Conformed copy including Amendment No. 1
as adopted 9/18/97
ASHLAND INC. NONQUALIFIED EXCESS BENEFIT
PENSION PLAN - 1996 RESTATEMENT
as adopted on September 19, 1996
- ------------------------------------------------------------------------------
WHEREAS, the Employee Retirement Income Security Act of 1974
("ERISA") establishes maximum limitations on benefits and contributions for
retirement plans which meet the requirements of Section 401(a) of the
Internal Revenue Code of 1986, as amended ("Code");
WHEREAS, Ashland Inc. ("Ashland" or the "Company") maintains
certain pension plans which are subject to the aforesaid limitations on
benefits and contributions;
WHEREAS, Ashland adopted the Ashland Oil, Inc. Nonqualified
Pension Plan as of September 24, 1975 (which is now called the Ashland Inc.
Nonqualified Excess Benefit Pension Plan, otherwise referred to as the
"Plan"), for the purpose of providing benefits for certain employees in
excess of the aforesaid limitations;
WHEREAS, the Plan was amended and completely restated as of July
21, 1977;
WHEREAS, the Plan was amended and completely restated as of
October 1, 1982;
WHEREAS, the Plan was amended and completely restated as of
November 3, 1988;
WHEREAS, Ashland has retained the authority to make additional
amendments to or terminate the Plan;
WHEREAS, Ashland desires to further amend and restate the Plan
and, as so amended, to continue the Plan in full force and effect;
NOW, THEREFORE, effective September 19, 1996, Ashland does hereby
further amend and restate the Plan in accordance with the following terms
and conditions:
1. Designation and Purpose of Plan. The Plan is designated the
"Ashland Inc. Nonqualified Excess Benefit Pension Plan" ("Plan"). The
purpose of the Plan is to provide benefits for certain employees in excess
of the limitations on contributions, benefits, and compensation imposed by
Sections 415 and 401(a)(17) of the Code (including successor provisions
thereto) on the plans to which those Sections apply. The portion of the
Plan providing benefits in excess of the Section 415 limits is an "excess
benefit plan" as that term is defined in
Section 3(36) of ERISA. It is intended that the portion, if any, of the
Plan which is not an excess benefit plan shall be maintained primarily for
a select group of management or highly compensated employees.
2. Eligibility. Subject to Section 11, the Plan shall apply to
those employees -
(i) who have retired as an early, normal, or deferred normal retiree under
the provisions of the Ashland Inc. and Affiliates Pension Plan ("Ashland
Pension Plan"), as it may be amended, from time to time, or under
provisions of any other retirement plan, as such other plan may be amended
from time to time, which, from time to time, is specifically designated by
Ashland for purposes of eligibility and benefits under the Plan (all such
plans are hereinafter referred to jointly and severally as "Affected
Plans"); and
(ii) who have been approved for participation in this Plan by Ashland or
its delegate, and such approval may, in the discretion of Ashland, be made
(A) before an employee's actual early, normal or deferred retirement; or
(B) posthumously in the event of a benefit potentially available under
Section 6 of the Plan.
Notwithstanding anything to the contrary contained herein, any employee who
would be entitled to participate in this Plan, but who is not a member of a
select group of management or a highly compensated employee, shall be
entitled to a benefit amount payable under the Plan based solely on the
limitations on benefits imposed under Section 415 of the Code.
3. Benefit Amount.
(i) Computation. At any particular time, the benefit payable to a retiree
eligible to participate in this Plan pursuant to the provisions in Section
2 shall be computed by subtracting from (A) the sum of (B) and (C) where -
(A) shall be the single life annuity that would be
payable at age 62 to such retiree under the Affected Plans -
(1) with the benefit so payable thereunder
calculated by disregarding any salary deferrals that may have been made by
such retiree under the Ashland Inc. Deferred Compensation Plan and thereby
restoring any salary that may have been so deferred to such retiree's
compensation for purposes of the Affected Plans, and
(2) prior to any reductions made because of the
limits imposed by Sections 415 and 401(a)(17) of the Code;
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provided that the single life annuity that would be so payable under the
Ashland Pension Plan shall be computed without applying any offset
attributable to the Ashland Inc. Leveraged Employee Stock Ownership Plan
("LESOP"), and such single life annuity shall be actuarially adjusted to be
equivalent to a single life annuity payable at the particular time
applicable based upon the applicable actuarial assumptions and other
relevant provisions used for the same in the Affected Plans; [as amended by
Amendment No. 1 adopted 9/18/97]
(B) shall be the single life annuity that would be
payable at age 62 to such retiree under the Affected Plans after reducing
the amount so payable for the limits imposed by Sections 415 and 401(a)(17)
of the Code, provided that such single life annuity that would be so
payable under the Ashland Pension Plan shall be computed after first
applying the offset attributable to the Offset Account (as that term is
defined under the LESOP) in the LESOP, and each such single life annuity
shall be actuarially adjusted to be equivalent to a single life annuity
payable at the particular time applicable based upon the applicable
actuarial assumptions and other relevant provisions used for the same in
the Affected Plans; and
(C) shall be the single life annuity that would be
actuarially equivalent to such retiree's nonforfeitable portion of the
Offset Account under the LESOP as of the valuation date thereunder
coincident with or next preceding such retiree's termination of employment
using the actuarial assumptions prescribed for this purpose in the Ashland
Pension Plan.
(ii) Commencement. Subject to Section 6, the benefit computed under
paragraph (i) of this Section 3 shall commence or otherwise be paid or
transferred pursuant to the provisions in Sections 4 or 5, effective as of
the date as of which payments to such retiree commence under the Affected
Plans.
4. Payment Options.
(i) Election. A retiree eligible under Section 2 for the benefit under
Section 3 shall, subject to Sections 5 and 6, elect the form in which such
benefit shall be paid from among those identified in this Section 4 and
such election shall be made at the time and in the manner prescribed by
Ashland, from time to time, provided that the election is made before the
first day of the month following such retiree's termination from
employment. Such election, including the designation of any contingent
annuitant or alternate recipient under sub-paragraphs (D) or (E) of
paragraph (ii) of this Section 4, shall be irrevocable except as otherwise
set forth herein.
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Notwithstanding anything in the foregoing to the contrary, any retiree who
makes an election under sub-paragraph (B) of paragraph (ii) of this Section
4 shall make such election by the later of -
(A) the 60th day following such retiree's approval to
participate in this Plan as provided under Section 2; or
(B) by the earlier of -
(1) the date six months prior to the first day of
the month following such retiree's termination from employment; or
(2) the December 31 immediately preceding the first
day of the month following such retiree's termination from employment.
Such election under sub-paragraph (B) of paragraph (ii) of this Section 4
shall be made in the manner prescribed by Ashland, from time to time, and
shall be irrevocable as of the applicable time identified under (A) or (B)
of this paragraph (i) of Section 4. Until the time at which such election
becomes irrevocable, an eligible retiree shall be able to change it.
(ii) Optional Forms of Payment.
(A) Lump Sum Option. Notwithstanding any provisions of
Section 3 to the contrary, a retiree in an eligible class may elect to
receive all of the benefit under Section 3 as a lump sum distribution,
subject to the discretion of the Committee as described below. A lump sum
benefit payable under the Plan to a retiree in an eligible class shall be
computed on the basis of the actuarially equivalent present value of such
retiree's benefit under Section 3 of the Plan payable at the particular
time applicable based upon (1) the 1971 Group Annuity Mortality Table for
males, regardless of whether the retiree is male or female and (2) the
average of the monthly published Pension Benefit Guaranty Corporation
("PBGC") interest rates for the six-month period which ends on the January
1 or July 1 which immediately precedes the date as of which this
calculation is made (hereinafter called the "Applicable PBGC Rate"). The
Applicable PBGC Rate is the one used for the valuation of benefits paid as
annuities from terminating single-employer plans for the first 20 years
following the valuation date. Such lump sum shall be payable within thirty
(30) days of the retiree's retirement date, or at such later date as
Ashland or its delegate may determine, in its sole discretion. The
Personnel and Compensation Committee of Ashland's Board of Directors shall
have the sole discretion to provide a lump sum benefit
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option to a class of retirees for a given calendar year. The decision as to
whether to provide a lump sum benefit option shall generally be made by the
Committee at the last committee meeting prior thereto. The option shall be
made available to a retiree contingent upon various considerations,
including, but not limited to, the following:
The tax status of the Company, including without limitation, the
corporate and individual tax rate then applicable and whether or
not the Company has or projects a net operating loss; the current
and projected liquidity of the Company, including cash flow,
capital expenditures and dividends; Company borrowing requirements
and debt leverage; applicable book charges; organizational issues,
including succession issues; security of the retirement payment(s)
with respect to the retiree; and the retiree's preference.
(B) Lump Sum Deferral Option. A retiree who is eligible
to receive a lump sum distribution under sub-paragraph (A) of this
paragraph (ii) of Section 4 and who was part of a select group of
management or a highly compensated employee, shall be able to elect to
defer all or a portion of the receipt of the elected lump sum (in
increments of such percentage or such amount as may be prescribed by
Ashland or its delegatee, from time to time),[as amended by Amendment No. 1
adopted 9/18/97] by having the obligation to distribute such amount
transferred to the Ashland Inc. Deferred Compensation Plan to be held
thereunder in a notional account and paid pursuant to the applicable
provisions of such Plan, as they may be amended from time to time;
provided, however, that the election to defer such distribution shall be
made at the time and in the manner prescribed in paragraph (i) of this
Section 4. [The prior last sentence was deleted by Amendment No. 1 adopted
9/18/97.]
(C) Single Life Annuity. A retiree eligible under Section
2 for the benefit under Section 3 may elect to have such benefit paid in
the form of equal monthly payments for and during such retiree's life, with
such payments ending at such retiree's death. Before such election becomes
irrevocable as provided under paragraph (i) of Section 4, the retiree may
change the option elected, subject to the applicable limitations and
conditions applied to elections for the options described under
sub-paragraphs (A) and (B) of this paragraph (ii) of Section 4. Payments
under this option shall be actuarially equivalent to the benefit provided
5
under Section 3, determined on the basis of the applicable actuarial
assumptions and other relevant provisions used for the same in the Ashland
Pension Plan.
(D) Joint and Survivor Income Option. A retiree eligible
under Section 2 for the benefit under Section 3 may elect to receive an
actuarially reduced benefit payable monthly during the retiree's lifetime
with payments to continue after his death to the person he designates
(hereinafter called "contingent annuitant"), in an amount equal to (1) 100%
of such actuarially reduced benefit, (2) 66 2/3% of such actuarially
reduced benefit, or (3) 50% of such actuarially reduced benefit. Benefit
payments under this option shall terminate with the monthly payment for the
month in which occurred the date of death of the later to die of the
retiree and his contingent annuitant. The following additional limitations
and conditions apply to this option:
(a) The contingent annuitant shall be designated by
the retiree in writing in such form and at such time as Ashland may from
time to time prescribe.
(b) In the event the contingent annuitant dies prior
to the date the election of this optional form of benefit becomes
irrevocable as provided under paragraph (i) of Section 4, the retiree's
selection of this option shall be void. Before the date the election of
this optional form of benefit becomes irrevocable as provided under
paragraph (i) of Section 4, the retiree may change the contingent annuitant
or change the option elected, subject to the applicable limitations and
conditions applied to elections for the options described under
sub-paragraphs (A) and (B) of this paragraph (ii) of Section 4.
(c) In the event of the death of the retiree prior
to the date the election is irrevocable as provided under paragraph (i) of
Section 4, such retiree shall be deemed to have terminated employment on
the day before his death (for reasons other than death) and survived until
the day after the date as of which the benefit he elected under this
sub-paragraph (D) would have commenced.
(d) Actuarial equivalence under this sub-paragraph
(D) shall be determined on the basis of the applicable actuarial
assumptions and other relevant provisions used for the same in the Ashland
Pension Plan.
(E) Period Certain Income Option. A retiree eligible
under Section 2 for the benefit under Section 3 may elect to receive an
actuarially reduced benefit payable monthly during his lifetime and
terminating with the monthly payment for the month in which his death
6
occurs, with the provision that not less than a total of 120 monthly
payments shall be made in any event to him and/or the person designated by
him to receive payments under this sub-paragraph (E) in the event of his
death (hereinafter called "alternate recipient"). Such alternate recipient
shall be designated in writing by the retiree in such form and at such time
as Ashland may from time to time prescribe. If a retiree and his alternate
recipient die after the date as of which payments have commenced but before
the total specified monthly payments have been made to such retiree and/or
his alternate recipient, the commuted value of the remaining unpaid
payments shall be paid in a lump sum to the estate of the later to die of
the retiree or his alternate recipient. The following additional
limitations and conditions shall apply to this option:
(a) A retiree may designate a new alternate
recipient if the one first designated dies before the retiree and after the
date the election of this optional form of benefit became irrevocable under
paragraph (i) of Section 4. In the event the alternate recipient dies prior
to the date the election becomes irrevocable as provided under paragraph
(i) of Section 4, the retiree's selection of this option shall be void.
Before the date the election of this optional form of benefit becomes
irrevocable as provided under paragraph (i) of Section 4, the retiree may
change the alternate recipient or change the option elected, subject to the
applicable limitations and conditions applied to elections for the options
described under sub-paragraphs (A) and (B) of this paragraph (ii) of
Section 4.
(b) In the event of the death of the retiree prior
to the date the election is irrevocable as provided under paragraph (i) of
Section 4, such retiree shall be deemed to have terminated employment on
the day before his death (for reasons other than death) and survived until
the day after the date as of which the benefit he elected under this
sub-paragraph (E) would have commenced.
(c) Actuarial equivalence under this sub-paragraph
(E) shall be determined on the basis of the applicable actuarial
assumptions and other relevant provisions used for the same in the Ashland
Pension Plan.
(F) Death Before Payment. Subject to Section 6, in the
event a retiree eligible under Section 2 for the benefit under Section 3
dies after having made an election of an optional form of payment under
this paragraph (ii) of Section 4 before the date such election became
irrevocable as provided under paragraph (i) of Section 4, such retiree
shall be deemed to have
7
terminated employment on the day before his death (for reasons other than
death) and survived until the day after the date as of which the optional
form of payment he elected would have commenced and payment shall then be
made under the Plan in accordance with such retiree's election.
5. Payment of Small Amounts. Unless such retiree elects to receive
his or her benefit in a lump sum as provided in Section 4, in the event a
monthly benefit under this Plan, payable to either a retiree or to his
contingent annuitant, alternate recipient or surviving spouse, is too small
(in the sole judgment of Ashland) to be paid monthly, such benefit may be
paid quarterly, semi-annually, or annually, as determined by Ashland to be
administratively convenient.
6. Surviving Spouse Benefit. In the event a retiree who was
eligible under Section 2 for the benefit under Section 3 dies, leaving a
surviving spouse, before electing an optional form of payment under
paragraph (ii) of Section 4 and before the date such an election would have
become irrevocable under paragraph (i) of Section 4, then such retiree
shall be deemed to have -
(i) elected the joint and 100% survivor income option under sub-paragraph
(D) of paragraph (ii) of Section 4;
(ii) named his spouse as the 100% contingent annuitant;
(iii) terminated employment on the day before his death (for reasons other
than death); and
(iv) survived until the day after the date as of which such benefit would
have commenced.
7. Costs. In appropriate cases, Ashland may cause an affiliate to
make the payment (or an allocable portion thereof) called for by the Plan
directly to the person eligible to receive such payments.
8. Confidentiality and No Competition. All benefits under the Plan
shall be forfeited by anyone who discloses confidential information to
others outside of Ashland's organization without the prior written consent
of Ashland or who accepts, during a period of five (5) years following his
or her retirement, any employment or consulting activity which is in direct
conflict with the business of Ashland at such time. Such determination
shall be made in the sole discretion of Ashland. A breach of this Section 8
shall result in an immediate forfeiture of benefits payable to any retiree
under the Plan.
8
9. Lost Participant/Beneficiary. In the event Ashland, after
reasonable effort, is unable to locate a person to whom a benefit is
payable under the Plan, such benefit shall be forfeited; provided, however,
that such benefit shall be reinstated (in the same amount and form as that
of the benefit forfeited without any obligation to pay amounts which would
otherwise have previously come due) upon proper claim made by such person
prior to termination of the Plan.
(i) The obligations of Ashland and any affiliate thereof with respect to
benefits under this Plan constitute merely the unsecured promise of Ashland
and/or its affiliates, as the case may be, to make the payments provided
for in this Plan. No property of Ashland or any affiliate is or shall, by
reason of the Plan, be held in trust or be deemed to be held in trust for
any person and any participant or beneficiary under the Plan, the estate of
either of them and any person claiming under or through them shall not
have, by reason of the Plan, any right, title or interest of any kind in or
to any property of Ashland and its affiliates. To the extent any person has
a right to receive payments under the Plan, such right shall be no greater
than the right of any unsecured general creditor of Ashland/ or its
affiliates.
(ii) Ashland shall administer the Plan. Ashland shall have full power and
authority to amend, modify, or terminate the Plan and shall have all powers
and the discretion necessary and convenient to administer the Plan in
accordance with its terms, including, but not limited to, all necessary,
appropriate, discretionary and convenient power and authority to interpret,
administer and apply the provisions of the Plan with respect to all persons
having or claiming to have any rights, benefits, entitlements or
obligations under the Plan. This includes, without limitation, the ability
to construe and interpret provisions of the Plan, make determinations
regarding law and fact, reconcile any inconsistencies between provisions in
the Plan or between provisions of the Plan and any other statement
concerning the Plan, whether oral or written, supply any omissions to the
Plan or any document associated with the Plan, and to correct any defect in
the Plan or in any document associated with the Plan. All such
interpretations of the Plan and documents associated with the Plan and
questions concerning its administration and application, as determined by
Ashland, shall be binding on all persons having an interest under the Plan.
Ashland may delegate (and may give to its delegatee the power and authority
to redelegate) to
9
any person or persons any responsibility, power or duty under the Plan.
Decisions of Ashland or its delegatee shall be final, conclusive, and
binding on all parties.
(iii) Except as expressly allowed pursuant to Sections 3 and 4 of this Plan
in regard to the form of benefit option, no right or interest of any person
entitled to a benefit under the Plan shall be subject to voluntary or
involuntary alienation, assignment, transfer, hypothecation, pledge, or
encumbrance of any kind; provided, however, Ashland or any affiliate may
offset or cause an offset to be made against any payment to be made under
the Plan in regard to amounts due and owing from such person to Ashland or
any affiliate. Notwithstanding anything to the contrary in this paragraph
(iii), legally required tax withholding on benefit payments, the recovery,
by any means, of previously made overpayments of Plan benefits, or the
direct deposit of Plan benefit payments in a bank or similar account,
provided that such direct deposits are allowed by Ashland in the
administration of the Plan and provided that such direct deposit is not
part of an arrangement constituting an assignment or alienation, shall not
be considered to be prohibited under this paragraph (iii).
(iv) No amount paid or payable under the Plan shall be deemed salary or
other compensation to any employee for the purpose of computing benefits to
which such employee or any other person may be entitled under any employee
benefit plan of Ashland or any affiliate.
(v) To the extent that state law shall not have been preempted by ERISA or
any other law of the United States, the Plan shall be governed by the laws
of the Commonwealth of Kentucky.
(vi) The Plan described herein shall amend and supersede, as of September
19, 1996, all provisions in the Ashland Oil, Inc. Nonqualified Pension Plan
as Amended, dated as of November 3, 1988, except as otherwise provided
herein and further excepting that the rights of former employees who
terminated employment, retired, or became disabled prior to the day before
the effective date hereof shall be governed by the terms of the Plan as in
effect at the time of such termination of employment, retirement, or
disability, unless otherwise provided herein.
11. Change in Control. Notwithstanding any provision of this Plan
to the contrary, in the event of a Change in Control (as defined
hereinafter in this Section 11), any employee who would or will meet the
requirements of Section 2, except that such employee has not been approved
to participate as provided under paragraph (ii) of Section 2, shall be
deemed to be approved for participation hereunder, regardless of when such
employee actually retires and
10
commences benefits under an Affected Plan and such entitlement shall be
vested from and after the time of such Change in Control. Ashland shall
reimburse an employee for legal fees and expenses incurred if he or she is
required to, and is successful in, seeking to obtain or enforce any right
to payment pursuant to the Plan after a Change in Control. In the event
that it shall be determined that such employee is properly entitled to the
payment of benefits hereunder, such employee shall also be entitled to
interest thereon payable in an amount equivalent to the prime rate of
interest (quoted by Citibank, N.A. as its prime commercial lending rate on
the latest date practicable prior to the date of the actual commencement of
payments) from the date such payment(s) should have been made to and
including the date it is made. Notwithstanding any provision of this Plan
to the contrary, the Plan may not be amended after a Change in Control
without the written consent of a majority of the Board of Directors of
Ashland (hereinafter "Board") who were directors prior to the Change in
Control. For purposes of this Section 11, a Change of Control shall be
deemed to occur (1) upon the approval of the shareholders of Ashland (or if
such approval is not required, upon approval of the Board) of (A) any
consolidation or merger of Ashland in which Ashland is not the continuing
or surviving corporation or pursuant to which shares of Ashland common
stock would be converted into cash, securities or other property other than
a merger in which the holders of Ashland common stock immediately prior to
the merger will have the same proportionate ownership of common stock of
the surviving corporation immediately after the merger, (B) any sale,
lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of Ashland, or
(C) adoption of any plan or proposal for the liquidation or dissolution of
Ashland, (2) when any "person" (as defined in Section 3(a)(9) or Section
13(d) of the Securities Exchange Act of 1934), other than Ashland or any
subsidiary or employee benefit plan or trust maintained by Ashland or any
of its subsidiaries, shall become the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 15% of the Ashland common stock outstanding at the
time, without the approval of the Board, or (3) if at any time during a
period of two consecutive years, individuals who at the beginning of such
period constituted the Board shall cease for any reason to constitute at
least a majority thereof, unless the election or nomination for election by
Ashland's shareholders of each new director during
11
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.