EXHIBIT 10.17
 
 
ASHLAND INC.
1997 STOCK INCENTIVE PLAN
(Amended as of November 7, 2002)
 
 
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 an
automatic grant of Restricted Stock of the Company upon being appointed or
elected to the Company’s Board of Directors.  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) “Beneficiary” shall mean the person, persons, trust or trusts designated by
an Employee or Outside Director or if no designation has been made, the person,
persons, trust, or trusts entitled by will or the laws of descent and
distribution to receive the benefits specified under this Plan in the event of
an Employee's or Outside Director's death.
 
(E) “Board” shall mean the Board of Directors of the Company or its designee.
 
(F) “Change in Control” shall be deemed to occur (1) upon approval of the
shareholders of Ashland (or if such approval is not required, upon the approval
of the Board) of (A) any consolidation or merger of Ashland, other than a
consolidation or merger of Ashland into or with a direct or indirect
wholly-owned subsidiary, 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, provided, however, that no sale, lease, exchange or other transfer of
all or substantially all the assets of Ashland shall be deemed to occur unless
assets constituting 80% of the total assets of Ashland are transferred pursuant
to such sale, lease, exchange or other transfer, or (C) adoption of any plan or
proposal for the liquidation or dissolution of Ashland, (2) when any “person”
(as defined in Section 3(a)(9) or 13(d) of the Exchange Act), other than Ashland
or any Subsidiary or employee benefit plan or trust maintained by Ashland, shall
become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 15% of Ashland's Common Stock outstanding
at the time, without the approval of the Board, or (3) at any time during a
period of two consecutive years, individuals who at the beginning of such period
constituted the Board shall cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by
Ashland's shareholders of each new director during such two-year period was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such two-year period.  Notwithstanding
the foregoing, any transaction, or series of transactions, that shall result in
the disposition of Ashland’s interest in Marathon Ashland Petroleum LLC,
including without limitation any transaction arising out of that certain
Put/Call, Registration Rights and Standstill Agreement dated January 1, 1998
among Marathon Oil Company, USX Corporation, Ashland and
 
Marathon Ashland Petroleum LLC, as amended from time to time, shall not be
deemed to constitute a Change in Control.
 
(G) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.
 
(H) “Committee” shall mean the Personnel and Compensation Committee of the
Board, as from time to time constituted, or any successor committee of the Board
with similar functions, which shall consist of three or more members, each of
whom shall be a Non-Employee Director and an “outside director” as defined in
the regulations issued under Section 162(m) of the Code or its designee.
 
(I) “Committee on Directors” shall mean the Committee on Directors of the Board,
as from time to time constituted, or any successor committee of the Board with
similar functions.
 
(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.
 
(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 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
 
Except as provided in subsection (B) of Section 8 herein, the Plan shall be
administered by the Committee.
 
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 (or, in the case of subsection (B) of Section 8 herein, the
Committee on Directors) may act only by a majority of its members.  Any
determination of the Committee or the Committee on Directors may be made,
without notice, by the written consent of the majority of the members of the
Committee or the Committee on Directors.  In addition, the Committee or the
Committee on Directors 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 or the Committee on Directors.  No member of the Committee or the
Committee on Directors shall be liable for any action taken or omitted to be
taken by him or her or by any other member of the Committee or the Committee on
Directors in connection with the Plan, except for his or her own willful
misconduct or as expressly provided by statute.
 
 

 
 
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.

 
(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., 500 Diederich Boulevard, 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 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.
 
B. Awards to Outside Directors

 
During the term of the Plan, each person who is duly appointed or elected as an
Outside Director shall be granted, effective on the date of his or her
appointment or election to the Board, an Award of 1,000 shares of Restricted
Stock.  All Awards under this subsection (B) are subject to the limitation on
the number of shares of Common Stock available pursuant to Section 3 and to the
terms and conditions set forth in this subsection (B) and subsection (C) below.
 
As a condition to any Award hereunder, the Outside Director 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 72, (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 on Directors, 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 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 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 (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, the
Committee, or the Committee on Directors may at any time terminate, modify or
amend the Plan in such respects as it shall deem advisable; provided, however,
that the Board 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 an Award of 1,000 Restricted Shares to an Outside Director upon
being appointed or elected to the Company’s Board of 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 or, in the case of an Outside Director, the Committee on
Directors, 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, the Committee or the Committee on Directors.
 
(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 was submitted to the shareholders of the Company for their approval and
adoption on January 30, 1997 and was approved by the shareholders on that date.
 
 

 
 
Section 17. Governing Law
 
The provisions of this Plan shall be interpreted and construed in accordance
with the laws of the Commonwealth of Kentucky.