ASHLAND INC.
DEFERRED COMPENSATION PLAN
(Amended and Restated as of September 18, 1997)
1. PURPOSE
The purpose of this Ashland Inc. Deferred Compensation Plan (the
"Plan"), is to provide eligible key employees of the Company with an
opportunity to defer compensation to be earned by them from the Company as
a means of saving for retirement or other future purposes.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
(a) "Accounting Date" means the Business Day on which a
calculation concerning a Participant's Compensation Account is performed,
or as otherwise defined by the Committee.
(b) "Beneficiary" means the person(s) designated by the
Participant in accordance with Section 12, or if no person(s) is/are so
designated, the estate of a deceased Participant.
(c) "Board" means the Board of Directors of Ashland Inc. or its
designee.
(d) "Business Day" means a day on which the New York Stock
Exchange is open for trading activity.
(e) "Change in Control" shall be deemed to occur (1) upon the
approval of the shareholders of the Company (or if such approval is not
required, upon the approval of the Board) of (A) any consolidation or
merger of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of Common Stock would be
converted into cash, securities or other property other than a merger in
which the holders of Common Stock immediately prior to the merger will have
the same proportionate ownership of Common Stock of the surviving
corporation immediately after the merger, (B) any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of
all or substantially all the assets of the Company, or (C) adoption of any
plan or proposal for the liquidation or dissolution of the Company, (2)
when any "person" (as defined in Section 3(a)(9) or 13(d) of the Exchange
Act), other than Ashland Inc. or any subsidiary or employee benefit plan or
trust maintained by Ashland Inc. or any of its subsidiaries, shall become
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 15% of the Common Stock outstanding at
the time, without the approval of the Board, or (3) if at any time during a
period of two consecutive years, individuals who at the beginning of such
period constituted the Board shall cease for any reason to constitute at
least a majority thereof, unless the election or the nomination for
election by the Company's shareholders of each new director during such
two-year period was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
two-year period.
(f) "Committee" means the Personnel and Compensation Committee of
the Board or its designee.
(g) "Common Stock" means the common stock, $1.00 par value, of
Ashland Inc.
(h) "Common Stock Fund" means that investment option, approved by
the Committee, in which a Participant's Compensation Account may be deemed
to be invested and may earn income based on a hypothetical investment in
Common Stock.
(i) "Company" means Ashland Inc., its divisions, subsidiaries and
affiliates.
(j) "Compensation" means any employee compensation determined by
the Committee to be properly deferrable under the Plan.
(k) "Compensation Account(s)" means the Retirement Account and/or
the In-Service Account(s).
(l) "Corporate Human Resources" means the Corporate Human
Resources Department of the Company.
(m) "Credit Date" means the date on which Compensation would
otherwise have been paid to the Participant or in the case of the
Participant's designation of investment option changes, within three
Business Days after the Participant's designation is received by Corporate
Human Resources, or as otherwise designated by the Committee.
(n) "Deferred Compensation" means the Compensation elected by the
Participant to be deferred pursuant to the Plan.
(o) "Election" means a Participant's delivery of a written notice
of election to Corporate Human Resources electing to defer payment of all
or a portion of his or her Compensation either until retirement,
Termination, death or such other time as further provided by the Committee
or the Company.
(p) "Employee" means a full-time, regular salaried employee (which
term shall be deemed to include officers) of the Company, its present and
future subsidiary corporations as defined in Section 424 of the Internal
Revenue Code of 1986, as amended or its affiliates.
(q) "Excess Payments" means payments made to a Participant
pursuant to the Plan and the Excess Plan.
(r) "Excess Plan" means the Ashland Inc. Nonqualified Excess
Benefit Pension Plan, as it now exists or as it may hereafter be amended.
(s) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(t) "Fair Market Value" means the price of a share of Common
Stock, as reported on the Composite Tape for New York Stock Exchange issues
on the date and at the time designated by the Company.
(u) "Fiscal Year" means that annual period commencing October 1
and ending the following September 30.
(v) "In-Service Account" means the account(s) to which the
Participant's Deferred Compensation is credited and from which, pursuant to
Section 10, distributions are made.
(w) "Participant" means an Employee selected by the Committee to
participate in the Plan and who has elected to defer payment of all or a
portion of his or her Compensation under the Plan.
(x) "Plan" means this Ashland Inc. Deferred Compensation Plan as
it now exists or as it may hereafter be amended.
(y) "Retirement Account" means the account(s) to which the
Participant's Deferred Compensation is credited and from which, pursuant to
Section 10, distributions are made.
(z) "SERP" means the Ninth Amended and Restated Ashland Inc.
Supplemental Early Retirement Plan for Certain Key Executive Employees, as
it now exists or as it may hereafter be amended.
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(aa) "SERP Payments" means payments made to a Participant pursuant
to the Plan and the SERP.
(bb) "Stock Unit(s)" means the share equivalents credited to the
Common Stock Fund of a Participant's Compensation Account pursuant to
Section 6.
(cc) "Termination" means termination of services as an Employee
for any reason other than retirement.
3. SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION
(a) Shares Authorized for Issuance. There shall be reserved for
issuance under the Plan 500,000 shares of Common Stock, subject to
adjustment pursuant to subsection (c) below.
(b) Units Authorized for Credit. The maximum number of Stock Units
that may be credited to Participants' Compensation Accounts under the Plan
is 1,500,000, subject to adjustment pursuant to subsection (c) below.
(c) Adjustments in Certain Events. In the event of any change in
the outstanding Common Stock of the Company by reason of any stock split,
share dividend, recapitalization, merger, consolidation, reorganization,
combination, or exchange or reclassification of shares, split-up,
split-off, spin-off, liquidation or other similar change in capitalization,
or any distribution to common shareholders other than cash dividends, the
number or kind of shares or Stock Units that may be issued or credited
under the Plan shall be automatically adjusted so that the proportionate
interest of the Participants shall be maintained as before the occurrence
of such event. Such adjustment shall be conclusive and binding for all
purposes of the Plan.
4. ELIGIBILITY
The Committee shall have the authority to select from management
and/or highly compensated Employees those Employees who shall be eligible
to participate in the Plan; provided, however, that employees and/or
retirees who have elected to defer an amount into this Plan from another
plan sponsored or maintained by Ashland Inc., the terms of which allowed
such employee or retiree to make such a deferral election into this Plan,
shall be considered to be eligible to participate in this Plan.
5. ADMINISTRATION
Full power and authority to construe, interpret and administer the
Plan shall be vested in the Company and the Committee. This power and
authority includes, but is not limited to, selecting Compensation eligible
for deferral, establishing deferral terms and conditions and adopting
modifications, amendments and procedures as may be deemed necessary,
appropriate or convenient by the Committee. Decisions of the Company and
the Committee shall be final, conclusive and binding upon all parties.
Day-to-day administration of the Plan shall be the responsibility of
Corporate Human Resources.
6. PARTICIPANT ACCOUNTS
Upon election to participate in the Plan, there shall be
established a Retirement Account and/or In-Service Account, as designated
by the Participant to which there shall be credited any Deferred
Compensation, as of each Credit Date. Each such Compensation Account shall
be credited (or debited) on each Accounting Date with income (or loss)
based upon a hypothetical investment in any one or more of the investment
options available under the Plan, as prescribed by the Committee for the
particular compensation credited, which may include a Common Stock Fund, as
elected by the Participant under the terms of Section 9.
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7. FINANCIAL HARDSHIP
Upon the written request of a Participant or a Participant's legal
representative and a finding that continued deferral will result in an
unforeseeable financial emergency to the Participant, the Committee or the
Company (each in its sole discretion) may authorize (a) the payment of all
or a part of a Participant's Compensation Account in a single installment
prior to his or her ceasing to be a Participant, or (b) the acceleration of
payment of any multiple installments thereof. It is intended that the
Committee's determinations as to whether the Participant has suffered an
"unforeseeable financial emergency" shall be made consistent with the
requirements under Section 457(d) of the Internal Revenue Code.
8. ACCELERATED DISTRIBUTION
(a) Availability of Withdrawal Prior to Retirement. The
Participant or the Participant's Beneficiary who is receiving installment
payments under the Plan may elect, in writing, to withdraw all or a portion
of a Participant's Compensation Account at any time prior to the time such
Compensation Account otherwise becomes payable under the Plan, provided the
conditions specified in Sections 8(c), 8(d) and 8(e) hereof are satisfied.
(b) Acceleration of Periodic Distributions. Upon the written
election of the Participant or the Participant's Beneficiary who is
receiving installment payments under the Plan, the Participant or
Participant's Beneficiary may elect to have all or a portion of the
remaining installments distributed in the form of an immediately payable
lump sum, provided the conditions specified in Section 8(c) and 8(e) hereof
are satisfied.
(c) Forfeiture Penalty. In the event of a withdrawal pursuant to
Section 8(a), or an accelerated distribution pursuant to Section 8(b), the
Participant shall forfeit from such Compensation Account an amount equal to
10% of the amount of the withdrawal or accelerated distribution, as the
case may be. The forfeited amount shall be deducted from the Compensation
Account prior to giving effect to the requested withdrawal or acceleration.
Neither the Participant nor the Participant's Beneficiary shall have any
right or claim to the forfeited amount, and the Company shall have no
obligation whatsoever to the Participant, the Participant's Beneficiary or
any other person with regard to the forfeited amount.
(d) Minimum Withdrawal. In no event shall the amount withdrawn in
accordance with Section 8(a) be less than 25% of the amount credited to
such Participant's Compensation Account immediately prior to the
withdrawal.
(e) Suspension from Deferrals. In the event of a withdrawal
pursuant to Section 8(a) or 8(b), a Participant who is otherwise eligible
to make deferrals of Compensation under this Plan shall be prohibited from
making such deferrals with respect to the remainder of the current Fiscal
Year and the Fiscal Year of the Plan immediately following the Fiscal Year
of the Plan during which the withdrawal was made, and any Election
previously made by the Participant with respect to deferrals of
Compensation for such Fiscal Years of the Plan shall be void and of no
effect.
9. MANNER OF ELECTION
(a) General. Any Employee selected by the Committee to participate
in the Plan may elect to do so by delivering to Corporate Human Resources
an Election on a form prescribed by Corporate Human Resources, designating
the Compensation Account to which the Deferred Compensation is to be
credited, electing the timing and form of distribution, and setting forth
the manner in which such Deferred Compensation shall be invested in
accordance with Section 6 hereof. The timing of the filing of the
appropriate form with Corporate Human Resources shall be determined by the
Company or the Committee. An effective election to defer Compensation may
not be revoked or modified except as otherwise determined by the Company or
the Committee or as stated herein. In addition to the provisions contained
in this Plan, any deferrals of SERP Payments or Excess Payments must be in
accordance with the terms of the SERP or the Excess Plan.
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(b) Investment Alternatives -- Existing Balances. A Participant
may elect to change an existing selection as to the investment alternatives
in effect with respect to an existing Compensation Account (in increments
prescribed by the Committee or the Company) as often, and with such
restrictions, as determined by the Committee or by the Company.
(c) Change of Beneficiary. A Participant may, at any time, elect
to change the designation of a Beneficiary in accordance with Section 11
hereof.
10. DISTRIBUTION
(a) Retirement Account. In accordance with the Participant's
Election, Deferred Compensation credited to a Participant's Retirement
Account shall be distributed in cash or shares of Common Stock (or a
combination of both). If no Election is made by a Participant as to the
distribution or form of payment of his or her Retirement Account, upon the
earlier of death or retirement such account shall be paid in cash in lump
sum. The entire Retirement Account must be paid out within forty years
following the date of the earlier of the Participant's death or retirement.
(b) In-Service Account. In accordance with the Participant's
Election and within the guidelines established by the Committee or the
Company, Deferred Compensation credited to a Participant's In-Service
Account shall be distributed in cash. A Participant may make different
Elections with respect to the applicable distribution periods for different
deferral cycles in the In-Service Accounts.
(c) Termination. Notwithstanding the foregoing, in the event of a
Participant's Termination, the Company reserves the right to distribute the
Participant's Compensation Account at such time and in such manner as
deemed appropriate.
(d) Change of Distribution of Compensation Account. A Participant
will be allowed to change the Election as to the distribution of Deferred
Compensation of his or her Retirement Account for all amounts previously
deferred pursuant to such Election, subject to approval by the Committee or
the Company. Such change must be made by the earlier of:
(1) the date six months prior to the first day of the
month following such Participant's retirement; or
(2) the December 31 immediately preceding the first day
of the month following such Participant's retirement.
A Participant may not change the Election as to the distribution
of Deferred Compensation in his or her In-Service Account(s) except as
otherwise set forth in Sections 7 and 8.
11. BENEFICIARY DESIGNATION
A Participant may designate one or more persons (including a
trust) to whom or to which payments are to be made if the Participant dies
before receiving distribution of all amounts due hereunder. A designation
of Beneficiary will be effective only after the signed Election is filed
with Corporate Human Resources while the Participant is alive and will
cancel all designations of Beneficiary signed and filed earlier. If the
Participant fails to designate a Beneficiary as provided above or if all of
a Participant's Beneficiaries predecease him or her and he or she fails to
designate a new Beneficiary, the remaining unpaid amounts shall be paid in
one lump sum to the estate of such Participant. If all Beneficiaries of the
Participant die after the Participant but before complete payment of all
amounts due hereunder, the remaining unpaid amounts shall be paid in one
lump sum to the estate of the last to die of such Beneficiaries.
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12. CHANGE IN CONTROL
Notwithstanding any provision of this Plan to the contrary, in the
event of a Change in Control, each Participant in the Plan shall receive an
automatic lump sum cash distribution of all amounts accrued in the
Participant's Compensation Account not later than fifteen (15) days after
the date of the Change in Control. For this purpose, the balance in the
portion of a Participant's Compensation Account invested in the Common
Stock Fund shall be determined by multiplying the number of Stock Units by
the higher of (a) the highest Fair Market Value on any date within the
period commencing 30 days prior to such Change in Control, or (b) if the
Change in Control of the Company occurs as a result of a tender or exchange
offer or consummation of a corporate transaction, then the highest price
paid per share of Common Stock pursuant thereto. Any consideration other
than cash forming a part or all of the consideration for Common Stock to be
paid pursuant to the applicable transaction shall be valued at the
valuation price thereon determined by the Board.
In addition, the Company shall reimburse a Participant for the
legal fees and expenses incurred if the Participant is required to seek to
obtain or enforce any right to distribution. In the event that it is
determined that such Participant is properly entitled to a cash
distribution hereunder, such Participant shall also be entitled to interest
thereon payable in an amount equivalent to the Prime Rate of Interest
quoted by Citibank, N.A. as its prime commercial lending rate on the
subject date from the date such distribution should have been made to and
including the date it is made. Notwithstanding any provision of this Plan
to the contrary, this Section 12 may not be amended after a Change in
Control occurs without the written consent of a majority in number of
Participants.
13. INALIENABILITY OF BENEFITS
The interests of the Participants and their Beneficiaries under
the Plan may not in any way be voluntarily or involuntarily transferred,
alienated or assigned, nor subject to attachment, execution, garnishment or
other such equitable or legal process. A Participant or Beneficiary cannot
waive the provisions of this Section 13.
14. GOVERNING LAW
The provisions of this plan shall be interpreted and construed in
accordance with the laws of the Commonwealth of Kentucky, except to the
extent preempted by Federal law.
15. AMENDMENTS
The Committee may amend, alter or terminate this Plan at any time
without the prior approval of the Board; provided, however, that the
Committee may not, without approval by the Board and the shareholders:
(a) increase the number of securities that may be issued under the
Plan (except as provided in Section 3(c));
(b) materially modify the requirements as to eligibility for
participation in the Plan; or
(c) otherwise materially increase the benefits accruing to
Participants under the Plan.
16. EFFECTIVE DATE
The Plan was approved by the shareholders of the Company on
January 26, 1995, and originally became effective as of October1, 1994, and
has been restated in this document effective as of September 18, 1997.
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