Kentucky
(State or other jurisdiction
of incorporation or organization)
|
20-0865835
(I.R.S. Employer Identification No.)
|
Title of each class
|
Name of each exchange on which registered
|
||
Common Stock, par value $.01 per share
Hercules Incorporated 8% Convertible Subordinated
Debentures due August 15, 2010
|
New York Stock Exchange
New York Stock Exchange
|
Page | ||||
PART I
|
||||
Item 1.
|
Business ...................................................................................................................................................................
|
1
|
||
General ....................................................................................................................................................................
|
1
|
|||
Corporate Developments .....................................................................................................................................
|
1
|
|||
Ashland Performance Materials .........................................................................................................................
|
2
|
|||
Ashland Distribution ...........................................................................................................................................
|
3
|
|||
Valvoline ................................................................................................................................................................
|
4
|
|||
Ashland Water Technologies ............................................................................................................................
|
5
|
|||
Miscellaneous .......................................................................................................................................................
|
5
|
|||
Item 1A.
|
Risk Factors .............................................................................................................................................................
|
7
|
||
Item 1B.
|
Unresolved Staff Comments .................................................................................................................................
|
10
|
||
Item 2.
|
Properties .................................................................................................................................................................
|
10
|
||
Item 3.
|
Legal Proceedings ..................................................................................................................................................
|
11
|
||
Item 4.
|
Submission of Matters to a Vote of Security Holders ......................................................................................
|
14
|
||
Item X.
|
Executive Officers of Ashland ..............................................................................................................................
|
14
|
||
PART II
|
||||
Item 5.
|
Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities ........................................................................................
|
15
|
||
Five-Year Total Return Performance Graph ......................................................................................................
|
16
|
|||
Item 6.
|
Selected Financial Data ........................................................................................................................................
|
17
|
||
Item 7.
|
Managements Discussion and Analysis of Financial
Condition and Results of Operations ................................................................................................................
|
17
|
||
Item 7A
|
Quantitative and Qualitative Disclosures about Market Risk ..........................................................................
|
17
|
||
Item 8.
|
Financial Statements and Supplementary Data ..................................................................................................
|
17
|
||
Item 9.
|
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .........................................................................................................
|
17
|
||
Item 9A.
|
Controls and Procedures .......................................................................................................................................
|
17
|
||
Item 9B.
|
Other Information ....................................................................................................................................................
|
17
|
||
PART III
|
||||
Item 10.
|
Directors, Executive Officers and Corporate Governance ................................................................................
|
17
|
||
Item 11.
|
Executive Compensation ........................................................................................................................................
|
18
|
||
Item 12.
|
Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters .......................................................................................
|
18
|
||
Item 13.
|
Certain Relationships and Related Transactions, and Director
Independence ........................................................................................................................................................
|
19
|
||
Item 14.
|
Principal Accountant Fees and Services .............................................................................................................
|
19
|
||
PART IV
|
||||
Item 15.
|
Exhibits and Financial Statement Schedules .......................................................................................................
|
19
|
·
|
Do It Yourself
(DIY)
- The DIY business group sells Valvoline products to consumers who perform their own auto maintenance.
Valvoline products are sold through retail
auto parts stores such as Autozone and Advance Auto Parts, mass merchandisers such as WalMart, and warehouse distributors and their affiliated jobber stores such as NAPA and Carquest.
|
·
|
Installer Channels
- The Installer Channels business group sells branded products and services to installers (such as car dealers, general repair shops and quick lubes) and to auto auctions through a network of independent distributors and company-owned and operated direct market operations. This
business also includes distribution to quick lubes branded Valvoline Express Care®, which consists of 368 independently owned and operated stores.
|
·
|
Valvoline Instant Oil Change®
(VIOC)
- The VIOC chain is one of the largest competitors in the U.S. fast oil change service business, providing Valvoline with a significant presence in the Installer Channels segment
of the passenger car and light truck motor oil market.
As of September 30, 2008, 261 company-owned and 585 independently-owned and operated franchise centers were operating in 39 states. VIOC has continued its customer service innovation through its upgraded and enhanced preventive maintenance tracking system for consumers and fleet operators. This computer-based system maintains service records on all customer vehicles and contains
a database on most car models, which allows service technicians to make service recommendations based primarily on manufacturers recommendations.
|
·
|
Commercial & Industrial (C&I) -
The C&I business group sells branded products and services to on-highway fleets, construction companies and original equipment manufacturers (OEMs) through company-owned and operated direct market operations, national accounts and
a network of distributors. C&I direct market distribution operations are conducted out of centers located in Orlando, Florida; Willow Springs, Illinois; Indianapolis, Indiana; Cincinnati, Ohio; East Rochester, Pennsylvania; and Dallas, Texas. The C&I business group also has a strategic alliance with Cummins Inc. (Cummins) to distribute heavy duty lubricants to the commercial market and Eaton Inc. (Eaton) to distribute co-branded hydraulic fluids to the commercial
and industrial markets.
|
·
|
Valvoline International
- Valvoline International markets Valvoline®, Eagle One® and Zerex® branded products through wholly-owned affiliates, joint ventures, licensees and independent distributors in more than 100 countries.
The
profitability of the business is dispersed geographically, although more than half of the profit comes from mature markets in Europe and Australia. There are rapidly growing businesses in the emerging markets, including joint ventures with Cummins in Argentina, Brazil, China and India. In addition, Valvoline operates joint ventures with local entities in Ecuador, Thailand and Venezuela. Valvoline International markets products for both consumer and commercial vehicles and equipment
and is served by company-owned plants in the United States, Australia and The Netherlands and by toll manufacturers.
|
§
|
limiting Ashlands ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of its growth strategy and other purposes;
|
§
|
requiring Ashland to dedicate a substantial portion of its cash flow from operations to pay interest on its debt, which would reduce availability of Ashlands cash flow to fund working capital, capital expenditures, acquisitions, execution of its growth strategy and other general corporate purposes;
|
§
|
making Ashland more vulnerable to adverse changes in general economic, industry and government regulations and in its business by limiting its flexibility in planning for, and making it more difficult for Ashland to react quickly to, changing conditions;
|
§
|
placing Ashland at a competitive disadvantage compared with those of its competitors that have less debt; and
|
§
|
exposing Ashland to risks inherent in interest rate fluctuations because some of its borrowings will be at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates.
|
§
|
provisions relating to the classification, nomination and removal of its directors;
|
§
|
provisions limiting the right of shareholders to call special meetings of its Board of Directors and shareholders;
|
§
|
provisions regulating the ability of its shareholders to bring matters for action at annual meetings of its shareholders; and
|
§
|
the authorization given to its Board of Directors to issue and set the terms of preferred stock.
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
|||
Ashland
1
|
100
|
159
|
193
|
227
|
250
|
124
|
||
S&P 500
|
100
|
113
|
126
|
140
|
163
|
127
|
||
Peer Group
2
|
100
|
176
|
300
|
322
|
403
|
370
|
1
|
Ashlands total return excludes Marathon Ashland Petroleum LLC (MAP) from fiscal 2005 to 2008 and Transportation and Construction from fiscal 2007 to 2008. Ashlands former Petroleum Refining and Marketing operations consisted primarily of its 38% interest in MAP which was transferred on June 30, 2005, along with two other businesses to Marathon Oil Corporation. Ashlands
former Transportation Construction operations consisted of Ashland Paving And Construction, Inc. which was sold on August 28, 2006, to Oldcastle Materials, Inc.
|
2
|
Ashlands Peer Group five-year cumulative total return index reflects Petroleum Refining and Marketing peers for fiscal 2002 through 2005 and Transportation and Construction peers for fiscal 2002 through 2006. Ashlands Peer Group five-year cumulative total return index is 341 when the Petroleum Refining and Marketing peer total returns for the three months ended
September 30, 2005 and Highway Construction peer total returns for 2007 are excluded.
|
|
∙
|
Highway Construction Portfolio:
Standard & Poors 500 Construction Materials (Large-Cap), Standard & Poors 400 Construction Materials (Mid-Cap), and Standard & Poors 600 Construction Materials (Small-Cap).
|
|
∙
|
Specialty Chemical Production, Distribution, and Motor Oil and Car Care Products Portfolio:
Standard & Poors 500 Specialty Chemicals (Large-Cap), Standard & Poors 400 Specialty Chemicals (Mid-Cap), Standard & Poors 600 Specialty
Chemicals (Small-Cap), and Standard & Poors 400 Diversified Chemicals (Mid-Cap).
|
|
∙
|
Petroleum Refining and Marketing Portfolio:
Standard & Poors 500 Oil & Gas Refining & Marketing & Transportation (Large-Cap), Standard & Poors 400 Oil & Gas Refining & Marketing & Transportation (Mid-Cap) (index
was discontinued by Standard & Poors on April 28, 2006), and Standard & Poors 600 Oil & Gas Refining & Marketing & Transportation (Small-Cap) (index has been in existence from the last quarter of fiscal 2002 forward and initially consisted only of Frontier Oil Corp.; the results for Frontier Oil Corp. have been included for prior periods to give complete information).
|
Equity Compensation Plan Information
|
||||||
Plan Category
|
Number of securities
to be issued upon
exercise
of outstanding options,
warrants and rights
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
|
|||
(a)
|
(b)
|
(c)
|
Equity compensation plans
approved by security holders
|
1,530,564 (1)
|
$27.42 (2)
|
3,449,839 (3)
|
||||||
Equity compensation plans
not approved by security
holders
|
28,242 (4)
|
$33.69 (2)
|
967,477 (5)
|
||||||
Total
|
1,558,806
|
$27.43 (2)
|
4,417,316
|
(1)
|
This figure includes (a) 303,407 stock options outstanding under the Ashland Inc. 1997 Stock Incentive Plan, (b) 570,817 stock options outstanding under the Amended and Restated Ashland Inc. Incentive Plan (the Amended Plan), and (c) 334,829 restricted stock shares granted under the Amended Plan and deferred. This figure also includes 118,708 performance share units for the 2007-2009 performance
period and 109,723 performance share units for the 2008-2010 performance period, payable in stock issued under the 2006 Ashland Inc. Incentive Plan (the 2006 Plan), estimated assuming target performance is achieved. Also included in the figure are 93,080 shares to be issued under the Deferred Compensation Plan, payable in stock upon termination of employment with Ashland.
|
(2)
|
This weighted-average exercise price excludes shares of Ashland Common Stock which may be distributed under the deferred compensation plans for employees and the deferred restricted stock and performance share units which may be distributed under the Amended Plan and 2006 Plan as described in footnotes (1) and (4) in this table.
|
(3)
|
This figure includes 2,871,382 shares available for issuance under the 2006 Plan, 232,441 shares available for issuance under the Deferred Compensation Plan and 346,016 shares available for issuance under the Deferred Compensation Plan for Non-Employee Directors.
|
(4)
|
This figure includes 1,068 stock options issued pursuant to the Ashland Inc. Stock Option Plan for Employees of Joint Ventures which was not approved by Ashlands shareholders. There are currently no shares reserved for future issuance under this plan. All remaining stock options granted under this plan expired on October 17, 2008. Also included in this figure are
27,174 shares to be issued under the Deferred Compensation Plan for Employees (2005), payable in stock upon termination of employment with Ashland.
|
(5)
|
This figure includes 469,017 shares available for issuance under the Deferred Compensation Plan for Employees (2005) and 498,460 shares available for issuance under the Deferred Compensation Plan for Non-Employee Directors (2005). Because these plans are not equity compensation plans as defined by the rules of the New York Stock Exchange, neither plan required approval by Ashlands shareholders.
|
|
3.1
|
-
|
Third Restated Articles of Incorporation of Ashland effective May 17, 2006 (filed as Exhibit 3(i) to Ashlands Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference).
|
|
3.2
|
-
|
By-laws of Ashland, effective as of June 30, 2005 (filed as Exhibit 3(ii) to Ashlands Form 10-Q for the quarter ended June 30, 2005, and incorporated herein by reference).
|
|
4.1
|
-
|
Ashland agrees to provide the SEC, upon request, copies of instruments defining the rights of holders of long-term debt of Ashland and all of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed with the SEC.
|
|
4.2
|
-
|
Indenture, dated as of August 15, 1989, as amended and restated as of August 15, 1990, between Ashland and Citibank, N.A., as Trustee.
|
|
4.3
|
-
|
Agreement of Resignation, Appointment and Acceptance, dated as of November 30, 2006, by and among Ashland, Wilmington Trust Company (Wilmington) and Citibank, N.A. (Citibank) whereby Wilmington replaced Citibank as Trustee under the Indenture dated as of August 15, 1989, as amended and restated as of August 15, 1990, between Ashland and Citibank (filed as Exhibit 4 to Ashlands Form 10-Q
for the quarter ended December 31, 2006, and incorporated herein by reference).
|
|
4.4
|
-
|
Warrant Agreement dated July 27, 1999 between Hercules and The Chase Manhattan Bank, as warrant agent. (Filed as Exhibit 4.4 to Hercules Current Report on Form 8-K, dated July 27, 1999 (SEC File No. 001-00496), and incorporated herein by reference).
|
|
4.5
|
-
|
Form of Series A Junior Subordinated Deferrable Interest Debentures (Filed as Exhibit 4.5 to Hercules Current Report on Form 8-K, dated July 27, 1999 (SEC File No. 001-00496), and incorporated herein by reference).
|
|
4.6
|
-
|
Form of CRESTS
SM
Unit (filed as Exhibit 4.7 to Hercules Current Report on Form 8-K, dated July 27, 1999 (SEC File No. 001-00496), and incorporated herein by reference).
|
|
4.7
|
-
|
Form of Warrant (filed as Exhibit 4.8 to Hercules Current Report on Form 8-K, dated July 27, 1999 (SEC File No. 001-00496), and incorporated herein by reference).
|
|
10.1
|
-
|
Ashland Inc. Deferred Compensation Plan for Non-Employee Directors and Amendment No. 1 (filed as Exhibit 10.5 to Ashlands Form 10-Q for the quarter ended December 31, 2004, and incorporated herein by reference).
|
|
10.
2
|
-
|
Ashland Inc. Deferred Compensation Plan and Amendment No. 1 (filed as Exhibit 10.3 to Ashlands Form 10-Q for the quarter ended December 31, 2004, and incorporated herein by reference).
|
|
10.3
|
-
|
Amended and Restated Ashland Inc. Deferred Compensation Plan for Employees (2005).
|
|
10.4
|
-
|
Amended and Restated Ashland Inc. Deferred Compensation Plan for Non-Employee Directors (2005).
|
|
10.5
|
-
|
Amended and Restated Ashland Inc. Supplemental Early Retirement Plan for Certain Employees.
|
|
10.6
|
-
|
Amended and Restated Ashland Inc. Nonqualified Excess Benefit Pension Plan.
|
|
10.7
|
-
|
Hercules Incorporated Amended and Restated Long Term Incentive Compensation Plan (filed as Exhibit 10-K to Hercules Annual Report on Form 10-K, filed March 29, 2000 (SEC File No. 001-00496), and incorporated herein by reference).
|
|
10.8
|
-
|
Amendment 2002-1 to Amended and Restated Long Term Incentive Compensation Plan (filed as Exhibit I, Proxy Statement, dated May 15, 2002 (SEC File No. 001-00496), and incorporated herein by reference).
|
|
10.9
|
-
|
Hercules Incorporated Omnibus Equity Compensation Plan for Non-Employee Directors (filed as Appendix II, Proxy Statement, dated June 20, 2003 (SEC File No. 001-00496), and incorporated herein by reference).
|
|
10.10
|
-
|
Hercules Incorporated 1993 Non-Employee Director Stock Accumulation and Deferred Compensation Plan (filed as Exhibit 4.1, Registration Statement on Form S-8, filed July 16, 1993 (SEC File No. 33-66136), and incorporated herein by reference).
|
|
10.11
|
-
|
Amendment 2002-1 to Non-Employee Director Stock Accumulation Plan (filed as Exhibit II, Proxy Statement, dated May 15, 2002 (SEC File No. 001-00496), and incorporated herein by reference).
|
|
10.12
|
-
|
Ashland Inc. Salary Continuation Plan.
|
|
10.13
|
-
|
Form of Ashland Inc. Executive Employment Contract between Ashland and certain executives of Ashland (filed as Exhibit 10.1 to Ashlands Form 8-K filed on September 28, 2006, and incorporated herein by reference).
|
|
10.14
|
-
|
Employment Agreement between Ashland and John E. Panichella.
|
|
10.15
|
-
|
Employment Agreement between Ashland and Paul C. Raymond, III.
|
|
10.16
|
-
|
Form of Indemnification Agreement between Ashland and members of its Board of Directors (filed as Exhibit 10.10 to Ashlands annual report on Form 10-K for fiscal year ended September 30, 2005, and incorporated herein by reference).
|
|
10.17
|
-
|
Ashland Inc. 1997 Stock Incentive Plan.
|
|
10.18
|
-
|
Amended and Restated Ashland Inc. Incentive Plan (filed as Exhibit 10.1 to Ashlands Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference).
|
|
10.19
|
-
|
2006 Ashland Inc. Incentive Plan (filed as Exhibit 10 to Ashlands Form 10-Q for the quarter ended December 31, 2005, and incorporated herein by reference).
|
|
10.20
|
-
|
Form of Notice granting Stock Appreciation Rights Awards.
|
|
10.21
|
-
|
Form of Notice granting Restricted Stock Awards.
|
|
10.22
|
-
|
Separation Agreement and General Release between Ashland and Gary A. Cappeline effective January 10, 2007 (filed as Exhibit 10.1 to Ashlands Form 10-Q for the quarter ended December 31, 2006, and incorporated herein by reference).
|
|
10.23
|
-
|
Agreement and Plan of Merger dated as of July 10, 2008 among Ashland, Ashland Sub-One, Inc. and Hercules Incorporated (filed as Exhibit 2.1 to Ashlands Form 8-K filed on July 14, 2008, and incorporated herein by reference).
|
|
10.24
|
-
|
Credit Agreement dated as of November 13, 2008 among Ashland, Bank of America, N.A., as Administrative Agent, The Bank of Nova Scotia, as Syndication Agent, the other Lenders party thereto, and Banc of America Securities LLC and The Bank of Nova Scotia, as Joint Lead Arrangers and Joint Book Managers (filed as Exhibit 10.1 to Ashlands Form 8-K filed on November 19, 2008, and incorporated herein by reference).
|
|
10.25
|
-
|
Interim Credit Agreement dated as of November 13, 2008 among Ashland, Banc of America Bridge LLC, as Administrative Agent, The Bank of Nova Scotia, as Syndication Agent, the other Lenders party thereto, and Banc of America Securities LLC and The Bank of Nova Scotia, as Joint Lead Arrangers and Joint Book Managers (filed as Exhibit 10.2 to Ashlands Form 8-K filed on November 19, 2008, and incorporated herein
by reference).
|
|
10.26
|
-
|
Transfer and Administration Agreement dated as of November 13, 2008 among CVG Capital II LLC, Ashland, in its capacity as both initial Originator and initial Servicer, each of YC SUSI Trust and Liberty Street Funding LLC, as Conduit Investors and Uncommitted Investors, Bank of America, National Association, as a Letter of Credit Issuer, a Managing Agent, an Administrator and a Committed Investor and as the Agent,
The Bank of Nova Scotia, as a Letter of Credit Issuer, a Managing Agent, an Administrator and a Committed Investor, and the Letter of Credit Issuers, Managing Agents, Administrators, Uncommitted Investors and Committed Investors parties thereto from time to time (filed as Exhibit 10.3 to Ashlands Form 8-K filed on November 19, 2008, and incorporated herein by reference).
|
|
10.27
|
-
|
Sale Agreement dated as of November 13, 2008 among Ashland and CVG Capital II LLC (filed as Exhibit 10.4 to Ashlands Form 8-K filed on November 19, 2008, and incorporated herein by reference).
|
|
11
|
-
|
Computation of Earnings Per Share (appearing on page F-13 of this annual report on Form 10-K).
|
|
12
|
-
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
21
|
-
|
List of Subsidiaries.
|
|
23.1
|
-
|
Consent of Independent Registered Public Accounting Firm.
|
|
23.2
|
-
|
Consent of Hamilton, Rabinovitz & Associates, Inc.
|
|
24
|
-
|
Power of Attorney, including resolutions of the Board of Directors.
|
|
31.1
|
-
|
Certification of James J. OBrien, Chief Executive Officer of Ashland, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
-
|
Certification of Lamar M. Chambers, Chief Financial Officer of Ashland, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
-
|
Certification of James J. OBrien, Chief Executive Officer of Ashland, and Lamar M. Chambers, Chief Financial Officer of Ashland, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
ASHLAND INC. | |||
(Registrant) | |||
|
By:
|
||
/s/ Lamar M. Chambers | |||
Lamar M. Chambers | |||
Senior Vice President, Chief Financial Officer and Controller | |||
Date: November 26, 2008 |
*By:
|
/s/ David L.
Hausrath
|
|
David L. Hausrath
|
|
Attorney-in-Fact
|
2008
|
2007
|
2006
|
||||||||||
North America
|
71%
|
72%
|
79%
|
|||||||||
Europe
|
21%
|
20%
|
16%
|
|||||||||
Asia Pacific
|
5%
|
5%
|
3%
|
|||||||||
Latin America & other
|
3%
|
3%
|
2%
|
|||||||||
100%
|
100%
|
100%
|
Sales and Operating Revenues by Business Segment
|
2008
|
2007
|
2006
|
|||||||||
Performance Materials
|
19%
|
18%
|
18%
|
|||||||||
Distribution
|
51%
|
51%
|
56%
|
|||||||||
Valvoline
|
19%
|
20%
|
19%
|
|||||||||
Water Technologies
|
11%
|
11%
|
7%
|
|||||||||
100%
|
100%
|
100%
|
2008
|
2007
|
|||||||||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
change
|
change
|
|||||||||||||||
Sales and operating revenues
|
$
|
8,381
|
$
|
7,785
|
$
|
7,233
|
$
|
596
|
$
|
552
|
2008
|
2007
|
|||||||||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
change
|
change
|
|||||||||||||||
Cost of sales and operating expenses
|
$ | 7,056 | $ | 6,447 | $ | 6,030 | $ | 609 | $ | 417 | ||||||||||
Gross profit as a percent of sales
|
16 | % | 17 | % | 17 | % |
2008
|
2007
|
|||||||||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
change
|
change
|
|||||||||||||||
Selling, general and administrative expenses
|
$ | 1,166 | $ | 1,171 | $ | 1,077 | $ | (5 | ) | $ | 94 | |||||||||
As a % of revenues
|
14 | % | 15 | % | 15 | % |
2008
|
2007
|
|||||||||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
change
|
change
|
|||||||||||||||
Equity and other income
|
||||||||||||||||||||
Equity income
|
$ | 23 | $ | 15 | $ | 11 | $ | 8 | $ | 4 | ||||||||||
Other income
|
31 | 34 | 33 | (3 | ) | 1 | ||||||||||||||
$ | 54 | $ | 49 | $ | 44 | $ | 5 | $ | 5 |
2008
|
2007
|
|||||||||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
change
|
change
|
|||||||||||||||
Gain (loss) on the MAP Transaction
|
$ | 20 | $ | (3 | ) | $ | (5 | ) | $ | 23 | $ | 2 |
2008
|
2007
|
|||||||||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
change
|
change
|
|||||||||||||||
Net interest and other financing income
|
||||||||||||||||||||
Interest income
|
$ | 40 | $ | 59 | $ | 59 | $ | (19 | ) | $ | - | |||||||||
Interest expense
|
(9 | ) | (10 | ) | (8 | ) | 1 | (2 | ) | |||||||||||
Other financing costs
|
(3 | ) | (3 | ) | (4 | ) | - | 1 | ||||||||||||
$ | 28 | $ | 46 | $ | 47 | $ | (18 | ) | $ | (1 | ) |
2008
|
2007
|
|||||||||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
change
|
change
|
|||||||||||||||
Income tax expense
|
$ | 86 | $ | 58 | $ | 29 | $ | 28 | $ | 29 | ||||||||||
Effective tax rate
|
32.9 | % | 22.3 | % | 13.6 | % |
2008
|
2007
|
|||||||||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
change
|
change
|
|||||||||||||||
Income (loss) from discontinued operations (net of tax)
|
||||||||||||||||||||
APAC
|
||||||||||||||||||||
Income from operations
|
$ | 1 | $ | 2 | $ | 115 | $ | (1 | ) | $ | (113 | ) | ||||||||
(Loss) gain on sale of operations
|
(7 | ) | (7 | ) | 110 | - | (117 | ) | ||||||||||||
Asbestos-related litigation reserves
|
(2 | ) | 35 | (1 | ) | (37 | ) | 36 | ||||||||||||
Electronic Chemicals
|
- | (1 | ) | - | 1 | (1 | ) | |||||||||||||
$ | (8 | ) | $ | 29 | $ | 224 | $ | (37 | ) | $ | (195 | ) |
(In millions)
|
2008
|
2007
|
2006
|
|||||||||
Quarterly operating income
|
||||||||||||
December 31
|
$ | 46 | $ | 58 | $ | 46 | ||||||
March 31
|
52 | 41 | 49 | |||||||||
June 30
|
87 | 91 | 47 | |||||||||
September 30
|
28 | 26 | 28 |
(In millions)
|
2008
|
2007
|
2006
|
|||||||||
Sales and operating revenues
|
||||||||||||
Performance Materials
|
$ | 1,621 | $ | 1,580 | $ | 1,425 | ||||||
Distribution
|
4,374 | 4,031 | 4,070 | |||||||||
Valvoline
|
1,662 | 1,525 | 1,409 | |||||||||
Water Technologies
|
893 | 818 | 502 | |||||||||
Intersegment sales
|
(169 | ) | (169 | ) | (173 | ) | ||||||
$ | 8,381 | $ | 7,785 | $ | 7,233 | |||||||
Operating income
|
||||||||||||
Performance Materials
|
$ | 52 | $ | 89 | $ | 112 | ||||||
Distribution
|
51 | 41 | 120 | |||||||||
Valvoline
|
83 | 86 | (21 | ) | ||||||||
Water Technologies
|
10 | 16 | 14 | |||||||||
Unallocated and other
(a)
|
17 | (16 | ) | (55 | ) | |||||||
$ | 213 | $ | 216 | $ | 170 | |||||||
Operating information
|
||||||||||||
Performance Materials
(b)
|
||||||||||||
Sales per shipping day
|
$ | 6.4 | $ | 6.1 | $ | 5.7 | ||||||
Pounds sold per shipping day
|
4.9 | 4.9 | 4.9 | |||||||||
Gross profit as a percent of sales
|
17.0 | % | 20.5 | % | 22.5 | % | ||||||
Distribution
(b)
|
||||||||||||
Sales per shipping day
|
$ | 17.3 | $ | 15.9 | $ | 16.2 | ||||||
Pounds sold per shipping day
|
18.8 | 19.6 | 20.3 | |||||||||
Gross profit as a percent of sales
|
7.8 | % | 7.9 | % | 9.5 | % | ||||||
Valvoline
(b)
|
||||||||||||
Lubricant sales gallons
|
169.2 | 167.1 | 168.7 | |||||||||
Premium lubricants (percent of U.S. branded volumes)
|
24.9 | % | 23.3 | % | 23.1 | % | ||||||
Gross profit as a percent of sales
|
23.0 | % | 24.8 | % | 19.9 | % | ||||||
Water Technologies
(b)
|
||||||||||||
Sales per shipping day
|
$ | 3.5 | $ | 3.1 | $ | 2.0 | ||||||
Gross profit as a percent of sales
|
36.7 | % | 39.2 | % | 43.7 | % |
(a)
|
Includes a $25 million charge for costs associated with Ashlands voluntary severance offer in 2007 and corporate costs previously allocated to APAC of $41 million in 2006.
|
(b)
|
Sales are defined as sales and operating revenues. Gross profit is defined as sales and operating revenues, less cost of sales and operating expenses.
|
2008
|
2007
|
2006
|
||||||||||
Cash (used) provided by:
|
||||||||||||
Operating activities from continuing operations
|
$ | 478 | $ | 189 | $ | 145 | ||||||
Investing activities from continuing operations
|
(418 | ) | (6 | ) | (285 | ) | ||||||
Financing activities from continuing operations
|
(70 | ) | (1,016 | ) | (472 | ) | ||||||
Discontinued operations
|
(8 | ) | (95 | ) | 1,445 | |||||||
Effect of currency exchange rate changes on cash and cash equivalents
|
7 | 5 | 2 | |||||||||
Net (decrease) increase in cash and cash equivalents
|
$ | (11 | ) | $ | (923 | ) | $ | 835 |
(In millions)
|
2008
|
2007
|
2006
|
|||||||||
Capital employed
|
||||||||||||
Performance Materials
|
$ | 795 | $ | 682 | $ | 505 | ||||||
Distribution
|
521 | 672 | 564 | |||||||||
Valvoline
|
485 | 501 | 489 | |||||||||
Water Technologies
|
333 | 359 | 322 |
2010- | 2012- |
Later
|
||||||||||||||||||
(In millions)
|
Total
|
2009
|
2011 | 2013 |
Years
|
|||||||||||||||
Contractual obligations
|
||||||||||||||||||||
Raw material and service contract purchase obligations
(a)
|
$ | 101 | $ | 53 | $ | 48 | $ | - | $ | - | ||||||||||
Employee benefit obligations
(b)
|
270 | 32 | 46 | 51 | 141 | |||||||||||||||
Operating lease obligations
(c)
|
215 | 42 | 67 | 49 | 57 | |||||||||||||||
Long-term debt
(d)
|
66 | 21 | 4 | 28 | 13 | |||||||||||||||
Unrecognized tax benefits
(e)
|
79 | 5 | 3 | 1 | 70 | |||||||||||||||
Total contractual obligations
|
$ | 731 | $ | 153 | $ | 168 | $ | 129 | $ | 281 | ||||||||||
Other commitments
|
||||||||||||||||||||
Letters of credit
(f)
|
$ | 102 | $ | 102 | $ | - | $ | - | $ | - |
(a)
|
Includes raw material and service contracts where minimal committed quantities and prices are fixed.
|
(b)
|
Includes estimated funding of Ashlands qualified U.S. and non-U.S. pension plans for 2009, as well as projected benefit payments through 2018 under Ashlands unfunded pension and other postretirement benefit plans. See Note N of Notes to Consolidated Financial Statements for additional information.
|
(c)
|
Includes leases for office buildings, retail outlets, transportation equipment, warehouses and storage facilities and other equipment. For further information see Note I of Notes to Consolidated Financial Statements.
|
(d)
|
Includes principal and interest payments. Capitalized lease obligations are not significant and are included in long-term debt. For further information see Note G of Notes to Consolidated Financial Statements.
|
(e)
|
Due to uncertainties in the timing of the effective settlement of tax positions with respect to taxing authorities, Ashland is unable to determine the timing of payments related to noncurrent unrecognized tax benefits, including interest and penalties. Therefore, these amounts were principally included in the Later Years column.
|
(f)
|
Ashland issues various types of letters of credit as part of its normal course of business. For further information see Note G of Notes to Consolidated Financial Statements.
|
(In millions)
|
2008
|
2007
|
2006
|
|||||||||
Increase in pension costs from
|
||||||||||||
Decrease in the discount rate
|
$ | 16 | $ | 24 | $ | 25 | ||||||
Increase in the salary adjustment rate
|
7 | 9 | 11 | |||||||||
Decrease in the expected return on plan assets
|
15 | 13 | 11 | |||||||||
Increase in other postretirement costs from
|
||||||||||||
Decrease in the discount rate
|
2 | 2 | 2 |
Page
|
||
Managements report on internal control over financial reporting ....................................................................................................................... |
F-2
|
|
Reports of independent registered public accounting firm ..................... .............................................................................................................. |
F-3
|
|
Consolidated financial statements:
|
||
Statements of consolidated income ..................... .............................................................................................................................................. |
F-5
|
|
Consolidated balance sheets ..................... .......................................................................................................................................................... |
F-6
|
|
Statements of consolidated stockholders equity ..................... ....................................................................................................................... |
F-7
|
|
Statements of consolidated cash flows ..................... ........................................................................................................................................ |
F-8
|
|
Notes to consolidated financial statements ................... ................................................................................................................................... |
F-9
|
|
Quarterly financial information ................................................................................................................................................................................ |
F-38
|
|
Consolidated financial schedule:
|
||
Schedule II – Valuation and qualifying accounts ............................................................................................................................................ |
F-38
|
|
Five-year selected financial information ..................... .............................................................................................................................................. |
F-39
|
/s/ James J. O'Brien | /s/ Lamar M. Chambers | ||
James J. O'Brien | Lamar M. Chambers | ||
Chairman of the Board and | Senior Vice President and | ||
Chief Financial Officer | Chief Financial Officer |
Ashland Inc. and Consolidated Subsidiaries
|
||||||||||||
Statements of Consolidated Income
|
||||||||||||
Years Ended September 30
|
||||||||||||
(In millions except per share data)
|
2008
|
2007
|
2006
|
|||||||||
Sales and operating revenues
|
$ | 8,381 | $ | 7,785 | $ | 7,233 | ||||||
Costs and expenses
|
||||||||||||
Cost of sales and operating expenses
|
7,056 | 6,447 | 6,030 | |||||||||
Selling, general and administrative expenses
|
1,166 | 1,171 | 1,077 | |||||||||
8,222 | 7,618 | 7,107 | ||||||||||
Equity and other income
- Notes A & D
|
54 | 49 | 44 | |||||||||
Operating income
|
213 | 216 | 170 | |||||||||
Gain (loss) on the MAP Transaction - Note C
(a)
|
20 | (3 | ) | (5 | ) | |||||||
Net interest and other financing income - Note G
|
28 | 46 | 47 | |||||||||
Income from continuing operations before income taxes
|
261 | 259 | 212 | |||||||||
Income taxes - Note K
|
86 | 58 | 29 | |||||||||
Income from continuing operations
|
175 | 201 | 183 | |||||||||
Income (loss) from discontinued operations (net of income taxes) - Note B
|
(8 | ) | 29 | 224 | ||||||||
Net income
|
$ | 167 | $ | 230 | $ | 407 | ||||||
Earnings per share - Note A
|
||||||||||||
Basic
|
||||||||||||
Income from continuing operations
|
$ | 2.78 | $ | 3.20 | $ | 2.57 | ||||||
Income (loss) from discontinued operations
|
(0.13 | ) | 0.46 | 3.16 | ||||||||
Net income
|
$ | 2.65 | $ | 3.66 | $ | 5.73 | ||||||
Diluted
|
||||||||||||
Income from continuing operations
|
$ | 2.76 | $ | 3.15 | $ | 2.53 | ||||||
Income (loss) from discontinued operations
|
(0.13 | ) | 0.45 | 3.11 | ||||||||
Net income
|
$ | 2.63 | $ | 3.60 | $ | 5.64 |
(a)
|
MAP Transaction refers to the June 30, 2005 transfer of Ashlands 38% interest in Marathon Ashland Petroleum LLC (MAP), Ashlands maleic anhydride business and 60 Valvoline Instant Oil Change centers in Michigan and northwest Ohio to Marathon Oil Corporation in a transaction valued at approximately $3.7 billion. See Note C for further information.
|
Ashland Inc. and Consolidated Subsidiaries
|
||||||||
Consolidated Balance Sheets
|
||||||||
September 30
|
||||||||
(In millions)
|
2008
|
2007
|
||||||
Assets
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 886 | $ | 897 | ||||
Available-for-sale securities - Note E
|
- | 155 | ||||||
Accounts receivable (less allowances for doubtful accounts of
|
||||||||
$33 million in 2008 and $41 million in 2007) - Note A
|
1,469 | 1,467 | ||||||
Inventories - Note A
|
494 | 610 | ||||||
Deferred income taxes - Note K
|
97 | 69 | ||||||
Other current assets
|
86 | 78 | ||||||
3,032 | 3,276 | |||||||
Investments and other assets
|
||||||||
Auction rate securities - Note E
|
243 | - | ||||||
Goodwill and other intangibles - Note F
|
408 | 377 | ||||||
Asbestos insurance receivable (noncurrent portion) - Note O
|
428 | 458 | ||||||
Deferred income taxes - Note K
|
154 | 157 | ||||||
Other noncurrent assets - Note H
|
394 | 435 | ||||||
1,627 | 1,427 | |||||||
Property, plant and equipment
- Note A
|
||||||||
Cost
|
||||||||
Land
|
82 | 79 | ||||||
Buildings
|
555 | 541 | ||||||
Machinery and equipment
|
1,520 | 1,390 | ||||||
Construction in progress
|
140 | 115 | ||||||
2,297 | 2,125 | |||||||
Accumulated depreciation and amortization
|
(1,185 | ) | (1,142 | ) | ||||
1,112 | 983 | |||||||
$ | 5,771 | $ | 5,686 | |||||
Liabilities and Stockholders Equity
|
||||||||
Current liabilities
|
||||||||
Current portion of long-term debt - Note G
|
$ | 21 | $ | 5 | ||||
Trade and other payables
|
1,209 | 1,141 | ||||||
Income taxes
|
- | 6 | ||||||
1,230 | 1,152 | |||||||
Noncurrent liabilities
|
||||||||
Long-term debt (noncurrent portion) - Note G
|
45 | 64 | ||||||
Employee benefit obligations - Note N
|
344 | 255 | ||||||
Asbestos litigation reserve (noncurrent portion) - Note O
|
522 | 560 | ||||||
Other noncurrent liabilities - Note H
|
428 | 501 | ||||||
1,339 | 1,380 | |||||||
Stockholders equity
- Notes L & M
|
||||||||
Common stock, par value $.01 per share, 200 million shares authorized
|
||||||||
Issued - 63 million shares in 2008 and 2007
|
1 | 1 | ||||||
Paid-in capital
|
33 | 16 | ||||||
Retained earnings
|
3,138 | 3,040 | ||||||
Accumulated other comprehensive income
|
30 | 97 | ||||||
3,202 | 3,154 | |||||||
$ | 5,771 | $ | 5,686 |
See Notes to Consolidated Financial Statements.
|
Ashland Inc. and Consolidated Subsidiaries
|
|||||||||||||||||||||
Statements of Consolidated Stockholders Equity
|
|||||||||||||||||||||
Accumulated
|
|||||||||||||||||||||
other
|
|||||||||||||||||||||
Common
|
Paid-in
|
Retained
|
comprehensive
|
||||||||||||||||||
(In millions)
|
stock
|
capital
|
earnings
|
income (loss)
|
(a)
|
Total
|
|||||||||||||||
Balance at September 30, 2005
|
$ | 1 | $ | 605 | $ | 3,251 | $ | (118 | ) | $ | 3,739 | ||||||||||
Total comprehensive income
(b)
|
407 | 74 | 481 | ||||||||||||||||||
Regular dividends, $1.10 per common share
|
2 | (80 | ) | (78 | ) | ||||||||||||||||
Special dividend, $10.20 per common share - Note L
|
5 | (679 | ) | (674 | ) | ||||||||||||||||
Issued 662,451 common shares under
|
|||||||||||||||||||||
stock incentive and other plans (c)
|
33 | 33 | |||||||||||||||||||
Repurchase of 6,670,930 common shares
|
(405 | ) | (405 | ) | |||||||||||||||||
Balance at September 30, 2006
|
1 | 240 | 2,899 | (44 | ) | 3,096 | |||||||||||||||
Total comprehensive income
(b)
|
230 | 184 | 414 | ||||||||||||||||||
Regular dividends, $1.10 per common share
|
(1 | ) | (68 | ) | (69 | ) | |||||||||||||||
Issued 728,839 common shares under
|
|||||||||||||||||||||
stock incentive and other plans (c)
|
44 | 44 | |||||||||||||||||||
Adoption of FAS 158, net of $27 million tax benefits
|
(43 | ) | (43 | ) | |||||||||||||||||
Repurchase of 4,712,000 common shares
|
(267 | ) | (21 | ) | (288 | ) | |||||||||||||||
Balance at September 30, 2007
|
1 | 16 | 3,040 | 97 | 3,154 | ||||||||||||||||
Total comprehensive income
(b)
|
167 | (67 | ) | 100 | |||||||||||||||||
Regular dividends, $1.10 per common share
|
(69 | ) | (69 | ) | |||||||||||||||||
Issued 151,821 common shares under
|
|||||||||||||||||||||
stock incentive and other plans (c)
|
17 | 17 | |||||||||||||||||||
Balance at September 30, 2008
|
$ | 1 | $ | 33 | $ | 3,138 | $ | 30 | $ | 3,202 |
(a)
|
At September 30, 2008 and 2007, the accumulated other comprehensive income (after-tax) of $30 million for 2008 and $97 million for 2007 was comprised of pension and postretirement obligations of $107 million for 2008 and $55 million for 2007, net unrealized translation gains of $157 million for 2008 and $153 million for 2007, net unrealized losses
on investment securities of $20 million for 2008, and net unrealized losses on cash flow hedges of $1 million for 2007.
|
(b)
|
Reconciliations of net income to total comprehensive income follow.
|
(In millions)
|
2008
|
2007
|
2006
|
|||||||||||||||||
Net income
|
$ | 167 | $ | 230 | $ | 407 | ||||||||||||||
Pension and postretirement obligation adjustment
|
(84 | ) | 165 | 76 | ||||||||||||||||
Related tax (expense) benefit
|
33 | (64 | ) | (29 | ) | |||||||||||||||
Unrealized translation gains
|
4 | 82 | 27 | |||||||||||||||||
Related tax benefit
|
- | - | 1 | |||||||||||||||||
Net unrealized losses on investment securities
|
(32 | ) | - | - | ||||||||||||||||
Related tax benefit
|
12 | - | - | |||||||||||||||||
Unrealized gains (losses) on cash flow hedges
|
- | 1 | (1 | ) | ||||||||||||||||
Total comprehensive income
|
$ | 100 | $ | 414 | $ | 481 |
Statements of Consolidated Cash Flows
|
||||||||||||
Years Ended September 30
|
||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
|||||||||
Cash flows from operating activities from continuing operations
|
||||||||||||
Net income
|
$ | 167 | $ | 230 | $ | 407 | ||||||
Loss (income) from discontinued operations (net of income taxes)
|
8 | (29 | ) | (224 | ) | |||||||
Adjustments to reconcile income from continuing operations
|
||||||||||||
to cash flows from operating activities
|
||||||||||||
Depreciation and amortization
|
145 | 133 | 111 | |||||||||
Deferred income taxes
|
44 | 22 | (1 | ) | ||||||||
Equity income from affiliates
|
(23 | ) | (15 | ) | (11 | ) | ||||||
Distributions from equity affiliates
|
13 | 10 | 5 | |||||||||
Gain from the sale of property and equipment
|
(2 | ) | (4 | ) | (1 | ) | ||||||
Stock based compensation expense
|
12 | 16 | 25 | |||||||||
(Gain) loss on the MAP Transaction - Note C
|
(20 | ) | 3 | 5 | ||||||||
Change in operating assets and liabilities (a)
|
134 | (177 | ) | (168 | ) | |||||||
Other items
|
- | - | (3 | ) | ||||||||
478 | 189 | 145 | ||||||||||
Cash flows from investing activities from continuing operations
|
||||||||||||
Additions to property, plant and equipment
|
(205 | ) | (154 | ) | (175 | ) | ||||||
Proceeds from the disposal of property, plant and equipment
|
10 | 27 | 21 | |||||||||
Purchase of operations - net of cash acquired
|
(129 | ) | (75 | ) | (183 | ) | ||||||
Proceeds from sale of operations
|
26 | - | - | |||||||||
Purchases of available-for-sale securities
|
(435 | ) | (484 | ) | (824 | ) | ||||||
Proceeds from sales and maturities of available-for-sale securities
|
315 | 680 | 876 | |||||||||
(418 | ) | (6 | ) | (285 | ) | |||||||
Cash flows from financing activities from continuing operations
|
||||||||||||
Proceeds from the exercise of stock options
|
3 | 19 | 18 | |||||||||
Excess tax benefits related to share-based payments
|
1 | 9 | 6 | |||||||||
Repayment of long-term debt
|
(5 | ) | (13 | ) | (13 | ) | ||||||
Repurchase of common stock
|
- | (288 | ) | (405 | ) | |||||||
Cash dividends paid
|
(69 | ) | (743 | ) | (78 | ) | ||||||
(70 | ) | (1,016 | ) | (472 | ) | |||||||
Cash used by continuing operations
|
(10 | ) | (833 | ) | (612 | ) | ||||||
Cash (used) provided by discontinued operations
|
||||||||||||
Operating cash flows
|
(8 | ) | (3 | ) | 197 | |||||||
Investing cash flows
|
- | (92 | ) | 1,248 | ||||||||
(8 | ) | (95 | ) | 1,445 | ||||||||
Effect of currency exchange rate changes on cash and cash equivalents - Note A
|
7 | 5 | 2 | |||||||||
(Decrease) increase in cash and cash equivalents
|
(11 | ) | (923 | ) | 835 | |||||||
Cash and cash equivalents - beginning of year
|
897 | 1,820 | 985 | |||||||||
Cash and cash equivalents - end of year
|
$ | 886 | $ | 897 | $ | 1,820 | ||||||
(Increase) decrease in operating assets
(a)
|
||||||||||||
Accounts receivable
|
$ | 10 | $ | (56 | ) | $ | (77 | ) | ||||
Inventories
|
126 | (75 | ) | (56 | ) | |||||||
Other current assets
|
(53 | ) | (22 | ) | 21 | |||||||
Investments and other assets
|
78 | 90 | (2 | ) | ||||||||
Increase (decrease) in operating liabilities
(a)
|
||||||||||||
Trade and other payables
|
57 | (103 | ) | 41 | ||||||||
Other current liabilities
|
(7 | ) | (20 | ) | (90 | ) | ||||||
Pension contributions
|
(25 | ) | (58 | ) | (111 | ) | ||||||
Noncurrent liabilities
|
(52 | ) | 67 | 106 | ||||||||
Change in operating assets and liabilities
|
$ | 134 | $ | (177 | ) | $ | (168 | ) | ||||
Supplemental disclosures
|
||||||||||||
Interest paid
|
$ | 10 | $ | 10 | $ | 9 | ||||||
Income taxes paid
|
53 | 25 | 140 |
(In millions)
|
2008
|
2007
|
||||||
Chemicals and plastics
|
$ | 549 | $ | 625 | ||||
Lubricants
|
127 | 117 | ||||||
Other products and supplies
|
18 | 23 | ||||||
Excess of replacement costs over LIFO carrying values
|
(200 | ) | (155 | ) | ||||
$ | 494 | $ | 610 |
2008
|
2007
|
2006
|
||||||||||
Numerator
|
||||||||||||
Numerator for basic and diluted EPS -
|
||||||||||||
Income from continuing operations
|
$ | 175 | $ | 201 | $ | 183 | ||||||
Denominator
|
||||||||||||
Denominator for basic EPS - Weighted-average
|
||||||||||||
common shares outstanding
|
63 | 63 | 71 | |||||||||
Share based awards convertible to common shares
|
1 | 1 | 1 | |||||||||
Denominator for diluted EPS - Adjusted weighted-
|
||||||||||||
average shares and assumed conversions
|
64 | 64 | 72 | |||||||||
EPS from continuing operations
|
||||||||||||
Basic
|
$ | 2.78 | $ | 3.20 | $ | 2.57 | ||||||
Diluted
|
2.76 | 3.15 | 2.53 |
2008
|
2007
|
2006
|
||||||||||
Revenues from discontinued operations
|
||||||||||||
APAC
(a)
|
$ | - | $ | - | $ | 2,730 | ||||||
Income (loss) from discontinued operations
|
||||||||||||
APAC
(a)
|
- | - | 176 | |||||||||
Asbestos-related litigation reserves, expenses and related receivables
|
(11 | ) | 35 | (2 | ) | |||||||
Gain (loss) on disposal of discontinued operations
|
||||||||||||
APAC
|
- | (6 | ) | 162 | ||||||||
Electronic Chemicals
|
- | (1 | ) | - | ||||||||
Income before income taxes
|
(11 | ) | 28 | 336 | ||||||||
Income tax (expense) benefit
|
||||||||||||
Benefit (expense) related to income (loss) from discontinued operations
|
||||||||||||
APAC | 1 | 2 | (61 | ) | ||||||||
Asbestos-related litigation reserves and expenses | 9 | - | 1 | |||||||||
Expense related to gain (loss) on disposal of discontinued operations
|
||||||||||||
APAC | (7 | ) | (1 | ) | (52 | ) | ||||||
Income from discontinued operations (net of income taxes)
|
$ | (8 | ) | $ | 29 | $ | 224 | |||||
(a)
|
APAC revenues and income for 2006 were for the eleven months ended August 28, 2006.
|
(In millions)
|
2008
|
2007
|
2006
|
|||||||||
Financial position
|
||||||||||||
Current assets
|
$ | 254 | $ | 217 | ||||||||
Current liabilities
|
(120 | ) | (104 | ) | ||||||||
Working capital
|
134 | 113 | ||||||||||
Noncurrent assets
|
71 | 72 | ||||||||||
Noncurrent liabilities
|
(9 | ) | (14 | ) | ||||||||
Stockholders' equity
|
$ | 196 | $ | 171 | ||||||||
Results of operations
|
||||||||||||
Sales and operating revenues
|
$ | 655 | $ | 514 | $ | 426 | ||||||
Income from operations
|
75 | 51 | 40 | |||||||||
Net income
|
52 | 42 | 27 | |||||||||
Amounts recorded by Ashland
|
||||||||||||
Investments and advances
|
$ | 81 | $ | 73 | $ | 61 | ||||||
Equity income
|
23 | 15 | 11 | |||||||||
Distributions received
|
13 | 10 | 5 |
2008
|
2007
|
|||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
(In millions)
|
amount
|
value
|
amount
|
value
|
||||||||||||
Assets
|
||||||||||||||||
Cash and cash equivalents
|
$ | 886 | $ | 886 | $ | 897 | $ | 897 | ||||||||
Available-for-sale securities
|
- | - | 155 | 155 | ||||||||||||
Auction rate securities
(a)
|
243 | 243 | - | - | ||||||||||||
Investments of captive insurance companies
(b)
|
26 | 26 | 20 | 20 | ||||||||||||
Liabilities
|
||||||||||||||||
Long-term debt (including current portion)
|
66 | 68 | 69 | 76 |
(a)
|
Classified as noncurrent in the Consolidated Balance Sheets. Previously these securities were classified as current and included in the available-for-sale securities caption in the Consolidated Balance Sheets.
|
(b)
|
Included in other noncurrent assets in the Consolidated Balance Sheets.
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
As of September 30, 2008
|
cost
|
gain
|
loss
|
value
|
||||||||||||
Student loan auction rate securities
|
$ | 275 | $ | - | $ | (32 | ) | $ | 243 | |||||||
(In millions)
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||||
As of September 30, 2007
|
cost
|
gain
|
loss
|
value
|
||||||||||||
U.S. Treasury and government agencies
|
$ | 45 | $ | - | $ | - | $ | 45 | ||||||||
Obligations of states and political subdivisions
|
70 | - | - | 70 | ||||||||||||
Corporate debt securities
|
10 | - | - | 10 | ||||||||||||
Other securities
|
30 | - | - | 30 | ||||||||||||
Total
|
$ | 155 | $ | - | $ | - | $ | 155 |
Investment securities
|
||||||||
Amortized
|
Fair
|
|||||||
(In millions)
|
cost
|
value
|
||||||
Other securities:
|
||||||||
5-10 years
|
$ | 15 | $ | 14 | ||||
Over 10 years
|
260 | 229 | ||||||
Total
|
$ | 275 | $ | 243 |
Performance
|
Water
|
|||||||||||||||||||
(In millions)
|
Materials
|
Distribution
|
Valvoline
|
Technologies
|
Total
|
|||||||||||||||
Balance at September 30, 2006
|
$ | 110 | $ | 1 | $ | 29 | $ | 70 | $ | 210 | ||||||||||
Acquisitions
|
51 | - | 1 | (3 | ) | 49 | ||||||||||||||
Currency translation adjustment
|
5 | - | - | 4 | 9 | |||||||||||||||
Balance at September 30, 2007
|
166 | 1 | 30 | 71 | 268 | |||||||||||||||
Acquisitions
|
28 | - | - | 1 | 29 | |||||||||||||||
Currency translation adjustment
|
2 | - | - | - | 2 | |||||||||||||||
Balance at September 30, 2008
|
$ | 196 | $ | 1 | $ | 30 | $ | 72 | $ | 299 |
2008
|
2007
|
|||||||||||||||||||||||
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||||
carrying
|
Accumulated
|
carrying
|
carrying
|
Accumulated
|
carrying
|
|||||||||||||||||||
(In millions)
|
amount
|
amortization
|
amount
|
amount
|
amortization
|
amount
|
||||||||||||||||||
Trademarks and trade names
|
$ | 67 | $ | (22 | ) | $ | 45 | $ | 63 | $ | (21 | ) | $ | 42 | ||||||||||
Intellectual property
|
54 | (21 | ) | 33 | 49 | (18 | ) | 31 | ||||||||||||||||
Other intangibles
|
51 | (20 | ) | 31 | 49 | (13 | ) | 36 | ||||||||||||||||
Total intangible assets
|
$ | 172 | $ | (63 | ) | $ | 109 | $ | 161 | $ | (52 | ) | $ | 109 |
2008
|
2007
|
|||||||
Medium-term notes, due 2013-2019, interest at a weighted-
|
||||||||
average rate of 8.4% at September 30, 2008 (7.7% to 9.4%)
|
$ | 21 | $ | 21 | ||||
8.80% debentures, due 2012
|
20 | 20 | ||||||
6.86% medium-term notes, Series H, due 2009
|
17 | 17 | ||||||
6.625% senior notes, due 2008
|
- | 3 | ||||||
Other
|
8 | 8 | ||||||
Total debt
|
66 | 69 | ||||||
Current portion of debt
|
(21 | ) | (5 | ) | ||||
Long-term debt (less current portion)
|
$ | 45 | $ | 64 |
(In millions)
|
2008
|
2007
|
2006
|
|||||||||
Interest income
|
$ | 40 | $ | 59 | $ | 59 | ||||||
Interest expense
|
(9 | ) | (10 | ) | (8 | ) | ||||||
Other financing costs
|
(3 | ) | (3 | ) | (4 | ) | ||||||
$ | 28 | $ | 46 | $ | 47 |
(In millions)
|
2008
|
2007
|
||||||
Deferred compensation investments
|
$ | 127 | $ | 152 | ||||
Equity investments
|
81 | 73 | ||||||
Tax receivables
|
49 | 49 | ||||||
Environmental insurance receivables
|
40 | 44 | ||||||
Investments of captive insurance companies
|
26 | 20 | ||||||
Note receivables
|
20 | 30 | ||||||
Debt defeasance assets
|
18 | 37 | ||||||
Other
|
33 | 30 | ||||||
$ | 394 | $ | 435 |
(In millions)
|
2008
|
2007
|
||||||
Environmental remediation reserves
|
$ | 112 | $ | 153 | ||||
Deferred compensation
|
101 | 144 | ||||||
Reserves of captive insurance companies (excluding environmental remediation reserves)
|
82 | 74 | ||||||
Other
|
133 | 130 | ||||||
$ | 428 | $ | 501 |
(In millions)
|
|||||||||||||||||
Future minimum rental payments
|
Rental expense
|
2008
|
2007
|
2006
|
|||||||||||||
2009
|
$
|
42
|
Minimum rentals
|
||||||||||||||
2010
|
37
|
(including rentals under
|
|||||||||||||||
2011
|
30
|
short-term leases)
|
$
|
59
|
$
|
60
|
$
|
53
|
|||||||||
2012
|
26
|
Contingent rentals
|
3
|
3
|
3
|
||||||||||||
2013
|
23
|
Sublease rental income
|
(1
|
) |
(2
|
) |
(2
|
) | |||||||||
Later years
|
57
|
$
|
61
|
$
|
61
|
$
|
54
|
||||||||||
$
|
215
|
Assets
|
||||
(In millions)
|
(liabilities)
|
|||
Accounts receivable
|
$ | 57 | ||
Inventories
|
33 | |||
Property, plant and equipment
|
56 | |||
Goodwill and other intangibles
|
59 | |||
Trade and other payables
|
(20 | ) | ||
Other noncurrent assets (liabilities) - net
|
(24 | ) | ||
$ | 161 |
(In millions)
|
2008
|
2007
|
2006
|
|||||||||
Current
|
||||||||||||
Federal
|
$ | 13 | $ | 5 | $ | (5 | ) | |||||
State
|
3 | (7 | ) | - | ||||||||
Foreign
|
26 | 38 | 35 | |||||||||
42 | 36 | 30 | ||||||||||
Deferred
|
44 | 22 | (1 | ) | ||||||||
Income tax expense
|
$ | 86 | $ | 58 | $ | 29 |
(In millions)
|
2008
|
2007
|
||||||
Deferred tax assets
|
||||||||
Employee benefit obligations
|
$ | 124 | $ | 92 | ||||
Environmental, self-insurance and litigation reserves (net of receivables)
|
78 | 83 | ||||||
Compensation accruals
|
75 | 90 | ||||||
Foreign net operating loss carryforwards
(a)
|
29 | 25 | ||||||
Uncollectible accounts receivable
|
9 | 11 | ||||||
Other items
|
47 | 28 | ||||||
Valuation allowances
(b)
|
(26 | ) | (23 | ) | ||||
Total deferred tax assets
|
336 | 306 | ||||||
Deferred tax liabilities
|
||||||||
Property, plant and equipment
|
75 | 75 | ||||||
Investment in unconsolidated affiliates
|
10 | 5 | ||||||
Total deferred tax liabilities
|
85 | 80 | ||||||
Net deferred tax asset
|
$ | 251 | $ | 226 |
(a)
|
Foreign net operating loss carryforwards will expire in future years as follows: $1 million in 2009, $1 million in 2010 and the remaining balance in other future years.
|
(b)
|
Valuation allowances primarily relate to the realization of recorded tax benefits on foreign net operating loss carryforwards.
|
2008
|
2007
|
2006
|
||||||||||
Income from continuing operations before income taxes
|
||||||||||||
United States
|
$ | 174 | $ | 163 | $ | 138 | ||||||
Foreign
|
87 | 96 | 74 | |||||||||
$ | 261 | $ | 259 | $ | 212 | |||||||
Income taxes computed at U.S. statutory rate (35%)
|
$ | 91 | $ | 91 | $ | 74 | ||||||
Increase (decrease) in amount computed resulting from
|
||||||||||||
Resolution and reevaluation of tax positions taken in prior years
|
(9 | ) | 9 | (16 | ) | |||||||
Life insurance (income) loss
|
9 | (7 | ) | (4 | ) | |||||||
(Gain) loss on MAP Transaction
|
(7 | ) | 1 | 2 | ||||||||
Net impact of foreign results
|
5 | (2 | ) | (5 | ) | |||||||
State income taxes
|
3 | (4 | ) | - | ||||||||
Business meals and entertainment
|
1 | 1 | 1 | |||||||||
Claim for research and development credits
|
(1 | ) | (3 | ) | (1 | ) | ||||||
Deductible dividends under employee stock ownership plan
|
(1 | ) | (15 | ) | (2 | ) | ||||||
Other items
|
(5 | ) | (13 | ) | (20 | ) | ||||||
Income tax expense
|
$ | 86 | $ | 58 | $ | 29 |
(In millions)
|
2008
|
|||
Balance at October 1, 2007
|
$ | 69 | ||
Increases related to positions taken on items from prior years
|
7 | |||
Decreases related to positions taken on items from prior years
|
(8 | ) | ||
Increases related to positions taken in 2008
|
13 | |||
Settlement of uncertain tax positions with tax authorities
|
(2 | ) | ||
Balance at September 30, 2008
|
$ | 79 |
(In millions)
|
2008
|
2007
|
2006
|
|||||||||
Stock options
|
$ | - | $ | - | $ | 1 | ||||||
SARs
|
7 | 7 | 7 | |||||||||
Performance share awards
|
3 | 6 | 13 | |||||||||
Nonvested stock awards
|
2 | 3 | 4 | |||||||||
$ | 12 | $ | 16 | $ | 25 | |||||||
Income tax benefit
|
$ | 5 | $ | 6 | $ | 10 |
(In millions except per share data)
|
2008
|
2007
|
2006
|
||||||||||
Weighted-average fair value per share of options or SARs granted
|
$
|
12.62
|
$
|
17.67
|
$
|
17.24
|
|||||||
Assumptions (weighted-average)
|
|||||||||||||
Risk-free interest rate
|
3.8 | % |
|
4.2 | % |
|
4.4 | % | |||||
Expected dividend yield
|
2.1 | % |
|
1.7 | % |
|
1.7 | % | |||||
Expected volatility
|
25.8 | % |
|
27.3 | % |
|
26.3 | % | |||||
Expected life (in years)
|
5.0
|
5.0
|
5.0
|
2008
|
2007
|
2006
|
||||||||||||||||||||||||
Number
|
Weighted-
|
Number
|
Weighted-
|
Number
|
Weighted-
|
|||||||||||||||||||||
of
|
average
|
of
|
average
|
of
|
average
|
|||||||||||||||||||||
common
|
exercise price
|
common
|
exercise price
|
common
|
exercise price
|
|||||||||||||||||||||
(In thousands except per share data)
|
shares
|
per share
|
shares
|
per share
|
shares
|
per share
|
||||||||||||||||||||
Outstanding - beginning of year
(a)
|
2,674 | $ | 36.07 | 2,602 | $ | 41.56 | 3,274 | $ | 39.74 | |||||||||||||||||
Granted
|
434 | 53.33 | 482 | 65.78 | 23 | 65.48 | ||||||||||||||||||||
Exercised
|
(173 | ) | 35.37 | (829 | ) | 31.15 | (678 | ) | 33.37 | |||||||||||||||||
Forfeitures and expirations
|
(47 | ) | 52.51 | (36 | ) | 53.63 | (17 | ) | 48.30 | |||||||||||||||||
Special dividend adjustment
(b)
|
- | - | 455 | - | - | - | ||||||||||||||||||||
Outstanding - end of year
(a)
|
2,888 | 43.92 |
(b)
|
2,674 | 41.99 |
(b)
|
2,602 | 41.56 | ||||||||||||||||||
Exercisable - end of year
|
2,234 | 39.91 | 2,064 | 36.07 | 2,181 | 39.21 |
(a)
|
Exercise prices per share for options and SARs outstanding at September 30, 2008 ranged from $19.11 to $19.75 for 161,000, $23.21 to $25.71 for 503,000 shares, from $32.28 to $38.47 for 660,000 shares, from $42.58 to $49.79 for 660,000 shares, and from $53.33 to $65.78 for 904,000 shares. The weighted-average remaining contractual life of outstanding stock options and SARs was
6.1 years and exercisable stock options and SARs was 5.5 years.
|
(b)
|
As described in Note M, Ashland distributed a special $10.20 dividend to each shareholder of record as of October 10, 2006. Adjustments were made to outstanding grants of stock options and SARs to maintain their intrinsic values. The number of shares was increased by a factor of 1.18 and the exercise prices were decreased by a factor of .85. These adjustments
did not result in an increase in the fair value of outstanding grants or any adjustment to expense recognition.
|
2008
|
2007
|
2006
|
||||||||||||||||||||||
Number
|
Weighted-
|
Number
|
Weighted-
|
Number
|
Weighted-
|
|||||||||||||||||||
of
|
average
|
of
|
average
|
of
|
average
|
|||||||||||||||||||
common
|
grant date
|
common
|
grant date
|
common
|
grant date
|
|||||||||||||||||||
(In thousands except per share data)
|
shares
|
fair value
|
shares
|
fair value
|
shares
|
fair value
|
||||||||||||||||||
Nonvested - beginning of year
|
424 | $ | 40.28 | 453 | $ | 39.19 | 459 | $ | 37.37 | |||||||||||||||
Granted
|
18 | 56.74 | 32 | 63.99 | 35 | 63.68 | ||||||||||||||||||
Vested
|
(136 | ) | 39.34 | (56 | ) | 43.70 | (25 | ) | 36.32 | |||||||||||||||
Forfeitures
|
(6 | ) | 59.62 | (5 | ) | 55.71 | (16 | ) | 45.07 | |||||||||||||||
Nonvested - end of year
|
300 | 40.86 | 424 | 40.28 | 453 | 39.19 |
Weighted-
|
||||||||||
Target
|
average
|
|||||||||
shares
|
fair value
|
|||||||||
(In thousands except per share data)
|
Performance period
|
granted
|
(a) |
per share
|
||||||
Fiscal Year 2008
|
October 1, 2007 - September 30, 2010
|
118 | $ | 50.55 | ||||||
Fiscal Year 2007
|
October 1, 2006 - September 30, 2009
|
142 | $ | 72.52 |
(a)
|
At the end of the performance period, the actual number of shares issued can range from zero to 200 percent of the target shares granted.
|
2008
|
2007
|
|
||||
Risk-free interest rate
|
3.5% - 3.7
|
% | 4.7% - 5.0 | % | ||
Expected dividend yield
|
1.7 | % | 1.8 | % | ||
Expected life (in years)
|
3.0
|
3.0
|
||||
Expected volatility
|
26.3 | % | 24.4 | % |
2008
|
2007
|
|||||||||||||||
Weighted-
|
Weighted-
|
|||||||||||||||
average
|
average
|
|||||||||||||||
grant date
|
grant date
|
|||||||||||||||
(In thousands except per share data)
|
Shares
|
fair value
|
Shares
|
fair value
|
||||||||||||
Nonvested - beginning of year
|
119 | $ | 72.52 | - | $ | - | ||||||||||
Granted
|
118 | 50.55 | 142 | 72.52 | ||||||||||||
Forfeitures
|
(10 | ) | 54.94 | (23 | ) | 72.52 | ||||||||||
Nonvested - end of year
|
227 | 61.87 | 119 | 72.52 |
At September 30, 2007
|
||||||||||||
Prior to
|
Effect of
|
Consolidated
|
||||||||||
Consolidated Balance Sheet Caption
|
adopting
|
adopting
|
Balance
|
|||||||||
(In millions)
|
FAS 158
|
FAS 158
|
Sheet
|
|||||||||
Assets
|
||||||||||||
Goodwill and other intangibles (pension intangible assets)
|
$ | 2 | $ | (2 | ) | $ | - | |||||
Deferred income taxes
|
57 | 27 | 84 | |||||||||
Liabilities
|
||||||||||||
Employee benefit obligations (current and long-term)
|
194 | 68 | 262 | |||||||||
Equity
|
||||||||||||
Accumulated other comprehensive income (loss)
|
(12 | ) | (43 | ) | (55 | ) |
Pension benefits
|
Other postretirement benefits
|
|||||||||||||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
||||||||||||||||||
Net periodic benefit costs
|
||||||||||||||||||||||||
Service cost
|
$ | 36 | $ | 37 | $ | 57 | $ | 5 | $ | 4 | $ | 7 | ||||||||||||
Interest cost
|
93 | 87 | 84 | 12 | 11 | 12 | ||||||||||||||||||
Curtailment
|
- | - | (1 | ) | - | 3 | (33 | ) | ||||||||||||||||
Special termination benefits - Note J
|
- | 8 | - | - | - | - | ||||||||||||||||||
Expected return on plan assets
|
(113 | ) | (102 | ) | (99 | ) | - | - | - | |||||||||||||||
Amortization of prior service cost (credit)
|
- | - | - | (3 | ) | 7 | (8 | ) | ||||||||||||||||
Amortization of net actuarial loss (gain)
|
5 | 17 | 40 | (3 | ) | (3 | ) | 1 | ||||||||||||||||
$ | 21 | $ | 47 | $ | 81 | $ | 11 | $ | 22 | $ | (21 | ) | ||||||||||||
Weighted-average plan assumptions
(a)
|
||||||||||||||||||||||||
Discount rate
|
6.16 | % | 5.66 | % | 5.42 | % | 5.96 | % | 5.64 | % | 5.33 | % | ||||||||||||
Rate of compensation increase
|
3.74 | % | 3.74 | % | 4.46 | % | - | - | - | |||||||||||||||
Expected long-term rate of
|
||||||||||||||||||||||||
return on plan assets | 7.62 | % | 7.58 | % | 8.26 | % | - | - | - |
(a)
|
The plan assumptions disclosed are a blended weighted-average rate for Ashlands U.S. and non-U.S. plans. The U.S. pension plan represented approximately 87% of the projected benefit obligation at September 30, 2008. Other postretirement benefit plans consist of U.S. and Canada, with the U.S. plan representing approximately 92% of the accumulated postretirement
benefit obligation at September 30, 2008. Non-U.S. plans use assumptions generally consistent with those of U.S. plans.
|
Other
|
||||||||
Pension
|
postretirement
|
|||||||
(In millions)
|
benefits
|
benefits
|
||||||
Net actuarial loss (gain)
|
$ | 16 | $ | (3 | ) | |||
Prior service cost (credit)
|
1 | (3 | ) | |||||
Total
|
$ | 17 | $ | (6 | ) |
Other postretirement
|
||||||||||||||||
Pension plans
|
benefit plans
|
|||||||||||||||
(In millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Change in benefit obligations
|
||||||||||||||||
Benefit obligations at October 1
|
$ | 1,562 | $ | 1,549 | $ | 205 | $ | 245 | ||||||||
Service cost
|
36 | 37 | 5 | 4 | ||||||||||||
Interest cost
|
93 | 87 | 12 | 11 | ||||||||||||
Curtailment
|
- | (2 | ) | - | 3 | |||||||||||
Special termination benefits
|
- | 8 | - | - | ||||||||||||
Participant contributions
|
2 | 1 | 11 | 11 | ||||||||||||
Benefits paid
|
(80 | ) | (75 | ) | (31 | ) | (28 | ) | ||||||||
Medicare Part D Act
|
- | - | 2 | 4 | ||||||||||||
Actuarial gain
|
(267 | ) | (63 | ) | (24 | ) | (59 | ) | ||||||||
Foreign currency exchange rate changes
|
(8 | ) | 17 | - | 1 | |||||||||||
Other
|
5 | 3 | - | 13 | ||||||||||||
Benefit obligations at September 30
|
$ | 1,343 | $ | 1,562 | $ | 180 | $ | 205 | ||||||||
Change in plan assets
|
||||||||||||||||
Value of plan assets at October 1
|
$ | 1,505 | $ | 1,311 | $ | - | $ | - | ||||||||
Actual (loss) return on plan assets
|
(261 | ) | 187 | - | - | |||||||||||
Employer contributions
|
25 | 58 | 20 | 17 | ||||||||||||
Participant contributions
|
2 | 1 | 11 | 11 | ||||||||||||
Benefits paid
|
(80 | ) | (75 | ) | (31 | ) | (28 | ) | ||||||||
Foreign currency exchange rate changes
|
(7 | ) | 13 | - | - | |||||||||||
Other
|
3 | 10 | - | - | ||||||||||||
Value of plan assets at September 30
|
$ | 1,187 | $ | 1,505 | $ | - | $ | - | ||||||||
Unfunded status of the plans
|
$ | (156 | ) | $ | (57 | ) | $ | (180 | ) | $ | (205 | ) | ||||
Amounts recognized in the balance sheet
|
||||||||||||||||
Noncurrent benefit assets
|
$ | - | $ | 74 | $ | - | $ | - | ||||||||
Current benefit liabilities
|
(6 | ) | (11 | ) | (14 | ) | (17 | ) | ||||||||
Noncurrent benefit liabilities
|
(150 | ) | (120 | ) | (166 | ) | (188 | ) | ||||||||
Net amount recognized
|
$ | (156 | ) | $ | (57 | ) | $ | (180 | ) | $ | (205 | ) | ||||
Weighted-average plan assumptions
|
||||||||||||||||
Discount rate
|
7.81 | % | 6.16 | % | 7.78 | % | 5.96 | % | ||||||||
Rate of compensation increase
|
3.73 | % | 3.74 | % | - | - |
Other postretirement
|
||||||||||||||||
Pension plans
|
benefit plans
|
|||||||||||||||
(In millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Net actuarial loss (gain)
|
$ | 98 | $ | 159 | $ | (21 | ) | $ | (45 | ) | ||||||
Prior service cost (credit)
|
4 | 2 | 3 | (26 | ) | |||||||||||
Total
|
$ | 102 | $ | 161 | $ | (18 | ) | $ | (71 | ) |
2008
|
2007
|
|||||||||||||||||||||||
Non-
|
Non-
|
|||||||||||||||||||||||
Qualified
|
qualified
|
Qualified
|
qualified
|
|||||||||||||||||||||
(In millions)
|
plans
(a)
|
plans
|
Total
|
plans
(a)
|
plans
|
Total
|
||||||||||||||||||
Projected benefit obligation
|
$ | 44 | $ | 75 | $ | 119 | $ | 48 | $ | 85 | $ | 133 | ||||||||||||
Accumulated benefit obligation
|
41 | 67 | 108 | 45 | 74 | 119 | ||||||||||||||||||
Fair value of plan assets
|
15 | - | 15 | 19 | - | 19 |
(a)
|
Includes qualified U.S. and non-U.S. pension plans.
|
Actual at September 30 | |||||||||
(In millions)
|
Target
|
2008
|
2007 | ||||||
Plan assets allocation
|
|||||||||
Equity securities
|
55 - 75 | % | 55 | % | 72 | % | |||
Debt securities
|
25 - 35 | % | 29 | % | 25 | % | |||
Other
|
5 - 15 | % | 16 | % | 3 | % | |||
100 | % | 100 | % |
Other postretirement benefits
|
|||||||||||||
Pension
|
With Medicare
|
Without Medicare
|
|||||||||||
(In millions)
|
benefits
|
Part D subsidy
|
Part D subsidy
|
||||||||||
2009
|
$ | 78 | $ | 15 | $ | 19 | |||||||
2010
|
81 | 16 | 20 | ||||||||||
2011
|
86 | 17 | 21 | ||||||||||
2012
|
91 | 17 | 22 | ||||||||||
2013
|
98 | 18 | 23 | ||||||||||
2014-2018
|
570 | 92 | 120 |
(In thousands)
|
2008
|
2007
|
2006
|
||||||||
Open claims - beginning of year
|
134
|
162
|
184
|
||||||||
New claims filed
|
4
|
4
|
6
|
||||||||
Claims settled
|
(2
|
) |
(2
|
) |
(3
|
) | |||||
Claims dismissed
|
(21
|
) |
(30
|
) |
(25
|
) | |||||
Open claims - end of year
|
115
|
134
|
162
|
(In millions)
|
2008
|
2007
|
2006
|
||||||||
Asbestos reserve - beginning of period
|
$ | 610 | $ | 635 | $ | 571 | |||||
Reserve adjustment
|
2 | 5 | 104 | ||||||||
Amounts paid
|
(40 | ) | (30 | ) | (40 | ) | |||||
Asbestos reserve - end of period
|
$ | 572 | $ | 610 | $ | 635 |
Revenues from
|
Property, plant
|
|||||||||||||||||||||||||||
external customers
|
Net assets
|
and equipment - net
|
||||||||||||||||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||||||||||
United States
|
$ | 5,549 | $ | 5,188 | $ | 5,312 | $ | 2,226 | $ | 2,211 | $ | 775 | $ | 720 | ||||||||||||||
International
|
2,832 | 2,597 | 1,921 | 976 | 943 | 337 | 263 | |||||||||||||||||||||
$ | 8,381 | $ | 7,785 | $ | 7,233 | $ | 3,202 | $ | 3,154 | $ | 1,112 | $ | 983 |
(a)
|
Intersegment sales are accounted for at prices that approximate market value.
|
(b)
|
Includes cash, cash equivalents, available-for-sale securities, property and other assets.
|
Ashland Inc. and Consolidated Subsidiaries
|
||||||||||||
Segment Information (continued)
|
||||||||||||
Years Ended September 30
|
||||||||||||
(In millions)
|
2008
|
2007
|
2006
|
|||||||||
Investment in equity affiliates
|
||||||||||||
Performance Materials
|
$ | 59 | $ | 49 | $ | 44 | ||||||
Valvoline
|
15 | 14 | 11 | |||||||||
Water Technologies
|
3 | 4 | 3 | |||||||||
Unallocated and other
|
4 | 6 | 3 | |||||||||
$ | 81 | $ | 73 | $ | 61 | |||||||
Expense (income) not affecting cash
|
||||||||||||
Depreciation and amortization
|
||||||||||||
Performance Materials
|
$ | 42 | $ | 36 | $ | 31 | ||||||
Distribution
|
24 | 22 | 21 | |||||||||
Valvoline
|
32 | 31 | 28 | |||||||||
Water Technologies
|
26 | 27 | 17 | |||||||||
Unallocated and other
|
21 | 17 | 14 | |||||||||
145 | 133 | 111 | ||||||||||
Other noncash items
(c)
|
||||||||||||
Performance Materials
|
(4 | ) | 7 | (12 | ) | |||||||
Distribution
|
2 | 3 | 12 | |||||||||
Valvoline
|
- | 7 | 6 | |||||||||
Water Technologies
|
1 | - | (1 | ) | ||||||||
Unallocated and other
|
27 | 19 | 15 | |||||||||
26 | 36 | 20 | ||||||||||
$ | 171 | $ | 169 | $ | 131 | |||||||
Property, plant and equipment - net
|
||||||||||||
Performance Materials
|
$ | 393 | $ | 318 | $ | 290 | ||||||
Distribution
|
205 | 204 | 192 | |||||||||
Valvoline
|
232 | 228 | 237 | |||||||||
Water Technologies
|
104 | 111 | 120 | |||||||||
Unallocated and other
|
178 | 122 | 111 | |||||||||
$ | 1,112 | $ | 983 | $ | 950 | |||||||
Additions to property, plant and equipment
|
||||||||||||
Performance Materials
|
$ | 48 | $ | 56 | $ | 58 | ||||||
Distribution
|
27 | 29 | 36 | |||||||||
Valvoline
|
42 | 28 | 38 | |||||||||
Water Technologies
|
17 | 24 | 23 | |||||||||
Unallocated and other
|
71 | 17 | 20 | |||||||||
$ | 205 | $ | 154 | $ | 175 |
(c)
|
Includes deferred income taxes, equity income from affiliates net of distributions and other items not affecting cash.
|
Quarters ended
|
December 31
|
March 31
|
June 30
|
September 30
|
||||||||||||||||||||||||||||
(In millions except per share data)
|
2007
|
2006
|
2008
|
2007
|
2008
|
2007
|
2008
|
(a) |
2007
|
(b) | ||||||||||||||||||||||
Sales and operating revenues
|
$ | 1,905 | $ | 1,803 | $ | 2,059 | $ | 1,915 | $ | 2,201 | $ | 1,983 | $ | 2,216 | $ | 2,085 | ||||||||||||||||
Operating income
|
46 | 58 | 52 | 41 | 87 | 91 | 28 | 26 | ||||||||||||||||||||||||
Income (loss) from continuing
|
||||||||||||||||||||||||||||||||
operations
|
38 | 53 | 72 | 31 | 66 | 86 | (1 | ) | 32 | |||||||||||||||||||||||
Net income (loss)
|
33 | 49 | 72 | 49 | 72 | 100 | (10 | ) | 32 | |||||||||||||||||||||||
Basic earnings per share
|
||||||||||||||||||||||||||||||||
Continuing operations
|
$ | .61 | $ | .82 | $ | 1.14 | $ | .49 | $ | 1.04 | $ | 1.37 | $ | (.01 | ) | $ | .52 | |||||||||||||||
Net income
|
.52 | .76 | 1.14 | .78 | 1.15 | 1.60 | (.15 | ) | .52 | |||||||||||||||||||||||
Diluted earnings per share
|
||||||||||||||||||||||||||||||||
Continuing operations
|
$ | .60 | $ | .81 | $ | 1.13 | $ | .49 | $ | 1.03 | $ | 1.35 | $ | (.01 | ) | $ | .51 | |||||||||||||||
Net income
|
.52 | .75 | 1.13 | .77 | 1.13 | 1.58 | (.15 | ) | .51 | |||||||||||||||||||||||
Regular cash dividends per share
|
$ | .275 | $ | .275 | $ | .275 | $ | .275 | $ | .275 | $ | .275 | $ | .275 | $ | .275 | ||||||||||||||||
Special cash dividend per share
(c)
|
- | $ | 10.20 | - | - | - | - | - | - | |||||||||||||||||||||||
Market price per common share
|
||||||||||||||||||||||||||||||||
High
|
$ | 68.99 | $ | 71.04 | $ | 49.88 | $ | 70.20 | $ | 58.58 | $ | 66.03 | $ | 48.97 | $ | 66.77 | ||||||||||||||||
Low
|
45.79 | 57.26 | 39.82 | 61.66 | 47.01 | 58.44 | 26.81 | 50.23 |
(a)
|
Fourth quarter results include a decrease in operating income of $7 million for severance costs associated with cost structure efficiency initiatives in Performance Materials and Water Technologies.
|
(b)
|
Fourth quarter results include an increase in operating income of $5 million related to the elimination of a one-month financial reporting lag for foreign operations and a decrease in income of $11 million related to foreign postretirement medical plans.
|
(c)
|
Ashland paid an additional dividend in October 2006 of $10.20 per share as part of the use of proceeds from the APAC divestiture. See Note B for further information.
|
Ashland Inc. and Consolidated Subsidiaries
|
||||||||||||||||||||
Schedule II - Valuation and Qualifying Accounts
|
||||||||||||||||||||
Balance at
|
Provisions
|
Balance
|
||||||||||||||||||
beginning
|
charged to
|
Reserves
|
Other
|
at end
|
||||||||||||||||
(In millions)
|
of year
|
earnings
|
utilized
|
changes
|
of year
|
|||||||||||||||
Year ended September 30, 2008
|
||||||||||||||||||||
Reserves deducted from asset accounts
|
||||||||||||||||||||
Accounts receivable
|
$ | 41 | $ | 10 | $ | (21 | ) | $ | 3 | $ | 33 | |||||||||
Inventories
|
13 | 2 | (4 | ) | - | 11 | ||||||||||||||
Year ended September 30, 2007
|
||||||||||||||||||||
Reserves deducted from asset accounts
|
||||||||||||||||||||
Accounts receivable
|
$ | 40 | $ | 24 | $ | (15 | ) | $ | (8 | ) | $ | 41 | ||||||||
Inventories
|
16 | 2 | (4 | ) | (1 | ) | 13 | |||||||||||||
Year ended September 30, 2006
|
||||||||||||||||||||
Reserves deducted from asset accounts
|
||||||||||||||||||||
Accounts receivable
|
$ | 33 | $ | 12 | $ | (11 | ) | $ | 6 | $ | 40 | |||||||||
Inventories
|
11 | 6 | (1 | ) | - | 16 |
Ashland Inc. and Consolidated Subsidiaries
|
||||||||||||||||||||
Five-Year Selected Financial Information
|
||||||||||||||||||||
Years Ended September 30
|
||||||||||||||||||||
(In millions except per share data)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
Summary of operations
|
||||||||||||||||||||
Sales and operating revenues
|
$ | 8,381 | $ | 7,785 | $ | 7,233 | $ | 6,731 | $ | 5,776 | ||||||||||
Costs and expenses
|
||||||||||||||||||||
Cost of sales and operating expenses
|
7,056 | 6,447 | 6,030 | 5,545 | 4,721 | |||||||||||||||
Selling, general and administrative expenses
|
1,166 | 1,171 | 1,077 | 1,079 | 968 | |||||||||||||||
8,222 | 7,618 | 7,107 | 6,624 | 5,689 | ||||||||||||||||
Equity and other income
|
54 | 49 | 44 | 564 | 438 | |||||||||||||||
Operating income
|
213 | 216 | 170 | 671 | 525 | |||||||||||||||
Gain (loss) on the MAP Transaction
|
20 | (3 | ) | (5 | ) | 1,284 | - | |||||||||||||
Loss on early retirement of debt
|
- | - | - | (145 | ) | - | ||||||||||||||
Net interest and other financing income (costs)
|
28 | 46 | 47 | (82 | ) | (114 | ) | |||||||||||||
Income from continuing operations
|
||||||||||||||||||||
before income taxes
|
261 | 259 | 212 | 1,728 | 411 | |||||||||||||||
Income tax (expense) benefit
|
(86 | ) | (58 | ) | (29 | ) | 230 | (100 | ) | |||||||||||
Income from continuing operations
|
175 | 201 | 183 | 1,958 | 311 | |||||||||||||||
Income (loss) from discontinued operations
|
(8 | ) | 29 | 224 | 46 | 67 | ||||||||||||||
Net income
|
$ | 167 | $ | 230 | $ | 407 | $ | 2,004 | $ | 378 | ||||||||||
Balance sheet information (as of September 30)
|
||||||||||||||||||||
Current assets
|
$ | 3,032 | $ | 3,276 | $ | 4,250 | $ | 3,757 | $ | 2,302 | ||||||||||
Current liabilities
|
1,230 | 1,152 | 2,041 | 1,545 | 1,815 | |||||||||||||||
Working capital
|
$ | 1,802 | $ | 2,124 | $ | 2,209 | $ | 2,212 | $ | 487 | ||||||||||
Total assets
|
$ | 5,771 | $ | 5,686 | $ | 6,590 | $ | 6,815 | $ | 7,502 | ||||||||||
Short-term debt
|
$ | - | $ | - | $ | - | $ | - | $ | 40 | ||||||||||
Long-term debt (including current portion)
|
66 | 69 | 82 | 94 | 1,508 | |||||||||||||||
Stockholders equity
|
3,202 | 3,154 | 3,096 | 3,739 | 2,706 | |||||||||||||||
Capital employed
|
$ | 3,268 | $ | 3,223 | $ | 3,178 | $ | 3,833 | $ | 4,254 | ||||||||||
Cash flow information
|
||||||||||||||||||||
Cash flows from operating activities from
|
||||||||||||||||||||
continuing operations
|
$ | 478 | $ | 189 | $ | 145 | $ | (76 | ) | $ | 33 | |||||||||
Additions to property, plant and equipment
|
205 | 154 | 175 | 180 | 137 | |||||||||||||||
Cash dividends
|
69 | 743 | 78 | 79 | 77 | |||||||||||||||
Common stock information
|
||||||||||||||||||||
Diluted earnings per share
|
||||||||||||||||||||
Income from continuing operations
|
$ | 2.76 | $ | 3.15 | $ | 2.53 | $ | 26.23 | $ | 4.36 | ||||||||||
Net income
|
2.63 | 3.60 | 5.64 | 26.85 | 5.31 | |||||||||||||||
Regular cash dividends per share
|
1.10 | 1.10 | 1.10 | 1.10 | 1.10 | |||||||||||||||
Special cash dividend per share - Note L
|
- | 10.20 | - | - | - |
1.
|
Unable to engage in any substantial gainful activity because of a medically determinable physical or mental impairment that is expected to result in death or last for a continuous period of 12 or more months; or
|
2.
|
Receiving income replacement benefits for a period of at least three months under an accident and health plan covering employees of the Company because of a medically determinable physical or mental impairment that is expected to result in death or last for a continuous period of 12 or more months.
|
1.
|
An illness or accident of the Participant, the Participants spouse or dependent (as defined in Internal Revenue Code section 152(a));
|
2.
|
A loss of the Participants property due to casualty; or
|
3.
|
Such other similar extraordinary unforeseeable circumstances because of events beyond the control of the Participant.
|
3.
|
SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION
|
6.
|
PARTICIPANT ACCOUNTS
|
8.
|
DEFERRAL ELECTION
|
1.
|
Upon a Participants Separation from Service as either a lump sum or in installments not exceeding 15 years; provided, however, that the distribution to a Participant who is a Specified Employee must not be made before the earliest of the date that is six months after the Participants Separation from Service or the date of the Participants
death;
|
2.
|
Upon a Participants death to the Participants Beneficiary as either a lump sum or in installments not exceeding 15 years from the date of the Participants death; or
|
3.
|
At a specified time or under a fixed schedule not exceeding 15 years from the Participants Separation from Service.
|
1.
|
Upon a Participants death to the Participants Beneficiary as either a lump sum or in installments not exceeding 15 years; or
|
2.
|
At a specified time or under a fixed schedule not less than two years measured from the beginning of the Plan Year after the Plan Year in which the Election is made and not exceeding 15 years measured from the beginning of the Plan Year after the Plan Year in which the Election is made.
|
1.
|
Upon a Participants Separation from Service and entitlement to a distribution under the Excess Plan and/or SERP, as applicable, as either a lump sum or in installments not exceeding 15 years from the date the Participant was entitled to a distribution under the Excess Plan and/or SERP, as applicable; provided, however, that the distribution to a
Participant who is a Specified Employee must not be made before the earliest of the date that is six months after the Participant was entitled to a distribution under the Excess Plan and/or SERP, as applicable or the date of the Participants death;
|
2.
|
Upon a Participants death to the Participants Beneficiary as either a lump sum or in installments not exceeding 15 years from the date of the Participants death; or
|
3.
|
At a specified time or under a fixed schedule not exceeding 15 years from the date the Participant incurred a Separation from Service and was entitled to a distribution under the Excess Plan and/or SERP, as applicable.
|
1.
|
Such an Election may not take effect until at least 12 months after it is made;
|
2.
|
Any delay to the distribution that would take effect because of the Election is at least to a date five years after the date the distribution otherwise would have begun; and
|
3.
|
In the case of a distribution that would be made under paragraphs (a)(3), (b)(2) or (c)(3) of this Section 9 such an Election may not be made less than 12 months before the date of the first scheduled payment.
|
1.
|
Distribution pursuant to a domestic relations order as described in Section 12;
|
2.
|
Distribution of a Participants or Beneficiarys Compensation Accounts shall be made in a single lump sum payment as soon as possible provided the distribution will be of the entirety of the Participants or Beneficiarys Compensation Accounts and the distribution does not exceed the adjusted Code section 402(g) limit; and
|
3.
|
Distribution or suspension of contributions may be made in the discretion of the Company for any other permitted purpose under Treas. Reg. section 1.409A-3(j)(4)(ii)-(xiv).
|
(a)
|
Initial Claim – Notice of Denial
. If any claim for benefits (within the meaning of section 503 of ERISA) is denied in whole or in part, the Company (which shall include the Company or its delegate throughout this Section 13) will provide
written notification of the denied claim to the Participant or beneficiary, as applicable, (hereinafter referred to as the claimant) in a reasonable period, but not later than 90 days after the claim is received. The 90-day period can be extended under special circumstances. If special circumstances apply, the claimant will be notified before the end of the 90-day period after the claim was received. The notice will identify the special circumstances. It will also specify the
expected date of the decision. When special circumstances apply, the claimant must be notified of the decision not later than 180 days after the claim is received.
|
(b)
|
Appeal of Denied Claim
. The claimant may file a written appeal of a denied claim with the Company in such manner as determined from time to time. The Company is the named fiduciary under ERISA for purposes of the appeal of the denied
claim. The Company may delegate its authority to rule on appeals of denied claims and any person or persons or entity to which such authority is delegated may re-delegate that authority. The appeal must be sent at least 60 days after the claimant received the denial of the initial claim. If the appeal is not sent within this time, then the right to appeal the denial is waived.
|
(i)
|
The reasons for the denial.
|
(ii)
|
Reference to the Plan provisions on which the denial is based. The reference need not be to page numbers or to section headings or titles. The reference only needs to sufficiently describe the provisions so that the provisions could be identified based on that description.
|
(iii)
|
A statement that the claimant may receive free of charge reasonable access to or copies of documents, records and other information relevant to the claim.
|
(iv)
|
A description of any voluntary procedure for an additional appeal, if there is such a procedure. It will also state that the claimant may file a civil action under section 502 of ERISA (ERISA – §29 U.S.C. 1132).
|
18.
|
EFFECTIVE DATE
|
(a)
|
"Accounting Date" means the Business Day on which a calculation concerning a Participant's Deferral Account is performed, or as otherwise defined by the Committee.
|
(b)
|
"Beneficiary" means the person(s) designated by a Participant in accordance with Article IV, Section 1.
|
(c)
|
"Board" means the Board of Directors of Ashland Inc. or its designee.
|
(d)
|
"Business Day" means a day on which the New York Stock Exchange is open for trading activity.
|
(e)
|
Change in Control shall be deemed to occur (1) upon 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 the Company (a Business Combination), other than a consolidation or merger of the Company into or with a direct or indirect wholly-owned
subsidiary, in which the shareholders of the Company own, directly or indirectly, less than 50% of the then outstanding shares of common stock of the Business Combination that are entitled to vote generally for the election of directors of the Business Combination or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially
the same proportionate ownership of common stock of the surviving corporation immediately after the merger, (B) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Ashland, provided, however, that no sale, lease, exchange or other transfer of all or substantially all the assets of Ashland shall be deemed to occur unless assets constituting 80% of the total assets of Ashland are transferred pursuant to such sale, lease
exchange or other transfer, or (C) adoption of any plan or proposal for the liquidation or dissolution of Ashland, (2) when any person (as defined in Section 3(a)(9) or 13(d) of the Exchange Act), other than Ashland or any subsidiary or employee benefit plan or trust maintained by Ashland, shall become the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 25% of Ashlands 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 Ashlands shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period.
|
(f)
|
Code means the Internal Revenue Code of 1986, as amended from time to time.
|
(g)
|
"Committee means the Governance and Nominating Committee of the Board or its designee.
|
(h)
|
"Common Stock" means the common stock, $.01 par value, of Ashland Inc.
|
(i)
|
"Common Stock Fund" means that investment option, approved by the Committee, in which a Participant's Deferral Account may be deemed to be invested and may earn income based on a hypothetical investment in Common Stock.
|
(j)
|
"Company" means Ashland Inc., its divisions and subsidiaries.
|
(k)
|
"Corporate Human Resources" means the Corporate Human Resources Department of the Company.
|
(l)
|
"Credit Date" means the date on which any Fees would otherwise have been paid to the Participant.
|
(m)
|
"Deferral Account" means the account(s) to which the Participant's Deferred Fees, Stock Units and Restricted Stock Units are credited and from which distributions are made. A Director who does not elect to defer Fees may still have a Deferral Account with a Restricted Stock Account (as defined in (z) of this Section 2).
|
(n)
|
"Deferred Fees" mean the Fees elected by the Participant to be deferred pursuant to the Plan.
|
(o)
|
"Director" means any non-employee director of the Company.
|
(p)
|
Disability means that a Participant is unable to engage in any substantial gainful activity because of a medically determinable physical or mental impairment that is expected to result in death or last for a continuous period of 12 or more months. Corporate Human Resources or its delegate shall determine whether a Participant has incurred
a Disability.
|
(q)
|
"Election" means a Participant's delivery of a written notice to the Vice-President of Human Resources for the Company (or his or her delegate) directing how his or her Fees will be paid under the terms of the Plan. The Committee or the Company may prescribe other means of making and delivering an Election. An Election
shall also include instructions specifying the time and form under which the Participants Deferral Account will be paid. Such elections shall be irrevocable except as otherwise provided in the Plan.
|
(r)
|
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
|
(s)
|
"Fair Market Value" means the price of a share of Common Stock, as reported on the Composite Tape for New York Stock Exchange on the date and at the time designated by the Company.
|
(t)
|
"Fees" mean the annual retainer and, as applicable, other additional retainers earned by a Director for service as a member of the Board during all or part of a calendar year.
|
(u)
|
"Participant" means a Director, regardless of whether the Director elects to defer the payment of any Fees.
|
(v)
|
"Payment Commencement Date" means the date payments of amounts deferred begin pursuant to Article III, Section 5.
|
(w)
|
Personal Representative means the person or persons who, upon the disability or incompetence of a Participant, have acquired on behalf of the Participant, by legal proceeding or otherwise, the right to receive the benefits specified in this Plan.
|
(x)
|
"Plan" means this Ashland Inc. Deferred Compensation Plan for Non-Employee Directors (2005) as it now exists or may be hereafter amended.
|
(y)
|
Restricted Stock Account means the portion of a Participants Stock Account that is separately accounted for and to which Restricted Stock Units are credited.
|
(z)
|
Restricted Stock Unit(s) means the share equivalents credited to a Participants Restricted Stock Account pursuant to Article III, Section 1.
|
(aa)
|
Secretary of the Treasury or Treasury means the United States Department of Treasury.
|
(bb)
|
"Stock Account means the portion of a Participants Deferral Account that is separately accounted for and to which Stock Units are credited.
|
(cc)
|
"Stock Unit(s)" means the share equivalents credited to a Participant's Stock Account pursuant to Article III, Section 1.
|
(gg)
|
"Termination" means retirement from the Board or termination of service as a Director for any other reason.
|
(hh)
|
Unforeseeable Emergency means a severe financial hardship of a Participant because of -
|
1.
|
An illness or accident of the Participant, the Participants spouse or dependent (as defined in Internal Revenue Code section 152(a));
|
2.
|
A loss of the Participants property due to casualty; or
|
3.
|
Such other similar extraordinary unforeseeable circumstances because of events beyond the control of the Participant.
|
3.
|
SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION
|
4.
|
DISTRIBUTION
|
1.
|
Upon a Participants separation from service, including death, as a Director as either a lump sum or in installments not exceeding 15 years; or
|
2.
|
At a specified time or under a fixed schedule not exceeding 15 years.
|
1.
|
Such an Election may not take effect until at least 12 months after it is made;
|
2.
|
Any delay to the distribution that would take effect because of the Election is at least to a date five years after the date the distribution otherwise would have begun; and
|
3.
|
In the case of a distribution that would be made under paragraph (a)(2) of this Section 4 such an Election may not be made less than 12 months before the date of the first scheduled payment.
|
1.01
|
Purpose
|
1.02
|
Effective Date
|
|
The Amended and Restated Ashland Inc. Supplemental Early Retirement Plan for Certain Employees is effective January 1, 2005, except as otherwise provided. This amended and restated Plan supersedes all prior versions of this Plan that were effective before January 1, 2005 with respect to Effective Retirement Dates that occur on or after such date, except as may otherwise be provided herein. The
rights and obligations of former Employees receiving Plan benefits before January 1, 2005 shall be governed by the terms of the Plan in effect at the time of each such former Employees Effective Retirement Date or at the time such an Employee otherwise ceased to be an Employee. Notwithstanding anything herein to the contrary, amendments to the Plan that were executed since July 1, 2003 through the date of the adoption of this amendment and restatement shall continue to apply hereafter according
to their respective terms; provided, however, that Amendment No. 1 to the Eleventh restatement of the Plan that was effective December 31, 2004 shall be null and void and treated as though never adopted.
|
ARTICLE II
.
|
DEFINITIONS
.
|
|
The following terms used herein shall have the following meanings unless the context otherwise requires:
|
2.01
|
Age
- means the age of an Employee as of his or her last birthday, except as may otherwise be provided under Sections 5.01 and 5.02 in the event of a Change in Control.
|
2.02
|
Annual Retirement Income
- means the lifetime annual income that would be payable to a Participant that is converted to the equivalent lump sum benefit payable under this Plan by Ashland commencing on such Participants Effective Retirement
Date, subject to the provisions of Section 5.04.
|
2.03
|
Ashland
- means Ashland Inc. and its present or future subsidiary corporations.
|
2.04
|
Board
- means the Board of Directors of Ashland and its designees.
|
2.05
|
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 the Company (a Business Combination),
other than a consolidation or merger of the Company into or with a direct or indirect wholly-owned subsidiary, in which the shareholders of the Company own, directly or indirectly, less than 50% of the then outstanding shares of common stock of the Business Combination that are entitled to vote generally for the election of directors of the Business Combination or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company
in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, (B) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Ashland, provided, however, that no sale, lease, exchange or other transfer of all or substantially all the assets of Ashland shall be deemed to occur unless
assets constituting 80% of the total assets of Ashland are transferred pursuant to such sale, lease exchange or other transfer, or (C) adoption of any plan or proposal for the liquidation or dissolution of Ashland, (2) when any person (as defined in Section 3(a)(9) or 13(d) of the Exchange Act), other than Ashland or any subsidiary or employee benefit plan or trust maintained by Ashland, shall become the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of more than 25% of Ashlands 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 Ashlands 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.
|
2.06
|
Change in Control Agreements
- means those contractual agreements, in effect from time to time, which are approved by the Board and which provide an Employee with benefits in the
event of a change in control as defined in such agreement or other benefits that may be included in such an agreement.
|
2.07
|
Committee
- means the Personnel and Compensation Committee of the Board and its designees.
|
2.08
|
Continuous Service
– means Continuous Service as defined in the Ashland Inc. and Affiliates Pension Plan, except as the determination of Continuous Service is modified for purposes
of this Plan.
|
2.09
|
Effective Retirement Date
– means:
|
|
(a)
|
In General
. The Effective Retirement Date of an Employee that is a Participant under Section 3.01 is whichever of the following applies, so long as the Participant has at least five years of Continuous Service.
|
(1)
|
The Effective Retirement Date is the first day of the month following the date a Participant incurs a Termination of Employment -
|
(i)
|
on or after the date the sum of the Participants Age and Continuous Service is 80; or
|
(ii)
|
on or after the date the Participant attains Age 55.
|
(2)
|
The Effective Retirement Date of a Participant that incurs a Termination of Employment before the dates specified in (1) above is the first day of the month following the date the Participant attains Age 55.
|
|
(b)
|
Change in Control
. The Effective Retirement Date in the event of a Change in Control of a Participant considered to be a Level I or II Participant who has a Change in Control Agreement shall be the first day of the month following (i)
such Participants termination for reasons other than Cause or (ii) such Participants resignation for Good Reason (as they are defined in the applicable Change in Control Agreement). The Effective Retirement Date in the event of a Change in Control of a Participant considered to be a Level III, IV or V Participant, or who is considered to be a Level I or II Participant and who does not have a Change in Control Agreement, shall be the first day of the month following
such Participants termination for reasons other than Cause. For Participants who do not have a Change in Control Agreement with Ashland, Cause shall have the meaning given to that word in Section 3.02. In the event a Change in Control, all Participants shall be completely vested in their Plan benefits, regardless of the number of their years of Continuous Service
|
2.10
|
Employee
– means, a common law employee of Ashland who is paid on the United States payroll of Ashland Inc.
|
2.11
|
Final Average Bonus
- means the Participants average bonus paid under the Incentive Compensation Plan (including amounts that may have been deferred) during the highest thirty-six (36) months out of the final eighty-four-month (84) period. The
calculation of the eighty-four month period shall be measured back from the Participants Termination of Employment that is nearest to or which is coincident with the Participants Effective Retirement Date. If the Participant becomes classified below a Level V Employee before the Termination of Employment identified in the preceding sentence, then the date of such change in classification is substituted for the said Termination Date. For these purposes, the bonus paid
for a particular month within a particular fiscal year under such plan shall be equal to the amount of such bonus actually paid
|
(regardless of the date paid, but excluding any adjustment for the deferral of such payment) to such Participant on account of such fiscal year divided by the number of months contained in such fiscal year which were used in determining the amount of such bonus actually paid to such Participant. The bonus paid that is used to compute the average described in this Section 2.11 shall only be a bonus that is paid to the Participant when such Participant is considered a Level III, IV or V Participant. |
2.12
|
Final Average Compensation
- means the average total compensation paid during the highest thirty-six months (36) out of the final eighty-four-month (84) period. The calculation of the eighty-four month period shall be measured back
from the Participants Termination of Employment that is nearest to or which is coincident with the Participants Effective Retirement Date. If the Participant becomes classified below a Level II Employee before the Termination of Employment identified in the preceding sentence, then the date of such change in classification is substituted for the said Termination Date. For these purposes, total compensation paid is the sum of the compensation paid and the
bonus paid during a particular month. Compensation paid shall be the base rate of compensation for such Participant in effect on the first day of such calendar month. Bonus paid shall have the same meaning as set forth in Section 2.11. In the event a payment is due under the Plan after a Change in Control because the Participant was terminated other than for Cause or resigned for Good Reason, the calculation of Final Average Compensation
shall include the amount paid under such Participants Change in Control Agreement. The amount so paid shall be divided by 36 to derive the monthly total compensation paid it represents. The total compensation paid that is used compute the average described in this Section 2.12 shall only be total compensation that is paid to the Participant when such Participant is considered a Level I or II Participant.
|
2.13
|
Incentive Compensation Plan
- means the annual bonus paid to Employees in base salary pay band grades 21 and above under the applicable incentive compensation plan.
|
2.14
|
Level I, II, III, IV or V Participant or Employee
– means, the following corresponding base salary pay band grades on the records of the Company or any succeeding equivalent compensation grade designations:
|
Level
|
Base Salary Pay Band Grade
|
|
Level I
|
2727-30
|
|
Level II
|
2525-26
|
|
Level III
|
2323-24
|
|
Level IV
|
2222
|
|
Level V
|
2121
|
2.15
|
Participant
– means an Employee that meets the applicable requirements of Article III and who has not incurred a Termination of Employment for Cause, as defined in Section 3.02. A former Employee that did not incur a Termination
of Employment for Cause and who has a benefit being paid or payable from the Plan is also a Participant. The term Participant includes Transition Participants, unless the context otherwise requires or unless expressly otherwise provided.
|
2.16
|
Plan
- means the Amended and Restated Ashland Inc. Supplemental Early Retirement Plan for Certain Employees, generally effective as of January 1, 2005, as set forth herein.
|
2.17
|
Service
- means the number of years and fractional years of employment by Ashland of an Employee, measured from the first day of the month coincident with or next succeeding his or her initial date of employment up to and including such Employees
Effective Retirement Date. For purposes of this Section 2.17, Service shall include an Employees employment with a subsidiary or an affiliate of Ashland determined in accordance with rules from time to time adopted or approved by the Board, or its delegate. Service shall be calculated based on the rules for calculating Periods of Service under the Ashland Inc. and Affiliates Pension Plan, except as the determination of Service is modified for purposes of this Plan or under any other
document that either directly or indirectly references the calculation of Service for purposes of the Plan.
|
2.18
|
Specified Employee
- means, for a particular calendar year, any Employee who was at anytime during the 12 months ending on the December 31 preceding the start of the particular calendar year (the Specified Employee identification date) classified
on the records of Ashland as being in base salary pay band grade 23 or higher. Such an Employee shall be classified as a Specified Employee as of January 1 of the particular calendar year (the Specified Employee effective date) and shall remain classified as such for the entirety of such calendar year. Notwithstanding anything to the contrary, no more than 200 Employees may be classified as Specified Employees for any calendar year. Unless otherwise provided in the particular
document, this definition of Specified Employee shall apply to all plans, programs, contracts, agreements and other arrangements maintained by the Company that are subject to Code section 409A.
|
2.19
|
Termination of Employment
– means a termination from employment resulting in a cessation of performing active service for Ashland
(other than by reason of death
or disability)
. An Employee is considered to incur a Termination of Employment on the date
the Employee terminates employment with Ashland or
when it is reasonably anticipated that
the Employee's
services to Ashland will permanently decrease to 20% or less of the average amount of services performed for Ashland during the immediately
preceding 36 month period (or period of total employment if less than 36 months). Notwithstanding anything in the foregoing to the contrary, a Termination of Employment does not occur as a result of military leave, sick leave or other
|
bona fide leave of absence not exceeding six months or the period during which the Employee retains a right to reemployment. | |
2.20 Transition Participant - means. the Employees on June 30, 2003 that were in an employment classification that potentially made them eligible for the Plan and that – | |
(a) were at least age 55 on June 30, 2003; or | |
(b) the sum of whose Age and Continuous Service was 80. | |
Transition Participants shall remain subject to the terms of the Plan in effect before July 1, 2003 addressing the calculation and amount of benefits. These Employees shall, however, be subject to the other changes that became effective thereafter and that apply to them as provided in the Plan as amended from time to time, such as those addressing the vesting of benefits and the change to the Effective Retirement Date. |
ARTICLE III
.
|
PARTICIPATION IN PLAN
.
|
|
Eligibility for benefits shall be determined as follows:
|
3.01
|
Participation after June 30, 2003
|
3.02
|
Termination for Cause
|
3.03
|
Automatic Vesting for Change in Control
|
ARTICLE IV
.
|
INTERACTION WITH CHANGE IN CONTROL AGREEMENTS
.
|
4.01
|
Terminations - General
|
4.02
|
Subsequent Activity in Conflict with Ashland
|
|
If a Participant wishes to accept employment or consulting activity which may be prohibited under this Section 4.02, such Participant may submit to Ashland written notice (Attention: Vice President Human Resources and Communications or any successor position thereto) of his or her wish to accept such employment or consulting activity. If within ten (10) business days following receipt of such notice Ashland
does not notify the Participant in writing of Ashlands objection to his or her accepting such employment or consulting activity, then such Participant shall be free to accept such employment or consulting activity for the period of time and upon the basis set forth in his or her written request.
|
|
In the event the provisions of this Section 4.02 are breached by a Participant, the Participant shall not be entitled to any additional payments hereunder (whether directly from this Plan or from a SERP Account for such Participant from the Ashland Inc. Deferred Compensation Plan for Employees (2005)) and shall be liable to repay to Ashland all amounts such Participant received prior to such breach. If
a Participant who breaches the provisions of this Section 4.02 received a
|
lump sum distribution of his or her benefit prior to such breach, such Participant shall be liable to repay to Ashland the amount of such distribution. If a Participant who breaches the provisions of this Section 4.02 deferred all or any part of a lump sum distribution hereunder to the Ashland Inc. Deferred Compensation Plan for Employees (2005), the amount so deferred shall be forfeited, and if any amount of the amount so deferred was distributed from the Ashland Inc. Deferred Compensation Plan for Employees (2005) before the breach occurred, the amount so distributed shall be repaid to Ashland. Any repayment of benefits hereunder shall be assessed interest at the rate applicable for the calculation of a lump sum payment under Section 5.04(b) for the month in which the breach occurs, with such interest compounded monthly from the month in which the breach occurs to the month in which such repayment is made to Ashland. Ashland shall have available to it all other remedies at law and equity to remedy a breach of this Section 4.02. |
ARTICLE V
.
|
RETIREMENT INCOME AND OTHER BENEFITS
.
|
5.01
|
LEVELS I AND II
.
|
|
The Transition Participants who are Level I or II Participants are eligible to receive Annual Retirement Income equal to:
|
|
(a)
|
Pre-Age 62 Benefit
|
|
A Transition Participant who retires under this Plan, including a Transition Participant to whom the provisions of paragraph (d) of this Section 5.01 apply, shall receive an Annual Retirement Income lump sum benefit for the period from and after the first day of the calendar month next following his or her Effective Retirement Date until the end of the month in which he or she attains age 62 equal to the greater
of (1) the amounts provided in the following schedule or (2) 50% of Final Average Compensation. Notwithstanding the previous sentence, in the event such Transition Participant retired with less than 20 years of Service, such Annual Retirement Income lump sum benefit amount shall be multiplied by a fraction (A) the numerator of which is such Transition Participants years of and fractional years of Service, and (B) the denominator of which is twenty (20).
|
|
% of
|
Retirement
|
Compensation
|
|
1st
|
-
|
Year After Effective
Retirement Date
|
75%
|
|
2nd
|
-
|
"
|
70%
|
|
3rd
|
-
|
"
|
65%
|
|
4th
|
-
|
"
|
60%
|
|
5th
|
-
|
"
|
55%
|
|
6th
|
-
|
Year and thereafter
to Age 62
|
50%
|
|
For purposes of this Section 5.01(a), % of Compensation shall mean the annualized average of the Transition Participants base monthly compensation rates (excluding incentive awards, bonuses, and any other form of extraordinary compensation) in effect with respect to Ashland on the first day of the thirty-six (36) consecutive calendar months which will give the highest average out of the one-hundred
twenty (120) consecutive calendar month period ending on the Transition Participants Effective Retirement Date.
|
|
(b)
|
Age 62 Benefit and Thereafter
|
|
From and after the first day of the calendar month next following his or her Effective Retirement Date, or the attainment of age 62, whichever is later, the Transition Participants Annual Retirement Income lump sum benefit amount shall be equal to 50% of Final Average Compensation; provided, however, that in the event such Transition Participant retired with less than 20 years of Service, such Annual Retirement
Income shall be 50% of Final Average Compensation multiplied by a fraction (A) the numerator of which is such Transition Participants years of and fractional years of Service, and (B) the denominator of which is twenty (20).
|
|
(c)
|
Benefit Reduction
|
|
The amount of benefit provided in paragraphs (a) and (b) of this
|
|
Section 5.01 shall be reduced by the sum of the following:
|
|
(1)
|
the Transition Participants benefit under the Ashland Inc. and Affiliates Pension Plan (the Pension Plan) (assuming 50% of such Transition Participants account under the Ashland Inc. Leveraged Employee Stock Ownership Plan were transferred to the Pension Plan, as allowed under the terms of each of the said plans and disregarding any benefit assignment under an approved qualified domestic relations
order affecting either the Pension Plan or the Ashland Inc. Leveraged Employee Stock Ownership Plan), determined on the basis of a single life annuity form of benefit;
|
|
(2)
|
the Transition Participants benefit under any other defined benefit pension plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended which is maintained by Ashland, determined by disregarding any benefit assignment under an approved qualified domestic relations order and on the basis of a single life annuity form of benefit (said plans referred to in sub-paragraphs (1)
|
and (2) of this paragraph (c) are hereinafter referred to jointly and severally as the Affected Plans); |
|
(3)
|
the Transition Participants benefit under the Ashland Inc. Nonqualified Excess Benefit Pension Plan, determined on the basis of a single life annuity form of benefit; and
|
|
(4)
|
the Transition Participants benefit under the Ashland Inc. ERISA Forfeiture Plan attributable to amounts which were forfeited under the Ashland Inc. Leveraged Employee Stock Ownership Plan, multiplied by 50%, and determined on the basis of a single life annuity benefit.
|
|
Because a Transition Participants benefit hereunder is payable as a lump sum, the reduction to such benefit shall be calculated based upon the lump sum actuarial present value of the benefits referred to in subparagraphs (1)-(4) of this paragraph (c). Such calculation shall be conducted on the basis that the benefits referred to in said subparagraphs (1)-(4) commence at the same time as of which
the benefit in this Plan is paid as a lump sum, using the Transition Participants attained age at the time of such commencement, unless otherwise required in paragraph (d) of this Section 5.01.
|
|
(1)
|
Participants Having Change in Control Agreements
. A Participant having a Change in Control Agreement who either is terminated without Cause or resigns for Good Reason after a Change in Control shall have the benefit
payable under this Section 5.01 computed by adding 3 years to the Participants Age and Service at the Participants Effective Retirement Date. These additions to Age and Service shall, except as otherwise provided, apply for purposes of computing the single life annuity payment to the Participant that is converted to Annual Retirement Income lump sum benefit amount, if applicable. A Participant subject to this paragraph (d)(1) whose Effective Retirement Date occurs before attaining
an actual age of 55 shall have the 3 year addition to Age apply when converting the single life annuity amount (if applicable) to the Annual Retirement Income lump sum benefit amount. If the Effective Retirement Date of a Participant subject to this paragraph (d)(1) occurs on or after the Participant attains an actual age of 55, then the Participant's actual age shall be used when making such a conversion. Notwithstanding anything to the contrary contained herein, when converting a Participant's
single life annuity (if applicable) to the lump sum payment, the Participant's actual age shall be used without reference to the additional 3 years. If the addition of 3 years to the Participants age results in an Age less
|
than 55 and the Participant commences the benefit, the amount of the benefit shall be adjusted to account for the fact it is paid before the Participants attainment of Age 55. This adjustment shall be based upon the early retirement table in Section 6.2 of the Ashland Inc. and Affiliates Pension Plan as it existed on September 30, 1999. When applying this table under these circumstances, age 55 shall be substituted for age 62 and adjustments for ages younger than those on the table shall be reasonably determined by an actuary or actuarial firm who regularly performs services in connection with the Plan. |
|
(2)
|
Participants Without Change in Control Agreements
. A Participant without a Change in Control Agreement who is terminated without Cause after a Change in Control shall have the benefit payable under this Section 5.01 computed
by adding the applicable amount to the Participants Age and Service at the Participants Effective Retirement Date. For these purposes, the applicable amount is derived from the following table.
|
Length of Participants Service at Separation from Employment
|
Number of Years
(the Applicable Amount)
|
Up to 5 years
|
3 months
|
More than 5 and up to 10 years
|
6 months
|
More than 10 and up to 15 years
|
1 year
|
More than 15 and up to 20 years
|
1 year and 6 months
|
More than 20 years
|
2 years
|
|
(e)
|
Benefit after June 30, 2003
. Subject to the applicable provisions of paragraph (d) above, the vested benefit payable to a Participant on the Effective Retirement Date for the period such Participant was deemed classified as a Level I
or II Participant is equal to 25% of Final Average Compensation multiplied by years of Service not to exceed 20 years of Service. Service includes full and fractional years. There is no reduction for commencement before age 62 and there is no increase for commencement after age 62. The normal form of the benefit so computed is a single lump sum payment. The benefit so payable shall be reduced by the actuarially equivalent (as defined below) lump sum benefit from the
following plans from which the Participant is entitled to a distribution:
|
(1)
|
the Ashland Inc. and Affiliates Pension Plan (the Pension Plan) (assuming 50% of such Participants account – if any - under the Ashland Inc. Leveraged Employee Stock Ownership Plan were transferred to the Pension Plan, as allowed under the terms of each of the said plans and disregarding any benefit assignment under an approved
qualified domestic relations order affecting either the Pension Plan or the Ashland Inc. Leveraged Employee Stock Ownership Plan);
|
(2)
|
the benefit under any other defined benefit pension plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended which is maintained by Ashland, determined by disregarding any benefit assignment under an approved qualified domestic relations order (said plans referred to in sub-paragraphs (1) and (2) of this paragraph (e) are hereinafter
referred to jointly and severally as the Affected Plans);
|
(3)
|
the benefit under the Ashland Inc. Nonqualified Excess Benefit Pension Plan; and
|
(4)
|
the benefit under the Ashland Inc. ERISA Forfeiture Plan attributable to amounts which were forfeited under the Ashland Inc. Leveraged Employee Stock Ownership Plan, multiplied by 50%.
|
|
(f)
|
Changes in Status
.
|
(1)
|
Subject to the applicable provisions of paragraph (d) above, a Participant that earned a benefit under this Section 5.01 and that also earned a benefit under Section 5.02 shall receive the greater of the two benefits produced.
|
(2)
|
If a Participant that earns a benefit hereunder is not considered to be a Level I, II, III, IV or V Participant on the earlier of the Participants Effective Retirement Date or Termination of Employment, then the Service after such Participant ceased to be considered a Level I, II, III, IV or V Participant shall be disregarded for purposes of computing
the benefit payable under the Plan. In that event, the only Service that shall be counted for purposes of computing the benefit payable under the Plan shall be the Service the Participant earned while considered to be a Level I, II, III, IV or V Participant. Notwithstanding anything in the foregoing to the contrary, such a Participant shall be credited with a minimum of five years of Service, so long as such Participant has at least five years of Continuous Service.
|
|
(g)
|
Specified Employee
. Notwithstanding anything contained in the Plan to the contrary, a Transition Participant or a Participant who is a Specified Employee shall have the distribution of his or her benefit which is made
on account of a Termination of Employment commence on a date that is not earlier than six months after his or her Termination of Employment.
|
5.02
|
LEVELS III, IV AND V
.
|
|
(a)
|
General
|
Length of Participants Service at Separation from Employment
|
Number of Years
(the Applicable Amount)
|
Up to 5 years
|
3 months
|
More than 5 and up to 10 years
|
6 months
|
More than 10 and up to 15 years
|
1 year
|
More than 15 and up to 20years
|
1 year and 6 months
|
More than 20 years
|
2 years
|
(c)
|
Benefit after June 30, 2003
. Subject to the applicable provisions of paragraph (b) above, the vested benefit payable to a Participant on the Effective Retirement Date for the period such Participant was deemed classified as a Level III,
IV or V Participant is equal to 25% of Final Average Bonus multiplied by years of Service not to exceed 20 years of Service. Service includes full and fractional years. There is no reduction for commencement before age 62 for Participants deemed classified as a Level III Participant at the Effective Retirement Date. There is no increase for commencement after age 62 for any Participant. There is an actuarial reduction to the benefit of a Participant that is deemed classified
as a Level IV or V Participant at the Effective Retirement Date. The actuarial reduction shall be made on the same basis as in the Ashland Inc. and Affiliates Pension Plan for the early commencement of a benefit in Articles 5, 6, and 7, as applicable. The appropriate actuarial reduction shall be determined as of the Effective Retirement Date. The normal form of the benefit so computed under this paragraph (c) is a single lump sum payment.
|
|
(d)
|
Changes in Status
.
|
(1)
|
Subject to the applicable provisions of paragraph (b) above, a Participant that earned a benefit under Section 5.02 and that also earned a benefit under Section 5.01 shall receive the greater of the two benefits produced.
|
(2)
|
If a Participant that earns a benefit hereunder is not considered to be a Level I, II, III, IV or V Participant on the earlier of the Participants Effective Retirement Date or Termination of Employment, then the Service after such Participant ceased to be considered a Level I, II, III, IV or V Participant shall be disregarded for purposes of computing
the benefit payable under the Plan. In that event, the only Service that shall be counted for purposes of computing
|
the benefit payable under the Plan shall be the Service the Participant earned while considered to be a Level I, II, III, IV or V Participant. Notwithstanding anything in the foregoing to the contrary, such a Participant shall be credited with a minimum of five years of Service, so long as such Participant has at least five years of Continuous Service. |
5.03
|
Benefits Payable for Less Than 12 Months
|
|
Subject to applicable transition rules under guidance issued by the Treasury under section 409A of the Code, Participants will have 30 days following the earlier of January 1, 2005 or the date they are first eligible for the Plan to elect a form of distribution from among those available under Section 5.04(b). Any subsequent change to that election shall be subject to the provisions of this paragraph (a),
sub-parts (1), (2) and (3), as applicable. In all other events, a Participant election is irrevocable. Notwithstanding anything in the foregoing to the contrary, any Participant who elects to change his or her election must meet the following requirements, as applicable –
|
(1)
|
The election may not take effect until at least 12 months after it is made;
|
(2)
|
If the distribution relates to a Termination of Employment, the first payment that would be made pursuant to the election would be at least five years after the amount otherwise would have been distributed but for this election, except in the event of the Participants death; and
|
(3)
|
The election must be made at least 12 months before the first scheduled payment that would have been payable at a specified time or pursuant to a fixed schedule.
|
|
A Participant may not accelerate the time or schedule of any payment under the Plan, except as provided in guidance from the Treasury under Internal Revenue Code section 409A.
|
(b) | Optional Forms of Payment |
|
(1)
|
Lump Sum Option
All benefits provided by the Plan shall be payable in a single lump sum payment, computed under the applicable provisions of Article V. A Participants benefit is payable as a lump sum
on the Effective Retirement Date (or as soon thereafter as reasonably possible), in a manner pursuant to a
|
Participants election under Section 5.04(a) under an option identified in one of the following sub-paragraphs of this Section 5.04(b). A lump sum benefit payable under the Plan to a Transition Participant shall be computed on the basis of the actuarially equivalent present value of such Transition Participants benefit under Article V based upon such actuarial assumptions as determined by the Committee. |
|
(2)
|
Default Lump Sum Deferral Option
If the Participant fails to make an election under Section 5.04(a) then the Participants benefit shall be transferred upon the Participants Effective Retirement Date (or
as soon thereafter as possible) to the Ashland Inc. Deferred Compensation for Employees (2005), or its successor, and held pursuant to the terms of such plan and thereafter distributed as provided thereunder. Notwithstanding the foregoing, if a Participant fails to make an election under this Plan, but does make an effective election for the distribution of a benefit under the Ashland Inc. Nonqualified Excess Benefit Pension Plan, then the distribution of the benefit hereunder shall be made in the
same manner as the Participant had elected under the said plan. In all events, a Participant who is a Specified Employee shall have the transfer or other distribution of his or her benefit which is made on account of a Termination of Employment commence on a date that is not earlier than six months after his or her Termination of Employment.
|
|
(3)
|
Lump Sum Payment Option
A Participant may elect to have his or her benefit paid as a single lump sum upon reaching his or her Effective Retirement Date. The benefit pursuant to such an election shall be
paid as soon thereafter as possible. In all events, a Participant who is a Specified Employee shall have the distribution of his or her benefit which is made on account of a Termination of Employment commence on a date that is not earlier than six months after his or her Termination of Employment.
|
|
(4)
|
Elective Lump Sum Deferral Option
A Participant may elect to have his or her benefit transferred to the Ashland Inc. Deferred Compensation Plan for Employees (2005), or any successor thereto, as a single lump sum upon
reaching his or her Effective Retirement Date, and held pursuant to the terms of such plan and thereafter distributed as provided thereunder. The benefit pursuant to such an election shall be transferred as soon as possible after the Effective Retirement Date. In all events, a Participant who is a Specified Employee shall have the transfer of his or her benefit which is made on account of a Termination of
|
Employment commence on a date that is not earlier than six months after his or her Termination of Employment. |
|
(5)
|
Time of Distribution or Transfer
Subject to the required delay of a distribution or transfer of a Plan benefit for a Participant who is a Specified Employee, the distribution or transfer of a benefit in the foregoing
sub-paragraphs of this Section 5.04(b) shall be paid by the later of (i) the end of the calendar year in which occurs the Participants Effective Retirement Date or (ii) the 15
th
day of the third calendar month following the Participants Effective Retirement Date.
|
|
5.05.
|
Distribution Exceptions
|
|
(1)
|
Distribution shall be made pursuant to a domestic relations order as described in Section 7.04;
|
|
(2)
|
Distribution of a benefit shall be made in a single lump sum payment as soon as possible after a Participants Termination of Employment if the distribution, when added to the amount that would be payable from the Ashland Inc. Nonqualified Excess Benefit Pension Plan will not exceed the adjusted Code section 402(g) limit; and
|
|
(3)
|
Distribution may be made in the discretion of Ashland for any other permitted purpose under Treas. Reg. section 1.409A-3(j)(4)(ii)-(xiv).
|
5.07
|
Participation in Other Benefits
|
|
Notwithstanding any provision of this Plan to the contrary, in the event of a Change in Control, an Employee who is deemed to be a Level I, II, III, IV or V Participant shall, in accordance with Section 3.03, automatically be deemed approved for participation under this Plan and shall be completely vested in his or her benefit. Consistent with the applicable terms of Sections 5.01 and 5.02, such a Participant
may, in his or her sole discretion, elect to retire prior to Age 62. In addition, Ashland (or its successor after the Change in Control) shall reimburse an Employee for legal fees, fees of other experts and expenses incurred by such Employee if he or she is required to, and is successful in, seeking to obtain or enforce any right to payment pursuant to the Plan. In the event that it shall be determined that such Employee is properly entitled to the payment of benefits hereunder, such Employee
shall also be entitled to interest thereon payable in an amount equivalent to the prime rate of interest (quoted by Citibank, N.A. as its prime commercial lending rate on the latest date practicable prior to the date of the actual commencement of
|
payments) from the date such payment(s) should have been made to and including the date it is made. Notwithstanding any provision of this Plan to the contrary, the provisions of this Plan or any other plan of Ashland Inc. having a material impact on the benefits payable under this Plan may not be amended after a Change in Control occurs without the written consent of a majority of the Board who were directors prior to the Change in Control. |
ARTICLE VII
.
|
MISCELLANEOUS
.
|
7.01
|
The obligations of Ashland hereunder constitute merely the promise of Ashland to make the payments provided for in this Plan. No employee, his or her spouse or the estate of either of them shall have, by reason of this Plan, any right, title or interest of any kind in or to any property of Ashland. To the extent any Participant has a right to receive payments from Ashland under this Plan, such
right shall be no greater than the right of any unsecured general creditor of Ashland.
|
7.02
|
Full power and authority to construe, interpret and administer this Plan shall be vested in the Board or its delegate. This includes, without limitation, the ability to make factual determinations, construe and interpret provisions of the Plan, reconcile any inconsistencies between provisions in the Plan or between provisions of the Plan and any other statement concerning the Plan, whether oral or written,
supply any omissions to the Plan or any document associated with the Plan, and to correct any defect in the Plan or in any document associated with the Plan. Decisions of the Board or its delegate shall be final, conclusive and binding upon all parties, provided, however, that no such decision may adversely affect the rights of any Participant who has been approved for participation in the Plan under the terms of Section 3.03 and whose benefit is determined under the terms of Section 5.01(d) or Section
5.02(b).
|
7.03
|
This Plan shall be binding upon Ashland and any successors to the business of Ashland and shall inure to the benefit of the Participants and their beneficiaries, if applicable. Except as otherwise provided in Article VI, the Board or its delegate may, at any time, amend this Plan, retroactively or otherwise, but no such amendment may adversely affect the rights of any Participant who has been approved
for participation in the Plan except to the extent that such action is required by law.
|
7.04
|
Except as otherwise provided in Section 5.04 and in connection with a division of property under a domestic relations proceeding under state law, no right or interest of the Participants under this Plan shall be subject to involuntary alienation, assignment or transfer of any kind. A Participant may voluntarily assign the Participants rights under the Plan. Ashland, the Board, the Committee
and any of their delegates shall not review, confirm, guarantee or otherwise comment on the legal validity of any voluntary assignment. Ashland and its delegates may review, provide recommendations and approve submitted domestic relations orders using procedures similar to those that apply to qualified domestic relations orders under the qualified pension plans
|
sponsored by Ashland. A domestic relations order intended to assign a benefit hereunder to a former spouse of a Participant must be delivered to the Company. The Company will review the order to determine if it is qualified. Upon notification by the Company that the order is qualified, the spouse will be able to elect a distribution of the assigned benefit by the end of the fifth calendar year following the calendar year during which the Company notifies the former spouse that the order is qualified. In all events, the entire assigned benefit must be distributed by the end of the fifth calendar year following the calendar year during which the Company notifies the former spouse that the order is qualified. Notwithstanding anything in the Plan to the contrary, if an assigned benefit is equal to or less than the adjusted Code section 402(g) limit it shall be distributed to the former spouse as soon as administratively possible. The amount of assigned benefits shall be calculated in a manner consistent with the table summary attached hereto and incorporated herein as Appendix B. The Company may prescribe procedures that are consistent with this Section 7.04 and applicable law to implement benefit assignments pursuant to qualified orders. |
7.05
|
This Plan shall be governed for all purposes by the laws of the Commonwealth of Kentucky.
|
7.06
|
If any term or provision of this Plan is determined by a court or other appropriate authority to be invalid, void, or unenforceable for any reason, the remainder of the terms and provisions of this Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
|
7.07
|
(a)
|
Initial Claim – Notice of Denial
. If any claim for benefits (within the meaning of section 503 of ERISA) is denied in whole or in part, Ashland (which shall include Ashland or its delegate throughout this Section 7.07) will provide
written notification of the denied claim to the Participant or beneficiary, as applicable, (hereinafter referred to as the claimant) in a reasonable period, but not later than 90 days after the claim is received. The 90-day period can be extended under special circumstances. If special circumstances apply, the claimant will be notified before the end of the 90-day period after the claim was received. The notice will identify the special circumstances. It will also specify the
expected date of the decision. When special circumstances apply, the claimant must be notified of the decision not later than 180 days after the claim is received.
|
(b)
|
Appeal of Denied Claim
. The claimant may file a written appeal of a denied claim with Ashland in such manner as determined from time to time. Ashland is the named fiduciary under ERISA for purposes of the appeal of the denied
claim. Ashland may delegate its authority to rule on appeals of denied claims and any person or persons or entity to which such authority is delegated may re-delegate that authority. The appeal must be sent at least 60 days after the claimant received the denial of the initial claim. If the appeal is not sent within this time, then the right to appeal the denial is waived.
|
(i)
|
The reasons for the denial.
|
(ii)
|
Reference to the Plan provisions on which the denial is based. The reference need not be to page numbers or to section headings or titles. The reference only needs to sufficiently describe the provisions so that the provisions could be identified based on that description.
|
(iii)
|
A statement that the claimant may receive free of charge reasonable access to or copies of documents, records and other information relevant to the claim.
|
(iv)
|
A description of any voluntary procedure for an additional appeal, if there is such a procedure. It will also state that the claimant may file a civil action under section 502 of ERISA (ERISA – §29 U.S.C. 1132).
|
Form of Benefit Payment under Ashland Pension Plan
|
Manner of Paying the Enhanced Pension through the SERP
|
Straight Life Annuity
|
The sum of the difference between the monthly payments under the elected benefit option using the additional two years age/service and the monthly payments under the elected benefit option not using the additional two years age/service from the Calculation Date through the month of death in 2007 is paid in a lump sum to the employees
estate. That amount will earn the applicable amount of interest until paid. Payment will not occur before 2008.
|
Life 10-Year Term Certain Annuity
|
The sum of the difference between the monthly payments under the elected benefit option using the additional two years age/service and the monthly payments under the elected benefit option not using the additional two years age/service from the Calculation Date through the month of death in 2007. The payment will be to the beneficiary
as would be determined under the Ashland Pension Plan. That amount will earn the applicable amount of interest until paid. Payment will not occur before 2008.
|
Survivor Annuity (including qualified joint and survivor annuity)
|
The lump sum that would have been paid had the employee survived is paid to the designated survivor annuitant in January 2008. That amount will earn the applicable amount of interest until paid.
|
Survivor Annuity (including qualified joint and survivor annuity) assuming neither survives to January 2008
|
The sum of the difference between the monthly payments under the elected benefit option using the additional two years age/service and the monthly payments under the elected benefit option not using the additional two years age/service from the Calculation Date through the month of death in 2007. The payment will be to the estate
of the last to die between the employee and the designated survivor annuitant. If the deaths were simultaneous or the order of death was otherwise unable to be determined, then the payment would be to the employees estate. That amount will earn the applicable amount of interest until paid. Payment will not occur before 2008.
|
Employee Base Salary Pay Band
|
Employee Age
|
Former Spouses Age
|
Actuarial Assumptions
|
≥
23**
|
≥ Effective Retirement Date*** if had terminated on date the order is approved
|
≥ Employees age at Effective Retirement Date*** if employee had terminated on date the order is approved
|
No actuarial adjustment
|
≥ 23**
|
Employee or former spouse or both < above age on date the order is approved
|
Employee or former spouse or both < above age on date the order is approved
|
Use Ashland Pension Plan assumptions that would apply to employee under the Pension Plan
|
21, 22 (23)**
|
≥ 62
|
≥ 62
|
No actuarial adjustment
|
21, 22 (23)**
|
Employee or former spouse or both < above age on date the order is approved
|
Employee or former spouse or both < above age on date the order is approved
|
Use Ashland Pension Plan assumptions that would apply to employee under the Pension Plan
|
*The Excess Plan would rarely be affected because, at least for those employees still under the traditional qualified pension plan formula, it is truly unknown whether a benefit is payable under the Excess Plan until the employee actually terminates employment. Therefore, for an employee covered under the traditional qualified pension plan formula, the Excess Plan could only be subject to an order that
is entered after the employee terminated employment. Employees in the RGA formula have a determinable Excess Plan benefit each year because it is known each year whether they have missed contribution credits due to base compensation exceeding the Code §401(a)(17) limit. Any actuarial adjustments to the Excess Plan benefit would use the applicable adjustments from the qualified pension plan.
|
***The Effective Retirement Date is the earliest date the employee could elect to commence SERP payments if the employee had actually terminated from employment.
|
(i)
|
Election
. Subject to applicable transition rules under guidance issued by the Treasury under section 409A of the Code, eligible employees will have 30 days following the earlier of January 1, 2005 or the date they are first eligible
for the Plan to elect a form of distribution from among those available under Section 4(ii). For this purpose, an eligible employee is first eligible for the Plan on the first day of the calendar year following the calendar year during which the eligible employee first accrued a benefit hereunder. Any subsequent change to that election shall be subject to the provisions of this paragraph (i), sub-parts (A), (B) and (C), as applicable. In all other events, an eligible employees
election is irrevocable. Notwithstanding anything in the foregoing to the contrary, any eligible employee who elects to change his or her election must meet the following requirements, as applicable –
|
(A)
|
The election may not take effect until at least 12 months after it is made;
|
(B)
|
If the distribution relates to a Termination of Employment, the first payment that would be made pursuant to the election would be at least five years after the amount otherwise would have been distributed but for this election, except in the event of the eligible employees death; and
|
(C)
|
The election must be made at least 12 months before the first scheduled payment that would have been payable at a specified time or pursuant to a fixed schedule.
|
11.
|
(a)
Initial Claim – Notice of Denial
. If any claim for
benefits (within the meaning of section 503 of ERISA) is denied in whole or in part, Ashland (which shall include Ashland or its delegate throughout this Section 11) will provide written notification of the denied claim to the participant or beneficiary, as applicable, (hereinafter referred to as the claimant) in a reasonable period, but not later than 90 days after the claim is received. The 90-day period can be extended under special circumstances. If special circumstances apply, the claimant
will be notified before the end of the 90-day period after the claim was received. The notice will identify the special circumstances. It will also specify the expected date of the decision. When special circumstances apply, the claimant must be notified of the decision not later than 180 days after the claim is received.
|
(i)
|
The reasons for the denial.
|
(ii)
|
Reference to the Plan provisions on which the denial is based. The reference need not be to page numbers or to section headings or titles. The reference only needs to sufficiently describe the provisions so that the provisions could be identified based on that description.
|
(iii)
|
A description of additional materials or information needed to process the claim. It will also explain why those materials or information are needed.
|
(iv)
|
A description of the procedure to appeal the denial, including the time limits applicable to those procedures. It will also state that the claimant may file a civil action under section 502 of ERISA (ERISA – §29 U.S.C. 1132). The claimant must complete the Plans appeal procedure before filing a civil action in court.
|
(b)
|
Appeal of Denied Claim
. The claimant may file a written appeal of a denied claim with Ashland in such manner as determined from time to time. Ashland is the named fiduciary under ERISA for purposes of the appeal of the denied
claim. Ashland may delegate its authority to rule on
|
appeals of denied claims and any person or persons or entity to which such authority is delegated may re-delegate that authority. The appeal must be sent at least 60 days after the claimant received the denial of the initial claim. If the appeal is not sent within this time, then the right to appeal the denial is waived. |
(i)
|
The reasons for the denial.
|
(ii)
|
Reference to the Plan provisions on which the denial is based. The reference need not be to page numbers or to section headings or titles. The reference only needs to sufficiently describe the provisions so that the provisions could be identified based on that description.
|
(iii)
|
A statement that the claimant may receive free of charge reasonable access to or copies of documents, records and other information relevant to the claim.
|
(iv)
|
A description of any voluntary procedure for an additional appeal, if there is such a procedure. It will also state that the claimant may file a civil action under section 502 of ERISA (ERISA – §29 U.S.C. 1132).
|
Employee Base Salary Pay Band
|
Employee Age
|
Former Spouses Age
|
Actuarial Assumptions
|
|||
≥ 23**
|
≥ Effective Retirement Date*** if had terminated on date the order is approved
|
≥ Employees age at Effective Retirement Date*** if employee had terminated on date the order is approved
|
No actuarial adjustment
|
|||
≥ 23**
|
Employee or former spouse or both < above age on date the order is approved
|
Employee or former spouse or both < above age on date the order is approved
|
Use Ashland Pension Plan assumptions that would apply to employee under the Pension Plan
|
|||
21, 22 (23)**
|
≥ 62
|
≥ 62
|
No actuarial adjustment
|
|||
21, 22 (23)**
|
Employee or former spouse or both < above age on date the order is approved
|
Employee or former spouse or both < above age on date the order is approved
|
Use Ashland Pension Plan assumptions that would apply to employee under the Pension Plan
|
|
*The Excess Plan would rarely be affected because, at least for those employees still under the traditional qualified pension plan formula, it is truly unknown whether a benefit is payable under the Excess Plan until the employee actually terminates employment. Therefore, for an employee covered under the traditional qualified pension plan formula, the Excess Plan could only be subject to an order that
is entered after the employee terminated employment. Employees in the RGA formula have a determinable Excess Plan benefit each year because it is known each year whether they have missed contribution credits due to base compensation exceeding the Code §401(a)(17) limit. Any actuarial adjustments to the Excess Plan benefit would use the applicable adjustments from the qualified pension plan.
|
|
***The Effective Retirement Date is the earliest date the employee could elect to commence SERP payments if the employee had actually terminated from employment.
|
Length of Service
|
Payment
|
|||
Up to 5 full years
|
3 months' base compensation
|
|||
More than 5 and up to 10 full years
|
6 months' base compensation
|
|||
More than 10 and up to 15 full years
|
1 year's base compensation
|
|||
More than 15 and up to 20 full years
|
1-1/2 year's base compensation
|
|||
More than 20 full years
|
2 years' base compensation
|
|||
Job Band
|
Payment
|
|||
Band 1 - 10
|
3 months' base compensation
|
|||
Band 11 - 22
|
6 months' base compensation
|
|||
Band 23 and above
|
1 year's base compensation
|
1.1
|
Duties and Responsibilities
. Employee shall be employed by Ashland on a full-time basis effective as of the closing date of the transactions contemplated by the Merger Agreement (the Commencement Date). Employee
shall serve as an executive officer of Ashland, in the role of President Aqualon and Vice President of Ashland Inc. Employee shall also serve as a member of Ashlands operating committee. Employee shall faithfully, industriously and to the best of his ability perform the duties that may be required of him and shall devote his full business time, effort, skill and attention to the affairs of Ashland during his employment. It is agreed that Employees performance during
the term of this Agreement will be measured in accordance with Ashlands performance appraisal process.
|
1.2
|
Term
. The term of this Agreement shall be three (3) years from the Commencement Date (the Term). Employee understands and agrees that in the event this Agreement is not extended for a subsequent term, then upon its expiration
he will become an employee at-will, which means that either Employee or Ashland will be free to discontinue the employment relationship without penalty at any time thereafter, with or without notice and with or without Cause; provided that in the event the merger with Hercules does not
|
|
occur on or before June 30, 2009, this Agreement will lapse and no further obligations will be owed by either party hereunder.
|
1.3
|
Effect of Prior Agreements
. Employee acknowledges that except for those obligations Ashland has specifically assumed under the terms of the Merger Agreement with Hercules, Ashland and Hercules shall have no
obligations to Employee pursuant to any previous employment agreements between Employee and Hercules, or any of its subsidiaries, affiliates or predecessors in interest.
|
2.1
|
Base Compensation
. Ashland shall pay Employee an annual salary (Base Compensation) of Three Hundred Sixty Thousand Dollars ($360,000), less applicable withholdings, which shall be payable in accordance with its customary
payroll practices with respect to time and manner of payment.
|
2.2
|
Vacation
. Employees vacation eligibility will be in accordance with Ashlands Vacation Benefit program, provided that Employees years of service with Hercules shall be counted for purposes of determining his eligibility
for vacation accrual under said vacation policy.
|
2.3
|
Periods not Worked
. Employee understands and agrees that except where some form of paid leave is provided under the regular policies of Ashland, Employee shall not receive compensation for workweeks in which no work is performed.
|
2.4
|
Employee Benefits
. Employees position is in salary band 26, and as a regular, full-time employee of Ashland, he shall be entitled to participate in all benefits offered to employees in this band according to the terms and conditions of such
programs, as they may be amended from time to time.
|
2.5
|
Restricted Stock
. In order to assist Employee in meeting the stock ownership requirements applicable to his position and to encourage Employee to remain with Ashland, within 90 days of the Commencement Date Ashland will provide Employee
with a grant of shares of Ashland Inc. restricted stock equivalent in value to one and one-half (1.5) times Employees Base Compensation, the number of shares granted to be determined based on the closing price of Ashland Inc. common stock as reflected on the New York Stock Exchange (NYSE) composite tape as of the Commencement Date. These shares of restricted stock will vest in full 48 months from the Commencement Date. In the event Employees employment is terminated
less than 48 months from the Commencement Date either by Ashland without Cause and in its sole discretion, or due to Employees death or disability, then Employee shall receive accelerated pro-rata vesting of these shares of restricted stock, based on the number of months of employment completed as of the date his employment ended. In the event Employee voluntarily elects to terminate
|
|
his employment or Ashland terminates his employment for Cause, as provided herein, less than 48 months from the Commencement Date, then all shares of restricted stock will not vest, and will be forfeited in their entirety. Employee and Ashland agree that Ashlands obligations under this section of the Agreement shall survive the expiration of the term of this Agreement.
|
2.6
|
Retention Bonus
. In order to encourage Employees continued service during the term of this Agreement, Ashland will provide Employee with a bonus (Retention Bonus) equal to Three Hundred Sixty Thousand Dollars ($360,000),
less applicable withholdings, to be paid as follows: one-third of the Retention Bonus will be due upon Employees 12-month anniversary of service with Ashland; one-third of the Retention Bonus will be due upon Employees 24-month anniversary of service with Ashland, and the final one-third payment will be due as of Employees 36-month anniversary of service with Ashland. Each Retention Bonus payment shall be made within 30 days of the date on which Employee becomes entitled
to receive said payment.
|
2.7
|
Incentive Compensation
. During the term of this Agreement, Employee shall be eligible to receive incentive compensation as follows:
|
|
(a)
|
2008 Incentive Compensation
. If the Commencement Date occurs on or before December 31, 2008, then for the remainder of calendar year 2008, Employee will remain eligible to receive incentive pay under the annual incentive compensation
program in which Employee was a participant immediately prior to the Commencement Date.
|
|
(b)
|
Ashland Incentive Compensation Plan
. Employee shall become eligible to participate in Ashlands Incentive Compensation Plan as of the Commencement Date. All terms and conditions governing Employees annual
incentive pay opportunity will be determined according to the terms and conditions of said plan.
|
|
(c)
|
Long-Term Incentive Plan
. Employee will become eligible to participate in Ashlands Long-Term Incentive Plan as of the Commencement Date. All terms and conditions governing Employees long-term incentive pay opportunity will be determined
according to the terms and conditions of said plan.
|
2.8
|
Severance Benefits
. In addition to those termination benefits otherwise provided for hereunder, Employee shall be eligible to receive benefits under Ashlands normal severance pay policies in the event his employment is terminated by Ashland
without Cause and in its sole discretion during the term of this Agreement; provided that the severance benefit Employee is eligible to receive shall be not less than 18 months of Base Compensation. All other terms and conditions for payment of the above benefits shall be made in accordance with the terms and conditions of the applicable plan(s).
|
2.9
|
Change in Control
. Employee shall be eligible to receive those benefits offered to employees in his salary band in the event of a Change in Control of Ashland (as defined in the applicable plan) during the term of this Agreement;
provided that the minimum benefit Employee shall receive in the event of such Change in Control shall be two (2) years of Employees Base Compensation, a payment equal to Employees annual incentive pay target, and all unvested equity compensation provided to Employee shall immediately vest. All other terms and conditions for payment of the above benefits shall be made in accordance with the terms and conditions of the applicable plan(s).
|
3.
|
Non-Competition
. Employee understands and agrees that as a condition of his employment, contemporaneous with the execution of this Agreement, he will also execute the Ashland Service Agreement, a copy of which is attached
hereto as Exhibit I, and the terms and conditions of which are incorporated by reference as if fully set forth herein. Provided however, that Employee specifically agrees that the restrictions provided in said Service Agreement shall extend for the greater of three (3) years from the date of the execution of this Agreement, or 18 months from the date Employee is no longer employed by Ashland in any capacity.
|
4.1
|
No Disclosure or Use of Confidential Information
. During Employees employment with Ashland and thereafter, Employee shall not, directly or indirectly, (a) disclose or permit the disclosure of any Confidential Information to any person or
entity, or (b) use or permit the use of Confidential Information: (i) in any way detrimental to Ashland, including in competition with Ashland; or (ii) for any purpose other than to benefit Ashland. Upon Ashlands request or termination of Employees employment, Employee shall
|
|
promptly return to Ashland all written or tangible Confidential Information. For purposes hereof, Confidential Information means all information about Ashland and/or Hercules, and any subsidiaries, affiliates or predecessors in interest of either, which is disclosed to Employee, directly or indirectly, before or during Employees employment with Ashland and/or Hercules, including: product design and manufacturing
information; any communications or correspondence identifying customers, prospects or projects; pricing and sales lists, business plans and strategies; policies, techniques and concepts; employee compensation; financial reports; proprietary technology, trade secrets, research and development data and know-how; copyrighted and unprotected materials; and other secret or confidential information or data which pertains to Ashland. Confidential Information does not include information which is or becomes
publicly available through an authorized or lawful disclosure.
|
4.2
|
Ownership of Works
. All ideas, discoveries, inventions, improvements, artworks, compositions, conceptions, and materials (including materials within the scope of the copyright laws) (Works) prepared or conceived by Employee
during the term of this Agreement and usable in or relating to Ashlands business shall be the property of Ashland and Employee hereby assigns and agrees to assign to Ashland all of Employees right, title and interest in such Works. Employee shall not use, or transfer to others, any Works other than in connection with Ashlands business or with Ashlands written consent. Employee agrees to execute all papers, and otherwise provide proper assistance, at Ashlands
request and expense, during and subsequent to Employees employment by Ashland to enable Ashland or its nominees to obtain patents, copyrights, and other legal protection for the Works in any country.
|
4.3
|
Confidentiality of this Agreement
. Employee agrees that he will keep the terms of this Agreement completely confidential, and will not hereafter disclose any information concerning this Agreement to anyone except his immediate family,
financial advisors and/or attorney: provided that they agree in advance of said disclosure to keep this information confidential and not disclose it to others. However, the obligation to treat information contained herein as confidential will not apply to any information Ashland has disclosed pursuant to United States securities laws, the rules of the New York Stock Exchange, or the rules of any other stock exchange on which Ashland stock is listed.
|
5.
|
Injunctive Relief
. Employee agrees that (a) the provisions of Sections 3 and 4 are reasonable and necessary to protect the legitimate interests of Ashland
and (b) any violation of Sections 3 or 4 will result in irreparable injury to Ashland, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such violation would not be reasonable or adequate compensation to Ashland for such a violation. Accordingly, Employee agrees that if he violates any provisions of Sections 3 or 4, Ashland shall be entitled to specific performance and injunctive relief, without posting bond or other security, and without the necessity of
proving actual damages.
|
6.1
|
Termination for Cause.
Ashland may terminate this Agreement for Cause at any time during its term. Upon a termination for Cause, no further compensation under this Agreement will be owed to Employee. Cause shall be defined
for the purposes of this Agreement as being:
|
|
(a)
|
any act or omission by Employee which reasonably constitutes dishonesty, disloyalty, fraud, deceit, gross negligence, willful misconduct or recklessness, including, but not limited to the willful violation of Ashlands by-laws, Business Responsibilities of an Ashland Employee, or other corporate policies and procedures governing employee conduct;
|
|
(b)
|
Employees insubordination; Insubordination shall be defined as Employees refusal or willful failure to perform specifically assigned duties relating to his position;
|
|
(c)
|
Employees inattention to, neglect of or any other failure to competently perform any assigned duties, unless such failure is due to Employees incapacity as a result of the Employees physical or mental illness;
|
|
(d)
|
any act by Employee that constitutes a conviction of any felony under the laws of the United States; or
|
|
(e)
|
Employees breach of any material portion of this Agreement.
|
6.2
|
Termination due to Death or Disability
. In addition, this agreement will automatically terminate, and except for those benefits specified under paragraphs 2.5 and 2.6 of this Agreement, no further compensation under this Agreement will be owed
to Employee in the event either of the following should occur during its term:
|
|
(a)
|
Employee becomes disabled and subsequently becomes eligible to receive payments under Ashlands Long Term Disability Plan; or
|
|
(b)
|
In the event of the Employees death. Provided, however, that Ashland will not be relieved of any obligations under its employee benefits plans which arise due to Employees death.
|
6.3
|
Termination for Other Reasons
. Ashland may terminate this contract at any time during its term, for any reason other than those enumerated above, and shall thereafter only be obligated to provide the following to Employee:
|
(a)
|
payment of the greater of (i) the balance of the Base Compensation Employee would have received if his employment had continued for the full term of this Agreement, or (ii) the amount of severance pay payable to employees in his salary band whose employment is terminated without Cause under Ashlands normal severance pay policies; and
|
(b)
|
payment of those amounts Employee would have otherwise been eligible to receive under Ashlands Incentive Compensation and Long-Term Incentive Pay plans, pro-rated through his last day of active employment, which will be paid in accordance with all other terms and conditions of said plans; and
|
(c)
|
pro-rata vesting of those shares of restricted stock granted to Employee pursuant to section 2.5 of this Agreement; and
|
(d)
|
payment of the balance of the Retention Bonus provided for in section 2.6 of this Agreement.
|
7.
|
Notices
.
Any notice required or desired to be given under this Agreement shall be deemed given if in writing mailed or delivered
as follows:
|
|
If to Employee:
|
8.
|
Successors and Assigns
.
This Agreement shall be binding upon and inure to the benefit of Ashland and its successors
and assigns.
|
9.
|
Waiver
.
No waiver of any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver
of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach.
|
10.
|
Modification
.
This Agreement may not be amended or modified other than by a written agreement signed by Employee
and an authorized representative of Ashland. No company practice or policy of Ashland shall change the provisions of this Agreement.
|
11.
|
Severability
.
The provisions of this Agreement are independent and severable from each other, and no provisions shall be affected
or rendered invalid or unenforceable if any other provision or provisions is deemed invalid or unenforceable by a court or arbitrator or competent jurisdiction.
|
12.
|
No Violation of any Other Contract Binding Upon Employee
.
Employee warrants and represents to Ashland that Employee is not
subject to any covenants, agreements or restrictions, including any covenants, agreements or restrictions arising out of any prior employment that would be breached or violated by Employees execution of this Agreement or by his performance of his duties hereunder.
|
13.
|
Attorneys Fees
. Any signatory to this Agreement who is the prevailing party in any legal proceeding against any other signatory brought under or with relation to this Agreement shall be entitled to recover court
costs, reasonable attorney fees, and all other out-of-pocket costs of litigation, including deposition, trace, and witness costs, from the non-prevailing party.
|
14.
|
Governing Law
. This Agreement shall be deemed to have been executed and delivered within the state of Ohio, and shall be construed, enforced and governed by, the laws of the State of Ohio without regard to principles
of conflict of laws and without regard to any law requiring construction against the party preparing the document.
|
/s/ John E. Panichella | |||||
John E. Panichella | |||||
By: | /s/ Susan B. Esler | |||||
Its: | VP HR & Communications | |||||
/s/ John E. Panichella | |||
(SIGNATURE) | |||
John E. Panichella | |||
(PRINT NAME) |
ACCEPTED | |||
ASHLAND INC. | |||
BY: | /s/ Susan B. Esler | ||
TITLE: | Vice President, Human Resources & Communications | ||
1.1
|
Duties and Responsibilities
. Employee shall be employed by Ashland on a full-time basis effective as of the closing date of the transactions contemplated by the Merger Agreement (the Commencement Date). Employee
shall serve as an executive officer of Ashland, in the role of President Paper Technologies, Water Technologies and Ventures and Vice President of Ashland Inc. Employee shall also serve as a member of Ashlands operating committee. Employee shall faithfully, industriously and to the best of his ability perform the duties that may be required of him and shall devote his full business time, effort, skill and attention to the affairs of Ashland during his employment. It
is agreed that Employees performance during the term of this Agreement will be measured in accordance with Ashlands performance appraisal process.
|
1.2
|
Term
. The term of this Agreement shall be three (3) years from the Commencement Date (the Term). Employee understands and agrees that in the event this Agreement is not extended for a subsequent term, then upon its expiration
he will become an employee at-will, which means that either Employee or Ashland will be free to discontinue the employment relationship without penalty at any time thereafter, with or without notice and with or without Cause; provided that in the event the merger with Hercules does not
|
occur on or before June 30, 2009, this Agreement will lapse and no further obligations will be owed by either party hereunder. |
1.3
|
Effect of Prior Agreements
. Employee acknowledges that except for those obligations Ashland has specifically assumed under the terms of the Merger Agreement with Hercules, Ashland and Hercules shall have no
obligations to Employee pursuant to any previous employment agreements between Employee and Hercules, or any of its subsidiaries, affiliates or predecessors in interest.
|
2.1
|
Base Compensation
. Ashland shall pay Employee an annual salary (Base Compensation) of Three Hundred Sixty Thousand Dollars ($360,000), less applicable withholdings, which shall be payable in accordance
with its customary payroll practices with respect to time and manner of payment.
|
2.2
|
Vacation
. Employees vacation eligibility will be in accordance with Ashlands Vacation Benefit program, provided that Employees years of service with Hercules shall be counted for purposes of
determining his eligibility for vacation accrual under said vacation policy.
|
2.3
|
Periods not Worked
. Employee understands and agrees that except where some form of paid leave is provided under the regular policies of Ashland, Employee shall not receive compensation for workweeks in which
no work is performed.
|
2.4
|
Employee Benefits
. Employees position is in salary band 26, and as a regular, full-time employee of Ashland, he shall be entitled to participate in all benefits offered to employees in this band according to the
terms and conditions of such programs, as they may be amended from time to time.
|
2.5
|
Restricted Stock
. In order to assist Employee in meeting the stock ownership requirements applicable to his position and to encourage Employee to remain with Ashland, within 90 days of the Commencement Date
Ashland will provide Employee with a grant of shares of Ashland Inc. restricted stock equivalent in value to one and one-half (1.5) times Employees Base Compensation, the number of shares granted to be determined based on the closing price of Ashland Inc. common stock as reflected on the New York Stock Exchange (NYSE) composite tape as of the Commencement Date. These shares of restricted stock will vest in full 48 months from the Commencement Date. In the event Employees
employment is terminated less than 48 months from the Commencement Date either by Ashland without Cause and in its sole discretion, or due to Employees death or disability, then Employee shall receive accelerated pro-rata vesting of these shares of restricted stock, based on the number of months of employment completed as of the date his employment ended. In the event Employee voluntarily elects to terminate his
|
employment or Ashland terminates his employment for Cause, as provided herein, less than 48 months from the Commencement Date, then all shares of restricted stock will not vest, and will be forfeited in their entirety. Employee and Ashland agree that Ashlands obligations under this section of the Agreement shall survive the expiration of the term of this Agreement. |
2.6
|
Retention Bonus
. In order to encourage Employees continued service during the term of this Agreement, Ashland will provide Employee with a bonus (Retention Bonus) equal to Three Hundred Sixty
Thousand Dollars ($360,000), less applicable withholdings, to be paid as follows: one-third of the Retention Bonus will be due upon Employees 12-month anniversary of service with Ashland; one-third of the Retention Bonus will be due upon Employees 24-month anniversary of service with Ashland, and the final one-third payment will be due as of Employees 36-month anniversary of service with Ashland. Each Retention Bonus payment shall be made within 30 days of the date on which
Employee becomes entitled to receive said payment.
|
2.7
|
Incentive Compensation
. During the term of this Agreement, Employee shall be eligible to receive incentive compensation as follows:
|
|
(a)
|
2008 Incentive Compensation
. If the Commencement Date occurs on or before December 31, 2008, then for the remainder of calendar year 2008, Employee will remain eligible to receive incentive pay under the annual incentive compensation
program in which Employee was a participant immediately prior to the Commencement Date.
|
|
(b)
|
Ashland Incentive Compensation Plan
. Employee shall become eligible to participate in Ashlands Incentive Compensation Plan as of the Commencement Date. All terms and conditions governing Employees annual
incentive pay opportunity will be determined according to the terms and conditions of said plan.
|
|
(c)
|
Long-Term Incentive Plan
. Employee will become eligible to participate in Ashlands Long-Term Incentive Plan as of the Commencement Date. All terms and conditions governing Employees long-term incentive pay opportunity will be determined
according to the terms and conditions of said plan.
|
2.8
|
Severance Benefits
. In addition to those termination benefits otherwise provided for hereunder, Employee shall be eligible to receive benefits under Ashlands normal severance pay policies in the event his employment is terminated by Ashland
without Cause and in its sole discretion during the term of this Agreement; provided that the severance benefit Employee is eligible to receive shall be not less than 18 months of Base Compensation. All other terms and conditions for payment of the above benefits shall be made in accordance with the terms and conditions of the applicable plan(s).
|
2.9
|
Change in Control
. Employee shall be eligible to receive those benefits offered to employees in his salary band in the event of a Change in Control of Ashland (as defined in the applicable plan) during the term of this Agreement;
provided that the minimum benefit Employee shall receive in the event of such Change in Control shall be two (2) years of Employees Base Compensation, a payment equal to Employees annual incentive pay target, and all unvested equity compensation provided to Employee shall immediately vest. All other terms and conditions for payment of the above benefits shall be made in accordance with the terms and conditions of the applicable plan(s).
|
3.
|
Non-Competition
. Employee understands and agrees that as a condition of his employment, contemporaneous with the execution of this Agreement, he will also execute the Ashland Service Agreement, a copy of which is attached
hereto as Exhibit I, and the terms and conditions of which are incorporated by reference as if fully set forth herein. Provided however, that Employee specifically agrees that the restrictions provided in said Service Agreement shall extend for the greater of three (3) years from the date of the execution of this Agreement, or 18 months from the date Employee is no longer employed by Ashland in any capacity.
|
4.1
|
No Disclosure or Use of Confidential Information
. During Employees employment with Ashland and thereafter, Employee shall not, directly or indirectly, (a) disclose or permit the disclosure of any Confidential Information to any person or
entity, or (b) use or permit the use of Confidential Information: (i) in any way detrimental to Ashland, including in competition with Ashland; or (ii) for any purpose other than to benefit Ashland. Upon Ashlands request or termination of Employees employment, Employee shall
|
promptly return to Ashland all written or tangible Confidential Information. For purposes hereof, Confidential Information means all information about Ashland and/or Hercules, and any subsidiaries, affiliates or predecessors in interest of either, which is disclosed to Employee, directly or indirectly, before or during Employees employment with Ashland and/or Hercules, including: product design and manufacturing information; any communications or correspondence identifying customers, prospects or projects; pricing and sales lists, business plans and strategies; policies, techniques and concepts; employee compensation; financial reports; proprietary technology, trade secrets, research and development data and know-how; copyrighted and unprotected materials; and other secret or confidential information or data which pertains to Ashland. Confidential Information does not include information which is or becomes publicly available through an authorized or lawful disclosure. |
4.2
|
Ownership of Works
. All ideas, discoveries, inventions, improvements, artworks, compositions, conceptions, and materials (including materials within the scope of the copyright laws) (Works) prepared or conceived by Employee
during the term of this Agreement and usable in or relating to Ashlands business shall be the property of Ashland and Employee hereby assigns and agrees to assign to Ashland all of Employees right, title and interest in such Works. Employee shall not use, or transfer to others, any Works other than in connection with Ashlands business or with Ashlands written consent. Employee agrees to execute all papers, and otherwise provide proper assistance, at Ashlands
request and expense, during and subsequent to Employees employment by Ashland to enable Ashland or its nominees to obtain patents, copyrights, and other legal protection for the Works in any country.
|
4.3
|
Confidentiality of this Agreement
. Employee agrees that he will keep the terms of this Agreement completely confidential, and will not hereafter disclose any information concerning this Agreement to anyone except his immediate family,
financial advisors and/or attorney: provided that they agree in advance of said disclosure to keep this information confidential and not disclose it to others. However, the obligation to treat information contained herein as confidential will not apply to any information Ashland has disclosed pursuant to United States securities laws, the rules of the New York Stock Exchange, or the rules of any other stock exchange on which Ashland stock is listed.
|
5.
|
Injunctive Relief
. Employee agrees that (a) the provisions of Sections 3 and 4 are reasonable and necessary to protect the legitimate interests of Ashland
and (b) any violation of Sections 3 or 4 will result in irreparable injury to Ashland, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such violation would not be reasonable or adequate compensation to Ashland for such a violation. Accordingly, Employee agrees that if he violates any provisions of Sections 3 or 4, Ashland shall be entitled to specific performance and injunctive relief, without posting bond or other security, and without the necessity of
proving actual damages.
|
6.1
|
Termination for Cause.
Ashland may terminate this Agreement for Cause at any time during its term. Upon a termination for Cause, no further compensation under this Agreement will be owed to Employee. Cause shall be defined
for the purposes of this Agreement as being:
|
|
(a)
|
any act or omission by Employee which reasonably constitutes dishonesty, disloyalty, fraud, deceit, gross negligence, willful misconduct or recklessness, including, but not limited to the willful violation of Ashlands by-laws, Business Responsibilities of an Ashland Employee, or other corporate policies and procedures governing employee conduct;
|
|
(b)
|
Employees insubordination; Insubordination shall be defined as Employees refusal or willful failure to perform specifically assigned duties relating to his position;
|
|
(c)
|
Employees inattention to, neglect of or any other failure to competently perform any assigned duties, unless such failure is due to Employees incapacity as a result of the Employees physical or mental illness;
|
|
(d)
|
any act by Employee that constitutes a conviction of any felony under the laws of the United States; or
|
|
(e)
|
Employees breach of any material portion of this Agreement.
|
6.2
|
Termination due to Death or Disability
. In addition, this agreement will automatically terminate, and except for those benefits specified under paragraphs 2.5 and 2.6 of this Agreement, no further compensation under this Agreement will be owed
to Employee in the event either of the following should occur during its term:
|
|
(a)
|
Employee becomes disabled and subsequently becomes eligible to receive payments under Ashlands Long Term Disability Plan; or
|
|
(b)
|
In the event of the Employees death. Provided, however, that Ashland will not be relieved of any obligations under its employee benefits plans which arise due to Employees death.
|
6.3
|
Termination for Other Reasons
. Ashland may terminate this contract at any time during its term, for any reason other than those enumerated above, and shall thereafter only be obligated to provide the following to Employee:
|
(a)
|
payment of the greater of (i) the balance of the Base Compensation Employee would have received if his employment had continued for the full term of this Agreement, or (ii) the amount of severance pay payable to employees in his salary band whose employment is terminated without Cause under Ashlands normal severance pay policies; and
|
(b)
|
payment of those amounts Employee would have otherwise been eligible to receive under Ashlands Incentive Compensation and Long-Term Incentive Pay plans, pro-rated through his last day of active employment, which will be paid in accordance with all other terms and conditions of said plans; and
|
(c)
|
pro-rata vesting of those shares of restricted stock granted to Employee pursuant to section 2.5 of this Agreement; and
|
(d)
|
payment of the balance of the Retention Bonus provided for in section 2.6 of this Agreement.
|
7.
|
Notices
.
Any notice required or desired to be given under this Agreement shall be deemed given if in writing mailed or delivered
as follows:
|
|
If to Employee:
|
8.
|
Successors and Assigns
.
This Agreement shall be binding upon and inure to the benefit of Ashland and its successors
and assigns.
|
9.
|
Waiver
.
No waiver of any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver
of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach.
|
10.
|
Modification
.
This Agreement may not be amended or modified other than by a written agreement signed by Employee
and an authorized representative of Ashland. No company practice or policy of Ashland shall change the provisions of this Agreement.
|
11.
|
Severability
.
The provisions of this Agreement are independent and severable from each other, and no provisions shall be affected
or rendered invalid or unenforceable if any other provision or provisions is deemed invalid or unenforceable by a court or arbitrator or competent jurisdiction.
|
12.
|
No Violation of any Other Contract Binding Upon Employee
.
Employee warrants and represents to Ashland that Employee is not
subject to any covenants, agreements or restrictions, including any covenants, agreements or restrictions arising out of any prior employment that would be breached or violated by Employees execution of this Agreement or by his performance of his duties hereunder.
|
13.
|
Attorneys Fees
. Any signatory to this Agreement who is the prevailing party in any legal proceeding against any other signatory brought under or with relation to this Agreement shall be entitled to recover court
costs, reasonable attorney fees, and all other out-of-pocket costs of litigation, including deposition, trace, and witness costs, from the non-prevailing party.
|
14.
|
Governing Law
. This Agreement shall be deemed to have been executed and delivered within the state of Ohio, and shall be construed, enforced and governed by, the laws of the State of Ohio without regard to principles
of conflict of laws and without regard to any law requiring construction against the party preparing the document.
|
/s/ Paul C. Raymond, III | |||||
Paul C. Raymond, III | |||||
By: | /s/ Susan B. Esler | |||||
Its: | VP Human Resources & Communications | |||||
/s/ Paul C. Raymond, III | |||||
Paul C. Raymond, III | |||||
/s/ SBE | |||||
/s/ PCR |
Position:
|
President Paper Technologies, Water Technologies and Ventures and Vice President Ashland Inc.
|
Location:
|
Wilmington, Delaware
|
Salary Grade
|
26
|
Base Salary:
|
$360,000
|
Annual Incentive Opportunity (IC):
|
(all numbers as a % of base salary)
|
|
Percent
|
Value
|
|||
Target
|
75%
|
$270,000
|
||
Maximum (150% of target)
|
112.5%
|
$405,000
|
||
Approximate
Percent (of
salary)
|
Approximate
Value
|
Approximate
Performance
Shares/Options
@$50 grant
price
|
|||||
Long-Term Incentive
|
|||||||
Total Target Value |
135%
|
$486,000
|
|||||
SAR-grant (fixed and rounded by band) |
65%
|
14,000
|
|||||
Long-Term Incentive Grant (as % of salary) |
70%
|
5,040
|
Severance Benefit (not for cause)
|
18 months base salary paid in a lump sum
|
CIC Agreement
|
2x base salary + target annual incentive (1 year)
|
|
immediate vesting of all unvested equity compensation
|
Retention Bonus
|
$360,000 paid in 1/3 increments at the completion of 12 months, 24 months and 36 months service.
|
Restricted Stock Grant
|
Restricted stock grant valued at 1.5x salary. Value determined based on share price at close of deal. Vest in full at completion of 48 months service
|
Supplemental Early Retirement Plan
|
(SERP) (non-qualified)
|
- Formula: Average of highest 3 years base salary and annual bonus (IC) out of last 7 years x .25 x full years of Ashland service (up to a maximum of 20 years)
|
|
(This benefit is offset by value of
Cash Balance Benefit)
|
- Fully vested in benefit after 5 years (Hercules service counts towards vesting)
|
|
Estimated value of SERP at various levels assuming target incentive and average salary increases of 2%
|
5 years
|
$836,000
|
||
7 years
|
$1,200,000
|
||
10 years
|
$1,800,000
|
||
15 years
|
$3,050,000
|
||
20 years
|
$4,500,000
|
Financial Planning Benefit
|
AYCO (value approximately $12,000 annual) + $2,500; or up to $5,000
|
(benefit is taxable as imputed
income)
|
|
|
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
.
|
A.
Awards to Employees
|
B.
Awards to Outside Directors
|
C.
Transferability
|
Name of Employee:
|
[Name]
|
Name of Plan:
|
2006 AI Incentive Plan
|
Number of SARs:
|
xxx,xxx
|
Grant Price Per SAR:
|
$ XX.XX
|
Date of SAR Grant:
|
November 19, 2008
|
Vesting Schedule:
|
50% on 11/19/2009
|
25% on 11/19/2010
|
|
25% on 11/19/2011
|
|
Expiration Date:
|
December 19, 2018
|
ASHLAND INC. | ||||
|
|
|||
By:__________________________________________
|
|
|||
|
|
Name of Company: | ASHLAND INC. |
Name of Participant: | [FirstName] [LastName] |
Number of Shares of Ashland Inc. | |
Common Stock | [x,xxx] |
Par Value Per Share: | $0.01 |
Vesting Schedule: | 50% or x,xxx on [date] |
25% or x,xxx on [date] | |
25 % or x,xxx on [date] | |
Date of Award: | [GRANT DATE] |
|
"The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeitures) contained in the Ashland Inc Incentive Plan from which the shares were issued and the Agreement entered into between the registered owner and Ashland Inc."
|
ASHLAND
INC
.
|
||
By: | ||
|
|
|
Susan B. Esler | ||
Vice President, Human Resources |
[Name] | Date |
Shareholder signature | |
(Note: please sign in the presence of a representative of an institution who is a member of a Medallion Signature Guarantee Program*) |
ASHLAND INC.
|
||||||||||||||||||||
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
|
||||||||||||||||||||
(In millions)
|
||||||||||||||||||||
Years ended September 30
|
||||||||||||||||||||
2004
|
2005
|
2006
|
2007
|
2008
|
||||||||||||||||
EARNINGS
|
||||||||||||||||||||
Income from continuing operations
|
$ | 311 | $ | 1,958 | $ | 183 | $ | 201 | $ | 175 | ||||||||||
Income tax expense (benefit)
|
100 | (230 | ) | 29 | 58 | 86 | ||||||||||||||
Interest expense
|
112 | 87 | 8 | 9 | 9 | |||||||||||||||
Interest portion of rental expense
|
20 | 20 | 18 | 20 | 21 | |||||||||||||||
Amortization of deferred debt expense
|
2 | 3 | - | 1 | - | |||||||||||||||
Distributions less than earnings
|
||||||||||||||||||||
of unconsolidated affiliates
|
(260 | ) | (246 | ) | (6 | ) | (5 | ) | (10 | ) | ||||||||||
$ | 285 | $ | 1,592 | $ | 232 | $ | 284 | $ | 281 | |||||||||||
FIXED CHARGES
|
||||||||||||||||||||
Interest expense
|
$ | 112 | $ | 87 | $ | 8 | $ | 9 | $ | 9 | ||||||||||
Interest portion of rental expense
|
20 | 20 | 18 | 20 | 21 | |||||||||||||||
Amortization of deferred debt expense
|
2 | 3 | - | 1 | - | |||||||||||||||
Capitalized interest
|
- | 1 | 3 | 2 | - | |||||||||||||||
$ | 134 | $ | 111 | $ | 29 | $ | 32 | $ | 30 | |||||||||||
RATIO OF EARNINGS TO FIXED CHARGES
|
2.13 | 14.34 | 8.00 | 8.88 | 9.37 |
Company
|
Jurisdiction of
Incorporation
|
Immediate Parent*
|
||
ASH GP LLC (ASH GP) ................................................................................................
|
Delaware
|
AIHI
|
||
ASH LP LLC (ASH LP) ................................................................................................
|
Delaware
|
AIHI
|
||
Ashland Brasil Ltda. (ABL) ........................................................................................
|
Brazil
|
AHBV
|
||
Ashland Canada Corp. (ACC) ....................................................................................
|
Nova Scotia, Canada
|
ACHBV
|
||
Ashland Canada Holdings B.V. (ACHBV) ...............................................................
|
Netherlands
|
AHBV
|
||
Ashland (Changzhou) Advanced Chemical Co., Ltd. ................................................
|
China
|
ACHC
|
||
Ashland (China) Holdings Co., Ltd. (ACHC) ..........................................................
|
China
|
ACC
|
||
Ashland Chemical Hispania, S.L. ...................................................................................
|
Spain
|
AIHI
|
||
Ashland Chimie France SAS (ACF) ..........................................................................
|
France
|
AF
|
||
Ashland Deutschland GmbH (ADG) .........................................................................
|
Germany
|
AIHI
|
||
Ashland-Especialidades Quimicas Ltda. ......................................................................
|
Brazil
|
AHBV
|
||
Ashland Finland Oy ........................................................................................................
|
Finland
|
AHBV 51% - ACC 49%
|
||
Ashland France SAS (AF) ..........................................................................................
|
France
|
AHBV
|
||
Ashland Holdings B.V. (AHBV) ................................................................................
|
Netherlands
|
ATCV
|
||
Ashland International Holdings, Inc. (AIHI) ...........................................................
|
Delaware
|
AI
|
||
Ashland Italia S.p.A. .......................................................................................................
|
Italy
|
AHBV
|
||
Ashland Japan Co., Ltd. ..................................................................................................
|
Japan
|
AIHI
|
||
Ashland Mauritius Corporation (AMC) ...................................................................
|
Mauritius
|
ACC
|
||
Ashland Nederland B.V. ..................................................................................................
|
Netherlands
|
AHBV
|
||
Ashland Polyester SAS ...................................................................................................
|
France
|
ACF
|
||
Ashland Resinas Ltda. ....................................................................................................
|
Brazil
|
ABL
|
||
Ashland Sweden AB .......................................................................................................
|
Sweden
|
AHBV
|
||
Ashland UK Limited ........................................................................................................
|
United Kingdom
|
AHBV
|
||
Ashmont Insurance Company, Inc. ...............................................................................
|
Vermont
|
AI
|
||
AshOne C.V. (AOCV) ..................................................................................................
|
Netherlands
|
ASH LP 1% - AIHI 98% - ASH GP 1%
|
||
AshTwo C.V. (ATCV) ..................................................................................................
|
Netherlands
|
AIHI 10% - AOCV 89% - ASH GP 1%
|
||
AshThree LLC ..................................................................................................................
|
Delaware
|
AI
|
||
Beijing Tianshi Special Chemical Technique Co., Ltd. ...............................................
|
China
|
AMC
|
||
Drew Ameroid Deutschland GmbH ...............................................................................
|
Germany
|
ADG
|
||
Drew Ameroid (Singapore) Pte. Ltd. ..............................................................................
|
Singapore
|
AHBV
|
||
Iberia Ashland Chemical S. A. ........................................................................................
|
Spain
|
AIHI
|
||
Valvoline (Australia) Pty. Limited ..................................................................................
|
Australia
|
AHBV
|
||
Valvoline (Deutschland) GmbH & Co. Kg ....................................................................
|
Germany
|
ADG
|
/s/ Francine Rabinovitz | |||
Hamilton, Rabinovitz & Associates, Inc. | |||
November 26, 2008 | |||
/s/ James J. OBrien
|
/s/ Barry W. Perry | |
James J. OBrien, Chairman of the Board,
Chief Executive Officer and Director
|
Barry W. Perry, Director
|
|
/s/ Lamar M. Chambers
|
/s/ Mark C. Rohr
|
|
Lamar M. Chambers, Senior Vice President,
Chief Financial Officer and Controller
(Principal Accounting Officer)
|
Mark C. Rohr, Director
|
|
/s/ Roger W. Hale
|
/s/ George A. Schaefer, Jr.
|
|
Roger W. Hale, Director
|
George A. Schaefer, Jr., Director
|
|
/s/ Bernadine P. Healy
|
/s/ Theodore M. Solso
|
|
Bernadine P. Healy, Director
|
Theodore M. Solso, Director
|
|
/s/ Kathleen Ligocki
|
/s/ John F. Turner | |
Kathleen Ligocki, Director
|
John F. Turner, Director
|
|
/s/ Vada O. Manager
|
/s/ Michael J. Ward
|
|
Vada O. Manager, Director
|
Michael J. Ward, Director
|
1.
|
I have reviewed this annual report on Form 10-K of Ashland Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal
control over financial reporting; and
|
5.
|
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the Audit Committee of registrants Board of Directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
|
/s/ James J. OBrien
|
|
James J. OBrien
|
|
Chairman and Chief Executive Officer
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this annual report on Form 10-K of Ashland Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal
control over financial reporting; and
|
5.
|
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the Audit Committee of registrants Board of Directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
|
/s/ Lamar M. Chambers
|
|
Lamar M. Chambers
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|