ASHLAND INC.
                         1997 STOCK INCENTIVE PLAN




SECTION 1. PURPOSE

      The  purpose of the  Ashland  Inc.  1997 Stock  Incentive  Plan is to
  promote the interests of Ashland Inc. and its  shareholders  by providing
  incentives to its  directors,  officers and employees.  Accordingly,  the
  Company may grant to  selected  officers  and  employees  Options,  Stock
  Appreciation Rights, Restricted Stock, Merit Awards and Performance Share
  Awards  in an effort  to  attract  and  retain  in its  employ  qualified
  individuals and to provide such  individuals  with incentives to continue
  service  with  Ashland,  devote  their best  efforts to the  Company  and
  improve Ashland's economic  performance,  thus enhancing the value of the
  Company  for the  benefit  of  shareholders.  The Plan also  provides  an
  incentive for qualified persons, who are not officers or employees of the
  Company,  to  serve on the  Board  of  Directors  of the  Company  and to
  continue to work for the best  interests of the Company by rewarding such
  persons  with  automatic  grants  of  Restricted  Stock  of the  Company.
  Options,  Stock Appreciation  Rights, Merit Awards and Performance Shares
  may not be granted to such Outside Directors under the Plan.





SECTION 2. DEFINITIONS

      (A)  "Agreement"  shall mean a written  agreement  setting  forth the
  terms of an Award, to be entered into at the Company's discretion.

      (B)  "Ashland"  shall  mean,  collectively,   Ashland  Inc.  and  its
  Subsidiaries.

      (C)  "Award"  shall mean an Option,  a Stock  Appreciation  Right,  a
  Restricted  Stock Award, a Merit Award, or a Performance  Share Award, in
  each case granted under this Plan.

      (D) "Ashland  Inc.  1993 Plan" shall mean the Ashland Inc. 1993 Stock
  Incentive Plan, as it now exists or as it may hereafter be amended.

      (E)  "Beneficiary"  shall mean the person,  persons,  trust or trusts
  designated by an Employee or Outside  Director or if no  designation  has
  been made, the person,  persons, trust, or trusts entitled by will or the
  laws of descent and distribution to receive the benefits  specified under
  this Plan in the event of an Employee's or Outside Director's death.

      (F) "Board" shall mean the Board of Directors of the Company.

      (G) "Change in Control" shall be deemed to occur (1) upon approval of
  the  shareholders  of Ashland (or if such approval is not required,  upon
  the approval of the Board) of (A) any  consolidation or merger of Ashland
  in which  Ashland  is not the  continuing  or  surviving  corporation  or
  pursuant to which shares of Common  Stock would be  converted  into cash,
  securities or other  property other than a merger in which the holders of
  Common  Stock  immediately  prior  to  the  merger  will  have  the  same
  proportionate  ownership  of Common  Stock of the  surviving  corporation
  immediately  after the merger,  (B) any sale, lease,  exchange,  or other
  transfer (in one transaction or a series of related  transactions) of all
  or substantially  all the assets of Ashland,  or (C) adoption of any plan
  or proposal for the  liquidation or dissolution of Ashland,  (2) when any
  "person" (as defined in Section  3(a)(9) or 13(d) of the  Exchange  Act),
  other than Ashland or any  Subsidiary  or employee  benefit plan or trust
  maintained by Ashland, shall become the "beneficial owner" (as defined in
  Rule 13d-3 under the Exchange Act), directly or indirectly,  of more than
  15% of  Ashland's  Common  Stock  outstanding  at the time,  without  the
  approval  of the  Board,  or  (3) at any  time  during  a  period  of two
  consecutive  years,  individuals  who at the  beginning  of  such  period
  constituted the Board shall cease for any reason to constitute at least a
  majority  thereof,  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.

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      (H) "Code" shall mean the Internal  Revenue Code of 1986,  as amended
  from time to time.

      (I) "Committee"  shall mean the Personnel and Compensation  Committee
  of the  Board,  as  from  time  to  time  constituted,  or any  successor
  committee of the Board with  similar  functions,  which shall  consist of
  three or more members,  each of whom shall be a Non-Employee Director and
  an "outside  director" as defined in the regulations issued under Section
  162(m) of the Code.

      (J) "Common  Stock" shall mean the Common Stock of the Company ($1.00
  par value), subject to adjustment pursuant to Section 13.

      (K)  "Company"  shall  mean,  collectively,   Ashland  Inc.  and  its
  Subsidiaries.

      (L) "Employee" shall mean a regular,  full-time or part-time employee
  of Ashland as  selected  by the  Committee  to receive an award under the
  Plan.

      (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
  amended.

      (N) "Exercise Price" shall mean, with respect to each share of Common
  Stock  subject to an Option,  the price fixed by the  Committee  at which
  such share may be purchased from the Company  pursuant to the exercise of
  such  Option,  which  price at no time may be less  than 100% of the Fair
  Market Value of the Common Stock on the date the Option is granted.

      (O) "Fair  Market  Value" shall mean the price of the Common Stock as
  reported on the Composite Tape of the New York Stock Exchange on the date
  and at the time  selected by the Company or as otherwise  provided in the
  Plan.

      (P)  "Incentive  Stock  Option" or "ISO" shall mean an Option that is
  intended by the Committee to meet the  requirements of Section 422 of the
  Code or any successor provision.

      (Q) "Merit Award" shall mean an award of Common Stock issued pursuant
  to Section 9 of the Plan.

      (R) "Non-Employee Director" shall mean a non-employee director within
  the  meaning  of  applicable  regulatory  requirements,  including  those
  promulgated under Section 16 of the Exchange Act.

      (S)  "Nonqualified  Stock  Option"  or  "NQSO"  shall  mean an Option
  granted  pursuant  to this Plan  which does not  qualify as an  Incentive
  Stock Option.

      (T) "Option" shall mean the right to purchase Common Stock at a price
  to be  specified  and upon terms to be  designated  by the  Committee  or
  otherwise determined pursuant to this Plan. An Option shall be designated
  by the  Committee as a  Nonqualified  Stock Option or an Incentive  Stock
  Option.

      (U)  "Outside  Director"  shall mean a director of the Company who is
  not also an Employee of the Company.

      (V) "Performance Goals" means performance goals as may be established
  in writing by the Committee which may be based on earnings,  stock price,
  return on equity,  return on  investment,  total return to  shareholders,
  economic  value  added,   debt  rating  or  achievement  of  business  or
  operational goals, such as drilling or exploration  targets or profit per
  barrel.  Such goals may be absolute in their terms or measured against or
  in relation to other  companies  comparably or otherwise  situated.  Such
  performance  goals may be  particular  to an  Employee  or the  division,
  department,  branch, line of business,  subsidiary or other unit in which
  the  Employee  works  and/or may be based on the  performance  of Ashland
  generally.

      (W)  "Performance  Period"  shall mean the period  designated  by the
  Committee during which the performance objectives shall be measured.

      (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.

<PAGE>
      (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.

<PAGE>

SECTION 4. ADMINISTRATION

      The Plan shall be administered by the Committee.  The Committee shall
  have no authority  regarding the granting of Restricted  Stock to Outside
  Directors, as such grants are fixed pursuant to subsection (B) of Section
  8 of the Plan.

      In addition  to any  implied  powers and duties that may be needed to
  carry out the  provisions of the Plan,  the Committee  shall have all the
  powers  vested  in it by the  terms  of  the  Plan,  including  exclusive
  authority  (except as to Awards of  Restricted  Stock  granted to Outside
  Directors) to select the  Employees to be granted  Awards under the Plan,
  to  determine  the type,  size and terms of the Awards to be made to each
  Employee selected, to determine the time when Awards will be granted, and
  to prescribe the form of the Agreements  embodying  Awards made under the
  Plan. Subject to the provisions of the Plan specifically governing Awards
  of  Restricted  Stock  granted  or to be  granted  to  Outside  Directors
  pursuant to subsection  (B) of Section 8 herein,  the Committee  shall be
  authorized to interpret  the Plan and the Awards  granted under the Plan,
  to establish, amend and rescind any rules and regulations relating to the
  Plan,  to make any other  determinations  which it believes  necessary or
  advisable for the  administration  of the Plan, and to correct any defect
  or supply any omission or reconcile any  inconsistency  in the Plan or in
  any Award in the manner and to the extent the Committee  deems  desirable
  to  carry  it  into  effect.   Any  decision  of  the  Committee  in  the
  administration  of the  Plan,  as  described  herein,  shall be final and
  conclusive.

      The  Committee  may  act  only  by a  majority  of its  members.  Any
  determination  of the  Committee  may be  made,  without  notice,  by the
  written  consent of the  majority  of the  members of the  Committee.  In
  addition,  the Committee may authorize any one or more of their number or
  any officer of the Company to execute and deliver  documents on behalf of
  the Committee.  No member of the Committee shall be liable for any action
  taken or omitted to be taken by him or her or by any other  member of the
  Committee in connection with the Plan,  except for his or her own willful
  misconduct or as expressly provided by statute.

      The  provisions of this Section 4 with respect to decisions  made by,
  and  authority of, the  Committee  shall be subject to the  provisions of
  subsection (B) of Section 8 herein.





SECTION 5. ELIGIBILITY

      Awards may only be granted (i) to  individuals  who are  Employees of
  Ashland, and (ii) as expressly provided in subsection (B) of Section 8 of
  the Plan,  to  individuals  who are duly  elected  Outside  Directors  of
  Ashland.





SECTION 6. OPTIONS

  A. Designation and Price.

          (a) Any  Option  granted  under  the  Plan may be  granted  as an
      Incentive Stock Option or as a Nonqualified  Stock Option as shall be
      designated  by the Committee at the time of the grant of such Option.
      Each Option shall,  at the  discretion of the Company and as directed
      by the Committee,  be evidenced by an Agreement between the recipient
      and the Company, which Agreement shall specify the designation of the
      Option as an ISO or a NQSO,  as the case may be,  and  shall  contain
      such terms and conditions as the Committee,  in its sole  discretion,
      may determine in accordance with the Plan.

          (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.

<PAGE>
  B. Exercise.

          The Committee may, in its discretion, provide for Options granted
      under  the Plan to be  exercisable  in  whole  or in part;  provided,
      however,  that no  Option  shall be  exercisable  prior to the  first
      anniversary  of the date of its grant,  except as provided in Section
      11 or as the Committee  otherwise  determines in accordance  with the
      Plan, and in no case may an Option be exercised at any time for fewer
      than 50 shares (or the total  remaining  shares covered by the Option
      if fewer than 50 shares) during the term of the Option. The specified
      number of shares will be issued upon receipt by Ashland of (i) notice
      from the  holder  thereof  of the  exercise  of an  Option,  and (ii)
      payment to Ashland (as  provided in this  Section 6,  subsection  (C)
      below),  of the Exercise  Price for the number of shares with respect
      to which the Option is exercised.  Each such notice and payment shall
      be delivered or mailed by postpaid  mail,  addressed to the Treasurer
      of Ashland at Ashland Inc.,  1000 Ashland  Drive,  Russell,  Kentucky
      41169,  or such other place or person as Ashland may  designate  from
      time to time.

  C. Payment for Shares.

          Except as  otherwise  provided  in this  Section 6, the  Exercise
      Price for the Common  Stock  shall be paid in full when the Option is
      exercised.  Subject to such rules as the  Committee  may impose,  the
      Exercise  Price may be paid in whole or in part (i) in cash,  (ii) in
      whole shares of Common  Stock owned by the Employee and  evidenced by
      negotiable  certificates,  valued at their Fair Market  Value  (which
      shares of Common  Stock  must have  been  owned by the  Employee  six
      months or longer,  and not used to effect an Option  exercise  within
      the preceding six months, unless the Committee  specifically provides
      otherwise),  (iii)  by  Attestation,  (iv) by a  combination  of such
      methods  of  payment,  or (v) by such  other  consideration  as shall
      constitute lawful  consideration for the issuance of Common Stock and
      be  approved  by  the  Committee   (including,   without  limitation,
      effecting  a  "cashless  exercise,"  with a broker,  of the  Option).
      "Attestation"   means  the   delivery   to  Ashland  of  a  completed
      Attestation Form prescribed by Ashland setting forth the whole shares
      of Common  Stock owned by the Employee  which the Employee  wishes to
      utilize to pay the  Exercise  Price.  The Common  Stock listed on the
      Attestation  Form must have been owned by the  Employee six months or
      longer,  and not have been used to effect an Option  exercise  within
      the preceding six months, unless the Committee  specifically provides
      otherwise. A "cashless exercise" of an option is a procedure by which
      a broker  provides  the  funds to an  Employee  to  effect  an option
      exercise.  At the direction of the  Employee,  the broker will either
      (i) sell all of the shares  received when the option is exercised and
      pay the Employee the proceeds of the sale (minus the option  exercise
      price, withholding taxes and any fees due to the broker) or (ii) sell
      enough of the shares  received  upon  exercise of the option to cover
      the exercise price, withholding taxes and any fees due the broker and
      deliver to the  Employee  (either  directly or through the Company) a
      stock certificate for the remaining shares.  Dispositions to a broker
      effecting a cashless  exercise are not exempt under Section 16 of the
      Exchange Act.





SECTION 7. STOCK APPRECIATION RIGHTS

      The Committee  may grant Stock  Appreciation  Rights  pursuant to the
  provisions  of this Section 7 to any holder of any Option  granted  under
  the Plan with  respect to all or a portion  of the shares  subject to the
  related Option. An SAR may only be granted concurrently with the grant of
  the related  Option.  Subject to the terms and provisions of this Section
  7,  each SAR shall be  exercisable  only at the same time and to the same
  extent  the  related  Option  is  exercisable  and in no event  after the
  termination of the 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 


<PAGE>
  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,  (i)  each  Outside  Director  who was
  granted an award of  restricted  stock under the Ashland  Inc.  1993 Plan
  shall be granted an Award of 1,000  shares of  Restricted  Stock upon the
  fifth  anniversary  of his or her prior award under the Ashland Inc. 1993
  Plan;  and (ii) each person who is hereafter duly appointed or elected as
  an Outside  Director  and who does not receive an award under the Ashland
  Inc.  1993 Plan  shall be  granted,  effective  on the date of his or her
  appointment  or  election  to the  Board,  an Award of  1,000  shares  of
  Restricted  Stock;  provided,  however,  that no Outside  Director  shall
  receive an award of Restricted  Stock under this Plan if such award would
  be in  addition to a  simultaneous  award of 1,000  shares of  Restricted
  Stock under the Ashland Inc. 1993 Plan. All Awards under this  subsection
  (B) are subject to the limitation on the number of shares of Common Stock
  available pursuant to Section 3 and to the terms and conditions set forth
  in this subsection (B) and subsection (C) below.

      As a condition to any Award  hereunder,  the Outside  Director may be
  required to pay to the Company a  non-refundable  amount equal to the par
  value of the shares of  Restricted  Stock awarded to him or her. Upon the
  granting of the Restricted  Stock Award,  such Outside  Director shall be
  entitled  to all rights  incident  to  ownership  of Common  Stock of the
  Company with respect to his or her Restricted Stock,  including,  but not
  limited  to,  the right to vote such  

<PAGE>
  shares of Restricted Stock and to receive  dividends thereon when, as and
  if paid; provided, however, that, subject to subsection (C) hereof, in no
  case may any shares of Restricted Stock granted to an Outside Director be
  sold, assigned, transferred,  pledged, or otherwise encumbered during the
  Restricted Period which shall not lapse until the earlier to occur of the
  following:  (i)  retirement  from the Board at age 70,  (ii) the death or
  disability of such Outside Director, (iii) a 50% change in the beneficial
  ownership of the Company as defined in Rule 13d-3 under the Exchange Act,
  or (iv)  voluntary  early  retirement to take a position in  governmental
  service.  Unless otherwise  determined and directed by the Committee,  in
  the case of voluntary  resignation or other  termination of service of an
  Outside  Director prior to the occurrence of any of the events  described
  in the preceding  sentence,  any grant of Restricted Stock made to him or
  her  pursuant to this  subsection  (B) will be  forfeited by such Outside
  Director.  As used herein, a director shall be deemed  "disabled" when he
  or she is unable to attend to his or her duties and responsibilities as a
  member of the Board  because  of  incapacity  due to  physical  or mental
  illness.

  C. Transferability

      Subject to subsection (B) of Section 15 hereof,  Restricted Stock may
  not be sold,  assigned,  transferred,  pledged,  or otherwise  encumbered
  during a Restricted  Period,  which,  in the case of Employees,  shall be
  determined  by the  Committee  and,  unless  otherwise  determined by the
  Committee,  shall not be less than one year from the date such Restricted
  Stock  was  awarded,  and,  in the case of  Outside  Directors,  shall be
  determined  in  accordance  with  subsection  (B) of this  Section 8. The
  Committee may, at any time,  reduce the Restricted Period with respect to
  any  outstanding  shares of  Restricted  Stock  awarded under the Plan to
  Employees,  but,  unless  otherwise  determined  by the  Committee,  such
  Restricted Period shall not be less than one year.

      During  the  Restricted   Period,   certificates   representing   the
  Restricted  Stock and any Retained  Distributions  shall be registered in
  the  recipient's  name and bear a  restrictive  legend to the effect that
  ownership of such Restricted Stock (and any such Retained Distributions),
  and the  enjoyment of all rights  appurtenant  thereto are subject to the
  restrictions,  terms,  and  conditions  provided  in  the  Plan  and  the
  applicable Agreement, if any. Such certificates shall be deposited by the
  recipient  with  the  Company,   together  with  stock  powers  or  other
  instruments  of  assignment,  each  endorsed in blank,  which will permit
  transfer to the Company of all or any portion of the Restricted Stock and
  any  securities   constituting  Retained  Distributions  which  shall  be
  forfeited in accordance  with the Plan and the applicable  Agreement,  if
  any.  Restricted Stock shall constitute issued and outstanding  shares of
  Common Stock for all  corporate  purposes.  The  recipient  will have the
  right to vote such  Restricted  Stock,  to receive and retain all regular
  cash dividends,  and to exercise all other rights, powers, and privileges
  of a holder of 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.


<PAGE>

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 

<PAGE>
  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 

<PAGE>
  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 January30, 2002. The
  Board or the  Committee  may at any time  terminate,  modify or amend the
  Plan in such respects as it shall deem advisable; provided, however, that
  the Board or the Committee may not,  without approval by the holders of a
  majority  of the  outstanding  shares of stock  present and voting at any
  annual or special meeting of shareholders of Ashland change the manner of
  determining the minimum  Exercise Price of Options,  other than to change
  the manner of  determining  the Fair Market  Value of the Common Stock as
  set forth in Section 2.





SECTION 15. MISCELLANEOUS PROVISIONS

      (A) Except as to Awards to Outside  Directors,  no  Employee or other
  person  shall have any claim or right to be  granted  an Award  under the
  Plan.

      (B) An Employee's or Outside Director's rights and interest under the
  Plan may not be  assigned  or  transferred  in  whole or in part,  either
  directly or by operation  of law or otherwise  (except in the event of an
  Employee's or Outside  Director's  death,  by will or the laws of descent
  and distribution),  including,  but not by way of limitation,  execution,
  levy, garnishment, attachment, pledge, bankruptcy or in any other manner,
  and no such right or interest of any Employee or Outside  Director in the
  Plan shall be subject to any obligation or liability of such  individual;
  provided,  however,  that an Employee's or Outside  Director's rights and
  interest  under the Plan may,  subject to the discretion and direction of
  the Committee,  be made transferable by such Employee or Outside Director
  during his or her lifetime.  Except as specified in Section 8, the holder
  of an Award  shall  have none of the  rights of a  shareholder  until the
  shares  subject  thereto  shall have been  registered  in the name of the
  person  receiving  or  person  or  persons  exercising  the  Award on the
  transfer books of the Company.

      (C) No Common Stock shall be issued  hereunder unless counsel for the
  Company shall be satisfied that such issuance will be in compliance  with
  applicable Federal, state, and other securities laws.

      (D) The expenses of the Plan shall be borne by the Company.

      (E) By accepting any Award under the Plan,  each Employee and Outside
  Director and each Personal  Representative or Beneficiary  claiming under
  or through him or her shall be conclusively  deemed to have indicated his
  or her acceptance and  ratification  of, and consent to, any action taken
  under the Plan by the Company, the Board or the Committee.

      (F) Awards granted under the Plan shall be binding upon Ashland,  its
  successors,  and  assigns.  
<PAGE>

      (G) The  appropriate  officers of the Company shall cause to be filed
  any reports,  returns, or other information regarding Awards hereunder or
  any Common  Stock issued  pursuant  hereto as may be required by Sections
  13, 15(d) or 16(a) of the Exchange Act, or any other applicable  statute,
  rule, or regulation.

      (H)  Nothing  contained  in this  Plan  shall  prevent  the  Board of
  Directors  from adopting other or additional  compensation  arrangements,
  subject to shareholder approval if such approval is required.

      (I) Each  Employee  shall be deemed to have been granted any Award on
  the date the Committee  took action to grant such Award under the Plan or
  such later date as the Committee in its sole  discretion  shall determine
  at the time such grant is authorized.





SECTION 16. EFFECTIVENESS OF THE PLAN

      The Plan shall be  submitted to the  shareholders  of the Company for
  their  approval and adoption on January 30, 1997 or such other date fixed
  for the next meeting of  shareholders  or any adjournment or postponement
  thereof.  The Plan  shall  not be  effective  and no Award  shall be made
  hereunder unless and until the Plan has been so approved and adopted at a
  meeting of the Company's shareholders.





SECTION 17. GOVERNING LAW

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