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ASHLAND INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 30, 1997
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Ashland Inc., a Kentucky corporation
("Ashland"), will be held on Thursday, January 30, 1997, at 10:30 A.M., Eastern
Standard Time, at the Ashland Petroleum Executive Office Building, 2000 Ashland
Drive, Russell, Kentucky, and at any adjournment thereof, for the purpose of
acting upon the following matters as well as such other business as may properly
come before the Annual Meeting or any adjournment thereof:
(1) to elect six directors to Class II;
(2) to ratify the appointment of Ernst & Young LLP as independent
auditors for fiscal year 1997;
(3) to approve the Ashland Inc. 1997 Stock Incentive Plan (a copy of
which is attached as Exhibit A to the Proxy Statement); and
(4) if presented at the Annual Meeting, to act upon a shareholder
proposal to request the Board of Directors to consider nominating a wage
roll employee who is a representative at his or her plant site to the Board
of Directors.
Only shareholders of record at the close of business on November 25, 1996
will be entitled to vote at the Annual Meeting or any adjournment thereof.
In order that your stock may be represented at the Annual Meeting, please
date and sign the enclosed proxy card and return it promptly in the accompanying
envelope. If you attend the Annual Meeting, you may vote in person even though
you have previously sent in your proxy card.
By Order of the Board of Directors,
THOMAS L. FEAZELL,
SENIOR VICE PRESIDENT,
GENERAL COUNSEL
AND SECRETARY
Russell, Kentucky
December 16, 1996
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ASHLAND INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 30, 1997
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Ashland Inc. ("Ashland" or the "Company") of proxies to be
voted at the Annual Meeting of Shareholders to be held on Thursday, January 30,
1997, at 10:30 A.M., Eastern Standard Time, at the Ashland Petroleum Executive
Office Building, 2000 Ashland Drive, Russell, Kentucky, and at any adjournment
thereof, for the purposes set forth in the accompanying Notice. It is expected
that this Proxy Statement and the accompanying proxy card will be mailed to
shareholders commencing on or about December 16, 1996.
Only the holders of Ashland's Common Stock of record at the close of
business on November 25, 1996 will be entitled to vote at the Annual Meeting. At
that date there were 64,718,757 shares of Ashland Common Stock outstanding. Each
shareholder is entitled to one vote for each share of Ashland Common Stock held
by him or her on the record date. Cumulative voting applies in the election of
directors. Under cumulative voting, a shareholder may multiply the number of
shares owned by the number of directors to be elected and cast this total number
of votes for any one nominee or distribute the total number of votes, in any
proportion, among as many nominees as the shareholder desires. The presence in
person or by proxy of shareholders holding a majority of the shares of Ashland
Common Stock will constitute a quorum for the transaction of business at the
Annual Meeting. Abstentions and broker non-votes will be included in the
computation of the number of shares of Ashland Common Stock that are present for
purposes of determining the presence of a quorum.
Whole shares of Ashland Common Stock credited to the account of a
participant in Ashland's Dividend Reinvestment Plan will be voted in accordance
with the proxy card returned by the participant to Ashland. The voting of shares
of Ashland Common Stock held under Ashland's employee benefit plans is discussed
under "Stock Ownership of Certain Persons."
Ashland's address is Ashland Inc., 1000 Ashland Drive, Russell, Kentucky
41169.
ITEM I. ELECTION OF DIRECTORS
The Board of Directors currently consists of sixteen directors, divided into
three classes. The number of directors to be elected at the 1997 Annual Meeting
is fixed at six. The directors who are nominated for election as Class II
directors by the shareholders at the 1997 Annual Meeting are Mr. Chellgren, Mr.
Gomory, Mr. Noonan, Ms. Pfeiffer, Mr. Rose and Dr. Stobaugh.
All the nominees were recommended by the Committee on Directors of the Board
for election. All nominees were elected by the shareholders at the 1994 Annual
Meeting for a three-year term. With the exception of Dr. Stobaugh, the nominees,
if elected, will hold office for a three-year term expiring in 2000. Under the
Board's current retirement policy, it is anticipated that Dr. Stobaugh will
retire after serving one year of his three-year term. Under Ashland's By-laws, a
director elected to fill a vacancy on the Board serves until the next annual
meeting of shareholders and until his or her successor has been elected and
qualified. Mr. John R. Hall, a director of Ashland since 1968 and Chairman of
the Board since 1981 will retire on January 30, 1997. Messrs. Edmund B.
Fitzgerald and James R. Rinehart, directors of Ashland since 1990 and 1985,
respectively, will also retire on January 30, 1997.
Shareholders voting at the Annual Meeting may not vote for more than the
number of nominees listed in the Proxy Statement. Under Ashland's By-laws, those
nominees receiving the greatest number of votes, up to the number of directors
to be elected, shall be elected directors. It is the intention of the
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persons named in the enclosed proxy card (Messrs. John R. Hall, Paul W.
Chellgren and Thomas L. Feazell), unless otherwise instructed in any form of
proxy, to vote FOR the election of the six nominees. Such persons may also vote
such shares cumulatively for less than the entire number of nominees if any
situation arises which, in the opinion of the proxy holders, makes such action
necessary or desirable or if authority is withheld from one or more nominees.
The Committee on Directors of the Board has no reason to believe that any of the
nominees will not be available for election as directors.
NOMINEES FOR CLASS II DIRECTORS
(Term expiring in 2000)
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PAUL W. CHELLGREN
(PHOTO) Mr. Chellgren, 53, has been President of Ashland since 1992 and was
elected Chief Executive Officer of Ashland effective October 1, 1996.
He was Chief Operating Officer of Ashland from 1992 to 1996, and Senior
Vice President and Chief Financial Officer from 1988 to 1992. He is a
Director of Ashland Coal, Inc. and PNC Bank Corp. He has served as a
Director of Ashland since 1992 and is a member of the Finance and
Public Policy--Environmental Committees of the Board of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY..............................................295,366(1)(7)
RALPH E. GOMORY
(PHOTO) Mr. Gomory, 67, is President of Alfred P. Sloan Foundation in New York,
New York. He was Senior Vice President for Science and Technology of
International Business Machines Corporation (IBM) from 1985 to 1989. He
is a Director of The Bank of New York, LEXMARK International, Inc.,
Polaroid Corp. and The Washington Post Company. He has served as a
Director of Ashland since 1989 and is a member of the Audit and Public
Policy--Environmental Committees of the Board of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY................................................6,000(1)(2)
PATRICK F. NOONAN
(PHOTO) Mr. Noonan, 54, is Chairman of The Conservation Fund in Arlington,
Virginia. He is a Director of International Paper Company and Saul
Centers, Inc., a Trustee of The National Geographic Society and serves
on the Board of Advisors of the Duke University School of the
Environment. He has served as a Director of Ashland since 1991 and is
Chairman of the Public Policy--Environmental Committee and a member of
the Audit Committee of the Board of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY.............................................6,796(1)(2)(6)
</TABLE>
2
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<TABLE>
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JANE C. PFEIFFER
(PHOTO) Mrs. Pfeiffer, 64, is a management consultant in Greenwich,
Connecticut. She is a Director of International Paper Company and J. C.
Penney Company, Inc. and a Trustee of Mutual Of New York. She has
served as a Director of Ashland since 1982 and is a member of the
Personnel and Compensation and the Public Policy-- Environmental
Committees of the Board of Directors. She also served on the 1996
Special Committee of the Board of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY.............................................6,008(1)(2)(5)
MICHAEL D. ROSE
(PHOTO) Mr. Rose, 54, is Chairman of the Board of Directors of Promus Hotel
Corporation in Memphis, Tennessee and will retire on January 1, 1997 as
Chairman of the Board of Directors of Harrah's Entertainment, Inc.
(both of which formerly comprised The Promus Companies Incorporated of
which Mr. Rose was Chairman of the Board of Directors from 1984 to
1995). Prior to April 1994, Mr. Rose also served as Chief Executive
Officer of The Promus Companies Incorporated. He is a Director of First
Tennessee National Corporation, General Mills, Inc., and Darden
Restaurants, Inc. He has served as a Director of Ashland since 1988 and
is Chairman of the Finance Committee and a member of the Personnel and
Compensation Committee of the Board of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY............................................15,853(1)(2)(6)
DR. ROBERT B. STOBAUGH
(PHOTO) Dr. Stobaugh, 69, is Charles E. Wilson Professor, Emeritus at the
Harvard Business School in Boston, Massachusetts. He is a Director of
Susquehanna Pfaltzgraff Company and the National Association of
Corporate Directors (NACD), where he was a member of the 1996 Blue
Ribbon Commission on Director Professionalism and Chairman of the 1995
Blue Ribbon Commission on Director Compensation. Author, co-author, or
co-editor of ten books, Dr. Stobaugh directed the Energy Project at
Harvard Business School and is a former President of the Academy of
International Business. He has served as a Director of Ashland since
1977 and is a member of the Finance Committee and the Committee on
Directors of the Board of Directors. He also served as Chairman of the
1996 Special Committee of the Board of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY............................................18,278(1)(2)(6)
</TABLE>
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CONTINUING CLASS III DIRECTORS
(Term expiring in 1998)
<TABLE>
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JACK S. BLANTON
(PHOTO) Mr. Blanton, 69, is Chairman of the Board of Houston Endowment, Inc.
and President of Eddy Refining Company in Houston, Texas. He is a
Director of Baker Hughes Incorporated, Burlington Northern Santa Fe,
Inc., Pogo Producing Co., and SBC Communications, Inc. He has served as
a Director of Ashland since 1988 and is Chairman of the Audit Committee
and a member of the Public Policy- Environmental Committee of the Board
of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY............................................31,396(1)(2)(4)
SAMUEL C. BUTLER
(PHOTO) Mr. Butler, 66, is a Partner of Cravath, Swaine & Moore, Attorneys in
New York, New York. He is a Director of Millipore Corporation and
United States Trust Corporation. He has served as a Director of Ashland
since 1970 and is a member of the Audit and Finance Committees of the
Board of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY...................................50,199(1)(2)(3)(4)(5)(6)
MANNIE L. JACKSON
(PHOTO) Mr. Jackson, 57, is the majority owner and Chairman of the Board of the
Harlem Globetrotters, International. Although retired as Senior Vice
President of marketing and administration for Honeywell Inc., he
remains as a consultant with Honeywell, an Advisor to the Chairman, and
a member of Honeywell's Southern Africa subsidiary's Board of
Directors. He serves on the Board of Advisors of Florida A&M's
Entrepreneurial Development Center, Howard University Business School
and the Humphrey Institute at the University of Minnesota. He is a
Director of Jostens, Inc., The Stanley Works and REEBOK Corporation. He
has served as a Director of Ashland since May, 1994 and is a member of
the Audit and Public Policy--Environmental Committees of the Board of
Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY.............................................4,976(1)(2)(6)
</TABLE>
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CONTINUING CLASS I DIRECTORS
(Term expiring in 1999)
<TABLE>
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THOMAS E. BOLGER
(PHOTO) Mr. Bolger, 69, is a Director and Chairman of the Executive Committee
of the Board of Directors of Bell Atlantic Corporation in Philadelphia,
Pennsylvania. He also served as Chairman of the Board of Directors of
that company from 1984 to 1989. He is a Trustee of The National
Geographic Society. He has served as a Director of Ashland since 1987
and is Chairman of the Personnel and Compensation Committee and a
member of the Finance Committee of the Board of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY............................................21,349(1)(2)(6)
FRANK C. CARLUCCI
(PHOTO) Mr. Carlucci, 66, is Chairman of The Carlyle Group in Washington, D.C.
He was Secretary of Defense of the United States of America from 1987
to 1989. He is a Director of BDM International, Bell Atlantic
Corporation, CB Commercial Real Estate Group, Inc., Mass Mutual Life
Insurance Company, General Dynamics Corporation, Kaman Corporation,
Neurogen Corporation, Northern Telecom Ltd., Quaker Oats Company,
SunResorts, Ltd., Texas Biotechnology Corporation, Pharmacia & Upjohn
Inc. and Westinghouse Electric Corporation. He has served as a Director
of Ashland since 1989 and is Chairman of the Committee on Directors and
a member of the Personnel and Compensation Committee of the Board of
Directors. He also served on the 1996 Special Committee of the Board of
Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY.........................................16,335(1)(2)(5)(6)
JAMES B. FARLEY
(PHOTO) Mr. Farley, 66, is the retired Chairman of Mutual Of New York, a
position held from 1989 until 1993. Previously he had been President of
that company from 1988 to 1990. He is presently a Trustee of Mutual of
New York and a Director of Harrah's Entertainment Inc. and Walter
Industries Inc. He has served as a Director of Ashland since 1984 and
is a member of the Committee on Directors and the Public
Policy-Environmental Committee of the Board of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY.............................................8,324(1)(2)(6)
</TABLE>
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W. L. ROUSE, JR.
(PHOTO) Mr. Rouse, 64, is an investor in Naples, Florida. He served as Chairman
of the Board of Directors, President and Chief Executive Officer of
First Security Corporation in Lexington, Kentucky from 1982 to 1992. He
is a Director of Kentucky American Water Company and K.U. Energy. He
has served as a Director of Ashland since 1986 and is a member of the
Personnel and Compensation Committee and the Committee on Directors of
the Board of Directors.
SHARES OF ASHLAND COMMON STOCK OWNED
BENEFICIALLY............................................18,239(1)(2)(6)
</TABLE>
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(1) Includes shares of Ashland Common Stock with respect to which each of the
individuals has the right to acquire beneficial ownership within 60 calendar
days after September 30, 1996 through the exercise of stock options: as to
Mr. Chellgren, 247,376 shares; as to all other directors except Mr. Jackson,
2,000 shares; and as to Mr. Jackson, 1,000 shares.
(2) Includes shares of Restricted Common Stock of Ashland as to which the
director has voting power: as to directors except Mr. Jackson, 2,000 shares;
and as to Mr. Jackson, 1,000 shares.
(3) Includes 3,880 shares owned in trust for the benefit of Mr. Butler.
(4) Includes the following shares of Ashland Common Stock as to which the
respective persons disclaim any beneficial ownership: Mr. Butler, 750 shares
owned by his wife; and Mr. Blanton, 2,000 shares owned by a trust for the
benefit of his son for which he is co-trustee.
(5) Includes shares of Ashland Common Stock held under the Ashland Dividend
Reinvestment Plan which provides participants with voting power with respect
to such shares.
(6) Includes Common Stock Units held under the Deferred Compensation and Stock
Incentive Plan For Non-Employee Directors. These Stock Units are payable in
cash or Ashland Common Stock at the director's election upon termination of
service from the Board.
(7) Includes shares of Ashland Common Stock held under Ashland's Employee
Savings Plan and/or Leveraged Employee Stock Ownership Plan to which
participants have voting power with respect to such shares and investment
power with respect to the shares in the Employee Savings Plan.
Shares shown above for each nominee and continuing director indicate
beneficial ownership at September 30, 1996. No nominee or continuing director
owns beneficially more than .46% of any class of Ashland stock.
Except as otherwise indicated, the nominees and continuing directors have
held the principal occupations described above during the past five years.
BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Committee on
Directors, Audit Committee, Personnel and Compensation Committee, Public
Policy-Environmental Committee and Finance Committee. The 1996 Special Committee
was created in fiscal 1996 to consider the organizations and procedures of the
Board and its Committees. During fiscal 1996, seven meetings of the Board of
Directors were held. The Committee on Directors met four times, the Audit
Committee met three times, the Personnel and Compensation Committee met five
times, the Public Policy-Environmental Committee met two times and the Finance
Committee met two times. The 1996 Special Committee met three times. Each
director attended at least 75% of the total meetings of the Board and the
Committees on
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which they served with the exception of Mr. Fitzgerald, Mr. Gomory and Ms.
Pfeiffer who attended 60%, 67% and 71% respectively, of such meetings. Overall
attendance at Board and Committee meetings was 89%.
THE COMMITTEE ON DIRECTORS is responsible for recommending nominees for
membership to the Board of Directors. Current members of the Committee are Mr.
Carlucci (Chairman), Mr. Farley, Mr. Rinehart, Mr. Rouse and Dr. Stobaugh.
Nominees for directors are selected on the basis of recognized achievements
and their ability to bring various skills and experience to the deliberations of
the Board. The Committee will consider candidates recommended by other
directors, employees and shareholders. Written suggestions for candidates to
serve as directors should be sent to the Secretary of Ashland at Ashland Inc.,
1000 Ashland Drive, Russell, Kentucky 41169. Ashland's By-laws require that
written notice of a shareholder's intention to nominate any person for election
as a director at a meeting of shareholders must be received by the Secretary of
Ashland not later than (i) 90 days in advance of such meeting (provided that if
the annual meeting of shareholders is held earlier than the last Thursday in
January, such notice must be given within 10 days after the first public
disclosure, which may include any public filing with the Securities and Exchange
Commission, of the date of the annual meeting), and (ii) with respect to an
election to be held at a special meeting of shareholders for the election of
directors, the close of business on the seventh day following the date on which
notice of such meeting is first given to shareholders. The notice must contain:
(a) the name and address of the shareholder who intends to make the nomination
and of the person or persons to be nominated; (b) a representation that the
shareholder is a holder of record of stock of Ashland entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such shareholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated,
or intended to be nominated, by the Board; (e) the consent of each nominee to
serve as a director if so elected; and (f) a representation as to whether or not
the shareholder will solicit proxies in support of his nominee(s). The chairman
of any meeting of shareholders to elect directors and the Board may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure or if the shareholder fails to comply with the
representations set forth in the notice.
THE AUDIT COMMITTEE is responsible for recommending the selection of
Ashland's independent auditors, the audit fees and the services provided by the
independent auditors, reviewing the scope and findings of external and internal
audits and reviewing the adequacy of Ashland's policies, procedures and internal
controls. Current members of the Committee are Mr. Blanton (Chairman), Mr.
Butler, Mr. Fitzgerald, Mr. Gomory, Mr. Jackson and Mr. Noonan.
THE PERSONNEL AND COMPENSATION COMMITTEE is responsible for approving
salaries of all corporate officers of Ashland and all awards and participation
under Ashland's incentive plans. It recommends the establishment of policies
dealing with compensation, position evaluations and personnel engagements,
transfers and terminations. In addition, it administers various Ashland employee
compensation plans and oversees Ashland's welfare and retirement and savings
plans, including the contribution levels, selection of investment managers,
determination of investment guidelines and the review of their performances.
Current members of the Committee are Mr. Bolger (Chairman), Mr. Carlucci, Ms.
Pfeiffer, Mr. Rose and Mr. Rouse.
THE PUBLIC POLICY-ENVIRONMENTAL COMMITTEE is responsible for the oversight
of policies, programs and practices in relation to public issues affecting
Ashland and the oversight of Ashland's environmental,
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health and safety compliance policies, programs and practices. Current members
of the Committee are Mr. Noonan (Chairman), Mr. Blanton, Mr. Chellgren, Mr.
Farley, Mr. Gomory, Mr. Jackson and Ms. Pfeiffer.
THE FINANCE COMMITTEE is responsible for reviewing Ashland's fiscal
policies, financial and capital structure and its current and contemplated
financial requirements and evaluating significant financial matters and
decisions such as capital structure, dividend action, offerings of corporate
stock and debt securities and major borrowings. Current members of the Committee
are Mr. Rose (Chairman), Mr. Bolger, Mr. Butler, Mr. Chellgren, Mr. Fitzgerald,
Mr. Rinehart and Dr. Stobaugh.
THE 1996 SPECIAL COMMITTEE, which was created at the March 21, 1996 meeting
of the Board of Directors, was given the responsibility to review the Board and
Committee organizations and procedures, update the work of previous special
committees in 1980 and 1990 in that regard, and provide any other
recommendations as to procedure, organization, protocol or mission of the Board
or its Committees as the 1996 Special Committee deemed appropriate. The Special
Committee will terminate upon completion of its mission. Current members of the
1996 Special Committee are Dr. Stobaugh (Chairman), Mr. Carlucci, Mr. Fitzgerald
and Ms. Pfeiffer.
COMPENSATION OF DIRECTORS
Directors who are employees of Ashland are not compensated for service on
the Board or its Committees. Non-employee directors receive an annual retainer
of $30,000, $1,000 for each Board meeting attended, $1,000 per year for each
Committee assignment ($2,000 if Chairperson) and $1,000 for each Committee
meeting attended ($2,000 if Chairperson). Non-employee members of the Board may
additionally receive compensation at the rate of $1,000 per day for services for
special assignments as designated by the Chairman of the Board from time to
time.
Pursuant to the Ashland Inc. Deferred Compensation and Stock Incentive Plan
for Non-Employee Directors (the "Directors' Plan") previously approved by
Ashland's shareholders, non-employee directors may receive their directors' fees
in cash or Ashland Common Stock and may defer receipt until termination of
service. Deferred amounts may earn income based either on the prime rate of
interest or on a hypothetical investment in Ashland Common Stock ("Stock
Units"), or a combination of both, at the director's election. Upon termination
of service, deferred amounts (together with accrued earnings, if any) may be
received in cash or Ashland Common Stock, or a combination of both, in a lump
sum or installments at the director's election. Upon a "change of control" of
Ashland (as defined in the Directors' Plan), each participating director will
receive an automatic cash distribution of all amounts in such director's
account.
Under the Directors' Plan, each year following the Annual Meeting, each
non-employee director is granted an option to purchase 1,000 shares of Ashland
Common Stock at an exercise price equal to the fair market value of the stock on
the date of grant provided the return on common shareholders' equity of Ashland
for the preceding fiscal year is equal to or greater than 10%. Since the return
on equity for Ashland's 1996 fiscal year was greater than 10%, options will be
issued under the Directors' Plan following the Annual Meeting on January 30,
1997.
Pursuant to stock incentive plans previously approved by Ashland's
shareholders, upon becoming a director of Ashland, each non-employee director
receives an award of 1,000 shares of Restricted Stock of Ashland (the "initial
award"). In addition, each non-employee director has received or will receive an
award of 1,000 shares of Restricted Stock of Ashland upon the later of January
31, 1994 or the fifth anniversary of his or her initial award (the "subsequent
award"). As a condition to any award, the director is required to pay to Ashland
an amount equal to the par value of the shares of Restricted Stock awarded to
him or her. The Restricted Stock may not be sold, assigned, transferred or
otherwise encumbered until the earliest to occur of: (a) normal retirement from
the Board at age 70; (b) the death or disability of such director; (c) a 50%
change in the beneficial ownership of Ashland; or, in the case of a
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subsequent award only, (d) voluntary early retirement to take a position in
governmental service. In the case of voluntary resignation or termination of the
director for any reason prior to the events described above, the grant of
Restricted Stock to such director will be forfeited.
It is anticipated that effective January 1, 1997, Ashland will terminate its
retirement plan for non-employee directors (the "Director Retirement Plan")
except for current directors who are at least 69 years old and have elected to
remain covered by the plan and non-employee directors who have previously
retired. Under the Director Retirement Plan, each non-employee director who
retires at age 70, or earlier if the director has at least five years of
continuous service, is eligible to participate. Under the plan, upon retirement
at age 70 with at least ten years of continuous service as a director of
Ashland, the director would receive the annual retainer in effect on his or her
date of retirement, for life. Upon retirement at age 70 with less than ten years
of continuous service as a director of Ashland, or upon retirement as a result
of permanent or total disability, the director would receive, at his or her
election, either (1) for life, an annual amount equal to 10% of the annual
retainer in effect on the date of his or her retirement multiplied by the number
of years of continuous service as a director of Ashland (up to a maximum of ten
years in the case of disability), or (2) an annual payment of 100% of the annual
retainer in effect on the date of his or her retirement for a number of years
equal to the number of years of continuous service as a director of Ashland.
Upon retirement prior to age 70, the director would receive, commencing at age
65, the amount of the annual retainer in effect on the date of his or her
retirement for a number of years equal to the number of years of continuous
service as a director of Ashland.
In connection with termination of the Director Retirement Plan, Ashland has
prospectively terminated eligibility for the Director Death Benefit Program
under which Ashland pays a one-time $50,000 death benefit to the designated
beneficiary of each active or retired director of Ashland who was not an
employee of Ashland on the date of his or her death. Retired directors and
current directors who are at least 69 years old and who have elected to remain
covered under the Director Retirement Plan will remain eligible for the death
benefit under the program. However, the program has been terminated for all
other current directors and any new directors elected to the Board. For current
directors not continuing in the Director Retirement Plan and the Director Death
Benefit Program, Ashland has valued their existing benefit under these plans and
provided them with commensurate Common Stock Units in the Directors' Plan.
Directors of Ashland participate in the Directors' Charitable Award Program.
Pursuant to the program, Ashland has purchased joint life insurance contracts in
the amount of $1 million on each director. Upon the death of a director, Ashland
will donate an amount equal to $1 million to one or more charitable
organizations recommended by the director. The donations are funded with the
proceeds Ashland receives from the joint life insurance contracts. Directors
derive no financial benefit from the program since all charitable deductions
accrue solely to Ashland.
The Board of Directors of Ashland considers stock ownership in the Company
by management to be of utmost importance. Such ownership enhances management's
commitment to the future of the Company and further aligns management's
interests with those of Ashland's shareholders. In keeping with this philosophy,
in fiscal year 1993, the Board established minimum stock ownership guidelines
for directors and certain executive officers. These guidelines require directors
to own Ashland Common Stock having a value of at least five times their annual
retainer. Each director will have five years from 1993 (or, if later, the year
the director was elected to the Board) to reach this ownership level. For
further information as to these guidelines as they pertain to Ashland's
executive officers, see the Personnel and Compensation Committee Report on
Executive Compensation in this Proxy Statement.
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STOCK OWNERSHIP OF CERTAIN PERSONS
The following table shows as of September 30, 1996, certain information
regarding those persons known by Ashland management to be the owners of more
than 5% of Ashland's outstanding Common Stock and the beneficial ownership of
each class of Ashland equity securities by each of the executive officers named
under "Executive Compensation" and all directors and executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND
CLASS OF NATURE OF PERCENT OF
STOCK BENEFICIAL OWNERSHIP CLASS (7)
----------- -------------------------- -------------
<S> <C> <C> <C>
Key Trust Company of Ohio, NA...................... Common 8,670,439(1) 13.4%
127 Public Square
Cleveland, Ohio 44114
Capital Research and Management Company............ Common 3,519,100(2) 5.5%
333 South Hope St., 52nd Floor
Los Angeles, California 90071
James R. Boyd...................................... Common 183,637(3)(4)(5)
John A. Brothers................................... Common 149,649(3)(4)(5)
Paul W. Chellgren.................................. Common 295,366(3)(4)
David J. D'Antoni.................................. Common 105,342(3)(4)(5)
John R. Hall....................................... Common 464,361(3)(4)(6)
All directors and executive
officers as a group.............................. Common 2,418,850(3)(4)(5)(6) 3.8%
Preferred 200
</TABLE>
- ------------------------
(1) Key Trust Company of Ohio, NA ("Key") has advised Ashland that as of
September 30, 1996, it was the record owner of 8,670,439 shares of Ashland
Common Stock or 13.4% of the shares of Ashland Common Stock outstanding on
such date. Key has advised Ashland that these shares include 8,611,803
shares held by it as trustee under the Ashland Leveraged Employee Stock
Ownership Plan ("LESOP"). Key has informed Ashland that it will vote shares
allocated to the account of a participant in the LESOP in accordance with
instructions received from such participant and, if the participant has not
provided voting instructions, Key will vote those shares in the same
proportion as shares for which instructions are received from other
participants in the LESOP. Key has advised Ashland that the remaining 58,636
shares of Ashland Common Stock held by it as of September 30, 1996 were held
by it in a variety of fiduciary capacities.
(2) Based upon a Form 13F filed with the Securities and Exchange Commission on
or about November 12, 1996, Capital Research and Management Company
("Capital") held in the aggregate 3,519,100 shares of Ashland Common Stock
as of September 30, 1996. Based upon information provided in the filing,
Ashland understands that Capital has no voting authority with respect to any
of these shares.
(3) Includes shares of Ashland Common Stock held under Ashland's Employee
Savings Plan and/or Leveraged Employee Stock Ownership Plan to which
participants have voting power with respect to such shares and investment
power with respect to the shares in the Employee Savings Plan.
(4) Includes shares of Ashland Common Stock with respect to which each of the
individuals has the right to acquire beneficial ownership within 60 calendar
days after September 30, 1996 through the exercise of stock options: as to
Mr. Brothers, 116,250 shares; Mr. Boyd, 156,750 shares; Mr. Chellgren,
247,376 shares; Mr. D'Antoni, 82,000 shares; Mr. Hall, 348,000 shares; and
all directors and executive officers as a group, 1,801,501 shares.
10
<PAGE>
(5) Includes Common Stock Units held by non-employee directors under the
Deferred Compensation and Stock Incentive Plan For Non-Employee Directors
and by executive officers under the Deferred Compensation Plan. Upon
termination of service with Ashland, these Stock Units are payable in cash
or Ashland Common Stock at the election of the individual.
(6) Includes the following shares of Ashland Common Stock as to which the
respective person disclaims any beneficial ownership: Mr. Hall, 1,000 shares
owned by his wife.
(7) Other than as indicated, share ownership does not exceed 1% of the class so
owned.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table is a summary of compensation information for each of the
last three fiscal years ended September 30, 1996, 1995, and 1994 for the Chief
Executive Officer and each of the other four most highly compensated executive
officers at September 30, 1996.
11
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------------
ANNUAL COMPENSATION
------------------------------------------- AWARDS PAYOUTS
OTHER --------- -----------
ANNUAL OPTIONS LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) (#) PAYOUTS(3)
- ---------------------------------- --------- ----------- ----------- ----------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
John R.Hall 1996 $ 909,569 $ 740,713 $ 14,337 0 $ 583,464
Chairman of the Board and 1995 876,988 0 9,694 50,000 0
Chief Executive Officer 1994 797,262 836,741 8,042 50,000 209,226
Paul W. Chellgren 1996 580,699 514,782 14,041 50,000 347,760
President and 1995 548,118 0 10,252 40,000 0
Chief Operating Officer 1994 498,289 584,911 5,539 40,000 106,904
John A. Brothers 1996 411,664 344,513 19,674 25,000 266,616
Senior Vice President and 1995 398,631 210,158 11,468 25,000 0
Group Operating Officer 1994 368,734 349,960 11,222 25,000 90,768
James R. Boyd 1996 355,127 371,673 9,957 25,000 213,293
Senior Vice President and 1995 338,836 141,666 2,052 25,000 0
Group Operating Officer 1994 308,939 368,338 4,218 25,000 65,472
David J. D'Antoni
Senior Vice President and 1996 340,178 333,160 3,834 15,000 269,906
President of Ashland Chemical 1995 323,888 326,727 2,590 15,000 0
Company 1994 298,973 307,944 495 10,000 156,062
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION(4)
- ---------------------------------- -----------------
<S> <C>
John R.Hall $ 54,217
Chairman of the Board and 117,079
Chief Executive Officer 116,905
Paul W. Chellgren 32,871
President and 76,017
Chief Operating Officer 73,849
John A. Brothers 22,446
Senior Vice President and 28,656
Group Operating Officer 58,528
James R. Boyd 26,483
Senior Vice President and 41,962
Group Operating Officer 43,892
David J. D'Antoni
Senior Vice President and 36,035
President of Ashland Chemical 37,843
Company 49,101
</TABLE>
- ------------------------
(1) Amounts received under Ashland's Incentive Compensation Plan for each of the
fiscal years ended September 30, 1994, 1995 and 1996.
(2) None of the named executives received perquisites and other personal
benefits, securities or property in excess of the lesser of $50,000 or 10%
of total salary and bonus. All amounts shown in this column reflect
reimbursement of taxes paid by the named executives.
(3) Amounts received under Ashland's Performance Unit Plan for the FY 1991--1994
performance period and the FY 1993--1996 performance period.
(4) Amounts shown in this column reflect employer matching contributions under
Ashland's Employee Savings Plan and allocations of stock under Ashland's
LESOP as provided on the same basis for all employees and related forfeiture
payments under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). For fiscal 1996, these payments were as follows:
<TABLE>
<CAPTION>
SAVINGS PLAN LESOP ERISA FORFEITURE PAYMENTS
------------ --------- --------------------------
<S> <C> <C> <C>
John R. Hall $ 1,800 $ 7,026 $ 45,391
Paul W. Chellgren 1,800 7,026 24,045
John A. Brothers 1,800 7,026 13,620
James R. Boyd 1,800 7,026 17,657
David J. D'Antoni 1,800 7,026 27,209
</TABLE>
12
<PAGE>
STOCK OPTION GRANTS
The following table sets forth certain information concerning stock options
granted in fiscal year 1996 to the named executive officers.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ----------------------------------------------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS EXERCISE APPRECIATION FOR
OPTIONS GRANTED TO OR BASE OPTION TERM*
GRANTED EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% 10%
- ----------------------------------------- --------- ----------------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Hall............................. 0 -- -- -- -- --
Paul W. Chellgren........................ 50,000 6.1% $ 39.00 10/19/06 $ 1,239,285 $ 3,148,129
John A. Brothers......................... 25,000 3.0% 39.00 10/19/06 619,643 1,574,065
James R. Boyd............................ 25,000 3.0% 39.00 10/19/06 619,643 1,574,065
David J. D'Antoni........................ 15,000 1.8% 39.00 10/19/06 371,786 944,439
</TABLE>
- ------------------------
* Option Value assuming stock price appreciation rates of 5% and 10%
compounded annually for the 10 year and 1 month term of the options. At the
5% and 10% rates, the stock price at October 19, 2006 (the expiration date
of the $39.00 options) would be $63.79 and $101.96, respectively, and the
potential realizable value for all Ashland shareholders if all 64,459,623
shares outstanding on September 19, 1996 (the grant date of the $39.00
options) were held until October 19, 2006 would be $4,111,602,617 and
$6,572,469,966, respectively. Actual gains will be dependent on future stock
market conditions and there can be no assurance that these amounts will be
achieved.
STOCK OPTION EXERCISES
The following table sets forth certain information concerning stock options
exercised in fiscal year 1996 by each of the named executive officers and the
value of unexercised options held by such officers on September 30, 1996.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR END OPTION VALUES(1)
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END (#) AT FY-END(1)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------- --------------- ------------ --------------------- -------------------------
<S> <C> <C> <C> <C>
John R. Hall................. 40,000 $ 442,500 348,000/37,500(2) $2,563,874/$195,313
Paul W. Chellgren............ 27,124 288,017 247,376/80,000 1,944,521/ 193,750
John A. Brothers............. 97,500 955,000 116,250/43,750 801,093/ 116,405
James R. Boyd................ 6,000 69,375 156,750/43,750 1,180,280/ 116,405
David J. D'Antoni............ 9,000 89,438 82,000/25,000 572,999/ 64,999
</TABLE>
- ------------------------
(1) Based on the closing price of Ashland Common Stock as reported on the New
York Stock Exchange Composite Tape on September 30, 1996 of $39.75 per
share.
(2) These unexercisable options include options on 25,000 shares at an exercise
price of $33.875 per share and 12,500 options at an exercise price of
$35.875 per share which would not be vested upon Mr. Hall's retirement as
Chairman of the Board and as an employee of Ashland at the Annual Meeting.
The Personnel & Compensation Committee has accelerated the vesting of these
options
13
<PAGE>
upon Mr. Hall's retirement and permitted them to be exercisable upon the
same terms and conditions as originally granted. The value of these options
based on the $39.75 per share closing price of Ashland Common Stock on the
New York Stock Exchange Composite Tape on September 30, 1996 is $195,312.50.
RETIREMENT PLANS
PENSION PLANS
Ashland maintains qualified pension plans (the "qualified plans") under
which executive officers are entitled to benefits on the same basis as other
employees. Upon a "change in control" of Ashland (as defined in the plans), the
qualified plans will automatically terminate and the funds in such plans,
together with any excess assets, will be distributed to the participants.
To the extent that benefits under the qualified plans exceed limits
established by the Internal Revenue Code of 1986, as amended (the "Code"), they
are payable under a nonqualified excess benefit pension plan (the "non-qualified
plan") which provides for the payment of benefits in excess of certain
limitations imposed by the provisions of ERISA or limitations on compensation or
benefits that may be imposed by the Code. The plan also provides that
participants may, at the discretion of the Personnel and Compensation Committee,
receive their retirement benefit under the non-qualified plan in a lump-sum
distribution. The plan also provides that those who are approved to receive a
lump sum may defer the payment of all or any part of it, in 25% increments,
through the Ashland Inc. Deferred Compensation Plan.
The following table shows the estimated annual benefits payable under the
qualified and non-qualified plans assuming continued employment until the normal
date of retirement at age 65, based on a straight-life annuity form of
retirement income. The amounts in the table are not subject to any reductions
for social security benefits received by the participant but are subject to
reductions for the actuarial value of 50% of a participant's LESOP account and
the actuarial value of 50% of any shares forfeited under the LESOP because of
the limitations established by the Code.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
---------------------------------------------------------------------------
AVERAGE YEARS OF PARTICIPATION
ANNUAL ---------------------------------------------------------------------------
EARNINGS* 10 15 20 25 30 35
- ------------ ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 25,000 $ 3,300 $ 4,950 $ 6,601 $ 8,251 $ 9,901 $ 11,552
50,000 7,050 10,575 14,101 17,626 21,151 24,677
100,000 14,550 21,825 29,100 36,376 43,650 50,925
200,000 29,550 44,325 59,100 73,876 88,650 103,425
300,000 44,550 66,825 89,100 111,376 133,650 155,925
400,000 59,550 89,325 119,100 148,876 178,650 208,425
500,000 74,550 111,825 149,100 186,376 223,650 260,925
600,000 89,550 134,325 179,100 223,876 268,650 313,425
800,000 119,550 179,325 239,101 298,876 358,651 418,427
1,000,000 149,550 224,325 299,101 373,876 448,651 523,427
1,200,000 179,550 269,325 359,101 448,876 538,651 628,427
1,400,000 209,550 314,325 419,101 523,876 628,651 733,427
</TABLE>
- ------------------------
* Average annual earnings includes a participant's salary during the highest
consecutive 36 month period of the final 120 month period prior to
retirement, but excludes other forms of compensation included in the Summary
Compensation Table.
As of October 1, 1996, Messrs. Hall, Chellgren, Brothers, Boyd and D'Antoni
had credited service in the combined plans of 34, 21, 26, 14 and 22 years,
respectively.
14
<PAGE>
SUPPLEMENTAL EARLY RETIREMENT PLAN
Under the Supplemental Early Retirement Plan, eligible key executive
employees may retire prior to their normal retirement date. Messrs. Hall and
Brothers are currently eligible to participate in the plan. The plan provides
that the maximum total annual benefit payable to a participant under the plan is
an amount equal to 50% of the final average annual compensation (salary plus
incentive compensation awards) received by the participant during the highest 36
months of the final 60 month period prior to retirement. The amount payable
under the plan is reduced to the extent payments are made under the qualified
and non-qualified pension plans of Ashland, subject to reductions for the
actuarial value of 50% of a participant's LESOP account and the actuarial value
of 50% of any shares forfeited under the LESOP because of the limitations
established by the Code. In addition, if the executive has entered into an
Executive Employment Agreement with Ashland, the amount payable under the plan
is reduced to reflect payments, if any, under such Agreement.
The plan provides that participants may, at the discretion of the Committee,
receive their retirement benefit under the plan in a lump-sum distribution. The
plan also provides that those who are approved to receive a lump sum may defer
the payment of all or any part of it, in 25% increments, through the Ashland
Inc. Deferred Compensation Plan. The retirement benefit received as a lump-sum
distribution is equal to the actuarial present value of all expected future
payments if the participant received monthly payments discounted at the average
of the monthly published Pension Benefit Guaranty Corporation ("PBGC") rates
used to value annuities in effect during the six month period ending on January
1 or July 1 immediately preceding the calculation date. The estimated lump-sum
value of the retirement benefit under the plan to Mr. Hall at age 64 and Mr.
Brothers, assuming retirement at age 62, using the current PBGC rate is
$2,610,922 and $1,781,498, respectively.
Upon a "change in control" of Ashland (as defined in the plan), eligible key
executive employees may, in their discretion, elect to retire at an earlier age
pursuant to the plan. Ashland normally enters into consulting agreements with
its retiring key executive employees who participate in the plan. Under these
agreements, a retiring employee receives payment of a mutually agreeable per
diem compensation for services rendered to Ashland.
EXECUTIVE EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
Currently, the named executive officers have employment agreements with
Ashland which provide for continuation of their then-current salaries for two
years after termination of their employment by Ashland without "Cause". In the
event of termination without "Cause" or resignation for "Good Reason" within two
years after any "change in control" of Ashland, the executive officers would
receive a payment equal to three times their annual compensation, including
incentive payments, based on the average of the preceding five years. In
addition, the agreements provide for continuation of certain benefits for a
period of one year. The terms "Cause", "Good Reason" and "change in control" are
defined in the agreements. In no event shall the total payment to any executive
officer exceed an amount which would be deemed an "excess parachute payment"
under Section 280G of the Code.
As described in the Aggregated Option Exercises in Fiscal Year 1996 and
Fiscal Year End Option Values table above, the Personal & Compensation Committee
voted to accelerate the vesting of Mr. Hall's options on 37,500 shares of
Ashland Common Stock in connection with his retirement.
PERSONNEL AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
PERSONNEL AND COMPENSATION COMMITTEE OF THE BOARD
The Personnel and Compensation Committee (the "Committee") is comprised
entirely of non-employee members of Ashland's Board of Directors (the "Board").
It is the Committee's responsibility to review, recommend and approve changes to
the Company's executive compensation policies and programs. It is also the
Committee's responsibility to review and approve all compensation payments to
the Chief Executive Officer and Ashland's other executive officers.
15
<PAGE>
ASHLAND'S COMPENSATION POLICY AND OBJECTIVES
Ashland's executive compensation program is designed to enable the Company
to attract, retain and motivate the high caliber of executives required for the
success of its business. The purpose of this program and the specific objectives
of the Committee are to:
- Pay for performance, motivating both long- and short-term performance for
the benefit of Ashland's shareholders;
- Provide a total compensation program competitive with those of companies
with which Ashland competes for top management talent;
- Place greater emphasis on variable incentive compensation versus fixed or
base pay, particularly for Ashland's executive officers;
- Reward executives based primarily on the performance of their particular
business units, while including a component recognizing corporate
performance;
- Encourage significant Ashland Common Stock ownership by Ashland's
executive officers in order to align their interests with those of
Ashland's shareholders; and
- Most importantly, join shareholder and management interests in achieving
superior performance which should translate into a superior total return
to Ashland's shareholders.
Overall, Ashland's executive compensation program is designed to be
performance-oriented, with a large portion of executive compensation "at risk".
The portion of total compensation represented by annual and long-term incentives
that relate directly to performance has grown significantly and now constitutes
over 60% of the total compensation of Ashland's executive officers.
Ashland uses annual and long-term bonus programs to enhance the commitment
of senior and mid-level managers to the objectives of the Company, its principal
business units, and Ashland's shareholders. Today approximately 340 of Ashland's
management and professional employees participate in the Company's annual
incentive plan, and approximately 500 employees participate in the Company's
stock option program.
ASHLAND'S COMPENSATION PROGRAMS
In order to further the Committee's objectives, the executive compensation
program for Ashland's executive officers includes three primary components: (1)
base pay; (2) an annual incentive bonus; and (3) a long-term incentive program
consisting of stock options and performance shares or units. The overall program
is designed to provide total compensation opportunities which are comparable to
the opportunities provided by a group of nineteen companies of similar size and
diversity to Ashland (the "Compensation Peer Group"). This Compensation Peer
Group contains a larger number of companies than the peer group of companies
selected for comparison in the Five-Year Cumulative Total Return Performance
Graph.
BASE SALARY
Annual salary is designed to compensate executives for their sustained
performance. Base salary levels for executive officers are reviewed each year by
the Committee and are generally less than the median of the Compensation Peer
Group. In addition, consideration is given to individual experience as well as
individual and corporate, subsidiary or division performance. Increases in
salaries are typically granted annually; however, executive salary increases
were delayed to a sixteen-month period during the last two fiscal year periods.
ANNUAL INCENTIVE BONUS
Incentive compensation is awarded annually based 20% upon the participant's
individual performance for the last fiscal year and 80% upon the Company's
operating performance as further described
16
<PAGE>
below. Within ninety days of the beginning of each fiscal year, (i) corporate
Return on Equity ("ROE") Hurdles and Targets, (ii) division and subsidiary
Return on Investment ("ROI") Hurdles and Targets, and (iii) for the Chairman of
the Board and Chief Executive Officer and President and Chief Operating Officer,
in addition to the ROE Hurdles and Targets, a net income Target, are set by the
Committee for the upcoming fiscal year. "Hurdles" are the minimum objectives
that must be reached in order to trigger a bonus payout. If the applicable
"Target(s)" is achieved, maximum incentive payments may be earned. The Committee
may adjust incentive awards downward based on such factors as the Committee
deems appropriate.
Awards for the Chief Executive Officer, President and Chief Operating
Officer and senior vice presidents (other than group operating officers and
division and subsidiary presidents) are based upon overall corporate
performance. For Ashland group operating officers, awards are based upon the
performance of the business units for which they are responsible in addition to
a corporate performance component. Awards to corporate employees are based
equally upon general overall corporate performance and division performance and
for division employees are entirely based on division performance. A
participant's maximum potential payout is generally a fixed percentage of the
midpoint of the annual salary range for the position held by the participant and
is dependent upon the participant's level of participation in Ashland's
Incentive Compensation Plan.
Based on substantially improved overall company performance in fiscal 1996,
incentive payments were made to most executive officers and divisional and
corporate staff executives. Such payments were made 80% in cash and 20% in
shares of Ashland Common Stock, in keeping with the Committee's belief that
stock ownership provides a direct relationship between an executive's
compensation and the shareholders' interests. It is anticipated that payment of
any fiscal 1997 awards will also be made 80% in cash and 20% in shares of
Ashland Common Stock.
LONG-TERM INCENTIVE COMPENSATION
PERFORMANCE SHARES/UNITS
The performance share/unit program is a long-term incentive plan primarily
tied to company performance. It is designed to motivate senior executives whose
work most affects Company earnings and to tie their compensation directly to
Ashland's long-term financial objectives. Historically, the Committee has
granted awards of performance shares or units to selected employees every two
years with each award covering a four-year performance cycle. The number of
performance shares or units awarded is based on the employee's responsibility
level, performance, and salary level. Awards granted to date under the plan have
generally ranged from 70% to 160% of an employee's base salary. Payment of an
award is made only if one or more of the established performance objectives are
met over the four-year performance period. In the past, awards were denominated
in cash and have been paid in cash. In keeping with the goal of increasing stock
ownership by executives, performance awards for the fiscal 1993-1996 performance
period were paid 50% in stock and 50% in cash. In addition, performance awards
for the fiscal 1995-1998 performance period to certain of Ashland's executive
officers were denominated in shares of Ashland Common Stock. It is anticipated
that payment of these awards will be made in shares of Ashland Common Stock.
Performance objectives are determined by the Committee at the beginning of
each performance period. Awards are based on achievement of the following
performance objectives: (a) a minimum four-year average corporate ROE (the
"corporate objective"); (b) total return to shareholders ("TRS") at least equal
to or greater than the median of the TRS of a peer group of companies over the
four-year period (the "peer TRS objective"); and (c) TRS at least equal to or
greater than the median of the companies in the Standard & Poor's 500 over the
four-year period (the "S&P TRS objective"). These objectives are weighted 50%,
25%, and 25%, respectively. Awards made to division and subsidiary personnel are
based on achievement of the following performance objectives: (a) a minimum
four-year average ROI for the applicable division or subsidiary; (b) the
corporate objective; (c) the peer TRS
17
<PAGE>
objective; and (d) the S&P TRS objective. These objectives are weighted 50%,
25%, 12.5%, and 12.5%, respectively. For the performance period beginning in
fiscal 1995, in addition to the performance objectives above, certain awards are
based upon achievement of an average net income objective for the four-year
period. If the foregoing objectives are met, the Committee may adjust any award
payment downward based on such factors as the Committee deems appropriate.
STOCK OPTIONS
Ashland's employee stock option program is a long-term plan designed to link
executive compensation with increased shareholder value over time. The Committee
believes that the use of stock is an important key employee retention and
motivation tool and results in long-term management for the benefit of Ashland's
shareholders. In determining the amount of stock options to be granted annually
to key employees, a target number of shares for each executive grade level is
established.
All stock options are granted with an exercise price equal to the fair
market value of Ashland Common Stock on the date of grant. Accordingly, the
upside or downside value of options granted to an executive corresponds
exclusively with Ashland's stock price performance. In the event that Ashland's
stock price declines to a level below the option grant price, options are not
re-valued or re-issued. Vesting of awards generally occurs over a period of
three years.
STOCK OWNERSHIP GUIDELINES
The Committee and Senior Management believe that linking a significant
portion of an executive's current and potential future net worth to the
Company's success, as reflected in the stock price, gives the executive a stake
similar to that of the Company's owners and results in long-term management for
the benefit of those owners. Consistent with this philosophy, the Committee has
adopted Stock Ownership Guidelines for Ashland's executive officers and
designated key managers. These guidelines establish minimum levels of stock
ownership as follows: the Chief Executive Officer--stock having a value equal to
five times base salary; the President--four times base salary; senior vice
presidents, division and subsidiary presidents and administrative vice
presidents--three times base salary; and designated key managers--one times base
salary. In keeping with this philosophy, payment of incentive compensation for
fiscal 1994, 1995 and 1996 was generally made 20% in Ashland Common Stock and it
is anticipated that payment of fiscal 1997 incentive compensation will also be
made 20% in stock. As previously stated, fiscal 1993-1996 performance unit
awards were paid 50% in stock and 50% in cash. In addition, fiscal 1995 -1998
performance awards to certain executive officers were denominated 100% in stock
and it is anticipated that any payment will be made 100% in stock.
DEDUCTIBILITY OF COMPENSATION
Under Section 162(m) of the Internal Revenue Code, the Company is subject to
the loss of the deduction for compensation in excess of $1,000,000 paid to one
or more of the executive officers named in this proxy statement. The deduction
can be preserved if the Company complies with certain conditions in the design
and administration of its compensation programs. The Committee will make every
reasonable effort, consistent with sound executive compensation principles and
the needs of the Company, to ensure that all future amounts paid to its
executive officers will be fully deductible by the Company.
OTHER PLANS
Ashland also maintains an Employee Savings Plan, pension, insurance and
other benefit plans for its employees. Executives participate in these plans on
the same terms as other eligible employees, subject to any legal limits on the
amounts that may be contributed or paid to executives under the plans.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Ashland made important progress in fiscal 1996. Financial results improved
significantly. Net income for fiscal 1996 rebounded to $211 million, or $2.97
per share, including an after-tax gain of $48 million, or 73 cents per share,
from the settlement of Ashland's claims in the Columbia Gas bankruptcy
18
<PAGE>
reorganization. Ashland's 1996 results compare to net income of $24 million, or
8 cents per share, for fiscal 1995 when unusual charges reduced results by $79
million, or $1.27 per share. During fiscal 1996, the price of Ashland Common
Stock increased 19 percent. The Company delivered a total return to shareholders
of 23 percent and a return on average common shareholders' equity of 13.3
percent. At the same time, Ashland's financial position improved. Total debt
declined 5 percent during fiscal 1996, while debt as a percentage of total
capitalization declined to 49 percent, compared to 53 percent at the end of
fiscal year 1995.
Considering these and other positive factors, Mr. Hall received an annual
bonus for fiscal 1996 of $740,713 as performance for the year exceeded the
established Hurdle, although it did not meet the Target. A performance unit
award payout of $583,464 was paid for the achievement of a four-year average
11.4% ROE and 16.4% TRS for the FY 1993-1996 performance period. In addition,
Mr. Hall's base salary increased in fiscal 1996 to $930,000. Mr. Hall did not
receive an award of stock options in fiscal 1996.
At the January 25, 1996 Annual Meeting, Mr. Hall announced his retirement as
Chief Executive Officer and Chairman of the Board of Directors of Ashland
effective September 30, 1996 and January 30, 1997, respectively. Mr. Chellgren
became Ashland's Chief Executive Officer on October 1, 1996, and is expected to
become Chairman of the Board at the January 30, 1997 Annual Meeting. Consistent
with his assumption of duties as Chief Executive Officer, Mr. Chellgren received
a base salary increase of $150,000 effective October 1, 1996.
SUMMARY
The Committee believes that the compensation and long-term incentive plans
provided to Ashland's executive officers are structured and operated to create
strong linkage and alignment with the long-term best interests of Ashland and
its shareholders.
PERSONNEL AND COMPENSATION
COMMITTEE
Thomas E. Bolger, Chairman
Frank C. Carlucci
Jane C. Pfeiffer
Michael D. Rose
W. L. Rouse, Jr.
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FIVE-YEAR TOTAL RETURN PERFORMANCE GRAPH
The following graph compares Ashland's five-year cumulative total
shareholder return (assuming reinvestment of dividends) with the cumulative
total return of the Standard & Poor's 500 Index and a group of company peers
which consists of Diamond Shamrock, Inc.; FINA, Inc.; Pennzoil Company; Sun
Company, Inc.; Total Petroleum (North America) Ltd.; Union Carbide Corporation
and USX-Marathon Group.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
ASHLAND, S&P 500 INDEX AND PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<S> <C> <C> <C>
ASHLAND, S&P 500 INDEX AND PEER GROUP
Ashland S&P 500 Peer Group
1991 $ 100 $ 100 $ 100
1992 85 111 86
1993 120 125 106
1994 129 130 118
1995 125 169 131
1996 153 203 149
</TABLE>
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ashland 100 85 120 129 125
S&P 500 100 111 125 130 169
Peer Group 100 86 106 118 131
<CAPTION>
1996
-----
<S> <C>
Ashland 153
S&P 500 203
Peer Group 149
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Personnel and Compensation Committee of the Board of
Directors during fiscal 1996 were Mr. Bolger (Chairman), Mr. Carlucci, Ms.
Pfeiffer, Mr. Rose and Mr. Rouse.
BUSINESS RELATIONSHIPS
During fiscal 1996, the firm of Cravath, Swaine & Moore, of which Mr. Butler
is a member, was paid for legal services rendered to Ashland and certain of its
subsidiaries.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during fiscal year 1996 its executive officers and
directors have complied with Section 16(a) of the Securities Exchange Act of
1934, and the rules and regulations adopted thereunder, with the exception of
one late report. James J. O'Brien inadvertently omitted to report the
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ownership of 206 shares of Ashland Common Stock in his initial Form 3 report
upon becoming an executive officer of Ashland. This omission was promptly
corrected by voluntarily filing an amended Form 3 report.
ITEM II. RATIFICATION OF AUDITORS
The Audit Committee of the Board of Directors recommended and the Board has,
subject to shareholder ratification, appointed Ernst & Young LLP to audit the
accounts of Ashland and its subsidiaries for fiscal 1997. Ernst & Young LLP has
audited the accounts of Ashland and its subsidiaries for many years.
The following resolution concerning the appointment of independent auditors
will be offered at the meeting:
"RESOLVED, that the appointment by the Board of Directors of the Company
of Ernst & Young LLP to audit the accounts of the Company and its
subsidiaries for the fiscal year 1997 is hereby ratified."
Representatives of Ernst & Young LLP will be present at the Annual Meeting
with the opportunity to make a statement and to respond to appropriate
questions. Submission of the appointment to shareholders is not required.
However, the Board will reconsider the appointment if it is not approved by the
shareholders. The appointment will be deemed ratified if the votes cast in favor
of the proposal exceed the votes cast against the proposal. Abstentions and
broker non-votes are not counted as votes cast either for or against the
proposal.
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ITEM III. APPROVAL OF THE ASHLAND INC.
1997 STOCK INCENTIVE PLAN
Ashland has used stock incentive plans as part of its incentive program for
many years. Their purpose is to assist the Company in attracting and retaining
qualified individuals to provide service to Ashland, and to provide those
individuals with incentives to devote their best efforts to Ashland, thus
enhancing the value of Ashland for the benefit of its shareholders.
Recently, awards have been made under the Ashland Inc. 1993 Stock Incentive
Plan (the "1993 Plan"). As of September 30, 1996, grants of stock options to
Ashland employees for 2,630,563 shares, grants of restricted stock awards to
Ashland directors for 14,000 shares and 235,995 performance share awards remain
outstanding under the 1993 Plan. This leaves 87,668 shares available for future
grants of options and other awards under the 1993 Plan. No grants or awards will
be made out of the 1993 Plan after January 26, 1998.
Awards also remain outstanding under the Ashland Inc. Long-Term Incentive
Plan (the "1989 Plan") and the Amended Stock Incentive Plan for Key Employees of
Ashland Inc. and its Subsidiaries (the "1985 Plan"). 2,587,210 granted but
unexercised stock options remain outstanding under the 1989 Plan and the 1985
Plan. In addition, 13,000 restricted shares granted under the 1989 Plan are held
by Ashland's current directors. Awards were not made out of the 1989 Plan after
November 3, 1993 and awards were not made out of the 1985 Plan after November 7,
1994. Finally, 29,000 granted but unexercised stock options are held by
Ashland's directors under the Ashland Inc. Deferred Compensation and Stock
Incentive Plan For Non-Employee Directors.
The new Ashland Inc. 1997 Stock Incentive Plan (the "Plan") was approved by
the Board of Directors of Ashland Inc. on November 7, 1996, subject to the
approval of Ashland's shareholders at the January 30, 1997 Annual Meeting of
Shareholders. The Board of Directors has determined that a new stock incentive
plan is needed to promote the interests of Ashland and its shareholders by
providing Ashland's directors, officers and employees with an incentive to
undertake and continue service with Ashland and its subsidiaries. Accordingly,
subject to approval of the Plan by shareholders, the Board of Directors has
authorized up to 3,212,000 shares of Ashland Common Stock for issuance under the
Plan. Of this amount, only 500,000 shares in the aggregate are authorized for
the issuance of restricted stock and merit awards under the Plan. The Plan will
be administered by the Personnel and Compensation Committee of the Board of
Directors (the "Committee"). Pursuant to the Plan, Ashland proposes to grant to
selected officers and employees of Ashland and its subsidiaries stock options,
stock appreciation rights, restricted stock awards, merit awards and performance
share awards. By way of example, and as an approximate indication of the number
of individuals likely to be eligible to participate in the Plan, at September
30, 1996, approximately 500 officers and employees were eligible to participate
in the 1993 Plan.
In addition, if the Plan is approved by the shareholders, Ashland will grant
to each current member of its Board of Directors who is not an officer or
employee of Ashland ("Outside Director") an award of 1,000 shares of restricted
stock at a date designated in the future in accordance with the Plan's terms.
Further, each person who is appointed or elected as an Outside Director after
the effective date of the Plan will receive an award of 1,000 shares of
restricted stock. The Plan provides that an Outside Director will not receive an
award of restricted stock thereunder if such award would be in addition to a
simultaneous award of restricted stock under the 1993 Plan.
STOCK OPTION AND STOCK APPRECIATION RIGHTS
Options may be granted by the Committee as incentive stock options ("ISOs")
intended to qualify for favorable tax treatment under the Federal tax law or as
nonqualified stock options ("NQSOs"). The Options may, in the Committee's
discretion, be made transferable. Option agreements are permitted but not
required under the terms of the Plan.
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Stock appreciation rights ("SARs") may be granted with respect to any
options granted under the Plan and may be exercised only when the underlying
option is exercisable. An SAR permits the holder to surrender an option or any
portion thereof and receive in exchange shares of Common Stock, cash, or a
combination thereof, 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 covered by such option or portion
thereof which is to be exercised.
The Plan requires that the exercise price of all options and SARs be equal
to or greater than the fair market value of Ashland Common Stock on the date of
grant of that option. The term of any ISO or related SAR cannot exceed ten years
from the date of grant, and the term of any NQSO cannot exceed ten years and one
month from the date of grant. Subject to the terms of the Plan and any
additional restrictions imposed at the time of grant, options and any related
SARs ordinarily will become exercisable, at least in part, commencing one year
after the date of grant.
Subject to such rules as the Committee may impose, the exercise price of an
option may be paid in cash, in shares of Ashland Common Stock owned by the
optionee for at least six months and not used in a stock option exercise for the
preceding six months, with a combination of cash and shares, by "attestation",
or by effecting a "cashless exercise" with a broker, or with such other
consideration as shall be approved by the Committee. "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 optionee (for at
least six months and not used to effect a stock option exercise within the
preceding six-month period) which the optionee wishes to utilize to pay the
exercise price. A "cashless exercise" is a technique which allows the optionee
to exercise stock options without cash through the assistance of a broker
through either a simultaneous exercise and sale or a broker loan. The "cashless
exercise" technique does not increase the compensation that the option provides.
In the case of a "change in control" of Ashland (as defined in the Plan),
options granted pursuant to the Plan may become fully exercisable as to all
optioned shares from and after the date of such "change in control" in the
discretion of the Committee or as may otherwise be provided in the grantee's
option agreement, if any.
An employee who dies, becomes disabled or retires during the term of an
option grant will have (or his or her beneficiaries will have) the full term to
exercise stock options vested at the time of his or her death, disability or
retirement. An employee who leaves Ashland other than as a result of death,
disability or retirement will have thirty (30) days to exercise vested options.
RESTRICTED STOCK AND MERIT AWARDS TO EMPLOYEES
The Committee may grant shares of Common Stock to participants in such
amounts, and subject to such restrictions ("Restricted Stock") and additional
terms and conditions, if any, as the Committee in its sole discretion shall
determine, consistent with the provisions of the Plan. The Committee may also
grant from time to time shares of Common Stock to selected Plan participants
free of restrictions ("Merit Awards") in such amounts as the Committee in its
sole discretion shall determine consistent with the provisions of the Plan. As a
condition to any award of Restricted Stock or Merit Award, the Committee may
require a participant to pay an amount equal to, or in excess of, the par value
of the shares of Restricted Stock or Common Stock awarded to him or her.
Unless otherwise directed by the Committee, Restricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered during a
"Restricted Period", which in the case of grants to employees shall not be less
than one year from the date of grant. The Restricted Period with respect to any
outstanding shares of Restricted Stock awarded to employees may be reduced by
the Committee at any time. Except for such restrictions, the employee as the
owner of such stock shall have all the rights of a shareholder including, but
not limited to, the right to vote such stock and to receive dividends thereon as
and when paid.
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In the event that an employee's employment is terminated for any reason, an
employee's Restricted Stock will be forfeited; provided, however, that the
Committee may limit such forfeiture in its sole discretion. At the end of the
Restricted Period all shares of Restricted Stock shall be transferred free and
clear of all restrictions to the employee. In the case of a "change in control"
of Ashland (as defined in the Plan), an employee may receive his or her
Restricted Stock free and clear of all restrictions in the discretion of the
Committee or as may otherwise be provided pursuant to the employee's Restricted
Stock award.
RESTRICTED STOCK AWARDS TO OUTSIDE DIRECTORS
Under the Plan, each Outside Director shall receive an award of 1,000 shares
of Restricted Stock upon the fifth anniversary of his or her prior award under
the 1993 Plan; provided, however, that no Outside Director shall receive
simultaneous awards of Restricted Stock under the Plan and the 1993 Plan. In
addition, each person who is duly appointed or elected as an Outside Director of
Ashland subsequent to the 1997 Annual Meeting of Shareholders and who does not
receive an award under the 1993 Plan shall receive an award of 1,000 shares of
Restricted Stock on the effective date of his or her appointment or election to
the Board of Directors of Ashland. As a condition to the award, each Outside
Director may be required to pay to Ashland an amount equal to, or in excess of,
the par value of the shares of Restricted Stock awarded to him or her.
Upon granting of the Restricted Stock, the Outside Director shall have all
rights of a shareholder as to his or her Restricted Stock, including but not
limited to, the right to vote such stock and to receive dividends thereon;
provided, however, that unless otherwise determined by the Committee, in no case
may any shares of Restricted Stock be sold, assigned, transferred, pledged, or
otherwise encumbered during the Restricted Period. Unless otherwise determined
by the Committee, the Restricted Period shall not lapse before the earlier to
occur of (a) normal retirement at age 70, (b) death or disability, (c) a 50%
change in the beneficial ownership of Ashland, as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, or (d) voluntary early retirement to take a
position in governmental service. Unless otherwise determined by the Committee,
in the case of voluntary resignation or termination, for any other reason of an
Outside Director prior to the occurrence of any of the events described in the
preceding sentence, any grant of Restricted Stock made to such Outside Director
will be forfeited.
Stock options, SARs, Merit Awards and Performance Shares (as defined below)
will not be granted to Outside Directors under the Plan.
PERFORMANCE SHARE AWARDS
The Committee may make, in its sole discretion and subject to the terms and
conditions it may determine in accordance with the Plan, awards of Common Stock
which shall be earned on the basis of Ashland's performance in relation to
established performance measures for a specific performance period ("Performance
Shares"). Such measures may include, but shall not be limited to, return on
investment, earnings per share, return on shareholders' equity, or return to
shareholders. Unless otherwise determined by the Committee, Performance Shares
may not be sold, assigned, transferred, pledged, or otherwise encumbered during
the relevant performance period.
Performance Shares may be paid in cash, shares of Common Stock or shares of
Restricted Stock in such proportion as the Committee may determine. An employee
must be employed at the end of the performance period to receive payment of
Performance Shares; provided, however, that in the event an employee's
employment is terminated by reason of death, disability, retirement or other
reason approved by the Committee, the Committee may limit such forfeiture in its
sole discretion. In the case of a "change in control" of Ashland (as defined in
the Plan), an employee may receive his or her Performance Shares in the
discretion of the Committee or as may otherwise be provided in the employee's
Performance Share award.
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PLAN ADMINISTRATION
The Plan will be administered by the Committee. The Board will have the
authority to amend the Plan as it deems advisable; however, no such amendment
shall, without authorization and approval of shareholders, change the manner of
determining the minimum exercise prices other than to change the manner of
determining fair market value of the Common Stock.
Except with respect to awards made to Outside Directors and subject to the
terms of the Plan, the Committee will select the individuals to whom stock
options, SARs, Restricted Stock, Merit Awards and Performance Shares will be
granted, determine the number of shares subject to each option award and SAR,
prescribe the terms and conditions of each option award and SAR granted under
the Plan, and make any other determination necessary or advisable for
administration of the Plan.
Shares subject to options and related SARs which lapse without having been
exercised, or Performance Shares which are forfeited, become available for new
grants under the Plan. To the extent that SARs are exercised and the
corresponding option canceled, the shares subject to the option will be charged
against the maximum number of shares authorized under the Plan at the time such
option was granted.
FEDERAL INCOME TAX CONSEQUENCES
The following brief description of the tax consequences of awards under the
Plan is based on Federal tax laws currently in effect and does not purport to be
a complete description of such Federal tax consequences.
OPTIONS
There are no Federal tax consequences either to the optionee or to Ashland
upon the grant of an ISO or a NQSO. On the exercise of an ISO, the optionee will
not recognize any income and Ashland will not be entitled to a deduction,
although such exercise may give rise to alternative minimum tax liability for
the optionee. Generally, if the optionee disposes of shares acquired upon
exercise of an ISO within two years of the date of grant or one year of the date
of exercise, the optionee will recognize ordinary income, and Ashland will be
entitled to a deduction, equal to the excess of the fair market value of the
shares on the date of exercise over the option price (limited generally to the
gain on the sale). Upon the ultimate sale of the shares, the balance of any gain
or loss will be treated as a capital gain or loss to the optionee. If the shares
are disposed of after the foregoing holding requirements are met, Ashland will
not be entitled to any deduction , and the entire gain or loss for the optionee
will be treated as a capital gain or loss.
On exercise of a NQSO, the excess of the date-of-exercise fair market value
of the shares acquired over the option price will generally be taxable to the
optionee as ordinary income and deductible by Ashland. The disposition of shares
acquired upon exercise of a NQSO will generally result in a capital gain or loss
for the optionee, but will have no tax consequences for Ashland.
STOCK APPRECIATION RIGHTS
The amount of any cash (or the fair market value of an Common Stock)
received by the holder of an option upon the exercise of SARs under the Plan
will be subject to ordinary income tax in the year of receipt and Ashland will
be entitled to a deduction for such amount.
RESTRICTED STOCK AWARDS
An employee or Outside Director (the "Recipient") who has been awarded
Restricted Stock will not recognize taxable income at the time of the award
unless he or she elects otherwise. At the time any restrictions applicable to
the Restricted Stock award lapse, the Recipient will recognize ordinary income
and Ashland will be entitled to a corresponding deduction equal to the excess of
the fair market value of such stock at such time over the amount paid therefore.
Dividends paid to the Recipient on the Restricted Stock during the Restricted
Period will be ordinary compensation income to the Recipient and deductible as
such by Ashland.
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MERIT AWARDS
A grant of Common Stock pursuant to a Merit Award will result in income for
the employee, and a tax deduction for Ashland, generally equal to the fair
market value of such shares less any amount paid for them.
PERFORMANCE SHARE AWARDS
An employee who has been awarded Performance Shares will not recognize
taxable income, and Ashland will not be entitled to a deduction, at the time of
the award. At the time the employee is entitled to the Performance Shares, the
employee will recognize ordinary income equal to the sum of the cash and the
fair market value of the shares of Common Stock at such time, and Ashland will
be entitled to a corresponding deduction. To the extent Performance Shares are
paid in shares of Restricted Stock, the Federal income tax consequences
described above applicable to Restricted Stock will apply.
NEW PLAN BENEFITS
The Committee has made no determinations with respect to grants of stock
options, SARs, Restricted Stock, Merit Awards or Performance Shares to officers
and employees under the Plan. Further, since such grants are entirely within the
discretion of the Committee, it is not possible to determine the types or
amounts of such grants that would have been granted for fiscal 1996 if the Plan
had been in effect. However, under the 1993 Plan, during fiscal 1996, 289,000
options were granted to executive officers as a group, no options were granted
to directors who are not executive officers, and 534,350 options were granted to
officers and employees, who are not executive officers, as a group. Stock
options granted to the Chief Executive Officer and the four most highly
compensated executives during fiscal 1996 under the 1993 Plan are listed in the
"Option Grants in Fiscal Year 1996" table. (Options were not granted to John R.
Hall due to his impending retirement.) The option exercise price for the options
granted under the 1993 Plan was the price for Ashland Common Stock on the date
of the grant.
On December 10, 1996, the closing price of Ashland Common Stock on the New
York Stock Exchange Composite Tape was $45.63 per share.
The Plan will be adopted if the votes cast in favor of its adoption exceed
the votes cast against adoption. Abstentions and broker non-votes are not
counted as votes casts either for or against adoption of the Plan.
FOR THE REASONS STATED HEREIN, THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THIS PROPOSAL.
ITEM IV. SHAREHOLDER PROPOSAL
John F. Brown, Sr. of 169 Maple Drive, Beaver, Pennsylvania 15009, stating
that he is the beneficial owner of over 100 shares of Ashland Common Stock, has
notified Ashland in writing that he intends to present the following resolution
at the Annual Meeting:
"RESOLVED that the stockholders of Ashland, Inc. assembled in annual
meeting in person and by proxy, hereby request that the Board of Directors
give consideration to having an Ashland wage roll employee who is currently
serving as a representative of the employees at his or her plant site to be
nominated for election to the Board of Directors."
Mr. Brown has submitted the following statement in support of his proposal
(reproduced as written):
"At this time, the Board of Directors is composed of 16 individuals who have
the following qualifications and experience:
- Executives of Ashland
- Executives and retired executives of other major corporations
- A management consultant
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- A chairperson of a conservation organization
- A professor at the Harvard School of Business
- A business and labor consultant and former CEO of a Fortune 500
company
I believe it would be of great benefit to Ashland for a wage roll Ashland
employee who is currently serving as a representative of the workers at his
or her site to serve on the Board of Directors.
A wage roll employee, who has spent years working in a factory, and who as
an employee representative, has listened first-hand to employees, learning
what motivates them positively and negatively would provide the Board with
knowledge and insight that is not now present on the Board.
Moreover, such an addition to the Board would be viewed by the wage roll
employees who comprise the vast majority of the Ashland work force as a
sincere effort by Ashland to recognize and understand their concerns. This
is particularly important at a time when there have been so many reductions
in the number of employees and a resulting increase in each employee's work
load and responsibility.
Chairman Hall has credited the employees as being a key factor in the
success and performance of Ashland. In its 1995 Annual Report, the Company
states that "... Ashland is united in its commitment to shareholders,
customers, employees and communities." In view of the importance of Ashland
employees to corporate success, and in view of Ashland's commitment to
shareholders and employees alike, it is necessary that the wage roll
employees' voice be present at the highest decision-making level of the
Company on the Board of Directors.
IF YOU AGREE, I URGE YOU TO VOTE FOR THE PROPOSAL."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THIS
SHAREHOLDER PROPOSAL FOR THE FOLLOWING REASONS:
For many years, Ashland's Proxy Statement has indicated the clear and
unambiguous commitment of the Board and its Committee on Directors (the
"Committee") (formerly known as the Nominating Committee) to consider candidates
recommended by directors, employees or shareholders for nomination to the Board.
This continuing and long-standing commitment has again been confirmed in this
proxy statement. (See the description of the Committee on Directors on page 7.)
While it will consider recommended candidates, the Board believes that any
potential candidate for the Board should be appraised based on his or her
individual achievements, skills and experience. The Board is against considering
a person for inclusion on (or exclusion from) the Board based primarily on a
position or membership in a particular constituency group. The Board believes
that qualifications and not status should be the criteria for Board membership.
Moreover, the Board believes that each director should represent all
shareholders. It is opposed to electing a director to represent a particular
point of view or particular constituency other than shareholders as a whole. In
this regard, it is important to the Board that its members possess a breadth of
experience, insight and knowledge to exercise independent judgment in carrying
out its responsibilities for broad corporate policy and the overall performance
of Ashland.
In the Board's view, the interests of shareholders as a whole are best
served when the Committee and the Board are able to exercise discretion to
consider potential qualified nominees who will bring broad experience, skills
and perspectives to bear on Ashland's efforts to achieve continued business
success and increase shareholder value.
The shareholder proposal will be adopted only if the votes cast in favor of
such proposal exceed the votes cast against such proposal. Abstentions and
broker non-votes are not counted as votes cast either for or against the
proposal. The adoption of this proposal would not in itself require a wage roll
employee to be added to the Board but would request the Board to consider such
an employee for nomination to the Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THIS
SHAREHOLDER PROPOSAL.
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MISCELLANEOUS
The expenses of solicitation of proxies for the Annual Meeting, including
the cost of preparing and mailing this Proxy Statement and the accompanying
material, will be paid by Ashland. Such expenses may also include the charges
and expenses of banks, brokerage houses and other custodians, nominees or
fiduciaries for forwarding proxies and proxy material to beneficial owners of
shares. Solicitation may be made by mail, telephone, telegraph and personal
interview, and by regularly engaged officers and employees of Ashland, who will
not be additionally compensated therefor. Ashland has arranged for the services
of Morrow & Co., Inc. ("Morrow") to assist in the solicitation of proxies. The
fees of Morrow, estimated at $35,000 excluding out-of-pocket expenses, will be
paid by Ashland.
The Board of Directors knows of no other matters to be voted upon at the
Annual Meeting. If any other matters properly come before the Annual Meeting, it
is the intention of the persons named in the enclosed proxy card to vote on such
matters in accordance with their judgment.
Any shareholder who executes a proxy card may revoke it by giving written
notice to the Secretary of Ashland or by giving to the Secretary a duly executed
form of proxy bearing a date later than the proxy card being revoked, at any
time before such proxy is voted. Attendance at the meeting shall not have the
effect of revoking a proxy unless the shareholder so attending shall, in
writing, so notify the Secretary of the meeting prior to the voting of the
proxy.
A proxy card which is properly signed, dated and not revoked will be voted
in accordance with the instructions contained thereon. If no instructions are
given, the persons named on the proxy card solicited by the Board of Directors
intend to vote: (i) FOR the election of the six nominees for directors; (ii) FOR
the ratification of the appointment of independent auditors for the 1997 fiscal
year; (iii) FOR the approval of the Ashland Inc. 1997 Stock Incentive Plan; and
(iv) AGAINST the shareholder proposal requesting the Board of Directors to
consider nominating a wage roll employee who is a representative at his or her
site to the Board of Directors.
Any shareholder may strike out the names of the proxies designated by the
Board of Directors on the proxy card and may write in and substitute the name of
any other person and may deliver the revised proxy card to such other person
whom the shareholder may wish to designate as proxy for the purpose of
representing such shareholder at the meeting.
In connection with the 1997 Annual Meeting, three shareholders (John J.
Gilbert, Margaret R. Gilbert and John C. Henry) submitted a shareholder proposal
requesting the Board of Directors to take the steps needed to eliminate the
classified board. The proponents agreed to withdraw their proposal as a result
of Ashland's agreement to submit the classified board issue to its shareholders
for a vote at the 1998 Annual Meeting. If the shareholders approve this change
at the 1998 meeting by a vote of 80% of the outstanding voting shares of Ashland
(which is the vote required under Ashland's Second Restated Articles of
Incorporation), then Ashland's directors will be elected for one year terms (as
their three year terms expire) beginning in 1998 such that all of Ashland's
directors would be elected as a single class at the 2000 annual meeting.
SHAREHOLDER PROPOSALS: Proposals which are the proper subject for inclusion
in the proxy statement and for consideration at an annual meeting may be
presented by shareholders. Any proposals by shareholders intended to be
presented at the 1998 Annual Meeting of Shareholders must be received by Ashland
at its Executive Headquarters, 1000 Ashland Drive, Russell, Kentucky, 41169 no
later than August 18, 1997 in order to be included in Ashland's proxy statement
and proxy card. In addition, Ashland's By-laws currently require that for
business to be properly brought before an annual meeting by a shareholder,
regardless of whether included in Ashland's proxy statement, the shareholder
must give written notice of his or her intent to propose such business, either
by personal delivery or by United States mail, postage prepaid, to the Secretary
of Ashland, at least 90 days in advance of such meeting.
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Such notice must set forth as to each matter the shareholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting and, in the event that such business includes a proposal to amend either
the Second Restated Articles of Incorporation or By-laws of Ashland, the
language of the proposed amendment, (ii) the name and address of the shareholder
proposing such business, (iii) a representation that the shareholder is a holder
of record of stock of Ashland entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to propose such business, (iv) any
material interest of the shareholder in such business, and (v) a representation
as to whether or not the shareholder will solicit proxies in support of his
proposal. The By-laws further provide that no business shall be conducted at any
annual meeting of shareholders except in accordance with the foregoing
procedures and that the chairman of any such meeting may refuse to permit any
business to be brought before an annual meeting without compliance with the
foregoing procedures.
Please fill in, sign and date the enclosed form of proxy and return it in
the accompanying addressed envelope which requires no further postage if mailed
in the United States. If you attend the Annual Meeting and wish to vote your
shares in person, you may do so. Your cooperation in giving this matter your
prompt attention will be appreciated.
THOMAS L. FEAZELL,
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Russell, Kentucky
December 16, 1996
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EXHIBIT A
ASHLAND INC.
1997 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Ashland Inc. 1997 Stock Incentive Plan is to promote the
interests of Ashland Inc. and its shareholders by providing incentives to its
directors, officers and employees. Accordingly, the Company may grant to
selected officers and employees 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 continue service with Ashland, devote their best efforts to the
Company and improve Ashland's economic performance, 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. 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, to be entered into at the Company's discretion.
(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) "Ashland Inc. 1993 Plan" shall mean the Ashland Inc. 1993 Stock
Incentive Plan, as it now exists or as it may hereafter be amended.
(E) "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.
(F) "Board" shall mean the Board of Directors of the Company.
(G) "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,
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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.
(H) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(I) "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 and an "outside director" as defined in
the regulations issued under Section 162(m) of the Code.
(J) "Common Stock" shall mean the Common Stock of the Company ($1.00 par
value), subject to adjustment pursuant to Section 13.
(K) "Company" shall mean, collectively, Ashland Inc. and its Subsidiaries.
(L) "Employee" shall mean a regular, full-time or part-time employee of
Ashland as selected by the Committee to receive an award under the Plan.
(M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(N) "Exercise Price" shall mean, with respect to each share of Common Stock
subject to an Option, the price fixed by the Committee at which such share may
be purchased from the Company pursuant to the exercise of such Option, which
price at no time may be less than 100% of the Fair Market Value of the Common
Stock on the date the Option is granted.
(O) "Fair Market Value" shall mean the price of the Common Stock as reported
on the Composite Tape of the New York Stock Exchange on the date and at the time
selected by the Company or as otherwise provided in the Plan.
(P) "Incentive Stock Option" or "ISO" shall mean an Option that is intended
by the Committee to meet the requirements of Section 422 of the Code or any
successor provision.
(Q) "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) "Outside Director" shall mean a director of the Company who is not also
an Employee of the Company.
(V) "Performance Goals" means 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 relation 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.
(W) "Performance Period" shall mean the period designated by the Committee
during which the performance objectives shall be measured.
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(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. 1997 Stock Incentive Plan.
(BB) "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 (unless otherwise directed by the
Committee), and in the case of Outside Directors is the period set forth in
subsection (B) of Section 8.
(CC) "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, if any.
(DD) "Restricted Stock Award" shall mean an award of Restricted Stock.
(EE) "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.
(FF) "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.
(GG) "Section 16(b) Optionee" shall mean an Employee or former Employee who
is subject to Section 16(b) of the Exchange Act.
(HH) "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.
(II) "Subsidiary" shall mean any present or future subsidiary corporations,
as defined in Section 424 of the Code, of Ashland.
(JJ) "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 3,212,000 shares of
Ashland Common Stock, par value $1.00 per share; provided, however, that of such
shares, only 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
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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. During the
term of the Plan (as provided in Section 14 hereof), no Employee shall be
granted more than a total of 500,000 in Options or Stock Appreciation Rights.
SECTION 4. ADMINISTRATION
The Plan shall be administered by 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 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. 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, at the discretion of
the Company and as directed by the Committee, 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.
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(b) Every Incentive Stock Option shall provide for a fixed expiration date
of not later than ten years from the date such Incentive Stock Option is
granted. Every Nonqualified Stock Option shall provide for a fixed expiration
date of not later than ten years and one month from the date such Nonqualified
Stock Option is granted.
(c) The Exercise Price of Common Stock issued pursuant to each Option shall
be fixed by the Committee at the time of the granting of the Option; provided,
however, that such Exercise Price shall in no event be less than 100% of the
Fair Market Value of the Common Stock on the date such Option is granted.
B. EXERCISE.
The Committee may, in its discretion, provide for Options granted under the
Plan to be exercisable in whole or in part; provided, however, that no Option
shall be exercisable prior to the first anniversary of the date of its grant,
except as provided in Section 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) 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. 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 or person 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 an 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. A
"cashless exercise" of an option is a procedure by which a broker provides the
funds to an Employee to effect an option exercise. At the direction of the
Employee, the broker will either (i) sell all of the shares received when the
option is exercised and pay the Employee the proceeds of the sale (minus the
option exercise price, withholding taxes and any fees due to the broker) or (ii)
sell enough of the shares received upon exercise of the option to cover the
exercise price, withholding taxes and any fees due the broker and deliver to the
Employee (either directly or through the Company) a stock certificate for the
remaining shares. Dispositions to a broker effecting a cashless exercise are not
exempt under Section 16 of the Exchange Act.
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 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
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related Option. An SAR shall be exercisable only when the Fair Market Value
(determined as of the date of exercise of the SAR) of each share of Common Stock
with respect to which the SAR is to be exercised shall exceed the Exercise Price
per share of Common Stock subject to the related Option. An SAR granted under
the Plan shall be exercisable in whole or in part by notice to Ashland. Such
notice shall state that the holder of the SAR elects to exercise the SAR and the
number of shares in respect of which the SAR is being exercised.
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,
which may, at the Company's discretion and as directed by the Committee, be
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 a non-refundable amount
equal to, or in excess of, the par value of the shares of Restricted Stock
awarded to him or her. 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.
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.
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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 Ashland Inc. 1993 Plan shall be granted an
Award of 1,000 shares of Restricted Stock upon the fifth anniversary of his or
her prior award under the Ashland Inc. 1993 Plan; and (ii) each person who is
hereafter duly appointed or elected as an Outside Director and who does not
receive an award under the Ashland Inc. 1993 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; provided, however, that no Outside Director shall
receive an award of Restricted Stock under this Plan if such award would be in
addition to a simultaneous award of 1,000 shares of Restricted Stock under the
Ashland Inc. 1993 Plan. 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 may 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 (C) 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) 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. Unless otherwise determined and directed by
the Committee, 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 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, 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, unless otherwise determined by the Committee, 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, unless otherwise determined by the Committee, such
Restricted Period shall not 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, if any. 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, if any. 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
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Common Stock with respect to such Restricted Stock, with the exception that (i)
the recipient will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Stock until the restrictions
applicable thereto shall have expired; (ii) the Company will retain custody of
all Retained Distributions made or declared with respect to the Restricted Stock
(and such Retained Distributions will be subject to the same restrictions, terms
and conditions as are applicable to the Restricted Stock) until such time, if
ever, as the Restricted Stock with respect to which such Retained Distributions
shall have been made, paid, or declared shall have become vested, and such
Retained Distributions shall not bear interest or be segregated in separate
accounts; (iii) 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 which may, in the Company's
discretion and as directed by the Committee, be 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 Performance Goals and Performance Period applicable to an award of
Performance Shares 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.
In making a Performance Share 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 Share award shall be established in shares of Common Stock and/or
shares of Restricted Stock in such proportions as the Committee shall determine.
The original amount of any Performance Share award shall not exceed 250,000
shares of Common Stock or Restricted Stock.
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
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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 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 prior to the end of such one year period (or such other period
determined by the Committee), the Option granted to such Employee shall
immediately terminate.
(B) Every Option shall provide that in the event the Employee dies (i) while
employed by Ashland, (ii) during the periods in which Options may be exercised
by an Employee determined to be disabled as provided in subsection (C) of this
Section 11 or (iii) after Retirement, 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 prior to the fixed termination date set forth in the
Option by such Employee for the number of shares which the Employee could have
acquired under the Option immediately prior to the Employee's disability. 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 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 at
any time or from time to time, prior to the fixed termination date set forth in
the Option for the number of shares which the Employee could have acquired under
the Option immediately prior to such Retirement.
(E) Except as provided in subsections (A), (B), (C), (D), (F) and (G) 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 thirty
(30) days 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 (if any),
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
A-9
<PAGE>
(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) Notwithstanding any provision of this Section 11 to the contrary, in the
event the Committee determines, in its sole and absolute discretion, that the
employment of any Employee has terminated for a reason or in a manner adversely
affecting the Company (which may include, without limitation, taking other
employment or rendering service to others without the consent of the Company),
then the Committee may direct that such Employee forfeit any and all Options
that he or she could otherwise have exercised pursuant to the terms of this
Plan.
(H) 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 (or, if no Agreement is entered into, at least one year
from the date of the Award). 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.
(I) 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 earlier terminated as hereinafter provided,
no Awards shall be granted hereunder after January 30, 2002. The Board or the
Committee may at any time terminate, modify or amend the Plan in such respects
as it shall deem advisable; provided, however, that the Board
A-10
<PAGE>
or the Committee 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 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.
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, 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 or 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 Sections 13, 15(d) or 16(a)
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.
SECTION 16. EFFECTIVENESS OF THE PLAN
The Plan shall be submitted to the shareholders of the Company for their
approval and adoption on January 30, 1997 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.
A-11
<PAGE>
P
R
O
X
Y
ASHLAND INC.
The Solicitation of this Proxy is made on Behalf of the
Board of Directors
The undersigned, hereby appoints JOHN R. HALL, PAUL W. CHELLGREN and
THOMAS L. FEAZELL, and each of them, with full power of substitution, the
attorney and proxy of the undersigned to attend the Annual Meeting of
Shareholders of ASHLAND INC. to be held at the Ashland Petroleum Executive
Office Building, Ashland Drive, Russell, Kentucky, 10:30 a.m. on January 30,
1997, or any adjournment thereof, and to vote the stock of the undersigned
with all powers the undersigned would possess if present upon the matters
described on the reverse side of this form and upon any other business that
may properly come before the meeting of any adjournment thereof.
PLEASE MARK, SIGN, DATE AND MAIL. THE PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
FOLD AND DETACH HERE
<PAGE>
Please mark your votes as
indicated in this example / X /
/ / To vote for all items AS RECOMMENDED BY THE BOARD OF DIRECTORS, mark this
box, sign, date and return this Proxy. (No additional vote necessary)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
1. Election of six directors to Class B -
Nominees are: Paul W. Chellgren, Ralph E. Gomory,
Patrick F. Noonan, Jane C. Pheiffer, Michael D. Rose and
Robert B. Stobaugh
FOR WITHHOLD FOR ALL (Except Nominee(s) written below)
/ / / / / /
2. Ratification of Ernst & Young, LLP as Independent auditors for the 1997
fiscal year.
FOR AGAINST ABSTAIN
/ / / / / /
3. Approval of the Ashland Inc. 1997 Stock Incentive Plan.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST
4. Request that the Board of Directors give consideration to having to
wage roll employee who is a representative at his/her site be nominated for
election to the Board.
FOR AGAINST ABSTAIN
/ / / / / /
Shares represented by this proxy will be voted as directed by the stockholder.
If no such choice is specified, this proxy will be voted FOR proposals 1, 2 and
3 and AGAINST proposal 4.
Signature(s) Dated: , 1996
--------------------------------------- --------------
Please date and sign exactly as your name or names appear(s) hereon. If stock is
held jointly, signature should include both names. Executors, administrators,
trustees, guardians and others signing in a representative capacity should give
their full title.
FOLD AND DETACH HERE
<PAGE>
THE SOLICITATION OF THESE CONFIDENTIAL VOTING INSTRUCTIONS IS MADE
ON BEHALF OF THE BOARD OF DIRECTORS
ASHLAND INC.
The undersigned, as a participant in the Employee Savings Plan or the Leveraged
Employee Stock Ownership Plan, or any combination, hereby instructs the Trustees
of the respective Plans to appoint JOHN R. HALL, PAUL W. CHELLGREN and THOMAS L.
FEAZELL, and each of them, with full power of substitution, the attorney and
proxy of the said Trustees to represent the interests of the undersigned in
Ashland Common Stock held under the terms of said Plan(s), at the Annual Meeting
of Shareholders of ASHLAND INC. to be held at the Ashland Petroleum Executive
Office Building, Ashland Drive, Russell, Kentucky, 10:30 a.m. on January 30,
1997, or any adjournment thereof, and to vote, with all powers the Trustees
would possess if present, (a) all shares of Ashland Common Stock ("Common
Stock") credited to the undersigned a account(s) under said Plan(s) as of the
record date for the Annual Meeting ("Allocated Shares") and (b) the
proportionate number of Non-Directed Shares of Common Stock as to which the
undersigned is entitled to direct the voting in accordance with the provisions
of the Plan(s), upon the following matters and upon any other business that may
properly come before the meeting or any adjournment thereof.
By completing, signing and returning this voting instruction card you will be
acting as a named fiduciary under the Employee Retirement Income Security Act of
1974, as amended, for the Plans in which you participate and will be voting all
Allocated Shares as well as all Non-Directed Shares of Common Stock the same
way. Any participant wishing to vote the Non-Directed Shares differently from
the Allocated Shares or not wishing to vote the Non-Directed Shares at all may
do so by requesting a separate voting instruction card from Harris Trust and
Savings Bank, 311 W. Monroe St., 11th Floor, Chicago, IL 60608. 312-461-5160,
Susan Hogan.
Non-Directed Shares are those shares of Common Stock allocated to a participant
account, but for which a voting instruction card is not timely received by the
Trustees.
PLEASE MARK, SIGN, DATE AND MAIL THE VOTING INSTRUCTION CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
FOLD AND DETACH HERE
<PAGE>
Please mark your votes as
indicated in this example / X /
/ / To vote for all items AS RECOMMENDED BY THE BOARD OF DIRECTORS, mark
this box, sign, date and return this Proxy. (No additional vote
necessary)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
1. Election of six directors to Class B -
Nominees are: Paul W. Chellgren, Ralph E. Gomory, Patrick F. Noonan,
Jane C. Pheiffer, Michael D. Rose and Robert B. Stobaugh
FOR WITHHOLD FOR ALL (Except
Nominee(s) written below)
/ / / / / /
2. Ratification of Ernst & Young, LLP as Independent auditors for the 1997
fiscal year.
FOR AGAINST ABSTAIN
/ / / / / /
3. Approval of the Ashland Inc. 1997 Stock Incentive Plan.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST
4. Request that the Board of Directors give consideration to having to wage
roll employee who is a representative at his/her site be nominated for
election to the Board.
FOR AGAINST ABSTAIN
/ / / / / /
Shares represented by this proxy will be voted as directed by the stockholder.
If no such choice is specified, this proxy will be voted FOR proposals 1, 2 and
3 and AGAINST proposal 4.
Signature(s) Dated: , 1996
--------------------------------------- ------------
Please date and sign exactly as your name or names appear(s) hereon. If stock is
held jointly, signature should include both names. Executors, administrators,
trustees, guardians and others signing in a representative capacity should give
their full title.
FOLD AND DETACH HERE
<PAGE>
[LOGO]
ASHLAND INC. P.O. BOX 391 ASHLAND, KENTUCKY 41114 PHONE (606) 329-3333
THOMAS L. FEAZELL
Senior Vice President
General Counsel and Secretary December 16, 1996
TO PARTICIPANTS IN THE FOLLOWING
EMPLOYEE BENEFIT PLANS:
Ashland Inc. Employee Savings Plan
Ashland Inc. Leveraged Employee Stock Ownership Plan
Dear Plan Participant:
In connection with Ashland Inc.'s 1997 Annual Meeting of Shareholders to
be held on January 30, 1997, please find enclosed:
(1) Notice of Meeting and Proxy Statement. The Proxy Statement describes
the items of business to be voted upon by Ashland's shareholders at the
annual meeting. The Proxy Statement also gives the recommendations of the
board of directors on how to vote these items.
(2) Confidential Voting Instruction Card. Please use this card to
instruct the Trustee how to vote the shares credited to your account(s) under
the Plan(s), and the proportionate number of the shares for which voting
instructions are not received under the Plans.
(3) 1996 Ashland Inc. Annual Report.
To vote the shares described above as you desire, please mark the card
in accordance with its instructions, date and sign it, and return it in the
accompanying prepaid envelope.
Very truly yours,
/s/ Thomas L. Feazell
Thomas L. Feazell
Enclosures
