement or other future purposes.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
(a) "Accounting Date" means the last day of a quarter or, if a
weekend or holiday, the next preceding business day.
(b) "Beneficiary" means the person(s) designated by the
Participant in accordance with Section 12.
(c) "Board" means the Board of Directors of Ashland Inc.
(d) "Change in Control" shall be deemed to occur (1) upon the
approval of the shareholders of the Company (or if such approval is not
required, upon the approval of the Board) of (A) any consolidation or
merger of the Company in which the Company 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 the Company, or (C) adoption of any
plan or proposal for the liquidation or dissolution of the Company, (2)
when any "person" (as defined in Section 3(a)(9) or 13(d) of the Exchange
Act), other than Ashland Inc. or any subsidiary or employee benefit plan or
trust maintained by Ashland Inc. or any of its subsidiaries, shall become
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 15% of the Common Stock outstanding at
the time, without the approval of the Board, or (3) if 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 the Company'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.
(e) "Committee" means the Personnel and Compensation Committee of
the Board.
(f) "Common Stock" means the common stock, $1.00 par value, of
Ashland Inc.
(g) "Common Stock Fund" means that investment option, approved by
the Committee, in which a Participant's Compensation Account may be
invested, as approved by the Committee, and may earn income based on a
hypothetical investment in Common Stock.
(h) "Company" means Ashland Inc., its divisions and subsidiaries.
(i) "Compensation" means any employee compensation determined by
the Committee to be properly deferrable under the Plan.
<PAGE>
(j) "Compensation Account" means the account to which the
Participant's Deferred Compensation is credited.
(k) "Corporate Human Resources" means the Corporate Human
Resources Department of the Company.
(l) "Credit Date" means such date as designated by the Committee
that Deferred Compensation shall be credited to the Compensation Account.
(m) "Deferred Compensation" means the Compensation elected by the
Participant to be deferred pursuant to the Plan.
(n) "Election" means a Participant's delivery of a written notice
of election to Corporate Human Resources electing to defer payment of all
or a portion of his or her Compensation.
(o) "Employee" means a full-time, regular salaried employee (which
term shall be deemed to include officers) of the Company and of its present
and future subsidiary corporations as defined in Section 424 of the
Internal Revenue Code of 1986, as amended.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(q) "Fair Market Value" means the price of a share of Common
Stock, as reported on the Composite Tape for New York Stock Exchange issues
on the date and at the time designated by the Company.
(r) "Fiscal Year" means that annual period commencing October 1
and ending the following September 30.
(s) "Nonqualified Plan" means the Ashland Inc. Nonqualified
Excess Benefit Pension Plan, as it now exists or as it may hereafter be
amended.
(t) "Nonqualified Payments" means payments made to a Participant
pursuant to the Plan and the Nonqualified Plan.
(u) "Participant" means an Employee selected by the Committee to
participate in the Plan and who has elected to defer payment of all or a
portion of his or her Compensation under the Plan. "Participant" shall also
include any Employee who had an account under the Prior Plans which has
been transferred to this Plan.
(v) "Plan" means this Ashland Inc. Deferred Compensation Plan as
it now exists or as it may hereafter be amended.
(w) "Prime Rate of Interest" means the rate of interest quoted by
Citibank, N.A. as its prime commercial lending rate on the latest date
practicable prior to the date of actual distribution under Section 13.
(x) "Prior Plans" mean the Ashland Inc. Deferred Compensation
Plan for ERISA Forfeitures and the Ashland Inc. Deferred Compensation Plan
for Key Employees, which are being replaced by this Plan as of the
effective date of this Plan identified in Section 17.
(y) "Section 16(b) Participant" means a Participant who is
subject to Section 16(b) of the Exchange Act.
(z) "SERP" means the Ninth Amended and Restated Ashland Inc.
Supplemental Early Retirement Plan for Certain Key Executive Employees, as
it now exists or as it may hereafter be amended.
<PAGE>
(aa) "SERP Payments" means payments made to a Participant
pursuant to the Plan and the SERP.
(bb) "Service Year" means the Fiscal Year or portion thereof
during which the services have been rendered for which Compensation is
payable.
(cc) "Stock Unit(s)" means the share equivalents credited to the
Common Stock Fund of a Participant's Compensation Account pursuant to
Section 6.
(dd) "Termination" means retirement from the Company or
termination of services as an Employee for any other reason.
3. SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION
(a) Shares Authorized for Issuance. There shall be reserved for
issuance under the Plan 500,000 shares of Common Stock, subject to
adjustment pursuant to subsection (c) below.
(b) Units Authorized for Credit. The maximum number of Stock
Units that may be credited to Participants' Compensation Accounts under the
Plan is 1,500,000, subject to adjustment pursuant to subsection (c) below.
(c) Adjustments in Certain Events. In the event of any change in
the outstanding Common Stock of the Company by reason of any stock split,
share dividend, recapitalization, merger, consolidation, reorganization,
combination, or exchange or reclassification of shares, split-up,
split-off, spin-off, liquidation or other similar change in capitalization,
or any distribution to common shareholders other than cash dividends, the
number or kind of shares or Stock Units that may be issued or credited
under the Plan shall be automatically adjusted so that the proportionate
interest of the Participants shall be maintained as before the occurrence
of such event. Such adjustment shall be conclusive and binding for all
purposes of the Plan.
4. ELIGIBILITY
The Committee shall have the authority to select among any
Employees those Employees who shall be eligible to participate in the Plan;
provided, however, that employees and/or retirees who have elected to defer
an amount into this Plan from another plan sponsored or maintained by
Ashland Inc., the terms of which allowed such employee or retiree to make
such a deferral election into this Plan, shall be considered to be eligible
to participate in this Plan.
5. ADMINISTRATION
Full power and authority to construe, interpret and administer the
Plan shall be vested in the Committee. This power and authority includes,
but is not limited to, selecting compensation eligible for deferral,
establishing deferral terms and conditions and adopting modifications,
amendments and procedures as may be deemed necessary, appropriate or
convenient by the Committee. Decisions of the Committee shall be final,
conclusive and binding upon all parties. Day-to-day administration of the
Plan shall be the responsibility of Corporate Human Resources.
6. PARTICIPANT ACCOUNTS
Upon election to participate in the Plan, there shall be
established a Compensation Account for the Participant to which there shall
be credited any Deferred Compensation, as of each Credit Date. Each
Participant's Compensation Account shall be credited (or debited) on each
Accounting Date with income (or loss) based upon a hypothetical investment
in any one or more of the investment options available under the Plan, as
prescribed by the Committee for the particular compensation credited, which
may include a Common Stock Fund, as elected by the Participant under the
terms of Section 8.
If a Participant elects to invest all or any portion of his or her
Compensation Account in the Common Stock Fund, that portion of the
Participant's Compensation Account shall be credited on
<PAGE>
each Credit Date with Stock Units equal to the number of shares of Common
Stock (including fractions of a share) that could have been purchased with
the amount of such Deferred Compensation at the Fair Market Value on the
Credit Date. As of any dividend payment date for the Common Stock, the
portion of a Participant's Compensation Account invested in the Common
Stock Fund as of the dividend record date shall be credited with additional
Stock Units. The number of Stock Units credited to the Common Stock Fund
will be determined by dividing (i) the product of (a) the dollar value of
the dividend declared in respect of a share of Ashland Common Stock
multiplied by (b) the number of Stock Units credited to the Participant's
Common Stock Fund as of the dividend record date by (ii) the Fair Market
Value of a share of Ashland Common Stock on the dividend payment date.
A Participant who had an existing account under the Prior Plans
shall automatically have such account transferred to a Compensation Account
under this Plan to be maintained and administered pursuant to the terms and
conditions of this Plan.
Amounts credited to a Compensation Account shall remain a part of
the general funds of the Company and nothing contained in this Plan shall
be deemed to create a trust or fund of any kind or create any fiduciary
relationship. Nothing contained herein shall be deemed to give any
Participant any ownership or other proprietary, security or other rights in
any funds, stock or assets owned or possessed by the Company, whether or
not earmarked for the Company's own purposes as a reserve or fund to be
utilized by the Company for the discharge of its obligations hereunder. To
the extent that any person acquires a right to receive payments or
distributions from the Company under this Plan, such right shall be no
greater than the right of any unsecured creditor of the Company.
7. FINANCIAL HARDSHIP
Upon the written request of a Participant or a Participant's legal
representative and a finding that continued deferral will result in
financial hardship to the Participant, the Committee (in its sole
discretion) may authorize (a) the payment of all or a part of a
Participant's Compensation Account in a single installment prior to his or
her ceasing to be a Participant, or (b) the acceleration of payment of any
multiple installments thereof. If, in the sole discretion of the Committee,
a delay in any distribution pursuant to this Section 7 shall be necessary
to avoid liability of the Participant under Section 16(b) of the Exchange
Act, any such distribution shall be so postponed.
8. MANNER OF ELECTION
(a) General. Any Employee selected by the Committee to participate
in the Plan may elect to do so by delivering to Corporate Human Resources a
written notice on a form prescribed by Corporate Human Resources electing
to defer payment of all or a portion (in 25% increments or other increments
so prescribed by the Committee) of his or her Compensation (an "Election")
and setting forth the manner in which such Deferred Compensation shall be
invested in accordance with Section 6 hereof. The timing of the filing of
the appropriate form with Corporate Human Resources shall be determined by
the Committee. An effective election to defer Compensation may not be
revoked or modified except as otherwise determined by the Committee or
stated herein. In addition to the provisions contained in this Plan, any
deferrals of SERP Payments or Nonqualified Payments must be in accordance
with the terms of the SERP or the Nonqualified Plan.
(b) Investment Alternatives - Existing Balances. A Participant may
elect to change an existing selection as to the investment alternatives in
effect with respect to his or her existing Compensation Account (in 25%
increments or other increments so prescribed by the Committee) one (1) time
during any three-month period by filing with Corporate Human Resources a
new Election, at least fifteen (15) days prior to the commencement of the
quarter in which the Participant desires the change to become effective.
The change will be deemed effective as of the first business day of the
next quarter subsequent to the filing of such Election. Notwithstanding the
foregoing, a Section 16(b) Participant's election to change an existing
selection involving the Common Stock Fund must occur at least six months
following an "opposite-way election" by that Section 16(b) Participant
involving either the Common Stock Fund of the Plan or the Ashland Common
Stock Fund of the Ashland Inc. Employee Savings Plan (the "Savings Plan").
An "opposite way election" means a transfer into either the Common Stock
Fund of the Plan or the Ashland Common Stock Fund of the
<PAGE>
Savings Plan followed by a transfer out of either the Common Stock Fund of
the Plan or the Ashland Common Stock Fund of the Savings Plan, or a
transfer out of either the Common Stock Fund of the Plan or the Ashland
Common Stock Fund of the Savings Plan followed by a transfer into either
the Common Stock Fund of the Plan or the Ashland Common Stock Fund of the
Savings Plan.
(c) Change of Beneficiary. A Participant may, at any time, elect
to change the designation of a Beneficiary.
(d) Change in Distribution of Account. A Participant will be
allowed to change the Election as to the applicable payment period or form
of payment for all amounts previously deferred pursuant to such Election,
subject to approval by the Committee. Such change must be made by the
earlier of:
(1) the date six months prior to the first day of the month
following such Participant's Termination; or
(2) the December 31 immediately preceding the first day
of the month following such Participant's Termination.
9. MANNER OF PAYMENT UPON TERMINATION
In accordance with the Participant's Election and subject to
Committee approval upon payout, amounts credited to a Participant's
Compensation Account will be paid in a lump sum or in the form of annual,
semi-annual, or quarterly installments, in cash, or if so determined by the
Committee, in shares of Common Stock or a combination of both to the
Participant following his or her Termination or, in the event of his or her
death, to a Beneficiary. The entire Compensation Account must be paid out
within forty years following the date of a Participant's Termination. A
Participant may make different elections with respect to the applicable
payment period or form of payment with respect to different forms of
Compensation and may provide for different payment periods and forms of
payment before and after his or her death.
The amount of any cash distribution to be made in installments
with respect to the Compensation Account will be determined by dividing the
balance in such Compensation Account on the Accounting Date immediately
preceding the cash distribution (minus any amounts in the Common Stock
Fund) by the number of installments in which distributions remain to be
made (including the current distribution). The amount of any cash
distribution to be made in installments with respect to Stock Units will be
determined by multiplying the number of Stock Units attributable to such
installment (determined as hereinafter provided) by the closing price of
the Common Stock on each Accounting Date immediately prior to the date on
which such installment is to be paid. The number of Stock Units
attributable to an installment shall be determined by dividing the current
number of Stock Units in the Common Stock Fund by the number of
installments in which distributions remain to be made (including the
current distribution).
The amount of any stock distribution to be made in installments
with respect to the Compensation Account shall be determined by dividing
the amount of cash attributable to such installment (determined as
hereinafter provided) by the closing price of the Common Stock on each
Accounting Date immediately prior to the date on which such installment is
to be paid. The amount of cash attributable to an installment shall be
determined by dividing the current balance in such Compensation Account on
the Accounting Date immediately preceding the stock distribution (minus any
amounts in the Common Stock Fund) by the number of installments in which
distributions remain to be made (including the current distribution). The
amount of any stock distribution to be made in installments with respect to
the amount of a Compensation Account invested in the Common Stock Fund
shall be determined by dividing the current number of Stock Units by the
number of installments in which distributions remain to be made (including
the current distribution). Only whole numbers of shares of Common Stock
will be issued, with the value of any fractional shares to be paid in cash.
10. COMMENCEMENT OF PAYMENTS
Payments of amounts deferred under this Plan shall commence after
a Participant's Termination in accordance with the Participant's Election.
If a Participant dies prior to the first
<PAGE>
deferred payment specified in an Election, payments shall commence to the
Participant's Beneficiary on the first payment date so specified.
11. ADMINISTRATIVE CONVENIENCE
Notwithstanding any provision of this Plan to the contrary, a
Participant may not defer Compensation in an amount less than $1,000 and no
payment or payments under the Plan may be made to the Participant or any
Beneficiary of the Participant in an amount that would annually total less
than $1,000, unless the amount remaining in a Compensation Account totals
less than $1,000, in which event the entire amount remaining in a
Compensation Account shall be paid to the Participant or his or her
Beneficiary. The Committee reserves the right, in its sole and absolute
discretion, to further modify the terms of the Plan or payments made to
Participants under the Plan for the Company's administrative convenience.
12. BENEFICIARY DESIGNATION
A Participant may designate one or more persons (including a
trust) to whom or to which payments are to be made if the Participant dies
before receiving payment of all amounts due hereunder. A designation of
Beneficiary will be effective only after the signed Election is filed with
Corporate Human Resources while the Participant is alive and will cancel
all designations of Beneficiary signed and filed earlier. If the
Participant fails to designate a Beneficiary as provided above or if all of
a Participant's Beneficiaries predecease him or her and he or she fails to
designate a new Beneficiary, the remaining unpaid amounts shall be paid in
one lump sum to the estate of such Participant. If all Beneficiaries of the
Participant die after the Participant but before complete payment of all
amounts due hereunder, the remaining unpaid amounts shall be paid in one
lump sum to the estate of the last to die of such Beneficiaries.
13. CHANGE IN CONTROL
Notwithstanding any provision of this Plan to the contrary, in the
event of a Change in Control, each Participant in the Plan shall receive an
automatic lump sum cash distribution of all amounts accrued in the
Participant's Compensation Account (including interest at the Prime Rate of
Interest from the date of the Change of Control through the business day
immediately preceding the date of distribution) not later than fifteen (15)
days after the date of the Change in Control. For this purpose, the balance
in the portion of a Participant's Compensation Account invested in the
Common Stock Fund shall be determined by multiplying the number of Stock
Units by the higher of (a) the highest Fair Market Value on any date within
the period commencing 30 days prior to such Change in Control, or (b) if
the Change in Control of the Company occurs as a result of a tender or
exchange offer or consummation of a corporate transaction, then the highest
price paid per share of Common Stock pursuant thereto. Any consideration
other than cash forming a part or all of the consideration for Common Stock
to be paid pursuant to the applicable transaction shall be valued at the
valuation price thereon determined by the Board.
In addition, the Company shall reimburse a Participant for the
legal fees and expenses incurred if the Participant is required to seek to
obtain or enforce any right to distribution. In the event that it is
determined that such Participant is properly entitled to a cash
distribution hereunder, such Participant shall also be entitled to interest
thereon payable in an amount equivalent to the Prime Rate of Interest from
the date such distribution should have been made to and including the date
it is made. Notwithstanding any provision of this Plan to the contrary,
this Section 13 may not be amended after a Change in Control occurs without
the written consent of a majority in number of Participants.
14. INALIENABILITY OF BENEFITS
The interests of the Participants and their Beneficiaries under
the Plan may not in any way be voluntarily or involuntarily transferred,
alienated or assigned, nor subject to attachment, execution,
<PAGE>
garnishment or other such equitable or legal process. A Participant or
Beneficiary cannot waive the provisions of this Section 14.
15. GOVERNING LAW
The provisions of this plan shall be interpreted and construed in
accordance with the laws of the Commonwealth of Kentucky, except to the
extent preempted by Federal law.
16. AMENDMENTS
The Committee may amend, alter or terminate this Plan at any time
without the prior approval of the Board; provided, however, that the
Committee may not, without approval by the Board and the shareholders:
(a) increase the number of securities that may be issued under
the Plan (except as provided in Section 3(c));
(b) materially modify the requirements as to eligibility for
participation in the Plan; or
(c) otherwise materially increase the benefits accruing to
Participants under the Plan.
17. EFFECTIVE DATE
The Plan was approved by the shareholders of the Company on
January 26, 1995, and originally became effective as of October1, 1994, and
has been restated in this document effective as of September 19, 1996.
EXHIBIT 12
ASHLAND INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
(In millions)
<TABLE>
<CAPTION>
Years Ended September 30
-------------------------------------------------------------
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
EARNINGS
Net income (loss) $ (336) $ 142 $ 197 $ 24 $ 211
Cumulative effect of accounting changes 268 - - - -
Minority interest in earnings of subsidiaries - - - 23 8
Income taxes (90) 58 75 (13) 92
Interest expense 132 124 119 174 172
Interest portion of rental expense 34 35 38 45 53
Amortization of deferred debt expense 1 2 1 1 1
Undistributed earnings of unconsolidated affiliates (22) (12) (14) 6 (17)
Amounts related to significant affiliates*
Earnings 30 (2) 27 16 36
Dividends (4) (4) - (4) -
---------- ---------- ---------- ---------- ----------
$ 13 $ 343 $ 443 $ 272 $ 556
========== ========== ========== ========== ==========
FIXED CHARGES
Interest expense $ 132 $ 124 $ 119 $ 174 $ 172
Interest portion of rental expense 34 35 38 45 53
Amortization of deferred debt expense 1 2 1 1 1
Capitalized interest 3 9 - - 1
Fixed charges of significant affiliates* 17 16 18 20 17
---------- ---------- ---------- ---------- ----------
$ 187 $ 186 $ 176 $ 240 $ 244
========== ========== ========== ========== ==========
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Preferred dividend requirements $ - $ 6 $ 19 $ 19 $ 19
Ratio of pretax to net income** - 1.41 1.38 .72 1.42
---------- ---------- ---------- ---------- ----------
Preferred dividends on a pretax basis - 9 26 14 27
Fixed charges 187 186 176 240 244
---------- ---------- ---------- ---------- ----------
$ 187 $ 195 $ 202 $ 254 $ 271
========== ========== ========== ========== ==========
RATIO OF EARNINGS TO FIXED CHARGES *** 1.84 2.51 1.13 2.28
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
*** 1.76 2.19 1.07 2.05
</TABLE>
* Significant affiliates are companies accounted for on the equity
method that are 50% owned or whose indebtedness has been directly or
indirectly guaranteed by Ashland or its consolidated subsidiaries.
** Computed as income before income taxes and minority interest divided
by net income before minority interest, which adjusts dividends on
preferred stock to a pretax basis.
*** Fixed charges exceeded earnings (as defined) by $174 million as a
result of special charges and the current year impact of accounting
changes.
<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaries
Management's Discussion and Analysis
Years Ended September 30
(In millions) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES AND OPERATING REVENUES
Petroleum $ 5,614 $ 5,050 $ 4,666
SuperAmerica 1,928 1,788 1,706
Valvoline 1,199 1,113 1,000
Chemical 3,695 3,551 2,885
APAC 1,235 1,123 1,101
Coal(1) 580 610 -
Exploration 241 198 199
Intersegment sales (1,362) (1,266) (1,223)
- --------------------------------------------------------------------------------------------------------------------------
$13,130 $12,167 $10,334
==========================================================================================================================
OPERATING INCOME
Petroleum $ 55 $ (54) $ 113
SuperAmerica 34 53 59
Valvoline 82 (4) 52
------------------------------------------
Total Refining and Marketing Group 171 (5) 224
Chemical 169 159 125
APAC 83 75 70
Coal(1) 36 66 -
Exploration 94 (6) 28
General corporate expenses (97) (91) (80)
- --------------------------------------------------------------------------------------------------------------------------
$ 456 $ 198 $ 367
==========================================================================================================================
EQUITY INCOME
Ashland Coal, Inc.(1) $ - $ - $ 6
Arch Mineral Corporation 13 (4) 7
Other 11 11 9
- --------------------------------------------------------------------------------------------------------------------------
$ 24 $ 7 $ 22
==========================================================================================================================
OPERATING INFORMATION
Petroleum
Product sales (thousand barrels per day)(2) 390.5 377.2 357.7
Refining inputs (thousand barrels per day)(3) 368.5 349.5 338.4
Value of products manufactured per barrel $ 24.64 $ 22.49 $ 21.50
Input cost per barrel 20.50 18.28 16.49
------------------------------------------
Refining margin per barrel $ 4.14 $ 4.21 $ 5.01
SuperAmerica
Product sales (thousand barrels per day) 74.2 71.5 70.2
Merchandise sales (millions) $ 583 $ 548 $ 519
Valvoline lubricant sales (thousand barrels per day)(2) 19.5 19.1 17.9
APAC construction backlog at September 30 (millions) $ 647 $ 672 $ 554
Ashland Coal, Inc.(4)
Tons sold (millions) 22.0 22.0 18.2
Sales price per ton $ 26.35 $ 27.80 $ 29.85
Arch Mineral Corporation(4)
Tons sold (millions) 28.6 27.2 24.3
Sales price per ton $ 25.47 26.23 26.35
Exploration
Net daily production
Natural gas (million cubic feet)(2) 108.4 102.9 94.3
Nigerian crude oil (thousand barrels) 17.5 18.8 18.7
Sales price
Natural gas (per thousand cubic feet) $ 2.39 $ 1.89 $ 2.42
Nigerian crude oil (per barrel) $ 18.46 $ 16.17 $ 15.01
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ashland Coal was consolidated in 1996 and 1995 and accounted for
on the equity method in 1994 (see Note F to the financial statements).
(2) Includes intersegment sales.
(3) Includes crude oil and other purchased feedstocks.
(4) Ashland's ownership interest is 56% in Ashland Coal (39% prior to 1995)
and 50% in Arch Mineral.
<PAGE>
RESULTS OF OPERATIONS
Ashland's net income amounted to $211 million in 1996, $24 million in
1995 and $197 million in 1994. However, comparisons of these results are
affected by various unusual items. The following table shows the effects of
unusual items on operating and net income for the three years ended
September 30, 1996.
<TABLE>
<CAPTION>
Operating income Net income
--------------------------------- ----------------------------------------
(In millions) 1996 1995 1994 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income before unusual items $383 $318 $356 $163 $103 $ 190
Columbia Gas bankruptcy settlement 73 - - 48 - -
Asset impairment write-downs - (83) - - (54) -
Early retirement and restructuring programs - (37) - - (25) -
Litigation matters - - 11 - - 7
- ----------------------------------------------------------------------------------------------------------------------------------
Income as reported $456 $198 $367 $211 $ 24 $197
==================================================================================================================================
</TABLE>
During 1995, Ashland Exploration entered into a settlement agreement with
Columbia Gas Transmission to resolve claims involving natural gas sales
contracts that were abrogated by Columbia in 1991. The agreement provided
for a $78 million payment to Ashland Exploration, of which 5% would be
withheld by Columbia to be used to potentially satisfy the claims of
non-settling producers. Ashland Exploration received the net proceeds under
this agreement in 1996, which resulted in operating income of $73 million.
At this time, it is uncertain what portion, if any, of the withheld amount
will ultimately be received by Ashland Exploration.
Effective September 30, 1995, Ashland adopted Financial Accounting
Standards Board Statement No. 121 (FAS 121), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." As a
result, Ashland recorded charges of $83 million to write down certain
assets to their fair values, including an idle unit at Ashland Petroleum's
Catlettsburg refinery, certain unused crude oil gathering pipelines of
Scurlock Permian, various petroleum product marketing properties to be sold
or shut down and various other assets. Fair values were based upon
appraisals or estimates of discounted future cash flows. In addition,
charges of $37 million related to early retirement and restructuring
programs were incurred, reflecting efforts by Ashland Petroleum and several
other divisions to reduce their costs and improve their competitive
positions.
Excluding unusual items, net income amounted to $163 million in 1996,
compared to $103 million in 1995. Record results were achieved by
Valvoline, Ashland Chemical and APAC, combined with increased earnings from
Ashland Petroleum, Ashland Exploration and Arch Mineral. Such improvements
more than offset the reduced earnings from SuperAmerica and Ashland Coal.
Net income before unusual items amounted to $103 million in 1995, compared
to $190 million in 1994. Record results from Ashland Chemical, APAC and
Ashland Coal were more than offset by reduced earnings from Ashland
Petroleum, Valvoline, Ashland Exploration and Arch Mineral, as well as
higher interest costs.
The following table compares operating income before unusual items by
segment for the last three years. Due to Ashland's purchase of an
additional interest in Ashland Coal during 1995, the results of Ashland
Coal were consolidated and shown as a new segment beginning with that year.
(In millions) 1996 1995 1994
- ---------------------------------------------------------------------------
Operating income
Petroleum $ 55 $ 48 $113
SuperAmerica 34 53 59
Valvoline 82 1 52
Chemical 169 164 125
APAC 83 75 70
Coal 36 66 -
Exploration 21 (2) 28
General corporate expenses (97) (87) (91)
- ---------------------------------------------------------------------------
$383 $318 $356
- ---------------------------------------------------------------------------
(Bar graph appears in the right margin comparing Ashland Inc. operating
income for fiscal 1994, 1995 and 1996. The graph shows the breakdown
between Ashland's petroleum and energy and chemical related businesses.)
PETROLEUM
Operating income of Ashland Petroleum amounted to $55 million in 1996,
compared to $48 million in 1995 before unusual items. The improvement was
achieved even though rapidly rising crude oil prices late in 1996 led to
severe margin compression and a weak September 1996 quarter. Despite the
modest improvement, results for 1996 were still disappointing given the
progress Ashland Petroleum made in its ongoing efforts to improve its
competitive position. Refinery runs averaged 368,500 barrels a day, up 5%
from 1995 and refining expenses (other than fuel consumed in the refining
process) were reduced by 26(cent) a barrel, due to the higher level of
throughputs and ongoing efforts to reduce costs and increase efficiency.
The effects of these improvements, however, were largely offset by higher
average crude oil costs, which could not be fully passed through in product
prices, and associated increases in fuel costs. For the year, input costs
increased $2.22 a barrel, peaking in the September 1996 quarter with an
increase of $4.58 a barrel compared to the September 1995 quarter. As a
result, refining margins were compressed during what is normally the strong
summer driving season.
(Bar graph appears in the right margin comparing operating income from
Ashland Petroleum for fiscal 1994, 1995 and 1996.)
<PAGE>
Ashland Inc. and Subsidiaries
Management's Discussion and Analysis
Operating income of Ashland Petroleum declined from $113 million in 1994 to
$48 million in 1995. Refining margins in 1995 were adversely affected by
the market confusion surrounding the introduction of reformulated gasoline
and by excess industry production of gasoline in the March 1995 quarter.
During that quarter, refiners switched production from distillate to
gasoline in response to one of the warmest winters of this century. While
refining margins recovered and averaged $5.07 a barrel during the last half
of 1995, overall refining margins for the year declined from $5.01 a barrel
in 1994 to $4.21 a barrel in 1995. Refining expenses also declined 12(cent)
a barrel in 1995 as the refineries operated at near capacity levels during
the last half of the year and cost savings from Ashland Petroleum's
restructuring program began to be realized. Earnings from Scurlock Permian
were up $4 million, reflecting better margins on crude oil transported.
SUPERAMERICA
An extremely competitive retail environment during 1996 adversely affected
results from SuperAmerica, reducing its operating income from $53 million
in 1995 to $34 million in 1996. While gasoline and merchandise volumes were
both up on a per store basis, the effect was more than offset by a decline
in gasoline margins of 1.5(cent) a gallon and increased operating costs.
Higher labor and occupancy costs resulted from a continued tight labor
market, the ongoing roll-out of the co-branding partnership program with
fast-food chains, initial costs associated with the opening of new stores
and rebuilds, and the ongoing operation of additional stores. At September
30, 1996, 742 retail locations were operating, compared to 704 locations in
1995 and 693 locations in 1994. Included in these totals are 624
SuperAmerica(R) stores in 1996, 609 stores in 1995 and 598 stores in 1994,
with the remainder being Rich Oil(R) outlets.
Earnings from SuperAmerica amounted to $53 million in 1995, compared to $59
million in 1994. Gasoline volumes were up slightly reflecting a higher
number of stores, and merchandise sales volumes were up on a per store
basis. However, the effects were more than offset by higher labor and
training costs, reflecting the increased number of stores, the tight labor
market and costs associated with the co-branding fast-food program.
(Bar graph appears in the left margin comparing operating income from
SuperAmerica for fiscal 1994, 1995 and 1996.)
VALVOLINE
Operating income from Valvoline was a record $82 million for 1996, compared
to near break-even results before unusual items for 1995. The record
earnings reflect improved results from nearly all of Valvoline's business
units, including a significant short-term earnings boost from the sale of
R-12, an automotive refrigerant. R-12 prices escalated rapidly during 1996,
as shortages developed within the market. Due to its ozone-depleting
characteristics, the U.S. Environmental Protection Agency banned the
production of R-12 at the end of 1995, but sales of existing inventories of
this refrigerant are still permitted. Even aside from R-12 earnings,
however, Valvoline's results would still have been up significantly.
Results from its lubricant business improved, reflecting increased volumes,
higher margins on both branded and private label sales and reduced
advertising and promotional costs. In addition, results from Valvoline
Instant Oil Change(R) (VIOC) nearly doubled, while the used oil collection
business continued to approach profitability. At September 30, 1996, VIOC
operated 374 company-owned outlets, compared to 365 outlets in 1995 and 347
outlets in 1994. In addition, the VIOC franchising program continued to
expand with 100 outlets open in 1996, compared to 90 outlets in 1995 and 75
outlets in 1994.
Valvoline had an extremely difficult year in 1995, operating just above
break-even levels, compared to 1994 when earnings of $52 million were
achieved. Domestic motor oil earnings were down considerably, reflecting
reductions in branded sales volumes, cost increases for additives and
packaging materials, higher advertising and promotional expenses, and a
continuing shift from packaged products to lower-margin bulk sales. Due to
competitive pressures, the higher costs could not be fully passed through
in higher sales prices, particularly with respect to private label sales.
Car care products and Zerex(R) antifreeze were negatively impacted by weak
demand reflecting the unusually warm winter weather and by escalating costs
for ethylene glycol, while results from R-12 refrigerants were adversely
affected by illegal imports. Operating income from international operations
was also down due to higher distribution costs and aggressive advertising
and promotional expenses to expand the European distributorships acquired
in 1994. Although average car counts and ticket prices continued to
improve, results from VIOC were down due to increased labor and material
costs.
(Bar graph appears in the left margin comparing operating income from
Valvoline for fiscal 1994, 1995 and 1996.)
CHEMICAL
For the fifth consecutive year, Ashland Chemical was the leading earnings
contributor to Ashland's results. Operating income increased from $164
million before unusual items in 1995 to $169 million in 1996 and represents
Ashland Chemical's fourth straight year of record earnings. Outstanding
results from the specialty chemical group, a moderate increase from the
distribution businesses and reduced environmental remediation costs more
than offset a decline from petrochemicals. Results from the distribution
businesses were up 5% on the strength of improved sales volumes, while
specialty chemicals earnings improved by 56%. The 1995 acquisition of
Aristech's unsaturated polyester resin business was a major contributor to
the improved results, along with higher sales volumes and margins for
electronic chemicals. Operating income from petrochemicals declined by $50
million, due largely to reduced prices for methanol, but also due to
increased natural gas prices and higher feedstock costs for cumene and
solvents.
(Bar graph appears in the left margin comparing operating income from
Ashland Chemical for fiscal 1994, 1995 and 1996.)
<PAGE>
Ashland Chemical's operating income of $164 million in 1995 was up over 30%
from its 1994 results of $125 million. A strong performance from the
petrochemical businesses was a key factor in the improvement. Exceptionally
strong prices for methanol during the first half of the year and higher
sales volumes and margins for cumene were responsible for most of the
petrochemical improvement. Operating income from methanol returned to more
normal levels during the last half of 1995, declining $22 million from the
earnings achieved during the first half of the fiscal year. Results from
the distribution businesses were up nearly 25%, reflecting higher sales
volumes. However, operating income from specialty chemicals was down 10%
due to reduced margins for water treatment chemicals and foundry products.
APAC
The APAC construction companies achieved their third straight year of
record results in 1996 with operating income of $83 million, compared to
$75 million in 1995. APAC's results continue to reflect its ongoing efforts
in cost control, safety and materials technology, allowing the highway
construction group to take full advantage of a strong construction economy.
Revenues rose 10%, reflecting a higher level of both public and private
sector construction jobs, as well as increased sales of hot-mix asphalt,
aggregate and ready-mix concrete.
APAC's operating income amounted to $75 million in 1995, compared to $70
million in 1994, which included income of $9 million related to the Arizona
operations that were sold in 1994. A strong backlog, which enhanced
revenues and margins from construction jobs, and close attention to costs
and safety were primary factors in APAC's improvement.
(Bar graph appears in the right margin comparing operating income from
APAC for fiscal 1994, 1995 and 1996.)
COAL
Ashland Coal had a difficult year in 1996 due largely to the expiration of
certain attractively-priced coal sales contracts in December 1995.
Operating income amounted to $36 million in 1996, compared to $66 million
in 1995 reflecting the lower sales prices. Results for 1996 also included
charges of $4 million related to Ashland Coal's restructuring of its
corporate and subsidiary support functions.
As a result of Ashland's acquisition of an additional interest, Ashland
Coal was consolidated beginning in 1995. Prior to 1995, Ashland accounted
for its investment in Ashland Coal on the equity method of accounting. On a
comparable basis, operating income from Ashland Coal increased from $35
million in 1994 to $66 million in 1995. The improvement reflects increased
productivity and cost reductions in 1995, combined with the adverse effects
of the UMW strike (including the related aftereffects) on 1994 results.
Such improvements more than offset the reduction in average sales prices
resulting from the expiration of a sales contract in the December 1994
quarter and other contract changes.
(Bar graph appears in the right margin comparing operating income from
Ashland Coal for fiscal 1994, 1995 and 1996.)
EXPLORATION
Operating income from Ashland Exploration amounted to $94 million in 1996,
including the gain of $73 million from the Columbia settlement. Excluding
unusual items in both years, Ashland Exploration's results for 1996
improved $23 million from 1995. Domestic operations were responsible for
$19 million of the improvement. Natural gas prices rose 50(cent) per
thousand cubic feet in 1996, reflecting industry-wide price improvements
associated with increased demand and more normal winter weather. In
addition, production increased 5%, partly due to the acquisition of
additional Appalachian properties in 1995. Depreciation, depletion and
amortization were also down in 1996, reflecting favorable reserve revisions
and the effects of the FAS 121 impairment reserves recorded in 1995.
Results from foreign operations were up $4 million, as 1995 results
included dry hole costs from an exploratory well offshore Nigeria.
Ashland Exploration incurred an operating loss of $2 million in 1995,
compared to operating income of $28 million in 1994. Results from domestic
operations were down $14 million, reflecting depressed natural gas prices.
The effect of reduced prices was partially offset, however, by a 9%
increase in natural gas production. Foreign earnings were down $16 million,
reflecting a combination of reduced profitability from the Nigerian
operations and increased exploration costs associated with Nigerian
offshore blocks acquired under a 1992 production-sharing agreement.
(Bar graph appears in the right margin comparing operating income from
Ashland Exploration for fiscal 1994, 1995 and 1996.)
GENERAL CORPORATE EXPENSES
Excluding unusual items, general corporate expenses were $97 million in
1996, $87 million in 1995 and $91 million in 1994. Expenses for 1996
include increased costs for incentive and deferred compensation. Expenses
for 1994 included consulting fees and other expenses related to a
corporatewide cost-control program and higher accruals for
performance-based compensation, which were partially offset by income from
the resolution of certain matters related to Ashland's former engineering
subsidiaries.
OTHER INCOME (EXPENSE)
Interest expense (net of interest income) amounted to $169 million in 1996,
$171 million in 1995 and $117 million in 1994. The changes in interest
costs incurred during the last three years resulted principally from
fluctuations in debt levels and, to a lesser extent, higher interest rates
in 1995.
Charges for asset impairment and restructuring costs reduced Ashland's
equity earnings from Arch Mineral by $6 million in 1995. Adjusting for
these unusual items, Arch Mineral generated equity income of $13 million in
1996, $2 million in 1995 and $7 million in 1994. Arch's results for 1996
were favorably affected by increased sales volumes and lower mining costs,
as well as the restructuring completed in 1995. Results for 1995 were
negatively affected by weak demand for Illinois high-sulfur coal and by
high mining costs resulting from unfavorable overburden ratios and adverse
geological conditions at certain Appalachian operations. The prolonged
strike by the United Mine Workers, which extended from April into December
1993, had a significant effect on the comparability of results for 1994.
(Bar graph appears in the right margin comparing operating income from
Arch Mineral for fiscal 1994, 1995 and 1996.)
<PAGE>
Ashland Inc. and Subsidiaries
Management's Discussion and Analysis
FINANCIAL POSITION
LIQUIDITY
Ashland's financial position has enabled it to obtain capital for its
financing needs and to maintain investment grade ratings on its senior debt
of Baa1 from Moody's and BBB from Standard & Poor's. Ashland has a
revolving credit agreement providing for up to $320 million in borrowings,
under which no borrowings were outstanding at September 30, 1996. At that
date, Ashland Coal also had revolving credit agreements providing for up to
$500 million in borrowings, of which $25 million was in use. Under a shelf
registration, Ashland can issue an additional $107 million in medium-term
notes should future opportunities or needs arise. Ashland and Ashland Coal
also have access to various uncommitted lines of credit and commercial
paper markets, under which short-term notes of $92 million were outstanding
at September 30, 1996. 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 $1.4 billion at September
30, 1996.
Cash flows from operations, a major source of Ashland's liquidity, amounted
to $767 million in 1996, $500 million in 1995 and $454 million in 1994. The
significant improvement in cash flows for 1996 reflects a higher level of
earnings, including the favorable effect of the Columbia settlement, and
reduced working capital requirements. Most of the unusual items that
reduced earnings in 1995 were non-cash charges and did not adversely affect
cash flows for that year. Cash flows from operations exceeded Ashland's
capital requirements for net property additions and dividends during the
last three years by nearly $200 million. The majority of other capital
requirements (i.e., for debt repayment, acquisitions, etc.) during this
period have come from borrowings, the issuance of stock and sales of
operations.
(Bar graph appears in the left margin comparing cash flows from operations
for fiscal 1994, 1995 and 1996.)
Property additions amounted to $1.3 billion during the last three years and
are summarized in the Information by Industry Segment on Page 61. While
about one-third of Ashland's capital expenditures during this period were
in Ashland Petroleum, its percent of the total expenditures has declined
every year since 1991. Capital expenditures by the related energy and
chemical businesses accounted for almost two-thirds of the total
expenditures during the last three years, increasing from 59% in 1994 to
72% in 1996.
(Bar graph appears in the left margin comparing property additions for
fiscal 1994, 1995 and 1996. The graph shows the breakdown between Ashland's
petroleum and energy and chemical related businesses.)
Long-term borrowings provided funds of $475 million since 1993, including
the issuance of $395 million of medium-term notes and $75 million of
pollution-control bonds. The proceeds from these long-term borrowings were
used to retire $266 million of long-term debt (scheduled maturities as well
as refundings to reduce interest costs) and to partially fund acquisitions.
Cash flows were supplemented as necessary by the issuance of short-term
notes and commercial paper.
(Bar graph appears in the left margin comparing debt as a percent of
capital employed for fiscal 1994, 1995 and 1996.)
Acquisitions (including operations acquired through the issuance of $41
million of Ashland common stock in 1995) amounted to $516 million since
1993. Such acquisitions include $212 million for certain operations of
Aristech Chemical Corporation and numerous smaller chemical companies, $118
million for additional interests in Ashland Coal, $69 million for Zerex and
Valvoline's European distributorships, $68 million for Appalachian natural
gas producing properties and $42 million for various construction
companies. Proceeds from the sale of operations generated $73 million
during the last three years, including the divestiture of APAC's Arizona
operations.
Investment purchases, sales and maturities relate primarily to the turnover
in the debt securities held by Ashland's captive insurance companies. The
net cash inflow related to these transactions in the last three years
principally reflects the decrease in the investment portfolios of these
companies.
Working capital at September 30, 1996, was $461 million, and liquid assets
(cash, cash equivalents and accounts receivable) amounted to 76% 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
inventories $474 million below their replacement costs at September 30,
1996.
CAPITAL RESOURCES
Ashland's capital employed at September 30, 1996, consisted of debt (49%),
deferred income taxes (2%), minority interest (4%), convertible preferred
stock (7%) and common stockholders' equity (38%). Debt as a percent of
capital employed decreased from 53% at the end of 1995, reflecting strong
cash flows from operations during 1996 and the net proceeds from the
Columbia settlement. Long-term debt at September 30, 1996, included $48
million of floating-rate debt, and the interest rates on an additional $510
million of fixed-rate debt were converted to floating rates through
interest rate swap agreements. As a result, interest costs in 1997 will
fluctuate based on short-term interest rates on $558 million of Ashland's
consolidated long-term debt, as well as on any short-term notes and
commercial paper.
During fiscal 1997, Ashland anticipates capital expenditures of
approximately $525 million. Ashland Petroleum's capital expenditures are
expected to amount to about $175 million, of which nearly $50 million is
committed to the continued expansion of the Ashland branded program and
petrochemical production at the division's Catlettsburg refinery. The
remaining $350 million of projected capital expenditures are directed to
growth opportunities in Ashland's related
<PAGE>
energy and chemical businesses. Ashland anticipates meeting its 1997
capital requirements for property additions and dividends from internally
generated funds.
At September 30, 1996, Ashland could issue up to an additional $49 million
in common stock under a shelf registration. During 1995, 1.4 million shares
were issued under this registration, generating net proceeds to Ashland of
$51 million. No shares were issued under this registration during 1996.
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 trends toward greater environmental awareness and ever
increasing regulations, Ashland believes that expenditures for
environmental compliance will continue to have a significant effect on its
businesses. Although it cannot accurately predict how such trends will
affect future operations and earnings, Ashland believes the nature and
significance of its ongoing compliance costs will be comparable to those of
its competitors in the petroleum, chemical and extractive industries.
Capital expenditures for air, water and solid waste control facilities
amounted to $40 million in 1996, $44 million in 1995 and $63 million in
1994. Based on current environmental regulations, Ashland anticipates such
capital expenditures will amount to about $25 million in 1997. Ashland's
environmental remediation and compliance expenditures amounted to $158
million in 1996, $151 million in 1995 and $140 million in 1994, and are
expected to be in the range of $160 million in 1997. Such compliance
expenditures do not include the costs of additives, such as MTBE and
ethanol, used to meet reformulated gasoline and oxygenated fuel
requirements.
Environmental reserves are subject to considerable uncertainties that
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.
During 1996, the U. S. Environmental Protection Agency (EPA) notified
Ashland that its three refineries would be subject to a comprehensive
inspection of compliance with federal environmental laws and regulations.
The inspections of two of the refineries have been completed and the third
inspection is expected to be completed before the end of this calendar
year. Such inspections could result in sanctions, monetary penalties and
further remedial expenditures. Also during 1996, Ashland arranged for an
independent review of environmental compliance at its three refineries by
an outside consulting firm, self-reported to the EPA a number of issues of
non-compliance with applicable laws or regulations, and commenced a program
to address these matters. Ashland is not in a position to determine what
actions, if any, may be instituted and is similarly uncertain at this time
what additional remedial actions may be required or costs incurred.
However, this matter is not expected to have a material adverse effect on
Ashland's consolidated financial position.
OUTLOOK
Although refining margins are expected to remain volatile, key external
factors look promising for the refining industry. The industry is currently
operating at a high rate of capacity, with gasoline and distillate
inventories down from last year's levels at this time. The economy is
reasonably strong, inflation appears to be under control, and economic
growth continues at a modest pace. In addition, petroleum product demand is
expected to continue increasing over 1% annually for the rest of the
decade. Such increases reflect a leveling of fuel efficiency in the
passenger car fleet, increasing sales of light-truck and sport-utility
vehicles which average fewer miles per gallon than passenger cars, and an
increasing number of vehicle miles traveled.
Ashland Petroleum continues to strengthen its position in refining by
enhancing its production of higher-value products through projects like the
expansion of its Catlettsburg petrochemical complex, reducing its operating
expenses and increasing its volumes sold under company brands. While
SuperAmerica continues to expand its retail network, Ashland Petroleum is
also increasing controlled gasoline sales through its branded
jobber/distributor marketing program. Under that program, 485 retail
locations were operating at September 30, 1996, and an additional 146
locations are committed to join the program in 1997. SuperAmerica(R) and
Ashland(R) brand expansions should increase controlled volumes to more than
65% of refinery gasoline production by 2001, providing deeper market
penetration in key Midwest markets, strengthening margins and reducing
Ashland Petroleum's dependence on wholesale markets.
Although Ashland is committed to improving profitability from its refining
operations, management believes its greatest opportunities for growth are
found within its related energy and chemical businesses. Although
SuperAmerica now plans to scale back its new store program to some extent
in response to excess capacity in certain markets, the division still
expects to build about 150 new retail locations over the next five years,
and selectively expand its partnership program with fast-food chains. The
new stores should increase SuperAmerica's share in strategic markets where
it is already a leader.
<PAGE>
Ashland Inc. and Subsidiaries
Management's Discussion and Analysis
Ashland Chemical and APAC will pursue growth through internal efforts and
selective acquisitions. Ashland Chemical will continue to emphasize
integrated marketing and distribution efforts, targeting its North American
customers and a growing international sales base. Investments in
acquisitions will also continue as attractive opportunities to add volume,
technologies, market coverage or a worldwide presence are identified.
Continued federal infrastructure funding and an expanding economy should
continue to benefit APAC's efforts to build market position in existing
markets and reduce costs. APAC's construction backlog amounted to $647
million at September 30, 1996 and is expected to contain margins comparable
to those included in last year's backlog. Although this backlog reflects
modest decreases in both the public and private sectors, the reductions are
not expected to have a significant effect on APAC's results for 1997.
Valvoline will focus on the continued integration of recent growth efforts,
reducing costs and improving return on investment, while pursuing
international growth through aggressive marketing and joint ventures. R-12
margins are expected to remain strong through 1997, but most of Valvoline's
R-12 inventories will likely be depleted by the end of that year. Domestic
sales volumes of higher-margin packaged lubricants serving the
"do-it-yourself" market will likely continue to give ground to lower-margin
bulk sales to the "do-it-for-me" market. However, sales of automotive
chemicals and international sales of lubricants are expected to provide
continued growth opportunities.
Ashland Exploration's natural gas production in 1997 is expected to
increase as the Vermilion field in the Gulf of Mexico comes on stream.
Continued development of the Nigerian producing properties is expected to
extend the useful lives of those fields. Development of the new offshore
Nigerian properties is expected to commence in 1997, but production will
not begin until at least 1998.
Ashland Coal's results for 1997 are expected to benefit from numerous steps
which have been taken or are underway at its mines to offset the effects of
the coal sales contracts which expired in December 1995. During the
September 1996 quarter, Ashland Coal completed the relocation of a dragline
to a mine with better geology. In addition, operations have begun in a new
area at another mine where the overburden ratios are more favorable. The
repositioning of a dragline at that mine to this area around the end of
calendar 1996 will provide additional benefits. Arch Mineral is expected to
continue benefiting from the restructuring of its operations which occurred
in 1995. While Arch will likely continue having difficulty marketing its
high-sulfur Illinois coal, it is working to increase its low-sulfur coal
production, reduce its costs and improve its market position. A low cost
structure is vital to both Ashland Coal and Arch Mineral, since they will
have an ever increasing exposure to competition from coal produced in other
regions of the U.S. and to the competitive pressures brought about by
utility deregulation. Ashland Coal and Arch Mineral have jointly announced
that they have resumed merger discussions. While Ashland believes a merger
would offer considerable synergies, Ashland cannot predict whether a merger
will occur.
EFFECTS OF INFLATION AND CHANGING PRICES
Ashland's 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 the increased 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.
FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, including various information
within the Capital Resources and Outlook sections. Although Ashland
believes that its expectations are based on reasonable assumptions, it
cannot assure that the expectations contained in such statements will be
achieved. Important factors which could cause actual results to differ
materially from those contained in such statements are discussed in Note A
to the Consolidated Financial Statements under risks and uncertainties.
Other factors and risks affecting Ashland's revenues and operations are
contained in Ashland's Form 10-K for the fiscal year ended September 30,
1996, which is on file with the Securities and Exchange Commission.
<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaries
Statements of Consolidated Income
Years Ended September 30
(In millions except per share data) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales and operating revenues (including excise taxes) $13,130 $12,167 $10,334
Other 155 72 48
- ----------------------------------------------------------------------------------------------------------------------------
13,285 12,239 10,382
COSTS AND EXPENSES
Cost of sales and operating expenses 10,151 9,286 7,742
Excise taxes on products and merchandise 985 988 877
Selling, general and administrative expenses 1,291 1,280 1,088
Depreciation, depletion and amortization 402 487 308
- ----------------------------------------------------------------------------------------------------------------------------
12,829 12,041 10,015
- ----------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 456 198 367
OTHER INCOME (EXPENSE)
Interest expense (net of interest income) - Notes A and E (169) (171) (117)
Equity income - Note C 24 7 22
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 311 34 272
Income taxes - Note I (92) 13 (75)
Minority interest in earnings of subsidiaries (8) (23) -
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME 211 24 197
Dividends on convertible preferred stock (19) (19) (19)
- ----------------------------------------------------------------------------------------------------------------------------
INCOME AVAILABLE TO COMMON SHARES $ 192 $ 5 $ 178
============================================================================================================================
EARNINGS PER SHARE - NOTE A
Primary $ 2.97 $ .08 $ 2.94
Assuming full dilution $ 2.82 $ .08 $ 2.79
AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING
Primary 65 62 61
Assuming full dilution 77 63 72
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaries
Consolidated Balance Sheets
September 30
(In millions) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents - Note A $ 77 $ 52
Accounts receivable (less allowances for doubtful accounts of
$27 million in 1996 and $25 million in 1995) 1,666 1,575
Construction completed and in progress - at contract prices 50 42
Inventories - Note A 736 726
Deferred income taxes - Note I 112 90
Other current assets 99 90
- ---------------------------------------------------------------------------------------------------------------------
2,740 2,575
INVESTMENTS AND OTHER ASSETS
Investments in and advances to unconsolidated affiliates - Note C 157 145
Investments of captive insurance companies - Note A 178 192
Cost in excess of net assets of companies acquired (less accumulated
amortization of $43 million in 1996 and $35 million in 1995) 120 107
Other noncurrent assets 359 403
- ---------------------------------------------------------------------------------------------------------------------
814 847
PROPERTY, PLANT AND EQUIPMENT
Cost
Petroleum 2,881 2,860
SuperAmerica 514 488
Valvoline 312 294
Chemical 818 737
APAC 626 566
Coal 980 972
Exploration (successful efforts method) 1,089 1,011
Corporate 154 150
- ---------------------------------------------------------------------------------------------------------------------
7,374 7,078
Accumulated depreciation, depletion and amortization (3,659) (3,508)
- ---------------------------------------------------------------------------------------------------------------------
3,715 3,570
- ---------------------------------------------------------------------------------------------------------------------
$7,269 $6,992
=====================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
(In millions) 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year
Notes payable to financial institutions $ 117 $ 186
Commercial paper - 15
Current portion of long-term debt 86 71
Trade and other payables 2,044 1,778
Income taxes 32 44
- -----------------------------------------------------------------------------------------------------------------------
2,279 2,094
NONCURRENT LIABILITIES
Long-term debt (less current portion) - Notes D and E 1,784 1,828
Employee benefit obligations - Note J 613 613
Reserves of captive insurance companies 166 169
Deferred income taxes - Note I 64 49
Other long-term liabilities and deferred credits 375 405
Commitments and contingencies - Notes E, H and K
- -----------------------------------------------------------------------------------------------------------------------
3,002 3,064
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 174 179
STOCKHOLDERS' EQUITY - Notes D, L and M
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 - 64 million shares in 1996 and 1995 64 64
Paid-in capital 280 256
Retained earnings 1,185 1,063
Loan to leveraged employee stock ownership plan (LESOP) - (11)
Other (8) (10)
- -----------------------------------------------------------------------------------------------------------------------
Total common stockholders' equity 1,521 1,362
- -----------------------------------------------------------------------------------------------------------------------
1,814 1,655
- -----------------------------------------------------------------------------------------------------------------------
$7,269 $6,992
=======================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaries
Statements of Consolidated Common Stockholders' Equity
Prepaid
Common Paid-in Retained Loan to contribution
(In millions) stock capital earnings LESOP to LESOP Other Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 1, 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
Net income 24 24
Dividends
Preferred stock (19) (19)
Common stock, $1.10 a share (68) (68)
Issued common stock under
Share offering program 2 49 51
Acquisition of operations
of other companies 1 40 41
Stock incentive plans 7 7
LESOP loan repayments 22 22
Other changes 1 1 2
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995 64 256 1,063 (11) - (10) 1,362
Net income 211 211
Dividends
Preferred stock (19) (19)
Common stock, $1.10 a share (70) (70)
Issued common stock under
Stock incentive plans 18 18
Employee savings plan 6 6
LESOP loan repayments 11 11
Other changes 2 2
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1996 $64 $280 $1,185 $ - $ - $ (8) $1,521
================================================================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaries
Statements of Consolidated Cash Flows
Years Ended September 30
(In millions) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net income $211 $ 24 $ 197
Expense (income) not affecting cash
Depreciation, depletion and amortization 402 487 308
Deferred income taxes (6) (73) 2
Other noncash items 35 33 22
Change in operating assets and liabilities(1) 125 29 (75)
- ---------------------------------------------------------------------------------------------------------------------------------
767 500 454
CASH FLOWS FROM FINANCING
Proceeds from issuance of long-term debt 68 330 77
Proceeds from issuance of capital stock 16 55(2) 17
Loan repayment from leveraged employee stock ownership plan 11 22 -
Repayment of long-term debt (97) (60) (109)
Increase (decrease) in short-term debt (84) 38 (5)
Dividends paid (93) (92) (79)
- ---------------------------------------------------------------------------------------------------------------------------------
(179) 293 (99)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment (510) (444) (376)
Purchase of operations - net of cash acquired (86) (327)(2) (62)
Proceeds from sale of operations 4 10 59
Investment purchases(3) (455) (725) (335)
Investment sales and maturities(3) 491 704 335
Other - net (7) 1 23
- ---------------------------------------------------------------------------------------------------------------------------------
(563) (781) (356)
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 25 12 (1)
Cash and cash equivalents - beginning of year 52 40 41
- ---------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 77 $ 52 $ 40
=================================================================================================================================
DECREASE (INCREASE) IN OPERATING ASSETS(1)
Accounts receivable $(80) $(112) $(153)
Construction completed and in progress (8) 13 (3)
Inventories (3) (63) (45)
Refundable income taxes (2) - -
Deferred income taxes 6 (7) -
Other current assets (1) 12 (7)
Investments and other assets 10 31 15
INCREASE (DECREASE) IN OPERATING LIABILITIES(1)
Trade and other payables 251 169 95
Income taxes (12) 4 (10)
Noncurrent liabilities (36) (18) 33
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN OPERATING ASSETS AND LIABILITIES $125 $ 29 $ (75)
=================================================================================================================================
(1) Excludes changes resulting from operations acquired or sold.
(2) Excludes $41 million of common stock issued in acquisitions.
(3) Represents primarily investment transactions of captive insurance companies.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Ashland Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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. Since Ashland
Coal, Inc. was consolidated in 1996 and 1995 and accounted for on the
equity method in 1994 (see Note F), the comparability of various amounts
included in Ashland's consolidated financial statements and the
accompanying notes are affected.
RISKS AND UNCERTAINTIES
The preparation of Ashland's consolidated financial statements in
conformity with generally accepted accounting principles requires Ashland's
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, and the disclosures
of contingent assets and liabilities. Significant items subject to such
estimates and assumptions include the carrying value of property, plant and
equipment, environmental reserves, income recognized under construction
contracts, and the ultimate realization of deferred tax assets, among other
items. Actual results could differ from the estimates and assumptions used.
Ashland's operations are affected by domestic and international political,
legislative, regulatory and legal actions. Such actions may include changes
in the policies of the Organization of Petroleum Exporting Countries or
other developments involving or affecting oil-producing countries,
including military conflict, embargoes, internal instability or actions or
reactions of the government of the United States in anticipation of, or in
response to, such actions.
Domestic and international economic conditions, such as recessionary
trends, inflation, interest and monetary exchange rates, as well as changes
in the availability or prices of crude oil, natural gas and petroleum
products, can have a significant effect on Ashland's operations. While
Ashland maintains reserves for anticipated liabilities and carries various
levels of insurance, Ashland could be affected by civil, criminal,
regulatory or administrative actions, claims or proceedings relating to
environmental or other matters. In addition, climate and weather can
significantly affect Ashland in several of its operations, such as its
construction, natural gas, heating oil and coal businesses.
<TABLE>
<CAPTION>
INVENTORIES
(In millions) 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Crude oil $336 $285
Petroleum products 323 284
Chemicals 342 315
Other products 146 176
Materials and supplies 63 66
Excess of replacement costs over LIFO carrying values (474) (400)
- ---------------------------------------------------------------------------------------------------------------
$736 $726
===============================================================================================================
</TABLE>
Crude oil, petroleum products, chemicals and other products with a
replacement cost of approximately $834 million at September 30, 1996, and
$741 million at September 30, 1995, 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 lease acquisition,
exploration and development costs) is depreciated by the straight-line
method over the estimated useful lives of the assets. Oil and gas lease
acquisition, exploration and development costs are accounted for using the
successful efforts method. Coal lease acquisition and development costs
which are recoverable are capitalized. Coal exploration costs are expensed
as incurred. Capitalized 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 $362 million in 1996, $355 million in 1995 and
$279 million in 1994.
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.
<PAGE>
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. 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 contracts to reduce its exposure to changing
prices for crude oil, petroleum products and natural gas, and uses forward
exchange contracts to hedge certain risks associated with changing foreign
currency exchange rates. Gains and losses on commodity contracts are
accounted for as part of the transactions or activities being hedged. Gains
and losses on forward exchange contracts that hedge assets, liabilities or
firm commitments are recognized when the related items being hedged are
settled. Gains and losses on contracts hedging anticipated foreign currency
transactions are reflected in income in the period the change occurs. In
the Statements of Consolidated Cash Flows, Ashland reports the cash flows
resulting from its hedging activities in the same category as the related
item that is 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. Periodic settlements under the swap agreements are recognized as
adjustments of interest expense for the related periods.
STOCK INCENTIVE PLANS
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123 (FAS 123), "Accounting for Stock-Based Compensation." With respect
to accounting for its stock options, as permitted under FAS 123, Ashland
intends to retain the intrinsic value method currently used as prescribed
by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," and related Interpretations. Ashland will provide
disclosures in accordance with FAS 123 when FAS 123 is adopted in fiscal
1997.
ACCOUNTING CHANGES
Effective September 30, 1995, Ashland adopted Financial Accounting
Standards Board Statement No. 121 (FAS 121), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." As a
result, Ashland recorded charges of $83 million (included in depreciation,
depletion and amortization) to write down certain assets to their fair
values. These assets included an idle unit at Ashland Petroleum's
Catlettsburg refinery, certain unused crude oil gathering pipelines of
Scurlock Permian, various petroleum product marketing properties to be sold
or shut down, and various other assets. Fair values were based upon
appraisals or estimates of discounted future cash flows. Operating income
was reduced for each of the affected segments as follows: Petroleum ($68
million); Valvoline ($3 million); Chemical ($4 million); Exploration ($4
million); and general corporate expenses ($4 million). In addition, Arch
Mineral adopted FAS 121 and recorded a charge to write down certain idle
facilities, decreasing Ashland's equity income by $3 million. The adoption
of FAS 121 reduced Ashland's net income for 1995 by $54 million or $.86 per
share.
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 and are carried
at market value plus accrued interest.
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 13 years.
Research and development costs are expensed as incurred ($27 million in
1996, $24 million in 1995 and $23 million in 1994).
Interest is capitalized on projects where construction of an asset takes
considerable time and involves substantial expenditures. Capitalized
interest was not significant during the last three years.
Certain prior year amounts have been reclassified in the consolidated
financial statements to conform with 1996 classifications.
<PAGE>
NOTE B - 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, APAC, Coal and Exploration. Information by industry
segment is shown on Pages 60 and 61.
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, antifreeze, 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.
APAC performs 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
13 southern states.
Coal operations are conducted by 56% owned, publicly traded Ashland Coal,
Inc., which produces low-sulfur bituminous coal in central Appalachia for
sale to domestic and foreign electric utility and industrial markets.
Ashland also holds a 50% equity interest in Arch Mineral Corporation (see
Note C). Arch Mineral produces metallurgical and steam coal from surface
and deep mines in Illinois, Kentucky, Virginia, West Virginia and Wyoming
for sale to utility and steel companies. Both Ashland Coal and Arch Mineral
market coal mined by independent producers.
Exploration operations are conducted by Ashland Exploration, which is
engaged in crude oil and natural gas production in the Appalachian Basin
and Gulf Coast areas of the United States and crude oil production in
Nigeria.
Certain information with respect to foreign operations follows.
<TABLE>
<CAPTION>
Total assets Income before income taxes
-------------------------- --------------------------------------------------
(In millions) 1996 1995 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Foreign operations
Petroleum $ 70 $ 30 $ 3 $ 4 $ 1
Valvoline 127 124 4 3 10
Chemical 327 302 41 42 28
Exploration 98 36 11 9 22
- -----------------------------------------------------------------------------------------------------------------------
$622 $492 $59 $58 $61
=======================================================================================================================
</TABLE>
<PAGE>
NOTE C - UNCONSOLIDATED AFFILIATES
Affiliated companies accounted for on the equity method include: Arch
Mineral Corporation (a 50% owned 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. Prior to 1995, Ashland Coal, Inc. was less than
50% owned and accounted for on the equity method (see Note F). Summarized
financial information reported by these affiliates and a summary of the
amounts recorded in Ashland's consolidated financial statements follow.
Ashland's retained earnings include $106 million of undistributed earnings
from unconsolidated affiliates accounted for on the equity method.
<TABLE>
<CAPTION>
Ashland Arch Mineral LOOP INC. and
(In millions) Coal, Inc. Corporation LOCAP INC. Other Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1996
Financial position
Current assets $ 165 $ 28 $ 265
Current liabilities (142) (82) (151)
---------------------------------------------
Working capital 23 (54) 114
Noncurrent assets 752 613 225
Noncurrent liabilities (646) (489) (107)
---------------------------------------------
Stockholders' equity $ 129 $ 70 $ 232
=============================================
Results of operations
Sales and operating revenues $ 727 $ 117 $ 846
Gross profit 98 38 214
Net income 27 8 28
Amounts recorded by Ashland
Investments and advances 73 13 71 $ 157
Equity income 13 2 9 24
Dividends received - - 7 7
- ----------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1995
Financial position
Current assets $ 148 $ 27 $ 238
Current liabilities (134) (91) (130)
---------------------------------------------
Working capital 14 (64) 108
Noncurrent assets 790 633 202
Noncurrent liabilities (693) (506) (101)
---------------------------------------------
Stockholders' equity $ 111 $ 63 $ 209
=============================================
Results of operations
Sales and operating revenues $ 714 $ 119 $ 775
Gross profit 50 36 193
Net income (loss) (8)(1) 4 29
Amounts recorded by Ashland
Investments and advances 63 12 70 $ 145
Equity income (loss) (4) 1 10 7
Dividends received 3 1 8 12
- ----------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1994
Results of operations
Sales and operating revenues $ 561 $ 641 $ 149 $ 701
Gross profit 71 60 54 172
Net income 17 14 15 14
Amounts recorded by Ashland
Equity income 6 7 3 6 $ 22
Dividends received 3 - - 5 8
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Includes a charge of $12 million resulting from
asset impairment write-downs under FAS 121 and provisions for
early retirement and restructuring programs.
<PAGE>
<TABLE>
<CAPTION>
NOTE D - LONG-TERM DEBT
(In millions) 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Senior debt of Ashland
Medium-term notes, due 1997-2025, interest at an average rate
of 8.4% at September 30, 1996 (5.8% to 10.4%) $ 909 $ 895
8.80% debentures, due 2012 250 250
11.125% sinking fund debentures, due 2017 200 200
Pollution control and industrial revenue bonds, due
1998-2022, interest at an average rate of 6.4%
at September 30, 1996 (3.7% to 7.4%) 227 217
Other 3 33
- ---------------------------------------------------------------------------------------------------------
1,589 1,595
6.75% convertible subordinated debentures, due 2014,
convertible into common stock at $51.34 per share 124 124
Debt of Ashland Coal, Inc. not guaranteed by Ashland
9.78% senior notes, due 1997-2000 101 101
9.66% senior notes, due 2001-2006 54 54
Other 2 25
- ---------------------------------------------------------------------------------------------------------
1,870 1,899
Current portion of long-term debt (86) (71)
- ---------------------------------------------------------------------------------------------------------
$1,784 $1,828
=========================================================================================================
</TABLE>
Aggregate maturities of long-term debt are $86 million in 1997, $85 million
in 1998, $73 million in 1999, $66 million in 2000 and $89 million in 2001.
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 1998.
Ashland has a revolving credit agreement which expires on February 9, 2000,
providing for up to $320 million in borrowings, under which no borrowings
were outstanding at September 30, 1996. In addition, Ashland Coal has
revolving credit agreements which expire on November 15, 1999, providing
for up to $500 million in borrowings, of which $25 million was in use at
September 30, 1996.
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, 1996,
distributions with respect to Ashland's capital stock were restricted to
$793 million and additional debt was limited to $1.4 billion.
Interest payments on all indebtedness amounted to $175 million in 1996,
$163 million in 1995 and $119 million in 1994. The weighted average
interest rate on short-term borrowings outstanding was 5.9% at September
30, 1996, and 6.0% at September 30, 1995.
NOTE E - FINANCIAL INSTRUMENTS
COMMODITY HEDGES
Ashland Petroleum selectively uses commodity futures contracts to reduce
its exposure to certain risks inherent within its refining business. Such
contracts are used principally to hedge the value of intransit crude oil
cargoes, hedge exposure under fixed-price sales contracts, obtain higher
prices for crude oil sold by Scurlock Permian, protect against margin
compression caused by increasing crude oil prices, take advantage of
attractive refining margins and lock in prices on a portion of the natural
gas fuel needs of the refineries. Ashland Exploration also selectively uses
futures contracts to reduce price volatility and lock in favorable sales
prices for future production of natural gas and crude oil. In addition,
trading in commodity futures contracts is a natural extension of cash
market trading and is occasionally used as an alternate method of obtaining
or selling crude oil and petroleum products to balance physical barrel
activity. The fair value of open commodity contracts was not significant at
September 30, 1996 and 1995.
FOREIGN CURRENCY HEDGES
Ashland uses forward exchange contracts to hedge certain significant
foreign currency transaction exposures of its operations. Forward exchange
contracts are used to hedge foreign currency-denominated accounts
receivable and payable. Any investments of Ashland's captive insurance
companies in foreign currency-denominated debt obligations are also hedged.
In addition, Ashland from time to time will enter into forward exchange
contracts to establish with certainty the functional currency amount of
future firm commitments denominated in other currencies, as well as hedge
against the effects of changing exchange rates on anticipated foreign
currency transactions. The fair value of open forward exchange contracts
was not significant at September 30, 1996 and 1995.
<PAGE>
INTEREST RATE SWAPS
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, 1996, Ashland had unleveraged swap agreements with a
notional principal amount of $510 million which were used to convert fixed
rates on certain debt, including the 8.80% debentures and various
medium-term notes, to variable rates. The variable rates are generally
adjusted quarterly or semiannually based on London Interbank Offered Rates
(LIBOR), but may be fixed for longer terms using forward rate agreements.
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. 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.
At September 30, 1996, Ashland was receiving a weighted-average fixed
interest rate of 5.9% and paying a weighted-average variable interest rate
of 5.7%, calculated on the notional amount. Interest expense was reduced by
$2 million in 1996, an insignificant amount in 1995 and $9 million in 1994
resulting from settlements under these agreements. Under its current swap
agreements, Ashland's annual interest expense in 1997 will change by about
$5 million for each 1% change in LIBOR. The terms remaining on Ashland's
swaps range from 8 to 68 months, with a weighted-average remaining life of
32 months.
The carrying amounts and fair values of Ashland's significant financial
instruments, including interest rate swaps, at September 30, 1996, and 1995
are shown below. The fair values of cash and cash equivalents, notes
payable to financial institutions 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>
1996 1995
------------------------------ -----------------------------
Carrying Fair Carying Fair
(In millions) amount value amount value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 77 $ 77 $ 52 $ 52
Investments of captive insurance companies 178 178 192 192
Liabilities
Notes payable to financial institutions and
commercial paper 117 117 201 201
Long-term debt (including current portion) 1,870 2,024 1,899 2,090
Interest rate swaps - 4 - 5
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE F - ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
In February 1995, Ashland purchased from Saarbergwerke AG all of Ashland
Coal's Class B Preferred Stock for $110 million. The purchase increased
Ashland's ownership of Ashland Coal from 39% to 54%. As a result of this
transaction, Ashland Coal was consolidated into Ashland's financial
statements retroactive to October 1, 1994. Ashland's investment in Ashland
Coal previously had been accounted for on the equity method. Ashland has
continued to reinvest dividends from Ashland Coal in additional shares of
its common stock, increasing its ownership in Ashland Coal to 56% as of
September 30, 1996.
Also during 1995, Ashland acquired the unsaturated polyester resins,
polyester distribution and maleic anhydride businesses of Aristech Chemical
Corporation, the Zerex(R) antifreeze product line, the northern West
Virginia assets of two natural gas producers, and various other chemical
and construction businesses. These and several smaller acquisitions
completed in various segments during the last three years were generally
accounted for as purchases and did not have a significant effect on
Ashland's consolidated financial statements.
DIVESTITURES
In 1994, Ashland sold APAC's Arizona operations. This 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.
<PAGE>
NOTE G - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
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
- ------------------------------------------------------------------------------------------------------------------------
(In millions except per share data)
1995(1) 1994 1996 1995 1996 1995 1996 1995(2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and operating revenues $3,079 $2,924 $3,072 $2,735 $3,481 $3,256 $3,500 $3,252
Operating income (loss) 175 91 33 4 148 109 100 (7)
Net income (loss) 87 35 (2) (29) 80 48 46 (30)
Primary earnings (loss) per share 1.29 .50 (.11) (.55) 1.16 .69 .64 (.55)
Common dividends per share .275 .275 .275 .275 .275 .275 .275 .275
Market price per common share
High 36-1/2 39-7/8 39-1/2 35-5/8 44-1/8 38-3/8 40-1/4 35-3/8
Low 30-3/8 31-1/4 34-1/4 31-5/8 38-1/8 33-1/2 35 32
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A gain resulting from the settlement of Ashland Exploration's claims in
the bankruptcy reorganization of Columbia Gas Transmission and Columbia Gas
Systems increased operating income by $73 million, net income by $48
million and earnings per share by $.74 in the quarter ended December 31,
1995.
(2) Charges for asset impairment write-downs under FAS 121 and early
retirement and restructuring programs reduced operating income by $120
million, net income by $79 million and earnings per share by $1.25 in the
quarter ended September 30, 1995.
NOTE H - 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, 1996,
and rental expense under operating leases follow.
<TABLE>
<CAPTION>
(In millions)
- ------------------------------------------------------------------------------------------------------------------------
Future minimum rental payments Rental expense 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 $ 89
1998 80 Minimum rentals
1999 61 (including rentals under
2000 57 short-term leases) $160 $142 $113
2001 45 Contingent rentals 14 10 12
Later years 198 Sublease rental income (17) (18) (12)
- ------------------------------------------------------------------------------------------------------------------------
$530 $157 $134 $113
========================================================================================================================
</TABLE>
In addition, Ashland Coal has entered into various noncancelable royalty
lease agreements under which future minimum payments are approximately $23
million annually through 2001 and $190 million in the aggregate thereafter.
OTHER COMMITMENTS
Under agreements with LOOP and LOCAP (see Note C), Ashland is obligated,
based upon its equity ownership, to provide a portion of the total debt
service and defined operating and administrative costs of these joint
ventures. This annual obligation is reduced by transportation charges paid
by Ashland and by a pro rata portion of transportation charges paid by
third parties who are not equity participants. If, after each obligor's
requirements have been satisfied, the joint ventures are unable to meet
cash requirements, Ashland is obligated to advance its pro rata share of
the deficiency. All funds provided to these joint ventures are used as
advances against future transportation charges. At September 30, 1996,
substantially all advances made to LOOP and LOCAP by Ashland had been
applied against transportation charges. Transportation charges incurred
amounted to $16 million in 1996, $21 million in 1995 and $24 million in
1994. At September 30, 1996, Ashland's contingent liability for its share
of the indebtedness of LOOP and LOCAP secured by throughput and deficiency
agreements amounted to approximately $89 million.
Ashland Coal owns 17.5% of a joint venture operating a coal loading and
storage facility at Newport News, Va. Venture partners are required to pay
their share of the venture's costs in relation to their ownership (for
fixed operating costs and debt service) or facility usage (for variable
operating costs). Ashland Coal's share of such payments amounted to
approximately $3 million annually in each of the last three years. Future
payments for fixed operating costs and debt service are estimated to
approximate $3 million annually through 2015 and $26 million in 2016.
Additionally, Ashland is contingently liable for a guarantee relating to
the office building partially occupied by Ashland Coal. At September 30,
1996, such obligation has a present value of approximately $7 million.
Ashland is 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 $7 million at September 30,
1996.
<PAGE>
NOTE I - INCOME TAXES
A summary of the provision for income taxes follows.
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current(1)
Federal $74 $ 38 $ 56
State 7 11 8
Foreign 17 11 9
- -------------------------------------------------------------------------------------
98 60 73
Deferred (6) (73) 2
- -------------------------------------------------------------------------------------
$92 $(13) $ 75
=====================================================================================
</TABLE>
(1) Income tax payments amounted to $110 million in 1996, $54 million in
1995 and $71 million in 1994.
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>
(In millions) 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Employee benefit obligations $251 $250
Environmental, insurance and litigation reserves 116 111
Alternative minimum tax credit carryforwards 77 75
Uncollectible accounts receivable 19 18
Compensated absences 16 15
Other items 64 62
- ------------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 543 531
- ------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment (450) (445)
Undistributed equity income (18) (17)
Prepaid royalties (18) (17)
Coal supply agreements (9) (11)
- ------------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities (495) (490)
- ------------------------------------------------------------------------------------------------------------------------
Net deferred tax asset $ 48 $ 41
========================================================================================================================
</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>
(In millions) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes and minority interest
United States $252 $(24) $211
Foreign 59 58 61
- -------------------------------------------------------------------------------------------------------------------------------
$311 $ 34 $272
===============================================================================================================================
Income taxes computed at U.S. statutory rates $109 $ 12 $ 95
Increase (decrease) in amount computed resulting from
Equity income (5) - (6)
State income taxes 4 5 6
Net impact of foreign results (4) (8) (8)
Non-conventional fuel credit (11) (10) (10)
Percentage depletion allowance (6) (14) -
Other items 5 2 (2)
- -------------------------------------------------------------------------------------------------------------------------------
Income taxes $ 92 $(13) $ 75
===============================================================================================================================
</TABLE>
The Internal Revenue Service (IRS) has examined Ashland's consolidated U.S.
income tax returns through 1991. 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.
<PAGE>
NOTE J - 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 employees' years of service and compensation during the years
immediately preceding their 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 during the last three years. 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, 1996 (7.5% and 5% at September 30, 1995).
<TABLE>
<CAPTION>
1996 1995
Plans with Plans with Plans with Plans with
assets in excess ABO in excess assets in excess ABO in excess
(In millions) of ABO of assets of ABO of assets
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets at fair value (primarily listed
stocks and bonds) $360 $ - $ 14 $290
- ------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations (ABO)
Vested 284 29 13 289
Nonvested 35 36 1 69
- ------------------------------------------------------------------------------------------------------------------------
319 65 14 358
- ------------------------------------------------------------------------------------------------------------------------
Plan assets less than (in excess of) ABO (41) 65(1) - 68(1)
Provision for future salary increases 149 17 1 162
Deferred pension costs (10) (15) (3) (63)
- ------------------------------------------------------------------------------------------------------------------------
Net accrued (prepaid) pension costs(2) $ 98 $ 67 $ (2) $167
========================================================================================================================
Components of deferred pension costs
Unrecognized transition gain (loss) $ 10 $ (4) $ - $ 9
Unrecognized net loss (9) (34) (2) (93)
Unrecognized prior service costs (11) (1) (1) (9)
Recognition of minimum liability - 24 - 30
- ------------------------------------------------------------------------------------------------------------------------
$ (10) $(15) $ (3) $ (63)
========================================================================================================================
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
Components of pension expense
Service cost $ 32 $ 23 $ 24
Interest cost 40 34 29
Actual investment loss (gain) on plan assets (34) (51) 7
Deferred investment gain (loss)(3) 6 30 (27)
Other amortization and deferral 3 1 4
Enhanced retirement program pension cost - 15 -
- ------------------------------------------------------------------------------------------------------------------------
$ 47 $ 52 $ 37
========================================================================================================================
</TABLE>
(1) Includes unfunded ABO of $65 million in 1996 and $62 million in 1995
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%.
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 or are disabled. 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 funds the costs of these plans on a
pay-as-you-go basis.
Effective October 1, 1992, 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 years of service. The cap limits Ashland's
contributions to the 1992 per capita health care costs, increasing
thereafter by up to 4.5% per year. These amendments reduced the accumulated
postretirement benefit obligation (APBO) for retiree health care plans at
that date by $197 million, which is being amortized to income over
approximately 12 years.
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, 1996, and 7.5% at September 30, 1995. Under the
amended plan, the assumed annual rate of increase in the per capita cost is
4.5%.
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- ------------------- --------------------
Health Life Health Life Health Life
(In millions) care insurance care insurance care insurance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accumulated postretirement benefit obligations (APBO)
Retired or disabled employees $130 $25 $146 $26
Fully eligible active plan participants 33 5 33 4
Other active plan participants 127 5 123 5
- --------------------------------------------------------------------------------------------------
290 35 302 35
Unrecognized net gain (loss) 28 (2) (2) (4)
Unrecognized plan amendment credit 112 5 129 6
- ------------------------------------------------------------------------------------------------------------------------------
Accrued other postretirement benefit costs $430 $38 $429 $37
==============================================================================================================================
Components of other postretirement benefit
expense
Service cost $ 12 $ 1 $ 12 $ 1 $ 7 $1
Interest cost 21 3 20 2 16 2
Amortization and deferral
(principally plan amendment credit) (16) (1) (15) (1) (15) (1)
- ------------------------------------------------------------------------------------------------------------------------------
$ 17 $ 3 $ 17 $ 2 $ 8 $2
==============================================================================================================================
</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 $2 million in both 1996 and 1995, and $1
million in 1994.
Ashland sponsors various savings plans to assist eligible employees in
providing for retirement or other future needs. Ashland matches employee
contributions up to 6% of their qualified earnings at a rate of 70% (20%
for LESOP participants prior to April 1, 1996). The increased company
contributions after March 31, 1996, are in the form of Ashland Common
Stock. Ashland's contributions (including the value of common shares
contributed to the plans) amounted to $15 million in 1996, $9 million in
1995 and $7 million in 1994.
NOTE K - 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 $173 million at September 30, 1996, and
$174 million at September 30, 1995. 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. In addition, various costs of remediation
efforts related to underground storage tanks are eligible for reimbursement
from state administered funds.
During 1996, the U. S. Environmental Protection Agency (EPA) notified
Ashland that its three refineries would be subject to a comprehensive
inspection of compliance with federal environmental laws and regulations.
The inspections of two of the refineries have been completed and the third
inspection is expected to be completed before the end of this calendar
year. Such inspections could result in sanctions, monetary penalties and
further remedial expenditures. Also during 1996, Ashland arranged for an
independent review of environmental compliance at its three refineries by
an outside consulting firm, self-reported to the EPA a number of issues of
non-compliance with applicable laws or regulations, and commenced a program
to address these matters. Ashland is not in a position to determine what
actions, if any, may be instituted and is similarly uncertain at this time
what additional remedial actions may be required or costs incurred.
However, this matter is not expected to have a material adverse effect on
Ashland's consolidated financial position.
In addition to environmental matters, Ashland and its subsidiaries are
parties to numerous claims and lawsuits (some of which are for substantial
amounts). While these 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, 1996, Ashland believes
that any liability resulting from these matters, after taking into
consideration Ashland's insurance coverages and amounts already provided
for, should not have a material adverse effect on Ashland's consolidated
financial position.
<PAGE>
NOTE L - CAPITAL STOCK
In May 1993, Ashland sold 6 million shares of cumulative convertible
preferred stock priced at $50 per share, realizing net proceeds, after fees
and expenses, of $293 million. 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 right to purchase one-thousandth share of preferred stock for $140.
Each one-thousandth share of preferred stock will be entitled to dividends
and to vote on an equivalent basis with one common share. The rights are
neither exercisable nor separately transferable from the common shares
unless a party acquires or tenders for more than 15% of Ashland's common
stock. If any party acquires more than 15% 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 preferred
stock of Ashland or the acquiring company at a substantial discount. The
rights expire on May 16, 2006, and can be redeemed at any time prior to
becoming exercisable.
At September 30, 1996, 500,000 shares of cumulative preferred stock are
reserved for potential issuance under the Shareholder Rights Plan. At
September 30, 1996, 17 million common shares are reserved for conversion of
debentures and preferred stock and for issuance under outstanding stock
options.
NOTE M - 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 the LESOP 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 were
allocated as the loan to the LESOP was repaid. All shares were allocated
and the loan was fully repaid as of March 31, 1996. The projected costs of
the LESOP (including the prepaid contribution, projected dividends on the
related unallocated shares and projected future contributions) were
expensed on a pro rata basis as the original shares were allocated to
employees. This expense totaled $7 million in 1996, $14 million in 1995 and
$18 million in 1994. 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
amounted to $11 million in 1996 and $22 million in 1995.
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>
1996 1995 1994
---------------------- ------------------------- --------------------------
Common Price range Common Price range Common Price range
(In thousands except per share data) shares per share shares per share shares per share
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding -
beginning of year(1) 5,222 $23-7/8 - 41 4,697 $14-1/4 - 41 4,504 $13-3/8 - 41
Options granted 823 31-1/8 - 39 839 33 - 33-7/8 860 35-7/8 - 37-1/2
Options exercised (747) 23-7/8 - 41 (164) 14-1/4 - 35-5/8 (639) 13-3/8 - 41
Options canceled (51) 33-1/8 - 41 (150) 23-7/8 - 41 (28) 23-7/8 - 41
- -----------------------------------------------------------------------------------------------------------------------
Options outstanding -
end of year(1) 5,247 $23-7/8 - 41 5,222 $23-7/8 - 41 4,697 $14-1/4 - 41
=======================================================================================================================
Options exercisable -
end of year 3,820 $23-7/8 - 41 3,777 $23-7/8 - 41 3,242 $14-1/4 - 41
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Shares of common stock available for
future grants of options or awards amounted to 3,403,000 at September 30,
1996, and 4,236,000 at September 30, 1995.
<PAGE>
Ashland Inc. and Subsidiaries
FIVE-YEAR INFORMATION BY INDUSTRY SEGMENT
Years Ended September 30
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALES AND OPERATING REVENUES
Petroleum $ 5,614 $ 5,050 $ 4,666 $ 4,752 $ 4,848
SuperAmerica 1,928 1,788 1,706 1,785 1,888
Valvoline 1,199 1,113 1,000 938 900
Chemical 3,695 3,551 2,885 2,586 2,488
APAC 1,235 1,123 1,101 1,116 1,043
Coal(1) 580 610 - - -
Exploration 241 198 199 247 262
Intersegment sales(2)
Petroleum (1,334) (1,228) (1,193) (1,195) (1,182)
Other (28) (38) (30) (30) (36)
- ----------------------------------------------------------------------------------------------------------------------------------
$13,130 $12,167 $10,334 $10,199 $10,211
==================================================================================================================================
OPERATING INCOME (LOSS)
Petroleum $ 55 $ (54) $ 113 $ 56(3) $ (125)
SuperAmerica 34 53 59 65 1
Valvoline 82 (4) 52 56 50
----------------------------------------------------------------------------------------
Total Refining and Marketing Group 171 (5) 224 177 (74)
Chemical 169 159 125 108 81
APAC 83 75 70 53 45
Coal(1) 36 66 - - -
Exploration 94(4) (6) 28 36 17
General corporate expenses (97) (91) (80)(5) (77) (132)
- ----------------------------------------------------------------------------------------------------------------------------------
$ 456 $ 198(6) $ 367 $ 297 $(63)(7)
==================================================================================================================================
IDENTIFIABLE ASSETS
Petroleum $ 2,374 $ 2,258 $ 2,259 $ 2,240 $ 2,296
SuperAmerica 406 401 398 364 446
Valvoline 557 603 532 430 402
Chemical 1,458 1,372 1,122 958 999
APAC 489 433 404 440 437
Coal(1) 899 928 - - -
Exploration 506 424 374 375 361
Corporate(8) 580 573 726 745 727
- ----------------------------------------------------------------------------------------------------------------------------------
$ 7,269 $ 6,992 $ 5,815 $ 5,552 $ 5,668
==================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Petroleum $145 $136 $155 $230 $273
SuperAmerica 42 47 39 25 37
Valvoline 19 25 25 21 19
Chemical 80 76 61 51 47
APAC 62 47 45 43 42
Coal(1) 58 58 - - -
Exploration 80 45 41 42 67
Corporate 24 10 10 20 19
- ----------------------------------------------------------------------------------------------------------------------------------
$510 $444 $376 $432 $504
==================================================================================================================================
DEPRECIATION, DEPLETION AND AMORTIZATION
Petroleum $122 $204 $134 $127 $125
SuperAmerica 31 29 27 28 31
Valvoline 23 24 19 18 17
Chemical 67 58 43 42 43
APAC 44 42 40 44 45
Coal(1) 72 72 - - -
Exploration 31 41 33 34 28
Corporate 12 17 12 12 13
- ----------------------------------------------------------------------------------------------------------------------------------
$402 $487(9) $308 $305 $302
==================================================================================================================================
</TABLE>
(1) Amounts relate to Ashland Coal, which was consolidated beginning in
1995.
(2) Intersegment sales are accounted for at prices which approximate market
value.
(3) Includes a gain of $15 million on the sale of TPT, an inland waterways
barge operation.
(4) Includes a gain of $73 million resulting from the settlement of Ashland
Exploration's claims in the bankruptcy reorganization of Columbia Gas
Transmission and Columbia Gas Systems.
(5) Includes a net gain of $11 million related to litigation matters.
(6) Includes charges for unusual items totaling $120 million, consisting of
asset impairment write-downs of $83 million under FAS 121 and provisions of
$37 million for early retirement and restructuring programs. The combined
effect of these items reduced operating income for each of the segments as
follows: Petroleum ($102 million); Valvoline ($5 million); Chemical ($5
million); Exploration ($4 million); and general corporate expenses ($4
million).
(7) 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); APAC ($9 million); Exploration ($16
million); and general corporate expenses ($49 million).
(8) Includes principally cash, cash equivalents, investments in and
advances to unconsolidated affiliates and investments of captive insurance
companies.
(9) Includes charges of $83 million for asset impairment write-downs which
increased depreciation, depletion and amortization for each of the segments
as follows: Petroleum ($68 million); Valvoline ($3 million); Chemical ($4
million); Exploration ($4 million); and Corporate ($4 million).
<PAGE>
Ashland Inc. and Subsidiaries SUPPLEMENTAL OIL AND GAS INFORMATION
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>
1996 1995 1994
---------------------- --------------------- ---------------------
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 1.3 14.4 15.7 .9 7.6 8.5 1.4 7.7 9.1
Revisions of previous estimates .4 7.2 7.6 .2 12.3 12.5 (.1) 6.7 6.6
Extensions and discoveries - 4.7 4.7 - 1.4 1.4 - - -
Purchases (net of sales) of reserves in place .1 - .1 .4 - .4 (.1) - (.1)
Production (.2) (6.4) (6.6) (.2) (6.9) (7.1) (.3) (6.8) (7.1)
- --------------------------------------------------------------------------------------------------------------------------------
End of year 1.6 19.9 21.5 1.3 14.4 15.7 .9 7.6 8.5
================================================================================================================================
Proved developed reserves
Beginning of year 1.3 14.4 15.7 .9 7.6 8.5 1.3 7.7 9.0
End of year 1.6 17.2 18.8 1.3 14.4 15.7 .9 7.6 8.5
- --------------------------------------------------------------------------------------------------------------------------------
NATURAL GAS RESERVES (billions of cubic feet)
Proved developed and undeveloped reserves
Beginning of year 507.4 349.2 455.5
Revisions of previous estimates 37.6 90.7 (98.2)
Extensions and discoveries 70.0 21.2 25.9
Purchases (net of sales) of
reserves in place 1.6 83.8 .4
Production (39.7) (37.5) (34.4)
- --------------------------------------------------------------------------------------------------------------------------------
End of year 576.9 507.4 349.2
================================================================================================================================
Proved developed reserves
Beginning of year 427.3 320.5 352.0
End of year 477.0 427.3 320.5
- --------------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS (in millions)
Revenues
Sales to third parties $112 $126 $ 238 $ 86 $110 $196 $ 96 $ 99 $195
Intersegment sales(1) 3 - 3 2 - 2 4 - 4
- --------------------------------------------------------------------------------------------------------------------------------
115 126 241 88 110 198 100 99 199
Costs and expenses
Production (lifting) costs(2) (30) (64) (94) (27) (49) (76) (24) (90) (114)
Exploration expenses (9) - (9) (11) (27) (38) (13) (1) (14)
Depreciation, depletion, amortization
and valuation provisions (34) (2) (36) (41) (1) (42) (34) (1) (35)
Other costs(3) 40 (1) 39 (24) (1) (25) (25) (2) (27)
Income and foreign exploration taxes (19) (46) (65) 16 (23) (7) 7 19 26
- --------------------------------------------------------------------------------------------------------------------------------
$ 63 $ 13 $ 76 $ 1 $ 9 $ 10 $ 11 $ 24 $ 35
================================================================================================================================
COSTS INCURRED (in millions)
Property acquisition costs
Proved properties $ 2 $ - $ 2 $ 69 $ - $ 69 $ 1 $ - $ 1
Unproved properties 5 - 5 2 - 2 2 - 2
Exploration costs 13 12 25 17 31 48 19 1 20
Development costs 35 28 63 30 10 40 32 2 34
- --------------------------------------------------------------------------------------------------------------------------------
CAPITALIZED COSTS (in millions)
Proved properties $624 $437 $1,061 $584 $400 $984
Unproved properties 13 1 14 11 1 12
- --------------------------------------------------------------------------------------------------
637 438 1,075 595 401 996
Accumulated depreciation,
depletion and amortization (254) (393) (647) (226) (392) (618)
- --------------------------------------------------------------------------------------------------
$383 $ 45 $ 428 $369 $ 9 $378
================================================================================================================================
</TABLE>
<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 (FAS 69), "Disclosures about Oil and Gas Producing
Activities." Under the guidelines of FAS 69, estimated future cash flows
are determined based on current prices for crude oil and natural gas,
estimated production of 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. Furthermore,
Ashland does not represent that such estimates are indicative of its
expected future cash flows or the current value of its reserves. Since gas
prices utilized in deriving these estimates are based on conditions that
existed at September 30 and are usually different than prices that exist at
December 31 due to seasonal fluctuations in the natural gas market, the
estimates may not be comparable to those of other companies with different
fiscal years. 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 discounted future net cash flows calculations was based on $1.85 per
million Btu at Henry Hub for 1996 and $1.64 for 1995.
<TABLE>
<CAPTION>
Discounted future net cash flows (in millions) U.S. Foreign Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SEPTEMBER 30, 1996
Future cash inflows $1,273 $ 434 $1,707
Future production (lifting) costs (509) (293) (802)
Future development costs (55) (21) (76)
Future income and foreign exploration taxes (116) (99) (215)
- -------------------------------------------------------------------------------------------------------------------------------
593 21 614
Annual 10% discount (304) (4) (308)
- -------------------------------------------------------------------------------------------------------------------------------
$ 289 $ 17 $ 306
===============================================================================================================================
SEPTEMBER 30, 1995
Future cash inflows $1,060 $ 228 $1,288
Future production (lifting) costs (505) (159) (664)
Future development costs (58) (16) (74)
Future income and foreign exploration taxes (33) (33) (66)
- -------------------------------------------------------------------------------------------------------------------------------
464 20 484
Annual 10% discount (212) (3) (215)
- -------------------------------------------------------------------------------------------------------------------------------
$ 252 $ 17 $ 269
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
Changes in discounted future ---------------------- -------------------- --------------------
net cash flows (in millions) U. S. Foreign Total U. S. Foreign Total U. S. Foreign Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net change due to extensions and
discoveries $ 27 $ 29 $ 56 $ 25 $ 6 $ 31 $ 21 $ - $ 21
Sales of oil and gas produced - net of
production (lifting) costs (85) (63) (148) (61) (61) (122) (76) (9) (85)
Changes in prices 60 20 80 24 24 48 (186) (3) (189)
Previously estimated development
costs incurred 22 28 50 7 35 42 24 2 26
Net change due to revisions of
previous estimates of reserves 4 73 77 7 46 53 (17) 34 17
Purchases (net of sales) of reserves in place 1 - 1 40 - 40 - - -
Accretion of 10% discount 25 1 26 20 1 21 31 1 32
Other - net(4) 10 (32) (22) (9) (40) (49) 33 (11) 22
Net change in income and foreign
exploration taxes (27) (56) (83) 2 (4) (2) 59 (13) 46
- -------------------------------------------------------------------------------------------------------------------------------
37 - 37 55 7 62 (111) 1 (110)
Discounted future net cash flows
Beginning of year 252 17 269 197 10 207 308 9 317
- -------------------------------------------------------------------------------------------------------------------------------
End of year $289 $ 17 $306 $252 $ 17 $269 $ 197 $ 10 $ 207
===============================================================================================================================
</TABLE>
(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.
<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaries
FIVE-YEAR SELECTED FINANCIAL INFORMATION
Years Ended September 30
(In millions except per share data) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues
Sales and operating revenues (including excise taxes) $13,130 $12,167 $10,334 $10,199 $10,211
Other 155 72 48 57 40
Costs and expenses
Cost of sales and operating expenses (10,151) (9,286) (7,742) (7,951) (8,210)
Excise taxes on products and merchandise (985) (988) (877) (645) (659)
Selling, general and administrative expenses (1,291) (1,280) (1,088) (1,058) (1,143)
Depreciation, depletion and amortization (402) (487) (308) (305) (302)
- -------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 456 198 367 297 (63)
Other income (expense)
Interest expense (net of interest income) (169) (171) (117) (123) (128)
Equity income 24 7 22 26 33
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes, minority interest and
the cumulative effect of accounting changes 311 34 272 200 (158)
Income taxes (92) 13 (75) (58) 90
Minority interest in earnings of subsidiaries (8) (23) - - -
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) before the cumulative effect
of accounting changes 211 24 197 142 (68)
Cumulative effect of accounting changes - - - - (268)
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 211 $ 24 $ 197 $ 142 $ (336)
===============================================================================================================================
BALANCE SHEET INFORMATION
Working capital
Current assets $ 2,740 $ 2,575 $ 2,171 $ 1,973 $ 2,110
Current liabilities 2,279 2,094 1,688 1,619 2,046
- -------------------------------------------------------------------------------------------------------------------------------
$ 461 $ 481 $ 483 $ 354 $ 64
===============================================================================================================================
Total assets $ 7,269 $ 6,992 $ 5,815 $ 5,552 $ 5,668
- -------------------------------------------------------------------------------------------------------------------------------
Capital employed
Debt due within one year $ 203 $ 272 $ 133 $ 159 $ 306
Long-term debt (less current portion) 1,784 1,828 1,391 1,399 1,444
Deferred income taxes 64 49 30 44 59
Minority interest in consolidated subsidiaries 174 179 - - -
Convertible preferred stock 293 293 293 293 -
Common stockholders' equity 1,521 1,362 1,302 1,162 1,086
- -------------------------------------------------------------------------------------------------------------------------------
$ 4,039 $ 3,983 $ 3,149 $ 3,057 $ 2,895
===============================================================================================================================
CASH FLOW INFORMATION
Cash flows from operations $ 767 $ 500 $ 454 $ 250 $ 398
Additions to property, plant and equipment 510 444 376 432 504
Dividends 93 92 79 66 60
- -------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION
Primary earnings (loss) per share $ 2.97 $ .08 $ 2.94 $ 2.26 $ (1.18)(1)
Dividends per share 1.10 1.10 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes the cumulative effect of accounting changes of $(4.57) per share.
EXHIBIT 21
LIST OF SUBSIDIARIES
Subsidiaries of Ashland Inc. ("AI") at October 1, 1996 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.
<TABLE>
<CAPTION>
Jurisdiction of Immediate
Company Incorporation Parent*
<S> <C> <C>
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 AI
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 AI 50%
Ashland Chemical Canada Ltd.......................................... Alberta, Canada AI
Ashland Coal, Inc.................................................... Delaware AI 56%
Ashland Crude Marketing, Inc......................................... Delaware AII
Ashland Crude Trading, Inc........................................... Delaware AI
Ashland Exploration, Inc. ("AEI").................................... Delaware AEHI
Ashland Exploration Holdings, Inc. ("AEHI").......................... Delaware AI
Ashland International Holdings , Inc. ("AIHI")....................... Delaware AI
Ashland Italia S.p.A................................................. Italy AIHI
Ashland Nederland B.V................................................ Netherlands AIHI
Ashland Nigerian Development Company ("ANDC")........................ Delaware AII
Ashland of Nigeria, Ltd. ("ANL")..................................... Delaware AII
Ashland Oil (Nigeria) Company Ultd................................... Nigeria ANL 50% - ANDC 50%
Ashland Overseas Investments, Inc. ("AII")........................... Delaware AEI
Ashland Pipe Line of Kentucky, L.L.C. ("APL")........................ Kentucky AI 99% - SPC 1%
Ashland Plastics France S.A.......................................... France AIHI
Ashland Scurlock Permian Canada, Ltd................................. Alberta, Canada SPC
Ashland UK Limited................................................... United Kingdom AIHI
Ash Property, Inc.................................................... Ohio AI
Ashmont Insurance Company, Inc. ("AIC").............................. Vermont AI
Bluegrass Insurance Company Limited.................................. Bermuda AIC
Iberia Ashland Chemical S.A.......................................... Spain AI 70%
Mid-Valley Supply Co................................................. Kentucky AI
Ohio River Pipe Line Company......................................... Delaware AI
Scurlock Permian Corporation ("SPC")................................. Kentucky AI
Valvoline (Australia) Pty. Ltd....................................... Australia AIHI
Valvoline Canada Ltd................................................. Ontario, Canada AIHI
Vecom International B.V.............................................. Netherlands AIHI
- ---------------
*100% of the voting securities are owned by the immediate parent except as otherwise indicated.
</TABLE>
Exhibit 23
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 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
Inc. Amended Stock Incentive Plan for Key Employees, in the Registration
Statement (Form S-8 No. 33-7501) pertaining to the Ashland Inc. Employee
Savings Plan, in the Registration Statement (Form S-8 No. 33-26101)
pertaining to the Ashland Inc. Long-Term Incentive Plan, in the
Registration Statement (Form S-8 No. 33-55922) pertaining to the Ashland
Inc. 1993 Stock Incentive Plan, in the Registration Statement (Form S-8 No.
33-49907) pertaining to the Ashland Inc. Leveraged Employee Stock Ownership
Plan, in the Registration Statement (Form S-8 No. 33-62901) pertaining to
the Ashland Inc. Deferred Compensation Plan, and in the Registration
Statement (Form S-3 No. 33-57011) as amended by Post-Effective Amendment
No. 1, pertaining to the U.S. $200,000,000 Ashland Inc. Medium-Term Notes,
Series G, and 3,000,000 shares of Ashland Inc. common stock, and the
related Prospectus, of our report dated November 6, 1996, with respect to
the consolidated financial statements and schedule of Ashland Inc. and
subsidiaries included in the Annual Report (Form 10-K) for the year ended
September 30, 1996.
Ernst & Young LLP
December 9, 1996
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors and
Officers of ASHLAND 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 7, 1996
/s/ John R. Hall /s/ Ralph E. Gomory
- -------------------------------------- ---------------------------------
John R. Hall, Chairman of the Board of Ralph E. Gomory, Director
Directors and Director
/s/ Paul W. Chellgren /s/ Mannie L. Jackson
- -------------------------------------- ---------------------------------
Paul W. Chellgren, President, Mannie L. Jackson, Director
Chief Executive Officer and Director
/s/ J. Marvin Quin /s/ Patrick F. Noonan
- -------------------------------------- ---------------------------------
J. Marvin Quin, Chief Financial Patrick F. Noonan, Director
Officer and Senior Vice President
/s/ Jack S. Blanton /s/ Jane C. Pfeiffer
- -------------------------------------- ---------------------------------
Jack S. Blanton, Director Jane C. Pfeiffer, Director
/s/ Thomas E. Bolger /s/ James R. Rinehart
- -------------------------------------- ---------------------------------
Thomas E. Bolger, Director James R. Rinehart, Director
/s/ Samuel C. Butler /s/ Michael D. Rose
- -------------------------------------- ---------------------------------
Samuel C. Butler, Director Michael D. Rose, Director
/s/ Frank C. Carlucci /s/ William L.Rouse
- -------------------------------------- ---------------------------------
Frank C. Carlucci, Director William L. Rouse, Jr., Director
/s/ James B. Farley /s/ Robert B. Stobaugh
- -------------------------------------- ---------------------------------
James B. Farley, Director Robert B. Stobaugh, Director
/s/ Edmund B. Fitzgerald
- --------------------------------------
Edmund B. Fitzgerald, Director
<PAGE>
CERTIFICATION
The Undersigned hereby certifies that he is an Assistant Secretary
of Ashland Inc., a Kentucky corporation ("Ashland"), and that, as such, he
is authorized to execute this Certificate on behalf of Ashland and further
certifies that:
Attached hereto as Exhibit A is a true and correct copy of an
excerpt from the minutes of the meeting of the Board of Directors
of Ashland held on November 7, 1996, setting forth certain actions
taken at such meeting, and the powers and authorities granted
pursuant to such actions have at all times been in effect without
amendment, waiver, rescission or modification since November 7,
1996.
IN WITNESS WHEREOF, I have signed and sealed this Certification
this 15th day of November, 1996.
/s/ T. C. Wales
-----------------------
T. C. Wales
Assistant Secretary
[S E A L]
EXCERPT FROM
MINUTES OF DIRECTORS' MEETING
ASHLAND INC.
November 7, 1996
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 bp necessary
and proper to implement the foregoing resolutions.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S ANNUAL REPORT TO
SHAREHOLDERS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
1996 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-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 77
<SECURITIES> 0
<RECEIVABLES> 1,693
<ALLOWANCES> 27
<INVENTORY> 736
<CURRENT-ASSETS> 2,740
<PP&E> 7,374
<DEPRECIATION> 3,659
<TOTAL-ASSETS> 7,269
<CURRENT-LIABILITIES> 2,279
<BONDS> 1,784
<COMMON> 64
0
293
<OTHER-SE> 1,457
<TOTAL-LIABILITY-AND-EQUITY> 7,269
<SALES> 13,130
<TOTAL-REVENUES> 13,285
<CGS> 11,538
<TOTAL-COSTS> 11,538
<OTHER-EXPENSES> 1,291
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 169
<INCOME-PRETAX> 287
<INCOME-TAX> 92
<INCOME-CONTINUING> 211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211
<EPS-PRIMARY> 2.97
<EPS-DILUTED> 2.82
</TABLE>
