As Effective March 19, 1998



                                  BY-LAWS
                                     OF
                                ASHLAND INC.

                                 ARTICLE I

                                  OFFICES

      SECTION  1.  Registered   Office.   The  registered   office  of  the
Corporation in the Commonwealth of Kentucky shall be at Ashland Drive, City
of Russell,  Greenup  County.  The names of the  registered  agents located
thereat  shall be designated by the Board from time to time by a resolution
adopted by a majority of the Board.
     SECTION 2. Other  Offices.  The  Corporation  may also have offices at
other places either within or without the Commonwealth of Kentucky.


                                 ARTICLE II

                          MEETINGS OF SHAREHOLDERS

     SECTION 1. Annual Meetings. The annual meeting of the shareholders for
the election of directors and for the transaction of such other business as
may properly come before the meeting shall be held at the principal  office
of the Corporation on the last Thursday of January,  annually,  at the hour
of ten  thirty  a.m.,  or at  such  other  place  (within  or  without  the
Commonwealth  of  Kentucky),  date and hour as shall be  designated  in the
notice thereof.
     SECTION 2. Annual Meeting  Business.  To be properly brought before an
annual meeting, business must be (i) specified in the notice of the meeting
(or any  supplement  thereto)  given by or at the direction of the Board of
Directors,  (ii) otherwise properly brought before the meeting by or at the
direction  of the Board of Directors or (iii)  otherwise  properly  brought
before the meeting by a  shareholder.  For business to be properly  brought
before an annual meeting by a shareholder,  the shareholder must have given
written  notice  thereof,  either by personal  delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation,  not later than
90 days in advance of such meeting  (provided that if the annual meeting of
shareholders is held earlier than the last Thursday in January, such notice
must be given within 10 days after the first public  disclosure,  which may
include any public filing with the Securities and Exchange  Commission,  of
the date of the annual meeting). Any such notice shall set forth as to each
matter the  shareholder  proposes to bring before the annual  meeting (i) a
brief  description of the business desired to be brought before the meeting
and the  reasons  for  conducting  such  business at the meeting and in the
event that such  business  includes a proposal  to amend  either the Second
Restated  Articles  of  Incorporation  or By-laws of the  Corporation,  the
language  of the  proposed  amendment,  (ii) the name  and  address  of the
shareholder  proposing  such  business,  (iii) a  representation  that  the
shareholder is a holder of record of stock of the  corporation  entitled to
vote at such  meeting  and  intends  to appear in person or by proxy at the
meeting  to  propose  such  business,  (iv) any  material  interest  of the
shareholder in such business, and (v) a representation as to whether or not
the  shareholder  will  solicit  proxies  in support  of his  proposal.  No
business shall be conducted at an annual meeting of shareholders  except in
accordance  with this  paragraph and the chairman of any annual  meeting of
shareholders  may refuse to permit  any  business  to be brought  before an
annual  meeting which fails to comply with the foregoing  procedures or, in
the case of a shareholder proposal, if the shareholder fails to comply with
the representations set forth in the notice.
      SECTION 3. Special  Meetings.  A special meeting of the  shareholders
may be called by the Board of  Directors,  the  Chairman of the Board,  any
Vice  Chairman  of the Board or the  President,  at such  place  (within or
without the Commonwealth of Kentucky), date and hour as shall be designated
in the notice  thereof.  The Secretary  shall call a special meeting of the
shareholders,  to be held on such date as the Secretary shall determine, on
the  request in writing  of the  holders of shares of capital  stock of the
Corporation  entitled to vote at such meeting which represent  one-third or
more of the total votes  entitled to be cast at such meeting.  Such request
shall set forth:  (i) the action  proposed to be taken at such  meeting and
the  reasons  for the  action;  (ii) the name and  address  of each of such
holders who  intends to propose  action be taken at such  meeting;  (iii) a
representation  that each is a holder of record of stock of the Corporation
entitled  to vote at such  meeting  and  intends  to appear in person or by
proxy at such meeting to propose the action specified in the request;  (iv)
any material  interest of any  shareholder  in such action;  and (v) in the
event that any proposed  action consists of or includes a proposal to amend
either the Second Restated  Articles of Incorporation or the By-laws of the
Corporation,  the language of the proposed  amendment.  The  Secretary  may
refuse to call a special  meeting  unless the request is made in compliance
with the foregoing procedure.
      SECTION 4. Notice of Meetings. Except as otherwise expressly required
by law, notice of each meeting of the shareholders  shall be given not less
than ten nor more than  sixty days  before the date of the  meeting to each
shareholder  entitled  to vote at such  meeting  by  mailing  such  notice,
postage  prepaid,  directed to the shareholder at his address as it appears
on the records of the Corporation. Every such notice shall state the place,
date and hour of the  meeting  and, in the case of a special  meeting,  the
purpose or purposes  for which the meeting is called.  Except as  otherwise
expressly  required  by  law,  notice  of  any  adjourned  meeting  of  the
shareholders  need not be given if the  date,  time and place  thereof  are
announced  at the  meeting at which the  adjournment  is taken,  unless the
adjournment is for more than 120 days or after the adjournment a new record
date is fixed for the adjourned meeting.
      SECTION  5.  Record  of  Shareholders.  It  shall  be the duty of the
officer  or agent of the  Corporation  who shall  have  charge of its stock
transfer  books to prepare and make a complete  record of the  shareholders
entitled to vote at any meeting of  shareholders  or  adjournment  thereof,
arranged by voting group (and within each voting group by class or series),
and  showing  the  address  of each  shareholder  and the  number of shares
registered in the name of each  shareholder.  Such record shall be produced
at the time and place of the meeting and shall be open to the inspection of
any shareholder entitled to vote at such meeting or any adjournment thereof
during  the whole  time of such  meeting or  adjournment  for the  purposes
thereof.
      SECTION 6. Quorum. At each meeting of the shareholders or adjournment
thereof,  except as otherwise  expressly  required by law, these By-laws or
the Second  Restated  Articles  of  Incorporation,  shareholders  holding a
majority  of the  shares of the  Corporation  issued  and  outstanding  and
entitled  to be voted  thereat  shall be  present  in person or by proxy to
constitute  a quorum for the  transaction  of  business.  The  shareholders
present at a duly  organized  meeting can  continue  to do  business  until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum.
     SECTION 7. Organization.  At each meeting of the shareholders,  one of
the following shall act as chairman of the meeting and preside thereat,  in
the following order of precedence:
      (a) the Chairman of the Board;
     (b) a Vice  Chairman  of the  Board in order of rank of  seniority  in
      office;  (c)  the  President;   or  (d)  any  other  officer  of  the
      Corporation designated by the Board or the
Executive  Committee  to act as  chairman  of such  meeting  and to preside
thereat if the Chairman of the Board,  each Vice  Chairman of the Board and
the President shall be absent from such meeting.
      The Secretary or, if he shall be absent from such meeting, the person
(who  shall  be the  Deputy  Secretary  or an  Assistant  Secretary  of the
Corporation,  if one of such  officers  shall be present  thereat) whom the
chairman of such  meeting  shall  appoint,  shall act as  secretary of such
meeting and keep the minutes thereof.
      SECTION 8. Order of  Business.  The order of business at each meeting
of the  shareholders  shall be  determined by the chairman of such meeting,
but such order of business may be changed by a majority in voting  interest
of those present in person or by proxy at such meeting and entitled to vote
thereat.
      SECTION 9.  Voting.  Except as otherwise  expressly  required by law,
these  By-laws,  or the Second  Restated  Articles of  Incorporation,  each
shareholder  entitled to vote shall,  at each meeting of the  shareholders,
have one  vote  (except  that at each  election  for  directors  each  such
shareholder  shall have the right to cast as many votes in the aggregate as
he  shall be  entitled  to vote  under  the  Second  Restated  Articles  of
Incorporation  multiplied  by the number of directors to be elected at such
election;  and each  shareholder may cast the whole number of votes for one
candidate,  or  distribute  such votes  among two or more  candidates),  in
person  or by  proxy,  for each  share of the  Corporation  held by him and
registered in his name on the books of the Corporation:
      (a) on the date  fixed  pursuant  to the  provisions  of Section 6 of
Article VIII of these By-laws as the record date for the  determination  of
shareholders who shall be entitled to receive notice of and to vote at such
meeting, or
      (b) if no record date shall have been so fixed,  then at the close of
business on the day on which notice of such meeting shall be given.
      Shares  of the  Corporation's  stock  belonging  to a  majority-owned
subsidiary of the Corporation shall not be counted in determining the total
number of  outstanding  shares and shall  neither be  entitled  to vote nor
counted for quorum  purposes.  Any vote of shares of the Corporation may be
given at any  meeting  of the  shareholders  by the  shareholders  entitled
thereto in person or by proxy  appointed by an instrument in writing by the
shareholder or his duly authorized attorney-in-fact.  The attendance at any
meeting of a shareholder who may  theretofore  have given a proxy shall not
have the effect of  revoking  the same unless he shall in writing so notify
the Secretary.
      At all meetings of the shareholders each matter,  except as otherwise
expressly required by law, these By-laws or the Second Restated Articles of
Incorporation,  shall be approved if the votes cast in favor of such matter
exceed the votes cast opposing such matter.
      Except  as  otherwise  expressly  required  by law,  the  vote at any
meeting of the  shareholders on any question need not be by ballot,  unless
so directed by the chairman of the meeting. On a vote by ballot each ballot
shall be signed by the  shareholder  voting,  or by his proxy,  if there be
such proxy, and shall state the number of shares voted.


                                ARTICLE III

                             BOARD OF DIRECTORS

     SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by the Board of Directors.
      SECTION 2. Number and Term of Office. Except as otherwise provided by
law, the number of directors which shall  constitute the Board of Directors
shall be fixed from time to time by a  resolution  adopted by a majority of
the Board of Directors.  So long as the Board of Directors shall consist of
nine or more members, the directors shall be classified with respect to the
time for which they shall  severally  hold  office,  by dividing  them into
three classes,  as nearly equal in number as possible.  Each class shall be
elected at the annual meeting of shareholders  held in 1986 for terms which
will expire as follows: one class of directors to be originally elected for
a term expiring at the annual meeting of  shareholders  to be held in 1987;
the second class of directors to be originally  elected for a term expiring
at the annual  meeting of  shareholders  to be held in 1988;  and the third
class of  directors  to be  originally  elected for a term  expiring at the
annual meeting of shareholders to be held in 1989.
      At each annual meeting of shareholders  beginning in 1987, successors
to the class of directors whose term then expires shall be elected to serve
for a term expiring at the annual meeting of shareholders held in the third
year following the year of their election and until their  successors shall
have been elected and qualified; provided, that the successor to a director
whose term expires at such annual meeting  because he was elected to fill a
vacancy on the board may, if so  specified  by the Board of  Directors,  be
elected to serve for a term expiring at the annual meeting of  shareholders
held in the first or second year  following  the year of his  election  and
until his  successor  shall have been elected and  qualified.  The Board of
Directors shall increase or decrease the number of directors in one or more
classes as may be appropriate whenever it increases or decreases the number
of  directors  in order to ensure that the three  classes  remain as nearly
equal in  number as  possible.  No  decrease  in the  number  of  directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
     SECTION 3.  Nomination.  Nominations for the election of directors may
be made by the Board of  Directors or by any  shareholder  entitled to vote
for the election of  directors.  Any  shareholder  entitled to vote for the
election of  directors  at a meeting  may  nominate a person or persons for
election as directors only if written notice of such  shareholder's  intent
to make such nomination is given,  either by personal delivery or by United
States mail,  postage  prepaid,  to the Secretary of the  Corporation,  not
later than (i) with respect to an election to be held at an annual  meeting
of shareholders,  90 days in advance of such meeting  (provided that if the
annual  meeting of  shareholders  is held earlier than the last Thursday in
January,  such notice must be given  within 10 days after the first  public
disclosure,  which may include any public  filing with the  Securities  and
Exchange  Commission,  of the date of the  annual  meeting)  and (ii)  with
respect to an election to be held at a special meeting of shareholders  for
the  election  of  directors,  the close of  business  on the  seventh  day
following  the date on  which  notice  of such  meeting  is first  given to
shareholders. Each such notice shall set forth: (a) the name and address of
the  shareholder  who intends to make the  nomination  and of the person or
persons to be nominated;  (b) a  representation  that the  shareholder is a
holder  of  record  of stock of the  Corporation  entitled  to vote at such
meeting  and  intends  to appear in  person or by proxy at the  meeting  to
nominate the person or persons  specified in the notice;  (c) a description
of all  arrangements  or  understandings  between the  shareholder and each
nominee  and any other  person or persons  (naming  such person or persons)
pursuant  to which  the  nomination  or  nominations  are to be made by the
shareholder;  (d) such other information regarding each nominee proposed by
such  shareholder  as would have been  required  to be  included in a proxy
statement  filed pursuant to the proxy rules of the Securities and Exchange
Commission had each nominee been nominated, or intended to be nominated, by
the Board of  Directors;  (e) the  consent  of each  nominee  to serve as a
director of the Corporation if so elected;  and (f) a representation  as to
whether  or not the  shareholder  will  solicit  proxies  in support of his
nominee(s).  The chairman of any meeting of shareholders to elect directors
and the Board of Directors may refuse to acknowledge  the nomination of any
person  not made in  compliance  with  the  foregoing  procedure  or if the
shareholder  fails to  comply  with the  representations  set  forth in the
notice.
     SECTION 4.  Election.  Except as otherwise  expressly  provided in the
Second  Restated  Articles  of  Incorporation,   at  each  meeting  of  the
shareholders  for the  election of  directors at which a quorum is present,
the persons  receiving  the greatest  number of votes,  up to the number of
directors to be elected, shall be the directors.
      SECTION 5.  Resignation,  Removal and  Vacancies.  Any  director  may
resign  at any time by giving  written  notice  of his  resignation  to the
Chairman of the Board, any Vice Chairman of the Board, the President or the
Secretary.  Any such  resignation  shall take effect at the time  specified
therein,  or,  if the time  when it shall  become  effective  shall  not be
specified therein, then it shall take effect when accepted by action of the
Board. Except as aforesaid, the acceptance of such resignation shall not be
necessary to make it effective.
      Any or all directors may be removed at a meeting of the  shareholders
called  expressly  for  that  purpose  (i) in the  case of a  removal  of a
director  for cause,  by a vote of the  holders of a majority of the voting
power of the then  outstanding  voting  stock  of the  Corporation,  voting
together as a single class,  or (ii) in the case of a removal of a director
without cause, by a vote of the holders of at least 80% of the voting power
of the then outstanding voting stock of the Corporation, voting together as
a single class. If less than all the directors are to be removed, no one of
the directors may be removed if the votes cast against his removal would be
sufficient  to elect him if then  cumulatively  voted at an election of the
entire  Board or, if there be classes of  directors,  at an election of the
class  of  directors  of which he or she is a part.  For  purposes  of this
Section 5,  "cause"  shall mean the  willful  and  continuous  failure of a
director to substantially perform such director's duties to the Corporation
(other than any failure resulting from incapacity due to physical or mental
illness)  or  the  willful  engaging  by a  director  in  gross  misconduct
materially and demonstrably injurious to the Corporation.  As used in these
By-laws,  "voting  stock"  shall  mean  shares  of  capital  stock  of  the
Corporation entitled to vote generally in the election of directors.
      Any vacancy occurring on the Board may be filled by a majority of the
directors  then in  office,  though  less than a quorum,  and the  director
elected  to fill such  vacancy  shall  hold  office  until the next  annual
meeting  of  shareholders  at which  directors  are  elected  and until his
successor is elected and qualified.
      SECTION 6. Meetings.

      (A)  Annual  Meetings.  As  soon as  practicable  after  each  annual
election of directors, the Board shall meet for the purpose of organization
and the transaction of other business.
      (B) Regular Meetings.  Regular meetings of the Board shall be held at
such  dates,  times  and  places  as the  Board  shall  from  time  to time
determine.
      (C)  Special  Meetings.  Special  meetings of the Board shall be held
whenever  called by the  Chairman  of the Board,  any Vice  Chairman of the
Board,  the  President  or upon the  written  request of a majority  of the
members of the whole Board filed with the  Secretary.  Any and all business
may be transacted at a special meeting which may be transacted at a regular
meeting of the Board.
      (D) Place of Meeting.  The Board may hold its  meetings at such place
or places within or without the  Commonwealth  of Kentucky as the Board may
from time to time by resolution  determine or as shall be designated in the
respective notices or waiver of notices thereof.
      (E) Notice of Meetings.  Notices of regular  meetings of the Board or
of any adjourned meeting need not be given.
      Notices of special  meetings  of the Board,  or of any meeting of any
committee  of the Board  which has not been fixed in advance as to time and
place by such committee, shall be mailed by the Secretary to each director,
or member of such  committee,  addressed  to him at his  residence or usual
place of  business,  at least two days before the day on which such meeting
is to be held, or shall be sent to him by telegraph, cable or other form of
recorded communication or be delivered personally or by telephone not later
than the day  before  the day on which  such  meeting  is to be held.  Such
notice shall include the date, time and place of such meeting, but any such
notice need not specify the  business to be  transacted  at, or the purpose
of, any such  meeting.  Notice of any such meeting need not be given to any
director or member of any committee,  however, if waived by him in writing,
whether  before  or after  such  meeting  shall be held,  or if he shall be
present  at such  meeting,  unless the  director  at the  beginning  of the
meeting  (or  promptly  upon his or her  arrival)  objects to  holding  the
meeting or transacting business at the meeting and does not thereafter vote
for or assent to action taken at the meeting.
      (F)  Quorum  and  Manner  of  Acting.  A  majority  of the  number of
directors  fixed by or in the manner  provided  in these  By-laws or in the
Second Restated Articles of Incorporation shall be present in person at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such  meeting,  and the vote of a majority  of those  directors
present at any such meeting at which a quorum is present shall be necessary
for the passage of any resolution or act of the Board,  except as otherwise
expressly required by law, these By-laws or the Second Restated Articles of
Incorporation.
      (G) Action by Consent.  Any action  required or permitted to be taken
at any  meeting of the Board,  or of any  committee  thereof,  may be taken
without a meeting if all members of the Board or committee, as the case may
be, consent thereto in writing,  and such writing is filed with the minutes
of the proceedings of the Board or committee.
      (H)  Meeting  by  Telephone.  Any  meeting  of the  Board,  or of any
committee  thereof  may be  conducted  through  the  use of  any  means  of
communication  by which all persons  participating  in the meeting can hear
and speak to each other, and the directors' participation in such a meeting
shall constitute presence in person at the meeting for all purposes.
      (I) Organization.  At each meeting of the Board, one of the following
shall act as chairman of the meeting and preside thereat,  in the following
order of precedence:

      (a) the Chairman of the Board;
     (b) a Vice  Chairman  of the  Board in order of rank of  seniority  in
office; or
      (c) the President.
      SECTION 7.  Compensation.  The Board of Directors may fix such amount
per annum  and such fees to be paid by the  Corporation  to  directors  for
attendance  at meetings of the Board or of any  committee,  or both, as the
Board shall from time to time  determine.  The Board may  likewise  provide
that the Corporation shall reimburse each director or member of a committee
for any expenses  incurred by him on account of his  attendance at any such
meeting.  Nothing  contained in this Section shall be construed to preclude
any  director  from  serving  the  Corporation  in any other  capacity  and
receiving compensation therefor.


                                 ARTICLE IV

                                 COMMITTEES

      SECTION 1. Executive Committee.
      (A) Designation and Membership.  The Board may, by resolution  passed
by a  majority  of  the  whole  Board,  designate  an  Executive  Committee
consisting  of the Chairman of the Board,  each Vice Chairman of the Board,
the  President and such  additional  number of directors as the Board shall
determine.  Vacancies may be filled by the Board at any time and any member
of the  Executive  Committee  shall be subject to removal,  with or without
cause, at any time by resolution passed by a majority of the whole Board.
      (B) Functions and Powers.  The  Executive  Committee,  subject to any
limitations prescribed by the Board, shall possess and may exercise, during
the intervals  between  meetings of the Board, all the powers and authority
of the  Board  in  the  management  of  the  business  and  affairs  of the
Corporation; provided, however, that the Executive Committee shall not have
the  power or  authority  to  approve  amendments  to the  Second  Restated
Articles of  Incorporation,  adopt  agreements of merger or  consolidation,
recommend  to the  shareholders  the  sale,  lease  or  exchange  of all or
substantially all the property and assets of the Corporation,  recommend to
the  shareholders the dissolution of the Corporation or the revocation of a
dissolution,  amend  these  By-laws  or to take any  other  action  which a
committee is prohibited by law from taking.
      At each  meeting of the Board the  Executive  Committee  shall make a
report of all action taken by it since its last report to the Board.
      (C) Meetings and Quorum. The Executive  Committee shall meet as often
as may be deemed  necessary and expedient at such times and places as shall
be determined by the members of the Executive Committee.  A majority of the
members of the Executive  Committee shall constitute a quorum. The Chairman
of the Board shall preside at meetings  thereof,  and, in his absence,  the
Executive Committee may appoint any other member of the Executive Committee
to preside.
      SECTION 2. Audit Committee.
      (A) The Board may by  resolution  passed by a  majority  of the whole
Board designate an Audit  Committee  consisting of three or more directors.
Vacancies  may be  filled  by the  Board at any time and any  member of the
Audit Committee shall be subject to removal,  with or without cause, at any
time by resolution passed by a majority of the whole Board.
      (B) The Audit  Committee  shall  review with the  independent  public
accountants  for the Corporation  the scope of their  examination,  receive
copies of the reports of such  accountants,  meet with  representatives  of
such  accountants  for the purpose of reviewing and  considering  questions
relating to such accountants'  examination and such reports, review, either
directly or through such accountants,  the internal accounting and auditing
procedures of the  Corporation,  report the results of the foregoing to the
Board and act upon  such  other  matters  as may be  referred  to it by the
Board.
      At each meeting of the Board the Audit  Committee shall make a report
of all action taken by it since its last report to the Board.
      (C) Meetings and Quorum.  The Audit  Committee shall meet as often as
may be deemed  necessary and expedient at such times and places as shall be
determined by the members of the Audit Committee. A majority of the members
of the Audit Committee shall  constitute a quorum.  The Audit Committee may
appoint any member to preside at meetings thereof.
      SECTION 3. Other Committees. The Board may, by resolution passed by a
majority of the whole Board, designate other committees,  each committee to
consist of two or more  directors  and to have such duties and functions as
shall be  provided  in such  resolution.  The Board shall have the power to
change the members of any such committee at any time, to fill vacancies and
to discharge any such committee, either with or without cause, at any time.


                                 ARTICLE V

                                  OFFICERS

     SECTION 1. Officers and  Executive  Officers of the  Corporation.  The
officers of the Corporation shall be:

      (a) a Chairman of the Board;
      (b) one or more Vice Chairmen of the Board;
      (c) a President;
      (d)  one  or  more  Vice  Presidents,  one or  more  of  whom  may be
designated  as  Executive  Vice  President,  one or  more  of  whom  may be
designated  as  Senior  Vice  President,  and one or  more  of whom  may be
designated as Administrative Vice President;
     (e) a Secretary and, as and when  designated,  a Deputy  Secretary and
one or more Assistant Secretaries;
     (f) a Treasurer and, as and when  designated,  a Deputy  Treasurer and
one or more Assistant Treasurers;
     (g) a Controller and, as and when designated,  a Deputy Controller and
one or more Assistant Controllers;
      (h) an Auditor  and, as and when  designated,  one or more  Assistant
Auditors.  The  following  officers  are hereby  designated  the  Executive
Officers of the Corporation:
      Chairman of the Board;
      Vice Chairmen of the Board;
      President;
      Executive Vice Presidents;
      Senior Vice Presidents;
      Administrative Vice Presidents;
      Secretary;
      Treasurer;
      Controller;
      Auditor.
      SECTION  2.  Election  and  Appointment  and  Term  of  Office.  Each
Executive  Officer shall be elected by the Board at its annual  meeting and
hold  office  until  the next  annual  meeting  of the  Board and until his
successor is elected or until his earlier death,  resignation or removal in
the manner hereinafter provided.
      The Board may elect  such other  officers  and  designate  such other
Executive Officers as it deems necessary and such other officers shall have
such authority and shall perform such duties as the Board may prescribe.
      The  Chairman  of the Board by  written  designation  filed  with the
Secretary,  may appoint all officers, other than Executive Officers, of the
Corporation.  Subject to the  authority  of the Board,  the persons  having
authority to appoint an officer shall also have authority to fix the salary
of such officer.
      If additional officers are elected by the Board during the year, each
of them shall hold  office  until the next  annual  meeting of the Board at
which officers are regularly  elected and until his successor is elected or
appointed or until his earlier death,  resignation or removal in the manner
hereinafter provided.
      SECTION 3. Resignation, Removal and Vacancies. Any officer may resign
at any time by giving written notice to the Chairman of the Board, any Vice
Chairman of the Board, the President or the Secretary, and such resignation
shall  be  effective  when the  notice  is  delivered,  unless  the  notice
specifies a later effective date.
      All  officers  and agents  elected or  appointed  shall be subject to
removal  at any time by the Board  with or  without  cause.  All  appointed
officers  may be removed at any time by the  Chairman  of the Board  acting
jointly with any Vice  Chairman of the Board or the  President,  by written
designation filed with the Secretary.
      A vacancy in any office  may be filled for the  unexpired  portion of
the term in the same manner as provided for election or appointment to such
office.
      SECTION 4. Duties and Functions.
     (A)  Chairman of the Board.  The  Chairman  of the Board,  if present,
shall  preside  at all  meetings  of the  shareholders  and the  Board.  If
designated by Board resolution,  he shall be Chief Executive Officer of the
Corporation,  and if so designated,  shall be vested with executive control
and management of the business and affairs of the  Corporation and have the
direction of all other officers, agents and employees. He shall perform all
such  other  duties as are  incident  to the  office or as may be  properly
required of him by the Board,  subject in all matters to the control of the
Board.
      (B) Vice  Chairmen of the Board.  The Vice Chairman of the Board with
seniority  of office,  in the absence of the  Chairman of the Board,  shall
preside  at all  meetings  of the  shareholders  and the  Board.  Each Vice
Chairman of the Board shall have such powers,  authority  and duties as may
be  delegated  to him from time to time by the Board or the Chairman of the
Board.
     (C) The President.  The  President,  in the absence of the Chairman of
the Board and all the Vice  Chairmen  of the  Board,  shall  preside at all
meetings  of the  shareholders  and  the  Board.  If  designated  by  Board
resolution, he shall be Chief Executive Officer of the Corporation,  and if
so designated, shall be vested with executive control and management of the
business and affairs of the Corporation and have the direction of all other
officers,  agents and employees.  He shall have such powers,  authority and
duties  as may be  delegated  to him from  time to time by the Board or the
Chairman of the Board.
      (D) Executive Vice  Presidents.  The Executive Vice Presidents  shall
have such powers,  authority  and duties as may be delegated or assigned to
them from time to time by the Board,  the  Chairman of the Board,  any Vice
Chairman of the Board or the President.
      (E) Senior Vice  Presidents.  The Senior Vice  Presidents  shall have
such powers,  authority  and duties as may be delegated or assigned to them
from  time to time by the  Board,  the  Chairman  of the  Board,  any  Vice
Chairman of the Board or the President.
      (F)  Administrative   Vice  Presidents.   The   Administrative   Vice
Presidents shall have such powers, authority and duties as may be delegated
or  assigned  to them from time to time by the Board,  the  Chairman of the
Board, any Vice Chairman of the Board or the President.
      (G) Vice  Presidents.  The Vice  Presidents  shall have such  powers,
authority  and duties as may be  delegated or assigned to them from time to
time by the Board,  the  Chairman  of the Board,  any Vice  Chairman of the
Board or the President.
      (H) Secretary.  The Secretary  shall attend to the giving and serving
of all notices required by law or these By-laws;  shall be the custodian of
the  corporate  seal and shall  affix  and  attest  the same to all  papers
requiring  it;  shall  have  responsibility  for  preparing  minutes of the
meetings of the Board and  shareholders;  and shall in general  perform all
the duties incident to the office of the Secretary,  subject in all matters
to the control of the Board.
      (I)  Treasurer.  The Treasurer  shall have custody and control of the
funds and  securities of the  Corporation  and shall perform all such other
duties as are  incident to his office or that may be  properly  required of
him by the Board, the Chairman of the Board, any Vice Chairman of the Board
or the President.
      (J) Controller. The Controller shall maintain adequate records of all
assets,  liabilities and  transactions of the  Corporation;  shall see that
adequate  audits  thereof are  currently  and  regularly  made;  shall have
general supervision of the preparation of the Corporation's balance sheets,
income  accounts  and other  financial  statements  or  records;  and shall
perform such other duties as shall,  from time to time,  be assigned to him
by the Board,  the Chairman of the Board, any Vice Chairman of the Board or
the  President.  These  duties and powers  shall  extend to all  subsidiary
corporations  and so far as the Board,  the Chairman of the Board, any Vice
Chairman  of the  Board  or the  President  may  deem  practicable,  to all
affiliated corporations.
      (K) Auditor.  The Auditor shall review the accounting,  financial and
related  operations  of  the  Corporation  and  shall  be  responsible  for
measuring  the  effectiveness  of  various  controls  established  for  the
Corporation. His duties shall include, without limitation, the appraisal of
procedures, verifying the extent of compliance with formal controls and the
prevention  and detection of fraud or  dishonesty  and such other duties as
shall,  from time to time, be assigned to him by the Board, the Chairman of
the Board,  any Vice Chairman of the Board or the  President.  These duties
and powers shall extend to all  subsidiary  corporations  and so far as the
Board,  any  Chairman of the Board,  any Vice  Chairman of the Board or the
President may deem practicable, to all affiliated corporations.


                                 ARTICLE VI

                CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

      SECTION 1. Borrowing  Authority.  The Chairman of the Board, any Vice
Chairman of the Board,  the  President,  an Executive Vice  President,  the
Senior Vice President  supervising the law function,  the Treasurer and any
other  officer,  employee,  or agent of the  Corporation  designated by the
Board  (collectively,  "Designated  Officers") shall,  subject to Section 3
hereof,  have the power,  acting jointly with any officer designated by the
Board as the Chief Financial  Officer or the Treasurer  (collectively,  the
"Financial   Officers"),   to  authorize  the  establishment  of  borrowing
facilities,  the borrowing of money, the issuance of debt  obligations,  or
the  guaranteeing of obligations of others on behalf of the Corporation for
borrowed  money  or  similar  obligations.  Any  individual  acting  as the
approving Financial Officer may not act as one of the approving  Designated
Officers on the same authorization.
      SECTION 2.  Delegation  of Authority.  Any  Financial  Officer of the
Corporation  acting  jointly with any  Designated  Officer may delegate the
authority to establish borrowing  facilities or to borrow money or to issue
debt obligations or to guarantee the obligations of others on behalf of the
Corporation for borrowed money or similar obligations or any combination of
the foregoing to any person(s) on behalf of the Corporation,  provided each
obligation  to be incurred  under each such  authority  does not exceed the
equivalent of Fifty Million  United States Dollars (U.S.  $50,000,000).  No
such delegated  authority may be redelegated.  Any individual acting as the
approving Financial Officer may not act as one of the approving  Designated
Officers on the same authorization.
     SECTION 3. Limitation of Authority. The Finance Committee of the Board
of Directors shall,  subject to the last sentence of this Section 3, retain
authority  for  and,  in its  sole  discretion,  shall  authorize  (a)  any
establishment  of borrowing  facilities,  borrowing of money or issuance of
debt  obligations by the Corporation  which exceeds the equivalent of Fifty
Million United States Dollars (U.S.  $50,000,000)  and which has a maturity
of more than one year from the effective  date of the issuance or borrowing
and (b) any guarantee of any debt obligation of non-affiliated  entities by
the Corporation which guaranty is for an amount exceeding the equivalent of
Fifty Million United States Dollars (U.S. $50,000,000) and which underlying
obligation  has a maturity of more than one year from the effective date of
the  issuance or  borrowing.  The  foregoing  limitations  shall not apply,
however, to those borrowings,  debt issuances, or guaranties of obligations
for borrowed money or similar  obligations  made or delivered,  under or in
connection with a borrowing facility or program previously  approved by the
Board  of  Directors  or  the  Finance   Committee  or  to  such  types  of
transactions with or on behalf of affiliated entities.
     SECTION 4.  Execution  of  Documents.  The  Designated  Officers,  the
Financial  Officers,  and any  other  officer,  employee  or  agent  of the
Corporation  designated  by the Board shall have power,  acting  alone,  to
execute  and  deliver,  in the name and on behalf of the  Corporation,  (a)
mortgages,  bonds,  debentures,  notes,  checks,  drafts  and other  orders
evidencing the borrowing or guaranteeing (when so authorized as provided in
Section 1, 2 or 3) or payment of money and (b) deeds, leases, contracts and
other  agreements  and  documents.  Each such named  officer  empowered  to
execute and deliver the  aforesaid  documents  and any such other  officer,
employee  or agent so  authorized  by the Board  may  delegate  such  power
(including   authority  to  redelegate)  by  written  instrument  to  other
officers, employees or agents of the Corporation.
     SECTION  5.  Deposits.  All  funds of the  Corporation  not  otherwise
employed  shall  be  deposited  from  time  to time  to the  credit  of the
Corporation or otherwise with such banks or other financial institutions as
may be designated by the Board, by any Designated Officer, by any Financial
Officer,  or by any other officer,  employee or agent of the Corporation so
designated  by the  Board.  Each  such  named  officer  and any such  other
officer,  employee or agent so  authorized  by the Board may delegate  such
power  (including  authority to redelegate) by written  instrument to other
officers, employees or agents of the Corporation.
     SECTION 6. Proxies in Respect of Shares or Other  Securities  of Other
Corporations.  Any Designated  Officer and any Financial Officer shall have
the  authority  (a) to appoint  from time to time an agent or agents of the
Corporation  to exercise in the name and on behalf of the  Corporation  the
powers and rights which the Corporation may have as the holder of shares or
other  securities  in any  other  corporation,  (b) to vote or  consent  in
respect  of such  shares or  securities  and (c) to  execute or cause to be
executed  in the  name and on  behalf  of the  Corporation  and  under  its
corporate seal, or otherwise,  such written proxies,  powers of attorney or
other  instruments  as he may deem  necessary  or proper in order  that the
Corporation may exercise such powers and rights. Any Designated Officer and
any  Financial  Officer may  instruct  any person or persons  appointed  as
aforesaid as to the manner of exercising such powers and rights.

                                ARTICLE VII

                             BOOKS AND RECORDS

      The Corporation  shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders,  the
Board,  the  Executive  Committee,  the  Audit  Committee,  and such  other
committees of the Board as the Board may by resolution  designate and shall
keep at its  registered  office or principal  place of business,  or at the
office of its transfer  agent or registrar,  a record of its  shareholders,
giving  the names and  addresses  of all  shareholders,  and the number and
class of the shares held by each.


                                ARTICLE VIII

                 SHARES AND THEIR TRANSFER; FIXING RECORD DATE

      SECTION 1.  Certificates  for  Shares.  Every  owner of shares of the
Corporation  shall be entitled to have a certificate  which shall set forth
upon  the  face or back  of such  certificate,  or  shall  state  that  the
Corporation  will  furnish to any  shareholder  upon  request  and  without
charge, a full statement of the designations,  preferences, limitations and
relative  rights of the  shares of each  class of shares  authorized  to be
issued,  and the variations in the relative rights and preferences  between
the shares of each series of any preferred or special  class of shares,  so
far as the same have been fixed and  determined,  and the  authority of the
Board  to  fix  and  determine  the  relative  rights  and  preferences  of
subsequent series of such preferred or special classes of shares.
      Each  certificate  representing  shares  shall  state  upon  the face
thereof  that  the   Corporation  is  organized   under  the  laws  of  the
Commonwealth of Kentucky; the name of the person to whom issued; the number
and class of shares,  and the designation of the series, if any, which such
certificate represents; and the par value of each share represented by such
certificate,  or a statement  that the shares are  without par value.  Such
certificate shall otherwise be in such form as the Board shall prescribe.
      Each  such  certificate  shall be  signed  by,  or in the name of the
Corporation by, the Chairman of the Board,  any Vice Chairman of the Board,
the  President  or a  Vice  President  and  by the  Secretary,  the  Deputy
Secretary or an Assistant  Secretary of the Corporation and shall be sealed
with the corporate seal or contain a facsimile thereof. In case any officer
who has  signed  or  whose  facsimile  signature  has  been  placed  upon a
certificate shall have ceased to be such officer before such certificate is
issued,  it may  nevertheless  be issued by the  Corporation  with the same
effect as if he were  such  officer  at the date of  issue.  Where any such
certificate  is manually  countersigned  by a transfer  agent or  registrar
(other than the Corporation itself or an employee of the Corporation),  any
of the other signatures on the certificate may be a facsimile.
      SECTION 2. Record.  A record shall be kept of the name of the person,
firm or corporation  owning the shares  represented by each certificate for
shares of the Corporation  issued, the number of shares represented by each
such certificate,  and the date thereof,  and, in the case of cancellation,
the date of cancellation.  Except as otherwise  expressly  required by law,
the person in whose name shares stand on the books of the Corporation shall
be deemed the owner thereof for all purposes as regards the Corporation.
      SECTION 3. Transfer of Shares. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof,  or by his attorney  thereunto duly authorized by written power of
attorney  duly  executed  and filed with the  Secretary  or with a transfer
agent  appointed  as  provided  in  Section 4 of this  Article,  and on the
surrender  of the  certificate  or  certificates  for such shares  properly
endorsed.
      SECTION 4. Regulations. The Board may make such rules and regulations
as it may deem expedient,  not inconsistent with these By-laws,  concerning
the issue,  transfer and  registration  of  certificates  for shares of the
Corporation.  The Board may appoint or authorize any officer or officers to
appoint  one or more  transfer  agents and one or more  registrars  and may
require all  certificates for shares to bear the signature or signatures of
any of them.
      SECTION 5. Lost,  Stolen,  Destroyed or Mutilated  Certificates.  The
holder of any  shares  of the  Corporation  shall  immediately  notify  the
Corporation of any loss,  theft or mutilation of the certificate  therefor.
The  Corporation may issue a new certificate for shares in the place of any
certificate theretofore issued by it and alleged to have been lost, stolen,
destroyed or mutilated,  and the Board, the Chairman of the Board, any Vice
Chairman of the Board,  the President or the  Secretary  may, in its or his
discretion,  require the owner of the lost, stolen,  mutilated or destroyed
certificate or his legal  representatives to give the Corporation a bond in
such sum,  limited  or  unlimited,  in such  form and with  such  surety or
sureties as the Board shall in its discretion  determine,  to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss,  theft,  mutilation or destruction of any such certificate or
the issuance of any such new certificate.
      SECTION 6. Fixing Date for  Determination  of Shareholders of Record.
In order that the  Corporation may determine the  shareholders  entitled to
notice of or to vote at any  meeting  of  shareholders  or any  adjournment
thereof,  or to express  consent to corporate  action in writing  without a
meeting,   or  entitled  to  receive  payment  of  any  dividend  or  other
distribution or allotment of any rights, or entitled to exercise any rights
in respect  of any  change,  conversion  or  exchange  of shares or for the
purpose of any other lawful action, the Board may fix, in advance, a record
date,  which  shall not be more than  seventy nor less than ten days before
the date of such  meeting,  nor more than  seventy  days prior to any other
action. A determination of shareholders entitled to notice of or to vote at
a  meeting  of the  shareholders  shall  apply  to any  adjournment  of the
meeting;  provided,  however,  that the Board may fix a new record date for
the adjourned meeting.


                                 ARTICLE IX

                                    SEAL

      The Board shall provide a corporate seal,  which shall be in the form
of a circle and shall bear the full name of the Corporation.


                                 ARTICLE X

                                FISCAL YEAR

      The fiscal  year of the  Corporation  shall begin on the first day of
October in each year.

                                 ARTICLE XI

                              INDEMNIFICATION

      SECTION 1. Every  person who is or was an officer or  employee of the
Corporation  or of any other  corporation or entity in which he served as a
director,   officer  or  employee   at  the  request  of  the   Corporation
(hereinafter  collectively  referred  to as a "Covered  Person"),  shall be
indemnified by the  Corporation  against any and all  reasonable  costs and
expenses (including but not limited to attorney's fees) and any liabilities
(including  but not limited to judgments,  fines,  penalties and reasonable
settlements)  that may be paid by or imposed against him in connection with
or resulting from any pending,  threatened or completed claim, action, suit
or proceeding  (whether  brought by or in the right of the  Corporation  or
such  other  corporation  or  entity or  otherwise),  and  whether,  civil,
criminal,  administrative,  investigative  or  legislative  (including  any
appeal  relating  thereto),  in  which  he may be  involved,  as a party or
witness or  otherwise,  by reason of his being or having been an officer or
employee  of the  Corporation  or a  director,  officer or employee of such
other corporation or entity, or by reasons of any action taken or not taken
in such  capacity,  whether or not he continues to be such at the time such
liability  or  expense  shall  have been paid or  imposed,  if the  Covered
Person:
     (a) has been  successful  on the merits or  otherwise  with respect to
such claim, action, suit or proceeding; or
      (b) acted in good  faith,  in what he  reasonably  believed to be the
best interests of the Corporation or such other  corporation or entity,  as
the case may be, and in addition, in any criminal action or proceeding, had
no reasonable  cause to believe that his conduct was  unlawful.  As used in
this Article XI, the terms "expense" and "liability" shall include, but not
be limited to,  counsel fees and  disbursements  and amounts of  judgments,
fines or penalties against, and reasonable amounts paid in settlement by, a
Covered Person. The termination of any claim, action, suit or proceeding by
judgment,  settlement (whether with or without court approval),  conviction
or upon a plea of guilty or nolo contendere,  or its equivalent,  shall not
create a  presumption  that a Covered  Person did not meet the standards of
conduct set forth in paragraph (b) of this Section 1.
      SECTION 2. Indemnification  under paragraph (b) of Section 1 shall be
made  unless it is  determined  by any of the  following  that the  Covered
Person has not met the  standard of conduct set forth in  paragraph  (b) of
Section 1:
      (a) the Board,  acting by a quorum  consisting  of directors who were
not parties to (or who are determined to have been  successful with respect
to) the claim, action, suit or proceeding;
      (b) a  committee  of the Board  established  pursuant to Section 3 of
Article IV of the By-laws  consisting  of directors who were not parties to
(or who are determined to have been  successful with respect to) the claim,
action, suit or proceeding;
      (c) any  officer or group of  officers  of the  Corporation  who,  by
resolution  adopted by the Board,  has been  given  authority  to make such
determinations;
      (d) either of the following  selected by the Board if a disinterested
committee of the Board (as  described  in paragraph  (b) of this Section 2)
cannot be obtained or by the person(s) designated in paragraphs (a), (b) or
(c) of this Section 2:
     (1)  independent  legal counsel (who may be the regular counsel of the
Corporation) who has delivered to the Corporation a written  determination;
or
      (2) an arbitrator or a panel of arbitrators  (which panel may include
directors,  officers,  employees  or  agents  of the  Corporation)  who has
delivered to the Corporation a written determination.
      SECTION 3. Expenses incurred with respect to any claim,  action, suit
or proceeding  of the  character  described in Section 1 of this Article XI
shall be advanced to a Covered Person by the Corporation prior to the final
disposition  thereof,  but the Covered  Person  shall be obligated to repay
such  advances if it is  ultimately  determined  that he is not entitled to
indemnification.  As a  condition  to  advancing  expenses  hereunder,  the
Corporation  may require the  Covered  Person to sign a written  instrument
acknowledging  his  obligation  to repay any  advances  hereunder  if it is
ultimately determined he is not entitled to indemnity.
      Notwithstanding the preceding  paragraph,  the Corporation may refuse
to advance  expenses  or may  discontinue  advancing  expenses to a Covered
Person if such  advancement is determined by the  Corporation,  in its sole
and  exclusive  discretion,   not  to  be  in  the  best  interest  of  the
Corporation.
      SECTION  4.  Notwithstanding  anything  in  this  Article  XI to  the
contrary,  no person shall be indemnified in respect of any claim,  action,
suit or  proceeding  initiated  by such  person  or his  personal  or legal
representative,   or  which   involved  the   voluntary   solicitation   or
intervention of such person or his personal or legal representative  (other
than an action to enforce  indemnification  rights  hereunder  or an action
initiated with the approval of a majority of the Board).
      SECTION 5. The rights of indemnification  provided in this Article XI
shall be in  addition to any other  rights to which any Covered  Person may
otherwise be entitled to by contract, vote of shareholders or disinterested
directors,  other  corporate  action or otherwise;  and in the event of any
such  person's  death,  such  rights  shall  extend  to his heirs and legal
representatives.

                                ARTICLE XII

                                 AMENDMENTS

      Any By-law may be adopted,  repealed, altered or amended by the Board
at  any  regular  or  special  meeting  thereof.  The  shareholders  of the
Corporation shall have the power to amend,  alter to repeal any By-law only
to the extent and in the manner provided in the Second Restated Articles of
Incorporation of the Corporation.




                               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.

     (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.

     (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

     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.

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
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 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.



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 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.

     (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.