ASHLAND INC.
DEFERRED COMPENSATION AND
STOCK INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
(Amended as of September 19, 1996)
ARTICLE I. GENERAL PROVISIONS
1. PURPOSE
The purpose of this Ashland Inc. Deferred Compensation and Stock
Incentive Plan For Non-Employee Directors (the "Plan") is to provide each
Director with an opportunity to defer some or all of the Director's Fees as
a means of saving for retirement or other purposes. In addition, the Plan
provides Directors with the ability to increase their proprietary interest
in the Company's long-term prospects by permitting Directors to receive all
or a portion of their Fees in Ashland Common Stock and providing for the
grant of options to purchase Ashland Common Stock to Directors.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
(a) "Accounting Date" means the last day of a quarter or if a weekend or
holiday, the next preceding business day.
(b) "Act" means the Securities Act of 1933, as amended from time to
time.
(c) "Agreement" means a written agreement setting forth the terms of an
Option.
(d) "Beneficiary" means the person(s) who, upon the death of a
Participant, shall have acquired by will, laws of descent and distribution
or by other legal proceedings, the right to receive the benefits specified
under this Plan in the event of a Director's death.
(e) "Board" means the Board of Directors of Ashland Inc.
(f) "Cash Account" means an account by that name established pursuant to
Article III, Section 1.
(g) "Change in Control" shall be deemed to occur (1) upon the approval
of the shareholders of the Company (or if such approval is not required,
upon the approval of the Board) of (A) any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation
or pursuant to which shares of Common Stock would be converted into cash,
securities or other property other than a merger in which the holders of
Common Stock immediately prior to the merger will have the same
proportionate ownership of Common Stock of the surviving corporation
immediately after the merger, (B) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all or
substantially all the assets of the Company, or (C) adoption of any plan or
proposal for the liquidation or dissolution of the Company, (2) when any
"person" (as defined in Section 3(a)(9) or 13(d) of the Exchange Act),
other than the Company or any subsidiary or employee benefit plan or trust
maintained by the Company, shall become the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than
15% of the Common Stock outstanding at the time, without the approval of
the Board, or (3) if at any time during a period of two consecutive years,
individuals who at the beginning of such period constituted the Board shall
cease for any reason to constitute at least a majority thereof, unless the
election or the nomination for election by the Company's shareholders of
each new director during such two-year period was approved by a vote of at
least two-thirds of the directors then still in office who were directors
at the beginning of such two-year period.
(h) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(i) "Committee" means the Personnel and Compensation Committee of the
Board.
(j) "Common Stock" means the common stock, $1.00 par value, of Ashland
Inc.
(k) "Company" means Ashland Inc., its divisions and subsidiaries.
(l) "Director" means any non-employee director of the Company.
(m) "Disability" means a Director's incapacity, due to physical or
mental illness, resulting in an inability to attend to his or her duties
and responsibilities as a member of the Board.
(n) "Election" means a Participant's delivery of a written notice of
election to the Secretary of the Company electing to defer payment of his
or her Fees or to receive such Fees in the form of Common Stock.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(p) "Exercise Price" means, with respect to each share of Common Stock
subject to an Option, the price at which such share may be purchased from
the Company pursuant to the exercise of such Option.
(q) "Fair Market Value" means the price of a share of Common Stock, as
reported on the Composite Tape on the date and at the time designated by
the Company.
(r) "Fees" mean the annual retainer and meeting fees, as well as any per
diem compensation for special assignments, earned by a Director for his or
her service as a member of the Board during a calendar year or portion
thereof.
(s) "Nonqualified Stock Option" means any Option that does not comply
with the provisions of Section 422 of the Code.
(t) "Option" means the right to purchase Common Stock as provided in
Article IV.
(u) "Participant" means a Director who has elected to defer payment of
all or a portion of his or her Fees and/or to receive all or a specified
portion of his or her Fees in shares of Common Stock.
(v) "Payment Commencement Date" means the date payments of amounts
deferred begin pursuant to Article III, Section 6.
(w) "Personal Representative" means the person or persons who, upon the
disability or incompetence of a Director, shall have acquired on behalf of
the Director, by legal proceeding or otherwise, the right to receive the
benefits specified in this Plan.
(x) "Plan" means this Ashland Inc. Deferred Compensation and Stock
Incentive Plan For Non-Employee Directors.
(y) "Prime Rate of Interest" means the rate of interest quoted by
Citibank, N.A. as its prime commercial lending rate on the subject date.
(z) "Stock Account" means an account by that name established pursuant
to Article III, Section 1.
(aa) "Stock Unit(s)" means the share equivalents credited to a
Participant's Stock Account pursuant to Article III, Sections 1 and 3.
(bb) "Termination" means retirement from the Board or termination of
service as a Director for any other reason.
3. SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION
(a) Shares Authorized for Issuance. There shall be reserved for issuance
under the Plan 500,000 shares of Common Stock, subject to adjustment
pursuant to subsection (b) below; provided, however, that of such shares,
only 150,000 shares shall be available for issuance in connection with the
award of Options. Such shares shall be authorized but unissued shares of
Common Stock. If any Option shall expire without having been exercised in
full, the shares subject to the unexercised portion of such Option shall
again be available for the purposes of the Plan.
(b) Adjustments in Certain Events. In the event of any change in the
outstanding Common Stock of the Company by reason of any stock split, stock
dividend, recapitalization, merger, consolidation, reorganization,
combination, or exchange of shares, split-up, split-off, spin-off,
liquidation or other similar change in capitalization, or any distribution
to common shareholders other than cash dividends, the number or kind of
shares that may be issued under the Plan shall be automatically adjusted so
that the proportionate interest of the Directors shall be maintained as
before the occurrence of such event. Such adjustment shall be conclusive
and binding for all purposes of the Plan.
4. ELIGIBILITY
Any non-employee Director of the Company shall be eligible to
participate in the Plan.
5. ADMINISTRATION
Full power and authority to construe, interpret and administer the Plan
shall be vested in the Committee. Decisions of the Committee shall be
final, conclusive and binding upon all parties. Day-to-day administration
of the Plan shall be the responsibility of the Company's Corporate Human
Resources Department. This Department may authorize new or modify existing
forms for use under this Plan so long as any such modified or new forms are
not inconsistent with the terms of the Plan.
ARTICLE II. COMMON STOCK PROVISION
Each Director may elect to receive all or a portion of his or her Fees
in shares of Common Stock by making an Election pursuant to Article III,
Section 4. Shares shall be issued to the Director at the end of each
quarter beginning in the quarter the Election is effective. The number of
shares of Common Stock so issued shall be equal to the amount of Fees which
otherwise would have been payable to such Director during the quarter
divided by the Fair Market Value. Only whole number of shares of Common
Stock will be issued, with any fractional shares to be paid in cash.
ARTICLE III. DEFERRED COMPENSATION
1. PARTICIPANT ACCOUNTS
(a) A Participant may elect to have deferred amounts credited to a Cash
Account, a Stock Account, or a combination of both such Accounts. The
Company shall maintain such Accounts in the name of the Participant.
(b) The Cash Account of a Participant shall be credited on each
Accounting Date with the dollar amount of such deferred compensation
otherwise payable to the Participant during the quarterly period ending on
the Accounting Date and as to which a cash deferral election has been made.
The Cash Account shall be adjusted and increased on each Accounting Date as
if interest were credited thereon, based on the Prime Rate of Interest on
such Accounting Date.
(c) The Stock Account of a Participant shall be credited on each
Accounting Date with Stock Units equal to the number of shares of Common
Stock (including fractions of a share) that could have been purchased with
the amount of such deferred Fees as to which a stock deferral election has
been made at the Fair Market Value on the Accounting Date. As of the date
of any dividend distribution date for the Common Stock, the Participant's
Stock Account shall be credited with additional Stock Units equal to the
number of shares of Common Stock (including fractions of a share) that
could have been purchased, at the Fair Market Value on such date, with the
amount which would have been paid as dividends on that number of shares
(including fractions of a share) of Common Stock which is equal to the
number of Stock Units then credited to the Participant's Stock Account.
2. FINANCIAL HARDSHIP
Upon the written request of a Participant or a Participant's legal
representative and a finding that continued deferral will result in
financial hardship to the Participant, the Committee (in its sole
discretion) may authorize (a) the payment of all or a part of a
Participant's account(s) in a single installment prior to his or her
ceasing to be a Director, or (b) the acceleration of payment of any
multiple installments hereof; provided, however, that if, in the sole
discretion of the Committee, a six-month delay in any distribution pursuant
to this Section 2 of this Article shall be necessary to avoid liability of
the Participant under Section 16 of the Act, any such distribution shall be
so postponed.
3. INITIAL CONVERSION
A Participant may make a special election on or before December 31, 1993
to convert (effective as of June 30, 1994) all or any portion of (i) his or
her Cash Account to his or her Stock Account, or (ii) his or her Stock
Account to his or her Cash Account. The number of Stock Units to be
credited to such Participant's Stock Account in the event of a conversion
under (i) shall be obtained by dividing the portion of the cash balance
credited to his or her Cash Account as specified in his or her election by
the Fair Market Value of Ashland Common Stock on June 30, 1994. The amount
to be credited to such Participant's Cash Account in the event of a
conversion under (ii) shall be determined by multiplying the number of
Stock Units specified in his or her election by the Fair Market Value on
June 30, 1994.
4. MANNER OF ELECTION
(a) Any Director wishing to participate in the Plan must deliver to the
Secretary of the Company a written notice, (i) electing to defer to a
period following his or her Termination payment of all or a portion (in 25%
increments) of his or her Fees, and/or (ii) to receive all or a portion (in
25% increments) of his or her Fees in shares of Common Stock (an
"Election"). The timing of the filing of the appropriate form with the
Secretary of the Company shall be determined by the Committee.
Notwithstanding the foregoing, a Director may choose to participate in the
Plan beginning in 1994 by filing an Election to so participate on or before
December 31, 1993 (the "1994 Election"). Pursuant to the 1994 Election, if
a Director chooses to defer payment of any portion of his or her Fees into
the Stock Account, such Fees will be deemed deferred into the Cash Account
until June 30, 1994 at which time such deferred Fees (together with accrued
earnings thereon) will be automatically transferred to the Stock Account.
The number of Stock Units to be credited to such Participant's Stock
Account upon the transfer of such amount shall be obtained by dividing such
amount by the Fair Market Value of Ashland Common Stock on June 30, 1994.
In addition, if a Participant chooses to receive all or a portion of Fees
in shares of Common Stock, such 1994 Election will not take effect until
June 30, 1994.
(b) With respect to Directors' Fees payable for all or any portion of a
calendar year after such person's initial election to the office of
Director of the Company, any such person wishing to participate in the Plan
may file a proper Election within 30 days after such election to office.
Any such Election shall be effective upon filing or as soon as possible
thereafter with respect to such Fees.
(c) An effective Election may not be revoked or modified with respect to
Fees payable for a calendar year or portion of a calendar year for which
such Election is effective except as otherwise determined by the Committee
or stated herein. Such Election, unless terminated or modified as described
below, shall apply to Fees payable with respect to each subsequent calendar
year. An effective Election may be terminated or modified for any
subsequent calendar year by the filing of an Election, with the timing of
the filing of the appropriate form with the Secretary of the Corporation to
be determined by the
Committee. A Participant will be allowed to change the Election as to the
applicable payment period for all amounts deferred pursuant to such
Election, subject to approval by the Committee. Such change must be made by
the earlier of:
(i) the date six months prior to the first day of the month
following the Participant's Termination; or
(ii) the December 31 immediately preceding the first day of
the month following the Participant's Termination.
If the Participant making such change is a member of the Committee, such
Participant shall abstain from the Committee's decision to approve or
disapprove such change.
(d) A Participant may elect to convert all or a portion of (i) his or
her existing Cash Account to his or her Stock Account, or (ii) his or her
existing Stock Account to his or her Cash Account (in 25% increments or in
other increments prescribed by the Committee) one (1) time during any
three-month period by filing with the Secretary of the Company a new
Election at least fifteen (15) days prior to the commencement of the
quarter in which the Participant desires the change to become effective;
provided however, than an inter-Account conversion must occur at least six
months after the last "opposite-way" inter-Account conversion. An
"opposite-way" inter-Account conversion occurs when a conversion into the
Stock Account is followed by a conversion out of the Stock Account, or a
conversion out of the Stock Account is followed by a conversion into the
Stock Account. Such election will be effective as of the first business day
of the next quarter subsequent to the filing of such Election.
5. MANNER OF PAYMENT UPON TERMINATION
In accordance with the Participant's Election and subject to Committee
approval upon payout, amounts credited to a Participant's Cash and/or Stock
Account will be paid in a lump sum or in the form of annual, semi-annual or
quarterly installments in shares of Common Stock or cash, or a combination
of both to the Participant following his or her Termination or, in the
event of his or her death, to a Beneficiary. If a Participant elects to
receive payments in installments, the entire Cash and/or Stock Account must
be paid out within forty years following the date of a Participant's
Termination. A Participant may provide for different payment periods and
forms of payment before and after his or her death.
The amount of any cash distribution to be made in installments with
respect to the Cash Account will be determined by dividing the current cash
balance in such Cash Account by the number of installments in which
distributions remain to be made (including the current distribution). The
amount of any cash distribution to be made in installments with respect to
Stock Units will be determined by multiplying the number of Stock Units
attributable to such installment (determined as hereinafter provided) by
the closing price of the Common Stock on each Accounting Date immediately
prior to the date on which such installment is to be paid. The number of
Stock Units attributable to an installment shall be determined by dividing
the current number of Stock Units in such Stock Account by the number of
installments in which distributions remain to be made (including the
current distribution).
The amount of any stock distribution to be made in installments with
respect to the Stock Account shall be determined by dividing the current
number of Stock Units in such Stock Account by the number of installments
in which distributions remain to be made (including the current
distribution). The amount of any stock distribution to be made in
installments with respect to the Cash Account shall be determined by
dividing the amount of cash attributable to such installment (determined as
hereinafter provided) by the closing price of the Common Stock on each
Accounting Date immediately prior to the date on which such installment is
to be paid. The amount of cash attributable to an installment shall be
determined by dividing the current cash balance in such Cash Account by the
number of installments in which distributions remain to be made (including
the current distribution). Only whole number of shares of Common Stock will
be issued, with the value of any fractional shares to be paid in cash.
6. PAYMENT COMMENCEMENT DATE
Payments of amounts deferred pursuant to a valid Election shall commence
after a Participant's Termination in accordance with his or her Election.
If a Participant dies prior to the first deferred payment specified in an
Election, payments shall commence to the Participant's Beneficiary on the
first payment date so specified.
7. CHANGE IN CONTROL
Notwithstanding any provision of this Plan to the contrary, in the event
of a "Change in Control" (as defined in Section 2(g) of Article I), each
Participant in the Plan shall receive an automatic lump sum cash
distribution of all amounts accrued in the Participant's Cash and/or Stock
Account(s) (including interest at the Prime Rate of Interest through the
business day immediately preceding the date of distribution) not later than
fifteen (15) days after the date of the "Change in Control." For this
purpose, the balance in the Stock Account shall be determined by
multiplying the number of Stock Units by the higher of (a) the highest
closing price of a share of Common Stock during the period commencing 30
days prior to such Change in Control or (b) if the Change in Control of the
Company occurs as a result of a tender or exchange offer or consummation of
a corporate transaction, then the highest price paid per share of Common
Stock pursuant thereto. Any consideration other than cash forming a part or
all of the consideration for Common Stock to be paid pursuant to the
applicable transaction shall be valued at the valuation price thereon
determined by the Board.
In addition, the Company shall reimburse a Director for the legal fees
and expenses incurred if the Director is required to seek to obtain or
enforce any right to distribution. In the event that it is determined that
such Director is properly entitled to a cash distribution hereunder, such
Director shall also be entitled to interest thereon at the Prime Rate of
Interest from the date such distribution should have been made to and
including the date it is made. Notwithstanding any provision of this Plan
to the contrary, Article I, Section 2(g) and Section 7 of this Article may
not be amended after a "Change in Control" occurs without the written
consent of a majority in number of Directors.
8. ADMINISTRATIVE CONVENIENCE
Notwithstanding any provision of this Plan to the contrary, a
Participant may not defer Fees in an amount less than $1,000 and no payment
or payments under the Plan may be made to the Participant or any
Beneficiary of the Participant in an amount that would annually total less
than $1,000, unless the amount remaining in a Cash Account and/or Stock
Account totals less than $1,000, in which event the entire amount remaining
in such account(s) shall be paid to the Participant or his or her
Beneficiary. The Committee reserves the right, in its sole and absolute
discretion, to further modify the terms of the Plan or payments made to
Participants under the Plan for the Company's administrative convenience.
ARTICLE IV. OPTIONS
1. OPTION GRANT
On the first business day following the Company's Annual Meeting of
Shareholders in 1994 and each year thereafter until 2004, or, if no such
meeting is held, on January 31 or the first business day thereafter, and
each year thereafter (such day hereinafter referred to as the "Effective
Date"), each person who is a Director of the Company on the Effective Date
shall be automatically granted an Option to purchase 1,000 shares of Common
Stock if, but only if, the return on average common stockholders' equity of
the Company for the immediately preceding fiscal year as set forth in the
Company's Annual Report to Shareholders is equal to or greater than 10%.
2. OPTION TERMS
Options granted under the Plan shall be subject to the following terms
and conditions:
(a) Option Designation and Agreement. Any Option granted under the Plan
shall be granted as a Nonqualified Stock Option. Each Option shall be
evidenced by an Agreement between the recipient and the Company containing
the terms and conditions of the Option.
(b) Option Price. The Exercise Price of Common Stock issued pursuant to
each Option shall be equal to Fair Market Value of the Common Stock on the
Effective Date.
(c) Term of Option. No Option shall be exercisable more than ten years
after the date the Option is granted.
(d) Vesting. Options granted under the Plan shall vest six months after
the date of grant.
(e) Exercise. Options, to the extent they are vested, may be exercised
in whole or in part at any time during the option period; provided,
however, that an Option may not be exercised at any time for fewer than 50
shares (or the total remaining shares covered by the Option if fewer than
50 shares) during the term of the Option. The specified number of shares
will be issued upon receipt by the Company of (i) notice from the optionee
of exercise of an Option, and (ii) payment to the Company (as provided in
(f) below), of the Exercise Price for the number of shares with respect to
which the Option is exercised. Each such notice and payment shall be
delivered or mailed by postpaid mail, addressed to the Treasurer of the
Company at, Ashland Inc., 1000 Ashland Drive, Russell, Kentucky, 41169, or
such other place as the Company may designate from time to time.
(f) Payment for Shares. The Exercise Price for the Common Stock shall be
paid in full when the Option is exercised. The Exercise Price may be paid
in whole or in part (i) in cash, (ii) in whole shares of Common Stock
(which shares of Common Stock must have been owned by the Director six
months or longer, and not used to effect a stock option exercise within the
preceding six months, unless the Committee specifically provides otherwise)
and evidenced by negotiable certificates, valued at their Fair Market
Value, (iii) Attestation or (iv) by a combination of such methods of
payment. In addition, a Director may exercise the Option by effecting a
"cashless exercise," with a broker, of the Option. "Attestation" means the
delivery to the Company of a completed Attestation Form prescribed by the
Company setting forth the whole shares of Common Stock owned by the
Director which the Director wishes to utilize to pay the Option price. The
Common Stock listed on the Attestation Form must have been owned by the
Director six months or longer, and not have been used to effect an Option
exercise within the preceding six months, unless the Committee specifically
provides otherwise.
(g) Termination . If a Director's service on the Board terminates by
reason of (i) normal retirement from the Board at age 70, (ii) the death or
Disability of such Director, (iii) a Change of Control of the Company, or
(iv) voluntary early retirement to take a position in governmental service,
any Option held by such Director may thereafter be exercised by the
Director, or in the event of death, by his or her Beneficiary to the extent
it was vested and exercisable at the time of Termination, (i) for a period
equal to the number of years of completed Board service as of the date of
Termination of the Director on whose behalf the Option is exercised, or
(ii) until the expiration of the stated term of such Option, whichever
period is the shorter. In the event of Termination for any reason other
than those set forth above, any Option held by such Director may thereafter
be exercised by the Director to the extent it was vested and exercisable at
the time of Termination (i) for a period of one year from the date of such
Termination or (ii) until the expiration of the stated term of such Option,
whichever period is the shorter.
(h) Term. No Option shall be granted pursuant to the Plan on or after
the tenth anniversary of the date of shareholder approval, but Option
awards granted prior to such tenth anniversary may extend beyond that date
until the expiration of their terms.
3. TRANSFER OF OPTIONS
Options granted under the Plan shall be transferable by will, by the
laws of descent and distribution, and, subject to the discretion and
direction of the Committee, may be made transferable by the Director-holder
thereof during his or her lifetime.
ARTICLE V. MISCELLANEOUS PROVISIONS
1. BENEFICIARY DESIGNATION
A Director may designate one or more persons (including a trust) to whom
or to which payments are to be made if the Director dies before receiving
payment of all amounts due hereunder. A designation of Beneficiary will be
effective only after the signed Election is filed with the Secretary of the
Company while the Director is alive and will cancel all designations of a
Beneficiary signed and filed earlier. If the Director fails to designate a
Beneficiary as provided above or if all of a Director's Beneficiaries
predecease him or her and he or she fails to designate a new Beneficiary,
remaining unpaid amounts shall be paid in one lump sum to the estate of
such Director. If all Beneficiaries of the Director die before the Director
or before complete payment of all amounts due hereunder, the remaining
unpaid amounts shall be paid in one lump sum to the estate of the last to
die of such Beneficiaries.
2. INALIENABILITY OF BENEFITS
The interests of the Directors and their Beneficiaries under the Plan
may not in any way be voluntarily or involuntarily transferred, alienated
or assigned, nor be subject to attachment, execution, garnishment or other
such equitable or legal process. Subject to Section 3 of Article IV of this
Plan, any Option shall be exercisable, during a Director's lifetime, only
by him or her or his or her Personal Representative.
3. GOVERNING LAW
The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the Commonwealth of Kentucky.
4. AMENDMENTS
The Committee may amend, alter or terminate this Plan at any time
without the prior approval of the Directors; provided, however, that the
Committee may not, without approval by the shareholders:
(a) materially increase the number of securities that may be issued
under the Plan (except as provided in Article I, Section 3),
(b) materially modify the requirements as to eligibility for
participation in the Plan,
(c) otherwise materially increase the benefits accruing to participants
under the Plan, or
(d) amend any provision relating to the amount, price, timing or vesting
of the Options, other than to comport with changes in the Code or the rules
and regulations promulgated thereunder.
5. COMPLIANCE WITH RULE 16b-3
It is the intention of the Company that the Plan comply in all respects
with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and
that Plan Participants remain non-employee directors ("Non-Employee
Directors") for purposes of administering other employee benefit plans of
the Company and having such other plans be exempt from Section 16(b) of the
Exchange Act. Therefore, if any Plan provision is found not to be in
compliance with Rule 16b-3 or if any Plan provision would disqualify Plan
participants from remaining Non-Employee Directors, that provision shall be
deemed amended so that the Plan does so comply and the Plan participants
remain Non-Employee Directors, to the extent permitted by law and deemed
advisable by the Committee, and in all events the Plan shall be construed
in favor of its meeting the requirements of Rule 16b-3.
6. EFFECTIVE DATE
The Plan was approved by the shareholders of the Company on January 27,
1994, and originally became effective as of November 9, 1993, and has been
restated in this document effective September 19, 1996.