ASHLAND INC. (Form: 10-K, Received: 11/22/2010 08:47:50)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended September 30, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from _________ to ___________

Commission file number 1-32532

ASHLAND INC.

Kentucky

(State or other jurisdiction of incorporation or organization)

20-0865835

(I.R.S. Employer Identification No.)

50 E. RiverCenter Boulevard

P.O. Box 391

Covington, Kentucky 41012-0391

Telephone Number (859) 815-3333

Securities Registered Pursuant to Section 12(b) of the Act:

	Title of each class	Name of each exchange on which registered
	Common Stock, par value $.01 per share	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

I ndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ Accelerated Filer o

Non-Accelerated Filer o Smaller Reporting Company ¨

(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

At March 31, 2010, the aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $4,119,623,083. In determining this amount, the Registrant has assumed that its directors and executive officers are affiliates. Such assumption shall not be deemed conclusive for any other purpose.

At October 31, 2010, there were 78,852,428 shares of Registrant’s common stock outstanding.

Documents Incorporated by Reference

Portions of Registrant’s Proxy Statement (Proxy Statement) for its January 27, 2011 Annual Meeting of Shareholders are incorporated by reference into Part III of this annual report on Form 10-K to the extent described herein.

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Business ....................................................................................................................................................................	1
		General .....................................................................................................................................................................	1
		Corporate Developments ......................................................................................................................................	1
		Ashland Aqualon Functional Ingredients .........................................................................................................	2
		Ashland Hercules Water Technologies .............................................................................................................	2
		Ashland Performance Materials ..........................................................................................................................	3
		Ashland Consumer Markets ................................................................................................................................	4
		Ashland Distribution ...........................................................................................................................................	5
		Miscellaneous ........................................................................................................................................................	5
	Item 1A.	Risk Factors ..............................................................................................................................................................	8
	Item 1B.	Unresolved Staff Comments ..................................................................................................................................	12
	Item 2.	Properties ..................................................................................................................................................................	12
	Item 3.	Legal Proceedings ...................................................................................................................................................	13
	Item 4.	(Removed and Reserved) .......................................................................................................................................	14
	Item X.	Executive Officers of Ashland ...............................................................................................................................	14

PART II
	Item 5.	Market for Registrant’s 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.	Management’s 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 .................................................................................	18
	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 .........................................................................................................................................................	18
	Item 14.	Principal Accountant Fees and Services ..............................................................................................................	18

PART IV
	Item 15.	Exhibits and Financial Statement Schedules ........................................................................................................	18

PART I

ITEM 1. BUSINESS

GENERAL

Ashland Inc. is a Kentucky corporation, with its principal executive offices located at 50 E. RiverCenter Boulevard, Covington, Kentucky 41011 (Mailing Address: 50 E. RiverCenter Boulevard, P.O. Box 391, Covington, Kentucky 41012-0391) (Telephone: (859) 815-3333). Ashland was organized in 2004 as the successor to a Kentucky corporation of the same name organized on October 22, 1936. The terms “Ashland” and the “Company” as used herein include Ashland Inc., its predecessors and its consolidated subsidiaries, except where the context indicates otherwise.

Ashland’s business consists of five reportable segments: Ashland Aqualon Functional Ingredients; Ashland Hercules Water Technologies; Ashland Performance Materials; Ashland Consumer Markets (Valvoline); and Ashland Distribution.

Financial information about these segments for each of the fiscal years in the three-year period ended September 30, 2010 is set forth in Note R of “Notes to Consolidated Financial Statements” in this annual report on Form 10-K.

Ashland Aqualon Functional Ingredients is one of the world’s largest producers of cellulose ethers. It provides specialty additives and functional ingredients that primarily manage the physical properties of water-based systems. Many of its products are derived from renewable and natural raw materials and perform in a wide variety of applications.

Ashland Hercules Water Technologies is a leading global producer of papermaking chemicals and a leading specialty chemicals supplier to the pulp, paper, commercial and institutional, food and beverage, chemical, mining and municipal markets. Its process, utility and functional chemistries are used to improve operational efficiencies, enhance product quality, protect plant assets and ensure environmental compliance.

Ashland Performance Materials is a global leader in unsaturated polyester resins and vinyl ester resins. In addition, it provides customers with leading technologies in gelcoats, pressure-sensitive and structural adhesives, and metal casting consumables and design services.

Ashland Consumer Markets, which includes the Valvoline™ family of products and services, is a leading innovator, marketer and supplier of high-performing automotive lubricants, chemicals and appearance products. Valvoline™, the world’s first lubricating oil, is the number three passenger car motor oil brand, and Valvoline Instant Oil Change™ is the number two quick-lube franchise in the United States.

Ashland Distribution is a leading plastics and chemicals distributor in North America. It distributes chemicals, plastics and composite raw materials in North America, as well as plastics in Europe and China. Ashland Distribution also provides environmental services in North America, including hazardous and nonhazardous waste collection, recovery, recycling and disposal services.

At September 30, 2010, Ashland and its consolidated subsidiaries had approximately 14,500 employees (excluding contract employees).

Available Information — Ashland’s Internet address is http://www.ashland.com . On this website, Ashland makes available, free of charge, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports as well as any beneficial ownership reports of officers and directors filed on Forms 3, 4 and 5. All such reports will be available as soon as reasonably practicable after Ashland electronically files such material with, or electronically furnishes such material to, the Securities and Exchange Commission (SEC). Ashland also makes available, free of charge on its website, its Corporate Governance Guidelines; Board Committee Charters; Director Independence Standards; and its code of business conduct that applies to Ashland’s directors, officers and employees. These documents are also available in print to any shareholder who requests them. Information contained on Ashland’s website is not part of this annual report on Form 10-K and is not incorporated by reference in this document. The public may read and copy any materials Ashland files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site ( http://www.sec.gov ) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

CORPORATE DEVELOPMENTS

On November 5, 2010, Ashland signed a definitive agreement with TPG Accolade, LLC to sell substantially all of the assets of its global distribution business conducted by the Ashland Distribution segment. The transaction is an asset sale with the total cash proceeds expected to be $930 million, before transaction fees, subject to post-closing working capital

adjustments and certain other adjustments, as specified in the definitive agreement. The transaction is expected to close prior to the end of the March 2011 quarter, subject to the receipt of certain regulatory approvals and the satisfaction of other standard closing conditions.

ASHLAND AQUALON FUNCTIONAL INGREDIENTS

Ashland Aqualon Functional Ingredients (Functional Ingredients) offers products that are primarily designed to modify the properties of water-based systems. Most of Functional Ingredients’ products are sold as key ingredients to other manufacturers, where they are used as small-quantity additives to provide functionality such as thickening and rheology control; water retention; adhesive strength; binding power; film formation; protective colloid, suspending and emulsifying action; foam control; and pH stability. Functional Ingredients has a diversified, global customer base that is serviced directly and through a series of distributors.

Functional Ingredients is comprised of the following businesses:

Regulated Industries — Regulated Industries’ food applications include bakery, beverage, confectionary, dairy, meat, meat analogues and pet food, prepared foods and sauces, dressings and fillings. Personal care applications include cosmetics, hair care, oral care, skin care, wound care and household products. In the pharmaceutical industry, Regulated Industries’ products are used for tablet binding, coatings, modified release and liquid and semi-liquid rheology control.

Coatings Additives — Coatings Additives offers a portfolio of complete rheology solutions for consistent, superior performance at very low use levels. For manufacturers of paints and other waterborne coatings products, these additives are crucial in controlling key product characteristics such as gloss, spatter, leveling and build, all of which are critical to delivering paints and coatings that fill specific market demand.

Construction — Construction’s product applications include tile and adhesive cements, gypsum plasters, renders, joint compounds, concrete, external insulation systems, masonry and mortar cements and self-leveling compounds. These product applications provide a comprehensive array of functional properties including thickening, water retention, sag resistance, workability and consistency, adhesion, stabilization, pumping, rheological properties and strength.

Energy and Specialties Solutions — Energy and Specialties Solutions offers water-soluble solutions for a variety of applications in the oil and gas industries including completion and workover fluids, drill-in fluids, oil-well cementing slurries, solvent thickeners and stimulation and hydraulic fracturing. This business also provides high-performance products to the industrial specialties market including applications in ceramics, fire-fighting fluids, foundry, industrial cleaners, inks and printing, mining, paint removers, paper and paper coatings, suspension polymerization and welding rods.

Functional Ingredients currently conducts manufacturing in the Americas, Europe and Asia Pacific at nine facilities in five countries and participates in one joint venture. Functional Ingredients operates manufacturing facilities in Wilmington, Delaware; Dalton, Georgia; Parlin, New Jersey; Kenedy, Texas and Hopewell, Virginia within the United States and Doel-Beveren, Belgium; Jiangmen, China; Alizay, France and Zwijndrecht, the Netherlands. Functional Ingredients also operates two production facilities through a joint venture in Luzhou and Suzhou, China. In addition, Functional Ingredients has completed construction of a large-capacity hydroxyethylcellulose production facility in Nanjing, China scheduled to begin operations in late 2010.

On January 28, 2010, Ashland completed the sale of its refined wood rosin and natural wood terpenes business, formerly known as Pinova, to a new company formed by TorQuest Partners, a Canadian private equity fund manager, for approximately $75 million before taxes, including $60 million in cash and a $15 million promissory note from the buyer.

ASHLAND HERCULES WATER TECHNOLOGIES

Ashland Hercules Water Technologies (Water Technologies) is a global service business delivering differentiated specialty chemical products to a number of industries including the paper, pulp, chemical, commercial and institutional, food and beverage, mining and municipal industries. Water Technologies is a leading global producer of papermaking chemicals for pulp and paper processing, tissues and towels, packaging, printing and writing papers, and virgin and deinked pulps. Its process, water treatment and functional chemistries are used to improve operational efficiencies, enhance product quality, protect plant assets and ensure environmental compliance. To meet the diverse requirements of its customers, Water Technologies offers a range of services, including analytical and applications laboratories, customized program offerings and, through its StreamLink Specialty Chemicals service model, a focused-service approach.

Water Technologies is comprised of the following businesses:

Process Chemistries — The Process Chemistries business manufactures and sells a broad array of deposit control agents, defoamers, biocides and other process additives for markets including pulp and paper manufacturing, food processing, oil refining and chemical processing, general manufacturing and extraction/mining. This business’s products are designed to deliver benefits such as enhanced operational efficiencies, system cleanliness, and superior performance in a wide variety of manufacturing operations globally.

Utility Water Treatment Chemistries — The Utility Water Treatment Chemistries business provides specialized chemicals and consulting services for the utility water treatment market, which includes boiler water, cooling water, fuel and waste streams. This business also manufactures and sells automated equipment, including performance-based feed and control systems, proprietary monitoring devices and remote system surveillance. The utility water treatment products, services and equipment offerings are designed to protect plant assets and optimize energy, water and operational costs at customers’ facilities.

Functional Chemistries — The Functional Chemistries business produces specialized chemicals for the paper industry that impart specific properties such as strength, liquid holdout and printability to the final paper or board. Product lines include sizing agents, wet/dry strength additives and specialized products such as crepe and release additives for tissue manufacturing.

Water Technologies operates throughout the Americas, Europe and Asia Pacific. It has 31 manufacturing facilities in 18 countries and participates in two joint ventures. Water Technologies has manufacturing plants in Macon and Savannah, Georgia; Chicopee, Massachusetts; Louisiana, Missouri; Greensboro, North Carolina; Portland, Oregon; Houston, Texas; Franklin, Virginia; Beckley, West Virginia and Milwaukee, Wisconsin within the United States and Chester Hill, Australia; Beringen, Belgium; Americana, Leme and Paulinia, Brazil; Burlington, Canada; Beijing and Shanghai, China; Somercotes, England; Tampere, Finland; Krefeld and Sobernheim, Germany; Perawang, Indonesia; Busnago, Italy; Mexico City, Mexico; Zwijndrecht, the Netherlands; Perm, Russia; Tarragona, Spain; Kim Cheon, South Korea; Helsingborg, Sweden and Nantou, Taiwan. Through separate joint ventures, it has production facilities in Navi Mumbai, India and Seoul, South Korea. Water Technologies also utilizes third-party tolling manufacturers.

Water Technologies markets and distributes its products and services directly and through third-party distributors.

ASHLAND PERFORMANCE MATERIALS

Ashland Performance Materials (Performance Materials) is a worldwide manufacturer and supplier of specialty chemicals and customized services to the building and construction, transportation, metal casting, packaging and converting and marine markets. It is a technology leader in unsaturated polyester and vinyl ester resins and gelcoats, high-performance adhesives and specialty resins; and metal casting consumables and design services.

Performance Materials is comprised of the following businesses:

Composites and Adhesives — The Composites and Adhesives business manufactures and sells a broad range of corrosion-resistant, fire-retardant, general-purpose and high-performance grades of unsaturated polyester and vinyl ester resins, gelcoats and low-profile additives for the reinforced plastics industry. Key markets include the transportation, construction, marine and infrastructure end markets. It also markets vinyl ester resins under the DERAKANE™ and HETRON™ brand names and unsaturated polyester resins under the AROPOL™ brand name.

The Composites and Adhesives business also manufactures and sells adhesive solutions to the packaging and converting, building and construction, and transportation markets and manufactures and markets specialty coatings and adhesive solutions across multiple industries. Key technologies and markets include: acrylic polymers for pressure-sensitive adhesives; polyvinyl acetate emulsions; urethane adhesives for flexible packaging applications; aqueous and radiation-curable adhesives and specialty coatings for the printing and converting applications; hot-melt adhesives for various packaging applications; emulsion polymer isocyanate adhesives for structural wood bonding; elastomeric polymer adhesives and butyl rubber roofing tapes for commercial roofing applications; acrylic, polyurethane and epoxy structural adhesives for bonding fiberglass reinforced plastics, composites, thermoplastics and metals in automotive, marine, recreational and industrial applications; specialty phenolic resins for paper impregnation and friction material bonding.

Casting Solutions — Casting Solutions manufactures and sells metal casting chemicals worldwide, including sand-binding resin systems, refractory coatings, release agents, engineered sand additives and riser sleeves. This business also provides casting process modeling, core-making process modeling and rapid prototyping services. In July 2010, Ashland and Süd-Chemie AG (Süd-Chemie) reached a contractual agreement on the formation of a global joint venture to merge their business activities in the foundry chemicals sector. The joint venture, to be known as ASK Chemicals GmbH, will be

headquartered in Hilden, Germany and is expected to close in December 2010. Süd-Chemie and Ashland will each hold a fifty-percent interest in the joint venture with Süd-Chemie providing the operations management leadership.

Performance Materials operates throughout the Americas, Europe and Asia Pacific. It has 29 manufacturing facilities and participates in six manufacturing joint ventures in 14 countries. Composites and Adhesives has manufacturing plants in Fort Smith and Jacksonville, Arkansas; Los Angeles, California; Bartow, Florida; Calumet City, Illinois; Elkton, Maryland; Ashland and Columbus, Ohio; White City, Oregon; Philadelphia and Pittsburgh, Pennsylvania; Piedmont, South Carolina and Milwaukee, Wisconsin within the United States and Sao Paulo, Brazil; Kelowna and Mississauga, Canada; Changzhou and Kunshan, China; Kidderminster, England; Porvoo, Finland; Sauveterre, France; Miszewo, Poland; Benicarlo, Spain; and, through a separate joint venture, has a manufacturing plant in Jeddah, Saudi Arabia. Casting Solutions will contribute manufacturing sites located in Cleveland, Ohio (two sites) and in Campinas, Brazil and Idiazabal, Spain to the Süd-Chemie joint venture. The remaining Casting Solutions manufacturing sites located in Mississauga, Canada; Changzhou, China; Kidderminster, England; Milan, Italy and Castro-Urdilales, Spain will remain with Performance Materials. Casting Solutions also has joint venture manufacturing facilities located in Bendorf and Wuelfrath, Germany; Ulsan, South Korea; Arceniega, Spain and Alvsjo, Sweden.

Performance Materials markets and distributes its products directly and through third-party distributors in the Americas, Europe and Asia Pacific. Additionally, Performance Materials distributes its products through Ashland Distribution in North America.

ASHLAND CONSUMER MARKETS

Ashland Consumer Markets (Consumer Markets) markets premium packaged automotive lubricants, chemicals, appearance products, antifreeze and filters, with sales in more than 100 countries. Consumer Markets’ Valvoline™ trademark was federally registered in 1873 and is the oldest trademark for lubricating oil in the United States. Consumer Markets markets the following key brands of products and services to the private passenger car, light truck and heavy duty markets: Valvoline lubricants; Valvoline Premium Blue™ commercial lubricants; MaxLife™ lubricant products for vehicles with 75,000 or more miles; Valvoline Professional Series™ automotive chemicals; Pyroil™ automotive chemicals; Eagle One™ automotive appearance products; Car Brite™ automotive reconditioning products; MaxLife™ and Zerex™ antifreeze; Tectyl™ industrial products and Valvoline Instant Oil Change™ automotive services.

Consumer Markets is comprised of the following businesses:

Do It Yourself (DIY) — The DIY business sells Valvoline™ and other branded and private label products to consumers who perform their own auto maintenance. These products are sold through retail auto parts stores such as AutoZone, O’Reilly’s, Advance Auto Parts, mass merchandisers such as Wal-Mart Stores, Inc., and warehouse distributors and their affiliated jobber stores such as NAPA and CARQUEST.

Installer Channels — The Installer Channels business 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 sells to national accounts such as Goodyear, Monro and Sears. In addition, this business includes distribution to quick lubes branded “Valvoline Express Care™,” which consists of 341 independently-owned and operated stores.

Valvoline Instant Oil Change (VIOC) — The Valvoline Instant Oil Change™ chain is the second largest franchise competitor in the U.S. “fast oil change” service business, providing Consumer Markets with a significant presence in the installer channels segment of the passenger car and light truck motor oil market. As of September 30, 2010, 256 company-owned and 606 independently-owned and operated franchise VIOC centers were operating in 41 states. VIOC centers offer customers an innovative computer-based preventive maintenance tracking system that allows service technicians to make service recommendations based primarily on manufacturers’ recommendations.

Commercial & Industrial (C&I) — The C&I business 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. The C&I business also maintains a strategic alliance with Cummins Inc. (Cummins) to distribute heavy duty lubricants to the commercial market, as well as smaller alliances with other global OEMs.

Valvoline International — Outside of North America, Valvoline International markets Valvoline™, Eagle One™, Zerex™ and other branded products through wholly-owned affiliates, joint ventures, licensees and independent distributors in more than 100 countries. Valvoline International operates joint ventures with Cummins in Argentina, Brazil, China and India. In addition, Valvoline International 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 numerous third-party warehouses and toll manufacturers throughout the world.

Consumer Markets operates lubricant blending and packaging plants in Santa Fe Springs, California; Cincinnati, Ohio; East Rochester, Pennsylvania and Deer Park, Texas within the United States and Wetherill Park, Australia and Dordrecht, the Netherlands. Automotive chemical manufacturing and distribution is conducted in Hernando, Mississippi. Bulk blending and distribution facilities are located in College Park, Georgia; Willow Springs, Illinois and St. Louis, Missouri within the United States and Mississauga, Canada. Distribution operations are conducted from centers located in Orlando, Florida; College Park, Georgia; Willow Springs, Illinois; Indianapolis, Indiana; St. Louis, Missouri; Cincinnati, Ohio; East Rochester, Pennsylvania; Memphis, Tennessee and Dallas, Texas within the United States and through owned facilities in Dordrecht, the Netherlands and Birkenhead, United Kingdom and leased facilities in Adelaide, Melbourne, New Castle, Perth and Sydney, Australia.

Additives (from key suppliers such as The Lubrizol Corporation) and base oils (from key suppliers such as Motiva Enterprises LLC and SK E&P Company) constitute a large portion of the raw materials required to manufacture Consumer Markets’ products. In addition to raw materials, Consumer Markets sources a significant portion of its packaging from key suppliers such as Graham Packaging Inc.

ASHLAND DISTRIBUTION

Ashland Distribution (Distribution) distributes chemicals, plastics and composite raw materials in North America and plastics in Europe and China. Distribution also provides environmental services, including hazardous and nonhazardous waste collection, recovery, recycling and disposal, in North America. Deliveries are made in North America through a network of owned, leased and third-party warehouses, as well as rail and tank terminals.

Distribution operates the following businesses:

Chemicals — The Chemicals business distributes specialty and industrial chemicals, additives and solvents to industrial users in North America as well as some export operations. Markets served include the paint and coatings, personal care, inks, adhesives, polymer, rubber, industrial and institutional compounding, automotive, appliance, oil and gas and paper industries.

Plastics — The Plastics business distributes a broad range of thermoplastic resins and offers specialized technical services to processors in North America as well as some export operations. Processors include injection molders, extruders, blow molders and rotational molders. This business provides plastic material transfer and packaging services and less-than-truckload quantities of packaged thermoplastics. It also markets a broad range of thermoplastics to processors in Europe and China.

Composites — The Composites business distributes polyester thermoset resins, gelcoats, fiberglass and other specialty reinforcements, catalysts and allied products to customers in the cast polymer, corrosion, marine, building and construction, and other fiber-reinforced plastics industries through distribution facilities located throughout North America.

Environmental Services — The Environmental Services business, working in cooperation with chemical waste service companies, provides customers, including major automobile manufacturers, with comprehensive, nationwide hazardous and nonhazardous waste collection, recovery, recycling and disposal services. These services are offered through a North American network of distribution centers, including several storage facilities that have been fully permitted by the United States Environmental Protection Agency (USEPA).

Distribution has 63 owned or leased facilities, 68 third-party warehouses, rail terminals and tank terminals and three locations that perform contract packaging activities. Distribution of thermoplastic resins in Europe is conducted in 20 countries primarily through 15 third-party warehouses and one leased warehouse that also operates as a compounding facility.

MISCELLANEOUS

Environmental Matters

Ashland has implemented a companywide environmental policy overseen by the Environmental, Health and Safety Committee of Ashland’s Board of Directors. Ashland’s Environmental, Health and Safety (EH&S) department has the responsibility to ensure that Ashland’s businesses worldwide maintain environmental compliance in accordance with applicable laws and regulations. This responsibility is carried out via training; widespread communication of EH&S policies; information and regulatory updates; formulation of relevant policies, procedures and work practices; design and implementation of EH&S management systems; internal auditing by an independent auditing group; monitoring of legislative and regulatory developments that may affect Ashland’s operations; assistance to the businesses in identifying compliance

issues and opportunities for voluntary actions that go beyond compliance; and incident response planning and implementation.

Federal, state and local laws and regulations relating to the protection of the environment have a significant impact on how Ashland conducts its businesses. Ashland’s operations outside the United States are subject to the environmental laws of the countries in which they are located. These laws include regulation of air emissions and water discharges, waste handling, remediation and product inventory, registration and regulation. New laws and regulations may be enacted or adopted by various regulatory agencies globally. The costs of compliance with any new laws or regulations cannot be estimated until the manner in which they will be implemented has been more precisely defined.

At September 30, 2010, Ashland’s reserves for environmental remediation amounted to $207 million, reflecting Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable, without regard to any third-party recoveries. Engineering studies and probability techniques are used, along with historical experience and other factors, to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Environmental remediation reserves are subject to numerous inherent uncertainties that affect Ashland’s ability to estimate its share of the costs. Such uncertainties involve the nature and extent of contamination at each site, the extent of required cleanup efforts under existing environmental regulations, widely varying costs of alternate cleanup methods, changes in environmental regulations, the potential effect of continuing improvements in remediation technology, and the number and financial strength of other potentially responsible parties at multiparty sites. Although it is not possible to predict with certainty the ultimate costs of environmental remediation, Ashland currently estimates that the upper end of the reasonably possible range of future costs for identified sites is approximately $360 million. Ashland does not believe that any current individual remediation location is material to Ashland, as its largest reserve for any site is less than 10% of the remediation reserve. Ashland regularly adjusts its reserves as environmental remediation continues. Environmental remediation expense, net of insurance receivables, amounted to $22 million in 2010, compared to $13 million in 2009 and $7 million in 2008.

Product Control, Registration and Inventory — Many of Ashland’s products and operations in the United States are subject to the Toxic Substance Control Act; the Food, Drug and Cosmetics Act; the Chemical Diversion and Trafficking Act; the Chemical Weapons Convention and other product-related regulations. Since 2007, existing and new chemical substances produced or imported into the European Union (EU) are subject to the EU regulation known as REACH (Registration, Evaluation and Authorisation of Chemicals). In 2008, Ashland completed the pre-registration of its chemical substances as required by REACH. In addition, in accordance with REACH’s requirements, Ashland is communicating the intended use of chemical substances in its products to suppliers and customers. Under REACH additional testing requirements, documentation, risk assessments and registrations are occurring and will continue to occur and may adversely affect Ashland’s costs of products produced or imported in the EU. Other countries have similar laws and regulations relating to product control, registration and inventory.

Remediation — Ashland currently operates, and in the past has operated, various facilities at which, during the normal course of business, releases of hazardous substances have occurred. Additionally, Ashland has known or alleged potential environmental liabilities at a number of third-party sites for which Ashland has financial responsibility. Federal and state laws, including but not limited to the Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and various other remediation laws, require that contamination caused by such releases be assessed and, if necessary, remediated to meet applicable standards. Some of these laws also provide for liability for related damage to natural resources, and claims for alleged property and personal injury damage can also arise related to contaminated sites. Laws in other jurisdictions in which Ashland operates require that contamination caused by such releases at these sites be assessed and, if necessary, remediated to meet applicable standards.

Air — In the United States, the Clean Air Act (CAA) imposes stringent limits on facility air emissions, establishes a federally mandated operating permit program, allows for civil and criminal enforcement actions and sets limits on the volatile or toxic content of many types of industrial materials and consumer products. Additionally, it establishes air quality attainment deadlines and control requirements based on the severity of air pollution in a given geographical area. Various state clean air acts implement, complement and, in many instances, add to the requirements of the federal CAA. The requirements of the CAA and its state counterparts have a significant impact on the daily operation of Ashland’s businesses and, in many cases, on product formulation and other long-term business decisions. Other countries where Ashland operates also have laws and regulations relating to air quality. Ashland’s businesses maintain numerous permits pursuant to these clean air laws.

State and local air agencies in the United States continue to implement strategies for meeting ozone and particulate matter standards established by the USEPA in 1997. Ozone strategies have included emission controls for certain types of emission sources, reduced limits on the volatile organic compound content of industrial materials and consumer products, and requirements on the transportation sector. Particulate matter strategies have included dust control measures for construction sites and reductions in emission rates allowed for industrial operations. In 2006, 2008 and 2009, the USEPA

established newer and more stringent standards for particulate matter, ozone and sulfur dioxide, respectively. State and local agencies are evaluating options for meeting these newest standards, which will begin to be implemented between 2010 and 2013. It is not possible at this time to estimate the potential financial impact that these newest standards may have on Ashland’s operations or products. Ashland will continue to monitor and evaluate these standards to meet these and all air quality requirements.

Solid Waste — Ashland’s businesses are subject to various laws relating to and establishing standards for the management of hazardous and solid waste. In the United States, RCRA applies. While many U.S. facilities are subject to the RCRA rules governing generators of hazardous waste, certain facilities are also required to have hazardous waste storage permits. Ashland has implemented systems to oversee compliance with the RCRA regulations and, where applicable, permit conditions. In addition to regulating current waste disposal practices, RCRA also addresses the environmental effects of certain past waste disposal operations, the recycling of wastes and the storage of regulated substances in underground tanks. Other countries where Ashland operates also have laws and regulations relating to hazardous and solid waste.

Climate Change and Related Regulatory Developments — Ashland has been collecting energy use data and calculating greenhouse gas (GHG) emissions for many years. For the past few years, Ashland has been evaluating the potential impacts from both climate change and the anticipated GHG regulations to facilities, products and other business interests, as well as the strategies commonly considered by the industrial sector to reduce the potential impact of these risks. These risks are generally grouped as impacts from legislative, regulatory and international developments, impacts from business and investment trends, and impacts to company assets from the physical effects of climate change. Current North American, European, and other regional regulatory developments are not expected to have a material affect on Ashland’s operations, although some facilities are subject to promulgated rules. Business and investment trends are expected to drive an increase in the demand for products that improve energy efficiency, reduce energy use and increase the use of renewable resources. At this time, Ashland cannot estimate the impact of this expected demand increase to its businesses. Physical effects from climate change have the potential to affect Ashland’s assets in areas prone to sea level rise or extreme weather events much as they do the general public and other businesses. Due to the uncertainty of these matters, Ashland cannot estimate the impact at this time of GHG-related developments on its operations or financial condition.

Water — Ashland’s businesses maintain numerous discharge permits. In the United States, such permits may be required by the National Pollutant Discharge Elimination System of the Clean Water Act and similar state programs. Other countries have similar laws and regulations requiring permits and controls relating to water discharge.

Competition

Functional Ingredients, Water Technologies and Performance Materials compete in the highly fragmented specialty chemicals industry. The participants in the industry offer a varied and broad array of product lines designed to meet specific customer requirements. Participants compete with individual and service product offerings on a global, regional and/or local level subject to the nature of the businesses and products, as well as the end-markets and customers served. The industry has become increasingly global as participants focus on establishing and maintaining leadership positions outside of their home markets. Many of these segments’ product lines face domestic and international competitive factors, including industry consolidation, pricing pressures and competing technologies.

Consumer Markets competes in the highly competitive automotive lubricants and consumer products car care businesses, principally through its offerings of premium products and services primarily under the Valvoline™ family of trademarks, coupled with strong brand marketing, customer support and distribution capabilities. Some of the major brands of motor oils and lubricants with which Consumer Markets competes globally are Castrol † , Mobil † and Pennzoil † . In the “fast oil change” business, Consumer Markets competes with other leading independent fast lube chains on a national, regional or local basis, as well as automobile dealers and service stations. Important competitive factors for Consumer Markets in the “fast oil change” market include Valvoline’s brand recognition; maintaining market presence through Valvoline Instant Oil Change™ and Valvoline Express Care™ outlets; and quality and speed of service, location, convenience and sales promotions.

Distribution competes with a large number of national, regional and local companies throughout North America. The Plastics business also competes with other distribution companies in Europe and China. Competition within each of Distribution’s businesses is based primarily on reliable and timely supply of products, breadth of product portfolio, service offerings and price.

Intellectual Property

Ashland's intellectual property portfolio, including patents, trademarks, copyrights, trade secrets, formulae and know-how, is an important component of Ashland’s business. The Valvoline™ trademark and other trademarks related to Valvoline products and franchises are of particular importance to the Consumer Markets segment and the overall Ashland business. Ashland also licenses intellectual property rights from third-parties.

Raw Materials and Supplies

Raw materials purchased by Ashland are ordinarily available in adequate quantities from multiple sources of supply in the U.S. and foreign countries. Ashland believes that raw material supplies will be available from multiple sources in quantities sufficient to meet demand in fiscal 2011.

Research

Ashland conducts a program of market-focused research and development to understand the needs of the marketplace, to frame those needs in a platform in which Ashland has capability to deliver, and to determine how to develop or access the intellectual property required to meet the identified market needs. Research and development costs are expensed as they are incurred and totaled $86 million in 2010 ($96 million in 2009 and $48 million in 2008).

Forward-Looking Statements

This annual report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are not historical facts and generally are identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “is likely,” “predicts,” and variations of such words and similar expressions. Although Ashland believes that its expectations are based on reasonable assumptions, such expectations are subject to risks and uncertainties that are difficult to predict and may be beyond Ashland’s control. As a result, Ashland cannot assure that the expectations contained in such statements will be achieved. Important factors that could cause actual results to differ materially from those contained in such statements are discussed under “Use of estimates, risks and uncertainties” in Note A of “Notes to Consolidated Financial Statements” in this annual report on Form 10-K. For a discussion of other factors and risks that could affect Ashland’s expectations and operations, see “Item 1A. Risk Factors” in this annual report on Form 10-K.

ITEM 1A. RISK FACTORS

The following discussion of “risk factors” identifies the most significant factors that may adversely affect Ashland’s business, operations, financial position or future financial performance. This information should be read in conjunction with Management’s Discussion and Analysis and the consolidated financial statements and related notes incorporated by reference into this annual report on Form 10-K. The following discussion of risks is designed to highlight what Ashland believes are important factors to consider when evaluating its expectations. These factors could cause future results to differ from those in forward-looking statements and from historical trends.

The competitive nature of Ashland’s markets may delay or prevent the Company from passing increases in raw materials costs on to its customers. In addition, certain of Ashland’s suppliers may be unable to deliver products or raw materials or may withdraw from contractual arrangements. The occurrence of either event could adversely affect Ashland’s results of operations.

Rising and volatile raw material prices, especially those of hydrocarbon derivatives or cotton linters or wood pulp, may negatively impact Ashland’s costs. Similarly, energy costs are a significant component of certain of Ashland’s product costs. Ashland is not always able to raise prices in response to such increased costs, and its ability to pass on the costs of such price increases is dependent upon market conditions.

Likewise, Ashland purchases certain products and raw materials from suppliers, often pursuant to written supply contracts. If those suppliers are unable to timely meet Ashland’s orders or choose to terminate or otherwise avoid contractual arrangements, Ashland may not be able to make alternative supply arrangements. Also, domestic and global government regulations related to the manufacture or transport of certain raw materials may impede Ashland’s ability to obtain those raw materials on commercially reasonable terms. If Ashland is unable to obtain and retain qualified suppliers under commercially acceptable terms, its ability to manufacture and deliver products in a timely, competitive and profitable manner could be adversely affected.

Several of Ashland’s businesses are cyclical in nature, and economic downturns or declines in demand, particularly for certain durable goods, may negatively impact its revenues and profitability.

Ashland’s revenues and profitability are susceptible to downturns in the economy, particularly in those segments serving the housing, construction, automotive and paper industries. Both overall demand for Ashland’s products and services and its profitability are affected by economic recession, inflation, changes in prices of raw materials (including many hydrocarbon derivatives, wood pulp and cotton linters) or changes in governmental monetary or fiscal policies. During the recent economic downturn, a number of Ashland’s customers in the construction, automotive, paper and certain other industries experienced financial and production stresses, which led to decreased demand for Ashland’s products and has affected Ashland’s margins on products sold. Demand for Ashland’s products by many of these customers has not returned to pre-downturn levels, and may not. While Ashland strives to reduce costs to help offset the effects of this decreased demand,

there is no assurance Ashland will be able to manage costs in light of any further demand decreases. If another economic downturn occurs, the economic recovery is slower than expected or there is a significant decline in customer demand, Ashland’s business, results of operations and financial condition could be negatively impacted.

Ashland faces competition from other companies, which places downward pressure on prices and margins and may otherwise adversely affect Ashland’s business.

Ashland operates in highly competitive markets, competing against a number of domestic and foreign companies. Competition is based on several key criteria, including product performance and quality, product price, product availability and security of supply, responsiveness of product development in cooperation with customers and customer service. Certain key competitors are significantly larger than Ashland and have greater financial resources, leading to greater operating and financial flexibility. As a result, these competitors may be better able to withstand changes in conditions within the relevant industry, changes in the prices of raw materials and energy and in general economic conditions. In addition, competitors' pricing decisions could compel Ashland to decrease its prices, which could negatively affect its margins and profitability. Also, additional competition in markets served by Ashland could adversely affect margins and profitability and could lead to a reduction in market share.

Ashland’s success depends upon its ability to attract and retain key employees and the identification and development of talent to succeed senior management .

Ashland’s success depends on its ability to attract and retain key personnel, and Ashland relies heavily on its management team. The inability to recruit and retain key personnel or the unexpected loss of key personnel may adversely affect Ashland’s operations. Also, approximately one-third of Ashland’s U.S. based employees will be retirement-eligible within the next five years, which increases the risk that key employees could leave the Company. In addition, because of its reliance on its management team, Ashland’s future success depends in part on its ability to identify and develop talent to succeed its senior management. The retention of key personnel and appropriate senior management succession planning will continue to be critical to the successful implementation of Ashland’s strategies.

Changes in laws or regulations or the manner of their interpretation or enforcement could adversely impact Ashland’s financial performance and restrict its ability to operate its business or execute its strategies.

New laws or regulations, or changes in existing laws or regulations or the manner of their interpretation or enforcement, could increase Ashland’s cost of doing business and restrict its ability to operate its business or execute its strategies. This includes, among other things, the possible taxation under U.S. law of certain income from foreign operations, compliance costs and enforcement under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and costs associated with complying with the Patient Protection and Affordable Care Act of 2010 and the regulations promulgated thereunder.

Ashland’s substantial international operations subject it to risks of doing business in foreign countries, which could adversely affect its business, financial condition and results of operations.

About one-third of Ashland’s net sales for fiscal 2010 were to customers outside of North America. Also, Ashland currently has approximately 50 facilities located outside the United States. Ashland expects sales from international markets to continue to represent an even larger portion of the Company’s net sales in the future. If the sale of Ashland Distribution is consummated, the Company expects that almost half of its sales will be from outside North America. Accordingly, Ashland’s business is subject to risks related to the differing legal, political, social and regulatory requirements and economic conditions of many jurisdictions.

The global nature of Ashland’s business presents difficulties in hiring and maintaining a workforce in certain countries. Fluctuations in exchange rates may affect product demand and may adversely affect the profitability in U.S. dollars of products and services provided in foreign countries. In addition, foreign countries may impose additional withholding taxes or otherwise tax Ashland’s foreign income, or adopt other restrictions on foreign trade or investment, including currency exchange controls. The imposition of tariffs is also a risk that could impair Ashland’s financial performance.

Certain legal and political risks are also inherent in the operation of a company with Ashland’s global scope. For example, it may be more difficult for Ashland to enforce its agreements or collect receivables through foreign legal systems. There is a risk that foreign governments may nationalize private enterprises in certain countries where Ashland operates. In certain countries or regions, terrorist activities and the response to such activities may threaten Ashland’s operations more than in those in the United States. Also, changes in general economic and political conditions in countries where Ashland operates, particularly in emerging markets, are a risk to Ashland’s financial performance.

As Ashland continues to operate its business globally, its success will depend in part on its ability to anticipate and effectively manage these and other related risks. There can be no assurance that the consequences of these and other factors relating to its multinational operations will not have an adverse effect on Ashland.

Ashland is responsible for, and has financial exposure to, liabilities from pending and threatened claims, including those alleging personal injury caused by exposure to asbestos, which reduce Ashland’s cash flows and could reduce profitability.

There are various claims, lawsuits and administrative proceedings pending or threatened, including those alleging personal injury caused by exposure to asbestos, against Ashland and its current and former subsidiaries. Such actions are with respect to commercial matters, product liability, toxic tort liability and other matters that seek remedies or damages, some of which are for substantial amounts. While these actions are being contested, their outcome is not predictable. Ashland’s businesses could be adversely affected by financial exposure to these liabilities.

Projecting future asbestos costs is subject to numerous variables that are extremely difficult to predict. In addition to the significant uncertainties surrounding the number of claims that might be received, other variables include the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, dismissal rates, costs of medical treatment, the impact of bankruptcies of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards. Furthermore, any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. In light of these inherent uncertainties, Ashland believes that its asbestos reserves represent the best estimate within a range of possible outcomes. As a part of the process to develop these estimates of future asbestos costs, a range of long-term cost models was developed. These models are based on national studies that predict the number of people likely to develop asbestos-related diseases and are heavily influenced by assumptions regarding long-term inflation rates for indemnity payments and legal defense costs, as well as other variables mentioned previously. Because of the inherent uncertainties in projecting future asbestos liabilities and establishing appropriate reserves, Ashland’s actual asbestos costs may exceed its reserves, which could adversely affect its profitability and financial performance.

Ashland has incurred, and may continue to incur, substantial operating costs and capital expenditures as a result of environmental, health and safety, and hazardous substances liabilities and requirements, which could reduce Ashland’s profitability.

Ashland is subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment and human health and safety, and the generation, storage, handling, treatment, disposal and remediation of hazardous substances and waste materials. Ashland has incurred, and will continue to incur, significant costs and capital expenditures to comply with these laws and regulations.

Environmental, health and safety regulations change frequently, and such regulations and their enforcement have tended to become more stringent over time. Accordingly, the enforcement of environmental, health and safety laws and regulations could interrupt Ashland’s operations, require modifications to its facilities or cause Ashland to incur significant liabilities, costs or losses that could adversely affect the profitability of the Company. Actual or alleged violations of environmental, health or safety laws and regulations could result in restrictions or prohibitions on plant operations as well as substantial damages, penalties, fines, civil or criminal sanctions and remediation costs. In addition, under some environmental laws, Ashland may be strictly liable and/or jointly and severally liable for environmental damages and penalties.

Ashland is also subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively environmental remediation) at multiple locations. Ashland uses engineering studies, historical experience and other factors to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Environmental remediation reserves are subject to numerous inherent uncertainties that affect Ashland’s ability to estimate its share of the applicable costs. Such uncertainties involve the nature and extent of contamination at each site, the extent of required cleanup efforts under existing environmental regulations, widely varying costs of alternate cleanup methods, changes in environmental regulations, the potential effect of continuing improvements in remediation technology and the number and financial strength of other potentially responsible parties at multiparty sites. As a result, Ashland’s actual costs for environmental remediation could exceed its reserves and, therefore, adversely affect Ashland’s financial performance.

Ashland’s business exposes it to potential product liability claims and recalls, which could adversely affect its financial condition and performance.

The development, manufacture and sales of specialty chemical products by Ashland, including products produced as food ingredients or with pharmaceutical and nutritional supplement applications, involve an inherent risk of exposure to product liability claims, product recalls, product seizures and related adverse publicity. A product liability claim or judgment against Ashland could also result in substantial and unexpected expenditures, affect consumer or customer confidence in its products, and divert management’s attention from other responsibilities. Although Ashland maintains product liability insurance, there can be no assurance that this type or the level of coverage is adequate or that Ashland will be able to continue to maintain its existing insurance or obtain comparable insurance at a reasonable cost, if at all. A product recall or a

partially or completely uninsured judgment against Ashland could have a material adverse effect on results of operations and financial condition.

Business disruptions could seriously harm Ashland’s operations and financial performance.

Business disruptions, including those related to natural disasters, severe weather conditions, supply disruptions, increasing costs for energy, temporary plant and/or power outages, information technology systems and network disruptions, terrorist attacks, armed conflict, war, pandemic diseases or other catastrophic events, could seriously harm Ashland’s operations, as well as the operations of its customers and suppliers, and adversely impact Ashland’s financial performance. Although it is impossible to predict the occurrences or consequences of any such events, they could result in reduced demand for Ashland’s products, make it difficult or impossible for Ashland to manufacture its products or deliver products and services to its customers or to receive raw materials from suppliers, or create delays and inefficiencies in the supply chain.

While Ashland maintains business continuity plans that are intended to allow the Company to continue operations or mitigate the effect of events that could disrupt its business, the Company cannot provide assurances that its plans would fully protect the Company from all such events. In addition, insurance maintained by the Company to protect against loss of business and other related consequences resulting from business disruptions is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of the Company’s damages or damages to others in the event Ashland’s business is disrupted. In addition, insurance related to these types of risks may not be available now or, if available, may not be available in the future at commercially reasonable rates.

Ashland’s pension and postretirement benefit plan obligations are currently underfunded, and Ashland may have to make significant cash payments to some or all of these plans, which would reduce the cash available for Ashland’s businesses.

Ashland has unfunded obligations under its domestic and foreign pension and postretirement benefit plans. The funded status of Ashland’s pension plans is dependent upon many factors, including returns on invested assets, the level of certain market interest rates and the discount rate used to determine pension obligations. Unfavorable returns on the plan assets or unfavorable changes in applicable laws or regulations could materially change the timing and amount of required plan funding, which would reduce the cash available for Ashland’s businesses. In addition, a decrease in the discount rate used to determine pension obligations could result in an increase in the valuation of pension obligations, which could affect the reported funding status of Ashland’s pension plans and future contributions, as well as the periodic pension cost in subsequent fiscal years.

Under the Employee Retirement Income Security Act of 1974, as amended, or ERISA, the Pension Benefit Guaranty Corporation, or PBGC, has the authority to terminate an underfunded tax-qualified pension plan under limited circumstances. In the event Ashland’s tax-qualified pension plans are terminated by the PBGC, Ashland could be liable to the PBGC for some portion of the underfunded amount and, under certain circumstances, the liability could be senior to Ashland’s senior unsecured notes.

Ashland is undergoing a strategic transformation to focus on investing in and growing its specialty chemicals businesses. If Ashland is unable to achieve the expected benefits from its growth strategy, its business, financial condition and results of operations could be adversely affected.

Ashland’s strategic objective has been to create a more focused company built around a strong core of specialty chemicals businesses. Ashland intends to invest in and to grow its specialty chemicals businesses, operating its other businesses to generate strong cash flows to fund this investment. As a result, Ashland is currently in a transformational period in which it has made and may continue to make changes that could be material to its business, financial condition and results of operations. Over the past six years, changes have included the disposition of Ashland’s refining and marketing and highway construction businesses, the acquisition of Hercules Incorporated (Hercules) and the proposed sale of the Distribution business.

The success of Ashland’s growth strategy may be limited by, among other things, the availability and suitability of acquisition candidates and Ashland’s financial resources, including available cash and borrowing capacity. In addition, acquisitions involve numerous risks including determining appropriate valuations, integrating operations and personnel, achieving expected synergies, providing new product or service offerings and dedicating management attention away from other business matters. Dispositions also involve certain risks, including stranded costs and the possibility that the benefits anticipated from a sale will not be fully realized. If Ashland is unable to achieve the expected benefits from its growth strategy, the Company’s business, financial condition or results of operations may be adversely affected.

Ashland may not be able to effectively protect or enforce its intellectual property rights.

Ashland relies on the patent, trademark, trade secret and copyright laws of the United States and other countries to protect its intellectual property rights. The laws of some countries may not protect Ashland’s intellectual property rights to

the same extent as the laws of the United States. Failure of foreign countries to have laws to protect Ashland’s intellectual property rights or an inability to effectively enforce such rights in foreign countries could result in the loss of valuable proprietary information, which could have an adverse effect on Ashland’s business and results of operations.

Even in circumstances where Ashland has a patent on certain technologies, such patents may not provide meaningful protection against competitors or against competing technologies. In addition, any patent applications submitted by Ashland may not result in an issued patent. There can be no assurance that Ashland’s intellectual property rights will not be challenged, invalidated, circumvented or rendered unenforceable. Ashland could also face claims from third parties alleging that Ashland’s products or processes infringe on their proprietary rights. If Ashland is found liable for infringement, it could be responsible for significant damages, prohibited from using certain products or processes or required to modify certain products and processes. Any such infringement liability could adversely affect Ashland’s product and service offerings, profitability and results of operations.

Ashland also protects its know-how and trade secrets by entering into confidentiality and non-disclosure agreements with most of its employees and third parties. There can be no assurance that such agreements will not be breached or that Ashland will be able to effectively enforce them. Any unauthorized disclosure of any of Ashland’s material know-how or trade secrets could adversely affect Ashland’s business and results of operations.

Ashland’s restrictive debt covenants may affect its ability to operate its business successfully.

The terms of Ashland’s credit facilities and senior unsecured notes contain various provisions that limit its ability to, among other things: grant liens; incur additional indebtedness; provide guarantees or support other contingent obligations; engage in mergers and acquisitions and consolidations; sell, transfer and otherwise dispose of property and assets; make loans, acquisitions, joint ventures and other investments; declare dividends, make distributions or redeem or repurchase capital stock; change the nature of Ashland’s business; and enter into transactions with its affiliates. These covenants could adversely affect Ashland’s ability to finance its future operations or capital needs and pursue available business opportunities.

In addition, Ashland’s credit facilities require it to maintain specified financial ratios and satisfy certain financial condition tests. Events beyond Ashland’s control, including changes in general economic and business conditions, may affect its ability to meet those financial ratios and financial condition tests. Ashland cannot assure that it will meet those tests or that the lenders will waive any failure to meet those tests. A breach of any of these covenants or any other restrictive covenants contained in Ashland’s credit facilities or senior unsecured notes would result in an event of default.

If an event of default under Ashland’s credit facilities occurs, the holders of the affected indebtedness could declare all amounts outstanding, together with accrued interest, to be immediately due and payable, which, in turn, could cause the default and acceleration of the maturity of certain of Ashland’s other indebtedness. If Ashland was unable to pay such amounts, the lenders under its credit facilities could proceed against the collateral pledged to them. Ashland has pledged a substantial portion of its assets to the lenders under its credit facilities. If an event of default occurs under the senior unsecured notes, the trustee under the notes or holders of at least 25% of the outstanding aggregate principal amount of notes may declare the principal of the notes and any accrued interest immediately payable, which, in turn, could cause the default and acceleration of the maturity of certain of Ashland’s other indebtedness, including its credit facility.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Ashland’s corporate headquarters is located in Covington, Kentucky. Principal offices of other major operations are located in Wilmington, Delaware (Functional Ingredients and Water Technologies); Dublin, Ohio (Performance Materials and Distribution); Lexington, Kentucky (Consumer Markets); Barendrecht, the Netherlands; Shanghai, China and Schaffhausen, Switzerland. All of these offices are leased, except for portions of the Dublin, Ohio facilities that are owned. Principal manufacturing, marketing and other materially important physical properties of Ashland and its subsidiaries are described within the appropriate business segment under “Item 1” in this annual report on Form 10-K. All of Ashland’s physical properties are owned or leased. Ashland believes its physical properties are suitable and adequate for the Company’s business. Additional information concerning certain leases may be found in Note K of “Notes to Consolidated Financial Statements” in this annual report on Form 10-K.

ITEM 3. LEGAL PROCEEDINGS

The following is a description of Ashland’s material legal proceedings.

Asbestos-Related Litigation

Hercules, a wholly-owned subsidiary of Ashland, is also subject to liabilities from asbestos-related personal injury lawsuits involving claims which typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products which were sold by one of Hercules’ former subsidiaries to a limited industrial market.

Ashland and Hercules are also defendants in lawsuits alleging exposure to asbestos at facilities formerly or presently owned or operated by Ashland or Hercules.

For additional detailed information regarding liabilities arising from asbestos-related litigation, see “Management’s Discussion and Analysis – Application of Critical Accounting Policies – Asbestos-related litigation” and Note N of “Notes to Consolidated Financial Statements” in this annual report on Form 10-K.

Environmental Proceedings

(1) CERCLA and Similar State Law Sites – Under CERCLA and similar state laws, Ashland and Hercules may be subject to joint and several liability for cleanup costs in connection with alleged releases of hazardous substances at sites where it has been identified as a “potentially responsible party” (PRP). As of September 30, 2010, Ashland and Hercules have been identified as a PRP by U.S. federal and state authorities, or by private parties seeking contribution, for the cost of environmental investigation and/or cleanup at 92 waste treatment or disposal sites. These sites are currently subject to ongoing investigation and remedial activities, overseen by the USEPA or a state agency, in which Ashland or Hercules is typically participating as a member of a PRP group. Generally, the type of relief sought includes remediation of contaminated soil and/or groundwater, reimbursement for past costs of site cleanup and administrative oversight and/or long-term monitoring of environmental conditions at the sites. The ultimate costs are not predictable with assurance.

(2) Multi-Media Environmental Compliance Investigation – In April 2005, Hercules’ Franklin, Virginia manufacturing facilities were subject to a multi-media environmental compliance investigation by the USEPA and the Virginia Department of Environmental Quality (VADEQ), and in April 2007, Hercules’ Hopewell, Virginia manufacturing facilities were subject to a CAA compliance investigation by USEPA and the VADEQ. In April 2008, the results of both investigations were provided to Hercules. The investigation uncovered areas of potential noncompliance with various environmental requirements which are being evaluated by Hercules. While it is reasonable to believe that these matters could potentially involve penalties exceeding $100,000, the potential liability with respect to these matters should not be material to Ashland.

(3) Hattiesburg, Mississippi Notice of Violation from MDEQ – In November 2008, the Mississippi Department of Environmental Quality (MDEQ) issued a Notice of Violation to Hercules’ now-closed Hattiesburg, Mississippi manufacturing facility alleging that a storm water retention basin at the facility had been operated as a hazardous waste storage and treatment facility without a permit in violation of the RCRA. Ashland is working with MDEQ to settle this matter in the context of the shutdown and ongoing remediation of the Hattiesburg facility. MDEQ has proposed to Ashland a settlement penalty in excess of $100,000. While it is reasonable to believe that this matter will involve a penalty exceeding $100,000, the potential liability with respect to this matter should not be material to Ashland.

(4) Louisiana, Missouri Air Inspection and Penalty Assessment – In 2007, the USEPA conducted an inspection of Hercules’ Louisiana, Missouri production facility for compliance with the CAA’s Leak Detection and Repair regulations. Hercules subsequently provided additional information to the USEPA in response to matters identified during the inspection close-out meeting. In July 2010, USEPA issued an offer of settlement and a proposed penalty assessment in excess of $100,000 to address alleged violations. Ashland is working with USEPA to address the allegations. While it is reasonable to believe that this matter could potentially involve a penalty exceeding $100,000, the potential liability with respect to this matter should not be material to Ashland.

For additional information regarding environmental matters and reserves, see “Management’s Discussion and Analysis – Application of Critical Accounting Policies – Environmental remediation” and Note N of “Notes to Consolidated Financial Statements” in this annual report on Form 10-K.

Other Pending Legal Proceedings

In addition to the matters described, there are various claims, lawsuits and administrative proceedings pending or threatened against Ashland and its current and former subsidiaries. Such actions are with respect to commercial matters, product liability, toxic tort liability, environmental and other matters that seek remedies or damages, some of which are for substantial amounts. While these actions are being contested, their outcome is not predictable with assurance.

ITEM 4. (REMOVED AND RESERVED)

ITEM X. EXECUTIVE OFFICERS OF ASHLAND

The following is a list of Ashland’s executive officers, their ages and their positions and offices during the last five years (listed alphabetically after the Chief Executive Officer and the current members of Ashland’s Executive Committee).

JAMES J. O’BRIEN (age 56) is Chairman of the Board, Chief Executive Officer and a Director of Ashland and has served in such capacities since 2002.

LAMAR M. CHAMBERS (age 56) is Senior Vice President and Chief Financial Officer of Ashland and has served in such capacities since 2008. During the past five years, he has also served as Vice President and Controller of Ashland.

DAVID L. HAUSRATH (age 58) is Senior Vice President and General Counsel of Ashland and has served in such capacities since 2004 and 1999, respectively. During the past five years, he has also served as Secretary of Ashland.

ROBERT M. CRAYCRAFT, II (age 41) is Vice President of Ashland and President of Distribution and has served in such capacities since 2008. During the past five years, he has also served as Vice President-U.S. Chemicals of Distribution and Senior Vice President and General Manager-Retail Business of Consumer Markets.

SUSAN B. ESLER (age 49) is Vice President, Human Resources and Communications of Ashland and has served in such capacity since 2006. During the past five years, she has also served as Vice President - Human Resources of Ashland.

THEODORE L. HARRIS (age 45) is Vice President of Ashland; President, Global Supply Chain and Environmental, Health and Safety; and President of Performance Materials and has served in such capacities since 2006, 2008 and 2009, respectively. During the past five years, he has also served as Vice President of Information Technology, President of Distribution and Vice President and General Manager of the Composite Polymers Division of Ashland.

J. WILLIAM HEITMAN (age 56) is Vice President and Controller of Ashland and has served in such capacities since 2008. During the past five years, he has also served as Controller of the North American Operations of The Goodyear Tire & Rubber Company.

SAMUEL J. MITCHELL, JR. (age 49) is Vice President of Ashland and President of Consumer Markets and has served in such capacities since 2002.

JOHN E. PANICHELLA (age 51) is Vice President of Ashland and President of Functional Ingredients and has served in such capacities since 2008. During the past five years, he has also served as Vice President and President-Aqualon Division of Hercules and Vice President and General Manager-Americas of General Electric Water & Process Technologies.

PAUL C. RAYMOND, III (age 48) is Vice President of Ashland and President of Water Technologies and has served in such capacities since 2008. During the past five years, he has also served as Vice President, President-Paper Technologies and Ventures Division and President-Pulp and Paper Division of Hercules.

ANNE T. SCHUMANN (age 50) is Vice President and Chief Information and Administrative Services Officer of Ashland and has served in such capacities since 2008 and 2009, respectively. During the past five years, she has also served as Vice President, Acquisition Integration of Ashland and Vice President, Information Technology and Human Resources and Vice President, Shared Services Center of Hercules.

WALTER H. SOLOMON (age 51) is Vice President and Chief Growth Officer of Ashland and has served in such capacities since 2005.

Each executive officer is elected by the Board of Directors of Ashland to a term of one year, or until a successor is duly elected, at the annual meeting of the Board of Directors, except in those instances where the officer is elected other than at an annual meeting of the Board of Directors, in which case his or her tenure will expire at the next annual meeting of the Board of Directors unless the officer is re-elected.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

See Quarterly Financial Information on page F-50 for information relating to market price and dividends of Ashland’s Common Stock.

At October 31, 2010, there were approximately 16,132 holders of record of Ashland’s Common Stock. Ashland Common Stock is listed on the New York Stock Exchange (NYSE) (ticker symbol ASH) and has trading privileges on NASDAQ.

There were no sales of unregistered securities required to be reported under Item 701 of Regulation S-K and Ashland made no purchases of Ashland Common Stock during the fourth quarter of fiscal 2010.

FIVE-YEAR TOTAL RETURN PERFORMANCE GRAPH

The following graph compares Ashland’s five-year cumulative total shareholder return with the cumulative total return of Standard & Poor’s 500 Index, Standard & Poor’s 400 Midcap Index and a peer group of companies. Ashland was listed in the S&P 500 Index until November 2008 and is now listed in the S&P 400 Midcap Index. The cumulative total shareholder return for each of these groups assumes the reinvestment of dividends.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

ASHLAND, S&P 500 INDEX, S&P 400 MIDCAP INDEX, AND PEER GROUP

	2005	2006	2007	2008	2009	2010
Ashland 1	100	117	129	65	97	111
S&P 500	100	111	129	101	94	103
S&P 400 Midcap	100	107	127	105	102	120
Peer Group 2	100	107	134	124	142	173

1	Ashland’s former Transportation Construction operations consisted of Ashland Paving And Construction, Inc. which was sold on August 28, 2006, to Oldcastle Materials, Inc.

2	Ashland’s Peer Group five-year cumulative total return index reflects Transportation and Construction peers for fiscal 2006.

The peer group consists of the following industry indices:

∙

Specialty Chemical Production, Distribution, and Motor Oil and Car Care Products Portfolio: Standard & Poor’s 500 Specialty Chemicals (Large-Cap), Standard & Poor’s 400 Specialty Chemicals (Mid-Cap), Standard & Poor’s 600 Specialty Chemicals (Small-Cap), and Standard & Poor’s 400 Diversified Chemicals (Mid-Cap).

∙

Highway Construction Portfolio, for fiscal 2006 only: Standard & Poor’s 500 Construction Materials (Large-Cap), Standard & Poor’s 400 Construction Materials (Mid-Cap), and Standard & Poor’s 600 Construction Materials (Small-Cap).

As of September 30, 2010, the aforementioned indices consisted of 28 companies. The annual returns for the companies or indices in each of the portfolios have been weighted by their respective beginning-of-year market capitalization. Each portfolio is then weighted to reflect Ashland’s annual invested capital in each of these lines of business with the annual return for the peer group represented by the sum of these weighted portfolios.

ITEM 6. SELECTED FINANCIAL DATA

See Five-Year Selected Financial Information on page F-51.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

See Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages M-1 through M-33.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Quantitative and Qualitative Disclosures about Market Risk on page M-33.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and financial schedule of Ashland presented in this annual report on Form 10-K are listed in the index on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures — As of September 30, 2010, Ashland, under the supervision and with the participation of Ashland’s management, including Ashland’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of Ashland’s disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of September 30, 2010.

Internal Control — See Management’s Report on Internal Control Over Financial Reporting on page F-2 and the Reports of Independent Registered Public Accounting Firms on pages F-3 and F-4.

Changes in Internal Control Over Financial Reporting — There has been no change in Ashland’s internal control over financial reporting during the quarter ended September 30, 2010, that has materially affected, or is reasonably likely to materially affect, Ashland’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

There is hereby incorporated by reference the information to appear under the captions “Election of Directors” and “Miscellaneous - Section 16(a) Beneficial Ownership Reporting Compliance” in Ashland’s Proxy Statement, which will be filed with the SEC within 120 days after September 30, 2010. See also the list of Ashland’s executive officers and related information under “Executive Officers of Ashland” in Part I - Item X in this annual report on Form 10-K.

There is hereby incorporated by reference the information to appear under the caption “Corporate Governance - Governance Principles” in Ashland’s Proxy Statement.

There is hereby incorporated by reference the information to appear under the caption “Corporate Governance - Shareholder Nominations of Directors” in Ashland’s Proxy Statement.

There is hereby incorporated by reference the information to appear under the caption “Audit Committee Report” regarding Ashland’s audit committee and audit committee financial experts, as defined under Item 407(d)(4) and (5) of Regulation S-K of the Securities Exchange Act of 1934, as amended, in Ashland’s Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

There is hereby incorporated by reference the information to appear under the captions “Compensation of Directors,” “Committees and Meetings of the Board of Directors - Personnel and Compensation Committee Interlocks and Insider Participation,” “Executive Compensation,” “Compensation Discussion and Analysis,” and “Personnel and Compensation Committee Report on Executive Compensation” in Ashland’s Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

There is hereby incorporated by reference the information to appear under the captions “Ashland Common Stock Ownership of Certain Beneficial Owners,” “Ashland Common Stock Ownership of Directors and Executive Officers of Ashland” and “Equity Compensation Plan Information” in Ashland’s Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

There is hereby incorporated by reference the information to appear under the captions “Corporate Governance - Director Independence and Certain Relationships,” and “Related Person Transaction Policy,” and “Audit Committee Report” in Ashland’s Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

There is hereby incorporated by reference the information with respect to principal accountant fees and services to appear under the captions “Audit Committee Report” and “Ratification of Independent Registered Public Accountants” in Ashland’s Proxy Statement.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this Report

(1) and (2) Financial Statements and Financial Schedule

(3) See Item 15(b) in this annual report on Form 10-K

The consolidated financial statements and financial schedule of Ashland presented in this annual report on Form 10-K are listed in the index on page F-1.

Schedules other than that listed have been omitted because of the absence of the conditions under which they are required or because the information required is shown in the consolidated financial statements or the notes thereto. Separate financial statements of unconsolidated affiliates are omitted because each company does not constitute a significant

subsidiary using the 20% tests when considered individually. Summarized financial information for such affiliates is disclosed in Note E of “Notes to Consolidated Financial Statements.”

(b) Documents required by Item 601 of Regulation S-K

3.1

Third Restated Articles of Incorporation of Ashland and amendment thereto effective February 3, 2009 (filed as Exhibit 3.1 to Ashland’s Form 10-Q for the quarter ended December 31, 2008, and incorporated herein by reference).

3.2

By-laws of Ashland, effective as of June 30, 2005 (filed as Exhibit 3(ii) to Ashland’s 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 (filed as Exhibit 4.2 to Ashland’s Form 10-K for the fiscal year ended September 30, 2008, and incorporated herein by reference).

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 Ashland’s Form 10-Q for the quarter ended December 31, 2006, and incorporated herein by reference).

4.4

Indenture, dated May 27, 2009, by and among Ashland, the Guarantors and U.S. Bank National Association (filed as Exhibit 4.1 to Ashland’s Form 10-Q for the quarter ended June 30, 2009, and incorporated herein by reference).

4.5

Registration Rights Agreement, dated May 27, 2009, by and among Ashland, the Guarantors and Banc of America Securities, LLC and Scotia Capital (USA) Inc. (filed as Exhibit 4.2 to Ashland’s Form 10-Q for the quarter ended June 30, 2009, and incorporated herein by reference).

4.6

Warrant Agreement dated July 27, 1999 between Hercules and The Chase Manhattan Bank, as warrant agent (filed as Exhibit 4.4 to Hercules’ Form 8-K filed on July 28, 1999 (SEC File No. 001-00496), and incorporated herein by reference).

4.7

Form of Series A Junior Subordinated Deferrable Interest Debentures (filed as Exhibit 4.5 to Hercules’ Form 8-K filed on July 28, 1999 (SEC File No. 001-00496), and incorporated herein by reference).

4.8

Form of CRESTS SM Unit (filed as Exhibit 4.7 to Hercules’ Form 8-K filed on July 28, 1999 (SEC File No. 001-00496), and incorporated herein by reference).

4.9

Form of Warrant (filed as Exhibit 4.8 to Hercules’ Form 8-K filed on July 28, 1999 (SEC File No. 001-00496), and incorporated herein by reference).

The following Exhibits 10.1 through 10.20 are contracts or compensatory plans or arrangements or management contracts required to be filed as exhibits pursuant to Items 601(b)(10)(ii)(A) and 601(b)(10)(iii)(A) and (B) of Regulation S-K.

10.1

Ashland Inc. Deferred Compensation Plan for Non-Employee Directors and Amendment No. 1 (filed as Exhibit 10.5 to Ashland’s 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 Ashland’s 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) (filed as Exhibit 10.3 to Ashland’s Form 10-K for the fiscal year ended September 30, 2008, and incorporated herein by reference).

10.4

Amended and Restated Ashland Inc. Deferred Compensation Plan for Non-Employee Directors (2005) (filed as Exhibit 10.4 to Ashland’s Form 10-K for the fiscal year ended September 30, 2008, and incorporated herein by reference).

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 (filed as Exhibit 10.6 to Ashland’s Form 10-K for the fiscal year ended September 30, 2008, and incorporated herein by reference).

10.7

Hercules Incorporated Long Term Incentive Compensation Plan (as Amended and Restated) (filed as Exhibit 10.2 to Ashland’s Form 10-Q for the quarter ended December 31, 2008, and incorporated herein by reference).

10.8

Amended and Restated Hercules Deferred Compensation Plan.

10.9

Hercules Incorporated Employee Pension Restoration Plan.

10.10

Form of Chief Executive Officer Change in Control Agreement (filed as Exhibit 10.1 to Ashland’s Form 8-K filed on January 7, 2009, and incorporated herein by reference).

10.11

Form of Executive Officer Change in Control Agreement (filed as Exhibit 10.2 to Ashland’s Form 8-K filed on January 7, 2009, and incorporated herein by reference).

10.12

Form of Executive Officer Change in Control Agreement, effective for agreements entered into after July 2009 (filed as Exhibit 10.11 to Ashland’s Form 10-K for the fiscal year ended September 30, 2009, and incorporated herein by reference).

10.13

Ashland Inc. Severance Pay Plan (filed as Exhibit 10.3 to Ashland’s Form 8-K filed on January 7, 2009, and incorporated herein by reference).

10.14

Employment Agreement between Ashland and John E. Panichella (filed as Exhibit 10.14 to Ashland’s Form 10-K for the fiscal year ended September 30, 2008, and incorporated herein by reference).

10.15

Employment Agreement between Ashland and Paul C. Raymond, III (filed as Exhibit 10.15 to Ashland’s Form 10-K for the fiscal year ended September 30, 2008, and incorporated herein by reference).

10.16

Form of Indemnification Agreement between Ashland and members of its Board of Directors (filed as Exhibit 10.10 to Ashland’s annual report on Form 10-K for fiscal year ended September 30, 2005, and incorporated herein by reference).

10.17

Amended and Restated Ashland Inc. Incentive Plan (filed as Exhibit 10.17 to Ashland’s Form 10-K for the fiscal year ended September 30, 2009, and incorporated herein by reference).

10.18

2006 Ashland Inc. Incentive Plan (filed as Exhibit 10 to Ashland’s Form 10-Q for the quarter ended December 31, 2005, and incorporated herein by reference).

10.19

Form of Notice granting Stock Appreciation Rights Awards.

10.20

Form of Notice granting Restricted Stock Awards (filed as Exhibit 10 to Ashland’s Form 10-Q for the quarter ended March 31, 2010, and incorporated herein by reference).

10.21

Credit Agreement dated as of March 31, 2010 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 Ashland’s Form 8-K filed on April 6, 2010, and incorporated herein by reference).

10.22

Amended and Restated Transfer and Administration Agreement dated as of March 31, 2010 among CVG Capital II LLC, Ashland, each of Liberty Street Funding LLC, Market Street Funding LLC and Three Pillars Funding LLC, as Conduit Investors and Uncommitted Investors, The Bank of Nova Scotia, as Agent, 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 10.2 to Ashland’s Form 8-K filed on April 6, 2010, and incorporated herein by reference).

10.23

Sale Agreement dated as of November 13, 2008 among Ashland and CVG Capital II LLC (filed as Exhibit 10.4 to Ashland’s Form 8-K filed on November 19, 2008, and incorporated herein by reference).

10.24

First Amendment to Sale Agreement dated as of March 31, 2010, between Ashland and CVG Capital II LLC (filed as Exhibit 10.3 to Ashland’s Form 8-K filed on April 6, 2010, and incorporated herein by reference).

10.25

Purchase Agreement for the $650 Million 9 1/8% Senior Notes due 2017, dated May 19, 2009, between Ashland and Banc of America Securities, LLC, Scotia Capital (USA) Inc. and SunTrust Robinson Humphrey, Inc. (filed as Exhibit 10.1 to Ashland’s Form 10-Q for the quarter ended June 30, 2009, and incorporated herein by reference).

10.26

Master Formation Agreement dated July 15, 2010, among Ashland, Süd-Chemie Aktiengesellschaft and Ashland-Südchemie-Kernfest GmbH (pursuant to Item 601(b)(2) of Regulation S-K, exhibits and schedules to the Master Formation Agreement have been omitted; exhibits and schedules will be supplementally provided to the SEC upon request).

10.27

Master Contribution and Sale Agreement dated July 15, 2010, among Ashland, Ashland International Holdings, Inc., Süd-Chemie Aktiengesellschaft, Tecpro Holding Corporation Inc. and Ashland-Südchemie-Kernfest GmbH (pursuant to Item 601(b)(2) of Regulation S-K, exhibits and schedules to the Master Contribution and Sale Agreement have been omitted; exhibits and schedules will be supplementally provided to the SEC upon request).

10.28

Agreement of Purchase and Sale dated November 5, 2010, by and between Ashland Inc. and TPG Accolade, LLC (filed as Exhibit 2.1 to Ashland’s Form 8-K filed on November 10, 2010, and incorporated herein by reference).

Computation of Earnings Per Share (appearing in Note A of “Notes to Consolidated Financial Statements” in this annual report on Form 10-K).

Computation of Ratio of Earnings to Fixed Charges.

List of Subsidiaries.

23.1

Consent of PricewaterhouseCoopers LLP.

23.2

Consent of Ernst & Young LLP.

23.3

Consent of Hamilton, Rabinovitz & Associates, Inc.

Power of Attorney.

31.1

Certification of James J. O’Brien, 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.

Certification of James J. O’Brien, 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.

101.INS*

XBRL Instance Document.

101.SCH*

XBRL Taxonomy Extension Schema Document.

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document.

*Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Consolidated Income for years ended September 30, 2010, 2009 and 2008; (ii) Consolidated Balance Sheets at September 30, 2010 and 2009; (iii) Statements of Consolidated Stockholders’ Equity at September 30, 2010, 2009 and 2008; (iv) Statements of Consolidated Cash Flows for the years ended September 30, 2010, 2009 and 2008; and (v) Notes to Consolidated Financial Statements, tagged as blocks of text. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

™ Trademark Ashland or its subsidiaries, registered in various countries.

† Trademark owned by a third party.

Upon written or oral request, a copy of the above exhibits will be furnished at cost.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ASHLAND INC.
	(Registrant)
	By:
	/s/ Lamar M. Chambers
	Lamar M. Chambers
	Senior Vice President and Chief Financial Officer
	Date: November 22, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, in the capacities indicated, on November 22, 2010.

Signatures			Capacity


/s/ James J. O'Brien			Chairman of the Board, Chief Executive Officer and Director
James J. O'Brien			(Principal Executive Officer)

/s/ Lamar M. Chambers			Senior Vice President and Chief Financial Officer
Lamar M. Chambers			(Principal Financial Officer)

/s/ J. William Heitman			Vice President and Controller
J. William Heitman			(Principal Accounting Officer)

*			Director
Roger W. Hale

*			Director
Bernadine P. Healy

*			Director
Kathleen Ligocki

*			Director
Vada O. Manager

*			Director
Barry W. Perry

*			Director
Mark C. Rohr

*			Director
George A. Schaefer, Jr.

*			Director
Theodore M. Solso

*			Director
John F. Turner

*			Director
Michael J. Ward

*By:

/s/ David L. Hausrath

David L. Hausrath

	Attorney-in-Fact

Date:	November 22, 2010

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements for the years ended September 30, 2010, 2009 and 2008.

BUSINESS OVERVIEW

Ashland profile

Ashland is a global specialty chemicals company that provides products, services and solutions that meet customer needs throughout a variety of industries. With approximately 14,500 employees worldwide, Ashland serves customers in more than 100 countries.

During the past several years Ashland has been focused on the objective of creating a dynamic, global specialty chemicals company. In that process, Ashland has divested certain noncore businesses, redesigned business models, and acquired businesses in growth markets like specialty additives, functional ingredients, water and adhesives to enhance Ashland’s specialty chemicals offerings. Ashland’s acquisition of Hercules, in November 2008, propelled the combined company to a global leadership position with expanded capabilities and promising growth potential in specialty additives and functional ingredients, paper and water technologies, and specialty resins.

Ashland’s sales generated outside of North America were 33% in 2010, 32% in 2009 and 29% in 2008. Sales by region expressed as a percentage of total consolidated sales were as follows:


Sales by Geography	2010			2009		(a)	2008
North America		67	%		68	%		71	%
Europe		21	%		20	%		21	%
Asia Pacific		8	%		8	%		5	%
Latin America & other		4	%		4	%		3	%
		100	%		100	%		100	%

(a) Sales from the acquired operations of Hercules are included herein from November 14, 2008.

Business segments

Ashland’s reporting structure is composed of five reporting segments: Ashland Aqualon Functional Ingredients (Functional Ingredients), Ashland Hercules Water Technologies (Water Technologies), Ashland Performance Materials (Performance Materials), Ashland Consumer Markets (Consumer Markets) and Ashland Distribution (Distribution). For further descriptions of each business segment see the “Results of Operations – Business Segment Review” beginning on page M-10.

The contribution to sales by each business segment expressed as a percentage of total consolidated sales were as follows:


Sales by Business Segment	2010			2009		(a)	2008
Functional Ingredients		10	%		10	%		n/a
Water Technologies		20	%		20	%		11	%
Performance Materials		14	%		13	%		19	%
Consumer Markets		19	%		20	%		19	%
Distribution		37	%		37	%		51	%
		100	%		100	%		100	%

(a) Sales from the acquired operations of Hercules are included herein from November 14, 2008.

M-1

KEY DEVELOPMENTS

During 2010 and other previous periods, the following operational decisions and economic developments had an impact on Ashland’s current and future cash flows, results of operations and financial position.

Economic environment

Despite a sluggish overall economic environment worldwide, Ashland’s financial performance during 2010 reflected improved demand within the markets it serves, as all of the business segments have reported increased volume levels, on a comparable basis, from the 2009 period, which was severely affected by a significant decline in demand from 6% to 22% across all of its business segments. Ashland has continued to emphasize product pricing to offset significant raw material cost increases in the most recent period, while internally assessing operations for cost reduction opportunities, to optimize cash flow generation and improve financial flexibility, positioning the company for future opportunities.

Cost-structure efficiency and Hercules integration programs

During 2010, Ashland successfully completed its last major step in the integration of Hercules by integrating its enterprise resource planning (ERP) system within the business units acquired as part of this acquisition. Additionally, Ashland continued the progress on the specific cost-structure efficiency programs implemented in 2008 and 2009 and is targeting these programs to be completed during fiscal 2011.

During 2008, Ashland implemented operational redesigns (2008 Program), primarily within Ashland’s Water Technologies and Performance Materials businesses, to take proactive steps to enhance profitability through streamlined operations and an improved overall cost structure of the businesses. This program continued during 2009 and was further expanded to capture additional cost saving opportunities.

In conjunction with the Hercules acquisition in November 2008, Ashland announced an integration plan (Integration Plan) that targeted certain projected cost savings as part of combining joint and redundant services and facilities. This program focused primarily on capturing operational, selling and administrative savings within the combined company. Additionally, with the prolonged and significant deterioration of global economic demand during 2009, Ashland announced in January 2009 an additional cost reduction and organizational restructuring plan (2009 Program), which was subsequently expanded in July 2009, to further reduce Ashland’s overall cost structure.

A summary of each program, along with initial targeted savings and status as of September 30, 2010, is as follows:

2008 Program – Originally intended to produce annualized cost savings of $40 million by the end of 2009, primarily within the Water Technologies and Performance Materials businesses, this program was expanded to $85 million by the end of 2009. Essentially all cost savings initiatives related to this program had been achieved as of the end of fiscal 2009.

Integration Program – Originally intended to produce synergy cost savings of $50 million, this program was expanded to $130 million in expected synergy savings by the end of 2010. As of the end of fiscal 2009, Ashland had achieved essentially all of the total run rate cost savings associated with this program.

2009 Program – Originally intended to produce reduced costs (including various plant and operational efficiencies and significant reductions in travel and entertainment expenses) of $85 million. This program was expanded to $185 million and included a specific $27 million cost reduction program within Distribution to realign the cost structure of this business and additional continued efforts to resize Ashland to match the current global economic demand. As of the end of fiscal 2010, Ashland had achieved essentially all of the total run rate cost savings associated with this program. Other items included in the program announced in January 2009, but not part of the totals above, reduced costs during 2009 only. These items primarily included:

·	Freezing wage and salaries globally for 2009, except where legally mandated otherwise, with savings of approximately $25 million; and

·	Implementing a two-week furlough program for most U.S. and Canadian based employees, that was essentially completed in June of 2009, and several other job and benefits related actions. Furlough program savings for 2009 totaled approximately $25 million.

Combined with previous operational redesigns (2008 Program) completed during 2009, Ashland has achieved run rate cost reductions of $425 million through September 30, 2010, an increase of $70 million from the September 30, 2009 run rate cost reductions achieved, which exceeded the previously targeted run rate cost savings of $400 million estimated for these cost reduction initiatives. The cumulative effect of these restructuring activities has resulted in 12 permanent facility closings through the end of fiscal 2010, and in total has reduced the global workforce by over 2,000 employees, or approximately 13%, exceeding the previous estimate by over 100 employees. The total restructuring cost incurred under the cost-structure efficiency programs for the twelve months ended September 30, 2010 was $4 million, and was classified within the selling, general and administrative expense caption. The total restructuring cost incurred under the cost-structure

M-2

efficiency programs for the twelve months ended September 30, 2009 was $96 million, of which $75 million during 2009 had been charged as an expense within the Statement of Consolidated Income, consisting of $58 million classified within the selling, general and administrative expense caption and $17 million of accelerated depreciation charged to the cost of sales caption. The remaining cost of $21 million related to established severance reserves associated with Hercules personnel which qualified for purchase method of accounting in accordance with U.S. GAAP, had no effect on the Statement of Consolidated Income. Additional costs from reductions in resources or facilities may occur in future periods, which could include additional charges related to severance, plant closings, reassessed pension plan valuations or other items. For further information on Ashland’s cost-structure efficiency and Hercules’ integration programs, see Note F of Notes to Consolidated Financial Statements.

In addition to the programs described above, during 2010, Performance Materials incurred a severance charge of $11 million and accelerated depreciation expense of $6 million. This was primarily related to reductions in production capacity, as part of Ashland’s continued effort to optimize its cost structure with the current market demand.

Debt repayments and Senior Credit Facilities refinancing

During 2010, Ashland reduced total debt by $389 million to $1,224 million at September 30, 2010, which is a $1,244 million reduction from the total debt outstanding as of the purchase date of the Hercules acquisition in November 2008. The total debt reduction was primarily funded by operating cash flows and resulted in Ashland achieving its targeted debt level capital structure goal approximately two years earlier than expected.

On March 31, 2010, as part of a refinancing of its then-existing senior credit facilities, Ashland entered into a Credit Agreement with Bank of America, N.A., as Administrative Agent, The Bank of Nova Scotia, as Syndication Agent, and the other Lenders party thereto (the Senior Credit Agreement). The Senior Credit Agreement provided for an aggregate principal amount of $850 million in senior secured credit facilities (the Senior Credit Facilities), consisting of a $300 million four-year Term Loan A facility and a $550 million revolving credit facility. The proceeds from the borrowings from the Term Loan A facility were used, together with proceeds from the accounts receivable securitization facility described below, and cash on hand to repay all amounts outstanding under Ashland’s previous senior secured facilities and to pay for fees and expenses incurred in connection with the Senior Credit Facilities and the related transactions. The new revolving credit facility will provide ongoing working capital and will be used for other general corporate purposes as well as support for the issuance of letters of credit. The new Senior Credit Agreement has more favorable terms as compared to the previously existing senior credit facility, including less restrictive covenants, which includes the removal of covenants associated with consolidated net worth and capital expenditure limits, and lower interest rates. In conjunction with the new Senior Credit Agreement, Ashland expanded the availability of the accounts receivable securitization facility from $200 million to $350 million, subject to available funding from qualifying receivables. For further information on the new Senior Credit Agreement and accounts receivable securitization, see the “Liquidity” section of the “Financial Position” discussion and Note I of Notes to Consolidated Financial Statements.

Corporate credit ratings

During 2010, Ashland’s corporate credit ratings were upgraded by both Standard & Poor’s and Moody’s Investor Services from BB- and Ba2, respectively, at September 30, 2009 to BB+ and Ba1, respectively, at September 30, 2010 with an outlook of positive from Standard & Poor’s and positive from Moody’s Investor Services.

Both rating agencies cited Ashland’s positive cash flows since the Hercules acquisition and Ashland’s significant debt reduction as major factors in these ratings actions. Ashland’s ability to access capital markets to provide liquidity has remained largely unchanged as a result of these ratings actions; however, the improved corporate credit ratings, along with improvements in the credit markets and Ashland’s financial performance, has allowed, and should continue in the future to allow, Ashland to borrow on more favorable terms, including less restrictive covenants and lower interest rates.

Acquisitions/Divestitures

Süd-Chemie joint venture agreement

In July 2010, Ashland and Süd-Chemie AG (Süd-Chemie) signed an agreement for the formation of an expanded global joint venture serving the foundry chemical sector. The transaction will combine three businesses: Ashland’s Casting Solutions business group, the Foundry-Products and Specialty Resins business unit of Süd-Chemie, and Ashland-Südchemie-Kernfest GmbH (ASK), the existing fifty-percent owned European-based joint venture between Ashland and Süd-Chemie, for which Ashland only recognizes equity income of the joint venture within its consolidated results. Ashland’s Casting Solutions and ASK businesses recorded sales of $279 million and $145 million, respectively, during each businesses’ most recently completed fiscal year. The Foundry-Products and Specialty Resins business unit of Süd-Chemie to be contributed to the joint venture generated sales of approximately $146 million for its most recently completed fiscal year.

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During the fifth year of the joint venture’s operations, Ashland will have the option to sell its shares in the new joint venture to Süd-Chemie under mutually agreed terms. If Ashland does not execute this option by the end of the sixth year of the joint venture’s operations, Süd-Chemie will have the option to acquire Ashland’s shares under mutually agreed terms. Under both options, if mutually agreed terms cannot be reached, then the fair market value of the shares will be determined through an appraisal process set forth in the agreement.

The transaction is expected to close by the end of the calendar year, subject to customary closing conditions, including regulatory review. At closing, the joint venture is expected to distribute a cash payment to Ashland of approximately 19 million euros. During the period in which the transaction closes, Ashland is expecting to recognize a gain, primarily attributable to the fair value remeasurement of the net assets contributed to the new joint venture exceeding the recorded values.

Ara Quimica acquisition

In April 2010, Ashland acquired the remaining 50% interest in Ara Quimica S.A. (Ara Quimica), a leading producer of custom unsaturated polyester resin formulations for the composites industry in South America, for $28 million. Prior to the acquisition, Ashland owned a 50% interest in Ara Quimica, which it recorded as an equity-method investment within the Performance Materials reporting segment. Ara Quimica reported sales of approximately $50 million from its most recent fiscal year ended December 31, 2009. Ashland recognized a pretax gain of $23 million as a result of revaluing its existing equity interest held in Ara Quimica before the business combination. The gain was included in the net gain on acquisitions and divestitures caption on the Statements of Consolidated Income.

Pinova divestiture

In January 2010, Ashland sold its refined wood rosin and natural wood terpenes business, formerly known as Pinova, a business unit of Functional Ingredients, to TorQuest Partners in a transaction valued at approximately $75 million before tax, which was comprised of $60 million in cash and a $15 million five-year promissory note from TorQuest Partners. The Pinova business, with annual revenues of approximately $85 million per year, had approximately 200 employees along with an associated manufacturing facility located in Brunswick, Georgia. The transaction resulted in a pretax gain of less than $1 million, which was included in the net gain on acquisitions and divestitures caption on the Statements of Consolidated Income. As part of this transaction, TorQuest Partners has agreed to continue to manufacture certain products on behalf of Ashland.

Drew Marine divestiture

In August 2009, Ashland sold its global marine services business known as Drew Marine, a business unit of Water Technologies, to J. F. Lehman & Co. in a transaction valued at approximately $120 million before tax, which was subsequently reduced by $4 million after giving affect to post-closing adjustments related primarily to working capital. Drew Marine businesses had annual sales of approximately $140 million per year. The transaction resulted in an initial pretax gain of $56 million during 2009, which was included in the net gain on acquisitions and divestitures caption on the Statements of Consolidated Income. As part of this transaction, Ashland has agreed to continue to manufacture certain products on behalf of Drew Marine.

Hercules acquisition

In November 2008, Ashland acquired Hercules Incorporated. The transaction was valued at $2,594 million and included $798 million of debt assumed in the acquisition. As part of the financing arrangement for the transaction, Ashland borrowed $2,300 million, which included $100 million drawn on the $400 million revolving credit facility, a $400 million Term Loan A facility, an $850 million Term Loan B facility, and a $200 million accounts receivable securitization facility. This debt has been reduced significantly since the original date of the acquisition and was refinanced in March of 2010. In addition, an initial $750 million bridge loan that was borrowed at the closing of this transaction was subsequently replaced with the issuance of $650 million senior unsecured bonds in May 2009. Ashland also retained $205 million of assumed Hercules debt.

Quarterly dividend increased

In May 2010, the Board of Directors of Ashland announced a quarterly dividend increase to 15 cents per share effective with the dividend payment on June 15, 2010 to eligible shareholders of record. This amount was double the previous quarterly dividend of 7.5 cents per share paid since November 2008. This increase reflected the progress made over the past two years in integrating the Hercules acquisition, paying down debt, creating operating leverage, executing Ashland’s business strategies, and Ashland’s confidence in future cash generation.

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RESULTS OF OPERATIONS – CONSOLIDATED REVIEW

Use of non-GAAP measures

Based on clarification and interpretive guidance from the Securities and Exchange Commission regarding the use of non-GAAP measures, Ashland has included within this document certain non-GAAP measures which include EBITDA (operating income plus depreciation and amortization), adjusted EBITDA (EBITDA adjusted for key items, which may include pro forma affects for significant acquisitions or divestitures, as applicable), adjusted EBITDA margin (adjusted EBITDA divided by sales, which can include pro forma adjustments) and free cash flow (cash flows by operating activities from continuing operations minus cash dividends paid and additions to property, plant and equipment). Such measurements are not prepared in accordance with U.S. GAAP and should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. Management believes the use of such non-GAAP measures on a consolidated and business segment basis assists investors in understanding the ongoing operating performance by presenting the financial results between periods on a more comparable basis. In addition, certain financial covenants related to Ashland’s Senior Credit Agreement are based on similar non-GAAP measures. The non-GAAP information provided is unique to Ashland and may not be consistent with the methodologies used by other companies.

Consolidated review

Net income

Ashland’s net income amounted to $332 million in 2010, $71 million in 2009 and $167 million in 2008, or $4.18, $.96 and $2.63 diluted earnings per share, respectively. Ashland’s net income is primarily affected by results within operating income, net interest and other financing (expense) income, income taxes, discontinued operations and other significant events or transactions that are unusual or nonrecurring. Income from continuing operations, which excludes results from discontinued operations, amounted to $301 million in 2010, $78 million in 2009 and $175 million in 2008, or $3.79, $1.07 and $2.76 per diluted earnings per share, respectively.

Ashland incurred pretax net interest and other financing expense of $197 million and $205 million during 2010 and 2009, respectively, as compared to net interest and other financing income of $28 million in 2008. Included within 2010 was an additional $66 million of accelerated amortization for deferred debt issuance costs and prepayment penalties associated with the Senior Credit Facility refinancing during March 2010. Included within 2009 was $18 million of accelerated amortization, of which $10 million related to debt issuance costs associated with the bridge loan payoff in May 2009 and $8 million related to debt issuance costs for prepayments made on both the Term Loans A and B facilities during 2009. The decrease in interest expense during 2010 compared to 2009 was primarily attributable to a lower weighted-average rate of borrowing due to Ashland’s refinancing of debt, as well as approximately $400 million in debt reduction. The increase in interest expense during 2009 compared to 2008 was attributable to the debt issued in conjunction with the financing of the Hercules acquisition.

The effective income tax rates of 23.2% for 2010 and 50.6% for 2009 were significantly affected by a number of discrete items discussed in further detail within the income tax expense caption discussion below in the comparative Statement of Consolidated Income analysis. The effective tax rate of 32.9% for 2008 was also impacted by several nonrecurring items during the year as well as the resolution of specific foreign and domestic tax matters, but to a lesser extent than during 2010 and 2009.

Discontinued operations, which are reported net of taxes, resulted in $31 million of income during 2010 and losses of $7 million and $8 million in 2009 and 2008, respectively. Each year had various adjustments related to previously recorded divestiture gains as well as updates to the asbestos liability and receivable models, which in 2010 included an income adjustment of $9 million after-tax related to an agreement with a number of London market insurance companies with respect to coverage for asbestos-related insurance claims.

Ashland reported significant nonrecurring items in both 2010 and 2009 that were not classified in operating income. These items in 2010 included a $23 million pretax gain as a result of remeasuring Ashland’s previously held 50% equity interest in Ara Quimica offset by a $5 million pretax charge as a result of the Patient Protection and Affordable Care Act included within the net gain on acquisitions and divestitures caption of the Statement of Consolidated Income. These items in 2009 included a $56 million pretax gain from the sale of Drew Marine, which was also reported within the net gain on acquisitions and divestitures caption of the Statement of Consolidated Income, as well as a $54 million pretax loss related to cross-currency swaps and a $32 million pretax loss on auction rate securities, which were both caused by the Hercules acquisition and reported within the other income and (expense) caption of the Statement of Consolidated Income. Ashland did not have any qualifying unusual or nonrecurring items in 2008.

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Operating income

Operating income amounted to $566 million in 2010, $390 million in 2009 and $213 million in 2008. Operating income results in 2010 compared to 2009 included an additional $24 million of operating income from the additional 44 day period the businesses of Hercules (acquired on November 13, 2008) were owned in 2010 as compared to 2009. Additionally, the current year included a $17 million restructuring charge for plant closure costs associated with capacity reductions in the composites line of business within Performance Materials. The results in 2009 included $47 million in nonrecurring purchase accounting adjustments related to inventory and in-process research and development associated with the Hercules acquisition and $54 million in severance charges for the ongoing integration and reorganization from the Hercules acquisition and other cost reduction programs. Excluding the items above, operating results improved from 2009 due partially to Ashland’s focus on cost control and price management over the past year. This cost control and price management, along with significant sales growth from increased volumes within all of Ashland’s business segments, after excluding the effect of acquisitions and divestitures as compared to 2009, helped mitigate the effect of substantial raw material cost increases.

Operating results in 2009 compared to 2008 increased as the acquisition of Hercules businesses increased operating income by approximately $49 million in 2009, despite $47 million in nonrecurring purchase accounting charges related to inventory fair value adjustments and in-process research and development. In addition, Ashland incurred $75 million for severance charges and accelerated depreciation for the ongoing integration and reorganization from the Hercules acquisition and other cost-structure efficiency programs. These items, along with significant volume declines across all business segments, severely affected operating results as compared to 2008 for legacy Ashland businesses, but were more than offset by aggressive cost reductions, lower raw materials costs and the affects of price increases, particularly within the Consumer Markets segment.

Operating income for 2010, 2009 and 2008 included depreciation and amortization (including a $10 million in-process research and development charge during 2009) of $304 million, $339 million and $145 million, respectively. EBITDA totaled $870 million, $729 million and $358 million for 2010, 2009 and 2008, respectively. As a result of the Hercules acquisition, adjusted EBITDA results in the table below have been prepared to illustrate the ongoing affects of Ashland’s acquisition of Hercules, which include the exclusion of certain charges, assuming the acquisition had been consummated on October 1, 2007. Adjusted EBITDA also excludes other key items, such as severance and restructuring, as management believes the use of such non-GAAP measures on a consolidated and business segment basis assists investors in understanding the ongoing operating performance by presenting the financial results between periods on a more comparable basis. The inventory fair value adjustment of $37 million in 2009 relates to a charge required by U.S. GAAP upon acquisition of a company’s inventory, which will no longer occur. The Hercules business results of $35 million and $381 million in 2009 and 2008, respectively, relate to the operating income earned and depreciation and amortization expense for 2009 and 2008 during the period in which Ashland did not yet own this business.


(In millions)	2010		2009			2008
Operating income	$	566	$	390		$	213
Depreciation and amortization (a)		304		339			145
EBITDA		870		729			358
Severance		11		54			9
Distribution environmental reserve adjustment		6		-			-
Inventory fair value adjustment		-		37			-
Results of the Hercules business prior to acquisition		-		35			381
Plant closing costs		-		4			-
Currency gain on intracompany loan		-		(5	)		-
Ashland-Cargill JV write-off and other due diligence costs		-		-			8
Adjusted EBITDA	$	887	$	854		$	756

(a)	Includes a $10 million charge for purchased in-process research and development in 2009.

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Statement of consolidated income – caption review

A comparative analysis of the Statement of Consolidated Income by caption is provided as follows for the years ended September 30, 2010, 2009 and 2008.

(In millions)		2010				2009				2008					2010 change			2009 change
Sales		$	9,012			$	8,106			$	8,381			$	906			$	(275	)

Sales for 2010 increased $906 million, or 11%, compared to 2009 primarily as a result of increases in volume, favorable currency exchange rates, and disciplined pricing management to offset increases in raw material costs. During 2010, Ashland experienced solid volume growth as all operating segments reported volume increases, after excluding the effect of acquisitions and divestitures, which increased sales $603 million, or 8%. Favorable currency exchange rates increased sales $105 million, or 1%, while net price and product mix increased sales by $91 million, or 1%. An additional increase in sales of $107 million, or 1%, occurred in 2010 from net acquisitions and divestitures attributable to the November 2008 acquisition of Hercules, the August 2009 divestiture of Drew Marine, the January 2010 divestiture of Pinova, and the April 2010 purchase of Ara Quimica.

Sales for 2009 decreased $275 million, or 3%, compared to 2008. Sales in 2009 included $1,709 million, or 20%, related to the acquired Hercules businesses. Significant volume declines across all businesses substantially decreased sales by $1,585 million, or 19%, with unfavorable currency exchange rates decreasing sales by $292 million, or 3%, compared to 2008. Price declines and unfavorable product mix of $189 million, or 2%, also reduced sales compared to 2008 as successful price management within Consumer Markets and Water Technologies were more than offset by price declines within Performance Materials and Distribution. Sales from the acquisition of the pressure-sensitive adhesive and atmospheric emulsions business of Air Products and Chemicals, Inc. (Air Products) within Performance Materials in June 2008 contributed an additional $82 million, or 1%, in 2009.

(In millions)	2010			2009			2008				2010 change		2009 change
Cost of sales	$	7,012		$	6,317		$	7,056		$	695	$	(739	)
Gross profit as a percent of sales		22.2	%		22.1	%		15.8	%

Cost of sales for 2010 increased $695 million, or 11%, compared to 2009 primarily due to increases in volume and price. Volume increased cost of sales by $397 million, or 7%, while rising raw material costs increased cost of sales an additional $173 million, or 3%, as savings achieved by Ashland’s cost reduction programs were unable to offset the increases in raw material costs during 2010. Currency exchange, due to the weakening of the U.S. dollar as compared to 2009, increased cost of sales by $74 million, or 1%, while the net acquisitions and divestitures impact of Hercules, Drew Marine, Pinova and Ara Quimica represented an $82 million, or 1%, increase in cost of sales for 2010. Change in product mix decreased cost of sales by $31 million, or 1%.

Cost of sales for 2009 decreased $739 million, or 11%, as increases related to the acquisitions of Hercules and Air Products were more than offset by significant declines in volume and raw material costs in 2009 as compared to 2008. The acquisitions of Hercules and Air Products represented a $1,308 million, or 18%, increase in cost of sales for 2009, which includes a nonrecurring charge of $37 million associated with the inventory fair value adjustment of Hercules’ acquired inventory. Additionally, a change in product mix increased cost of sales by $18 million. Significant volume declines reduced cost of sales by $1,276 million, or 18%, while currency exchange, due to the strengthening of the U.S. dollar’s average as compared to 2008, reduced cost of sales by $224 million, or 3%. Decreases in raw material costs contributed an additional $565 million, or 8%, decline in cost of sales. Gross profit margin increased by 6.3 percentage points compared to 2008 as a result of the Hercules acquisition, which included higher margin businesses, the mix of higher margin products sold during 2009 and improved pricing, particularly within Consumer Markets.

( In millions)	2010			2009			2008			2010 change		2009 change
Selling, general and administrative expense	$	1,399		$	1,341		$	1,118		$	58	$	223
As a percent of sales		15.5	%		16.5	%		13.3	%

Selling, general and administrative expenses for 2010 increased 4% compared to 2009, however, expenses as a percent of sales decreased 1.0 percentage point, as Ashland was able to leverage 11% sales growth through strict cost management efforts. Expenses impacting the comparability of 2010 compared to 2009 included $4 million and $58 million for severance

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and restructuring charges during 2010 and 2009, respectively, primarily due to the ongoing integration and reorganization from the Hercules acquisition, and a $21 million reduction in expenses during 2009 as a result of the employee furlough program. In addition, 2009 excluded approximately $50 million of costs related to the former Hercules businesses due to the timing of the acquisition (44 days into the first quarter). Currency exchange also increased expenses by an additional $18 million, while the remaining increase related primarily to increases in incentive compensation during 2010 compared to 2009.

Selling, general and administrative expenses for 2009 increased 20% compared to 2008, with expenses as a percent of sales increasing 3.2 percentage points as the acquisition of Hercules businesses and several key charges increased this percentage. Expenses impacting the comparability of 2009 as compared to 2008 include $58 million in severance and restructuring charges, primarily due to the ongoing integration and reorganization from the Hercules acquisition. The acquisitions of Hercules and Air Products added $348 million in selling, general and administrative expenses (excluding the severance and restructuring charges) as compared to 2008. Ashland’s cost reduction initiatives and other items reduced expenses by $138 million from 2008, while currency exchange effects reduced selling, general and administrative expenses by $45 million. For further information on cost saving initiatives see the “Key Fiscal 2009 Developments” discussion within Management’s Discussion and Analysis as well as Note F of Notes to Consolidated Financial Statements.


							2010			2009
(In millions)	2010		2009		2008		change			change
Research and development expense	$	86	$	96	$	48	$	(10	)	$	48

Research and development expenses for 2010 decreased as compared to 2009 primarily as a result of a $10 million charge related to the purchased in-process research and development projects at Hercules as of the acquisition date that occurred in 2009.

Research and development expenses for 2009 doubled compared to 2008 and included a charge of $10 million related to the purchased in-process research and development projects at Hercules as of the acquisition date. The acquired businesses of Hercules added $45 million in research and development expenses (excluding the previously mentioned in-process research and development charge) as compared to 2008, while legacy Ashland businesses decreased expenses by $10 million during 2009.


							2010		2009
(In millions)	2010		2009		2008		change		change
Equity and other income
Equity income	$	19	$	14	$	23	$	5	$	(9	)
Other income		32		24		31		8		(7	)
	$	51	$	38	$	54	$	13	$	(16	)

Total equity and other income increased 34% during 2010 compared to 2009. The increase in 2010 primarily relates to increased equity income from various joint venture affiliations and other income attributable to Consumer Markets, Performance Materials and other corporate activities.

Total equity and other income decreased 30% during 2009 compared to 2008. The decrease in 2009 primarily relates to decreased equity income from joint ventures associated with Performance Materials, which was severely impacted by significant declines in global demand in 2009.


										2010			2009
(In millions)	2010			2009			2008			change			change
Net interest and other financing (expense) income
Interest expense	$	(198	)	$	(215	)	$	(9	)	$	17		$	(206	)
Interest income		12			21			40			(9	)		(19	)
Other financing costs		(11	)		(11	)		(3	)		-			(8	)
	$	(197	)	$	(205	)	$	28		$	8		$	(233	)

The combined decrease, excluding interest income, in interest expense and other financing costs of $17 million in 2010 compared to 2009 is a result of the significant decrease in debt outstanding of approximately $400 million compared to 2009 and a lower weighted-average interest rate as a result of the Senior Credit Facility debt refinanced during 2010. Additionally, 2010 included $66 million of accelerated amortization of debt issuance costs and prepayment penalties associated with the Senior Credit Facility refinancing. Excluding this charge and the $18 million of accelerated amortization

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for the bridge loan extinguishment and prepayments made on both Term A and Term B facilities, interest expense and other financial costs decreased by $65 million during 2010. In conjunction with the Hercules acquisition, interest income in 2010 compared to 2009 also declined, as part of the funding to complete the acquisition was paid from Ashland’s existing liquid investments in the first quarter of fiscal 2009.

The increase in net interest and other financing expense of $233 million during 2009 primarily relates to an increase in interest expense of $206 million compared to 2008, which represents interest charges associated with debt borrowed at closing, on November 13, 2008, of the Hercules acquisition, which also increased other financing costs as compared to 2008. Interest expense for 2009 includes $52 million of amortization for deferred debt issuance costs, with $10 million related to the bridge loan extinguishment that was converted into senior unsecured bonds during 2009. In addition, interest expense included $8 million related to accelerated amortization from prepayments made on both the Term Loan A and Term Loan B facilities. In conjunction with the Hercules acquisition, interest income declined during 2009 as the remaining funding to complete the merger was paid from Ashland’s existing liquid investments. For further information on Ashland’s debt, including rates paid and scheduled maturities, see Note I of Notes to Consolidated Financial Statements.


								2010			2009
(In millions)	2010			2009		2008		change			change
Net gain on acquisitions and divestitures
Ara Quimica	$	23		$	-	$	-	$	23		$	-
MAP Transaction		(4	)		3		20		(7	)		(17	)
Drew Marine		2			56		-		(54	)		56
	$	21		$	59	$	20	$	(38	)	$	39

Net gain on acquisitions and divestitures during 2010 includes the remeasurement gain from Ashland’s previously held equity interest in Ara Quimica upon the purchase of the remaining 50% interest in April 2010 and subsequent adjustments to the 2005 transfer of Ashland’s 38% interest in the Marathon Ashland Petroleum joint venture and two other small businesses to Marathon Oil Corporation (Marathon) (the MAP Transaction), along with a final closing gain associated with the sale of Drew Marine.

Net gain on acquisitions and divestitures for 2009 includes the sale of Drew Marine, as well as subsequent adjustments to the 2005 transfer of Ashland’s 38% interest in Marathon. The gain in 2008 primarily relates to the settlement with Marathon of certain tax related matters associated with the MAP Transaction, which resulted in a $23 million gain. Other MAP Transaction losses recorded during 2008 primarily relate to decreases in the recorded receivable from Marathon for the estimated present value of future tax deductions related primarily to environmental and other postretirement obligations. See Notes B and C of Notes to Consolidated Financial Statements for further discussion on acquisitions and divestitures.


								2010		2009
(In millions)	2010		2009			2008		change		change
Other income and (expense)
Loss on currency swaps	$	-	$	(54	)	$	-	$	54	$	(54	)
Gain (loss) on auction rate securities		2		(32	)		-		34		(32	)
	$	2	$	(86	)	$	-	$	88	$	(86	)

Other income and expense during 2009 included two significant nonrecurring charges related to the Hercules acquisition. The first was a $54 million loss on currency swaps related to a swap associated with the Hercules acquisition. Hercules had held a significant hedge against certain open currency swap positions that Ashland immediately settled upon the acquisition. The second was a $32 million charge on auction rate securities as a result of a permanent realized loss on these securities due to the continued illiquid market these securities trade in and Ashland’s change in intent to no longer hold these securities until maturity. For further information on auction rate securities see the “Liquidity” discussion within Management’s Discussion and Analysis as well as Note G of Notes to Consolidated Financial Statements.

( In millions)	2010			2009			2008			2010 change		2009 change
Income tax expense	$	91		$	80		$	86		$	11	$	(6	)
Effective tax rate		23.2	%		50.6	%		32.9	%

The overall effective tax rate of 23.2% for 2010 includes certain discrete items such as the change in the tax treatment of a federal subsidy related to Ashland’s postretirement plan resulting in a charge of $14 million, a benefit of $9 million related

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to a deferred tax balance adjustment, a $17 million benefit for research and development credits associated with Hercules, a $6 million favorable adjustment related to the utilization of capital losses for which a benefit had not previously been recognized, and a benefit of $8 million associated with the gain on the Ara Quimica acquisition.

The overall effective tax rate was significantly increased during 2009 due to several key factors. Using a 35% statutory federal tax rate applied to the income from continuing operations for 2009, income taxes would have been an expense of $55 million. Significant discrete items for 2009 included an $8 million valuation allowance on auction rate securities losses and increases in the resolution and re-evaluation of tax positions taken in prior years of $29 million. These discrete expense items were partially offset by research and development credits of $9 million.

The overall effective tax rate of 32.9% in 2008 was affected by a $9 million charge from investments held for life insurance policies, which historically has been a tax benefit for Ashland. See Note L of Notes to Consolidated Financial Statements for a complete reconciliation of Ashland’s tax provision for the last three years to the 35% U.S. statutory rate.


									2010		2009
(In millions)	2010		2009			2008			change		change
Income (loss) from discontinued operations
(net of income taxes)
APAC	$	8	$	(6	)	$	(6	)	$	14	$	-
Asbestos-related litigation reserves		21		2			(2	)		19		4
Electronic Chemicals		2		(3	)		-			5		(3	)
	$	31	$	(7	)	$	(8	)	$	38	$	1

During 2010, Ashland entered into a new agreement with a number of London market insurance companies with respect to coverage for asbestos-related insurance claims. As a result, a $12 million increase to the Ashland asbestos receivable was recorded within the Consolidated Balance Sheet, which had a $9 million (after-tax) affect on the Statement of Consolidated Income within the discontinued operations caption. As a result of this agreement and other revised estimates, Ashland no longer discounts any portion of the asbestos receivable. In addition, both 2010 and 2009 were impacted by after-tax favorable net adjustments to the asbestos reserve and receivables of $12 million and $2 million, respectively, as a result of Ashland’s ongoing assessment of these matters. Additionally, during 2010, 2009 and 2008, subsequent tax adjustments were made to the gain on the sale of APAC (divested in 2006) and adjustments to environmental claims were made to the gain on the sale of Electronic Chemicals (divested in 2003). See Notes D and N of Notes to Consolidated Financial Statements for further information.

Quarterly operating income (loss)

The following details Ashland’s quarterly reported operating income (loss) for the years ended September 30, 2010, 2009 and 2008.


(In millions)	2010		2009			2008
December 31	$	146	$	(7	)	$	46
March 31		151		112			52
June 30		163		152			87
September 30		106		133			28

RESULTS OF OPERATIONS – BUSINESS SEGMENT REVIEW

Results of Ashland’s business segments are presented based on its management structure and internal accounting practices. The structure and practices are specific to Ashland; therefore, the financial results of Ashland’s business segments are not necessarily comparable with similar information for other comparable companies. Ashland refines its expense allocation methodologies to the reportable segments from time to time as internal accounting practices are improved, more refined information becomes available and businesses change. Revisions to Ashland’s methodologies that are deemed insignificant are applied on a prospective basis. During 2009, Ashland began fully allocating significant actual corporate costs as opposed to budgeted expenditures which was utilized in prior periods, except for certain significant company-wide restructuring activities, such as the restructuring plan related to the Hercules acquisition described in Note F of Notes to Consolidated Financial Statements, and other costs or adjustments that relate to former businesses that Ashland no longer operates. To align prior period results to the current period presentation, Ashland reclassified certain depreciation and amortization charges in 2008 that were previously presented within the unallocated and other section to the applicable reporting segments that were originally allocated these corporate charges.

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As previously discussed, Ashland’s businesses are managed along five industry segments: Functional Ingredients, Water Technologies, Performance Materials, Consumer Markets and Distribution. For additional information, see Note R of Notes to Consolidated Financial Statements.

The following table shows sales, operating income and statistical operating information by business segment for each of the last three years ended September 30.


(In millions)	2010			2009			2008
Sales
Functional Ingredients	$	915		$	812		$	-
Water Technologies		1,785			1,652			893
Performance Materials		1,286			1,106			1,621
Consumer Markets		1,755			1,650			1,662
Distribution		3,419			3,020			4,374
Intersegment sales		(148	)		(134	)		(169	)
	$	9,012		$	8,106		$	8,381
Operating income (loss)
Functional Ingredients	$	115		$	36		$	-
Water Technologies		114			78			10
Performance Materials		23			1			52
Consumer Markets		262			252			83
Distribution		55			52			51
Unallocated and other		(3	)		(29	)		17
	$	566		$	390		$	213
Depreciation and amortization
Functional Ingredients (a)	$	99		$	106		$	-
Water Technologies (a)		88			99			29
Performance Materials		53			63			46
Consumer Markets		36			36			35
Distribution		28			28			28
Unallocated and other		-			7			7
	$	304		$	339		$	145

Operating information
Functional Ingredients (b) (c)
Sales per shipping day	$	3.6		$	3.7	%	$	-
Metric tons sold (thousands)		163.6			154.1			-
Gross profit as a percent of sales		33.7	%		26.7	%		-
Water Technologies (b) (c)
Sales per shipping day	$	7.1		$	6.6		$	3.5
Gross profit as a percent of sales		34.1	%		33.9	%		36.7	%
Performance Materials (b)
Sales per shipping day	$	5.1		$	4.4		$	6.4
Pounds sold per shipping day		4.5			3.9			4.9
Gross profit as a percent of sales		16.0	%		17.0	%		17.0	%
Consumer Markets (b)
Lubricant sales gallons		174.3			158.8			169.2
Premium lubricants (percent of U.S. branded volumes)		29.6	%		28.2	%		24.9	%
Gross profit as a percent of sales		32.0	%		32.0	%		23.0	%
Distribution (b)
Sales per shipping day	$	13.6		$	12.0		$	17.3
Pounds sold per shipping day		15.1			14.7			18.8
Gross profit as a percent of sales (d)		9.3	%		10.0	%		7.8	%

(a)	Includes amortization for purchased in-process research and development of $5 million within both Functional Ingredients and Water Technologies in 2009.

(b)	Sales are defined as sales and operating revenues. Gross profit is defined as sales, less cost of sales.

(c)	Industry segment results from November 14, 2008 forward include operations acquired from Hercules Incorporated.

(d)	Distribution’s gross profit as a percentage of sales for 2010 includes a LIFO quantity charge of $2 million and for 2009 and 2008 include a LIFO quantity credit of $15 million and $16 million, respectively.

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Ashland’s financial performance during 2010 improved from 2009 due partially to Ashland’s focus on cost control and price management over the past year. This cost control and price management, along with significant sales growth from increased volumes within all of Ashland’s business segments, after excluding the effect of acquisitions and divestitures as compared to 2009, helped mitigate the effect of substantial raw material cost increases, primarily within Functional Ingredients, Water Technologies and Consumer Markets, during 2010.

Ashland’s financial performance during 2009 was severely impacted by significantly declining demand, a direct result of the weakness in the global economy, especially within the North American and European transportation and construction industries. Volume levels were down across all businesses, including operations acquired from Hercules on November 13, 2008, decreasing anywhere from 6% to 22% versus 2008. Despite this pressure Ashland implemented pricing improvements and aggressively reduced excess capacity to match current market demands, which more than offset the effects of the declining volume, as average selling prices were generally higher in 2009 versus 2008. This coupled with significant reductions in selling, general and administrative expenses from the cost-structure efficiency programs previously described further improved operating income during 2009.

Functional Ingredients

Functional Ingredients is one of the world’s largest producers of cellulose ethers. It provides specialty additives and functional ingredients that primarily manage the physical properties of water-based systems. Many of its products are derived from renewable and natural raw materials and perform in a wide variety of applications.

In January 2010, Ashland sold its refined wood rosin and natural wood terpenes business, formerly known as Pinova, a business unit of Functional Ingredients, to TorQuest Partners in a transaction valued at approximately $75 million before tax. The Pinova business, with annual sales of approximately $85 million a year, had approximately 200 employees along with an associated manufacturing facility located in Brunswick, Georgia.

In November 2008, Ashland acquired Hercules in a transaction valued at approximately $3.4 billion. The acquired company included the Functional Ingredients business. This significant global business, which had sales of $1,096 million for the twelve month period ended September 30, 2008, now forms one of Ashland’s five current operating business segments.

2010 compared to 2009

Functional Ingredients’ sales increased 13% to $915 million compared to $812 million for the 321 day period this business was owned in 2009, which was due to the closing of the Hercules acquisition on November 13, 2008. The additional 44 days in 2010 contributed $112 million, or 14%, in sales, while the divestiture of Pinova in January of 2010 reduced sales by $59 million, or 7%. Sales in 2009 included a significant nonrecurring transaction to an oilfield chemical supplier in the amount of $17 million, representing 5% of the product volume for 2009. Including this one-time sales transaction, volume increased sales by $85 million, or 10%, primarily due to strength in demand within the regulated and coatings markets, while an unfavorable currency exchange decreased sales by $5 million. Price and product mix decreased sales by $30 million, or 4%, compared to 2009.

Gross profit increased $92 million in 2010 compared to 2009. The additional 44 day period that the acquired operations of the Hercules business was owned in 2010 increased gross profit by $36 million. Increased volume added an additional $55 million in gross profit as metric tons sold increased 6% to 163.6 thousand. Price decreased gross profit by $48 million, while the divestiture of Pinova and currency exchange reduced gross profit by an additional $7 million and $2 million, respectively. A favorable change in product mix added an additional $28 million in gross profit. In addition, during 2009, gross profit was negatively affected by a nonrecurring charge of $30 million related to the fair value of inventory acquired from Hercules. In total, gross profit margin during 2010 increased 7.0 percentage points to 33.7%.

Selling, general and administrative expenses (which include research and development expenses throughout the business segment discussion and analysis) increased $14 million primarily as a result of the $20 million increase associated with the additional 44 day period that the acquired operations of the Hercules business was owned in 2010. Salaries, benefits and incentive compensation combined to increase expenses by $5 million in 2010, primarily due to the employee furlough program that was in place during 2009. These increases were partially offset by a nonrecurring $5 million in-process research and development charge recorded in 2009, which was associated with the valuation from the Hercules acquisition and severance and restructuring accruals of $10 million charged during 2009. Equity and other income increased by $1 million during 2010 as compared to 2009.

Operating income totaled $115 million in 2010 compared to $36 million during the 321 day period Functional Ingredients was owned in 2009. Adjusted EBITDA increased $11 million, from $203 million in 2009 to $214 million in 2010. Adjusted EBITDA margin increased 1.4 percentage points in 2010 from 22.0% in 2009 to 23.4% in 2010.

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2009 compared to 2008

Functional Ingredients’ sales were $812 million in 2009 and included a significant one-time sales transaction to an oilfield chemical supplier in the amount of $17 million, which represented 2% of sales and 5% of volume for 2009. Sales per shipping day for 2009 were $3.7 million and metric tons sold were 154.1 thousand.

Gross profit was $218 million during 2009 and included a nonrecurring $30 million inventory fair value adjustment from the Hercules acquisition. In addition, the gross profit margin of 26.7% was negatively impacted by 4.3 points due to the significant one-time sales transaction and acquisition-related inventory charge described above.

Selling, general and administrative expenses during 2009 were $182 million, or 22% of sales. These expenses during 2009 included two nonrecurring charges of $10 million for severance and $5 million for purchased in-process research and development that related to the Hercules acquisition.

Operating income totaled $36 million for 2009. Adjusted EBITDA was $203 million in 2009 while the EBITDA margin was 22.0%.

EBITDA and Adjusted EBITDA reconciliation

The following EBITDA and adjusted EBITDA presentation for the three annual periods below is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Functional Ingredients. Adjusted EBITDA results have been prepared to illustrate the ongoing effects of Ashland’s acquisition of Hercules, which exclude certain acquisition related charges, while assuming the acquisition of Hercules had been consummated on October 1, 2007. The inventory fair value adjustment of $30 million in 2009 relates to a charge required by U.S. GAAP upon acquisition of a company’s inventory, which will not reoccur for this inventory purchased. The Hercules business results of $21 million during 2009 and $258 million for 2008 relate to the operating income and depreciation and amortization recognized for the 44 day period in 2009 and the twelve month period in 2008 that this business was not owned, respectively.


	September 30
(In millions)	2010		2009		2008
Operating income	$	115	$	36	$	-
Depreciation and amortization (a)		99		106		-
EBITDA		214		142		-
Severance		-		10		-
Inventory fair value adjustment		-		30		-
Results of the Hercules business prior to acquisition		-		21		258
Adjusted EBITDA	$	214	$	203	$	258

(a)	Includes $5 million for purchased in-process research and development expensed in 2009.

Water Technologies

Water Technologies is a leading global producer of papermaking chemicals and a leading specialty chemicals supplier to the pulp, paper, commercial and institutional, food and beverage, chemical, mining and municipal markets. Its process, utility and functional chemistries are used to improve operational efficiencies, enhance product quality, protect plant assets and ensure environmental compliance.

In August 2009, Ashland sold its global marine services business known as Drew Marine, a business unit of Water Technologies, to J. F. Lehman & Co. in a transaction valued at approximately $120 million before tax. The Drew Marine business, with annual sales of approximately $140 million a year, had approximately 325 employees, 28 offices and 98 stocking locations in 47 countries. The transaction resulted in an initial pretax gain of $56 million recorded in 2009, which is included in the net gain on acquisitions and divestitures caption of the Statement of Consolidated Income. As part of this transaction, Ashland agreed to continue to manufacture certain products on behalf of Drew Marine.

In November 2008, Ashland acquired Hercules, in a transaction valued at approximately $3.4 billion. The acquired company included a significant global pulp, paper, and water treatment business. This business, which had sales of $1,222 million for the twelve month period ended September 30, 2008, was combined into Ashland’s existing water technologies business to form a global water treatment business with significant scale worldwide.

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2010 compared to 2009

Water Technologies’ sales increased 8% to $1,785 million compared to $1,652 million in 2009, a direct result of the inclusion of the additional 44 day period that the Hercules paper business was owned in 2010, which contributed sales of $155 million, or 9%. Additionally, volume and currency exchange increased sales $92 million and $31 million, respectively, for a total of 7%, compared to 2009. The previously mentioned divestiture of Drew Marine in August of 2009 reduced sales by $130 million, or 7%, compared to 2009, with unfavorable pricing adding an additional $20 million, or 1%, decline. Change in product mix increased sales by $5 million.

Gross profit increased $49 million in 2010 compared to 2009. The additional 44 day period that the acquired operations of the Hercules business was owned in 2010 increased gross profit by $47 million. Volume and currency exchange increased gross profit by $31 million and $14 million, respectively, with pricing and product mix adding an additional $5 million and $2 million, respectively, in gross profit. The divestiture of Drew Marine in August of 2009 reduced gross profit by $57 million compared to 2009. In addition, during 2009, gross profit was negatively affected by a nonrecurring charge of $7 million related to the fair value of inventory from the Hercules acquisition. In total, gross profit margin during 2010 increased 0.2 percentage points to 34.1%.

Selling, general and administrative expenses increased $11 million during 2010, or 2%, primarily as a result of the additional 44 day period the Hercules paper business was owned, which contributed an additional $30 million in expense when comparing to 2009. Foreign currency added an additional $8 million of expense, while the divestiture of Drew Marine and various cost saving initiatives, primarily integration and employee reduction activities, reduced expenses by approximately $18 million. In addition, during 2009, the selling, general and administrative expenses were negatively affected by a nonrecurring charge of $5 million related to purchased in-process research and development projects and $4 million in severance, both a result of the Hercules acquisition. Equity and other income decreased by $2 million during 2010 as compared to 2009.

Operating income totaled $114 million in 2010 compared to $78 million during 2009. Adjusted EBITDA increased $4 million, from $198 million in 2009 to $202 million in 2010. Adjusted EBITDA margin increased 0.3 percentage points in 2010 from 11.0% in 2009 to 11.3% in 2010.

2009 compared to 2008

Water Technologies’ sales increased 85% to $1,652 million compared to $893 million, a direct result of the Hercules paper business acquired on November 13, 2008, which contributed sales of $919 million. This increase in sales was partially offset by a $126 million, or 14%, decline in volume and a $63 million, or 7%, decline attributable to foreign currency. Improved pricing and mix contributed an additional $29 million, or 3%, as compared to 2008.

Gross profit increased $231 million in 2009 compared to 2008. Overall raw material inflation was experienced early in 2009, with sequential moderation through the rest of the year; however, this was more than offset by successfully negotiated full service and municipal contracts that recaptured the increased raw material costs during the period. The acquired Hercules business contributed $264 million to gross profit while price increases and mix improvements that reduced cost of goods sold, contributed an additional $47 million to gross profit. Other items affecting gross profit included a $45 million decrease in volume and a $28 million decrease attributable to foreign currency. In addition, during 2009, gross profit was negatively affected by a nonrecurring charge of $7 million related to the fair value of inventory from the Hercules acquisition. In total, gross profit margin during 2010 decreased 2.8 percentage points to 33.9%, which reflects the inclusion of the former Hercules paper business, which has historically been a lower gross profit business as compared to the legacy Ashland business.

Selling, general and administrative expenses increased $163 million during 2009 compared to 2008, as cost increases of $216 million from the acquired operations of Hercules were partially offset by a $43 million reduction in selling expense, principally related to operational cost savings from restructuring the business subsequent to the Hercules acquisition, and a $19 million reduction attributable to foreign currency. In addition, during 2009, selling, general and administrative expenses were negatively affected by a nonrecurring charge of $5 million related to purchased in-process research and development projects and $4 million in severance, both a result of the Hercules acquisition.

Operating income totaled $78 million in 2009 compared to $10 million during 2008. Adjusted EBITDA increased $4 million, from $194 million in 2008 to $198 million in 2009. Adjusted EBITDA margin increased 1.8 percentage points in 2009 from 9.2% in 2008 to 11.0% in 2009.

EBITDA and Adjusted EBITDA reconciliation

M-14

acquisition of Hercules had been consummated on October 1, 2007. The inventory fair value adjustment of $7 million in 2009 relates to a charge required by U.S. GAAP upon acquisition of a company’s inventory, which will not reoccur for this purchased inventory. The Hercules paper business results of $10 million in 2009 and $152 million in 2008 relate to the operating income and depreciation and amortization recognized for the 44 day period in 2009 and twelve month period in 2008 that this business was not owned, respectively.


	September 30
(In millions)	2010		2009		2008
Operating income	$	114	$	78	$	10
Depreciation and amortization (a)		88		99		29
EBITDA		202		177		39
Severance		-		4		3
Inventory fair value adjustment		-		7		-
Results of the Hercules business prior to acquisition		-		10		152
Adjusted EBITDA	$	202	$	198	$	194

(a)	Includes $5 million for purchased in-process research and development expensed in 2009.

Performance Materials

Performance Materials is a global leader in unsaturated polyester resins and vinyl ester resins. In addition, it provides customers with leading technologies in gelcoats, pressure-sensitive and structural adhesives, and metal casting consumables and design services.

In July 2010, Ashland and Süd-Chemie AG (Süd-Chemie) reached a contractual agreement on the formation of an expanded global joint venture serving the foundry chemical sector. The transaction will combine three businesses: Ashland’s Casting Solutions business group, the Foundry-Products and Specialty Resins business unit of Süd-Chemie, and Ashland-Südchemie-Kernfest GmbH (ASK), the existing fifty-percent owned European-based joint venture between Ashland and Süd-Chemie, for which Ashland only recognizes equity income of the joint venture within its consolidated results. Ashland’s Casting Solutions and ASK businesses recorded sales of $279 million and $145 million, respectively, during each businesses’ most recent completed fiscal year. The Foundry-Products and Specialty Resins business unit of Süd-Chemie to be contributed to the joint venture generated sales of approximately $146 million for its most recent completed fiscal year. The joint venture agreement will cause the existing Ashland Casting Solutions business to qualify for the equity method of accounting under U.S. GAAP, which will require Ashland to deconsolidate the results within its business operations and record equity income for its share of the joint venture results.

In April 2010, Ashland acquired the remaining 50% of Ara Quimica, a leading producer of custom unsaturated polyester resin formulations for the composites industry in South America, for $28 million. Prior to the acquisition, Ashland owned a 50% interest in Ara Quimica which it accounted for as an equity-method investment within the Performance Materials reporting segment. Ara Quimica reported sales of approximately $50 million from its most recent fiscal year ended December 31, 2009. Ashland recognized a pretax gain of $23 million as a result of valuing its prior equity interest held in Ara Quimica before the business combination at the current fair market price. The gain is included in the net gain on acquisitions and divestitures caption on the Statements of Consolidated Income for the current period.

In June 2008, Ashland acquired the assets of the pressure-sensitive adhesive business and atmospheric emulsions business of Air Products and Chemicals, Inc. The $92 million transaction included manufacturing facilities in Elkton, Maryland and Piedmont, South Carolina. The purchased operations, which were merged into Performance Materials, had sales of $126 million in calendar year 2007, principally in North America.

2010 compared to 2009

Performance Materials’ sales increased 16% to $1,286 million compared to $1,106 million in 2009. Volume increased sales by $171 million, or 15%, as pounds sold per shipping day increased 15% to 4.5 million. Pricing reduced sales by $38 million, or 3%, as weak demand over the prior year contributed to excess product supply within the market, resulting in downward pricing pressure, especially within the composites line of business. A favorable currency exchange increased sales by $18 million, or 2%, and the acquisition of Ara Quimica contributed an additional $29 million, or 2%, in sales.

Gross profit increased $16 million in 2010 compared to 2009. Both 2010 and 2009 included plant closure costs of $17 million for each period, of which $6 million and $14 million, respectively, related to accelerated depreciation. Plant closure costs in both periods were the result of capacity reductions in reaction to a substantial overall decline in industry demand as well as Ashland’s continued overall effort to optimize cost structure. Volume and foreign currency increased gross profit by $59 million and $3 million, respectively, while the acquisition of Ara Quimica contributed an additional

M-15

$7 million in gross profit. These increases were partially offset by increases in raw material costs, which resulted in a $53 million decrease in gross profit. In total, gross profit margin during 2010 decreased 1.0 percentage points to 16.0%, as compared to 2009.

Selling, general and administrative expenses decreased $4 million, or 2%, compared to 2009, primarily due to various reductions associated with recent cost saving initiatives of $16 million, which were partially offset by incentive compensation and the inclusion of Ara Quimica expenses, which combined to increase expenses by $12 million. Equity and other income increased $2 million during 2010 compared to 2009, primarily due to a $3 million charge in the prior period from a joint venture that closed a significant manufacturing facility.

Operating income totaled $23 million in 2010 compared to $1 million in 2009. Adjusted EBITDA increased $11 million, from $76 million in 2009 to $87 million in 2010. Adjusted EBITDA margin decreased 0.1 percentage points in 2010 from 6.9% in 2009 to 6.8% in 2010.

2009 compared to 2008

Performance Materials’ sales decreased 32% to $1,106 million compared to $1,621 million in 2008. A decrease in volume of $463 million, or 29%, was the primary factor in sales decline due to significant demand weakness within the transportation, construction, packaging and converting and metal casting markets. A currency exchange decrease of $83 million, or 5%, and price declines of $51 million, or 3%, also contributed to the sales decline. These decreases were partially offset by sales from the acquisition of Air Products which contributed $82 million, or 5%, to 2009 sales. Excluding the effect of Air Products for 2009, sales decreased 37%.

Gross profit decreased by $88 million in 2009 compared to 2008. Pounds sold per shipping day decreased 20% to 3.9 million during 2009, which caused a $140 million decrease in gross profit, while the effect of foreign currency decreased gross profit by $16 million. However, disciplined price management and aggressive reductions in manufacturing costs from excess capacity mitigated the gross profit margin decline from lost volume, as price increases coupled with raw material cost decreases added $55 million to gross profit, which included a $17 million charge for plant closure costs. The acquisition of Air Products contributed $13 million to gross profit. In total, gross profit margin during 2010 remained unchanged at 17.0%.

Selling, general and administrative expenses decreased $44 million, or 18%, during 2009 as compared to 2008, primarily due to a $20 million decrease related to headcount and other cost reduction programs and a $17 million decline in reduced corporate allocations. These decreases were partially offset by increased severance charges of $1 million during 2009 compared to 2008. Equity and other income decreased $7 million during 2009 compared to 2008, primarily due to reduced equity income from various joint ventures impacted by the current global economic environment as well as a $3 million charge from a joint venture that closed a manufacturing facility.

EBITDA and Adjusted EBITDA reconciliation

Operating income totaled $1 million in 2009 compared to $52 million in 2008. Adjusted EBITDA decreased $28 million, from $104 million in 2008 to $76 million in 2009. Adjusted EBITDA margin increased 0.5 percentage points in 2009 to 6.9% from 6.4% in 2008. A reconciliation of EBITDA and Adjusted EBITDA results for 2010, 2009 and 2008 were as follows.


	September 30
(In millions)	2010		2009		2008
Operating income	$	23	$	1	$	52
Depreciation and amortization		53		63		46
EBITDA		76		64		98
Severance		11		9		6
Plant closing costs		-		3		-
Adjusted EBITDA	$	87	$	76	$	104

Consumer Markets

Consumer Markets, which includes the Valvoline™ family of products and services, is a leading innovator, marketer and supplier of high-performing automotive lubricants, chemicals and appearance products. Valvoline™, the world’s first lubricating oil, is the number three passenger car motor oil brand, and Valvoline Instant Oil Change™ is the number two quick-lube franchise in the United States.

M-16

2010 compared to 2009

Consumer Markets’ sales increased 6% to $1,755 million compared to $1,650 million in 2009. Volume increased sales by $119 million, or 7%, as the lubricant volume increase of 10% to 174.3 million gallons was primarily due to increases within the Do-It-Yourself, Do-It-For-Me and international market channels. A favorable currency exchange increased sales by $32 million, or 2%. These increases were partially offset by price declines in the first half of the year, which reduced sales by $47 million, or 3%, while changes in product mix resulted in a $1 million increase in sales.

Gross profit increased $34 million in 2010 as compared to 2009. Volume increased gross profit by $34 million due to the 10% increase in lubricant sales. Foreign currency increased gross profit by $13 million, while pricing and a change in product mix reduced gross profit by $11 million and $2 million, respectively. In total, gross profit margin remained flat at 32.0% as price increases and various operational cost saving initiatives mitigated raw material cost inflation.

Selling, general and administrative expenses increased $30 million, or 10%, during 2010 primarily due to increases in advertising costs of $7 million, foreign currency of $7 million and salary, benefits and incentive compensation of $12 million, which was partially related to the employee furlough program in place during the prior period. Equity and other income increased by $6 million during 2010 compared to 2009, primarily due to increased equity income from various joint venture arrangements.

Operating income totaled a record $262 million in 2010 as compared to $252 million for 2009, the previous operating income record. EBITDA increased $10 million from $288 million in 2009 to $298 million in 2010. EBITDA margin decreased 0.5 percentage points in 2010 from 17.5% in 2009 to 17.0% in 2010. There were no unusual or key items that affected comparability for adjusted EBITDA during 2010 and 2009.

2009 compared to 2008

Consumer Markets’ sales decreased 1% to $1,650 million compared to $1,662 million in 2008. Increased pricing of $112 million, or 7%, and a $22 million, or 1%, favorable change in product mix due to more premium lubricants sold during 2009 partially offset volume declines in sales of $92 million, or 6%, as lubricant volume decreased to 158.8 million gallons during 2009. Foreign currency declines also reduced sales by an additional $54 million, or 3%, as compared to 2008.

Gross profit increased $147 million in 2009 as compared to 2008. The combination of price increases that began in fiscal 2008, lower raw material costs and cost saving initiatives positively impacted results, causing an increase in gross profit of $170 million. This increase in gross profit was offset by net volume and mix decreases, reducing gross profit by $7 million and foreign currency declines of $16 million compared to 2008. In total, gross profit margin during 2009 increased 9.0 percentage points to 32.0%.

Selling, general and administrative expenses decreased $18 million, or 6%, during 2009 primarily due to currency exchange decreases of $11 million and reduced travel, entertainment and other expenses of $13 million. Equity and other income increased by $4 million during 2009, primarily due to increases in equity income from various joint ventures.

Operating income totaled $252 million in 2009 compared to $83 million in 2008. EBITDA increased $170 million, from $118 million in 2008 to $288 million in 2009. EBITDA margin increased 10.4 percentage points in 2009 from 7.1% in 2008 to 17.5% in 2009. There were no unusual or key items that affected comparability for adjusted EBITDA during 2009 and 2008.

Distribution

Distribution is a leading plastics and chemicals distributor in North America. It distributes chemicals, plastics and composite raw materials in North America, as well as plastics in Europe and China. Ashland Distribution also provides environmental services in North America, including hazardous and nonhazardous waste collection, recovery, recycling and disposal services.

2010 compared to 2009

Distribution’s sales increased 13% to $3,419 million compared to $3,020 million in 2009. Price and volume increases of $219 million, or 7%, and $151 million, or 5%, respectively, were the primary factors as a disciplined price increase environment has been successful in conjunction with increased product demand within the market, as indicated by the 3% increase in pounds sold per shipping day to 15.1 million. A favorable currency exchange increased sales $29 million, or 1%.

Gross profit increased $15 million in 2010 compared to 2009. Volume and favorable currency exchange increased gross profit by $25 million and $3 million, respectively, while material cost increases reduced gross profit by $13 million in 2010 as compared to 2009. In total, gross profit margin during 2010 decreased 0.7 percentage points to 9.3% from 10.0%, which included a $15 million LIFO quantity credit benefit as compared to a $2 million charge in 2010.

M-17

Selling, general and administrative expenses increased $11 million, or 4%, during 2010 as increases attributable to incentive compensation of $8 million, environmental remediation of $6 million and foreign currency of $2 million were partially offset by reductions in salaries and benefits due to operational cost reductions of $5 million. Equity and other income decreased by $1 million during 2010 compared to 2009.

Operating income totaled $55 million in 2010 compared to $52 million in 2009. Adjusted EBITDA results for 2010 and 2009 totaled $89 million and $84 million, respectively, and included a $6 million charge for an environmental remediation assessment for 2010 and a $4 million severance charge for 2009. Adjusted EBITDA margin decreased 0.2 percentage points in 2010 from 2.8% in 2009 to 2.6% in 2010.

2009 compared to 2008

Distribution’s sales decreased 31% to $3,020 million compared to $4,374 million in 2008, primarily as a result of volume declines. Pounds sold per shipping day decreased 22% to 14.7 million compared to 18.8 million in 2008, causing a $962 million decline in sales. Decreases in foreign currency of $92 million, or 2%, and price of $300 million, or 7%, contributed to the overall sales decline as price increase announcements with customers during 2009 were met with limited success.

Gross profit decreased $38 million in 2009 compared to 2008. Volume decreased gross profit by $109 million and currency exchange reduced gross profit an additional $7 million. Material cost decreases resulted in a favorable contribution of $78 million to gross profit, which included a $15 million favorable quantity LIFO adjustment in 2009. In total, gross profit margin during 2009 increased 2.2 percentage points to 10.0%.

Selling, general and administrative expenses decreased $39 million, or 13%, during 2009 as compared to 2008, with decreases in corporate allocations of $15 million, incentive compensation and salaries of $16 million, travel and entertainment of $6 million and currency exchange of $6 million as the primary factors. These decreases were partially offset by severance charges of $4 million incurred during 2009.

Operating income totaled $52 million in 2009 as compared to $51 million in 2008. EBITDA totaled $80 million for 2009 as compared to $79 million for 2008. Adjusted EBITDA results for 2009 totaled $84 million and included a $4 million severance charge. There were no unusual or key items that affected comparability for adjusted EBITDA during 2008. Adjusted EBITDA margin increased 1.0 percentage points in 2009 from 1.8% in 2008 to 2.8% in 2009.

Unallocated and other

Unallocated and other recorded costs of $3 million for 2010 and $29 million for 2009 compared to income of $17 million for 2008. During 2009, Ashland began fully allocating significant actual corporate costs as opposed to budgeted expenditures which was utilized in prior periods, except for certain significant company-wide restructuring activities, such as the current restructuring plan related to the Hercules acquisition described in Note D of Notes to Consolidated Financial Statements, and other costs or adjustments that relate to former businesses that Ashland no longer operates.

Costs for 2010 primarily related to a self-insured product liability claim of $4 million. Costs associated with 2009 consisted of $31 million for severance and plant closure charges associated with the ongoing integration and reorganization of the Hercules acquisition and $3 million in due diligence costs associated with investment opportunities and other charges. These charges were partially offset by a currency gain on an intracompany loan of $5 million. Income components for 2008 included lower incentive compensation and direct support costs that were not reallocated back to the businesses that was partially offset by an $8 million charge for costs associated with Ashland’s joint venture with Cargill to manufacture bio-based propylene glycol, which had been suspended due to persistently high glycerin input costs and other costs related to growth opportunities. In addition to the ongoing costs that typically occur each year related to formerly owned businesses, 2008 included a favorable $11 million adjustment from Ashland’s self-insurance program.

M-18

FINANCIAL POSITION

Liquidity

Ashland’s cash flows from operating, investing and financing activities, as reflected in the Statements of Consolidated Cash Flows, are summarized as follows.


(In millions)	2010			2009			2008
Cash provided (used) by:
Operating activities from continuing operations	$	517		$	1,027		$	478
Investing activities from continuing operations		3			(2,115	)		(418	)
Financing activities from continuing operations		(435	)		573			(70	)
Discontinued operations		(10	)		(2	)		(8	)
Effect of currency exchange rate changes on cash and cash equivalents		(10	)		(17	)		7
Net decrease in cash and cash equivalents	$	65		$	(534	)	$	(11	)

Operating activities

Cash flows generated from operating activities from continuing operations, a major source of Ashland’s liquidity, amounted to $517 million in 2010, $1,027 million in 2009 and $478 million in 2008. The cash generated during each period is primarily driven by net income results, depreciation and amortization (including debt issuance cost amortization), and changes in working capital, which were fluctuations within accounts receivable, inventory, and trade and other payables. Ashland continues to emphasize working capital management as a high priority and focus within the company.

In 2010, a working capital outflow of $244 million was primarily a result of increased inventory and accounts receivable balances due to increased sales from volume and price increases, as compared to 2009. Working capital generated cash inflows of $344 million in 2009 and $193 million in 2008, as a result of Ashland’s increased focus on the timely collection of accounts receivables, increased turns of inventory and more favorable vendor payment terms, as well as the severe declines in demand in 2009 and the last half of 2008, which reduced sales (accounts receivable) and inventory levels and significantly contributed to reduced raw material and supply purchases.

Operating cash flows for 2010 included net income of $332 million, and noncash adjustments of $304 million for depreciation and amortization and $81 million for debt issuance cost amortization. Operating cash flows for 2009 included net income of $71 million and a noncash adjustment for depreciation and amortization of $329 million as well as significant nonrecurring charges from the Hercules acquisition and other items which included an inventory fair value adjustment and purchased in-process research and development amortization of $37 million and $10 million, respectively, debt issuance cost amortization of $52 million, a currency swap loss of $54 million and a $32 million loss on auction rate securities. These significant charges were offset by the gain associated with the Drew Marine sale of $56 million included in net income. Operating cash flows for 2008 included net income of $167 million and a noncash adjustment of $145 million for depreciation and amortization. The increase in depreciation and amortization expense as compared to 2009 relates to the additional depreciation and amortization associated with the valuation of the acquired Hercules operations and other acquisition related amortization. The depreciation and amortization from these assets will be included in operations on an ongoing basis through the remainder of their useful lives as determined and as part of the purchase accounting fair value estimates discussed in Note B of Notes to Consolidated Financial Statements.

Ashland contributed cash of $63 million to its qualified pension plans during 2010 compared to $47 million in 2009 and $25 million in 2008 and paid income taxes of $86 million during 2010 compared to $49 million in 2009 and $53 million in 2008. Cash receipts for interest income were $12 million in 2010, $21 million in 2009 and $40 million in 2008, while cash payments for interest expense amounted to $118 million in 2010, $198 million in 2009 and $10 million in 2008.

Investing activities

Cash provided by investing activities was $3 million for 2010 as compared to cash used by investing activities of $2,115 million and $418 million 2009 and 2008, respectively. The significant cash investing activities for 2010 included cash inflows of $150 million related to the sale of auction rate securities and $64 million related to the Pinova and Drew Marine business sales, offset by cash outflows of $206 million and $23 million for capital expenditures and the purchase of the remaining 50% interest in the Ara Quimica business net of cash acquired, respectively. Investing activities during 2010 also included cash inflows of $18 million from proceeds from disposals of property, plant and equipment.

The significant cash investing activities for 2009 included cash outflows of $2,080 million for the purchase of Hercules’ operations in November 2008, $95 million for the settlement of currency interest rate swap hedges related to the acquisition and $174 million for capital expenditures. These significant cash investing activities were offset by sales of auction rate

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securities during 2009 resulting in cash proceeds of $73 million and proceeds from the FiberVisions and Drew Marine sales of $114 million.

The significant cash investing activities for 2008 included net purchases of available-for-sale securities of $120 million, $205 million for capital expenditures and $129 million for purchased operations, partially offset by cash proceeds of $26 million associated with the MAP Transaction.

Financing activities

Cash used by financing activities was $435 million for 2010 as compared to cash provided by financing activities of $573 million for 2009 and a cash usage of $70 million in 2008. Significant cash financing activities for 2010 included repayments of long-term debt of $780 million, cash dividends paid of $.45 per share, for a total of $35 million and $13 million in debt issue costs paid in connection with the senior credit facility refinancing in March 2010. These cash outfows were partially offset by proceeds from long- and short-term debt of $334 million and $48 million, respectively. Financing activities also included cash inflows of $11 million for proceeds from the exercise of stock options and excess tax benefits related to share-based payments.

Significant cash financing activities for 2009 included cash inflows of $2,628 million associated with short-term and long-term financing secured with Bank of America Securities LLC, Scotia Capital (USA) Inc. and other lenders for the acquisition of Hercules, including the subsequent 9.125% Senior Notes due 2017 issued in May 2009 for which the proceeds were used to extinguish the bridge loan facility under the interim credit agreement discussed further in Note I of Notes to Consolidated Financial Statements. This cash inflow for 2009 was partially offset by cash used for the extinguishment of certain debt instruments that Hercules held as of the closing date of the acquisition, the extinguishment of the bridge loan facility, previously discussed, and other debt prepayments made subsequent to the Hercules acquisition that totaled $1,881 million. In addition, $162 million in debt issue costs were paid in connection with securing the financing for the Hercules acquisition and the subsequent 9.125% Senior Notes due 2017 issued to replace the bridge loan facility. In total, as a result of Ashland’s focus and efficient execution on cash generation and savings opportunities, Ashland was able to reduce debt by approximately $1 billion of the debt associated with the financing of the Hercules acquisition during 2009. Cash dividends paid during 2009 were $.30 per common share and totaled $22 million, a $47 million reduction as compared to 2008 as a result of the reduction in the $1.10 per common share dividend paid during 2008.

Significant cash financing activities for 2008 included cash outflows of $69 million for dividends paid.

Senior Credit Facilities

The Senior Credit Facilities are guaranteed by Ashland’s present and future subsidiaries (other than certain immaterial subsidiaries, regulated subsidiaries, joint ventures, special purpose finance subsidiaries, certain foreign subsidiaries and certain unrestricted subsidiaries) and are secured by a first priority security interest in substantially all the personal property assets of Ashland and such guarantor subsidiaries, including the capital stock or other equity interests of certain of Ashland’s U.S. and first-tier foreign subsidiaries and a portion of the stock of certain of Ashland’s other first-tier foreign subsidiaries. The Senior Credit Facilities may cease to be secured upon Ashland achieving an Investment Grade corporate family rating as defined in the Senior Credit Agreement.

The Senior Credit Facilities carry an initial interest rate of either LIBOR plus 275 points or base rate plus 175 basis points, at Ashland’s option, and as of September 30, 2010, the weighted-average interest rate on the Term Loan A was 2.8%. Total borrowing capacity remaining under the $550 million revolving credit facility was $428 million, representing a reduction of $122 million for letters of credit outstanding at September 30, 2010. The Term Loan A facility was drawn in full at closing and is required to be repaid by Ashland in consecutive quarterly installments commencing with the installment due on June 30, 2010, with 5% of the original principal amount due during year one, 7.5% of the original principal amount due during year two, 10% of the original principal amount due during year three, and 77.5% of the original principal amount due during year four (in quarterly installments of 5.0%, 5.0%, 5.0% and 62.5%), with a final payment of all outstanding principal and interest on March 31, 2014.

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As a result of the new Senior Credit Agreement and prepayments made during the March 2010 quarter, Ashland expensed $62 million of the remaining $84 million debt issuance costs related to the loan fees paid to originate the initial term facility and incurred an additional $4 million of prepayment fee penalties related to the previous Term Loan B facility, which were included in the net interest and other financing (expense) income caption in the Statements of Consolidated Income. In addition, Ashland incurred $12 million of new debt issuance costs associated with the new Senior Credit Agreement that will be recognized as an expense ratably over the life of the new term of the agreement.

Covenant restrictions

The newly amended (during 2010) Senior Credit Facilities include less restrictive covenants than the previous credit facility and no longer contain covenants associated with minimum consolidated net worth and capital expenditure limits. The covenants contain certain usual and customary representations and warranties, and usual and customary affirmative and negative covenants which include financial covenants, limitations on liens, additional indebtedness, further negative pledges, investments, payment of dividends, mergers, sale of assets and restricted payments, and other customary limitations. As of September 30, 2010, Ashland is in compliance with all debt agreement covenant restrictions.

The maximum consolidated leverage ratios permitted under the Senior Credit Facilities are as follows: 3.25 from the period March 31, 2010 through September 30, 2010, 3.00 from the period December 31, 2010 through September 30, 2011 and 2.75 from December 31, 2011 and each fiscal quarter thereafter.

The Senior Credit Facilities define the consolidated leverage ratio as the ratio of consolidated indebtedness minus cash and cash equivalents to consolidated EBITDA for any measurement period. In general, the Senior Credit Facilities define consolidated EBITDA as net income plus consolidated interest charges, taxes, depreciation and amortization expense, fees and expenses related to capital market transactions, restructuring and integration charges, noncash stock and equity compensation expense, and any other nonrecurring expenses or losses that do not represent a cash item in such period or any future period; less any noncash gains or other items increasing net income. In general, consolidated indebtedness includes debt plus all purchase money indebtedness, banker’s acceptances and bank guaranties, deferred purchase price of property or services, attributable indebtedness, and guaranties.

The permitted consolidated fixed charge coverage ratios under the Senior Credit Facility are 1.25 from the period March 31, 2010 through September 30, 2010 and 1.50 from December 31, 2010 and for each fiscal quarter thereafter.

The Senior Credit Facilities define the consolidated fixed charge coverage ratio as the ratio of consolidated EBITDA less the aggregate amount of all cash capital expenditures to consolidated fixed charges for any measurement period. In general consolidated fixed charges are defined as the sum of consolidated interest charges, the aggregate principal amount of all regularly scheduled principal payments and the aggregate amount of all restricted payments, which include any dividend or other distribution with respect to any capital stock or other equity interest.

At September 30, 2010, Ashland’s calculation of the consolidated leverage ratio per the refinancing was 0.9 compared to the maximum consolidated leverage ratio permitted under Ashland’s Senior Credit Agreement of 3.25. At September 30, 2010, Ashland’s calculation of the fixed charge coverage ratio was 4.7 compared to the permitted consolidated ratio of 1.25. Any change in consolidated EBITDA of $100 million would have an approximate .1x effect on the consolidated leverage ratio and a .6x effect on the fixed charge coverage ratio. Any change in consolidated indebtedness of $100 million would affect the consolidated leverage ratio by approximately .1x.

Ashland projects that cash flow from operations and other available financial resources such as cash on hand and revolving credit should be sufficient to meet investing and financing requirements to enable Ashland to comply with the covenants and other terms of each respective financing facility. These projections are based on various assumptions that include, but are not limited to: operational results, working capital cash generation, capital expenditures, pension funding requirements and tax payment and receipts.

Accounts receivable securitization

Also as part of the refinancing described above, on March 31, 2010, Ashland amended and restated its existing accounts receivable securitization facility, pursuant to (i) a First Amendment to Sale Agreement, between Ashland and CVG Capital II, LLC, a wholly-owned “bankruptcy remote” special purpose subsidiary of Ashland (CVG), which amended the Sale Agreement, dated as of November 13, 2008 (as so amended, the Sale Agreement) and (ii) an Amended and Restated Transfer and Administration Agreement (the Transfer and Administration Agreement), among CVG, Ashland, each of Liberty Street Funding LLC, Market Street Funding LLC and Three Pillars Funding LLC, as Conduit Investors and Uncommitted Investors, The Bank of Nova Scotia, as the Agent (the Agent), a Letter of Credit Issuer, a Managing Agent, an Administrator and a Committed Investor, PNC Bank, National Association, as a Letter of Credit Issuer, a Managing Agent, an Administrator and a Committed Investor, SunTrust Bank, as a Letter of Credit Issuer and a Committed Investor, SunTrust Robinson Humphrey, Inc., as a Managing Agent and an Administrator and Wells Fargo Bank, National Association, as a Letter of Credit Issuer, a Managing Agent and a Committed Investor, as acknowledged and agreed to by Bank of America, National Association and YC SUSI Trust, as exiting parties.

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The primary purposes of the amendment of the accounts receivable securitization facility was to increase the maximum available funds under the facility from $200 million to $350 million and to extend the maturity date of the facility to March 29, 2013. Ashland incurred an additional $1 million in fees related to the amendment and restatement of the facility that was capitalized and included within other noncurrent assets within the Consolidated Balance Sheet. At September 30, 2010, the outstanding amount of accounts receivable sold by Ashland to CVG was $663 million. Ashland had drawn $40 million under the facility as of September 30, 2010 of the approximate $350 million in available funding from qualifying receivables. As of September 30, 2010, the weighted-average interest rate on the accounts receivable securitization was 1.8%.

As part of the receivables securitization facility, under the Sale Agreement Ashland will sell, on an ongoing basis, substantially all of its qualifying accounts receivable (but not those of its subsidiaries), certain related assets and the right to the collections on those accounts receivable to CVG. Under the terms of the Transfer and Administration Agreement, CVG may, from time to time, obtain up to $350 million (in the form of cash or letters of credit for the benefit of Ashland and its other subsidiaries) from the Conduit Investors, the Uncommitted Investors and/or the Committed Investors (together the Investors) through the sale of its interest in such receivables, related assets and collections or by financing those receivables, related assets and rights to collection. Ashland transfers under the facility are accounted for as secured borrowings and the receivables sold pursuant to the facility are included in the Condensed Consolidated Balance Sheet as accounts receivable. Borrowings under the facility will be repaid as accounts receivable are collected, with new borrowings created as and when CVG requests additional fundings from the Investors under the Transfer and Administration Agreement, which will generally occur on a monthly basis. Once sold to CVG, the accounts receivable, related assets and rights to collection described above will be separate and distinct from Ashland’s own assets and will not be available to its creditors should Ashland become insolvent. Ashland’s equity interest in CVG has been pledged to the lenders under Ashland’s new senior secured credit facilities described above. Substantially all of CVG’s assets have been pledged to the Agent in support of its obligations under the Transfer and Administration Agreement.

Free cash flow

The following represents Ashland’s calculation of free cash flow for the disclosed periods.


	September 30
(In millions)	2010			2009			2008
Cash flows provided by operating activities from continuing operations	$	517		$	1,027		$	478
Less:
Additions to property, plant and equipment		(206	)		(174	)		(205	)
Cash dividends paid		(35	)		(22	)		(69	)
Free cash flows	$	276		$	831		$	204

Cash flow metrics

At September 30, 2010, working capital (current assets minus current liabilities, excluding long-term debt due within one year) amounted to $1,191 million, compared to $954 million at the end of 2009. Ashland’s working capital is affected by its use of the LIFO method of inventory valuation that valued inventories below their replacement costs by $151 million at September 30, 2010 and $125 million at September 30, 2009. Liquid assets (cash, cash equivalents and accounts receivable) amounted to 120% of current liabilities at September 30, 2010, compared to 111% at September 30, 2009.

The following summary reflects Ashland’s cash, investment securities and debt as of September 30, 2010 and 2009.


	September 30
(In millions)	2010		2009
Short-term debt	$	71	$	23
Long-term debt (including current portion)		1,153		1,590
Total debt	$	1,224	$	1,613

Cash and cash equivalents	$	417	$	352
Auction rate securities	$	22	$	170

The scheduled aggregate maturities of debt by fiscal year for the next five years are as follows: $116 million in 2011, $38 million in 2012, $85 million in 2013, $203 million in 2014 and $8 million in 2015. As previously discussed, Ashland completed a refinancing of its previously existing senior credit facilities by entering into a new Senior Credit Agreement on March 31, 2010. The new senior secured credit facility provides for an aggregate principal amount of $850 million

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consisting of a $550 million four-year revolver (undrawn at close) and a $300 million four-year Term Loan A facility (fully drawn at close). In conjunction with the senior credit facilities refinancing, Ashland expanded the availability of the accounts receivable securitization facility from $200 million to $350 million, subject to available funding from qualifying receivables. The net proceeds from the refinancing, along with utilization from Ashland’s existing receivables securitization facility ($300 million of available $350 million drawn at close), were used to pay off Ashland’s previously existing Term Loan B due 2014 and refinance Ashland’s existing revolving credit facility due 2013 and Term Loan A due 2013.

Total borrowing capacity remaining under the new $550 million revolving credit facility was $428 million, which was reduced by $122 million for letters of credit outstanding at September 30, 2010. Additionally, at September 30, 2010, Ashland had approximately $310 million in available funding from qualifying receivables sold to a wholly owned accounts receivable securitization facility. In total, Ashland’s available liquidity position, which includes cash, the revolving credit and accounts receivable securitization facility, was $1,155 million at September 30, 2010.

The current portion of long-term debt was $45 million at September 30, 2010 and $53 million at September 30, 2009. Based on Ashland’s current debt structure included in Note I of Notes to Consolidated Financial Statements and assuming interest rates remain stable, future annual book interest expense could range from approximately $115 million to $120 million based on applicable fixed and floating interest rates.

Auction rate securities

At September 30, 2010 and 2009, Ashland held at par value $25 million and $192 million, respectively, in student loan auction rate securities for which there was not an active market with consistent observable inputs. In February 2008, the auction rate securities market became largely illiquid, as there was not enough demand to purchase all of the securities that holders desired to sell at par value during certain auctions. Since this time, the market for auction rate securities has failed to achieve equilibrium. As of September 30, 2008, Ashland had recorded, as a component of stockholders’ equity, a temporary $32 million unrealized loss on the portfolio. As of that date, all the student loan instruments held by Ashland were AAA rated and collateralized by student loans which are substantially guaranteed by the U.S. government under the Federal Family Education Loan Program. Ashland’s estimate of fair value for auction rate securities as of September 30, 2008 was based on various internal discounted cash flow models and relevant observable market prices and quotes. The assumptions within the models include credit quality, liquidity, estimates on the probability of each valuation model and the impact due to extended periods of maximum auction rates.

During the first quarter of 2009, Ashland liquidated $20 million (par value) auction rate securities for $18 million in cash proceeds and recognized a loss of $2 million, which was the recorded book value of this instrument. As a result of this sale, as well as Ashland’s debt structure following the Hercules acquisition and the ongoing impact from the global economic downturn, Ashland determined in the first quarter that it no longer had the intent to hold these instruments until their maturity date. As a result, Ashland recorded the remaining $30 million unrealized loss as a permanent realized loss in the other expenses caption of the Consolidated Statement of Income. A full valuation allowance was established for this tax benefit at December 31, 2008 because for tax purposes Ashland did not have capital gains to offset this capital loss. For further information on income taxes, see Note L of Notes to Consolidated Financial Statements.

The following details the auction rate securities sold during 2010 and 2009.


(In millions)	2010		2009
Par value	$	168	$	83
Cash received		150		73
Gain or (loss)		2		(2	)

Capital resources

During 2010, Ashland’s total debt decreased by $389 million to $1,224 million. Since the acquisition of Hercules in November 2008, Ashland has primarily used its cash generated from operations to reduce debt by more than $1 billion. Debt as a percent of capital employed was 24% at September 30, 2010 compared to 31% at September 30, 2009.

Stockholders’ equity increased $219 million to $3,803 million. This increase was primarily due to the voluntary common stock contribution of $100 million made in November 2009 to Ashland’s U.S. pension plans and net income of $332 million. These increases were partially offset by regular cash dividends of $35 million, deferred translation losses of $64 million and pension and postretirement obligations of $158 million.

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During the third quarter of fiscal 2010, the Board of Directors of Ashland announced and paid a quarterly cash dividend of 15 cents per share to eligible shareholders of record. This amount was double the previous quarterly dividend of 7.5 cents per share paid in the first two quarters of fiscal 2010 and all four quarters in fiscal 2009. In conjunction with Ashland’s existing debt facilities, Ashland is subject to various covenants that may restrict certain future payments, which could include quarterly dividend payments, although Ashland does not anticipate that will occur.

Ashland did not repurchase any outstanding common shares during 2010, 2009 or 2008. In 2010, Ashland made a voluntary pension plan contribution of approximately 3.0 million shares of Ashland Common Stock, valued at $100 million on the date of transfer as described above. In 2009, as part of the completed merger to acquire all of the outstanding shares of Hercules in November 2008, Ashland issued 10.5 million shares. See Note B of Notes to Consolidated Financial Statements for additional details regarding the acquisition. At September 30, 2010 and 2009, 8.5 million and 9.8 million common shares, respectively, were reserved for issuance under stock incentive and deferred compensation plans.

Capital expenditures were $206 million for 2010 and averaged $195 million during the last three years. Under the new senior credit facilities agreement entered into in March 2010, Ashland is no longer subject to a capital expenditure limit, which under the previous financing arrangements was approximately $300 million in fiscal year 2010. Ashland is currently forecasting approximately $230 million of capital expenditures for fiscal 2011 funded primarily from operating cash flows. During 2010, Ashland used $23 million in capital to acquire the remaining 50% interest in Ara Quimica, a leading producer of custom unsaturated polyester resin formulations for the composites industry in South America and part of the Performance Materials business segment. During 2009, Ashland used $2,080 million in capital and $450 million in stock to obtain Hercules’ Aqualon (included within the Functional Ingredients business segment) and Paper Technologies and Ventures (included within the Water Technologies business segment) businesses. During 2008, Ashland used capital to acquire several businesses within Performance Materials, including Air Products, which totaled $129 million.

A summary of the capital employed in Ashland’s current operations as of the end of the last three years follows.


(In millions)	2010		2009		2008
Capital employed
Functional Ingredients	$	2,528	$	2,684	$	-
Water Technologies		1,656		1,663		333
Performance Materials		811		750		795
Consumer Markets		578		588		485
Distribution		501		374		521

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Contractual obligations and other commitments

The following table aggregates Ashland’s obligations and commitments to make future payments under existing contracts at September 30, 2010. Contractual obligations for which the ultimate settlement of quantities or prices are not fixed and determinable have been excluded.


						2012	-		2014	-	Later
(In millions)	Total		2011			2013			2015		years
Contractual obligations
Raw material and service contract purchase obligations (a)	$	90	$	23	$	29		$	9		$	29
Employee benefit obligations (b)		456		71		83			87			215
Operating lease obligations (c)		277		66		107			58			46
Debt (d)		1,403		116		123			211			953
Debt interest payments (e)		917		111		222			199			385
Unrecognized tax benefits (f)		116		-		-			-			116
Total contractual obligations	$	3,259	$	387	$	564		$	564		$	1,744

Other commitments
Letters of credit (g)	$	122	$	122	$	-		$	-		$	-

(a)	Includes raw material and service contracts where minimal committed quantities and prices are fixed.

(b)

Includes estimated funding of Ashland’s qualified U.S. and non-U.S. pension plans for 2010, as well as projected benefit payments through 2020 under Ashland’s unfunded pension and other postretirement benefit plans. See Note M 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 K of Notes to Consolidated Financial Statements.

(d)	Capitalized lease obligations are not significant and are included within this caption. For further information, see Note I of Notes to Consolidated Financial Statements.

(e)	Includes interest expense on both variable and fixed rate debt assuming no prepayments. Variable interest rates have been assumed to remain constant through the end of the term at rates that existed as of September 30, 2010.

(f)

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.

(g)	Ashland issues various types of letters of credit as part of its normal course of business. For further information, see Note I of Notes to Consolidated Financial Statements.

OFF-BALANCE SHEET ARRANGEMENTS

As part of its normal course of business, Ashland is a party to various financial guarantees and other commitments. These arrangements involve elements of performance and credit risk that are not included in the Consolidated Balance Sheets. The possibility that Ashland would have to make actual cash expenditures in connection with these obligations is largely dependent on the performance of the guaranteed party, or the occurrence of future events that Ashland is unable to predict. Ashland has reserved the approximate fair value of these guarantees in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

NEW ACCOUNTING PRONOUNCEMENTS

For a discussion and analysis of recently issued accounting pronouncements and its impact on Ashland, see Note A of Notes to Consolidated Financial Statements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The preparation of Ashland’s Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses, and the disclosures of contingent assets and liabilities. Significant items that are subject to such estimates and assumptions include, but are not limited to, long-lived assets (including goodwill and other intangible assets), employee benefit obligations, income taxes, liabilities and receivables associated with asbestos litigation and environmental remediation. Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions. Management has reviewed the estimates affecting these items with the Audit Committee of Ashland’s Board of Directors.

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Long-lived assets

Tangible assets

The cost of property, plant and equipment is depreciated by the straight-line method over the estimated useful lives of the assets. Buildings are depreciated principally over 25 to 35 years and machinery and equipment principally over 4 to 15 years. Ashland reviews property, plant and equipment asset groups for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Ashland monitors these changes and events on at least a quarterly basis. Examples of events or changes in circumstances could include, but are not limited to, a prolonged economic downturn, current period operating or cash flow losses combined with a history of losses or a forecast of continuing losses associated with the use of an asset group, or a current expectation that an asset group will be sold or disposed of before the end of its previously estimated useful life. Recoverability is based upon projections of anticipated future undiscounted cash flows associated with the use and eventual disposal of the property, plant and equipment asset groups, as well as specific appraisals in certain instances. Reviews occur at the lowest level for which identifiable cash flows are largely independent of cash flows associated with other property, plant and equipment asset groups. If the future undiscounted cash flows result in a value that is less than the carrying value, then the long-lived asset is considered impaired and a loss is recognized based on the amount by which the carrying amount exceeds the estimated fair value. Various factors that Ashland uses in determining the impact of these assessments include the expected useful lives of long-lived assets and our ability to realize any undiscounted cash flows in excess of the carrying amounts of such asset groups, and are affected primarily by changes in the expected use of the assets, changes in technology or development of alternative assets, changes in economic conditions, changes in operating performance and changes in expected future cash flows. Because judgment is involved in determining the fair value of property, plant and equipment asset groups, there is risk that the carrying value of these assets may require adjustment in future periods.

Asset impairment charges are included within the selling, general and administrative expense caption of the Statements of Consolidated Income and were $1 million in 2010, $3 million in 2009 and $2 million in 2008. Total depreciation expense on property, plant and equipment for 2010, 2009 and 2008 was $235 million, $261 million and $134 million, respectively. Depreciation expense for 2010 and 2009 included $6 million and $17 million in accelerated depreciation related to the closure of plant facilities, included within the cost of sales caption of the Statements of Consolidated Income, while 2008 did not have a charge. Capitalized interest for 2010 and 2009 was $2 million and $3 million, respectively, and was not significant for 2008.

Goodwill

In accordance with U.S. GAAP, Ashland reviews goodwill and other intangible assets for impairment either annually or when events and circumstances indicate an impairment may have occurred. This annual assessment is performed as of July 1 and consists of Ashland determining each reporting unit’s current fair value compared to its current carrying value. Ashland has determined that its reporting units for allocation of goodwill include the Functional Ingredients, Water Technologies, Consumer Markets and Distribution reportable segments. Within the Performance Materials reportable segment, because further discrete financial information is provided and management regularly reviews this information, this reportable segment is further broken down into the Casting Solutions and Composite Polymers/Specialty Polymers and Adhesives reporting units. Goodwill associated with each of these reporting units as of September 30, 2010 was $1,080 million for Functional Ingredients, $620 million for Water Technologies, $115 million for Consumer Markets, $80 million for Distribution, $52 million for Castings Solutions, and $281 million for Composites and Adhesives.

When externally quoted market prices of Ashland’s reporting units are not readily available, Ashland makes various estimates and assumptions in determining the estimated fair values of those units through the use of discounted cash flow models. Discounted cash flow models are highly reliant on various assumptions. Significant assumptions Ashland utilized in these models for the current year included: projected business results and future industry direction, long-term growth factors (ranging from 3% to 5%) and weighted-average cost of capital, which ranged from 10% to 11%. Ashland uses assumptions that it deems to be conservative estimates of likely future events and compares the total fair values of each reporting unit to Ashland’s market capitalization, and implied control premium, to determine if the fair values are reasonable compared to external market indicators. Subsequent changes in these key assumptions could affect the results of future goodwill impairment reviews.

In conjunction with the July 1 annual assessment of goodwill, Ashland’s valuation techniques did not indicate any impairment. Each reporting unit’s fair value was significantly over its carrying values, except for the Functional Ingredients reporting unit, whose calculated fair value exceeded its carrying value by approximately 20%. Based on the sensitivity analysis performed on two key assumptions in the current year discounted cash flow model, a negative 1% change in either the long-term growth factor or weighted-average cost of capital assumptions for this reporting unit would have resulted in a fair value approximately at its current carrying value. In calculating the fair value of Functional Ingredients within the model, Ashland assumed a long-term growth factor of 5%, which was consistent with the prior year’s model. In addition, Ashland utilized a weighted-average cost of capital of 10% for the current year model, which is a slight decrease from the

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10.5% utilized in the prior year’s model. The current year’s weighted-average cost of capital of 10% is considered by Ashland to be a conservative adjustment from the prior year’s rate based on Ashland’s significantly lower overall weighted-average borrowing rate at September 30, 2010 of 6.8% compared to the September 30, 2009 rate of 7.8%, as well as generally the overall lower interest rate environment that currently exists in the credit markets. Ashland believes that the current fair value results of the Functional Ingredients reporting unit are positive given that this business was just purchased and recorded at fair value in early fiscal 2009. The current year discounted cash flow model result, which is a significant increase in fair value over the previous year’s model, indicates the business is capitalizing on growth opportunities and cost synergies that existed at the outset of the purchase of the business. Assuming no changes in key assumptions identified, Ashland currently anticipates the future fair value of the Functional Ingredients reporting unit to continue to increase over time.

Ashland did compare and assess the total fair values of the reporting units to Ashland’s market capitalization at the annual assessment date, including the implied control premium, to determine if the fair values are reasonable compared to external market indicators. While Ashland’s current market capitalization total approximates its current carrying value, the discounted cash flow models for each reporting unit summed together exceeded Ashland’s carrying value by a significant amount as of Ashland’s annual impairment testing date. Ashland believes its use of significant assumptions within its valuation models are reasonable estimates of likely future events. Because the fair value results for each reporting unit did not indicate a potential impairment existed, Ashland did not recognize any goodwill impairment during 2010, 2009, and 2008. Subsequent to this annual impairment test, no indications of an impairment were identified.

Other indefinite-lived intangible assets

Other indefinite-lived intangible assets include certain trademarks and trade names. These assets had a balance of $290 million as of September 30, 2010. Ashland reviews these intangible assets for possible impairment annually or whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. Ashland tests these indefinite-lived intangible assets, using a “relief-from-royalty” valuation method compared to the carrying value. Significant assumptions inherent in the valuation methodologies for these intangibles include, but are not limited to, such estimates as projected business results, growth rates, weighted-average cost of capital, which ranged from 10% to 13%, royalty and discount rates (ranging from 0.5% to 6%). In conjunction with the July 1 annual assessment of indefinite-lived intangible assets, Ashland’s models did not indicate any impairment, as each indefinite-lived intangible asset’s fair value exceeded their carrying values.

Ashland’s assessment of an impairment charge on any of these assets classified currently as having indefinite lives, including goodwill, could change in future periods if any or all of the following events were to occur with respect to a particular reporting unit: divestiture decision, negative change in Ashland’s weighted-average cost of capital rates, growth rates or other assumptions, economic deterioration that is more severe or of a longer duration than anticipated, or another significant economic event. For further information, see Note H of Notes to Consolidated Financial Statements.

Employee benefit obligations

Ashland and its subsidiaries sponsor contributory and noncontributory qualified and non-qualified defined benefit pension plans that cover a majority of employees in the United States and in a number of other countries. Benefits under these plans generally are based on employees’ years of service and compensation during those years of service. In addition, the companies also sponsor unfunded postretirement benefit plans, which provide health care and life insurance benefits for eligible employees who retire or are disabled. Retiree contributions to Ashland’s health care plans are adjusted periodically, and the plans contain other cost-sharing features, such as deductibles and coinsurance. Life insurance plans generally are noncontributory. For further information, see Note M of Notes to Consolidated Financial Statements.

During 2009, in conjunction with the purchase of Hercules, Ashland assumed $207 million and $109 million of net liabilities associated with qualified and non-qualified defined benefit pension plans and postretirement plans, respectively. The assumed Hercules pension plan had a projected benefit obligation of $1,521 million as of the acquisition date.

Ashland’s pension and other postretirement obligations and annual expense calculations are based on a number of key assumptions including the discount rate at which obligations can be effectively settled, the anticipated rate of compensation increase, the expected long-term rate of return on plan assets and certain employee-related factors, such as turnover, retirement age and mortality. Because Ashland’s retiree health care plans contain various caps that limit Ashland’s contributions and because medical inflation is expected to continue at a rate in excess of these caps, the health care cost trend rate has no material impact on Ashland’s postretirement health care benefit costs.

Ashland developed the discount rate used to determine the present value of its obligations under the U.S. pension and postretirement health and life plans by matching the stream of benefit payments from the plans to the Mercer Pension Discount Yield Curve Spot Rates. Ashland uses this approach to reflect the specific cash flows of these plans for determining the discount rate. The discount rate determined as of September 30, 2010 was 5.07% for the U.S. pension plans

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and 4.67% for the postretirement health and life plans. Non-U.S. pension plans followed a similar process based on financial markets in those countries where Ashland provides a defined benefit pension plan.

Ashland’s expense under both U.S. and non-U.S. pension plans is determined using the discount rate as of the beginning of the fiscal year, which amounted to a weighted-average rate of 5.82% for 2010, 7.81% for 2009 and 6.16% for 2008. The rates used for the postretirement health and life plans were 5.50% for 2010, 7.78% for 2009 and 5.96% for 2008. The 2011 expense for the pension plans will be based on a weighted-average discount rate of 5.01%, while 4.68% will be used for the postretirement health and life plans.

The weighted-average rate of compensation increase assumptions were 3.67% for 2010, 3.73% for 2009 and 3.74% for 2008. The compensation increase assumptions for the U.S. plans were 3.75% for 2010, 3.75% for 2009 and 3.75% for 2008. The rate of the compensation increase assumption for the U.S. plans will remain at 3.75% in determining Ashland’s pension costs for 2011.

The weighted-average long-term expected rate of return on assets was assumed to be 7.90% in 2010, 7.97% in 2009 and 7.62% in 2008. The long-term expected rate of return on assets for the U.S. plans was assumed to be 8.25% in 2010, 8.25% in 2009 and 7.75% in 2008. For 2010, the U.S. pension plan assets generated an actual return of 12.34%, compared to a gain of 15.90% in 2009 and a loss of 18.50% in 2008. However, the expected return on plan assets is designed to be a long-term assumption, and actual returns will be subject to considerable year-to-year variances. Ashland has generated compounded annual investment returns of 6.87% and 5.26% on its U.S. pension plan assets over the last five-year and ten-year periods. Ashland estimates total fiscal 2011 pension costs for U.S. and non-U.S. pension plans to be approximately $95 million, and expects to contribute $30 million to its non-U.S. pension plans and approximately $20 million to its U.S. pension plans in cash.

Shown below are the estimated increases in pension and postretirement expense that would have resulted from a one percentage point change in each of the assumptions for each of the last three years.


(In millions)	2010		2009		2008		(a)
Increase in pension costs from
Decrease in the discount rate	$	43	$	19	$	16
Increase in the salary adjustment rate		11		9		7
Decrease in the expected return on plan assets		27		23		15
Increase in other postretirement costs from
Decrease in the discount rate		2		3		2

(a) Excludes Hercules pension and other postretirement plans assumed during 2009 as part of its acquisition by Ashland.

Income taxes

Ashland is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment in the forecasting of taxable income using historical and projected future operating results is required in determining Ashland’s provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable, and those deferred. Under U.S. GAAP, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax loss carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the period in which the enactment date changes. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized. In the event that the actual outcome of future tax consequences differs from Ashland’s estimates and assumptions due to changes or future events such as tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans, the resulting change to the provision for income taxes could have a material affect on the Consolidated Statement of Income and Consolidated Balance Sheet.

The recoverability of deferred tax assets and the recognition and measurement of uncertain tax positions are subject to various assumptions and judgment by Ashland. If actual results differ from the estimates made by Ashland in establishing or maintaining valuation allowances against deferred tax assets, the resulting change in the valuation allowance would generally impact earnings or other comprehensive income depending on the nature of the respective deferred tax asset. Additionally, the positions taken with regard to tax contingencies may be subject to audit and review by tax authorities, which may result in future taxes, interest and penalties. Positive and negative evidence is considered in determining the need for a valuation allowance against deferred tax assets, which includes such evidence as historical earnings, projected future earnings, tax planning strategies, and expected timing of reversal of existing temporary differences.

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In determining the recoverability of deferred tax assets Ashland gives consideration to all available positive and negative evidence including reversals of deferred tax liabilities (other than those with an indefinite reversal period), projected future taxable income, tax planning strategies, and recent financial operations. Ashland attaches the most weight to historical earnings due to their verifiable nature. In evaluating the objective evidence that historical results provide, we consider three years of cumulative income or loss. In addition, Ashland has reflected increases and decreases in our valuation allowance based on the overall weight of positive versus negative evidence on a jurisdiction by jurisdiction basis.

As a result of the Hercules acquisition during 2009, significant historical tax positions and structures related to Hercules have been combined within Ashland. Some of these previous tax positions and structures from Hercules required a complete reassessment regarding certain of Ashland’s pre-acquisition tax positions and structures. As such, material changes in certain tax matters may occur in the future based on deviations from Ashland’s current estimates and assumptions in combining these tax positions and structures. For additional information, see Note L of Notes to Consolidated Financial Statements.

Asbestos-related litigation

Ashland and Hercules, a wholly-owned subsidiary of Ashland, have liabilities from claims alleging personal injury caused by exposure to asbestos. To assist in developing and annually updating independent reserve estimates for future asbestos claims and related costs given various assumptions, Ashland retained Hamilton, Rabinovitz & Associates, Inc. (HR&A). The methodology used by HR&A to project future asbestos costs is based largely on recent experience, including claim-filing and settlement rates, disease mix, enacted legislation, open claims, and litigation defense. The claim experience of Ashland and Hercules are separately compared to the results of previously conducted third party epidemiological studies estimating the number of people likely to develop asbestos-related diseases. Those studies were undertaken in connection with national analyses of the population expected to have been exposed to asbestos. Using that information, HR&A estimates a range of the number of future claims that may be filed, as well as the related costs that may be incurred in resolving those claims. See Note N of Notes to Consolidated Financial Statements for additional information.

Ashland asbestos-related litigation

The claims alleging personal injury caused by exposure to asbestos asserted against Ashland result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley Stoker Corporation (Riley), a former subsidiary. Because claims are frequently filed and settled in large groups, the amount and timing of settlements and number of open claims can fluctuate significantly from period to period.

From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs, which generally approximates the mid-point of the estimated range of exposure from model results. Ashland reviews this estimate and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 50-year model developed with the assistance of HR&A.

During the most recent update completed during 2010, it was determined that the reserve adjustment for asbestos claims should be increased by $28 million. Total reserves for asbestos claims were $537 million at September 30, 2010 compared to $543 million at September 30, 2009.

Excluding the Hercules asbestos claims further described below, Ashland has insurance coverage for most of the litigation defense and claim settlement costs incurred in connection with its asbestos claims, and coverage-in-place agreements exist with the insurance companies that provide most of the coverage currently being accessed. As a result, increases in the asbestos reserve have been largely offset by probable insurance recoveries. The amounts not recoverable generally are due from insurers that are insolvent, rather than as a result of uninsured claims or the exhaustion of Ashland’s insurance coverage.

For the Ashland asbestos-related obligations, Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. Approximately 70% of the estimated receivables from insurance companies are expected to be due from domestic insurers, of which approximately 83% have a credit rating of B+ or higher by A. M. Best, as of September 30, 2010. The remainder of the insurance receivable is due from London insurance companies, which generally have lower credit quality ratings, and from Underwriters at Lloyd’s, whose insurance policy obligations have been transferred to a Berkshire Hathaway entity. During fiscal 2010, Ashland entered into a new agreement with a number of London market insurance companies with respect to coverage for asbestos-related insurance claims. As a result, a $12 million increase to the Ashland asbestos receivable was recorded within the Consolidated Balance Sheet, which had a $9 million (after-tax) effect on the Statement of Consolidated Income within the discontinued operations caption. As a result of this agreement and other revised estimates, Ashland no longer discounts any portion of the asbestos receivable at this time.

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At September 30, 2010, Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $421 million (excluding the Hercules receivable for asbestos claims), of which $56 million relates to costs previously paid. Receivables from insurers amounted to $422 million at September 30, 2009. During 2010, the model used for purposes of valuing the asbestos reserve described above, and its impact on valuation of future recoveries from insurers, was updated. This model update along with potential settlement adjustments caused an additional $24 million net increase in the receivable for probable insurance recoveries.

Hercules asbestos-related litigation

Hercules, a wholly-owned subsidiary of Ashland, has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products which were sold by one of Hercules’ former subsidiaries to a limited industrial market. Because claims are frequently filed and settled in large groups, the amount and timing of settlements and number of open claims can fluctuate significantly from period to period.

In November 2008, Ashland completed its acquisition of Hercules. At that time, Hercules’ recorded reserve for asbestos claims was $233 million for indemnity costs. Hercules’ accounting policy in recording reserves for asbestos claims was to reserve at the lowest level of an estimated range of exposure for indemnity claims, excluding estimates of future litigation defense costs. Ashland’s accounting policy in recording reserves for asbestos claims is to include amounts for the best estimate of projected indemnity and litigation defense costs, which generally approximates the mid-point of the estimated range of exposure from model results. As a result, Ashland recorded a $105 million increase to the asbestos reserve for Hercules to include projected defense costs. To do so, Ashland utilized several internal models that it employs to estimate defense costs associated with asbestos claims.

During 2009, Ashland included the Hercules claims within its annual assessment of these matters, which includes running various non-inflated, non-discounted approximate 50-year models developed with the assistance of HR&A and determining from the range of estimates in the models the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs. Based on Ashland’s assessment of the best estimate of the range of exposure from the most recent model results, an additional $156 million increase was recorded, which was accounted for as an adjustment to Hercules’ opening balance sheet because the adjustment related to claims that had been incurred as of the acquisition date.

During December 2009, Ashland essentially completed the final valuation of the Hercules asbestos claims liability existing as of the acquisition date and underlying claim files as part of transitioning to a standardized claims management approach. This assessment resulted in a $35 million and $22 million reduction to the asbestos liability and receivable, respectively, which was accounted for as an adjustment to Hercules’ opening balance sheet since the adjustment related to claims that had been incurred as of the acquisition date. During the most recent update, completed during 2010, it was determined that the liability for asbestos claims should be reduced by $58 million. Based upon review of the assumptions underlying the asbestos valuation model and the most recent claim filing and settlement trend rates for both pre- and post-acquisition periods, Ashland determined that $14 million of the $58 million adjustment should be recorded to goodwill, which was partially offset by $6 million for a decrease in probable insurance recoveries, totaling to a net $8 million adjustment to goodwill. Total reserves for Hercules asbestos claims were $375 million at September 30, 2010 compared to $484 million at September 30, 2009.

As of Ashland’s acquisition date of Hercules, all of the cash previously recovered and placed into a trust from the settlements with certain of Hercules’ insurance carriers had been exhausted. With the addition of estimated defense and indemnity costs, the total Hercules asbestos reserve exceeded the amount needed to obtain reimbursements pursuant to coverage-in-place agreements with certain other insurance carriers. Accordingly, Ashland recorded a $97 million receivable within the noncurrent asbestos insurance receivable caption of the Consolidated Balance Sheet. Upon completion of the annual update during 2010, the receivable was reduced by $28 million, $6 million of which was recorded to goodwill. Receivables from insurers amounted to $68 million and $118 million as of September 30, 2010 and 2009, respectively. As of September 30, 2010, this estimated receivable exclusively consists of domestic insurers, of which approximately 97% have a credit rating of B+ or higher by A. M. Best.

Asbestos litigation cost projection

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reserves for Ashland and Hercules represent the best estimate within a range of possible outcomes. As a part of the process to develop these estimates of future asbestos costs, a range of long-term cost models was developed. These models are based on national studies that predict the number of people likely to develop asbestos-related diseases and are heavily influenced by assumptions regarding long-term inflation rates for indemnity payments and legal defense costs, as well as other variables mentioned previously. Ashland has currently estimated in various approximate 50-year models that it is reasonably possible that total future litigation defense and claim settlement costs on an inflated and undiscounted basis could range as high as approximately $830 million for the Ashland asbestos-related litigation and approximately $570 million for the Hercules asbestos-related litigation (or approximately $1.4 billion in the aggregate), depending on the combination of assumptions selected in the various models. If actual experience is worse than projected relative to the number of claims filed, the severity of alleged disease associated with those claims or costs incurred to resolve those claims, Ashland may need to increase further the estimates of the costs associated with asbestos claims and these increases could potentially be material over time.

Environmental remediation

Ashland and Hercules are subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively environmental remediation) at multiple locations. At September 30, 2010, such locations included 92 waste treatment or disposal sites where Ashland and/or Hercules have been identified as a potentially responsible party under Superfund or similar state laws, 153 current and former operating facilities (including certain operating facilities conveyed to MAP) and about 1,225 service station properties, of which 117 are being actively remediated.

Ashland’s reserves for environmental remediation amounted to $207 million at September 30, 2010 compared to $221 million at September 30, 2009, of which $162 million at September 30, 2010 and $169 million at September 30, 2009 were classified in other noncurrent liabilities on the Consolidated Balance Sheets. As a result of the Hercules acquisition on November 13, 2008, Ashland assumed all Hercules’ environmental and asset retirement obligation contingencies. Hercules’ obligations assumed by Ashland were $107 million, which includes an increase of $29 million for different remediation approaches than previously assumed under Hercules’ valuation models.

The total reserves for environmental remediation reflect Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable, without regard to any third-party recoveries. Engineering studies, probability techniques, historical experience and other factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Ashland discounts certain environmental sites and regularly adjusts its reserves as environmental remediation continues. Ashland has estimated the value of its probable insurance recoveries associated with its environmental reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage. At September 30, 2010 and 2009, Ashland’s recorded receivable for these probable insurance recoveries was $30 million and $35 million, respectively. Environmental remediation expense is included within the selling, general and administrative expense caption of the Statements of Consolidated Income and on an aggregate basis amounted to $30 million in 2010, $15 million in 2009 and $11 million in 2008. Environmental remediation expense, net of insurance receivables, was $22 million in 2010, $13 million in 2009 and $7 million in 2008.

Environmental remediation reserves are subject to numerous inherent uncertainties that affect Ashland’s ability to estimate its share of the costs. Such uncertainties involve the nature and extent of contamination at each site, the extent of required cleanup efforts under existing environmental regulations, widely varying costs of alternate cleanup methods, changes in environmental regulations, the potential effect of continuing improvements in remediation technology, and the number and financial strength of other potentially responsible parties at multiparty sites. Although it is not possible to predict with certainty the ultimate costs of environmental remediation, Ashland currently estimates that the upper end of the reasonably possible range of future costs for identified sites is approximately $360 million, which includes the Hercules sites. No individual remediation location is material, as the largest reserve for any site is less than 10% of the remediation reserve.

OUTLOOK

During 2010, Ashland completed the last major step of the Hercules integration, implementing the common SAP TM enterprise resource planning system across the organization, while also refinancing its debt structure, to take advantage of lower rate instruments. This new debt structure, along with cash flows created from operations during the year, enabled Ashland to significantly reduce its debt and increase available liquidity, which was approximately $1.2 billion at the end of the fiscal year.

Ashland experienced significant sales growth during 2010 within each segment of business. Despite this growth, Ashland’s underlying cost structure remained essentially unchanged. However, persistent raw material cost inflation impacted results from certain businesses, to varying degrees, throughout the year.

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Raw materials cost increases within Functional Ingredients continued to escalate throughout the past year, and combined with lower selling prices have resulted in a gross profit margin decline from historical levels. However, current and anticipated pricing actions should allow for these margins within this business to return to its historical levels. This business also experienced inventory shortages in certain key products for the majority of the year. Ashland expects the new Nanjing facility in China, which will become operational early in fiscal 2011, to help alleviate these shortages in certain products, while serving as a long-term platform for growth within the Asia market. This new facility is expected to initially cause some margin decline in the upcoming year until it becomes fully utilized. This business continues to emphasize new and innovative products, which in the current year accounted for a record 23% of sales, as a key metric for sustained long-term growth. As such, Functional Ingredients will continue to partner with its customers to focus on designing new products or enhancements that create value within the market.

Water Technologies’ financial performance continues to be challenged by escalating raw material prices that have decreased margins, particularly within the longer duration fixed price contracts that are prevalent within this industry. This business will focus on aggressive product pricing during the upcoming year to offset the margin decline as a result of these recent raw material cost increases, which Ashland expects will return margins to more historical levels. In addition, this business will concentrate on increasing its growth within certain higher margin products and markets, to utilize and leverage its significant scale throughout its existing markets.

Performance Materials is well prepared to capture increased profitability as volume growth returns to the markets it serves. During the past year, this business demonstrated its operating leverage as the underlying cost structure of the business did not increase despite a 16% increase in sales. In addition, Performance Materials is positioned to capitalize on technical advantages in certain high growth sectors of its business. In July of 2010, Ashland signed a joint venture agreement to combine its foundry chemicals business that is anticipated to close by the end of the calendar year. Ashland expects this new arrangement to reduce Performance Materials’ operating income in 2011 as stranded costs are eliminated throughout the year. In addition, the newly combined business will be reported under the equity method of accounting instead of the consolidation method.

Consumer Markets has just completed two consecutive record years. Despite persistent raw material cost increases throughout the year, this business demonstrated its ability to maintain its gross profit margin and brand value in creating a new level of profitability for this business. Consumer Markets is focused on continuing to build upon this new financial performance level by concentrating on certain key strategic components of the business which include: maintaining product pricing, expanding international growth, increasing growth in premium brands through technical innovation and effective brand advertising and continuing the growth of the Valvoline Instant Oil Change™ business. Effectively managing the growth platform for these core strategic components will be the primary factor in maintaining and expanding upon this new level of financial performance.

Distribution took significant strides in the past year to reach its targeted financial performance as margins continued to increase ratably throughout the current year. Distribution’s main focus is to take advantage of its significant cash generation potential by growing overall volume levels, which will allow it to leverage its existing scale and cost structure to improve overall profitability. On November 5, 2010, Ashland signed a definitive agreement to sell substantially all of its assets within the Ashland Distribution business to TPG Accolade, LLC for $930 million. The transaction is expected to close prior to the end of the March 2011 quarter, subject to the receipt of certain regulatory approvals and the satisfaction of other standard closing conditions.

Despite considerable raw material cost inflation throughout the past year Ashland was able to demonstrate its ability to generate substantial cash flow while growing sales at a significant rate. Ashland is now currently well positioned with its strong balance sheet and available liquidity to implement and execute its growth strategies and capitalize on potential opportunities.

EFFECTS OF INFLATION AND CHANGING PRICES

Ashland’s financial statements are prepared on the historical cost method of accounting in accordance with U.S. GAAP and, as a result, do not reflect changes in the purchasing power of the U.S. dollar. Monetary assets (such as cash, cash equivalents and accounts receivable) lose purchasing power as a result of inflation, while monetary liabilities (such as accounts payable and indebtedness) result in a gain, because they can be settled with dollars of diminished purchasing power. As of September 30, 2010, Ashland’s monetary assets currently exceed its monetary liabilities, leaving it currently more exposed to the effects of future inflation. However, given the recent consistent stability of inflation in the U.S. in the past several years as well as forward economic outlooks, current inflationary pressures seem moderate.

Certain of the industries in which Ashland operates are capital-intensive, and replacement costs for its plant and equipment generally would exceed their historical costs. Accordingly, depreciation and amortization expense would be greater if it were based on current replacement costs. However, because replacement facilities would reflect technological

M-32

improvements and changes in business strategies, such facilities would be expected to be more productive than existing facilities, mitigating at least part of the increased expense.

Ashland uses the LIFO method to value a portion of its inventories to provide a better matching of revenues with current costs. However, LIFO values such inventories below their replacement costs.

FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements including, without limitation, statements made under the caption “Management’s Discussion and Analysis” (MD&A), within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In addition, Ashland may from time to time make forward-looking statements in its Annual Report to Shareholders, quarterly reports and other filings with the Securities and Exchange Commission, press releases and other written and oral communications. These forward-looking statements are based on Ashland’s expectations and assumptions, as of the date such statements are made, regarding Ashland’s future operating performance and financial condition, the economy and other future events or circumstances. Ashland’s expectations and assumptions include, without limitation, those mentioned within the MD&A, internal forecasts and analyses of current and future market conditions and trends, management plans and strategies, operating efficiencies and economic conditions, such as prices, supply and demand, cost of raw materials, the ability to recover raw material cost increases through price increases, weather and legal proceedings and claims (including environmental and asbestos matters). Various risks and uncertainties may cause actual results to differ materially from those stated, projected or implied by any forward-looking statements, including, without limitation, risks and uncertainties affecting Ashland that are contained in “Use of estimates, risks and uncertainties” in Note A of Notes to Consolidated Financial Statements and in Item 1A of this Form 10-K. Ashland believes its expectations and assumptions are reasonable, but there can be no assurance that the expectations reflected herein will be achieved. Ashland undertakes no obligation to subsequently update any forward-looking statements made in this Form 10-K or otherwise except as required by securities or other applicable law.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Ashland regularly uses foreign currency derivative instruments to manage its exposure to certain transactions denominated in foreign currencies. All derivative instruments are recognized as either assets or liabilities in the Consolidated Balance Sheets and are measured at fair value. Changes in the fair value of all derivatives are recognized immediately in income unless the derivative qualifies as a hedge of future cash flows. Gains and losses related to a hedge are either recognized in income immediately to offset the gain or loss on the hedged item, or deferred and recorded in the stockholders’ equity section of the Consolidated Balance Sheets as a component of accumulated other comprehensive income and subsequently recognized in the Statements of Consolidated Income when the hedged item affects net income. The ineffective portion of the change in fair value of a hedge is recognized in income immediately. At September 30, 2010 and 2009, Ashland had no derivative contracts that qualified for hedge accounting. Credit risks arise from the possible inability of counterparties to meet the terms of their contracts, but exposure is limited to the replacement value of the contracts. Ashland further minimizes this credit risk through internal monitoring procedures and as of September 30, 2010 does not have significant credit risk on open derivative contracts. The potential loss from a hypothetical 10% adverse change in foreign currency rates on Ashland’s open foreign currency derivative instruments at September 30, 2010 would be less than a $5 million impact on Ashland’s consolidated financial position, results of operations, cash flows or liquidity. Ashland did not transact or have open any hedging contracts with respect to commodities or any related raw material requirements for the year ended September 30, 2010. See Note G of Notes to Consolidated Financial Statements for additional information regarding derivative instruments.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL SCHEDULE

	Page
Management’s report on internal control over financial reporting ......................................................................................................................................	F-2
Reports of independent registered public accounting firms ................... ..............................................................................................................................	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-50
Consolidated financial schedule:
Schedule II – Valuation and qualifying accounts ..............................................................................................................................................................	F-50
Five-year selected financial information ..................... .................................................................................................................................................................	F-51

F-1

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for the preparation and integrity of the Consolidated Financial Statements and other financial information included in this annual report on Form 10-K. Such financial statements are prepared in accordance with accounting principles generally accepted in the United States. Accounting principles are selected and information is reported which, using management’s best judgment and estimates, present fairly Ashland’s consolidated financial position, results of operations and cash flows. The other financial information in this annual report on Form 10-K is consistent with the Consolidated Financial Statements.

Ashland’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Ashland’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Ashland’s Consolidated Financial Statements. Ashland’s internal control over financial reporting is supported by a code of business conduct which summarizes our guiding values such as obeying the law, adhering to high ethical standards and acting as responsible members of the communities where we operate. Compliance with that Code forms the foundation of our internal control systems, which are designed to provide reasonable assurance that Ashland’s assets are safeguarded and its records reflect, in all material respects, transactions in accordance with management’s authorization. The concept of reasonable assurance is based on the recognition that the cost of a system of internal control should not exceed the related benefits. Management believes that adequate internal controls are maintained by the selection and training of qualified personnel, by an appropriate division of responsibility in all organizational arrangements, by the establishment and communication of accounting and business policies, and by internal audits.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Board, subject to stockholder ratification, selects and engages the independent auditors based on the recommendation of the Audit Committee. The Audit Committee, composed of directors who are not members of management, reviews the adequacy of Ashland’s policies, procedures, controls and risk management strategies, the scope of auditing and other services performed by the independent auditors, and the scope of the internal audit function. The Committee holds meetings with Ashland’s internal auditor and independent auditors, with and without management present, to discuss the findings of their audits, the overall quality of Ashland’s financial reporting and their evaluation of Ashland’s internal controls. The report of Ashland’s Audit Committee can be found in the Company’s 2010 Proxy Statement.

Management assessed the effectiveness of Ashland’s internal control over financial reporting as of September 30, 2010. Management conducted its assessment utilizing the framework described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management believes that Ashland maintained effective internal control over financial reporting as of September 30, 2010.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited and reported on the Consolidated Financial Statements of Ashland Inc. and consolidated subsidiaries and the effectiveness of Ashland’s internal control over financial reporting. The reports of the independent auditors are contained in this Annual Report.

/s/ James J. O’Brien

James J. O’Brien

Chairman of the Board and Chief Executive Officer

/s/ Lamar M. Chambers

Lamar M. Chambers

Senior Vice President and Chief Financial Officer

November 22, 2010

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Stockholders

Ashland Inc. and consolidated subsidiaries

In our opinion, the accompanying consolidated balance sheets and the related statements of consolidated income, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Ashland Inc. and its subsidiaries at September 30, 2010 and September 30, 2009, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule for each of the two years in the period ended September 30, 2010 listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Cincinnati, Ohio

November 22, 2010

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Stockholders

Ashland Inc. and consolidated subsidiaries

We have audited the accompanying statements of consolidated income, stockholders’ equity, and cash flows of Ashland Inc. and consolidated subsidiaries for the year ended September 30, 2008. Our audit also included the financial statement schedule as of September 30, 2008 and for the year then ended, listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of Ashland Inc. and consolidated subsidiaries’ management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Ashland Inc. and consolidated subsidiaries for the year ended September 30, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule as of September 30, 2008 and for the year then ended, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Ernst & Young LLP

Cincinnati, Ohio

November 25, 2008

F-4

Ashland Inc. and Consolidated Subsidiaries
Statements of Consolidated Income
Years Ended September 30

(In millions except per share data)	2010			2009			2008
Sales	$	9,012		$	8,106		$	8,381
Costs and expenses
Cost of sales		7,012			6,317			7,056
Selling, general and administrative expense		1,399			1,341			1,118
Research and development expense		86			96			48
		8,497			7,754			8,222
Equity and other income - Notes A and E		51			38			54
Operating income		566			390			213
Net interest and other financing (expense) income - Note I		(197	)		(205	)		28
Net gain on acquisitions and divestitures - Note C		21			59			20
Other income and (expense)		2			(86	)		-
Income from continuing operations before income taxes		392			158			261
Income tax expense - Note L		91			80			86
Income from continuing operations		301			78			175
Income (loss) from discontinued operations (net of income taxes) - Note D		31			(7	)		(8	)
Net income	$	332		$	71		$	167

Earnings per share - Note A
Basic
Income from continuing operations	$	3.86		$	1.08		$	2.78
Income (loss) from discontinued operations		0.40			(0.10	)		(0.13	)
Net income	$	4.26		$	0.98		$	2.65
Diluted
Income from continuing operations	$	3.79		$	1.07		$	2.76
Income (loss) from discontinued operations		0.39			(0.11	)		(0.13	)
Net income	$	4.18		$	0.96		$	2.63

See Notes to Consolidated Financial Statements.

F-5

Ashland Inc. and Consolidated Subsidiaries
Consolidated Balance Sheets
At September 30

(In millions)	2010			2009
Assets
Current assets
Cash and cash equivalents	$	417		$	352
Accounts receivable (less allowances for doubtful accounts of
$28 million in 2010 and $38 million in 2009) - Note A		1,608			1,392
Inventories - Note A		644			527
Deferred income taxes - Note L		112			118
Other assets		52			48
Current assets held for sale - Note C		-			41
		2,833			2,478
Noncurrent assets
Auction rate securities - Note G		22			170
Goodwill - Note H		2,228			2,220
Intangibles - Note H		1,113			1,181
Asbestos insurance receivable (noncurrent portion) - Note N		459			510
Deferred income taxes - Note L		336			310
Other assets - Note J		513			619
Noncurrent assets held for sale - Note C		9			52
		4,680			5,062
Property, plant and equipment - Note A
Cost
Land		266			289
Buildings		817			723
Machinery and equipment		2,326			2,283
Construction in progress		128			164
		3,537			3,459
Accumulated depreciation and amortization		(1,519	)		(1,392	)
		2,018			2,067
	$	9,531		$	9,607
Liabilities and Stockholders’ Equity
Current liabilities
Short-term debt - Note I	$	71		$	23
Current portion of long-term debt - Note I		45			53
Trade and other payables		1,043			973
Accrued expenses and other liabilities		528			523
Current liabilities held for sale - Note C		-			5
		1,687			1,577
Noncurrent liabilities
Long-term debt (noncurrent portion) - Note I		1,108			1,537
Employee benefit obligations - Note M		1,372			1,214
Asbestos litigation reserve (noncurrent portion) - Note N		841			956
Deferred income taxes - Note L		145			149
Other liabilities - Note J		575			590
		4,041			4,446
Stockholders’ equity - Notes O and P
Common stock, par value $.01 per share, 200 million shares authorized
Issued - 79 million shares in 2010 and 75 million shares in 2009		1			1
Paid-in capital		665			521
Retained earnings		3,482			3,185
Accumulated other comprehensive loss		(345	)		(123	)
		3,803			3,584
	$	9,531		$	9,607

See Notes to Consolidated Financial Statements.

F-6

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, 2007	$	1	$	16		$	3,040		$	97			$	3,154
Total comprehensive income (loss) (b)							167			(67	)			100
Regular dividends, $1.10 per common share							(69	)						(69	)
Common shares issued under stock incentive
and other plans (c) (d)				17										17
Balance at September 30, 2008		1		33			3,138			30				3,202
Total comprehensive income (loss) (b)							71			(153	)			(82	)
Regular dividends, $.30 per common share							(22	)						(22	)
Issuance of common shares - Note O				450										450
Common shares issued under stock incentive
and other plans (c) (d)				42										42
Other				(4	)		(2	)						(6	)
Balance at September 30, 2009		1		521			3,185			(123	)			3,584
Total comprehensive income (loss) (b)							332			(222	)			110
Regular dividends, $.45 per common share							(35	)						(35	)
Issuance of common shares - Note O				100										100
Common shares issued under stock incentive
and other plans (c) (d)				44										44
Balance at September 30, 2010	$	1	$	665		$	3,482		$	(345	)		$	3,803

( a)	At September 30, 2010 and 2009, the accumulated other comprehensive loss of $345 million for 2010 and $123 million for 2009 was comprised of unfunded pension and postretirement obligations of $620 million for 2010 and $462 million for 2009, and net unrealized translation gains of $275 million for 2010 and $339 million for 2009.
(b)	Reconciliations of net income to total comprehensive (loss) income follow.

	(In millions)	2010			2009			2008
	Net income	$	332		$	71		$	167
	Pension and postretirement obligation adjustment		(250	)		(525	)		(84	)
	Related tax benefit		92			170			33
	Unrealized translation (loss) gain		(64	)		182			4
	Net unrealized gain (loss) on investment securities		-			32			(32	)
	Related tax (loss) benefit		-			(12	)		12
	Total comprehensive (loss) income	$	110		$	(82	)	$	100

(c)	Includes income tax benefits resulting from the exercise of stock options of $8 million in 2010, $2 million in 2009 and $2 million in 2008. Includes $10 million from the fair value of Hercules stock options converted into stock options for Ashland shares in 2009.
(d)	Common shares issued were 972,938, 1,353,880 and 151,821 for 2010, 2009 and 2008, respectively.

See Notes to Consolidated Financial Statements.

F-7

Ashland Inc. and Consolidated Subsidiaries
Statements of Consolidated Cash Flows
Years Ended September 30

(In millions)	2010			2009			2008
Cash flows provided by operating activities from continuing operations
Net income	$	332		$	71		$	167
(Income) loss from discontinued operations (net of income taxes)		(31	)		7			8
Adjustments to reconcile income from continuing operations
to cash flows from operating activities
Depreciation and amortization		304			329			145
Debt issuance cost amortization		81			52			-
Purchased in-process research and development amortization		-			10			-
Deferred income taxes		9			12			44
Equity income from affiliates		(19	)		(14	)		(23	)
Distributions from equity affiliates		17			15			13
Gain from the sale of property and equipment		(6	)		(2	)		(2	)
Stock based compensation expense - Note P		14			9			12
Stock contributions to qualified savings plans		22			13			-
Net gain on acquisitions and divestitures - Notes B and C		(21	)		(59	)		(20	)
Loss on early retirement of debt		5			-			-
Inventory fair value adjustment related to Hercules acquisition		-			37			-
Loss on currency swaps related to Hercules acquisition		-			54			-
(Gain) loss on auction rate securities		(2	)		32			-
Change in operating assets and liabilities (a)		(188	)		461			134
		517			1,027			478
Cash flows provided (used) by investing activities from continuing operations
Additions to property, plant and equipment		(206	)		(174	)		(205	)
Proceeds from the disposal of property, plant and equipment		18			47			10
Purchase of operations - net of cash acquired		(23	)		(2,080	)		(129	)
Proceeds from sale of operations		64			114			26
Settlement of currency swaps related to Hercules acquisition		-			(95	)		-
Purchases of available-for-sale securities		-			-			(435	)
Proceeds from sales and maturities of available-for-sale securities		150			73			315
		3			(2,115	)		(418	)
Cash flows (used) provided by financing activities from continuing operations
Proceeds from the issuance of long-term debt		334			2,628			-
Repayment of long-term debt		(780	)		(1,862	)		(5	)
Proceeds from/repayments of short-term debt		48			(19	)		-
Debt issuance/modification costs		(13	)		(162	)		-
Cash dividends paid		(35	)		(22	)		(69	)
Proceeds from the exercise of stock options		6			9			3
Excess tax benefits related to share-based payments		5			1			1
		(435	)		573			(70	)
Cash provided (used) by continuing operations		85			(515	)		(10	)
Cash used by discontinued operations
Operating cash flows		(10	)		(2	)		(8	)
Effect of currency exchange rate changes on cash and cash equivalents		(10	)		(17	)		7
Increase (decrease) in cash and cash equivalents		65			(534	)		(11	)
Cash and cash equivalents - beginning of year		352			886			897
Cash and cash equivalents - end of year	$	417		$	352		$	886
(Increase) decrease in operating assets (a)
Accounts receivable	$	(202	)	$	405		$	10
Inventories		(119	)		147			126
Other current and noncurrent assets		28			114			25
Increase (decrease) in operating liabilities (a)
Trade and other payables		77			(208	)		57
Pension contributions		(63	)		(47	)		(25	)
Other current and noncurrent liabilities		91			50			(59	)
Change in operating assets and liabilities	$	(188	)	$	461		$	134
Supplemental disclosures
Interest paid	$	118		$	198		$	10
Income taxes paid		86			49			53

(a) Excludes changes resulting from operations acquired or sold.

See Notes to Consolidated Financial Statements.

F-8

Ashland Inc. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements

NOTE A – SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation and basis of presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and U.S. Securities and Exchange Commission regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. All material intercompany transactions and balances have been eliminated. Certain assets and liabilities that have been categorized as held for sale or sold during 2010 have been reclassified within the September 30, 2009 Consolidated Balance Sheet. Additionally, certain other prior period data has been reclassified in the Consolidated Financial Statements and accompanying notes to conform to the current period presentation.

The Consolidated Financial Statements include the accounts of Ashland and its majority owned subsidiaries. In addition, Ashland consolidates a variable interest entity, acquired as part of the Hercules Incorporated (Hercules) acquisition, in which Ashland has a 40% ownership interest and has been deemed to be the primary beneficiary. As of September 30, 2010, this variable interest entity had an equity position of $22 million. Investments in joint ventures and 20% to 50% owned affiliates where Ashland has the ability to exert significant influence are accounted for under the equity method.

Use of estimates, risks and uncertainties

The preparation of Ashland’s Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. Significant items that are subject to such estimates and assumptions include, but are not limited to, long-lived assets (including goodwill and other intangible assets), employee benefit obligations, income taxes, liabilities and receivables associated with asbestos litigation and environmental remediation. Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions.

Ashland’s results are affected by domestic and international economic, political, legislative, regulatory and legal actions. Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies, and changes in the prices of hydrocarbon-based products and other raw materials, can have a significant effect on operations. While Ashland maintains reserves for anticipated liabilities and carries various levels of insurance, Ashland could be affected by civil, criminal, regulatory or administrative actions, claims or proceedings relating to asbestos, environmental remediation or other matters.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and highly liquid investments maturing within three months after purchase.

Investment securities

Securities are classified as available-for-sale or held-to-maturity on the date of purchase. Available-for-sale securities are reported at fair value with unrealized gains and losses, net of related deferred income taxes, included in accumulated other comprehensive income, a component of stockholders’ equity. Held-to-maturity securities are recorded at amortized cost. Interest and dividends are reported within the caption net interest and other financing (expense) income in the Statements of Consolidated Income. The cost of securities sold is based on the specific identification method. All securities are reviewed quarterly for possible other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance, the creditworthiness of the issuer and Ashland’s intent and ability to hold the security. A decline in value that is considered to be other-than-temporary is recorded as a loss within the Statements of Consolidated Income. The net unrealized gain on investment securities in accumulated other comprehensive income as of September 30, 2010 and 2009 was not significant. For additional information on investment securities, see Note G.

Allowance for doubtful accounts

Ashland records an allowance for doubtful accounts as a best estimate of the amount of probable credit losses for accounts receivable. Each month Ashland reviews this allowance and considers factors such as customer credit, past transaction history with the customer and changes in customer payment terms when determining whether the collection of a

F-9

NOTE A – SIGNIFICANT ACCOUNTING POLICIES (continued)

receivable is reasonably assured. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. The allowance for doubtful accounts is adjusted when it becomes probable a receivable will not be recovered.

Inventories

Inventories are carried at the lower of cost or market. Certain chemicals, plastics and lubricants with a replacement cost of $348 million at September 30, 2010, and $260 million at September 30, 2009, are valued at cost using the last-in, first-out (LIFO) method. During 2009 and 2008 certain inventory quantities valued under the LIFO method were reduced. This reduction resulted in a liquidation of LIFO quantities carried at lower costs prevailing in prior years as compared with the cost of purchases within the periods presented, the effect of which decreased cost of goods sold during 2009 and 2008 by $18 million and $31 million, respectively. The remaining inventories are valued using the weighted-average cost method.


(In millions)	2010			2009
Finished products	$	620		$	486
Raw materials, supplies and work in process		175			166
LIFO carrying values		(151	)		(125	)
	$	644		$	527

Property, plant and equipment

Assets held for sale

When specific actions to dispose of assets progress to the point that criteria, as defined within U.S. GAAP, have been met, the underlying assets and liabilities are adjusted to the lesser of carrying value or fair value, which may include an impairment charge to the extent identified, and reclassified into a “held for sale” category within the Consolidated Balance Sheet. Impairment charges, to the extent they exist, are recognized in the Statements of Consolidated Income. For additional information on assets held for sale, see Note C.

Goodwill and other indefinite-lived intangibles

In accordance with U.S. GAAP, Ashland tests goodwill and other indefinite-lived intangible assets for impairment annually as of July 1 and whenever events or circumstances make it more likely than not that an impairment may have occurred. Ashland reviews goodwill for impairment based on its identified reporting units, which are defined as reportable segments or groupings of businesses one level below the reportable segment level. Ashland tests goodwill for impairment by comparing the carrying value to the estimated fair value of its reporting units, determined using externally quoted prices (if available) or a discounted cash flow model and, when deemed necessary, a market approach. Ashland tests its indefinite-lived intangible assets, principally trademarks and trade names, using a “relief-from-royalty” valuation method compared to the carrying value. Significant assumptions inherent in the valuation methodologies for goodwill and other intangibles are employed and include, but are not limited to, such estimates as projected business results, growth rates, the weighted-average cost of capital for a market participant, and royalty and discount rates. For further information on goodwill and other intangible assets, see Note H.

F-10

Derivative instruments

Ashland regularly uses foreign currency derivative instruments to manage its exposure to certain transactions denominated in foreign currencies. All derivative instruments are recognized as either assets or liabilities on the balance sheet and are measured at fair value. Changes in the fair value of all derivatives are recognized immediately in income unless the derivative qualifies as a hedge of future cash flows. Gains and losses related to a hedge are either recognized in income immediately to offset the gain or loss on the hedged item, or deferred and recorded in the stockholders’ equity section of the Consolidated Balance Sheets as a component of accumulated other comprehensive income and subsequently recognized in the Statements of Consolidated Income when the hedged item affects net income. The ineffective portion of the change in fair value of a hedge is recognized in income immediately. At September 30, 2010 and 2009, Ashland did not have any derivative contracts that qualified for hedge accounting. Credit risks arise from the possible inability of counterparties to meet the terms of their contracts, but exposure is limited to the replacement value of the contracts. Ashland further minimizes this credit risk through internal monitoring procedures. As of September 30, 2010, Ashland had not identified any significant credit risk on open derivative contracts. For additional information on derivative instruments, see Note G.

Revenue recognition

Sales generally are recognized when persuasive evidence of an arrangement exists, products are received or services are provided to customers, the sales price is fixed or determinable and collectability is reasonably assured. For consignment inventory, title and risk of loss are transferred when the products have been consumed or used in the customer’s production process. The percentage of Ashland’s sales recognized from consignment inventory sales was 5% during 2010 and 2009 and 3% during 2008. Ashland reports all sales net of tax assessed by qualifying governmental authorities.

Expense recognition

Cost of sales include material and production costs, as well as the costs of inbound and outbound freight, purchasing and receiving, inspection, warehousing, internal transfers, and all other distribution network costs. Selling, general and administrative expenses include sales and marketing costs, advertising, customer support, environmental remediation, corporate and divisional administrative and other costs. Advertising costs ($70 million in 2010, $63 million in 2009 and $66 million in 2008) and research and development costs ($86 million in 2010, $96 million in 2009 and $48 million in 2008) are expensed as incurred.

Ashland Consumer Markets has established an engine guarantee associated with its Valvoline™ product line. Consumers register their vehicles to qualify for the guarantee. Ashland had established an estimation methodology for quantifying the future potential reserves related to this guarantee program. However, during 2010 Ashland insured this program with a third party, which has significantly limited the potential exposure related to this guarantee program. Generally, all other Ashland products are sold without extended warranties.

Income taxes

Asbestos-related litigation

Ashland is subject to liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims result from indemnification obligations undertaken in 1990 in connection with the sale of Riley Stoker Corporation (Riley) and the acquisition of Hercules in November 2008. Although Riley, a former subsidiary, was neither a producer nor a manufacturer of asbestos, its industrial boilers contained some asbestos-containing components provided by other companies. Hercules, a wholly-owned subsidiary of Ashland, has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products sold by one of Hercules’ former subsidiaries to a limited industrial market.

F-11

NOTE A – SIGNIFICANT ACCOUNTING POLICIES (continued)

Ashland retained Hamilton, Rabinovitz & Associates, Inc. (HR&A) to assist in developing and annually updating independent reserve estimates for future asbestos claims and related costs given various assumptions. The methodology used by HR&A to project future asbestos costs is based largely on Ashland’s recent experience, including claim-filing and settlement rates, disease mix, enacted legislation, open claims, and litigation defense. Ashland’s claim experience is compared to the results of previously conducted epidemiological studies estimating the number of people likely to develop asbestos-related diseases. Those studies were undertaken in connection with national analyses of the population expected to have been exposed to asbestos. Using that information, HR&A estimates a range of the number of future claims that may be filed, as well as the related costs that may be incurred in resolving those claims. From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs. For additional information on asbestos-related litigation, see Note N.

Environmental remediation

Accruals for environmental remediation are recognized when it is probable a liability has been incurred and the amount of that liability can be reasonably estimated. Such costs are charged to expense if they relate to the remediation of conditions caused by past operations or are not expected to mitigate or prevent contamination from future operations. Liabilities are recorded at estimated cost values based on experience, assessments and current technology, without regard to any third-party recoveries and are regularly adjusted as environmental assessments and remediation efforts continue. For additional information on environmental remediation, see Note N.

Pension and other postretirement benefit costs

The funded status of Ashland’s pension and other postretirement benefit plans is recognized in the Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at September 30, the measurement date. For defined benefit pension plans, the benefit obligation is the projected benefit obligation (PBO) and for the other postretirement benefit plans the benefit obligation is the accumulated postretirement benefit obligation (APBO). The PBO represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. The APBO represents the actuarial present value of postretirement benefits attributed to employee services already rendered. The fair value of plan assets represents the current market value of assets held by an irrevocable trust fund for the sole benefit of participants. The measurement of the benefit obligation is based on Ashland’s estimates and actuarial valuations. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain key assumptions that require significant judgment, including, but not limited to, estimates of discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates and mortality rates. For additional information regarding plan assumptions and the current financial position of the pension and other postretirement plans, see Note M.

Foreign currency translation

Operations outside the United States are measured primarily using the local currency as the functional currency. Upon consolidation, the results of operations of the subsidiaries and affiliates whose functional currency is other than the U.S. dollar are translated into U.S. dollars at the average exchange rates for the year while assets and liabilities are translated at year-end exchange rates. Adjustments to translate assets and liabilities into U.S. dollars are recorded in the stockholders’ equity section of the Consolidated Balance Sheets as a component of accumulated other comprehensive income and are included in net earnings only upon sale or liquidation of the underlying foreign subsidiary or affiliated company.

Stock incentive plans

Ashland recognizes compensation expense for stock incentive plans awarded to key employees and directors, primarily in the form of stock appreciation rights (SARs), restricted stock, performance shares and other non-vested stock awards, based upon the grant-date fair value over the appropriate vesting period. Ashland utilizes several industry accepted valuation models to determine the fair value. For further information concerning stock incentive plans, see Note P.

Earnings per share

The following is the computation of basic and diluted earnings per share (EPS) from continuing operations. Stock options and SARs available to purchase shares outstanding for each reported year whose grant price was greater than the average market price of Ashland Common Stock for each applicable fiscal year were not included in the computation of income from continuing operations per diluted share because the effect of these instruments would be antidilutive. The total number of these shares outstanding was 2.0 million for 2010 and 2009 and 2.2 million for 2008.

F-12


(In millions except per share data)	2010		2009		2008
Numerator
Numerator for basic and diluted EPS -
Income from continuing operations	$	301	$	78	$	175
Denominator
Denominator for basic EPS - Weighted-average
common shares outstanding		78		72		63
Share based awards convertible to common shares		1		1		1
Denominator for diluted EPS - Adjusted weighted-
average shares and assumed conversions		79		73		64
EPS from continuing operations
Basic	$	3.86	$	1.08	$	2.78
Diluted		3.79		1.07		2.76

New accounting pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued accounting guidance related to fair value measurements (The Accounting Standards Codification (ASC) 820-10-15 Fair Value Measurements and Disclosures), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and requires expanded disclosures about fair value measurements. This guidance applies to all other accounting pronouncements that require or permit fair value measurements because the FASB has previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. The guidance became effective for financial assets and liabilities of Ashland on October 1, 2008 and nonfinancial assets and liabilities of Ashland on October 1, 2009. Fair value disclosures for financial and nonfinancial assets and liabilities in connection with the adoption are provided in Note F.

In December 2007, the FASB issued new guidance for entities that enter into collaborative arrangements (ASC 808-10 Collaborative Arrangements). The guidance defines a collaborative arrangement and establishes presentation and disclosure requirements for transactions among participants in a collaborative arrangement and between participants in the arrangement and third parties. This guidance defines a collaborative arrangement as a contractual arrangement that involves two or more parties that both: (1) actively participate in a joint operating activity and (2) are exposed to significant risks and rewards that depend on the commercial success of the joint operating activity. This guidance became effective for Ashland on October 1, 2009. The adoption of this guidance did not have a material impact on the Consolidated Financial Statements.

In December 2007, the FASB issued guidance related to business combinations (ASC 805-10 Business Combinations) which provides that the acquisition method of accounting (formerly referred to as purchase method) be used for all business combinations and that an acquirer be identified for each business combination. In addition, the guidance establishes revised principles and requirements for how Ashland will recognize and measure assets, liabilities and expenses related to a business combination. This guidance impacts the accounting and reporting of business combinations that occur after October 1, 2009 and the manner in which changes in estimates related to acquisitions that occurred prior to the effective date, such as the Hercules acquisition.

In December 2007, the FASB issued guidance related to noncontrolling ownership interests in the Consolidated Financial Statements (ASC 810-10-65-1 Consolidation). This guidance establishes new accounting and reporting standards that require the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled and presented in the consolidated balance sheet within equity, but separate from the parent’s equity. The guidance also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income. In addition, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary shall be initially measured at fair value, with the gain or loss on the deconsolidation of the subsidiary measured using the fair value of any noncontrolling equity investment rather than the carrying amount of that retained investment. The guidance also clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest and includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. This guidance became effective for Ashland on October 1, 2009. The adoption of this guidance did not have a material impact on the Consolidated Financial Statements.

In April 2008, the FASB issued guidance related to the determination of the useful life of intangible assets (ASC 350-30 General Intangibles Other than Goodwill) which amends the list of factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets. The new guidance applies to (1) intangible assets that are acquired individually or with a group of other assets and (2) intangible assets acquired in both

F-13

NOTE A – SIGNIFICANT ACCOUNTING POLICIES (continued)

business combinations and asset acquisitions. This guidance became effective for Ashland on October 1, 2009. The adoption of this guidance did not have an impact on the Consolidated Financial Statements.

In December 2008, the FASB issued guidance related to employers’ disclosures about postretirement benefit plan assets (ASC 715 Compensation-Retirement Benefits) which requires additional disclosures such as significant risks within plan assets, investment allocation decisions, fair values by major category of plan assets and valuation techniques. This guidance became effective for Ashland on September 30, 2010. Additional disclosures resulting from the adoption are provided in Note M.

In June 2009, the FASB issued accounting guidance related to variable interest entities (ASC 805 Consolidation) which alters how an entity determines whether it has a controlling financial interest in a variable interest entity. This guidance also requires ongoing reassessments of the analysis and provides for enhanced disclosures about an entity’s involvement in a variable interest entity. This Statement will become effective for Ashland on October 1, 2010. Ashland does not anticipate the adoption of this guidance will have a material impact on the Consolidated Financial Statements.

In October 2009, the FASB issued accounting guidance related to separating consideration in multiple-deliverable revenue arrangements (ASC 605-25 Revenue Recognition – Multiple-Element Arrangements). Under this guidance, multiple-deliverable arrangements will be accounted for separately (rather than as a combined unit) by selecting the best evidence of selling price among vendor-specific objective evidence, third-party evidence or estimated selling price. Additionally, this guidance eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method. This guidance will become effective for Ashland on October 1, 2010. The adoption of this guidance is not expected to have a material impact on the Consolidated Financial Statements.

NOTE B – ACQUISITIONS

Ara Quimica

Hercules

On November 13, 2008, Ashland completed its acquisition of Hercules. The merger was recorded by Ashland using the purchase method of accounting in accordance with applicable U.S. GAAP whereby the total purchase price, including qualifying transaction-related expenses, were allocated to tangible and intangible assets and liabilities acquired based upon their respective fair values.

The total merger consideration for outstanding Hercules Common Stock was $2,096 million in cash and $450 million in Ashland Common Stock with the remaining value of the transaction related to cash consideration and value for restricted stock units, stock options and transaction costs. Each share of Hercules Common Stock issued and outstanding immediately prior to the effective date of the Hercules acquisition was converted into the right to receive $18.60 in cash and 0.0930 of a share of Ashland Common Stock, subject to the payment of cash in lieu of fractional shares of Ashland Common Stock. Ashland exchanged 10.5 million shares of Ashland common shares for the 112.7 million shares of outstanding Hercules Common Stock on November 13, 2008.

The Hercules acquisition was financed in part through $2,600 million in secured financing from Bank of America Securities LLC, Scotia Capital (USA) Inc. and other lenders consisting of a $400 million revolving credit facility, a $400 million term loan A facility, an $850 million term loan B facility, a $200 million accounts receivable securitization facility and a $750 million bridge loan, which was subsequently replaced in May 2009 by $650 million senior unsecured notes and $100 million in cash generated from operations. The total debt borrowed upon the closing of the merger was approximately $2,300 million with the remaining cash consideration for the transaction paid from Ashland’s existing cash, which was used in part to extinguish $594 million of existing Hercules debt and to pay transaction fees associated with the

F-14

financing facilities. A significant amount of this debt has since been repaid, and during 2010, Ashland refinanced the remaining debt from this transaction. See Note I for further information on each financial debt instrument.

The purchase price of Hercules, excluding debt assumed, was $2,594 million, including expenses incurred in connection with the transaction, and consisted of the following items:


P urchase price (in millions)
Cash consideration for stock	$	2,096	(a)
Stock consideration		450	(b)
Cash consideration for Restricted Stock Units (RSUs)		5	(c)
Options
Cash-out options		15	(d)
Fair value of Hercules stock options converted into stock options for Ashland shares		10	(e)
Transaction costs		18	(f)
Total purchase price	$	2,594

(a)	The cash portion ($18.60) of the merger consideration paid per outstanding share of Hercules Common Stock.

(b)

The stock portion of the merger consideration was based on 0.0930 of a share of Ashland Common Stock for each share of Hercules Common Stock. A price of $42.93 per Ashland common share was assumed, which represents the average closing price per share of Ashland Common Stock on the New York Stock Exchange (NYSE) on the announcement date two days immediately prior to and immediately subsequent to the announcement date of the proposed acquisition in accordance with U.S. GAAP.

(c)

The cash payment for RSUs was calculated by multiplying the number of shares of Hercules Common Stock underlying the RSUs by the cash-out amount, which is the sum of $18.60 and the product of 0.0930 and the average closing price of Ashland Common Stock on the NYSE for the ten trading days preceding the completion of the merger. Hercules RSUs represented the equivalent of approximately 240 thousand shares.

(d)

The cash payment for certain stock options was equal to the product of the number of Hercules shares subject to the option and the amount by which the exercise price of the Hercules option is exceeded by the sum of $18.60 and the amount calculated by multiplying 0.0930 by the average closing price of Ashland Common Stock on the NYSE for the ten trading days preceding the completion of the merger.

(e)

Approximately one million of Hercules’ stock options were converted into options to purchase shares of Ashland Common Stock based on the option exchange ratio set forth in the merger agreement. The fair value of Hercules’ stock options that were converted into options to purchase shares of Ashland Common Stock were recognized as a component of the purchase price, based on the fair value of the options, as described below. The additional purchase price was calculated using the Black-Scholes option pricing model, which considered a price of $42.93 per Ashland common share assumed and the following weighted-average assumptions.

Black-Scholes
Expected option life (in years)	1.3
Volatility	26.0	%
Risk-free rate	0.7	%
Dividend yield	1.2	%

The expected life of the options was determined by taking into account the contractual life of the options (of which a significant amount were less than one year), the accelerated vesting of all Hercules options at the date of the acquisition, and estimated attrition of the option holders. The volatility, dividend yield, and risk-free interest rate assumptions used were derived using the closing date of the acquisition and were impacted by the short-term expected option life. Ashland believes the fair value of the converted stock options approximates the fair value of the Hercules stock options. Accordingly, the fair value of the converted stock options was recognized as a component of the purchase price and no additional amounts have been reflected as compensation expense.

(f)	Ashland's costs for various legal and financial services associated with the transaction.

F-15

NOTE B – ACQUISITIONS (continued)

The following table summarizes the values of the assets acquired and liabilities assumed at the date of acquisition, as well as adjustments that have been made as a result of ongoing valuations.


	At
	November 13
Purchase price allocation (in millions)	2008
Assets:
Cash	$	54
Accounts receivable		355
Inventory		261
Other current assets		57
Intangible assets		1,093
Goodwill		1,812
Asbestos receivable		97
Property, plant and equipment		1,057
Purchased in-process research and development		10
Other noncurrent assets		187
Liabilities:
Accounts payable		(232	)
Accrued expenses		(221	)
Debt		(798	)
Pension and other postretirement obligations		(316	)
Environmental		(107	)
Asbestos		(451	)
Deferred tax - net		(144	)
Other noncurrent liabilities		(120	)
Total purchase price	$	2,594

Purchase price allocation adjustments made during 2010 primarily related to asbestos liabilities and receivables, as a result of the final assessment after completion of the review of the underlying claim files, as well as certain other nominal valuation adjustments to previously recorded purchase accounting or pre-acquisition amounts within legal, environmental and income taxes.

Purchased in-process research and development (IPR&D) represents the value assigned in a business combination to acquired research and development projects that, as of the date of the acquisition, had not established technological feasibility and had no alternative future use. Amounts assigned to IPR&D meeting these criteria must be charged to expense as part of the allocation of the purchase price of the business combination. During 2009, Ashland recorded pretax charges totaling $10 million associated with the Hercules acquisition within the research and development expense caption of the Statement of Consolidated Income. The estimated values assigned to the IPR&D projects were determined based on a discounted cash flow model assigned to the following projects:


(In millions)
Functional Ingredients	Corebond	$	2
Water Technologies	Biofilm Sensor	$	2
Water Technologies	Surface Dry Strength	$	2
Functional Ingredients / Water Technologies	Other	$	4

As part of the valuation of the Hercules acquisition, Ashland recorded $1,093 million of intangible assets. Of these intangible assets, Ashland has identified approximately $255 million of certain product trade names, within the Functional Ingredients and Water Technologies businesses, that have been designated as indefinite-lived assets. Ashland’s designation of an indefinite life for these assets took many factors into consideration, including the current market leadership position of the brands as well as their recognition worldwide in the industry. The remaining $838 million identified finite-lived intangible assets are being amortized over the estimated useful life in proportion to the economic benefits consumed. Ashland considered the useful lives of the customer relationships, developed technology and product trade names to be 10 to 24 years, 5 to 20 years and 20 years, respectively. The determination of the useful lives is based upon various industry

F-16

studies, historical acquisition experience, economic factors, and future cash flows of the combined company. In addition, Ashland reviewed certain technological trends and also considered the relative stability in the current Hercules customer base.

The following details the total intangible assets identified.


			Life
Intangible asset type (in millions)	Value		(years)
Customer relationships - Functional Ingredients	$	289	10 - 24
Customer relationships - Water Technologies		240	12
Developed technology - Functional Ingredients		217	15
Developed technology - Water Technologies		60	5 - 20
Product trade names - Functional Ingredients		32	20
Product trade names - Functional Ingredients		104	Indefinite
Product trade names - Water Technologies		151	Indefinite
Total	$	1,093

The results of Hercules’ operations have been included in Ashland’s Consolidated Financial Statements since the November 13, 2008 closing date. The following unaudited pro forma information assumes the acquisition of Hercules occurred at the beginning of the respective periods presented and excludes certain nonrecurring charges, such as purchase accounting adjustments and other nonrecurring charges associated with the Hercules acquisition, that were deemed necessary to exclude for comparability purposes.


	Fiscal year ended
Unaudited pro forma information	September 30
(In millions, except per share amounts)	2009		2008
Sales	$	8,373	$	10,699
Income from continuing operations	$	239	$	183
Net income	$	232	$	208

Basic earnings per share
Income from continuing operations	$	3.22	$	2.49
Net income	$	3.12	$	2.83

Diluted earnings per share
Income from continuing operations	$	3.16	$	2.45
Net income	$	3.07	$	2.78

The unaudited pro forma information is presented above for illustrative purposes only and does not purport to be indicative of the results of future operations of Ashland or the results that would have been attained had the operations been combined during the periods presented.

Air Products

NOTE C – DIVESTITURES

Casting Solutions Joint Venture

In July 2010, Ashland and Süd-Chemie (Süd-Chemie) signed an agreement for the formation of an expanded global joint venture serving the foundry chemical sector. The transaction will combine three businesses: Ashland’s Casting Solutions business group, the Foundry-Products and Specialty Resins business unit of Süd-Chemie, and Ashland-Südchemie-Kernfest GmbH (ASK), the existing fifty-percent owned European-based joint venture between Ashland and Süd-Chemie, for which Ashland only recognizes equity income of the joint venture within its consolidated results. Ashland’s Casting

F-17

NOTE C – DIVESTITURES (continued)

Solutions and ASK businesses recorded sales of $279 million and $145 million, respectively, during each businesses’ most recently completed fiscal year. The Foundry-Products and Specialty Resins business unit of Süd-Chemie to be contributed to the joint venture generated sales of approximately $146 million for its most recently completed fiscal year.

The transaction is expected to close by the end of the calendar year, subject to customary closing conditions, including regulatory review. At closing, the joint venture is expected to distribute a cash payment to Ashland of approximately 19 million euros. During the period in which the transaction closes, Ashland is expecting to recognize a gain primarily attributable to the fair value remeasurement of the net assets contributed to the new joint venture exceeding the recorded values. As of September 30, 2010, the recorded values of assets and liabilities expected to be contributed by Ashland to the new joint venture were as follows:


	Assets
(In millions)	(liabilities)
Cash	$	13
Accounts receivable		52
Inventories		19
Property, plant and equipment		29
Goodwill		52
Trade and other payables		(27	)
Other noncurrent assets (liabilities) - net		10
	$	148

Pinova

Drew Marine

Held for sale classification

As a result of these divestitures, the assets and liabilities of these businesses were reflected as held for sale in the September 30, 2009 Consolidated Balance Sheet and are comprised of the following components:

F-18


	September 30
(In millions - unaudited)	2009
Accounts receivable	$	13
Inventories		28
Current assets	$	41

Property, plant and equipment, net	$	39
Noncurrent assets	$	39

Trade payables	$	5
Current liabilities	$	5

In addition to the Pinova and Drew Marine assets and liabilities identified above, Ashland had noncurrent assets held for sale of $9 million and $13 million at September 30, 2010 and 2009, respectively, primarily related to corporate aircraft, non-operational properties and certain Valvoline Instant Oil Change™ locations.

FiberVisions

In December 2008, Ashland completed the sale of its indirectly held 33.5% ownership interest in FiberVisions Holdings, LLC (FiberVisions) to Snow Phipps Group, LLC (Snow Phipps), a New York-based private equity firm and the majority owner of FiberVisions for $7 million. FiberVisions, a leading global producer of specialty fibers for nonwoven fabrics and textile fibers used in consumer and industrial products, was acquired by Ashland as part of the Hercules acquisition. The sale of the company’s interest in FiberVisions generated a capital loss of approximately $220 million for tax purposes that can be used to offset capital gains. At the time of the sale, the unutilized capital loss benefit was fully offset by a deferred tax asset valuation allowance because Ashland is not permitted to anticipate additional future capital gains; therefore, no tax benefit was recognized on this transaction. For further information on income taxes, see Note L.

MAP Transaction

On June 30, 2005, Ashland completed the transfer of its 38% interest in Marathon Ashland Petroleum LLC (MAP) and two other businesses to Marathon Oil Corporation (Marathon) in a transaction valued at approximately $3.7 billion (the MAP Transaction). The two other businesses were Ashland’s maleic anhydride business and 60 Valvoline Instant Oil Change™ (VIOC) centers in Michigan and northwest Ohio. Because none of the businesses qualified as discontinued operations under U.S. GAAP, the gain was reported in income from continuing operations on a separate line caption on the Statements of Consolidated Income below operating income and labeled net gain on acquisitions and divestitures.

Due to the structure of the MAP Transaction, Marathon is entitled to the tax deductions for Ashland’s future payments of certain contingent liabilities related to previously owned businesses of Ashland. However, pursuant to the terms of the Tax Matters Agreement (TMA), Marathon has agreed to compensate Ashland for these tax deductions. Ashland recorded a discounted receivable for the estimated present value of probable recoveries from Marathon for the portion of these future tax deductions which is not dependent upon Marathon’s ability to utilize these deductions. This receivable was included in the total pretax gain on the transaction while the accretion of the discount associated with this receivable is recorded in the net interest and other financing (expense) income caption. At September 30, 2010 and 2009, this receivable was $37 million and $40 million, respectively, and is included in other current and noncurrent assets on Ashland’s Consolidated Balance Sheets. Due to the continuing nature of certain tax issues, the original recorded gain has been adjusted in the net gain (loss) on acquisitions and divestitures caption in the Statements of Consolidated Income during 2010, 2009 and 2008, and may continue to be adjusted in future periods.

During 2008, Ashland and Marathon agreed to a tax related settlement with respect to four specific tax attributes and deductions subject to the terms of the TMA. These tax attributes and deductions were originally scheduled to be reimbursed periodically at much later points in the future, some with the potential of greater than 20 or more years. The effect of this settlement accelerated Marathon’s reimbursement to Ashland for certain of these deductions, resulting in the receipt of $26 million in cash from Marathon representing the present value of the future deductions. As a result of this specific agreement, Ashland recorded a gain within the net gain on acquisitions and divestitures caption of the Consolidated Statement of Income of $23 million during 2008.

F-19

NOTE D – DISCONTINUED OPERATIONS

Ashland is subject to liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley Stoker Corporation (Riley), a former subsidiary, and from the acquisition during 2009 of Hercules, a wholly-owned subsidiary of Ashland. Additional adjustments to the recorded litigation reserves and related insurance receivables continue annually and primarily reflect updates to the estimates. See Note N for further discussion of Ashland’s asbestos-related activity including assumed Hercules obligations.

On August 28, 2006, Ashland completed the sale of the stock of Ashland Paving And Construction, Inc. (APAC) to Oldcastle Materials, Inc. (Oldcastle) for $1.3 billion. The sale qualified as a discontinued operation and, as a result, the previous operating results, assets and liabilities related to APAC have been reflected as discontinued operations in the Consolidated Financial Statements. Ashland has made subsequent adjustments to the gain on the sale of APAC, primarily relating to the tax effects of the sale, during 2010, 2009 and 2008. Due to the ongoing assessment of certain tax matters associated with this divestiture, subsequent adjustments to this gain may continue in future periods in the discontinued operations caption in the Statements of Consolidated Income.

During 2003, Ashland completed the sale of the net assets of its Electronic Chemicals business and certain related subsidiaries that qualified as a discontinued operation. Ashland has made subsequent adjustments to the sale of Electronic Chemicals, primarily relating to environmental liabilities and tax effects of the sale. Due to the ongoing assessment of certain matters associated with this divestiture, subsequent adjustments to this sale may continue in future periods in the discontinued operations caption in the Statements of Consolidated Income.

During 2009, Ashland recorded two adjustments that related to prior periods within the discontinued operations caption of the Statement of Consolidated Income. These included a charge related to a change in the duration period on a retained environmental liability from the Electronic Chemicals business and a charge related to a tax basis adjustment from the APAC divestiture. Ashland assessed the affect these adjustments had on income from discontinued operations and net income in the current and prior periods and, after considering quantitative and qualitative factors, determined such adjustments to be below the threshold that would necessitate a restatement of the consolidated financial statements for the prior years. Ashland also considered the impact of these prior period adjustments on its internal controls and financial reporting and based on qualitative and quantitative factors, including the discrete nature of the transactions involved, concluded that the matters did not indicate a material weakness in internal controls over financial reporting.

Components of amounts reflected in the Statements of Consolidated Income related to discontinued operations are presented in the following table for each of the years ended September 30.


(In millions)	2010			2009			2008
Income (loss) from discontinued operations
APAC	$	-		$	1		$	-
Asbestos-related litigation reserves, expenses and related receivables		29			2			(11	)
Gain (loss) on disposal of discontinued operations
Electronic Chemicals		3			(4	)		-
Income (loss) before income taxes		32			(1	)		(11	)
Income tax (expense) benefit
Benefit (expense) related to income (loss) from discontinued operations
APAC		-			(1	)		1
Asbestos-related litigation reserves and expenses		(8	)		-			9
Benefit (expense) related to gain (loss) on disposal of discontinued operations
APAC		8			(6	)		(7	)
Electronic Chemicals		(1	)		1			-
Income (loss) from discontinued operations (net of income taxes)	$	31		$	(7	)	$	(8	)

NOTE E – UNCONSOLIDATED AFFILIATES

Summarized financial information for companies accounted for on the equity method is presented in the following table, along with a summary of the amounts recorded in Ashland’s Consolidated Financial Statements. At September 30, 2010 and 2009, Ashland’s retained earnings included $55 million and $45 million, respectively, of undistributed earnings from unconsolidated affiliates accounted for on the equity method.

F-20

The summarized financial information for all companies accounted for on the equity method by Ashland is as of and for the years ended September 30, 2010, 2009 and 2008, respectively.


(In millions)	2010		(a)	2009			2008
Financial position
Current assets	$	229		$	226
Current liabilities		(89	)		(89	)
Working capital		140			137
Noncurrent assets		62			66
Noncurrent liabilities		(7	)		(8	)
Stockholders' equity	$	195		$	195
Results of operations
Sales	$	561		$	517		$	655
Income from operations		66			52			75
Net income		38			32			52
Amounts recorded by Ashland
Investments and advances	$	76		$	79		$	81
Equity income		19			14			23
Distributions received		17			15			13

(a) Amounts in 2010 exclude Ara Quimica, which was acquired in April 2010.

NOTE F – RESTRUCTURING ACTIVITIES

During 2010, Ashland continued to manage the specific cost-structure efficiency programs implemented in 2008 and 2009. During 2008, Ashland implemented operational redesigns (2008 Program), primarily within Ashland’s Water Technologies and Performance Materials businesses, to take proactive steps to enhance profitability through streamlined operations and an improved overall cost structure of the businesses. This program continued during 2009 and was further expanded to capture additional cost saving opportunities.

In total, Ashland has achieved run-rate cost reductions of $425 million related to these cost reduction initiatives. The cumulative effect of these restructuring activities has resulted in 12 permanent facility closings through the end of 2010 and in total has reduced the global workforce by over 2,000 employees, or approximately 13%. The total restructuring cost incurred under the cost-structure efficiency and other related programs during 2010 was $4 million, and was classified within the selling, general and administrative expense caption on the Statement of Consolidated Income. The total restructuring cost incurred under the cost-structure efficiency programs during 2009 was $96 million, of which $75 million during 2009 had been charged as an expense within the Statement of Consolidated Income, consisting of $58 million classified within the selling, general and administrative expense caption and $17 million of accelerated depreciation charged to the cost of sales caption. The remaining cost of $21 million related to severance associated with Hercules personnel, which qualified for purchase method of accounting in accordance with U.S. GAAP, and had no effect on the Statement of Consolidated Income. Additional costs from reductions in resources or facilities may occur in future periods, which could include charges related to additional severance, plant closings, reassessed pension plan valuations or other items, although Ashland does not currently expect these to be significant. Ashland anticipates principally completing these restructuring activities during 2011.

F-21

NOTE F – RESTRUCTURING ACTIVITIES (continued)

The following table details at September 30, 2010, 2009 and 2008, the amount of restructuring reserves related to the cost-structure efficiency and Hercules integration programs included in accrued expenses and other liabilities in the Consolidated Balance Sheet and the related activity in these reserves during 2010, 2009 and 2008.


				Plant
				closure/
(In millions)	Severance			other costs			Total
Balance as of September 30, 2007	$	-		$	-		$	-
Restructuring reserve		9			-			9
Utilization (cash paid or otherwise settled)		(2	)		-			(2	)
Balance as of September 30, 2008		7			-			7
Restructuring reserve		75			21			96
Utilization (cash paid or otherwise settled)		(44	)		(21	)		(65	)
Balance as of September 30, 2009		38			-			38
Restructuring reserve		4			-			4
Utilization (cash paid or otherwise settled)		(27	)		-			(27	)
Balance at September 30, 2010	$	15		$	-		$	15

NOTE G – FAIR VALUE MEASUREMENTS

As required by U.S. GAAP, Ashland uses applicable guidance for defining fair value, the initial recording and periodic remeasurement of certain assets and liabilities measured at fair value and related disclosures for instruments measured at fair value. Fair value accounting guidance establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An instrument’s categorization within the fair value hierarchy is based upon the lowest level on input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows.

Level 1 – Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 – Unobservable inputs for the asset or liability for which there is little, if any, market activity at the measurement date. Unobservable inputs reflect Ashland’s own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include Ashland’s own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment.

For assets that are measured using quoted prices in active markets (Level 1), the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs (Level 2) are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability. For all other assets and liabilities for which unobservable inputs are used (Level 3), fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models that Ashland deems reasonable.

F-22

The following table summarizes financial asset instruments subject to recurring fair value measurements as of September 30, 2010. Ashland did not have any financial liability instruments subject to recurring fair value measurements as of September 30, 2010. For additional information on fair value hierarchy measurements of pension plan asset holdings, see Note M.


					Quoted prices
					in active		Significant
					markets for		other		Significant
			Total		identical		observable		unobservable
	Carrying		fair		assets		inputs		inputs
(In millions)	value		value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	417	$	417	$	417	$	-	$	-
Auction rate securities		22		22		-		-		22
Deferred compensation investments (a)		169		169		62		107		-
Investment of captive insurance company (a)		2		2		2		-		-
Total assets at fair value	$	610	$	610	$	481	$	107	$	22

(a) Included in other noncurrent assets in the Consolidated Balance Sheets.

The following table summarizes financial asset instruments subject to recurring fair value measurements as of September 30, 2009. Ashland did not have any financial liability instruments subject to recurring fair value measurements as of September 30, 2009.


					Quoted prices
					in active		Significant
					markets for		other		Significant
			Total		identical		observable		unobservable
	Carrying		fair		assets		inputs		inputs
(In millions)	value		value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	352	$	352	$	352	$	-	$	-
Auction rate securities		170		170		-		-		170
Deferred compensation investments (a)		175		175		69		106		-
Investment of captive insurance company (a)		3		3		3		-		-
Total assets at fair value	$	700	$	700	$	424	$	106	$	170

(a) Included in other noncurrent assets in the Consolidated Balance Sheets.

Level 3 instruments

Auction rate securities

During the first quarter of 2009, Ashland liquidated $20 million (par value) auction rate securities for $18 million in cash proceeds and recognized a loss of $2 million, which was the recorded book value of this instrument. As a result of this sale, as well as Ashland’s current debt structure following the Hercules acquisition and the ongoing impact from the current global economic downturn, Ashland also determined in this quarter that it no longer had the intent to hold these instruments until their maturity date. As a result, Ashland recorded the remaining $30 million unrealized loss as a permanent realized loss in the other expenses caption of the Consolidated Statement of Income. A full valuation allowance was established for

F-23

NOTE G – FAIR VALUE MEASUREMENTS (continued)

this tax benefit at December 31, 2008 because for tax purposes Ashland did not have capital gains to offset this capital loss. For further information on income taxes, see Note L.

At September 30, 2010 and 2009, auction rate securities were recorded at $22 million and $170 million, respectively, and were classified as noncurrent assets in the Consolidated Balance Sheets. Due to the uncertainty as to when active trading will resume in the auction rate securities market, Ashland continues to believe the recovery period for certain of these securities may extend beyond a twelve-month period. As a result, Ashland classified these instruments as noncurrent at September 30, 2010 and 2009 in the Consolidated Balance Sheets. At September 30, 2010, scheduled maturities for auction rate securities were as follows:


	Amortized		Fair
(In millions)	cost		value
Over 30 years	$	25	$	22

The following table provides a reconciliation of the beginning and ending balances of Ashland’s auction rate securities, as these are Ashland’s only assets measured at fair value using significant unobservable inputs (Level 3).


(In millions)	Level 3
Balance as of October 1, 2008 (par value)	$	275
Unrealized losses as of October 1, 2008 included in other comprehensive income		(32	)
Recorded balance as of October 1, 2008		243
Transfers in and/or (out) of Level 3		-
Total losses charged in the Consolidated Statement of Income		(32	)
Total reversal of losses included in other comprehensive income		32
Sales of auction rate securities		(73	)
Balance as of October 1, 2009 (par value)		170
Transfers in and/or (out) of Level 3		-
Realized gain recognized in the Consolidated Statement of Income		2
Sales of auction rate securities		(150	)
Balance as of September 30, 2010	$	22

Derivative and hedging activities

Currency hedges

Ashland conducts business in a variety of foreign currencies. Accordingly, Ashland regularly uses foreign currency derivative instruments to manage exposure on certain transactions denominated in foreign currencies to curtail the earnings volatility effects of short-term assets and liabilities denominated in currencies other than Ashland’s functional currency (the U.S. dollar).

Ashland contracts with counter-parties to buy and sell foreign currencies to offset the impact of exchange rate changes on transactions denominated in non-functional currencies, including short-term inter-company loans. These contracts generally require exchange of one foreign currency for another at a fixed rate at a future date and generally have maturities of less than twelve months. All contracts are marked-to-market with net changes in fair value recorded within the selling, general and administrative expense caption. During 2010 and 2009, a loss of $1 million and a gain of $5 million, respectively, were recorded in the Statements of Consolidated Income for these contracts within the selling, general and administrative expense caption. The impacts of these contracts were largely offset by gains and losses resulting from the impact of changes in exchange rates on transactions denominated in non-functional currencies.

The net gain position on foreign currency derivatives outstanding in the Consolidated Balance Sheet as of September 30, 2010 was $1 million (consisting of a gain of $2 million with a notional amount of $86 million offset by a loss of $1 million with a notional amount of $41 million) and was included in other noncurrent assets. The net loss position on foreign currency derivatives outstanding in the Consolidated Balance Sheet as of September 30, 2009 was less than $1 million (consisting of a gain of $1 million with a notional amount of $43 million offset by a loss of $1 million with a notional amount of $73 million) and was included in other noncurrent liabilities. As of September 30, 2010, there were no open foreign currency derivatives which qualified for hedge accounting treatment.

F-24

Interest rate hedges

During 2009, Ashland purchased a three year interest rate cap on a notional amount of $300 million of variable rate debt. This interest rate cap fixes Ashland’s interest rate on that outstanding variable interest rate debt when LIBOR interest rates equal or exceed 7% on a reset date. This interest rate cap qualifies as an interest rate swap within the provisions of the senior credit agreement, but does not qualify for hedge accounting. As a result, gains or losses reflecting changes in fair value, along with the amortization of the upfront premium paid by Ashland to purchase the instrument, are reported in the Statements of Consolidated Income within the net interest and other financing (expense) income caption. As of September 30, 2010 and 2009, the fair value of the interest rate cap was less than $1 million and recorded within the other noncurrent assets caption of the Consolidated Balance Sheets.

Long-term debt instruments

At September 30, 2010 and 2009, Ashland’s long-term debt (including current portion) had a carrying value of $1,153 million and $1,590 million, respectively, compared to a fair value of $1,402 million and $1,751 million, respectively. The fair values of long-term debt are based on quoted market prices or, if market prices are not available, the present values of the underlying cash flows discounted at Ashland’s incremental borrowing rates.

NOTE H – GOODWILL AND OTHER INTANGIBLES

When externally quoted market prices of Ashland’s reporting units are not readily available, Ashland makes various estimates and assumptions in determining the estimated fair values of those units through the use of discounted cash flow models. Discounted cash flow models are highly reliant on various assumptions. Significant assumptions Ashland utilized in these models included: projected business results and future industry direction, long-term growth factors and Ashland’s weighted-average cost of capital. Ashland uses assumptions that it deems to be conservative estimates of likely future events and compares the total fair values of each reporting unit to a market multiples valuation technique and in aggregate sums the total discounted cash flow results and compares it to Ashland’s market capitalization, and implied control premium, to determine if the fair values are reasonable compared to external market indicators. In conjunction with the July 1 annual assessment of goodwill, Ashland’s valuation techniques did not indicate any impairment.

Ashland’s assessment of an impairment charge on any of these assets currently classified as having indefinite lives, including goodwill, could change in future periods if any or all of the following events were to occur with respect to a particular reporting unit: divestiture decision, negative change in Ashland’s weighted-average cost of capital rates, growth rates or other assumptions, economic deterioration that is more severe or of a longer duration than anticipated, or another significant economic event.

Ashland’s purchase of Hercules increased goodwill by $1,812 million. In connection with the goodwill associated with this acquisition, Ashland determined that a certain amount of the goodwill should be allocated to all reporting units because each reporting unit will benefit from synergies related to the acquisition that will increase these businesses’ overall reported profitability. Ashland calculated the increased value that each reporting unit is expected to receive from the estimated synergy savings, which was then multiplied by industry valuation multiples for each specific reporting unit, in determining the appropriate amount of goodwill to allocate for this transaction.

F-25

NOTE H – GOODWILL AND OTHER INTANGIBLES (continued)

The following is a progression of goodwill by segment for the years ended September 30, 2010 and 2009.


	Functional			Water			Performance			Consumer
(In millions)	Ingredients			Technologies		(a)	Materials		(b)	Markets		Distribution		Total
Balance at September 30, 2008	$	-		$	56		$	196		$	30	$	1	$	283
Acquisitions		1,030			515			97			85		79		1,806
Currency translation adjustment		76			55			-			-		-		131
Balance at September 30, 2009		1,106			626			293			115		80		2,220
Acquisitions		4			2			42			-		-		48
Currency translation adjustment		(30	)		(8	)		(2	)		-		-		(40	)
Balance at September 30, 2010	$	1,080		$	620		$	333		$	115	$	80	$	2,228

(a)	Excludes goodwill of $16 million as of September 30, 2008 associated with the Drew Marine sale during 2009 that has been classified within assets held for sale.

(b)

Goodwill consisted of $52 million and $51 million as well as $281 million and $242 million, respectively, for the Casting Solutions and Composites and Adhesives reporting units as of September 30, 2010 and 2009. The addition of $42 million of goodwill during 2010 is related to the Ara Quimica acquisition.

Intangible assets principally consist of trademarks and trade names, intellectual property, customer lists and sale contracts. Intangible assets are amortized on a straight-line basis over their estimated useful lives. The cost of trademarks and trade names is amortized principally over 15 to 25 years, intellectual property over 5 to 20 years, customer relationships over 3 to 24 years and other intangibles over 2 to 50 years.

Certain intangible assets within trademarks and trade names have been classified as indefinite lived and had a balance of $290 million as of September 30, 2010 and 2009. In accordance with U.S. GAAP, Ashland annually reviews these intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. In conjunction with the July 1 annual assessment of indefinite-lived intangible assets, Ashland’s models did not indicate any impairment. Intangible assets were comprised of the following as of September 30, 2010 and 2009.


	2010							2009
	Gross					Net		Gross					Net
	carrying		Accumulated			carrying		carrying		Accumulated			carrying
(In millions)	amount		amortization			amount		amount		amortization			amount
Trademarks and trade names	$	353	$	(27	)	$	326	$	353	$	(24	)	$	329
Intellectual property		331		(63	)		268		331		(41	)		290
Customer relationships		586		(79	)		507		586		(40	)		546
Other intangibles		40		(28	)		12		40		(24	)		16
Total intangible assets	$	1,310	$	(197	)	$	1,113	$	1,310	$	(129	)	$	1,181

Amortization expense recognized on intangible assets was $68 million for 2010, $68 million for 2009 and $11 million for 2008, and is primarily included in the selling, general and administrative expense caption of the Statements of Consolidated Income. As of September 30, 2010, all of Ashland’s intangible assets that had a carrying value were being amortized except for certain trademarks and trade names that currently have been determined to have indefinite lives. Estimated amortization expense for future periods is $68 million in 2011, $66 million in 2012, $65 million in 2013, $63 million in 2014 and $62 million in 2015.

F-26

NOTE I – DEBT

The following table summarizes Ashland’s current and long-term debt at September 30, 2010 and 2009.


(In millions)	2010			2009
Term Loan A, due 2013 (a)	$	-		$	219
Term Loan B, due 2014 (a)		-			542
Term Loan A, due 2014 (a)		293			-
6.60% notes, due 2027 (b)		12			12
Accounts receivable securitization		40			-
9.125% notes, due 2017		630			628
Medium-term notes, due 2013-2019, interest at a weighted-
average rate of 8.4% at September 30, 2010 (7.7% to 9.4%)		21			21
8.80% debentures, due 2012		20			20
Hercules Tianpu - term notes, due through 2011 (b)		14			19
Hercules Nanjing - term notes, due 2013		34			-
6.50% junior subordinated notes, due 2029 (b)		126			125
International revolver agreements, interest at a weighted-
average rate of 4.6% at September 30, 2010 (1.4% to 9.5%)		30			22
Other		4			5
Total debt		1,224			1,613
Short-term debt		(71	)		(23	)
Current portion of long-term debt		(45	)		(53	)
Long-term debt (less current portion)	$	1,108		$	1,537

(a)	Senior credit facilities. On March 31, 2010, Term Loan A due 2014 was entered into while the Term Loan A due 2013 and Term Loan B due 2014 were paid in full.

(b)	Retained instrument from the Hercules acquisition.

At September 30, 2010 Ashland’s total debt had an outstanding principal balance of $1,403 million and discounts of $179 million. The scheduled aggregate maturities of debt for the next five fiscal years are as follows: $116 million in 2011, $38 million in 2012, $85 million in 2013, $203 million in 2014 and $8 million in 2015.

In conjunction with the acquisition of Hercules on November 13, 2008, Ashland secured $2,600 million in financing from Bank of America Securities LLC, Scotia Capital (USA) Inc. and other lenders consisting of a $400 million revolving credit facility, a $400 million term loan A facility, an $850 million term loan B facility, a $200 million accounts receivable securitization facility and a $750 million bridge loan, that was subsequently replaced with the issuance of $650 million senior unsecured bonds in May 2009. The total debt borrowed upon the closing of the acquisition was $2,300 million which included amounts used to fund the $594 million extinguishment of certain debt instruments that Hercules held as of the closing date. The remaining Hercules debt inherited as part of the acquisition was recorded at its fair value of $205 million as of the acquisition date.

Senior credit facilities

F-27

NOTE I – DEBT (continued)

The Senior Credit Facilities may cease to be secured upon Ashland achieving an Investment Grade corporate family rating as defined in the Senior Credit Agreement.

The Senior Credit Facilities carried an initial interest rate of either LIBOR plus 275 points or base rate plus 175 basis points, at Ashland’s option, and as of September 30, 2010, the weighted-average interest rate on the Term Loan A was 2.8%. Total borrowing capacity remaining under the $550 million revolving credit facility was $428 million, representing a reduction of $122 million for letters of credit outstanding at September 30, 2010. The Term Loan A facility was drawn in full at closing and is required to be repaid by Ashland in consecutive quarterly installments, with 5% of the original principal amount due during year one, 7.5% of the original principal amount due during year two, 10% of the original principal amount due during year three, and 77.5% of the original principal amount due during year four (in quarterly installments of 5.0%, 5.0%, 5.0% and 62.5%), with a final payment of all outstanding principal and interest on March 31, 2014.

As a result of the new Senior Credit Agreement and prepayments made before the refinancing date, Ashland expensed $62 million of the remaining $84 million debt issuance costs related to the loan fees paid to originate the initial term facility and incurred an additional $4 million of prepayment fee penalties related to the previous Term Loan B facility, which were included in the net interest and other financing (expense) income caption in the Statements of Consolidated Income. In addition, Ashland incurred $12 million of new debt issuance costs associated with the new Senior Credit Agreement that were deferred and will be recognized as an expense ratably over the life of the new term of the agreement.

Senior unsecured notes

In May 2009, Ashland issued $650 million aggregate principal amount of 9.125% senior unsecured notes due 2017. The notes were issued at 96.577% of the aggregate principal amount to yield 9.75%. Ashland may redeem some or all of the notes at any time on or after June 1, 2013 at certain fixed redemption prices. The notes will mature on June 1, 2017 and rank equally with other unsecured and unsubordinated senior obligations. Ashland used the net proceeds from this issuance, together with available liquidity, to repay the $750 million bridge loan facility entered into as part of the interim credit agreement in connection with the closing of the Hercules acquisition on November 13, 2008. The interim credit agreement for the bridge loan facility provided $750 million of unsecured senior interim loans at a rate of 9% per annum through November 13, 2009, the interim loan maturity date. Upon termination of the bridge facility, Ashland expensed the remaining $10 million of debt issuance cost related to the loan fees paid to originate the bridge loan facility, which was included in the net interest and other financing (expense) income caption in the Statements of Consolidated Income for the year ended September 30, 2009.

Hercules retained instruments

Upon completion of the Hercules acquisition, Ashland assumed the following Hercules debt facilities: 6.60% notes due 2027, 6.50% junior subordinated deferrable interest debentures due 2029, term loans of Hercules Tianpu at rates ranging from 2.10% to 5.47% through 2011.

The 6.5% junior subordinated deferrable interest debentures due 2029 (the 6.5% debentures) had an initial issue price of $741.46 and have a redemption price of $1,000. The 6.5% debentures were initially issued to Hercules Trust II (Trust II), a subsidiary trust established in 1999. Trust II had issued, in an underwritten public offering, 350,000 CRESTS SM Units, each consisting of a 6.5% preferred security of Trust II and a warrant (exercisable through 2029) to purchase 23.4192 shares of the Hercules Common Stock for the equivalent of $42.70 per share. The preferred securities and the warrants were separable and were initially valued at $741.46 and $258.54, respectively. In connection with the Hercules dissolution and liquidation of Trust II in December 2004, Trust II distributed the 6.5% debentures to the holders of the preferred securities and the preferred securities were cancelled. The CRESTS SM Units now consist of the 6.5% debentures and the warrants, both of which were fair valued in conjunction with the Hercules acquisition. Ashland will accrete the difference between the $282 million par value and the $124 million recorded fair value at the time of the acquisition of the 6.5% debentures over the remaining term. The effective rate for this instrument was 15.57% as of September 30, 2010 and 2009.

Hercules Tianpu is consolidated within Ashland’s Consolidated Financial Statements. Loans issued by Hercules Tianpu are guaranteed by Ashland for approximately 55% of the outstanding balances. The loans are denominated in Renminbi and U.S. dollar equivalents.

Accounts receivable securitization

As part of the refinancing described above, on March 31, 2010, Ashland amended and restated its existing accounts receivable securitization facility, pursuant to (i) a First Amendment to Sale Agreement, between Ashland and CVG Capital II, LLC, a wholly-owned “bankruptcy remote” special purpose subsidiary of Ashland (CVG), which amended the Sale Agreement, dated as of November 13, 2008 (as so amended, the Sale Agreement) and (ii) an Amended and Restated Transfer and Administration Agreement (the Transfer and Administration Agreement), among CVG, Ashland, each of Liberty Street

F-28

Funding LLC, Market Street Funding LLC and Three Pillars Funding LLC, as Conduit Investors and Uncommitted Investors, The Bank of Nova Scotia, as the Agent (the Agent), a Letter of Credit Issuer, a Managing Agent, an Administrator and a Committed Investor, PNC Bank, National Association, as a Letter of Credit Issuer, a Managing Agent, an Administrator and a Committed Investor, SunTrust Bank, as a Letter of Credit Issuer and a Committed Investor, SunTrust Robinson Humphrey, Inc., as a Managing Agent and an Administrator and Wells Fargo Bank, National Association, as a Letter of Credit Issuer, a Managing Agent and a Committed Investor, as acknowledged and agreed to by Bank of America, National Association and YC SUSI Trust, as exiting parties.

The primary purposes of the amendment of the accounts receivable securitization facility were to increase the maximum available funds under the facility from $200 million to $350 million and to extend the maturity date of the facility to March 29, 2013. At September 30, 2010, the outstanding amount of accounts receivable sold by Ashland to CVG was $663 million. Ashland had drawn $40 million under the facility as of September 30, 2010 of the approximate $350 million in available funding from qualifying receivables.

As part of the receivables securitization facility, under the Sale Agreement Ashland will sell, on an ongoing basis, substantially all of its qualifying accounts receivable (but not those of its subsidiaries), certain related assets and the right to the collections on those accounts receivable to CVG. Under the terms of the Transfer and Administration Agreement, CVG may, from time to time, obtain up to $350 million (in the form of cash or letters of credit for the benefit of Ashland and its other subsidiaries) from the Conduit Investors, the Uncommitted Investors and/or the Committed Investors (together the Investors) through the sale of its interest in such receivables, related assets and collections or by financing those receivables, related assets and rights to collection. Ashland accounts for its transfers under the facility as secured borrowings, and the receivables sold pursuant to the facility are included in the Condensed Consolidated Balance Sheet as accounts receivable. Borrowings under the facility will be repaid as accounts receivable are collected, with new borrowings created as, and when, CVG requests additional fundings from the Investors under the Transfer and Administration Agreement, which will generally occur on a monthly basis. Ashland continues to classify any borrowings under this facility as a short-term debt instrument within the Consolidated Balance Sheets. Once sold to CVG, the accounts receivable, related assets and rights to collection described above will be separate and distinct from Ashland’s own assets and will not be available to its creditors should Ashland become insolvent. Ashland’s equity interest in CVG has been pledged to the lenders under Ashland’s new senior secured credit facilities described above. Substantially all of CVG’s assets have been pledged to the Agent in support of its obligations under the Transfer and Administration Agreement.

Debt defeasance

During 2006, Ashland entered into an in-substance defeasance of approximately $49 million to repay current and long-term debt that had a carrying value of $44 million on the balance sheet. Because the transaction was not a legal defeasance the investment has been placed into a trust and will be exclusively restricted to future obligations and repayments related to these debt instruments. The investments have been classified on the balance sheet as other current assets or other noncurrent assets based on the contractual debt repayment schedule. At September 30, 2010 and 2009, the carrying value of the investments to defease debt, was $17 million and $18 million, respectively. The carrying value of the debt was $13 million as of September 30, 2010 and 2009.

Net interest and other financing (expense) income


(In millions)	2010			2009			2008
Interest expense	$	(198	)	$	(215	)	$	(9	)
Interest income		12			21			40
Other financing costs		(11	)		(11	)		(3	)
	$	(197	)	$	(205	)	$	28

Interest expense for the year ended September 30, 2010 included debt amortization costs of $81 million, of which $66 million related to accelerated amortization of debt issuance costs and prepayment penalties associated with the senior credit facility refinancing in March 2010.

Interest expense for the year ended September 30, 2009 included debt amortization costs of $52 million, of which $8 million related to accelerated amortization from prepayments made on both the term loan A and term loan B facility and $10 million relates to the previously mentioned extinguishment of the bridge loan facility in May 2009.

F-29

NOTE I – DEBT (continued)

Covenants related to debt agreements

The maximum consolidated leverage ratio permitted under the Senior Credit Facilities are as follows: 3.25 from the period March 31, 2010 through September 30, 2010, 3.00 from the period December 31, 2010 through September 30, 2011 and 2.75 from December 31, 2011 and each fiscal quarter thereafter.

The permitted consolidated fixed charge coverage ratio under the Senior Credit Facility is 1.25 from the period March 31, 2010 through September 30, 2010 and 1.50 from December 31, 2010 and for each fiscal quarter thereafter.

Corporate credit ratings

NOTE J – OTHER NONCURRENT ASSETS AND LIABILITIES

The following table provides the components of other noncurrent assets in the Consolidated Balance Sheets as of September 30.


(In millions)	2010		2009
Deferred compensation investments	$	169	$	175
Equity investments		76		79
Debt issuance cost		47		112
Tax receivables		40		42
Environmental insurance receivables		30		35
Land use rights		31		31
Note receivables		23		14
Defined benefit plan assets		19		32
Debt defeasance assets		17		18
Other		61		81
	$	513	$	619

F-30

The following table provides the components of other noncurrent liabilities in the Consolidated Balance Sheets as of September 30.


(In millions)	2010		2009
Environmental remediation reserves	$	162	$	169
Accrued tax liabilities (including sales and franchise)		125		145
Insurance reserves related to workers compensation and general liability		100		86
Deferred compensation		88		93
Other		100		97
	$	575	$	590

NOTE K – LEASES

Ashland and its subsidiaries are lessees of office buildings, retail outlets, transportation equipment, warehouses and storage facilities, and other equipment, facilities and properties under leasing agreements that expire at various dates. Capitalized lease obligations are not significant and are included in long-term debt while capital lease assets are included in property, plant and equipment. Future minimum rental payments at September 30, 2010 were $66 million in 2011, $60 million in 2012, $47 million in 2013, $30 million in 2014, $28 million in 2015 and $46 million in 2016 and later years. Rental expense under operating leases was as follows:


(In millions)	2010			2009			2008
Minimum rentals (including rentals under short-term leases)	$	77		$	78		$	59
Contingent rentals		6			3			3
Sublease rental income		(6	)		(6	)		(1	)
	$	77		$	75		$	61

NOTE L – INCOME TAXES

A summary of the provision for income taxes related to continuing operations follows.


(In millions)	2010			2009		2008
Current
Federal	$	10		$	9	$	13
State		(1	)		3		3
Foreign		52			68		26
		61			80		42
Deferred		30			-		44
Income tax expense	$	91		$	80	$	86

Deferred income taxes are provided for income and expense items recognized in different years for tax and financial reporting purposes. Ashland has not recorded deferred income taxes on the undistributed earnings of certain foreign subsidiaries and foreign corporate joint ventures. As of September 30, 2010, management intends to indefinitely reinvest such earnings, which amounted to $518 million. It is not practicable to estimate the amount of U.S. tax that might be payable if these earnings were ever to be remitted. Foreign net operating loss carryforwards primarily relate to certain European operations and generally may be carried forward. U.S. state net operating loss carryforwards relate to operational losses within certain states and generally may be carried forward. Temporary differences that give rise to significant deferred tax assets and liabilities as of September 30 are presented in the following table.

F-31

NOTE L – INCOME TAXES (continued)


(In millions)	2010			2009
Deferred tax assets
Employee benefit obligations	$	497		$	431
Environmental, self-insurance and litigation reserves (net of receivables)		233			247
Credit carryforwards (a)		169			152
Foreign net operating loss carryforwards (b)		111			106
State net operating/capital loss carryforwards (c)		96			101
Federal capital loss carryforwards (d)		75			73
Compensation accruals		93			79
Uncollectible accounts receivable		10			12
Other items		(26	)		80
Valuation allowances (e)		(310	)		(306	)
Total deferred tax assets		948			975
Deferred tax liabilities
Property, plant and equipment		258			295
Goodwill and other intangibles (f)		257			277
Investment in unconsolidated affiliates		135			127
Total deferred tax liabilities		650			699
Net deferred tax asset	$	298		$	276

(a)	Consists primarily of foreign tax credits of $106 million expiring over 2014 to 2018, alternative minimum tax credits of $16 million with no expiration and research and development credits of $44 million expiring over 2021 to 2029.

(b)	Gross foreign net operating loss carryforwards will expire in future years as follows: $1 million in 2011, $3 million in 2012 and the remaining balance in other future years.

(c)	Gross state net operating/capital loss carryforwards will expire in future years as follows: $33 million in 2011, $100 million in 2012 and the remaining balance in other future years.

(d)	Federal capital loss carryforwards will expire primarily in 2014.

(e)	Valuation allowances primarily relate to the realization of recorded tax benefits on U.S. federal, state and foreign net operating loss carryforwards as well as capital losses.

(f)	The total amount of goodwill as of September 30, 2010 expected to be deductible for tax purposes is $111 million.

The U.S. and foreign components of income from continuing operations before income taxes and a reconciliation of the statutory federal income tax with the provision for income taxes follow. The foreign components of income from continuing operations disclosed below exclude any allocations of certain corporate expenses incurred in the U.S.


(In millions)	2010			2009			2008
Income from continuing operations before income taxes
United States	$	179		$	30		$	174
Foreign		213			128			87
	$	392		$	158		$	261

Income taxes computed at U.S. statutory rate (35%)	$	137		$	55		$	91
Increase (decrease) in amount computed resulting from
Patient Protection and Affordable Care Act		14			-			-
Non-taxable gain from the acquisition of Ara Quimica		(8	)		-			-
Resolution and reevaluation of tax positions		(5	)		29			(9	)
Auction rate securities valuation allowance (release)		(6	)		8			-
Deferred tax balance adjustment		(9	)		-			-
Nondeductible (gain) loss on life insurance investments		(2	)		2			9
Claim for research and development credits		(19	)		(9	)		(1	)
Gain on divestitures		-			(4	)		(7	)
Net impact of foreign results		(12	)		(2	)		5
Other items		1			1			(2	)
Income tax expense	$	91		$	80		$	86

F-32

Ashland’s income tax expense for 2010, 2009 and 2008 included $5 million of tax benefit, $29 million of tax expense and $9 million of tax benefit, respectively, due to the resolution of domestic and foreign tax matters and the reevaluation of income tax reserves related to tax positions taken in previous years. Income tax expense for 2010 also included a benefit of $17 million for the identification of additional U.S. research and development tax credits within the acquired Hercules businesses, a $12 million benefit from foreign results, and a benefit of $9 million related to a deferred tax balance adjustment. In addition, income tax expense for 2010 included a benefit of $8 million attributable to a non-taxable book gain which was recorded as a result of the Ara Quimica acquisition.

The $9 million deferred tax balance adjustment noted above was recorded to correct previous assumptions in deferred tax balances related to contingent liabilities for which Marathon is entitled to the deduction pursuant to the previously referred to TMA. Ashland assessed the effect of these adjustments on income from continuing operations in the current and prior periods and, after considering quantitative and qualitative factors, determined the adjustment to be below the threshold that would necessitate the representation of consolidated financial statements for the prior years. Ashland also considered the impact on its internal controls and financial reporting and based on quantitative and qualitative factors concluded that the matter did not indicate a material weakness in its internal controls over financial reporting.

Patient Protection and Affordable Care Act

During 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law. The PPACA contains a provision that changes the tax treatment related to a federal subsidy available to Ashland under its postretirement plans. The subsidy is known as the Retiree Drug Subsidy (RDS). Ashland is not currently taxed on the RDS payments received. However, as a result of the PPACA, RDS payments will effectively become taxable to Ashland on October 1, 2013, by requiring the amount of the subsidy received to be offset against Ashland’s deduction for health care expenses. The change in tax treatment does not affect the taxation of the subsidy itself, but would reduce Ashland’s deduction for the costs of health care for retirees by the amount of the subsidy received. As a result, the deductible temporary difference and any related deferred tax asset on Ashland’s Condensed Consolidated Balance Sheet associated with the benefit plan will be reduced. In accordance with U.S. GAAP, which states that the impact of the change in tax law should be immediately recognized in the period that includes the enactment date regardless of the effective date of the change in tax law, Ashland recorded a $19 million charge within the Statement of Consolidated Income during 2010, comprised of a $14 million income tax charge and a $5 million net loss on divestitures related to postretirement plans of the businesses divested as part of the MAP Transaction.

MAP Transaction tax matters

In June 2008, Ashland received two Revenue Agents Reports (RAR) from the Internal Revenue Service (IRS) that included the results of the IRS audits for the tax periods ended September 30, 2004, June 30, 2005 (the date of the completed MAP Transaction) and September 30, 2005. The first RAR for the tax years ended September 30, 2004 and June 30, 2005 reflected a refund of approximately $4 million for the September 2004 tax year and additional federal taxes owed of approximately $14 million (of which approximately $11 million related to the MAP Transaction) for the June 2005 tax year. Under the terms of the previously referred to TMA, Marathon was responsible for this payment and paid Ashland $11 million. Ashland paid the IRS approximately $12 million in additional federal taxes and interest for the September 2004 and June 2005 tax years in July of 2008. The second RAR for the tax year ended September 30, 2005 reflected a refund to Ashland of approximately $4 million.

Unrecognized tax benefits

U.S. GAAP prescribes a recognition threshold and measurement attribute for the accounting and financial statement disclosure of tax positions taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first step requires Ashland to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step requires Ashland to recognize in the financial statements each tax position that meets the more likely than not criteria, measured at the amount of benefit that has a greater than 50-percent likelihood of being realized. Ashland had $116 million and $125 million of unrecognized tax benefits, of which $28 million and $48 million relate to discontinued operations, at September 30, 2010 and 2009, respectively. As of September 30, 2010, the total amount of unrecognized tax benefits that, if recognized, would affect the tax rate for continuing and discontinued operations was $86 million. The remaining unrecognized tax benefits relate to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility. Recognition of these tax benefits would not have an impact on the effective tax rate. Ashland includes the full amount of unrecognized tax benefits in other noncurrent liabilities in the Consolidated Balance Sheets.

Ashland recognizes interest and penalties related to uncertain tax positions as a component of income tax expense in the Statements of Consolidated Income and such interest and penalties totaled $12 million in 2009. There were no such interest and penalties during 2010. Ashland had $33 million and $38 million in interest and penalties related to unrecognized tax benefits accrued as of September 30, 2010 and 2009, respectively.

F-33

NOTE L – INCOME TAXES (continued)

During the twelve month period ended September 30, 2010, changes in unrecognized tax benefits were as follows.


(In millions)
Balance at September 30, 2008	$	79
Increases related to positions taken on items from prior years		21
Decreases related to positions taken on items from prior years		(7	)
Increases related to assumed Hercules positions in the current year		35
Increases related to positions taken in the current year		29
Lapse of statute of limitations		(9	)
Settlement of uncertain tax positions with tax authorities		(23	)
Balance at September 30, 2009		125
Increases related to positions taken on items from prior years		14
Decreases related to positions taken on items from prior years		(21	)
Increases related to positions taken in the current year		18
Lapse of statute of limitations		(10	)
Settlement of uncertain tax positions with tax authorities		(10	)
Balance at September 30, 2010	$	116

It is reasonably possible that the amount of unrecognized tax benefits may increase or decrease within the next twelve months as the result of settlement of ongoing audits, which may have a material affect on the Consolidated Financial Statements.

Ashland or one of it subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Foreign taxing jurisdictions significant to Ashland include Australia, Canada, Switzerland and the Netherlands. Ashland is subject to U.S. federal and state income tax examinations by tax authorities for periods after July 1, 2005. With respect to countries outside of the United States, with certain exceptions, Ashland’s foreign subsidiaries are subject to income tax audits for years after 2002.

NOTE M – EMPLOYEE BENEFIT PLANS

Pension plans

Ashland and its subsidiaries sponsor contributory and noncontributory qualified defined benefit pension plans that cover a majority of employees in the United States and in a number of other countries. In addition, Ashland has non-qualified unfunded pension plans which provide supplemental defined benefits to those employees whose benefits under the qualified pension plans are limited by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. Ashland funds the costs of the non-qualified plans as the benefits are paid. Pension obligations for applicable employees of non-U.S. consolidated subsidiaries are provided for by depositing funds with trustees or by book reserves in accordance with local practices and regulations of the respective countries.

In November 2008, in conjunction with the purchase of Hercules, Ashland assumed $207 million of net liabilities associated with qualified and non-qualified defined benefit pension plans, which had a projected benefit obligation of $1,521 million. Effective September 30, 2009, Ashland’s U.S. qualified plan was merged into the Hercules U.S. qualified plan and renamed the Ashland Hercules Pension Plan. The plan assumed all assets and liabilities of the former Ashland Plan; however, the benefits of the applicable employees under the Ashland Plan and Hercules Plan will remain unchanged from those in place prior to the merger of the plans until January 1, 2011.

Benefits for those eligible for Ashland’s legacy U.S. pension plans generally are based on employees’ years of service and compensation during the years immediately preceding their retirement. The participants in these plans are employees with at least ten years of service as of July 1, 2003. In September 2010, Ashland amended its legacy U.S. pension plans, effective January 1, 2011, to increase the final pension average pay calculation from three years to four years through 2015 and five years thereafter, with 2011 and 2015 serving as transition years.

Benefits under the assumed Hercules U.S. pension plans generally are based on employees’ years of service and compensation during the years immediately preceding their retirement. On January 1, 2005, the plan was closed for new participants. In September 2010, Ashland amended the plan, effective January 1, 2011, for qualified earnings, which will be modified to include annual base pay plus previous year incentive pay. In addition, the early retirement discount age to receive a 100% pension increased from age 60 to age 62 and other discount factors beginning at age 55 also increased.

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On July 1, 2003, all new employees and the pension benefits of employees under the legacy U.S. pension plan with less than ten years of service were converted to cash balance accounts. Employees with existing pension credits received an initial account balance equal to the present value of their accrued benefits in Ashland’s legacy U.S. pension plan on that date. Effective January 1, 2011, all cash balance accounts will be vested and frozen, with the plan closed to new participants. Employees with accrued balances in their accounts at December 31, 2010 will not receive additional accruals, but they will continue to receive interest on their accounts.

Other postretirement benefit plans

Ashland and its subsidiaries sponsor health care and life insurance plans for eligible employees in the U.S. and Canada who retire or are disabled. Ashland’s retiree life insurance plans are noncontributory, while Ashland shares the costs of providing health care coverage with its retired employees through premiums, deductibles and coinsurance provisions. Ashland funds its share of the costs of the postretirement benefit plans as the benefits are paid. Employees hired after June 30, 2003 will have access to any retiree health care coverage that may be provided, but will have no Ashland company funds available to help pay for such coverage. In May 2010, Ashland implemented changes, effective January 1, 2011, eliminating post-65 benefit coverage for those eligible participants retiring on or after January 1, 2016.

In November 2008, in conjunction with the purchase of Hercules, Ashland assumed $109 million of liabilities associated with postretirement plans. The assumed postretirement health care plans include a limit on Ashland’s share of costs for recent and future retirees. The assumed pre-65 health care cost trend rate as of September 30, 2010 was an initial rate of 7.8% in 2010 reducing to 4.5% in 2027 and thereafter. The assumptions used to project the liability anticipate future cost-sharing changes to the written plans that are consistent with the increase in health care cost. U.S. employees from Hercules hired after December 31, 2002 will have access to any retiree health care coverage that may be provided, but will have no Ashland company funds available to help pay for such coverage.

Since January 1, 2004, Ashland’s plans have limited their annual per capita costs to an amount equivalent to base year per capita costs, plus annual increases of up to 1.5% per year for costs incurred. As a result, health care cost trend rates have no significant effect on the amounts reported for the health care plans. Premiums for retiree health care coverage are equivalent to the excess of the estimated per capita costs over the amounts borne by Ashland.

Components of net periodic benefit costs

The following table summarizes the components of pension and other postretirement benefit costs, and the assumptions used to determine net periodic benefit costs for the plans.


	Pension benefits									Other postretirement benefits
(In millions)	2010			2009			2008			2010			2009			2008
Net periodic benefit costs
Service cost	$	49		$	38		$	36		$	5		$	5		$	5
Interest cost		205			204			93			19			20			12
Amendment		1			-			-			-			-			-
Expected return on plan assets		(216	)		(180	)		(113	)		-			-			-
Amortization of prior service credit (a)		-			-			-			(4	)		(3	)		(3	)
Amortization of net actuarial loss (gain)		51			15			5			(1	)		(5	)		(3	)
	$	90		$	77		$	21		$	19		$	17		$	11
Weighted-average plan assumptions (b)
Discount rate		5.82	%		7.81	%		6.16	%		5.50	%		7.78	%		5.96	%
Rate of compensation increase		3.67	%		3.73	%		3.74	%		-			-			-
Expected long-term rate of
return on plan assets		7.90	%		7.97	%		7.62	%		-			-			-

(a)	During 2010, Ashland’s changes to the final pension average pay calculation and freezing the cash balance plan resulted in a curtailment gain that is being amortized within this caption.

(b)

The plan assumptions discussed are a blended weighted-average rate for Ashland’s U.S. and non-U.S. plans. The U.S. pension plan represented approximately 84% of the projected benefit obligation at September 30, 2010. Other postretirement benefit plans consist of U.S. and Canada, with the U.S. plan representing approximately 95% of the accumulated postretirement benefit obligation at September 30, 2010. Non-U.S. plans use assumptions generally consistent with those of U.S. plans.

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NOTE M – EMPLOYEE BENEFIT PLANS (continued)

The following table shows other changes in plan assets and benefit obligations recognized in accumulated other comprehensive income.


	Pension						Postretirement
(In millions)	2010			2009			2010			2009
Net actuarial loss	$	281		$	472		$	44		$	61
Prior service credit		(16	)		-			(14	)		-
Reversal of amortization item:
Net actuarial gain (loss)		(51	)		(15	)		1			5
Prior service credit		-			-			4			3
Total	$	214		$	457		$	35		$	69

Total recognized in net periodic benefit cost
and accumulated other comprehensive income	$	304		$	534		$	54		$	86

The following table shows the amounts in accumulated other comprehensive income at September 30, 2010 that are expected to be recognized as components of net periodic benefit cost (income) during the next fiscal year.


				Other
	Pension			postretirement
(In millions)	benefits			benefits
Net actuarial loss	$	75		$	1
Prior service credit		(2	)		(5	)
Total	$	73		$	(4	)

At September 30, 2010 and 2009, the amounts recognized in accumulated other comprehensive income, regulatory assets and regulatory liabilities, before income tax benefits, are shown in the following table.


	Pension					Postretirement
(In millions)	2010			2009		2010			2009
Net actuarial loss	$	945		$	715	$	45		$	-
Prior service cost (credit)		(11	)		5		(30	)		(20	)
Benefit obligations at September 30	$	934		$	720	$	15		$	(20	)

Obligations and funded status

Actuarial valuations are performed for the pension and other postretirement benefit plans to determine Ashland’s obligation for each plan. In accordance with U.S. GAAP, Ashland recognizes the unfunded status of the plans as a liability in the Consolidated Balance Sheets. Summaries of the change in benefit obligations, plan assets, funded status of the plans, amounts recognized in the balance sheet, and assumptions used to determine the benefit obligations for 2010 and 2009 follow.

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							Other postretirement
	Pension plans						benefit plans
(In millions)	2010			2009			2010			2009
Change in benefit obligations
Benefit obligations at October 1	$	3,593		$	1,343		$	344		$	180
Assumed obligations from Hercules		-			1,521			-			109
Service cost		49			38			5			5
Interest cost		205			204			19			20
Participant contributions		2			2			18			16
Benefits paid		(220	)		(198	)		(49	)		(47	)
Medicare Part D Act		-			-			3			2
Actuarial loss		438			675			44			59
Curtailment gain		(25	)		-			-			-
Plan amendment		(18	)		-			(17	)		-
Foreign currency exchange rate changes		(15	)		13			1			-
Other		2			(5	)		(1	)		-
Benefit obligations at September 30	$	4,011		$	3,593		$	367		$	344
Change in plan assets
Value of plan assets at October 1	$	2,745		$	1,187		$	-		$	-
Assumed plan assets from Hercules		-			1,318			-			-
Actual return on plan assets		348			381			-			-
Employer contributions		162			47			31			31
Participant contributions		2			2			18			16
Benefits paid		(220	)		(198	)		(49	)		(47	)
Foreign currency exchange rate changes		(14	)		13			-			-
Other		2			(5	)		-			-
Value of plan assets at September 30	$	3,025		$	2,745		$	-		$	-

Unfunded status of the plans	$	(986	)	$	(848	)	$	(367	)	$	(344	)
Amounts recognized in the balance sheet
Noncurrent benefit assets	$	19		$	32		$	-		$	-
Current benefit liabilities		(11	)		(11	)		(27	)		(29	)
Noncurrent benefit liabilities		(994	)		(869	)		(340	)		(315	)
Net amount recognized	$	(986	)	$	(848	)	$	(367	)	$	(344	)
Weighted-average plan assumptions
Discount rate		5.01	%		5.82	%		4.68	%		5.50	%
Rate of compensation increase		3.66	%		3.67	%		-			-

The accumulated benefit obligation for all pension plans was $3,851 million at September 30, 2010 and $3,428 million at September 30, 2009. Information for pension plans with an accumulated benefit obligation in excess of plan assets follows:


	2010						2009
			Non-						Non-
	Qualified		qualified				Qualified		qualified
(In millions)	plans (a)		plans		Total		plans (a)		plans		Total
Projected benefit obligation	$	3,354	$	143	$	3,497	$	3,137	$	144	$	3,281
Accumulated benefit obligation		3,249		136		3,385		3,008		134		3,142
Fair value of plan assets		2,502		-		2,502		2,403		-		2,403

(a)	Includes qualified U.S. and non-U.S. pension plans.

Plan assets

The expected long-term rate of return on U.S. pension plan assets for 2010 and 2009 was 8.25%. The basis for determining the expected long-term rate of return is a combination of future return assumptions for various asset classes in Ashland’s investment portfolio, historical analysis of previous returns, market indices and a projection of inflation.

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NOTE M – EMPLOYEE BENEFIT PLANS (continued)

The following table summarizes the various investment categories that the pension plan assets are invested in and the applicable fair value hierarchy that the financial instruments are classified within these investment categories as of September 30, 2010. For additional information and a detailed description of each level within the fair value hierarchy, see Note G.


			Quoted prices
			in active		Significant
			markets for		other		Significant
	Total		identical		observable		unobservable
	fair		assets		inputs		inputs
(In millions)	value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	111	$	111	$	-	$	-
U.S. government securities		252		106		146		-
Corporate debt instruments		1,100		236		864		-
Corporate stocks		163		75		88		-
Insurance contracts		69		-		69		-
Private equity and hedge funds		1,116		-		-		1,116
Common/collective trusts		163		-		-		163
Other investments		51		-		-		51
Total assets at fair value	$	3,025	$	528	$	1,167	$	1,330

Ashland’s pension plans hold Level 3 investments primarily within private equity, hedge funds and common and collective trusts. The fair value of Ashland’s ownership interest in these investments is based on the current market value of underlying investments, which are generally traded in active markets. The following table provides a reconciliation of the beginning and ending balances for these Level 3 assets.


	Total		Private		Common/
	Level 3		equity and		collective			Other
(In millions)	assets		hedge funds		trusts			investments
Balance as of October 1, 2009	$	1,052	$	627	$	376		$	49
Realized gains		123		11		110			2
Change in unrealized gains (losses)		15		59		(44	)		-
Purchases and sales, net		140		419		(279	)		-
Balance as of September 30, 2010	$	1,330	$	1,116	$	163		$	51

Ashland’s U.S. pension plan assets are managed by outside investment managers, which are monitored monthly against investment return benchmarks and Ashland’s established investment strategy. Ashland’s investment strategy is designed to promote diversification, to moderate volatility and to balance the expected long-term rate of return with an acceptable risk level. Investment managers are selected based on an analysis of, among other things, their investment process, historical investment results, frequency of management turnover, cost structure and assets under management. Assets are periodically reallocated between investment managers to maintain an appropriate asset mix, diversification of investments and to optimize returns.

Ashland’s historical investment strategy has been characterized by an asset mix consisting of 30% fixed income and 70% risk assets such as traditional equity instruments. During the beginning of 2009, Ashland tactically shifted its investment strategy towards a significantly greater allocation of fixed income securities to capitalize on historically high credit spreads. By the end of fiscal 2009, credit spreads had significantly declined and Ashland’s asset allocation was returned to strategic levels consisting of 40% fixed income and 60% risk assets, which includes both conventional equity and alternative investment instruments. The return to the strategic asset allocation was completed by the end of December 2009.

Ashland’s investment strategy and management practices relative to plan assets of non-U.S. plans generally are consistent with those for U.S. plans, except in those countries where investment of plan assets is dictated by applicable regulations. The weighted-average asset allocations for Ashland’s U.S. and non-U.S. plans at September 30, 2010 and 2009 by asset category follow.

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			Actual at September 30
(In millions)	Target		2010		2009
Plan assets allocation
Equity securities	40 - 80	%	47	%	11	%
Debt securities	20 - 45	%	44	%	75	%
Other	0 - 20	%	9	%	14	%
			100	%	100	%

Cash flows

During fiscal 2010, Ashland contributed $50 million to its non-U.S. pension plans and $112 million to its U.S. pension plans, $12 million in cash and $100 million in Ashland Common Stock. The Ashland Common Stock contribution was made in November 2009. In fiscal 2011, Ashland expects to contribute $30 million to its non-U.S. pension plans and approximately $20 million to its U.S. pension plans. The Pension Protection Act of 2006, enacted in August 2006, introduced new minimum funding requirements that became effective for Ashland during fiscal 2009. As a result, Ashland’s required contributions to its non-U.S. and U.S. pension plans may vary in the future.

The following benefit payments, which reflect future service expectations, are projected to be paid in each of the next five years and in aggregate for five years thereafter.

			Other postretirement benefits
	Pension		With Medicare		Without Medicare
(In millions)	benefits		Part D subsidy		Part D subsidy
2011	$	209	$	28	$	31
2012		215		28		31
2013		220		29		32
2014		226		29		33
2015		233		30		34
2016 - 2020		1,251		140		162

Other plans

Ashland sponsors qualified savings plans to assist eligible employees in providing for retirement or other future needs. Under such plans, company contributions amounted to $22 million in 2010, $19 million in 2009 and $17 million in 2008. Ashland also sponsors various other benefit plans, some of which are required by different countries. The assumed liability of these plans in 2009 from the Hercules acquisition totaled $4 million. The total noncurrent liabilities associated with these plans were $18 million and $30 million as of September 30, 2010 and 2009, respectively.

NOTE N – LITIGATION, CLAIMS AND CONTINGENCIES

Asbestos litigation

Ashland asbestos-related litigation

Because claims are frequently filed and settled in large groups, the amount and timing of settlements and number of open claims can fluctuate significantly from period to period. A summary of Ashland asbestos claims activity, excluding Hercules claims, follows.

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NOTE N – LITIGATION, CLAIMS AND CONTINGENCIES (continued)


(In thousands)	2010			2009			2008
Open claims - beginning of year		100			115			134
New claims filed		2			2			4
Claims settled		(1	)		(1	)		(2	)
Claims dismissed		(18	)		(16	)		(21	)
Open claims - end of year		83			100			115

A progression of activity in the asbestos reserve is presented in the following table.


(In millions)	2010			2009			2008
Asbestos reserve - beginning of period	$	543		$	572		$	610
Reserve adjustment		28			5			2
Amounts paid		(34	)		(34	)		(40	)
Asbestos reserve - end of period	$	537		$	543		$	572

During the most recent update, completed during 2010, it was determined that the liability for Ashland asbestos claims should be increased by $28 million. Total reserves for asbestos claims were $537 million at September 30, 2010 compared to $543 million at September 30, 2009.

At September 30, 2010, Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $421 million (excluding the Hercules receivable for asbestos claims), of which $56 million relates to costs previously paid. Receivables from insurers amounted to $422 million at September 30, 2009. During 2010, the model used for purposes of valuing the asbestos reserve described above, and its impact on valuation of future recoveries from insurers, was updated. This model update along with potential settlement adjustments resulted in an additional $24 million net increase in the receivable for probable insurance recoveries.

Hercules asbestos-related litigation

F-40


(In thousands)	2010		2009		(a)
Open claims - beginning of year	21		27
New claims filed	-		1
Claims dismissed	(1	)	(7	)
Open claims - end of year	20		21

(a) Beginning of year represents acquisition date of November 13, 2008.

A progression of activity in the asbestos reserve is presented in the following table.


(In millions)	2010			2009			(a)
Asbestos reserve - beginning of year	$	484		$	233
Reserve adjustments (b)		(93	)		261
Amounts paid		(16	)		(10	)
Asbestos reserve - end of year	$	375		$	484

(a)	Beginning of year represents acquisition date of November 13, 2008.

(b)	Includes purchase accounting adjustments recorded during 2010 and 2009 as part of purchase price allocations for the Hercules acquisition.

As of Ashland’s acquisition date of Hercules, all of the cash previously recovered and placed into a trust from the settlements with certain of Hercules’ insurance carriers had been exhausted. With the addition of estimated defense and indemnity costs, the total Hercules asbestos reserve exceeded the amount needed to obtain reimbursements pursuant to coverage-in-place agreements with certain other insurance carriers. Accordingly, Ashland recorded a $97 million receivable within the noncurrent asbestos insurance receivable caption of the Consolidated Balance Sheet. As previously mentioned, during 2010, the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was updated. This model update along with likely settlement adjustments caused a $28 million reduction in the receivable for probable insurance recoveries, $6 million of which was recorded to goodwill. Receivables from insurers amounted to $68 million and $118 million as of September 30, 2010 and 2009, respectively. As of September 30, 2010, this estimated receivable exclusively consists of domestic insurers, of which approximately 97% have a credit rating of B+ or higher by A. M. Best.

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NOTE N – LITIGATION, CLAIMS AND CONTINGENCIES (continued)

Asbestos litigation cost projection

Projecting future asbestos costs is subject to numerous variables that are extremely difficult to predict. In addition to the significant uncertainties surrounding the number of claims that might be received, other variables include the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, dismissal rates, costs of medical treatment, the impact of bankruptcies of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards. Furthermore, any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. In light of these inherent uncertainties, Ashland believes that the asbestos reserves for Ashland and Hercules represent the best estimate within a range of possible outcomes. As a part of the process to develop these estimates of future asbestos costs, a range of long-term cost models was developed. These models are based on national studies that predict the number of people likely to develop asbestos-related diseases and are heavily influenced by assumptions regarding long-term inflation rates for indemnity payments and legal defense costs, as well as other variables mentioned previously. Ashland has currently estimated in various approximate 50-year models that it is reasonably possible that total future litigation defense and claim settlement costs on an inflated and undiscounted basis could range as high as approximately $830 million for the Ashland asbestos-related litigation and approximately $570 million for the Hercules asbestos-related litigation (or approximately $1.4 billion in the aggregate), depending on the combination of assumptions selected in the various models. If actual experience is worse than projected relative to the number of claims filed, the severity of alleged disease associated with those claims or costs incurred to resolve those claims, Ashland may need to increase further the estimates of the costs associated with asbestos claims and these increases could potentially be material over time.

Environmental remediation and asset retirement obligations

The following table provides a reconciliation of the changes in the environmental remediation reserves during 2010.


(In millions)	2010			2009
Environmental remediation reserve - beginning of year	$	221		$	149
Inherited Hercules obligations		7			100
Disbursements, net of cost recoveries		(47	)		(47	)
Revised obligation estimates and accretion		28			18
Foreign currency translation		(2	)		1
Environmental remediation reserve - end of year	$	207		$	221

The total reserves for environmental remediation reflect Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable, without regard to any third-party recoveries. Engineering studies, probability techniques, historical experience and other factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Ashland continues to discount certain environmental sites from the Hercules acquisition and regularly adjusts its reserves as environmental remediation continues. Ashland has estimated the value of its probable insurance recoveries associated with its environmental reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage. At September 30, 2010 and 2009, Ashland’s recorded receivable for these probable insurance recoveries was $30 million and $35 million, respectively. Environmental remediation expense is included within the selling, general and administrative expense caption of the Statements of Consolidated Income and on

F-42

an aggregate basis amounted to $30 million in 2010, $15 million in 2009 and $11 million in 2008. Environmental remediation expense, net of insurance receivables, was $22 million in 2010, $13 million in 2009 and $7 million in 2008.

Other legal proceedings and claims

In addition to the matters described above, there are other various claims, lawsuits and administrative proceedings pending or threatened against Ashland and its current and former subsidiaries. Such actions are with respect to commercial matters, product liability, toxic tort liability, and other environmental matters, which seek remedies or damages, some of which are for substantial amounts. While these actions are being contested, their outcome is not predictable. For more information on these claims, see the Legal Proceedings section of Form 10-K (Part I, Item 3).

NOTE O – CAPITAL STOCK

In November 2009, Ashland made a voluntary pension plan contribution of approximately 3.0 million shares of Ashland Common Stock, valued at $100 million on the date of transfer.

On November 13, 2008, Ashland completed its acquisition of Hercules. As part of the consideration to acquire the 112.7 million shares of outstanding Hercules Common Stock on that date, Ashland issued 10.5 million shares of Ashland Common Stock valued, as of the announcement date, at $450 million. See Note B for more information on the Hercules acquisition.

Ashland did not repurchase any shares during 2010, 2009 and 2008. At September 30, 2010, 8.5 million common shares are reserved for issuance under stock incentive and deferred compensation plans.

NOTE P – STOCK INCENTIVE PLANS

Ashland has stock incentive plans under which key employees or directors are granted SARs, performance share awards or nonvested stock awards. Each program is typically a long-term incentive plan designed to link employee compensation with increased shareholder value over time or reward superior performance and encourage continued employment with Ashland. Ashland recognizes compensation expense for the grant date fair value of stock-based awards over the applicable vesting period. The components of Ashland’s pretax stock-based awards (net of forfeitures), which is included in the selling, general and administrative expense caption of the Statements of Consolidated Income, and associated income tax benefits are as follows:


(In millions)	2010		2009		2008
SARs	$	6	$	4	$	7
Nonvested stock awards		4		3		2
Performance share awards		4		2		3
	$	14	$	9	$	12

Income tax benefit	$	5	$	3	$	5

F-43

NOTE P – STOCK INCENTIVE PLANS (continued)

Stock Appreciation Rights (SARs)

SARs are granted to employees or directors at a price equal to the fair market value of the stock on the date of grant and typically become exercisable over periods of one to three years. Unexercised SARs lapse ten years and one month after the date of grant. Ashland estimates the fair value of SARs granted using the Black-Scholes option-pricing model. This model requires several assumptions, which Ashland has developed and updates based on historical trends and current market observations. The accuracy of these assumptions is critical to the estimate of fair value for these equity instruments. The following table illustrates the weighted-average of key assumptions used within the Black-Scholes option-pricing model. The risk free interest rate assumption was based on the U.S. Treasury yield curve in effect at the time of the grant for the expected term of the instrument. The dividend yield reflects the assumption that the current dividend payout will continue with no anticipated increases. The volatility assumption was calculated by utilizing an unbiased standard deviation of Ashland’s common stock closing price for the past five years. The expected life is based on historical data and is not necessarily indicative of exercise patterns that may occur.

(In millions except per share data)	2010			2009			2008
Weighted-average fair value per share of SARs granted	$	16.61		$	2.90		$	12.62
Assumptions (weighted-average)
Risk-free interest rate		2.3	%		2.1	%		3.8	%
Expected dividend yield		0.8	%		2.9	%		2.1	%
Expected volatility		51.8	%		38.5	%		25.8	%
Expected life (in years)		5.0			5.0			5.0

A progression of activity and various other information relative to SARs and previously issued and vested stock options is presented in the following table.


	2010					2009						2008
	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)		3,903		$	33.10		2,888		$	43.92			2,674		$	36.07
Granted		592			37.69		1,350			10.49			434			53.33
Exercised		(725	)		21.36		(405	)		22.56			(173	)		35.37
Converted Hercules options (b)		-			-		939			31.54			-			-
Forfeitures and expirations (b)		(56	)		31.33		(869	)		37.13			(47	)		52.51
Outstanding - end of year (a)		3,714			36.11		3,903			33.10	(b)		2,888			43.92
Exercisable - end of year		2,408			41.84		2,294			42.67			2,234			39.91

(a)

Exercise prices per share for SARs and options outstanding at September 30, 2010 ranged from $9.49 to $19.81 for 1,113,000 shares, $21.43 to $25.71 for 118,000 shares, from $32.28 to $38.47 for 1,063,000 shares, from $42.58 to $49.79 for 607,000 shares, and from $53.33 to $65.78 for 813,000 shares. The weighted-average remaining contractual life of outstanding SARs and stock options was 6.5 years and exercisable SARs and stock options was 5.4 years.

(b)	As part of the Hercules acquisition, Ashland converted certain Hercules options into Ashland options at equivalent exercise stock price values, of which a significant amount expired during 2009.

The total intrinsic value of SARs and stock options exercised was $13 million in 2010, $5 million in 2009 and $5 million in 2008. The actual tax benefit realized from the exercised SARs and stock options was $8 million in 2010, $2 million in 2009 and $2 million in 2008. The total grant date fair value of SARs and stock options that vested during 2010, 2009 and 2008 was $5 million, $5 million and $7 million, respectively. As of September 30, 2010, there was $7 million of total unrecognized compensation costs related to SARs. That cost is expected to be recognized over a weighted-average period of 1.9 years. As of September 30, 2010, the aggregate intrinsic value of outstanding SARs and stock options was $56 million and exercisable SARs and stock options was $26 million.

Nonvested stock awards

Nonvested stock awards are granted to employees or directors at a price equal to the fair market value of the stock on the date of grant and generally vest over a one-to-five-year period. However, such shares are subject to forfeiture upon termination of service before the vesting period ends. Nonvested stock awards entitle employees or directors to vote the shares and to receive any dividends or dividend equivalents.

F-44

A progression of activity and various other information relative to nonvested stock awards is presented in the following table.


	2010					2009					2008
	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		254		$	26.59		300		$	40.86		424		$	40.28
Granted		149			41.80		191			13.08		18			56.74
Vested		(42	)		41.52		(227	)		32.48		(136	)		39.34
Forfeitures		(7	)		37.29		(10	)		62.06		(6	)		59.62
Nonvested - end of year		354			30.98		254			26.59		300			40.86

The total fair value of nonvested stock awards that vested during 2010, 2009 and 2008 was $2 million, $7 million and $7 million, respectively. As of September 30, 2010, there was $7 million of total unrecognized compensation costs related to nonvested stock awards. That cost is expected to be recognized over a weighted-average period of 2.2 years.

Performance shares

Ashland sponsors a long-term incentive plan that awards performance shares/units to certain key employees that are tied to Ashland’s overall financial performance relative to the financial performance of a selected industry peer group. Ashland believes that the focus on relative performance encourages management to make decisions that create shareholder value. Awards are granted annually, with each award covering a three-year performance cycle. Each performance share/unit is convertible to one share of Ashland Common Stock. These plans are recorded as a component of stockholders’ equity in the Consolidated Balance Sheets. Performance measures used to determine the actual number of performance shares issuable upon vesting include an equal weighting of Ashland’s total shareholder return (TSR) performance and Ashland’s return on investment (ROI) performance as compared to the performance peer group over the three-year performance cycle. TSR relative to peers is considered a market condition while ROI is considered a performance condition under applicable U.S. GAAP. Nonvested performance shares/units do not entitle employees to vote the shares or to receive any dividends thereon.

The following table shows the performance shares/units granted for all plans that award Ashland Common Stock.


					Weighted-
		Target			average
		shares			fair value
(In thousands)	Performance period	granted		(a)	per share
Fiscal Year 2010	October 1, 2009 - September 30, 2012		173		$	39.23
Fiscal Year 2009	October 1, 2008 - September 30, 2011		286		$	7.99
Fiscal Year 2008	October 1, 2007 - September 30, 2010		118		$	50.55

(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.

The fair value of the ROI portion of the performance share awards is equal to the fair market value of Ashland’s Common Stock on the date of the grant discounted for the dividends forgone during the vesting period of the three-year performance cycle. Compensation cost is recognized over the requisite service period if it is probable that the performance condition will be satisfied. The fair value of the TSR portion of the performance share awards is calculated using a Monte Carlo simulation valuation model using key assumptions included in the following table. Compensation cost is recognized over the requisite service period regardless of whether the market condition is satisfied.

	2010		2009		2008
Risk-free interest rate	0.3% - 1.3	%	0.9% - 1.2	%	3.5% - 3.7	%
Expected dividend yield	1.5	%	2.2	%	1.7	%
Expected life (in years)	3.0		3.0		3.0
Expected volatility	61.2	%	43.6	%	26.3	%

F-45

NOTE P – STOCK INCENTIVE PLANS (continued)

The following table shows changes in nonvested performance shares/units for all plans that award Ashland Common Stock.


	2010					2009					2008
				Weighted-					Weighted-					Weighted-
				average					average					average
				grant date					grant date					grant date
(In thousands except per share data)	Shares			fair value		Shares			fair value		Shares			fair value
Nonvested - beginning of year		492		$	31.77		227		$	61.87		119		$	72.52
Granted		173			39.23		286			7.99		118			50.55
Vested		(29	)		62.46		-			-		-			-
Forfeitures		(100	)		66.75		(21	)		29.62		(10	)		54.94
Nonvested - end of year		536			25.97		492			31.77		227			61.87

As of September 30, 2010, there was $5 million of total unrecognized compensation costs related to nonvested performance share awards. That cost is expected to be recognized over a weighted-average period of approximately 1.9 years.

NOTE Q – SUBSEQUENT EVENTS

On November 5, 2010, Ashland signed a definitive agreement with TPG Accolade, LLC (TPG) to sell substantially all of the assets of its global distribution business conducted by the Ashland Distribution segment. The transaction is an asset sale with the total cash proceeds expected to be $930 million, before transaction fees, subject to post-closing working capital adjustments and certain other adjustments, as specified in the definitive agreement. Ashland will retain and has agreed to indemnify TPG for certain liabilities of the Ashland Distribution business arising prior to the closing of the sale, which include pension and other postretirement benefits, as well as certain other potential liabilities, including certain litigation and environmental liabilities relating to the pre-closing period, as described in the agreement. Ashland anticipates recording a significant gain upon the closing of the transaction, which is expected prior to the end of the March 2011 quarter, and is subject to regulatory approvals and satisfaction of other customary closing conditions.

Ashland Distribution recorded sales of $3,419 million during the year ended September 30, 2010 and employs approximately 2,000 employees across North America and Europe. The approximate carrying amounts of the assets and liabilities expected to be a part of the sale as of September 30, 2010 were as follows: current assets of $700 million, noncurrent assets of $250 million and current liabilities of $325 million. The transaction is expected to qualify as a discontinued operation, which will require Ashland to reclassify its previously reported results.

NOTE R – SEGMENT INFORMATION

Following the Hercules acquisition, Ashland’s businesses are managed along five industry segments: Functional Ingredients, Water Technologies, Performance Materials, Consumer Markets and Distribution.

F-46

Information about Ashland’s domestic and international operations follows. Ashland has no material operations in any individual international country and no single customer represented more than 10% of sales in 2010, 2009 or 2008.


	Sales from										Property, plant
	external customers						Net assets				and equipment - net
(In millions)	2010		2009		2008		2010		2009		2010		2009
United States	$	5,569	$	5,083	$	5,549	$	853	$	609	$	1,132	$	1,167
International		3,443		3,023		2,832		2,950		2,975		886		900
	$	9,012	$	8,106	$	8,381	$	3,803	$	3,584	$	2,018	$	2,067

The following tables present various financial information for each segment for the years ended September 30, 2010, 2009 and 2008 and as of September 30, 2010, 2009 and 2008. Results of Ashland’s reportable segments are presented based on its management structure and internal accounting practices. The structure and practices are specific to Ashland; therefore, the financial results of Ashland’s business segments are not necessarily comparable with similar information for other comparable companies. Ashland refines its expense allocation methodologies to the reportable segments from time to time as internal accounting practices are improved, more refined information becomes available and businesses change. Revisions to Ashland’s methodologies that are deemed insignificant are applied on a prospective basis. During 2009, Ashland began fully allocating significant actual corporate costs, as opposed to budgeted expenditures which was utilized in prior periods, except for certain specific company-wide restructuring activities that were significant, such as the current restructuring plan related to the Hercules acquisition described in Note E, and other costs or adjustments that relate to former businesses that Ashland no longer operates. To align prior period results to the current period presentation, Ashland reclassified certain depreciation and amortization charges in 2008 that were previously presented within the unallocated and other section to the applicable reporting segments that were originally allocated these corporate charges.

F-47

NOTE R – SEGMENT INFORMATION (continued)

Ashland Inc. and Consolidated Subsidiaries
Segment Information
Years Ended September 30

(In millions)	2010			2009			2008
Sales
Functional Ingredients	$	915		$	812		$	-
Water Technologies		1,785			1,652			893
Performance Materials		1,286			1,106			1,621
Consumer Markets		1,755			1,650			1,662
Distribution		3,419			3,020			4,374
Intersegment sales (a)
Functional Ingredients		(4	)		(10	)		-
Water Technologies		(6	)		(3	)		-
Performance Materials		(114	)		(105	)		(151	)
Consumer Markets		-			-			(6	)
Distribution		(24	)		(16	)		(12	)
	$	9,012		$	8,106		$	8,381
Equity income
Water Technologies	$	1		$	1		$	1
Performance Materials		8			6			16
Consumer Markets		10			8			5
Unallocated and other		-			(1	)		1
		19			14			23
Other income (expense)
Functional Ingredients		1			-			-
Water Technologies		(1	)		1			2
Performance Materials		6			6			3
Consumer Markets		12			8			7
Distribution		3			4			3
Unallocated and other		11			5			16
		32			24			31
	$	51		$	38		$	54
Operating income (loss)
Functional Ingredients	$	115		$	36		$	-
Water Technologies		114			78			10
Performance Materials		23			1			52
Consumer Markets		262			252			83
Distribution		55			52			51
Unallocated and other		(3	)		(29	)		17
	$	566		$	390		$	213
Assets
Functional Ingredients	$	2,672		$	2,782		$	-
Water Technologies		1,914			1,919			495
Performance Materials		1,109			995			1,080
Consumer Markets		854			819			750
Distribution		974			847			1,090
Unallocated and other		2,008			2,245			2,356
	$	9,531		$	9,607		$	5,771

(a)	Intersegment sales are accounted for at prices that approximate market value.

F-48

Ashland Inc. and Consolidated Subsidiaries
Segment Information (continued)
Years Ended September 30

(In millions)	2010		2009		2008
Investment in equity affiliates
Functional Ingredients	$	2	$	-	$	-
Water Technologies		4		4		3
Performance Materials		42		54		59
Consumer Markets		25		18		15
Unallocated and other		3		3		4
	$	76	$	79	$	81
Operating income not affecting cash
Depreciation and amortization
Functional Ingredients (a)	$	99	$	106	$	-
Water Technologies (a)		88		99		29
Performance Materials		53		63		46
Consumer Markets		36		36		35
Distribution		28		28		28
Unallocated and other		-		7		7
		304		339		145
Other noncash items
Functional Ingredients		7		33		-
Water Technologies		10		11		1
Performance Materials		6		4		(4	)
Consumer Markets		6		4		-
Distribution		7		7		2
Unallocated and other		-		-		27
		36		59		26
	$	340	$	398	$	171
Property, plant and equipment - net
Functional Ingredients	$	654	$	654	$	-
Water Technologies (b)		357		362		102
Performance Materials		364		367		393
Consumer Markets		252		241		232
Distribution		182		187		205
Unallocated and other (b)		209		256		163
	$	2,018	$	2,067	$	1,095
Additions to property, plant and equipment
Functional Ingredients	$	75	$	58	$	-
Water Technologies		32		26		17
Performance Materials		29		27		48
Consumer Markets		39		33		42
Distribution		14		8		27
Unallocated and other		17		22		71
	$	206	$	174	$	205

(a)	Includes, during 2009, amortization for purchased in-process research and development of $5 million within both Functional Ingredients and Water Technologies.

(b)	Fiscal 2008 has been adjusted for the affects of the Drew Marine and corporate aircraft assets that, during 2009, have been sold or moved to held for sale classification within the Consolidated Balance Sheet.

F-49

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table presents quarterly financial information and per share data relative to Ashland’s Common Stock.


Quarters ended	December 31						March 31						June 30						September 30
(In millions except per share data)	2009			2008			2010			2009			2010			2009			2010		(a)	2009		(b)
Sales	$	2,020		$	1,966		$	2,248		$	1,990		$	2,362		$	2,037		$	2,382		$	2,113
Cost of sales		1,534			1,641			1,738			1,531			1,838			1,544			1,903			1,601
Gross profit as a percentage of sales		24.1	%		16.5	%		22.7	%		23.1	%		22.2	%		24.2	%		20.1	%		24.2	%
Operating income (loss)		146			(7	)		151			112			163			152			106			133
Income (loss) from continuing
operations		76			(119	)		20			48			134			51			72			98
Net income (loss)		86			(119	)		22			48			148			50			76			93

Basic earnings per share
Continuing operations	$	.99		$	(1.73	)	$	.25		$	.65		$	1.71		$	.69		$	.92		$	1.32
Net income (loss)		1.13			(1.73	)		.28			.65			1.89			.67			.97			1.24

Diluted earnings per share
Continuing operations	$	.97		$	(1.73	)	$	.25		$	.65		$	1.67		$	.68		$	.91		$	1.30
Net income (loss)		1.10			(1.73	)		.27			.65			1.85			.66			.96			1.22

Regular cash dividends per share	$	.075		$	.075		$	.075		$	.075		$	0.15		$	.075		$	0.15		$	.075

Market price per common share
High	$	43.01		$	30.13		$	54.46		$	12.26		$	63.73		$	29.99		$	53.10		$	45.80
Low		33.29			8.02			38.64			5.35			46.37			10.76			42.77			23.76

(a)	Fourth quarter results include a decrease in operating income of $17 million for severance and accelerated deprecation charges associated with cost-structure efficiency initiatives as well as a $6 million charge for environmental remediation assessments.

(b)

Fourth quarter results include a decrease in operating income of $23 million for severance and accelerated depreciation charges associated with cost-structure efficiency initiatives as well as a pretax gain of $56 million related to the sale of Ashland’s interest in Drew Marine, a division within Water Technologies.


Ashland Inc. and Consolidated Subsidiaries
Schedule II - Valuation and Qualifying Accounts

	Balance at		Provisions						Acquisition			Balance
	beginning		charged to			Reserves			and other			at end
(In millions)	of year		earnings			utilized			changes			of year
Year ended September 30, 2010
Reserves deducted from asset accounts
Accounts receivable	$	38	$	10		$	(20	)	$	-		$	28
Inventories		21		(5	)		5			-			21
Tax valuation allowance		306		12			(10	)		2			310
Year ended September 30, 2009
Reserves deducted from asset accounts
Accounts receivable	$	33	$	29		$	(23	)	$	(1	)	$	38
Inventories		11		13			(3	)		-			21
Tax valuation allowance		26		16			-			264			306
Year ended September 30, 2008
Reserves deducted from asset accounts
Accounts receivable	$	41	$	10		$	(21	)	$	3		$	33
Inventories		13		2			(4	)		-			11
Tax valuation allowance		23		3			-			-			26

F-50

Ashland Inc. and Consolidated Subsidiaries
Five-Year Selected Financial Information
Years Ended September 30

(In millions except per share data)	2010			2009			2008			2007			2006
Summary of operations
Sales	$	9,012		$	8,106		$	8,381		$	7,785		$	7,233
Costs and expenses
Cost of sales		7,012			6,317			7,056			6,447			6,030
Selling, general and administrative expense		1,399			1,341			1,118			1,126			1,029
Research and development expense		86			96			48			45			48
		8,497			7,754			8,222			7,618			7,107
Equity and other income		51			38			54			49			44
Operating income		566			390			213			216			170
Net interest and other financing (expense) income		(197	)		(205	)		28			46			47
Net gain (loss) on acquisitions and divestitures		21			59			20			(3	)		(5	)
Other income (expense)		2			(86	)		-			-			-
Income from continuing operations
before income taxes		392			158			261			259			212
Income tax expense		91			80			86			58			29
Income from continuing operations		301			78			175			201			183
Income (loss) from discontinued operations		31			(7	)		(8	)		29			224
Net income	$	332		$	71		$	167		$	230		$	407

Balance sheet information (as of September 30)
Current assets	$	2,833		$	2,478		$	3,026		$	3,276		$	4,250
Current liabilities		1,687			1,577			1,230			1,152			2,041
Working capital	$	1,146		$	901		$	1,796		$	2,124		$	2,209

Total assets	$	9,531		$	9,607		$	5,771		$	5,686		$	6,590

Short-term debt	$	71		$	23		$	-		$	-		$	-
Long-term debt (including current portion)		1,153			1,590			66			69			82
Stockholders’ equity		3,803			3,584			3,202			3,154			3,096
Capital employed	$	5,027		$	5,197		$	3,268		$	3,223		$	3,178

Cash flow information
Cash flows from operating activities from
continuing operations	$	517		$	1,027		$	478		$	189		$	145
Additions to property, plant and equipment		206			174			205			154			175
Cash dividends		35			22			69			743			78

Common stock information
Basic earnings per share
Income from continuing operations	$	3.86		$	1.08		$	2.78		$	3.20		$	2.57
Net income		4.26			0.98			2.65			3.66			5.73
Diluted earnings per share
Income from continuing operations		3.79			1.07			2.76			3.15			2.53
Net income		4.18			0.96			2.63			3.60			5.64
Dividends
Regular cash dividends per share		0.45			0.30			1.10			1.10			1.10
Special cash dividend per share (a)		-			-			-			10.20			-

(a)	Paid as a result of the APAC divestiture; see Note D for further information on the sale.

F-51

EXHIBIT 10.5

AMENDED AND RESTATED

ASHLAND INC.

SUPPLEMENTAL EARLY RETIREMENT PLAN

FOR CERTAIN EMPLOYEES

Generally Effective as of January 1, 2011

ARTICLE I . PURPOSE AND EFFECTIVE DATE .

1.01

Purpose

The purpose of the Plan is to allow designated employees to retire prior to their sixty-fifth birthday without an immediate substantial loss of income. This Plan is a supplemental retirement arrangement for a select group of management.

1.02	Effective Date

The Amended and Restated Ashland Inc. Supplemental Early Retirement Plan for Certain Employees is effective January 1, 2011, except as otherwise provided. This amended and restated Plan supersedes all prior versions of this Plan that were effective before January 1, 2011 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, 2011 shall be governed by the terms of the Plan in effect at the time of each such former Employee’s 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 Participant’s 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 Ashland’s Common Stock outstanding at the time, without the approval of the Board, or (3) at any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election by Ashland’s shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period.

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 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 Participant’s 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 Participant’s termination for reasons other than “Cause” or (ii) such Participant’s 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 Participant’s termination for reasons other than “Cause”. For Participant’s 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 Participant’s 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 Participant’s Termination of Employment that is nearest to or which is coincident with the Participant’s 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 paid month period (whether or not consecutive) as determined by the following chart out of the final month period (whether or not consecutive) as determined by the following chart:

Termination of Employment:	Highest Paid Month Period	Final Month Period
January 2011	36 months	84 months
February 2011	37 months	85 months
March 2011	38 months	86 months
April 2011	39 months	87 months
May 2011	40 months	88 months
June 2011	41 months	89 months
July 2011	42 months	90 months
August 2011	43 months	91 months
September 2011	44 months	92 months
October 2011	45 months	93 months
November 2011	46 months	94 months
December 2011	47 months	95 months
January 2012 to December 2015	48 months	96 months
January 2016	48 months	107 months
February 2016	49 months	108 months
March 2016	50 months	109 months
April 2016	51 months	110 months
May 2016	52 months	112 months
June 2016	53 months	113 months
July 2016	54 months	114 months
August 2016	55 months	115 months
September 2016	56 months	116 months

October 2016	57 months	117 months
November 2016	58 months	118 months
December 2016	59months	119 months
January 2017 and after	60 months	120 months

The calculation of the final period shall be measured back from the Participant’s Termination of Employment that is nearest to or which is coincident with the Participant’s 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 Participant’s 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. With respect to any Employee who becomes a Participant in the Plan on or after January 1, 2011, the total compensation paid that is used to compute the average in this Section 2.12 shall only be the bonus paid during a particular month.

2.13	“Hercules Employee” - means an Employee originally hired by Hercules Inc. or its subsidiary.

2.14	“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.

2.15	“LESOP” - means the Ashland Inc. Leveraged Employee Stock Ownership Plan.

2.16	“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	27-30
Level II	25-26
Level III	23-24
Level IV	22

Level V

2.17

“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.

2.18	“Pension Plan” - means the Ashland Hercules Pension Plan.

2.19	“Plan” - means the Amended and Restated Ashland Inc. Supplemental Early Retirement Plan for Certain Employees, generally effective as of January 1, 2011, as set forth herein.

2.20

“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 the earlier of such Employee's termination from employment or Effective Retirement Date. For purposes of this Section 2.17, Service shall include an Employee’s 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; provided, however, that Service for purposes of computing the amount of the benefit payable under the Plan shall not include any period of employment with a corporation or other business entity before such corporation or other business entity became an affiliate of Ashland Inc., as determined by the Board or its delegate. Service shall be calculated based on the rules for calculating Periods of Service under the 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. Notwithstanding the foregoing, with respect to any Hercules Employee, Service shall be measured from January 1, 2011.

2.21

“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.

2.22

“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.

2.23	“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 January 1, 2011

Any Employee who was a Participant in the Plan as of December 31, 2010 shall continue to participate in the Plan. Effective as of January 1, 2011, any Employee who participated in the Pension Plan but was not eligible for the Retirement Growth Account under Section 3.3 of said plan and is classified as a Level I, II, III, IV or V Employee shall participate in the Plan. After earning five years of Continuous Service, whenever earned, a Participant shall be completely vested in the applicable benefit under Plan. The determination of whether a Level III, IV or V Employee receives a reduced benefit for commencement before age 62 under Section 5.02(c) is made based on the Employee’s deemed status on the Effective Retirement Date. Notwithstanding such vesting, a Participant forfeits the right to receive any benefit under this Plan if the Participant incurs a Termination of Employment for Cause, as defined in Section 3.02. A Participant may also forfeit the right to the Plan benefit and may have to repay a prior distribution pursuant to the provisions of Section 4.02. Participation in the Plan is not subject to an election by an Employee. Participation is automatic and is based on the Employee’s status on Ashland’s records at the applicable time.

3.02	Termination for Cause

Ashland reserves the right to terminate any Participant for “Cause” prior to his or her Effective Retirement Date, with a resulting forfeiture of the payment of benefits under the Plan. Ashland also reserves the right to terminate any Participant’s participation in the Plan for “Cause” subsequent to his or her Effective Retirement Date. For purposes of this Section 3.02, “Cause” shall mean the willful and continuous failure of a Participant to substantially perform his or her duties to Ashland (other than any such failure resulting from incapacity due to physical or mental illness), or the willful engaging by a Participant in gross misconduct materially and demonstrably injurious to Ashland, each to be determined by Ashland in its sole discretion.

3.03	Automatic Vesting for Change in Control

Subject to the provisions of Article VI, in the event of a Change in Control (as defined in Section 2.05), an Employee who is deemed to be a Level I, II, III, IV or V Participant shall automatically be completely vested in his or her benefits, regardless of the number of years of Continuous Service.

ARTICLE IV . INTERACTION WITH CHANGE IN CONTROL AGREEMENTS .

4.01	Terminations - General

Notwithstanding any provision of this Plan to the contrary, an Employee who has entered into an Change in Control Agreement with Ashland and who is terminated without “Cause” or resigns for “Good Reason” following a “change in control of Ashland” (each quoted term as defined in the applicable Change in Control Agreement) shall be entitled to receive the benefits as provided pursuant to this Plan. Benefits payable hereunder in such a situation shall be calculated in accordance with the payment option elected by the Employee.

4.02	Subsequent Activity in Conflict with Ashland

The provisions of this Section 4.02 shall apply to Level I, II, III, IV and V Participants, regardless of whether such a Participant has a Change in Control Agreement; except that the provisions of this Section 4.02 shall not apply to any Participant after a Change in Control. If a Participant accepts, during a period of five (5) years subsequent to his or her Effective Retirement Date, or Termination of Employment, if earlier, any consulting or employment activity which is in direct and substantial conflict with the business of Ashland at such time (such determination regarding conflicting activity to be made in the sole discretion of the Board), he or she shall be considered in breach of the provisions of this Section 4.02; provided, however, he or she shall not be restricted in any manner with respect to any other non-conflicting activity in which he or she is engaged.

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 Ashland’s 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 .

(a) Transition Participants . The Transition Participants who are Level I or II Participants are eligible to receive Annual Retirement Income equal to:

(1)

Pre-Age 62 Benefit

A Transition Participant who retires under this Plan, including a Transition Participant to whom the provisions of paragraph (b) 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 Participant’s years of and fractional years of Service, and (B) the denominator of which is twenty (20).

Retirement			% of 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 Participant’s 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 Participant’s Effective Retirement Date.

(2)

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 Participant’s 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 Participant’s years of and fractional years of Service, and (B) the denominator of which is twenty (20).

(3)

Benefit Reduction

The amount of benefit provided in paragraphs (1) and (2) of this Section 5.01 shall be reduced by the sum of the following:

(A)

the Transition Participant’s benefit under the Pension Plan (assuming 50% of such Transition Participant’s account under the LESOP 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 LESOP), determined on the basis of a single life annuity form of benefit;

(B)

the Transition Participant’s 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”);

(C)

the Transition Participant’s benefit under the Ashland Inc. Nonqualified Excess Benefit Pension Plan, determined on the basis of a single life annuity form of benefit; and

(D)

the Transition Participant’s benefit under the Ashland Inc. ERISA Forfeiture Plan attributable to amounts which were forfeited under the LESOP, multiplied by 50%, and determined on the basis of a single life annuity benefit.

Because a Transition Participant’s 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 (A)-(D) of this paragraph (3). Such calculation shall be conducted on the basis that the benefits referred to in said subparagraphs (A)-(D) commence at the same time as of which the benefit in this Plan is paid as a lump sum, using the Transition Participant’s attained age at the time of such commencement, unless otherwise required in paragraph (d) of this Section 5.01.

(b)	Benefit After a Change in Control

(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 Participant’s Age and Service at the Participant’s 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 (b)(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 (b)(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 Participant’s 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 Participant’s 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 Participant’s Age and Service at the Participant’s Effective Retirement Date. For these purposes, the applicable amount is derived from the following table.

Length of Participant’s 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

These additions to Age and Service shall, except as otherwise provided, apply for purposes of computing the single life annuity payment (if applicable) to the Participant that would be converted to the Annual Retirement Income lump sum benefit amount. A Participant subject to this paragraph (b)(2) whose Effective Retirement Date occurs before attaining an actual age of 55 shall have the applicable amount added to such Participant’s 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 (b)(2) 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 a lump sum payment option, the Participant's actual age shall be used without reference to the addition of the applicable amount. If the addition of the applicable amount to the Participant’s 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 Participant’s 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.

(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 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 Pension Plan (assuming 50% of such Participant’s account – if any - under the LESOP 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 LESOP);

(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 (c) 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%.

An interest rate assumption of 8% and the Section 415/417 Mortality Table in the Pension Plan shall be used for purposes of computing the actuarial equivalence of the reductions in the above numbered paragraphs, except for computing the actuarial equivalence of the benefit under the Ashland Inc. Nonqualified Excess Benefit Pension Plan under above paragraph (3). Effective for Effective Retirement Dates on and after October 1, 2007, the computation under said paragraph (3) shall be conducted using the same assumptions as apply to the computation of the benefit payable under the Ashland Inc. Nonqualified Excess Benefit Pension Plan. Actuarial equivalence shall be determined as of the Effective Retirement Date.

(d)

Changes in Status .

(1)

Subject to the applicable provisions of paragraph (b) 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 Participant’s 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.

(e)

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

The Annual Retirement Income lump sum benefit amount of a Transition Participant (including a Transition Participant to whom the provisions of paragraph (b) of this Section 5.02 apply) who on his or her Effective Retirement Date was deemed to be a Level III, IV, or V Participant shall, from and after the first day of the calendar month next following his or her 62nd birthday, be equal to 50% of the Transition Participant’s Final Average Bonus; provided, however, that in the event such Transition Participant retired with less than 20 years of Service, such Annual Retirement Income after age 62 shall be 50% of Final Average Bonus multiplied by a fraction (A) the numerator of which is such Participant’s years of and fractional years of Service, and (B) the denominator of which is twenty (20). Although a Transition Participant may elect to commence benefits under this Plan upon his or her Effective Retirement Date, there shall be an actuarial adjustment (consistent with that applied under Ashland’s qualified pension plan, as from time to time in effect) for Participants receiving benefits under this Section 5.02 whose Effective Retirement Date is prior to age 62.

(b) Benefit After a Change in Control

A Participant who is terminated other than for “Cause” after a Change in Control shall have the benefit payable under this Section 5.02 computed by adding to the Participant’s Age and Service at the Participant’s Effective Retirement Date the number of years equal to the applicable amount for the Participant derived from the following table.

Length of Participant’s 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

These additions to Age and Service shall, except as otherwise provided, apply for purposes of computing the single life annuity payment (if applicable) to the Participant that would be converted to the Annual Retirement Income lump sum benefit amount. A Participant subject to this paragraph (b) whose Effective Retirement Date occurs before attaining an actual age of 62 shall have the applicable amount from the table hereinabove added to his or her 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 (b) occurs on or after the Participant attains an actual age of 62, 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 applicable amount derived from the table hereinabove. If the addition of the applicable amount from the table hereinabove to the Participant’s age results in an Age less than 62 and the Participant commences the benefit, the amount of the benefit shall be adjusted to account for the fact it is paid before the Participant’s attainment of Age 62. 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, 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.

(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 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)

5.03	Benefits Payable for Less Than 12 Months

Annual Retirement Income benefits that would be payable under Sections 5.01 and 5.02 for a period of less than 12 months if such benefits were payable as an annuity due to a Participant’s attainment of age 62 or death will be computed as if payable on a pro-rata basis, with months taken as a fraction of a year.

5.04 Payment Options

(a) Election

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 Participant’s 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 Participant’s 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 Participant’s 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 Participant’s 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 Participant’s benefit shall be transferred upon the Participant’s 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 shall thereafter be distributed in three annual payments beginning with the January 1 after the account is established in the Ashland Inc. Deferred Compensation for Employees (2005) (33 1/3% in the first year, 50% of the remaining amount in the second year and the remaining amount in the third year). 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 Participant’s Effective Retirement Date or (ii) the 15 th day of the third calendar month following the Participant’s Effective Retirement Date.

5.05.

Distribution Exceptions

Notwithstanding anything in the Plan to the contrary, the following shall apply to the distribution of benefits under the Plan:

(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).

5.06. Survivor Benefits

For deaths occurring after the approval of this restatement, if a Participant with a vested benefit dies before his or her Effective Retirement Date, the benefit that would have been paid to the Participant had the Participant survived to his or her Effective Retirement Date shall be paid to the beneficiary designated by the Participant as elected by the Participant from those options made available by Ashland; provided, however, that the benefit must be completely distributed by the end of the fifth calendar year following the calendar year in which the Participant died. In the absence of an election, the benefit shall be paid in January of the calendar year following the calendar year in which the Participant died. If the Participant dies before he or she attained age 55 and before the sum of his or her age and years of Continuous Service equaled 80, the benefit payable hereunder shall be actuarially adjusted using the assumptions under the Pension Plan that applied at the time of the Participant’s death.

5.07	Participation in Other Benefits

After the Effective Retirement Date, a Participant may continue to participate in the benefits offered by Ashland to former Employee’s and retiree’s similarly situated to the Participant. Ashland reserves all rights to change those benefits at any time, including the right to terminate them. Except as otherwise expressly provided in this Plan, a Participant’s active participation in all employee benefit programs maintained by Ashland derived from his or her employment status with Ashland shall be discontinued.

ARTICLE V-A . LIMITED TEMPORARY ENHANCED RETIREMENT PROGRAM BENEFIT .

5.01A GENERAL.

For Participants whose Effective Retirement Date is March 1, 2007 (except as may otherwise be provided in Section 5.04A below), the retirement benefits payable under Article V shall be computed as modified under Section 5.03A below, provided that such Participants satisfy all of the requirements specified in Section 5.02A. For purposes of this Article V-A, the limited enhanced retirement program benefit described herein is referred to as the Voluntary Severance Offer (VSO).

5.02A ELIGIBILITY .

Subject to Section 3.01, the Employees who are eligible to have their benefits computed with the modifications described in Section 5.03A are those who would have been eligible for the pension benefit described in section 18.7B of the Pension Plan, but who are not so eligible because they are in pay classification band 21 or higher.

5.03A ENHANCED BENEFIT .

Each Participant described in Section 5.02A(a) who elects an Effective Retirement Date of March 1, 2007 (or at the Delayed Effective Retirement Date under Section 5.04A), hereinafter called "Electing Participant", shall have his or her benefit computed under Section 5.01 or Section 5.02 (whichever is applicable) by adding 2 years to his or her Age and 2 years to his or her Service at the Effective Retirement Date (or at the Delayed Effective Retirement Date under Section 5.04A). These additions to Age and Service shall apply for purposes of computing the single life annuity amount with regard to the Electing Participant; for purposes of any actuarial reduction for early commencement; and for purposes of applying the Section 2.08 definition of Effective Retirement Date to this Article V-A. Notwithstanding anything to the contrary contained herein, when converting an Electing Participant's benefit to the lump sum payment option, the Electing Participant's actual age shall be used without reference to the additional 2 years.

5.04A DELAYED EFFECTIVE RETIREMENT DATE .

Ashland reserves the right to require an Electing Participant or a Special Participant (as defined in Section 5.05A) to remain employed and delay his or her Effective Retirement Date (or other termination date) until, at the latest, to November 30, 2007 (hereinafter referred to as the "Delayed Effective Retirement Date").

(a) If an Electing Participant's or Special Participant’s employment is terminated on or before his or her Delayed Effective Retirement Date by reason of discharge for cause, such Electing Participant or Special Participant shall not be entitled to any benefit computed under this Plan.

(b) If an Electing Participant or Special Participant terminates employment by reason of death on or before his or her Delayed Effective Retirement Date, but after February 28, 2007, the benefit shall be determined as if he or she had the Delayed Effective Retirement Date on the day before death with any election of an optional form of benefit made by such Electing Participant or Special Participant given effect.

(c) An Electing Participant or Special Participant who terminates employment on his or her Delayed Effective Retirement Date (except by reason of discharge for cause or death), shall have the benefit determined as provided under Section 5.03A by applying the rules contained therein to such Electing Participant or Special Participant at such Electing Participant's or Special Participant’s Delayed Effective Retirement Date; provided, however, that such Electing Participant's or Special Participant’s

benefit, as so determined and payable effective as of the first of the calendar month immediately following the Delayed Effective Retirement Date, shall not be less than the amount of the benefit that would have been payable to such Electing Participant or Special Participant as of March 1, 2007.

5.05A LIMITED TEMPORARY ENHANCED UNFUNDED PENSION BENEFIT

(a) Persons described in paragraph (b) of this Section 5.05A who constitute a select group of management or highly paid employees shall be entitled to the applicable benefit described in paragraph (c) of this Section 5.05A. Such benefit shall constitute an unfunded promise to be paid from the general assets of Ashland Inc., and the payment of such benefit shall have no priority with respect to the claims of unsecured general creditors of Ashland Inc.

(b) The benefit described in paragraph (c) of this Section 5.05A shall be paid with respect to those persons who would be entitled to the enhanced benefit payment under section 18.7B of the Pension Plan but for the exception contained in section 18.7B (b)(2)(i) of such Pension Plan (relating to highly compensated employees and employees in pay code band 21 and above). For purposes of the benefit described in paragraph (c) of this Section 5.05A, these persons shall be referred to as Special Participants. Such designation includes individuals who are otherwise Participants in this Plan and individuals who would not otherwise have a benefit paid through this Plan.

(c) The determination of the benefit payable under this paragraph (c) is different for Special Participants who, without the addition to age and service described in section 18.7B of the said Pension Plan and as of February 28, 2007, either (i) are age 55 or older; or (ii) have age and Continuous Service under the said Pension Plan equaling at least 80 (referred to as retirement eligible Special Participants) and Special Participants who require the addition to age and service described in section 18.7B of the said Pension Plan to fall within either clause (i) or (ii) as of February 28, 2007 (referred to as not retirement eligible Special Participants).

(1) Retirement Eligible Special Participants . For a retirement eligible Special Participant, the benefit payable under this paragraph (c) is calculated as the difference between two amounts calculated under the said Pension Plan. This calculation is made as of the later of February 28, 2007 or the Delayed Termination Date (as defined in said Pension Plan). This date is referred to as the Calculation Date. The difference is between (i) the amount payable under the said Pension Plan on the Calculation Date adding the additional age and service pursuant to section 18.7B of said Pension Plan as though the retirement eligible Special Participant were eligible to receive the additional benefit described in said section 18.7B; and (ii) the amount payable under the said Pension Plan on the Calculation Date based on the retirement eligible Special Participant’s actual age and service. This difference (which cannot be a negative number) is converted to an actuarially equivalent lump sum using the actuarial assumptions in the said Pension Plan, as determined by Ashland Inc., based on the actual age of the retirement eligible Special Participant.

(2) Not Retirement Eligible Special Participants . By definition, a not retirement eligible Special Participant cannot begin payments under the said Pension Plan because the not retirement eligible Special Participant is not eligible to commence benefits thereunder based on his or her actual age and service on the first of the month after the relevant Calculation Date. To facilitate the commencement of a benefit equivalent to what could have been paid under the said Pension Plan had the not retirement eligible Special Participant actually been retirement eligible, such Special Participant will be offered an election to commence an equivalent benefit through this Plan, determined based on rules that would have applied under the said Pension Plan. For this purpose, the not retirement eligible Special Participant’s actual age and service will be used. Any such payments will only last through the end of the calendar month during which such Special Participant attains age 55. Such Special Participant will then be able to make a separate election under the rules of the said Pension Plan for the benefit to commence payment from the said Pension Plan. The not retirement eligible Special Participant is also entitled to a lump sum payment computed as the difference between (i) the amount payable under the said Pension Plan on the Calculation Date adding the additional age and service pursuant to section 18.7B of said Pension Plan as though the not retirement eligible Special Participant were eligible to receive the additional benefit described in said section 18.7B; and (ii) the amount payable under this Plan (as determined hereinabove) on the Calculation Date based on the not retirement eligible Special Participant’s actual age and service. This difference (which cannot be a negative number) is converted to an actuarially equivalent lump sum using the actuarial assumptions in the said Pension Plan, as determined by Ashland Inc., but assuming that the not retirement eligible Special Participant had age and Continuous Service under the said Pension Plan that equaled 80 as of the Calculation Date and using such Special Participant’s actual age.

(3) Payment of Lump Sum . The lump sum amounts described in the preceding sub-paragraphs (1) and (2) are paid as soon as administratively feasible in January 2008, with certain exceptions that are described below. Before the lump sum is paid, it will earn interest at the same rate and under the same terms that apply to the Retirement Growth Account benefit under the said Pension Plan. The lump sum of a Special Participant who is also a Participant in this Plan shall be paid pursuant to the valid election such Participant has made for the rest of his or her benefit that is payable hereunder. Additionally, payments shall comply with the provisions of Internal Revenue Code section 409A. For purposes of computing any benefit under this Plan or the Ashland Inc. Nonqualified Excess Benefit Pension Plan that is coordinated with the said Pension Plan benefit, the lump sum payable under this paragraph (c) shall be considered to be part of the benefit payable under the said Pension Plan. If a Special Participant dies before January 1, 2008, the death benefit that may be payable with respect to the benefit described in this Section 5.05A shall be based upon the Appendix A that is attached hereto and made a part of hereof, as interpreted and applied by Ashland Inc.

(d) Elections by Special Participants for the benefit described in paragraph (c) of this Section 5.05A shall be made in such form and at such time as Ashland Inc., or its delegate, shall prescribe and

such elections shall be subject to such rules and procedures, including the prior execution of a general release, as may be from time to time prescribed by Ashland Inc.

5.06A Administration .

Ashland Inc. has plenary power and authority to interpret, administer and apply all provisions of the Plan relating to or associated with the VSO. The provisions of this Article V-A were effective February 28, 2007.

ARTICLE VI . CHANGE IN CONTROL .

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 Participant’s 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.

The written decision will include:

(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 Plan’s appeal procedure before filing a civil action in court.

If the claimant does not receive notice of the decision on the claim within the prescribed time periods, the claim is deemed denied. In that event the claimant may proceed with the appeal procedure described below.

(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.

The claimant may submit materials and other information relating to the claim. Ashland will appropriately consider these materials and other information, even if they were not part of the initial claim submission. The claimant will also be given reasonable and free access to or copies of documents, records and other information relevant to the claim.

Written notification of the decision on the appeal will be delivered to the claimant in a reasonable period, but not later than 60 days after the appeal is received. The 60-day period can be extended under special circumstances. If special circumstances apply, the claimant will be notified before the end of the 60-day period after the appeal 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 120 days after the appeal is received.

Special rules apply if Ashland designates a committee as the appropriate named fiduciary for purposes of deciding appeals of denied claims. For the special rules to apply, the committee must meet regularly on at least a quarterly basis.

When the special rules for committee meetings apply the decision on the appeal must be made not later than the date of the committee meeting immediately following the receipt of the appeal. If the appeal is received within 30 days of the next following meeting, then the decision must not be made later than the date of the second committee meeting following the receipt of the appeal.

The period for making the decision on the appeal can be extended under special circumstances. If special circumstances apply, the claimant will be notified by the committee or its delegate before the end of the otherwise applicable period within which to make a decision. 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 the date of the third committee meeting after the appeal is received.

In any event, the claimant will be provided written notice of the decision within a reasonable period after the meeting at which the decision is made. The notification will not be later than 5 days after the meeting at which the decision is made.

Whether the decision on the appeal is made by a committee or not, a denial of the appeal will include:

(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).

If the claimant does not receive notice of the decision on the appeal within the prescribed time periods, the appeal is deemed denied. In that event the claimant may file a civil action in court. The decision regarding a denied claim is final and binding on all those who are affected by the decision. No additional appeals regarding that claim are allowed.

APPENDIX A

See Section 5.05A(c)(3).

Form of Benefit Payment under 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 employee’s 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 employee’s estate. That amount will earn the applicable amount of interest until paid. Payment will not occur before 2008.

APPENDIX B

Actuarial Assumptions for SERP/Excess Plan for Domestic Relations Orders*

Employee Base Salary Pay Band	Employee Age	Former Spouse’s Age	Actuarial Assumptions
≥ 23**	≥ Effective Retirement Date*** if had terminated on date the order is approved	≥ Employee’s 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.

**Band 23 employees under the old formula are treated the same as bands 21 and 22 employees.

***The Effective Retirement Date is the earliest date the employee could elect to commence SERP payments if the employee had actually terminated from employment.

AMENDED AND RESTATED

HERCULES DEFERRED COMPENSATION PLAN

EFFECTIVE JANUARY 1, 2008

AMENDED AND RESTATED

HERCULES DEFERRED COMPENSATION PLAN

(EFFECTIVE JANUARY 1, 2008)

The Plan provides eligible employees with the opportunity to defer the receipt of a portion of compensation to (1) a date or dates beginning after the employee’s retirement; (2) upon the earlier of such other designated date as provided hereunder or separation from service or (3) upon separation from service. Amounts deferred will be credited each quarter with interest equal to the Morgan Guaranty Trust Company prime rate. The total amount deferred, including interest credits, will be paid in accordance with the terms of settlement options elected by the employee. The Plan is unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The Plan, as amended and restated, is intended to satisfy the requirements of Section 409A of the Code.

Eligibility to participate in this Plan shall normally be limited to those executives who receive awards under the Hercules Long-Term Incentive Compensation Plan during the calendar year prior to the deferral period. Other employees may become eligible upon the approval of the Chief Executive Officer.

For purposes of the Plan, compensation means base monthly salary and bonus payouts, if any, applicable to awards made pursuant to the Management Incentive Compensation Plan (MICP) or a successor plan.

Base Monthly Salary : Elections to defer base monthly salary must be made prior to December 31 of the year preceding the year that the services to which the base monthly salary relates are performed. If an employee first becomes eligible to participate in the Plan during a calendar year (and is not already eligible to participate in any other account-based nonqualified deferred compensation plan to which employee

deferrals may be made), the employee may make a deferral election with respect to base monthly salary attributable to future services during the calendar year within 30 days of initial eligibility.

Eligible employees shall elect, on a form provided by the Company, the percentage of their base monthly salary for the ensuing year that is to be deferred. An election to defer a portion of base monthly salary shall be irrevocable.

Deferral percentages cannot be less than 5% or more than 60% of base monthly salary.

MICP Payouts : Elections to defer the cash portion payout applicable to future awards under the MICP must be made at least 6 months prior to the end of the performance period to which the payout relates, or earlier at the Company’s discretion; provided, however, that the employee is continuously employed from the earlier of the beginning of such performance period or the date the performance goals for such performance period are established through the date of the deferral election. The annual election to defer the MICP payout shall be irrevocable.

Eligible employees shall elect, on a form provided by the Company, the percentage of their payout, if any, for the current performance period. Deferral percentages may be up to 100% (in 5% increments) of the cash portion of the MICP payout, if any. Only MICP payouts to be made in cash may be deferred. Payouts in restricted stock or other non-cash remuneration may not be deferred under this Plan.

Deferred Accounts and Interest Credits

The Company shall establish and maintain a deferral account in the name of each participant. Every account shall be credited monthly with the base monthly salary deferred and/or, at the time an MICP award becomes payable, with the amount of MICP payout deferred. Participant accounts shall be credited quarterly with interest equal to the Morgan Guaranty Trust Company prime rate of interest.

Non-Qualified Savings Plan (NQSP) Account

There are two types of Non-Qualified Savings Plan (NQSP) account deferrals:

1.	Matching Contribution Replacement Due to Deferred Compensation . To the extent that participation in the Hercules Deferred Compensation Plan reduces the amount that an eligible participant may contribute to the

Hercules Incorporated Savings and Investment Plan (“401(k) Plan”), a Non-Qualified Savings Plan (NQSP) account shall be established and maintained within this Plan. This account will consist of the Company Matching Contributions (as defined in the 401(k) Plan) that cannot be credited to the 401(k) Plan solely by reason of the participant’s election to defer base monthly salary and/or the cash portion of the MICP payout. Such amounts shall be credited to the participant’s NQSP account under this Plan. The Company Matching Contribution percent will be based on the 401(k) earnings deferral rate elected by the employee and in effect when he or she makes deferral elections under this Plan.

Excess Contributions . Certain highly compensated participants will have their ability to contribute to, or to be credited with contributions under, the 401(k) Plan limited due to the imposition of IRS and Internal Revenue Code limits. The Company projects which participants may exceed the regulatory earnings limit in the subsequent calendar year. Such participants may elect to defer up to an additional 6% of their base monthly salary and the “Target” portion of their MICP payout, which will be matched in this Deferred Compensation Plan to the same extent a match would have been made had the participant been able to contribute such amounts under the 401(k) Plan.

A deferral election under this Section must be made prior to the year that the services to which the base monthly salary relates are performed (or if applicable, in accordance with the timing rules for mid-year eligibility). The deferral will start on the next January 1 and will continue for the entire calendar year. However, the Company Matching Contributions made in relation to this deferral under the Plan will be limited to an amount such that, when combined with the Matching Contributions under the 401(k) Plan, the total does not exceed the Matching Contributions the participant would have received had he continued the same deferral percentage in effect when he made his NQSP election and had he not been subject to IRS earnings limits under the 401(k) Plan. In addition to the foregoing, certain highly compensated participants may not receive a full Performance Retirement Contribution (PRC), or similar non-matching

Company Contribution under the 401(k) Plan, due to the imposition of IRS or Internal Revenue Code limits. Any Company Contributions so limited shall be added to the participant’s NQSP account under this Plan.

The applicable Company Matching Contributions referenced above shall be credited to the participant’s NQSP account at the end of each calendar year (or, if earlier, within thirty (30) days following his separation from service (within the meaning of Section 409A of the Internal Revenue Code)). The other Company contributions referenced above shall be credited to the participant’s NQSP account at approximately the same time they would have been contributed to the 401(k) Plan.

Once credited to a participant’s account, employee deferrals and Company contributions shall be credited quarterly with interest equal to the Morgan Guaranty prime rate of interest.

With respect to amounts under this Plan that were deferred and vested as of December 31, 2004 (including future earnings thereon), and subject to the approval of the Company, a participant may elect to exchange such account balance for Restricted Stock under the applicable “Exchange Awards” provisions of the Hercules Incorporated Long-Term Incentive Compensation Plan (LTICP).

Subject to the terms and conditions set forth in this Section, participants may elect the time and form of payment of benefits under this Plan at the time of their deferral elections. The payment of benefits shall be made (or commence to be made) within ninety (90) days following the time of payment elected by the participant. Plan account balances may be paid in the form of a lump sum or installments. A right to receive installment payments shall be treated as a right to receive a series of separate payments. However, in no event shall NQSP account balances be payable prior to the earliest of participant’s separation from service or disability (each as defined in Section 409A of the Internal Revenue Code), or death.

Notwithstanding previous deferral elections, participants who become eligible for benefits under the Hercules Long-Term Disability (“LTD”) Plan and who are disabled within the meaning of Section 409A shall have their Plan account balances commence

to be paid within ninety (90) days of the date of LTD commencement in the form elected. If no election is made, the participant’s entire Plan account balance will be paid to the participant (or beneficiary, as applicable) in a lump sum within ninety (90) days of separation from service.

Notwithstanding previous deferral elections, in the event of a participant’s death, his or her Plan account balance shall be paid to the participant’s beneficiary within ninety (90) days of the date of the participant’s death.

Any Plan account balance payable to a specified employee (as defined in Section 409A(a)(2)(B)(i) of the Internal Revenue Code) upon such employee’s separation from service (other than by reason of death) shall not be paid to the specified employee until the first business day of the seventh month following separation from service.

Notwithstanding the foregoing, with respect to amounts under this Plan that were deferred and vested as of December 31, 2004 (including future earnings thereon) (“Grandfathered Account”), the following rules will apply:

(1) Participants who are retirement eligible 1 may elect to have their Grandfathered Account settled in one of the following options:

·	Lump sum payable at separation from service or death.

·	A dollar amount to be paid upon the earliest of a specified date or separation from service or death. If any amount remains, such amount will be paid at separation from service.

A percentage of the Grandfathered Account to be paid after retirement as a lump sum and/or in equal annual installments over 1 to 10 years. Payouts must commence on or prior to age 70-1/2 and no later than 10 years from retirement. The percentage shall be applied against the Grandfathered Account balance on the effective date of retirement. Calculation of the annual installment shall be as follows: the first payment shall be the value of the account on the first payout date divided by the

1	Retirement: Termination of employment at Normal Retirement Date (age 65) or with consent of the Company with immediate eligibility for Early or Reduced Early Retirement benefits under a retirement or pension plan maintained by the Company, a Participating Subsidiary or Related Entity.

6 of 8

number of installments that the participant has chosen. Each succeeding payment shall equal the account balance (including credited interest) on each anniversary installment date divided by number of payments remaining to be paid.

(2) Participants who are not retirement eligible at the time of election will have their Grandfathered Account paid in the same manner as the remainder of their Plan account.

Notwithstanding the foregoing, pursuant to Internal Revenue Service Notice 2007-86, section 3.A.01(B), the Human Resources Committee of the Board of Directors has discretion to permit some or all of the Participants to make transitional payment elections in 2008 with respect to all account balances that are to be paid after 2008. A transitional payment election under this section is allowed to change the deferral period and/or the form of distribution for such account balances so long as all distributions of the deferred account balance, after the transitional payment election is taken into account, are to be made after 2008. Accordingly, each Participant may, on or before December 31, 2008, elect to receive his or her account balance as a lifetime monthly annuity.

Subsequent Deferrals

Changes to distribution elections are allowed if made 12 months in advance of the current distribution date, the new election does not take effect for 12 months, and the distribution must be deferred at least 5 years from the current distribution date. Annual installments will be treated as a series of separate payments. The ability to make changes as described in this paragraph shall not apply to Grandfathered Accounts.

Other Terms and Conditions

Participation in the Plan is strictly voluntary.

Amounts deferred under this Plan do not qualify as earnings for purposes of calculating benefits under The Pension Plan of Hercules Incorporated or the Hercules Savings and Investment Plan. Pension benefits otherwise accrued under the Hercules Incorporated Employee Pension Restoration Plan applicable to amounts deferred under

this Plan shall be governed by the terms and conditions of the Hercules Incorporated Employee Pension Restoration Plan.

The Human Resources Committee of the Board of Directors shall have the sole responsibility for administering and interpreting the provisions of the Plan and shall also have the authority to do those things necessary and possible to achieve the deferred receipt of income intended for eligible employees under this Plan.

All amounts paid under the Plan shall be made from the general assets of the Company. Participants shall have no secured interest in any asset of the Company, including, without limitations, investments of the Company, if any, intended to retire its obligations u nder the Plan.

Hercules Incorporated

Employee Pension Restoration Plan

Effective January 1, 2008

Hercules Incorporated maintains the Pension Plan of Hercules Incorporated (the “Pension Plan”), a tax-qualified defined benefit pension plan for salaried employees, nonrepresented hourly employees and certain represented hourly employee groups. A number of key employees will be unable to receive their maximum retirement benefits from the Pension Plan because of limitations imposed by the Internal Revenue Code of 1986, as amended (“Code”) and related Internal Revenue Service regulations on the amount of benefits that may be paid from the Pension Plan, and further, by reason of the permitted method of accruing benefits under the Pension Plan, certain key employees who are hired in mid career will accrue a retirement benefit which is less than a full pension. The purpose of the Hercules Incorporated Employee Pension Restoration Plan (the “Restoration Plan”) is to restore the aforementioned shortfall, and in certain cases, to provide additional pension accrual pursuant to employment agreements between Hercules and certain key employees.

The Restoration Plan is a nonqualified plan of retirement benefits and is not part of the Pension Plan. Any benefit payable by an Employer shall be paid out of its general assets, shall not be funded in advance, and shall represent solely an unsecured contract obligation of the Employer. The Restoration Plan is unfunded and is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The Restoration Plan is intended to satisfy the requirements of Section 409A of the Code.

(a)

Administrator shall mean the Vice President of Human Resources of Hercules, who shall administer the Plan.

(b)

Board shall mean, as to each Employer, the Board of Directors of such Employer.

(c)

Code shall mean the Internal Revenue Code of 1986, as amended.

(d)

Early Retirement Date shall mean the date as of which a Participant is entitled to receive an immediate pension under the Pension Plan, but not earlier than age 55.

(e)

Employer shall mean Hercules Incorporated and also any employer which is a Participating Company in the Pension Plan (as defined in the Pension Plan) and which elects to become an Employer under this Plan by action of its Board, provided that the Board of Directors of Hercules Incorporated consents thereto.

(f)

Participant shall mean (i) an employee of an Employer who would receive a pension benefit from the Pension Plan in excess of his actual pension benefit from the Pension Plan if that employee had not been subject to the limitation on benefits described in Paragraph 6 or the limitation on compensation described in Paragraph 7, or if the employee had not deferred salary or bonus under the Hercules Deferred Compensation Plan, or (ii) a key employee with an agreement as referenced in Sections 1 and 5 herein.

(g)

Pension Plan shall mean the Pension Plan of Hercules Incorporated, as it may be amended from time to time.

(h)

Restoration Plan shall mean this Hercules Incorporated Employee Pension Restoration Plan, as it may be amended from time to time.

Incorporate By Reference Pension Plan of Hercules Incorporated into the Restoration Plan

The relevant provisions of the Pension Plan including, but not limited to provisions relating to vesting, service credit, determination of form of payment, and designations of beneficiaries, but excluding provisions regarding suspension of benefits, are hereby incorporated by reference into the Restoration Plan as though herein set forth in full. Notwithstanding the previous sentence, this Restoration Plan, under conditions noted herein, provides for modifications of the Pension Plan provisions in order to meet the specific objectives of the Restoration Plan and to comply with provisions of Section 409A of the Code.

Individual Employment Contract Adjustments

The years of service for benefit accrual and vesting service shall be computed according to the terms of the Pension Plan except as adjusted by employment agreements between Employer and a Participant, or as otherwise properly adjusted, including adjustments that may aggregate a Participant’s periods of service prior to employment with the Employer with vesting and accrual service normally accrued

under the Pension Plan, or which may provide for additional periods of service in the event of a change in control of Hercules Incorporated.

Section 415 Limitations Adjustment

The Restoration Plan benefit shall be computed without regard to the limitations imposed by Section 415 of the Code.

Compensation Adjustment

Pensionable compensation, as defined under the Pension Plan, shall be expanded to include the following items:

(a)

salary and bonuses deferred under the Hercules Deferred Compensation Plan, but only to the extent such deferrals do not reduce pensionable compensation below the annual limit set forth in Section 401(a)(17) of the Code, and

(b)

compensation in excess of $230,000 (as may be adjusted from time to time in accordance with Section 401(a)(17) of the Code) which is not taken into account in determining benefits under the Pension Plan.

Compensation from a Participant’s employer prior to being employed by an Employer may also be included as compensation for this Restoration Plan only if pursuant to a specific employment agreement.

Calculation of Restoration Plan Benefit

The Restoration Plan benefit shall be calculated as follows:

Step A – Calculate the Pension Plan single life annuity payable at age 65 using Compensation, Vesting, and Accrual service determined under the Restoration Plan (Sections 4, 5, 6, and 7).

Step B – Calculate the Pension Plan single life annuity payable at age 65.

Step C – Determine prior Employer offset, if applicable.

Step D – Restoration benefits before actuarial adjustments: A – (B+C).

Step E – Apply actuarial adjustments to Step D result for early retirement actuarial or other reductions and survivor options elected by Plan participants provided for in Section 9 of this Plan.

Time and Mode of Payment of Benefits

(a)

Retirement Eligible Participants . In the case of a Participant who separates from service (as defined in Section 409A of the Code) on or after his or her Early Retirement Date, benefits earned under the Restoration Plan shall be payable as soon as practicable (but not more than 90 days) following the Participant’s separation from service. Payment shall be made in the form of (1) a 51% Partial Cash Payment, as determined under the Pension Plan, and (2) a monthly annuity for the remainder. The lump sum portion of the 51% Partial Cash Payment payable under the Restoration Plan shall be paid in a cash distribution to the Participant in an amount equal to 51% of the present value equivalent of the Restoration Plan’s monthly pension benefit earned through December 31, 2004, that would otherwise have been payable over the Participant’s expected lifetime. Such 51% Partial Cash Payment shall be determined by using actuarial life-expectancy tables (used in the Pension Plan) and the applicable interest rate provided under the Pension Plan as of the date of payment. Notwithstanding the foregoing, pursuant to Internal Revenue Service Notice 2007-86, section 3.A.01(B), the Employer has discretion to permit some or all of the Participants to make transitional payment elections in 2008 with respect to the Restoration Plan benefits that are to be paid after 2008. A transitional payment election under this section is allowed to change the deferral period and/or the form of distribution for such benefits so long as all distributions of the benefits, after the transitional payment election is taken into account, are to be made after 2008. Accordingly, each Participant may, on or before December 31, 2008, elect to receive the entire Restoration Plan benefit as a life annuity, payable monthly.

(b)

Deferred Vested Participants . In the case of a Participant who separates from service (as defined in Section 409A of the Code) before his or her Early Retirement Date, vested benefits earned under the Restoration Plan shall be payable as soon as practicable (but not more than 90 days) following the date that would have been the Participant’s Early Retirement Date had he or she continued in service. Payment shall be made in the form of a single life annuity, payable monthly, if the Participant is unmarried on the date benefits commence, or a joint and 50% survivor annuity, payable monthly, if the Participant is married on the date benefits commence.

(c)

Specified Employees . Notwithstanding Sections 9(a) and 9(b), no benefit payments under this Restoration Plan shall be made to a Specified Employee (as defined in Section 409A(a)(2)(B)(i) of the Code) upon his or her separation from service (other than by reason of death) until the first business day of the seventh month following his or her separation from service. When payments are made after the delay, there will be an additional amount payable to the Specified Employee (or, in the event of his death, to his beneficiary) equal to the interest earned accrued throughout the delay period, applying the same interest rate used above to calculate the lump sum portion of the 51% Partial Cash Payment described above.

(d)

Disabled Employees . A disabled Participant who separates from service (as defined in Section 409A of the Code) shall commence benefits in the manner described in Sections 9(a), (b) and (c). Any additional benefits accrued under this Restoration Plan solely as a result of deemed credited service attributable to the Participant’s disability shall be treated as disability pay that is exempt from Section 409A of the Code and shall be paid in the form and at the time set forth in the Pension Plan.

(e)

Pre-Retirement Death . In the case of a Participant who dies prior to his separation from service (as defined in Section 409A of the Code), vested benefits earned under the Restoration Plan shall be payable as soon as practicable (but not more than ninety (90) days) following the date of the Participant’s death. Such benefits shall be determined as if the Participant had survived until the date of retirement, commenced receipt of his Restoration Plan benefit in the form of a joint and 50% survivor annuity, and died the next day. The pre-retirement benefit payable under this Restoration Plan shall be paid as an annuity for the life of the beneficiary (or, if the beneficiary is an estate or trust, as a lump sum).

(f)

Return to Service . Notwithstanding Section 4, a Participant’s return to service with an Employer following his separation from service (as defined in Section 409A of the Code) shall not affect payment of the Participant’s Restoration Plan benefit. Any Restoration Plan benefit a Participant may be entitled to receive for service following such a return to service shall be calculated under Section 8 by including in the amount calculated under Step C thereof an offset for Restoration Plan benefits paid after such return to service and prior

to the Participant’s subsequent separation from service (as defined in Section 409A of the Code).

10.

Forfeiture of Benefits

Notwithstanding any other provision of the Restoration Plan, no payment of any benefit shall be made, and all rights of the Participant to the payment thereof shall be forfeited if, prior to the time of such payment, the Participant (I) shall be employed without Employer’s consent by a competitor of, or shall be engaged in any activity in competition with Employer, including, but not limited to, actively recruiting current employees of the Employer; (II) divulge without the consent of Employer any secret or confidential information belonging to Employer or a subsidiary; or (III) has been dishonest or fraudulent in any matter affecting Employer, or has committed any act that, in the sole judgment of the Board, has been substantially detrimental to the interests of the Employer. Employer shall give Participant written notice of the occurrence of any such event prior to making any such forfeiture. The determination of the Board as to the occurrence of any of the events specified in the foregoing clauses (I), (II), and (III) of this subparagraph shall be conclusive and binding upon all persons for such purposes.

11.

Termination of Participation

(a)

A Participant shall cease to be a Participant hereunder with respect to any benefit not yet accrued hereunder upon his termination of employment from the Employer.

(b)

Termination of employment or status as a Participant shall not, except as provided in Section 10 of the Plan, operate to impair the right of a Participant to vested benefits under this Plan which have accrued to the date of the termination of employment or of his or her status as a Participant.

12.

Nonalienability of Benefits

No Participant or beneficiary shall have the right to alienate, assign, pledge, encumber or otherwise transfer any right to any benefit hereunder or to the payment or receipt thereof; and in the event any such disposition is made or attempted; or if at any time any benefit shall be the subject of any levy, attachment or other process requiring the payment thereof other than to the Participant or his or her beneficiary

entitled to the same under this Plan, all rights of the Participant or such beneficiary or any person claiming such rights to any such benefit shall be in all respects cancelled, and there shall be no obligation to pay any such benefit under this Plan.

13.

Right to Amend or Terminate Pension Plan of Hercules Incorporated

Nothing contained herein shall be deemed to restrict the right of Employer to amend or terminate the Pension Plan or any provisions thereof when and as deemed necessary or desirable. References in this Restoration Plan to the Pension Plan shall be deemed to refer to the Pension Plan as amended to the date when the determination of any right to or the amount or payment of any benefit hereunder is made. In case of the termination of the Pension Plan, this Restoration Plan shall also be terminated, without prejudice to any right to any benefit theretofore accrued hereunder. In the event of a termination of the Restoration Plan, benefits under the Restoration Plan shall be distributed in accordance with Section 9, or at the discretion of the Board of Directors of Hercules Incorporated, at a time permitted under Section 409A of the Code.

14.

Coordination with Grantor Trust

Hercules has entered into a grantor trust agreement for the benefit of management employees that will pay the benefits of the Restoration Plan, to the extent available, from assets of the grantor trust in the event of an unsolicited change in control. The grantor trust will pay the benefits of the Restoration Plan pursuant to the terms of the Restoration Plan, which is incorporated as an Exhibit to the grantor trust.

15.

No Right to Employment

Nothing contained in this Restoration Plan shall be deemed to create or confirm to any present or future employee of Employer any right to employment or continued employment.

16.

Withholding and Payroll Taxes

In the event that it is determined that any benefit or payment of any benefit hereunder is subject to any withholding or payroll tax, the Employer shall have the

right to deduct any such withholding or payroll tax from any benefit payment otherwise payable or which may become payable hereunder.

17.

Effective Date

The Restoration Plan shall be effective, January 1, 2008 and shall amend and supersede all provisions of the Hercules Nonqualified Supplemental Retirement Plan that were in effect on October 1, 1990.

NOTICE OF GRANT OF STOCK APPRECIATION RIGHT (SAR) AWARD

Name of Employee:

[Name]

Name of Plan:

2006 AI Incentive Plan

Number of SAR’s:

[x,xxx]

Grant Price Per SAR:

[$xx.xx]

Date of SAR Grant:

[Grant Date]

Vesting Schedule:

50% on 1 st Anniversary of Grant Date

Additional 25% on 2 nd Anniversary of Grant Date

Remaining 25% on 3 rd Anniversary of Grant Date

Expiration Date:

[Ten years & 30 days after Grant Date]

ASHLAND INC ("Ashland") hereby confirms the grant of a Stock Appreciation Right (“SAR”) award (“Award”) to the above-named Employee ("Employee"). This Award entitles Employee to receive Ashland stock equal to the excess of the fair market value of Ashland Common Stock, par value $0.01 per share (“Common Stock”), as determined by the closing price of the Common Stock as reported on the Composite Tape of the New York Stock Exchange, on the date the SAR is exercised over the grant price of the Common Stock, with an aggregate value equal to the excess of the fair market value of one share of Common Stock over the exercise price specified in such SAR multiplied by the number of SARs of Common Stock covered by such SAR or portion thereof which is so surrendered.

This Award is granted under, and is subject to, all the terms and conditions of the Plan. Copies of the Plan and related Prospectus are available for your review on Fidelity’s website.

This grant of Stock Appreciation Rights is subject to your on-line acceptance of the terms and conditions of this Agreement through the Fidelity website.

By:____________________________________

Personal and Confidential

EXHIBIT 10.26

Master Formation Agreement

Today the fourteenth day of July 2010

-14.07.2010 -

appeared before me, the undersigned

Prof. Dr. Dieter Mayer

Notary Public

with office in Pacellistraße 14, D-80333 M ϋ nchen, Germany,

1. Mr.Mark Alan Stach, born on 16.12.1961, with business address at 50E. River Center Blvd. Covington, KY 41012-0391, U.S.A. acting not in his own behalf but with the provisio of subsequent approval (vorbehaltlich Genehmigung), whereby the approval is seen as communicated and legally effective as of receipt by the notary public, for

Ashland Inc.

seated in Covington, KY 41012-0391, U.S.A.,

business address: 50E. River Center Blvd. Covington,

KY 41012-0391, U.S.A.,

2. Mr. Dr. Ulrich M ϋ ller , born on 10.06.1963, with business address at Lenbachplatz 6, 80333 Munich, acting not in his own behalf but with the provisio of subsequent approval (vorbehaltlich Genehmigung), whereby the approval is seen as communicated and legally effective as of receipt by the notary public, for

Sud-Chemie Aktiengesellschaft,

seated in Mϋnchen,

business address: Lenbachplatz 6, 80333 Munich, (Commercial Register Munich, HRB 1019)

3. Mr. Thiemo Heinzen , born on 16.10.1965, with business address at Lenbachplatz 6, 80333 Munich, acting not in his own behalf but with the provisio of subsequent approval (vorbehaltlich Genehmigung), whereby the approval is seen as communicated and legally effective as of receipt by the notary public, for

Ashland-Sudchemie-Kernfest GmbH,

seated in Hilden,

business address: Reisholzstraße 16-18, 40721 Hilden,

(Commercial Register Dϋsseldorf, HRB 44968)

The persons appearing identified themselves through presentation of their photo identity papers.

The persons appearing requested this Deed to be recorded in the English language. The officiating Notary Public, who has sufficient command of the English language, ascertained that the persons appearing also have sufficient command of the English language. After having been instructed by the officiating Notary Public, the persons appearing waived the right to obtain the assistance of a sworn interpreter and the right to obtain a certified translation of this Deed.

The officiating Notary Public pointed out that, before the recording, he was required to ask each of those persons appearing whether he or any of his partners had already been or was presently active, outside of an official capacity, in the following recorded matter. Those appearing declared that this was not the case.

The persons appearing requested notarization of the following:

On July 13 th and 14 th , 2010 in order to facilitate the notarization of this Agreement all appendixes referring to the following - excluded the Exhibit 4 (Master Contribution and Sale Agreement) but included all appendixes to Exhibit 4 - have been notarized separately by the officiating notary public Prof. Dr. Dieter Mayer in Munich, Role of Deeds No. M 1539/2010 (the "Reference Deed"). Reference is made to the Reference Deed according to section 13 a BeurkG. The Parties declare that the Reference Deed - the original of which was available during the notarization - is well known to them. They waive their right to nave the Reference Deed being read aloud

by the officiating notary public as well as their right to have the Reference Deed being attached to this deed.

The Parties hereby approve (genehmigen) the Reference Deed and explicitly enter the agreements that are part of the Reference Deed as defined below.

MASTER FORMATION AGREEMENT

by and among

ASHLAND INC.

and

SÜD-CHEMIE AKTIENGESELLSCHAFT

and

ASHLAND-SÜDCHEMIE-KERNFEST GMBH

TABLE OF CONTENTS

Page

ARTICLE I CERTAIN DEFINED TERMS ..............................................................................................................			2
ARTICLE II CORPORATE STRUCTURE ..............................................................................................................			6
	Section 2.1	JV Holding Companies; Transfers and/or Contributions on the Scheduled Closing Date .................	6
	Section 2.2	Transfers on the Scheduled Closing Date ......................................................................................	7
	Section 2.3	Ashland Step Plan ........................................................................................................................	7
	Section 2.4	SC Step Plan ...............................................................................................................................	8
	Section 2.5	Steps Towards Closing ................................................................................................................	9
	Section 2.6	Contemplated Group Structure, Opening Balance Sheet ...............................................................	10
ARTICLE III BUSINESS SCOPE ...........................................................................................................................			10
	Section 3.1	Business Scope ............................................................................................................................	10
	Section 3.2	Excluded Business .......................................................................................................................	10
ARTICLE IV MASTER CONTRIBUTION AND SALE AGREEMENT .................................................................			11
ARTICLE V New Governance Documents ...............................................................................................................			11
	Section 5.1	Governance Documents ...............................................................................................................	11
	Section 5.2	Existing Governing Documents .....................................................................................................	11
ARTICLE VI CLOSING ..........................................................................................................................................			11
	Section 6.1	Closing Conditions .......................................................................................................................	11
	Section 6.2	Local Closing Conditions .............................................................................................................	16
	Section 6.3	Merger Filings ..............................................................................................................................	16
	Section 6.4	Reasonable Best Efforts ...............................................................................................................	17
	Section 6.5	Waiver of Closing Conditions .......................................................................................................	17
	Section 6.6	Rescission ....................................................................................................................................	17
	Section 6.7	Material Adverse Change Determination .......................................................................................	18
	Section 6.8	Closing Date ................................................................................................................................	19
	Section 6.9	Preparation of Closing ..................................................................................................................	21
	Section 6.10	Waiver of Closing Actions ............................................................................................................	22
	Section 6.11	Closing Confirmation ....................................................................................................................	22

-ii-

	Section 6.12	Rescission ....................................................................................................................................	22
	Section 6.13	Local Closing Date ......................................................................................................................	22
	Section 6.14	Period until Local Closing .............................................................................................................	23
	Section 6.15	Disposal of Local Businesses ........................................................................................................	23
ARTICLE VII COMPENSATION; NET ASSET VALUE IMBALANCE ..............................................................			23
	Section 7.1	Compensation Payments to Ashland and SC ................................................................................	23
	Section 7.2	Net Asset Value Imbalance ..........................................................................................................	24
	Section 7.3	Preparation of the Closing Date Balance and Net Asset Values Statement	26
	Section 7.4	Review of the Closing Date Balance and Net Asset Values Statement by Ashland and SC; Disputes ............................................................................................................	26
	Section 7.5	Final Determination of the Imbalance Payment ..............................................................................	28
	Section 7.6	General Rules for Payment ...........................................................................................................	28
ARTICLE VIII COSTS ............................................................................................................................................			29
	Section 8.1	Costs in connection with the Transfer of Businesses and the Implementation of the Step Plan .........	29
	Section 8.2	Costs for the Preparation and Finalization of the Closing Date Balance and Net Asset Values Statement .........................................................................................................	29
ARTICLE IX COVENANTS ...................................................................................................................................			30
	Section 9.1	Conduct of Business Prior to Closing ............................................................................................	30
	Section 9.2	Further Assurances ......................................................................................................................	32
	Section 9.3	Performance by the Group Companies .........................................................................................	32
	Section 9.4	Access to Information ..................................................................................................................	32
	Section 9.5	Notice of Claims ..........................................................................................................................	32
	Section 9.6	Public Announcements .................................................................................................................	33
ARTICLE X FURTHER CONTRACTUAL ARRANGEMENTS ............................................................................			33
	Section 10.1	Supply Relations ..........................................................................................................................	33
	Section 10.2	Corporate Names/Use of Names .................................................................................................	33
ARTICLE XI CONFIDENTIALITY ........................................................................................................................			34
	Section 11.1	Confidentiality ..............................................................................................................................	34
	Section 11.2	Proprietary Information ................................................................................................................	34

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	Section 11.3	Consented Disclosures .................................................................................................................	35
	Section 11.4	Mandatory Disclosures ................................................................................................................	35
	Section 11.5	Termination of Obligations ............................................................................................................	35
ARTICLE XII Notices ..............................................................................................................................................			35
	Section 12.1	Notices ........................................................................................................................................	35
	Section 12.2	Effectiveness ................................................................................................................................	36
ARTICLE XIII MISCELLANEOUS ........................................................................................................................			36
	Section 13.1	Expenses .....................................................................................................................................	36
	Section 13.2	Foreign Currencies .......................................................................................................................	36
	Section 13.3	Calculations .................................................................................................................................	36
	Section 13.4	Language .....................................................................................................................................	37
	Section 13.5	Amendments ................................................................................................................................	37
	Section 13.6	Consent Requirements .................................................................................................................	37
	Section 13.7	Exhibits ........................................................................................................................................	37
	Section 13.8	Entire Agreement .........................................................................................................................	37
	Section 13.9	No Third Party Beneficiary ...........................................................................................................	37
	Section 13.10	Assignment ..................................................................................................................................	37
	Section 13.11	Exclusion of Remedies .................................................................................................................	37
	Section 13.12	Interpretation ...............................................................................................................................	38
	Section 13.13	Set-off and Retention ...................................................................................................................	38
	Section 13.14	Interest ........................................................................................................................................	38
	Section 13.15	Invalid Provisions .........................................................................................................................	38
	Section 13.16	Governing Law ............................................................................................................................	38
	Section 13.17	Arbitration ...................................................................................................................................	38

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LIST OF EXHIBITS

Exhibit 1.0	Master Transition Services Agreement .......................................................................	2
Exhibit 1.1	Brazil Toll Manufacturing Agreement .........................................................................	2
Exhibit 1.2	Warehousing and Services Agreement .......................................................................	2
Exhibit 1.3	Dublin Site License Agreement ..................................................................................	2
Exhibit 1.4	Manufacturing Services Agreement ............................................................................	2
Exhibit 1.5	Ashland Capital Budget .............................................................................................	3
Exhibit 1.6	Global Business Plan .................................................................................................	4
Exhibit 1.7	SC Capital Budget ....................................................................................................	5
Exhibit 2.1(c)	Initial Limited Partnership Agreement .........................................................................	7
Exhibit 2.3(a)(i)	High Level Step Plan .................................................................................................	8
Exhibit 2.3(a)(ii)	JV Balance Sheet Requirement Specifications ............................................................	8
Exhibit 2.6	Contemplated Group Structure ..................................................................................	10
Exhibit 4	Master Contribution and Sale Agreement ..................................................................	11
Exhibit 5.1-1	Shareholders' Agreement ..........................................................................................	11
Exhibit 5.1-1 (A)	Additional Terms of exchange rate .............................................................................	11
Exhibit 5.1-2	Amended and Restated Limited Partnership Agreement (to be adopted at Closing) ...................................................................................................	11
Exhibit 6.1(a)(iii)	ASK Step Plan Confirmation ....................................................................................	12
Exhibit 6.1(a)(vi)	AS-Group Material Adverse Change Bring Down .....................................................	12
Exhibit 6.1(b)(i)	SC Step Plan Confirmation .......................................................................................	13
Exhibit 6.1(b)(ii)	SC Material Breach Bring Down ...............................................................................	13
Exhibit 6.1(b)(iii)	SC Material Third Party Consents .............................................................................	13
Exhibit 6.1(b)(iv)	SC Covenant Bring Down .........................................................................................	13
Exhibit 6.1(b)(v)	SC Business Material Adverse Change Bring Down ..................................................	13
Exhibit 6.1(c)(i)	Ashland Step Plan Confirmation ................................................................................	14
Exhibit 6.1(c)(ii)	Ashland Material Breach Bring Down ........................................................................	14
Exhibit 6.1(c)(iii)	Ashland Material Third Party Consents ......................................................................	14
Exhibit 6.1(c)(iv)-1	Ashland Permitted Encumbrances ..............................................................................	15
Exhibit 6.1(c)(iv)-2	Ashland Release Notice ............................................................................................	15
Exhibit 6.1(c)(v)	Ashland Covenant Bring Down .................................................................................	15

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Exhibit 6.1(c)(vi)	Ashland Business Material Adverse Change Bring Down ...........................................	15
Exhibit 6.7(c)	Arbitrator Basic Terms of Reference .........................................................................	18
Exhibit 6.8(a)(i)(4)	Exaloid Share Sale Agreement ..................................................................................	20
Exhibit 6.8(a)(ii)	Ashland Step Plan Confirmation at Closing ................................................................	20
Exhibit 6.8(b)(ii)	SC Step Plan Confirmation at Closing .......................................................................	21
Exhibit 6.8(d)(iii)	SC Shareholder Loans to be repaid at Closing ...........................................................	21
Exhibit 7.1	Payment ...................................................................................................................	24
Exhibit 7.2(a)(i)	Agreed Ashland Net Asset Value ..............................................................................	24
Exhibit 7.2(a)(ii)	Agreed SC Net Asset Value .....................................................................................	24
Exhibit 7.3(b)(i)	Ashland Net Asset Valuations Principles ....................................................................	26
Exhibit 7.3(b)(ii)	SC Net Asset Valuations Principles ...........................................................................	26
Exhibit 7.6(b)	Bank Accounts .........................................................................................................	28
Exhibit 8.1(a)	Cost Sharing .............................................................................................................	29

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INDEX OF DEFINED TERMS

Affiliate	2	Closing Date Net Asset Values	25
Agreed Ashland Net Asset Values	24	Closing Date Net Asset Values Statement	26
Agreed Ashland Net Debt	24	Compensation Payment Financing	9
Agreed Ashland Working Capital	24	Compensation Payments	24
Agreed Net Asset Values	24	Contemplated Group Structure	10
Agreed SC Net Asset Values	24	Costs	29
Agreed SC Net Debt	24	Dispute	38
Agreed SC Working Capital	24	EBITDA	3
Agreement	1	Euribor	3
ALIP	7	Exaloid Share Sale Agreement	20
Amended and Restated Limited Partnership Agreement	11	Exhibits	37
Ancillary Agreements	2	Final MAC Determination	18
ASAV	1	Fulfillment Date	4
AS-Group	1	GAAP	4
AS-Group Business	10	Global Business Plan	4
AS-Group MAC Relevant EBITDA	2	Governmental Authority	4
AS-Group MAC Relevant Net Sales	2	Group	1
AS-Group Material Adverse Change	2	Group Business	10
Ashland	1	Group Companies	1
Ashland Bank Account	28	Group Material Adverse Change	4
Ashland Business	10	High Level Step Plan	8
Ashland Capital Budget	3	Initial Limited Partnership Agreement	7
Ashland Closing Date Net Asset Values	25	JV Holding Companies	6
Ashland Closing Date Net Debt	25	License Agreements	4
Ashland Closing Date Working Capital	25	Local Closing Date	23
Ashland Imbalance Payment	25	Local Contribution or Sale Agreements	4
Ashland Material Breach	3	Local Interim Period	23
Ashland Material Third Party Consents	14	Local Parties	16
Ashland Step Plan	7	MAC Determination Notice	18
Ashland Termination Event	17	MAC Dispute Notice	18
Ashland's Auditor	26	MAC Relevant EBITDA	4
ASK	1	MAC Relevant Net Sales	4
ASK Bank Account	28	Master Contribution and Sale Agreement	11
Business	10	Mutual Closing Conditions	12
Business Day	3	Neutral Auditor	27
Closing	19	NewCo	9
Closing Actions	19	Parties	1
Closing Conditions	11	Permitted Encumbrances	5
Closing Confirmation	22	Pre-Closing Agreed Global Business Plan	13
Closing Date	19	Proprietary Information	34
Closing Date Balance and Net Asset Values Statement	26	Revised Closing Date Balance and Net Asset Values Statement	27
Closing Date Balance Sheet	26	Rules	38
		SC	1

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SC Bank Account	28	Scheduled Closing Date	6
SC Business	10	SC's Auditor	26
SC Capital Budget	5	Shareholders' Agreement	11
SC Closing Date Net Asset Values	25	Step Plan Deadline	8
SC Closing Date Net Debt	25	Steps Towards Closing	9
SC Closing Date Working Capital	25	Süd-Chemie Aktiengesellschaft	1
SC Imbalance Payment	25	Tecpro Holding Corporation, Inc.	6
SC Material Breach	5	Transaction	1
SC Material Third Party Consent	13	Transaction Documents	6
SC Step Plan	8	Transferred Businesses	6
SC Termination Event	17	US Limited Partnership	1
SCF	6

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MASTER FORMATION AGREEMENT

This MASTER FORMATION AGREEMENT (together with all appendices, exhibits and schedules thereto the " Agreement ") is made and entered into by and among (i) Ashland Inc. , a publicly listed stock corporation, organized and existing under the laws of the Commonwealth of Kentucky, USA, having its office at 50 East RiverCenter Boulevard, Covington, Kentucky 41011, USA (" Ashland "), (ii) Süd-Chemie Aktiengesellschaft , a publicly listed stock corporation, organized and existing under the laws of the Federal Republic of Germany, having its office at Lenbachplatz 6, 80333 München, Germany (" SC "), and (iii) Ashland-Südchemie-Kernfest GmbH , a limited liability company, organized and existing under the laws of the Federal Republic of Germany, having its office at Reisholzstrasse 16-18, 40721 Hilden (" ASK "). Ashland, SC and ASK shall hereinafter collectively be referred to as the " Parties " or individually as a " Party ".

W I T N E S S E T H

WHEREAS, Ashland and SC are the sole shareholders of the jointly controlled companies (i) ASK and (ii) Ashland-Avébène S.A.S (" ASAV "; ASK together with its subsidiaries and ASAV (as such entities stand prior to Closing) shall hereinafter be referred to as the " AS-Group ").

WHEREAS, Ashland and SC intend to combine their respective worldwide businesses relating to the foundry industry (the " Transaction ") by transferring such businesses to (i) ASK and its subsidiaries, and (ii) a newly formed US partnership (" US Limited Partnership "; ASK and US Limited Partnership and their subsidiaries (as such entities stand after Closing) collectively the " Group "; the entities that will be part of the Group shall hereinafter be referred to as the " Group Companies " or individually as a " Group Company ").

WHEREAS, Ashland and SC shall, directly or indirectly through their Affiliate's ownership of ASK and the future US Limited Partnership, each hold directly or indirectly 50% of the interest in the Group.

WHEREAS, the Group shall become a globally active full range supplier to the foundry industry, developing, producing and selling premium products and services such as resins, coatings, feeders, sleeves, filters, cores and risers and various other additives by way of technology and service differentiation.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Parties agree as follows:

ARTICLE I

CERTAIN DEFINED TERMS

As used in this Agreement, the following capitalized terms have the meanings set forth below:

" Affiliate " means any person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the person specified, excluding the Group Companies and the members of the AS-Group, as the case may be. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether through ownership of voting securities or ownership interests, by contract or otherwise, provided that the direct or indirect ownership of fifty per cent (50%) or more of the voting share capital of a person is deemed to constitute control of such person, and "controlling" and "controlled" have corresponding meanings.

" Ancillary Agreements " means (i) the master transition services agreement substantially in the form as attached hereto as Exhibit 1.0 , (ii) the Brazil toll manufacturing agreement substantially in the form as attached hereto as Exhibit 1.1 , (iii) the warehousing and services agreement substantially in the form as attached hereto as Exhibit 1.2 , (iv) the Dublin site license agreement substantially in the form as attached hereto as Exhibit 1.3 , (v) the manufacturing services agreement substantially in the form as attached hereto as Exhibit 1.4 and (v) the License Agreements substantially in the form, in each case, as the same may be amended by the Parties upon mutual agreement between the Signing Date and the Scheduled Closing Date.

" AS-Group MAC Relevant EBITDA " means the EBITDA of the AS-Group as shown in the Global Business Plan.

" AS-Group MAC Relevant Net Sales " means the net sales of the AS-Group as shown in the Global Business Plan.

" AS-Group Material Adverse Change " means any event, circumstance, effect or change which individually (without taking into account any other event, circumstance, effect or change) affects the business of the AS-Group and has reduced or is reasonably likely to reduce in an aggregate amount of more than (x) EUR 40,000,000.00 (in words: Euro forty million) the consolidated AS-Group MAC Relevant Net Sales, or (y) EUR 5,000,000.00 (in words: Euro five million) the consolidated AS-Group MAC Relevant EBITDA of the AS-Group, such AS-Group MAC Relevant Net Sales and AS-Group MAC Relevant EBITDA as projected for the two year period from January 1, 2010 thru December 31, 2011 in the Global Business Plan from the perspective of a prudent business person; provided however, that

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(i) proceeds from or claims which have been conceded in writing by third parties (including claims against insurance companies) shall be calculated against such reduction; this shall not apply to proceeds from or claims for remedies provided for herein or in the Master Contribution and Sale Agreement; and

(ii) an AS-Group Material Adverse Change shall not have occurred, if such reduction is cured (whether by remediation in kind or monetary compensation (including by monetary compensation paid by the AS-Group)) prior to the Closing Date, or

(iii) an AS-Group Material Adverse Change shall not have occurred, if such reduction is reasonably capable of being cured (whether by remediation in kind or monetary compensation (including by monetary compensation paid by the AS-Group)) within three (3) months from the Closing Date.

An AS-Group Material Adverse Change shall not include any effect resulting from (i) changes in general economic conditions (including general developments of capital and financial markets) or industry-wide conditions, (ii) changes in applicable laws or interpretations thereof, (iii) measures or actions taken by or with the joint approval of Ashland and SC or (iv) the compliance with the terms of, or the taking of any action required or otherwise contemplated by any of the Transaction Documents, or (v) the execution or consummation of the Transaction Documents.

" Ashland Capital Budget " means the 2010 capital budget for the Ashland Business attached hereto as Exhibit 1.5 .

" Ashland Material Breach " shall have occurred if (i) any Breach (as defined in Section 7.1 of the Master Contribution and Sale Agreement) with respect to the representation and warranties made by Ashland in the Master Contribution and Sale Agreement has occurred , and (ii) such Breach is reasonably likely to give ASK or the relevant Group Company a claim under the Master Contribution and Sale Agreement in excess of EUR 5,000,000.00 (in words: Euro five million).

" Business Day " means any day other than Saturday, Sunday and public holidays in Munich, Germany and in New York, NY, USA.

" EBITDA " means earnings before interest, income taxes, depreciation and amortizations, calculated as demonstrated in the Global Business Plan.

" Euribor " means the percentage rate per annum determined by the Banking Federation of the European Union for a twelve months period which appears on the appropriate

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page of the Reuters screen (or such other page as the Parties may agree) at or about 11.00 a.m. London time on the date on which payment of the sum under this Agreement was due but not paid.

" Fulfillment Date " means the date on which the last of the Closing Conditions has been fulfilled or waived.

" GAAP " means generally accepted accounting principles, consistently applied throughout the periods presented.

" Global Business Plan " means (i) as from the Signing Date until the date on which SC and Ashland agree on the Pre-Closing Agreed Global Business Plan in writing, the business plan attached hereto as Exhibit 1.6 and (ii) as from the date on which SC and Ashland agree on the Pre-Closing Agreed Global Business Plan in writing, the Pre-Closing Agreed Global Business Plan.

" Governmental Authority " means any applicable federal, state or local government, regulatory or administrative authority, or any court, agency, commission, tribunal, or judicial or arbitral body or self-regulated entity, whether domestic or foreign.

" License Agreements " shall have the meaning ascribed thereto in the definitions Section of the Master Contribution and Sale Agreement.

" Local Contribution or Sale Agreements " has the meaning given to it in the Master Contribution and Sale Agreement.

" Local Closing Conditions " means those conditions precedent as set forth in the respective Local Contribution or Sale Agreement.

" MAC Relevant EBITDA " means the EBITDA of the Group as shown in the Global Business Plan, but excluding the EBITDA attributable to AS-Group.

" MAC Relevant Net Sales " means the net sales of the Group as defined in the Global Business Plan, but excluding the net sales attributable to the AS-Group.

" Group Material Adverse Change " means any event, circumstance, effect or change which individually (without taking into account any other event, circumstance, effect or change) affects the Ashland Transferred Business Assets or the SC Transferred Business Assets (each as defined in the Master Contribution and Sale Agreement), as the case may be, and has

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reduced or is reasonably likely to reduce in an aggregate amount of more than (x) EUR 40,000,000.00 (in words: Euro forty million) the consolidated MAC Relevant Net Sales, or (y) EUR 5,000,000.00 (in words: Euro five million) the consolidated MAC Relevant EBITDA of the Group, such MAC Relevant Net Sales and MAC Relevant EBITDA as projected for the two year period from January 1 2010 thru December 31 2011 in the Global Business Plan from the perspective of a prudent business person; provided however, that

(ii) a Group Material Adverse Change shall not have occurred, if such reduction is cured (whether by remediation in kind or monetary compensation (including by monetary compensation paid by the affected Party)) prior to the Closing Date, or

(iii) a Group Material Adverse Change shall not have occurred, if such reduction is reasonably capable of being cured (whether by remediation in kind or monetary compensation (including by monetary compensation paid by the affected Party)) within three (3) months from the Closing Date.

A Group Material Adverse Change shall not include any effect resulting from (i) changes in general economic conditions (including general developments of capital and financial markets) or industry-wide conditions, (ii) changes in applicable laws or interpretations thereof, (iii) measures or actions taken by or with the approval of ( a ) SC in the case of a Group Material Adverse Change with respect to the Ashland Transferred Business Assets, or ( b ) Ashland in the case of a Group Material Adverse Change with respect to the SC Transferred Business Assets, (iv) compliance with the terms of, or the taking of any action required or otherwise contemplated by any of the Transaction Documents, or (v) the execution or consummation of the Transaction Documents.

" Permitted Encumbrances " shall have the meaning ascribed thereto in the Master Contribution and Sale Agreement.

" SC Capital Budget " means the 2010 capital budget for the SC Business attached hereto as Exhibit 1.7 .

SC Material Breach " shall have occurred if (i) any Breach (as defined in Section 7.1 of the Master Contribution and Sale Agreement) with respect to the representations and warranties made by SC in the Master Contribution and Sale Agreement has occurred, and (ii) such Breach is reasonably likely to give ASK or the relevant Group Company a claim under the Master Contribution and Sale Agreement in excess of EUR 5,000,000.00 (in words: Euro five million).

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" Scheduled Closing Date " means

(i) the last calendar day of the month into which the Fulfillment Date falls, if the Fulfillment Date falls into any day between day 1 (including) and day 15 (including) of a calendar month;

(ii) the last calendar day of the month following the month into which the Fulfillment Date falls, if the Fulfillment Date falls into any day after day 15 (excluding) of a calendar month; or

(iii) any other date as agreed between Ashland and SC in writing.

" SCF " means Süd-Chemie Finance GmbH ( i.e. , a subsidiary of SC)

" Signing Date " means the date of this Agreement.

" Tecpro Holding Corporation, Inc. " means Tecpro Holding Corporation, Inc., a U.S. subsidiary of SC.

" Transaction Documents " means this Agreement, the Master Contribution and Sales Agreement, including its appendices, exhibits and schedules.

" Transferred Businesses " means the Ashland Business, the SC Business and the shareholding in ASAV.

ARTICLE II

CORPORATE STRUCTURE

Section 2.1 JV Holding Companies; Transfers and/or Contributions on the Scheduled Closing Date. ASK and US Limited Partnership shall serve as ultimate holding companies for the Group (collectively the " JV Holding Companies "). The business year of the JV Holding Companies shall be the calendar year.

(b) Ashland and SC shall procure that between the Signing Date and the Closing Date (i) ASK's registered capital of EUR 4,000,000 remains unchanged and ASK's place of business and registered seat remains in Hilden, Germany, and (ii) ASAV's registered capital of EUR 1,200,000 remains unchanged and ASAV's place of business and registered seat remains in LeGoulet 29720, France. Ashland and SC undertake to take all

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actions in accordance with the shareholders' agreement relating to their joint shareholding in ASK and ASAV and/or their respective current articles of association, if and to the extent such actions (including the granting of consents or the entering into amendment agreements) are required to consummate this Agreement and the Transaction. As from the Closing Date the relations of Ashland and SC as joint shareholders in ASK shall be governed by the Shareholders' Agreement (as defined in Section 5.1) and the new articles of association to be resolved thereunder.

(c) The Parties shall and shall procure, as the case may be, that as soon as reasonably practical after the Signing Date, US Limited Partnership is formed by each of Ashland, Ashland Licensing and Intellectual Property, LLC (" ALIP ") and Tecpro Holding Corporation Inc. as limited partners, who shall each (Ashland and ALIP on the one hand and Tecpro Holding Corporation Inc. on the other hand) hold 49.95% of the LP interest in US Limited Partnership and ASK as general partner, who shall hold 0.1% GP Interest in US Limited Partnership. Ashland, ALIP and Tecpro Holding Corporation Inc. shall each make those contributions to US Limited Partnership as and when required by this Agreement and ASK shall make those contributions to US Limited Partnership as and when required by this Agreement. US Limited Partnership's principal place of business shall be in Dublin, Ohio, USA. US Limited Partnership's name shall be ASK Chemicals LP. The initial partnership agreement of US Limited Partnership is attached hereto as Exhibit 2.1(c) (the " Initial Limited Partnership Agreement ").

Section 2.2 Transfers on the Scheduled Closing Date . On the Scheduled Closing Date

(a) Ashland shall (and shall procure that its relevant Affiliates will) transfer the Ashland Transferred Companies and the Ashland Carve-Out Business (each as defined in the Master Contribution and Sales Agreement); and

(b) SC (and shall procure that its relevant Affiliates will) transfer the SC Transferred Companies and the SC Carve-Out Business (each as defined in the Master Contribution and Sales Agreement)

to the relevant Group Companies. In preparation of these transfer obligations, the Parties agree to prepare certain step plans as set forth in Section 2.3 and Section 2.4 and to adhere and cause their respective Affiliates to adhere to such step plans prior to the Scheduled Closing Date and on the Scheduled Closing Date, respectively.

Section 2.3 Ashland Step Plan .

(a) Ashland shall prepare a detailed step plan (such step plan, including its completions, if any, the " Ashland Step Plan ") which shall set forth in detail all steps which are required to

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(i) consummate the transfer of the Ashland Transferred Companies and the Ashland Carve-Out Business to the Group Companies in accordance with the specifications of the high level step plan attached hereto as Exhibit 2.3(a)(i) (the " High Level Step Plan "); and

(ii) effect the balance sheet objectives (attributable to the transfer of the Ashland Transferred Companies and the Ashland Carve-Out Business) set forth on Exhibit 2.3(a)(ii) .

(b) Any deviation, alteration or amendment of the High Level Step Plan requires the written consent by SC.

(c) No later than twenty (20) Business Days after the Signing Date (the " Step Plan Deadline ") Ashland shall provide the Ashland Step Plan to ASK and SC.

(d) If, at any time after the Signing Date Ashland determines material impediments for the execution of the Ashland Step Plan exist, Ashland shall promptly inform ASK and SC of such impediments. Without limiting the forgoing, Ashland undertakes that ASK and SC shall be provided with all material correspondence between Ashland and its advisors which relates to the execution of the Ashland Step Plan. Ashland shall grant ASK and SC access to its advisors and give them and their advisors the opportunity to discuss details of the material correspondence.

Section 2.4 SC Step Plan .

(a) SC shall prepare a detailed step plan (such step plan, including its completion, if any, the " SC Step Plan ") which shall set forth in detail all steps which are required to

(i) consummate the transfer of the SC Transferred Companies and the SC Carve-Out Business (each as defined in the Master Contribution and Sales Agreement) to the Group Companies in accordance with the specifications of the high level step plan attached hereto as Exhibit 2.3(a)(i) ; and

(ii) effect the balance sheet objectives (attributable to the transfer of the SC Transferred Companies and the SC Carve-Out Business) set forth on Exhibit 2.3(a)(ii).

(b) Any deviation, alteration or amendment of the High Level Step Plan requires the written consent by Ashland.

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(c) No later than twenty (20) Business Days after the Step Plan Deadline SC shall provide the SC Step Plan to ASK and Ashland.

(d) If at any time after the Signing Date, SC determines material impediments for the execution of the SC Step Plan exist, SC shall promptly inform ASK and Ashland of such impediments. Without limiting the forgoing, SC undertakes that ASK and Ashland shall be provided with all material correspondence between SC and its advisors which relates to the execution of the SC Step Plan. SC shall grant ASK and Ashland access to its advisors and give them and their advisors the opportunity to discuss details of the material correspondence.

Section 2.5 Steps Towards Closing . Ashland shall undertake and/or procure that all activities set forth on the Ashland Step Plan will duly be performed as soon as reasonably practical after the Signing Date and SC shall undertake and/or procure that all activities set forth on the SC Step Plan will duly be performed as soon as reasonably practical after the Signing Date. In addition (together with the steps on the Ashland Step Plan and the SC Step Plan, the " Steps Towards Closing "):

(a) ASK shall (and Ashland and SC shall procure that ASK will) form or have otherwise in place the subsidiary companies (each a " NewCo ") with a legal form and registered seat as required by the Contemplated Group Structure (as defined in Section 2.6) ;

(b) ASK shall (and Ashland and SC shall procure that ASK will) enter into binding debt financing agreements on reasonable commercial terms under which ASK shall have the right to draw monies up to the Compensation Payment to Ashland as contemplated under Section 7.1 on the Scheduled Closing Date (the " Compensation Payment Financing ") and further shall have the right to draw monies up to EUR 40 million (the " Other Financing ");

(c) SC shall procure that the profit and loss transfer agreements between SCF and SKW and between SC and WD are being terminated on or prior to the Scheduled Closing Date; and

(d) Ashland, SC and ASK shall (and Ashland and SC shall procure that ASK will) and shall procure (and Ashland and SC shall procure that ASK will procure) that their relevant Affiliates will prepare and finalize drafts of the Local Contribution and Sales Agreements, including all respective annexes thereto, in accordance with the principles set forth in the Master Contribution and Sales Agreement and execute such drafts upon their finalization.

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Section 2.6 Contemplated Group Structure, Opening Balance Sheet . The contemplated corporate structure of the Group, which shall be implemented on the Scheduled Closing Date by virtue of the Master Contribution and Sale Agreements and certain Local Contribution or Sale Agreements to be performed thereunder, is shown in Exhibit 2.6 (the " Contemplated Group Structure ").

The Parties shall procure that the Group will within 90 days after the Closing Date prepare unaudited balance sheets of the Group Companies in accordance with IFRS as per the Closing Date.

ARTICLE III

BUSINESS SCOPE

Section 3.1 Business Scope . The scope of business of the Group shall include:

(a) Subject to Section 3.2, Ashland's and Ashland Affiliates' casting solutions business which manufactures and sells metal casting chemicals worldwide, including sandbinding resin systems, refractory coatings, release agents, engineered sand additives and riser sleeves and also provides casting process modeling, core-making process modeling and rapid prototyping services (the " Ashland Business ");

(b) Subject to Section 3.2, SC's and SC Affiliates' foundry business and related business (the " SC Business "); and

The Ashland Business, the SC Business and the AS-Group Business shall hereinafter collectively be referred to hereinafter as the " Business " or the " Group Business ".

Section 3.2 Excluded Business . For the avoidance of doubt the SC Business shall not include the betonite business of SC. The Ashland Business shall not include the real property and the manufacturing related assets of (i) Kidderminster, UK, (ii) Missasauga, Ontario, Canada, (iii) Changzhou, PRC, (iv) Castro, Spain and (v) Milano, Italy.

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ARTICLE IV

MASTER CONTRIBUTION AND SALE AGREEMENT

The transfer of the Ashland Business, the SC Business and the shareholding in ASAV shall be performed on the Scheduled Closing Date by a combination of contributions and sales of both shareholdings and assets as further described in a master contribution and sale agreement, attached hereto as Exhibit 4 (the " Master Contribution and Sale Agreement ") and to be executed simultaneously with this Agreement.

ARTICLE V

NEW GOVERNANCE DOCUMENTS

Section 5.1 Governance Documents . The governance of, and other matters respecting the applicable Parties' ownership of (i) ASK shall be governed by a shareholders' agreement, a draft of which is attached hereto as Exhibit 5.1-1 , it being understood that said draft shall be amended prior to the Scheduled Closing Date to reflect the agreements said forth on Exhibit 5.1-1 (A) (“Additional Terms on exchange rates”) (the " Shareholders' Agreement ") and (ii) US Limited Partnership shall be governed by the amended and restated limited partnership agreement, a draft of which is attached hereto as Exhibit 5.1-2 (the " Amended and Restated Limited Partnership Agreement "). Save any amendments mutually agreed upon by the Parties prior to the Closing, such drafts shall be deemed final (in all material respects) and shall be executed by the parties thereto on the Scheduled Closing Date.

Section 5.2 Existing Governing Documents . Ashland and SC shall terminate, or cause to be terminated, the existing shareholders' agreements governing the operations of the AS-Group without any further claims or liabilities of the parties thereto, subject to the occurrence of the Closing.

ARTICLE VI

CLOSING

Section 6.1 Closing Conditions

. The obligation of Ashland and SC to perform the Closing Actions shall be subject to the fulfillment or waiver, if such waiver is provided for in Section 6.5 , of the following conditions precedent (the " Closing Conditions "):

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(a) Mutual Conditions. The respective obligations of Ashland and SC to effect the Closing are subject to the prior satisfaction of the following conditions (the " Mutual Closing Conditions "):

(i) the Transaction may be lawfully consummated pursuant to the merger control laws of the Republic of Korea and the European Union;

(ii) there shall have been no enforceable judgment, injunction, order or decree by any court or Governmental Authority which shall prohibit the Closing;

(iii) ASK has provided to Ashland and SC a written statement, substantially in the form as attached as Exhibit 6.1 (a) (iii) , signed by the managing director of ASK including reasonable evidence confirming that all Steps Towards Closing for which ASK and/or ASK's Affiliates are responsible have duly been completed, except for those which are identified as steps that shall be completed on the Scheduled Closing Date;

(iv) ASK executed and/or caused the relevant Group Companies who are Local Parties to execute, the Local Contribution or Sale Agreements and made or caused the relevant Local Parties to make any deliveries contemplated thereunder;

(v) Subject to termination or retirement of such Carve-Out Employees as defined in the Master Contribution and Sale Agreement) in the ordinary course of business, at least 80% of the Carve-Out Employees (employed by Ashland as of the Signing Date, including a sufficient number of employees involved in each functional area, and with the levels of seniority and expertise necessary to operate the Ashland Carve-Out Business (as defined in the Master Contribution and Sale Agreement), have agreed to accept employment with one of the Group Companies on terms which are satisfactory to the Parties in light of the Global Business Plan;

(vi) no AS-Group Material Adverse Change has occurred between the Signing Date and the Closing and a bring down certificate, in the form attached hereto as Exhibit 6.1 (a) (vi) has been submitted to Ashland and SC by ASK;

(vii) ASK shall have obtained the Compensation Payment Financing and the Other Financing;

(viii) the Group shall have obtained comprehensive insurance coverage for the Group Business;

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(ix) SC and Ashland have agreed in writing on an updated version of the Global Business Plan (the " Pre-Closing Agreed Global Business Plan ");

(x) SC and Ashland shall have agreed on the Shareholders’ Agreement in order to reflect the agreements contemplated by Exhibit 5.1-1 (A), and

(xi) the Initial Limited Partnership Agreement has been duly executed by ASK.

(b) The obligation of Ashland to effect the Closing is subject to the prior satisfaction of the following additional conditions

(i) SC has provided to Ashland a written statement substantially in the form as attached as Exhibit 6.1(b)(i) signed by SC’s General Counsel including customary evidence that all Steps Towards Closing for which SC and/or SC's Affiliates are responsible have duly been completed, except for those which are identified as steps that shall be completed on the Scheduled Closing Date;

(ii) no SC Material Breach has occurred, and a bring down certificate, in the form attached hereto as Exhibit 6.1(b)(ii) has been submitted to Ashland by SC;

(iii) those third parties' consents and waivers (including such of governmental authorities and co-shareholders) set forth on Exhibit 6.1(b)(iii) (the " SC Material Third Party Consents ") have been obtained, provided, that none of such consents and waivers set forth on such Exhibit shall impose obligations upon the Group Business that are substantially more adverse or substantially different in character than the corresponding obligations that are imposed on the SC Business by the applicable contracts that are in effect on the date hereof;

(iv) SC has performed in all material respects its covenants set forth in Article IX and Article XI required to be performed at or prior to the Closing and a bring down certificate, in the form as attached hereto as Exhibit 6.1(b)(iv) has been submitted to Ashland by SC;

(v) no Group Material Adverse Change has occurred with respect to the SC Business between the Signing Date and the Closing Date and a bring down certificate, in the form attached hereto as Exhibit 6.1(b)(v) has been submitted to Ashland by SC;

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(vi) SC shall have provided evidence reasonably satisfactory to Ashland that the actions contemplated by Article XI of the Master Contribution and Sale Agreement have been completed;

(vii) The Local Closing Conditions necessary to effectuate the transfer of: (A) the AMSC Shares; (B) the SKW Shares, and (C) the WD Shares (in each case, as defined in the Master Contribution and Sale Agreement) shall have been fulfilled or waived;

(viii) SC executed and/or caused its relevant Affiliates who are Local Parties to execute, the Local Contribution or Sale Agreements and made or caused the relevant Local Parties to make any deliveries contemplated thereunder; and

(ix) the Initial Limited Partnership Agreement has been duly executed by SC and Tecpro Holding Corporation Inc.;

(c) The obligation of SC to effect the Closing is subject to the prior satisfaction of the following additional conditions:

(i) Ashland has provided to SC a written statement substantially in the form as attached as Exhibit 6.1(c)(i) signed by Ashland’s General Counsel including customary evidence that all Steps Towards Closing for which Ashland and/or Ashland's Affiliates are responsible have duly been completed, except for those which are identified as steps that shall be completed on the Scheduled Closing Date;

(ii) no Ashland Material Breach has occurred, and a bring down certificate, in the form attached hereto as Exhibit 6.1(c)(ii) has been submitted to SC by Ashland;

(iii) SC shall have received five out of the ten consents listed on Exhibit 6.1(c)(iii) (the " Ashland Material Third Party Consents "), provided, that none of such consents and waivers set forth on such Exhibit shall impose obligations upon the Group Business that are substantially more adverse or substantially different in character than the corresponding obligations that are imposed on the Ashland Business by the applicable contracts that are in effect on the date hereof. For the purposes of determining whether a consent shall be considered received hereunder, it is agreed that if the then current contract with a third party (i) transfers by operation of law or (ii) is validly assigned without requiring the consent of such third party then such consent shall be deemed to have been received.

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(iv) those Permitted Encumbrances set forth on Exhibit 6.1(c)(iv)-1 shall have been released and terminated by the current secured party and Ashland has delivered to SC a statement to that effect, substantially in the form of Exhibit 6.1(c)(iv)-2 together with U.C.C. termination statements to evidence the relevant terminations;

(v) Ashland has performed in all material respects its covenants set forth in Article IX and Article XI required to be performed at or prior to the Closing and a bring down certificate, in the form as attached hereto as Exhibit 6.1(c)(v) has been submitted to SC by Ashland;

(vi) no Group Material Adverse Change has occurred with respect to the Ashland Business between the Signing Date and the Closing Date and a bring down certificate, in the form attached hereto as Exhibit 6.1(c)(vi) has been submitted to SC by Ashland;

(vii) The Local Closing Conditions necessary to effectuate the transfer of: (A) the Ashland US Business; (B) the Ashland Resinas Shares, (C) the Ashland Iberia Shares, (D) Ashland Japan Shares and (E) Ashland Korea Shares (in each case, as defined in the Master Contribution and Sale Agreement) shall have been fulfilled or waived; and

(viii) Ashland has provided to SC evidence that Ashland Resinas Ltda. has been granted a new certificate of approval ( habite-se ) covering its entire site and activities in Campinas by the competent Governmental Authority;

(ix) Ashland has restricted access to the warehouse at the site in Poligono Industrial Ezilolatza, Idiazabel, Guipuzcoa, 20213, Spain of Kemen Manguitos S.A. to the reasonable satisfaction of SC;

(x) Ashland executed and/or caused its relevant Affiliates who are Local Parties to execute, the Local Contribution or Sale Agreements and made or caused the relevant Local Parties to make any deliveries contemplated thereunder;

(xi) at least 60% of the Key Employees (as defined in the Master Contribution and Sale Agreement) pertaining to the Ashland Business have agreed to accept employment with one of the Group Companies on terms which are satisfactory to the Parties in light of the Global Business Plan; and

(xii) the Initial Limited Partnership Agreement has been duly executed by Ashland and Ashland Licensing and Intellectual Property, LLC.

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Section 6.2 Local Closing Conditions. The obligation of Ashland and SC to effect any of the actions set forth in Section 6.8(a) and Section 6.8(b) with respect to the performance of the Local Contribution or Sale Agreements shall not be suspended in any way; except: (i) in the case of Ashland as specified in Section 6.1(b)(vii) in the case of SC as specified in Section 6.1(c)(vii).

Section 6.3 Merger Filings .

(a) Without undue delay after the execution of this Agreement, however, in no event later than 30 Business Days thereafter, Ashland and SC shall on behalf of themselves and with effect for the relevant parties to the Local Contribution or Sale Agreements (the " Local Parties ") file all necessary notifications or applications for approval with the competent merger control authorities. Ashland and SC shall support each other with respect to the necessary filings and provide assistance in preparing the relevant filing documentation. Neither Ashland nor SC shall make any filings or submissions without the prior approval of the respective other Party. Ashland and SC shall keep each other regularly informed of the progress of the procedure with the authorities and shall submit copies of all filings and submissions made to the merger control authorities to the other Party without undue delay. Ashland and SC shall (i) provide, and shall procure that the relevant Local Parties provide to each other, such documents and other information and such assistance as is necessary to make the filings and necessary submissions and to obtain all merger clearances as soon as possible, and (ii) comply, and shall procure that the relevant Local Parties comply, with all information requests by the competent merger control authorities. Ashland and SC shall provide to the other Party copies of any correspondence with merger control authorities and copies of any written statement, order or decision of the merger control authorities without undue delay.

(b) In the event that any competent merger control authority states its intention to grant its approval only subject to compliance with specific conditions, limitations or orders the relevant Party affected hereby shall comply with, and shall procure that the relevant Local Party complies with all such conditions, limitations or orders which are reasonably acceptable to such Party. No Party shall, however, be obligated to dispose of any material assets in order to comply with any conditions, limitations or orders set by a merger control authority.

(c) If, after six (6) months after the Signing Date, (i) any merger clearance referred to in Section 6.1(a)(i), or any other governmental consent, approval or waiver required under applicable law in any jurisdiction in order to effect the consummation, in whole or in part, of this Agreement or any Local Contribution or Sale Agreement is not obtained, or (ii) the consummation, in whole or in part, of this Agreement or any Local Contribution or Sale Agreement is prohibited under any enforceable law, or any enforceable judgment, injunction, order or decree by any court or Governmental Authority, including those referred to in Section 6.1(a), the Parties shall nevertheless consummate the Closing, provided, however, that (i) this shall not apply if the merger control clearance by the Republic

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of Korea and the European Union has not been granted, and (ii) no Party shall be obligated to perform any of the Local Contribution or Sale Agreements in respect of which the consummation of the Closing would violate any applicable law or decision. Ashland and SC shall cooperate in good faith to obtain any approval and, if deemed promising by either Ashland or SC, challenge any decision prohibiting the Closing or the closing under any Local Contribution or Sale Agreement, and shall agree on such arrangements as give commercial effect to the intent of Ashland and SC to the extent permitted under applicable law.

Section 6.4 Reasonable Best Efforts . Each Party shall use reasonable best efforts to ensure that the Closing Conditions will be fulfilled as soon as possible after the Signing Date.

Section 6.5 Waiver of Closing Conditions . Ashland and SC may waive the satisfaction of the Closing Conditions, in whole or in part, set forth in Section 6.1(a) by joint written declaration. Ashland may waive the satisfaction of the Closing Conditions, in whole or in part, set forth in Section 6.1(b). SC may waive the satisfaction of the Closing Conditions, in whole or in part, set forth in Section 6.1(c). The waiver shall be made by written notice by the Party entitled to such waiver to the respective other Party. The effect of a waiver shall be limited to eliminating the need that the respective Closing Condition is being fulfilled on the Closing Date and shall not prejudice any claims either Party may have with respect to the fulfillment of such Closing Condition (including, without limitation, claims either Party may have in accordance with Section 9.1(d)).

Section 6.6 Rescission .

(a) Either Ashland or SC shall be entitled to rescind this Agreement, if the Mutual Closing Conditions have not been fulfilled within six (6) months after the Signing Date.

(b) In case that Ashland has committed (i) an Ashland Material Breach or (ii) a material breach of its material covenants or agreements under this Agreement or (iii) a Group Material Adverse Change has occurred with respect to the Ashland Business ((i), (ii), and (iii) each a " SC Termination Event "), SC may rescind this Agreement within 30 thirty Business Days after SC has obtained knowledge of a SC Termination Event.

(c) In case that SC has committed (i) a SC Material Breach or (ii) a material breach of its material covenants or agreements under this Agreement or (iii) a Group Material Adverse Change has occurred with respect to the SC Business ((i), (ii), and (iii) each an " Ashland Termination Event "), Ashland may rescind this Agreement within 30 thirty Business Days after Ashland has obtained knowledge of a Ashland Termination Event.

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(d) The effect of such rescission shall be limited to eliminating the obligation of either Party to consummate this Agreement, but shall not limit or prejudice any claims either Party may have against the respective other Party in case of a non-fulfillment of a Closing Condition. In case of a rescission pursuant to this Section, all agreements concluded by the Parties hereunder shall automatically be null and void; however, ARTICLE XI, ARTICKE XII and ARTICLE XIII of this Agreement shall survive for a period of five (5) years of the day the withdrawal becomes effective.

Section 6.7 Material Adverse Change Determination .

(a) In the event that, prior to the occurrence of the Closing, either Ashland or SC determines that

(i) a Group Material Adverse Change, either with respect to the Ashland Business or with respect to the SC Business (for the avoidance of doubt Ashland can make such determination with respect to the Ashland Business as well as the SC Business and SC can make such determination with respect to the SC Business as well as the Ashland Business), or

(ii) an AS-Group Material Adverse Change

has occurred, it shall promptly after such determination, but no later than at the beginning of the Scheduled Closing Date, notify the other Party of such determination and provide it with a written statement setting forth the basis of such determination (the " MAC Determination Notice ").

(b) In the event that the respective other Party disagrees with such determination, it shall within five (5) Business Days of receipt of the MAC Determination Notice notify the Party that has submitted the MAC Determination Notice of such disagreement and provide it with a written statement setting forth the basis of such disagreement (the " MAC Dispute Notice ").

(c) The MAC Dispute Notice shall promptly be submitted by either Ashland or SC for resolution to Klaus Gerstenmaier Germany, and shall be finally determined within twenty (20) Business Days after submission in accordance with the terms of reference to be prepared by Klaus Gerstenmaier based on the individual case submitted and on the basic terms of reference attached hereto as Exhibit 6.7(c) whether a Group Material Adverse Change or an AS-Group Material Adverse Change, as the case may be, has occurred or not. Such determination shall be final and binding upon the Parties (the " Final MAC Determination "). The applicable condition precedent shall not be deemed to have been satisfied until the delivery of the Final MAC Determination. For as long as Ashland and SC

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continue to disagree as to whether a Group Material Adverse Change or an AS-Group Material Adverse Change has occurred upon the submission of a MAC Dispute Notice to Klaus Gerstenmaier neither Party shall be obliged to perform any of the Closing Actions, unless a Final MAC Determination has been rendered which holds that no Group Material Adverse Change or no AS-Group Material Adverse Change, respectively, has occurred.

Section 6.8 Closing Date . If the Scheduled Closing Date is on a Business Day, Ashland and SC shall meet at the offices of Skadden, Arps, Slate, Meagher & Flom LLP in Munich, Germany, or at such other location as agreed upon between the Parties, where the following actions (the " Closing Actions ", which in their entirety shall constitute the " Closing ") shall be performed simultaneously (the date on which all Closing Actions have been performed shall hereinafter be referred to as the " Closing Date " and Closing shall be deemed to have occurred as of the end of the Closing Date (i.e., 12:00 pm/00:00 am, i.e. midnight) in each of the local jurisdictions).

If the Scheduled Closing Date is not on a Business Day, Ashland and SC shall meet at the offices of Skadden, Arps, Slate, Meagher & Flom LLP in Munich, Germany, or at such other location as agreed upon between the Parties, on the Business Day immediately preceding the Scheduled Closing Date, where the Closing Actions with the exception of such mentioned in Sections 6.8 (a)(i) and 6.8 (b)(i) shall be performed simultaneously. In this event, the Closing Date will be the Scheduled Closing Date and Closing shall be deemed to have occurred as of the end of the Scheduled Closing Date (i.e., 12:00 pm/00:00 am, i.e. midnight) in each of the local jurisdictions). The Closing Actions set forth in Sections 6.8 (a)(i)(1) and 6.8 (b)(i)(1) shall be performed shortly before the end of the Scheduled Closing Date.

(a) At the Closing, Ashland

(i) shall deliver, or cause to be delivered, to SC the following documents:

(1) each of the bring down certificates referred to in Section 6.1(c)(ii), Section 6.1(c)(v) and Section 6.1(c)(vi) each newly issued as of the Scheduled Closing Date;

(2) the Shareholders' Agreement duly executed by Ashland and AIHI (as defined in the Master Contribution and Sale Agreement), and the Restated Limited Partnership Agreement duly executed by Ashland;

(3) all Ancillary Agreements to which it and/or its relevant Affiliates are party duly executed by Ashland and/or its relevant Affiliates;

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(4) the share purchase and transfer agreement for the sale and transfer of the shares held by Ashland in Exaloid S.L. to Süd-Chemie España, S.L. substantially in the form as attached hereto as Exhibit 6.8(a)(i)(4) (the " Exaloid Share Sale Agreement ") duly executed by Ashland; and

(ii) shall provide to SC a written statement substantially in the form as attached as Exhibit 6.8(a)(ii) signed by the Ashland's General Counsel including customary evidence that all Steps Towards Closing for which Ashland and/or Ashland's Affiliates are responsible have duly been completed;

(iii) shall procure that the Group Companies remit all required cash payments in accordance with the terms of the Local Contribution or Sale Agreements;

(b) At the Closing, SC

(i) shall deliver, or cause to be delivered, to Ashland the following documents:

(1) each of the bring down certificates referred to in Section 6.1(b)(ii), Section 6.1(b)(iv) and Section 6.1(b)(v) each newly issued as of the Scheduled Closing Date;

(2) the Shareholders' Agreement duly executed by SC and SCF, the Amended and Restated Limited Partnership Agreement duly executed by Tecpro Holding Corporation Inc.;

(3) all Ancillary Agreements to which it or and/or its relevant Affiliates are party duly executed by SC and/or its relevant Affiliates;

(4) the evidence with respect to the termination of the SKW and WD Profit and Loss Transfer Agreement called for by Section 6.1(b)(vi),

(5) the Exaloid Share Sale Agreement duly executed by Süd-Chemie España, S.L.;

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(ii) shall provide to Ashland a written statement substantially in the form as attached as Exhibit 6.8(b)(ii) signed by the SC's General Counsel including customary evidence that all Steps Towards Closing for which SC and/or SC's Affiliates are responsible have duly been completed;

(iii) make the purchase price payment under the Exaloid Share Sale Agreement to the Ashland Bank Account; and

(c) At the Closing ASK shall deliver to SC and Ashland the bring down certificate referred to in Section 6.1(a)(vi) newly issued as of the Scheduled Closing Date.

(d) At the Closing, Ashland and SC shall further procure that

(i) the JV Holding Companies countersign the relevant Ancillary Agreements on behalf of themselves and all future Group Companies;

(ii) ASK makes the Compensation Payments to the Ashland Bank Account and the SC Bank Account, respectively, each as provided for in Section 7.1;

(iii) the SC Transferred Companies (as defined in the Master Contribution and Sale Agreement) repay all outstanding shareholder loans as listed in Exhibit 6.8(d)(iii) granted to the SC Transferred Companies by SC and/or SCF (including interest accrued thereon until (but excluding) the Scheduled Closing Date) by making respective payments to the SC Bank Account

(iv) ASK duly executes the Amended and Restated Limited Partnership Agreement.

(e) At the Closing, Ashland and SC shall send the jointly signed local closing triggering emails in the form as attached to each of the Local Contribution or Sale Agreements setting forth the relevant effective date and time to the relevant recipients named in the relevant Local Contribution or Sale Agreement.

Section 6.9 Preparation of Closing . Ashland and SC shall meet at least three (3) Business Days prior to the Scheduled Closing Date at the offices of Skadden, Arps, Slate,

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Meagher & Flom LLP in Munich, Germany, or at such other location as agreed upon between the Parties to prepare the Closing Actions set forth under Section 6.8 above. The Parties may commence with the Closing Actions prior to the Scheduled Closing Date but will take at least one Closing Action not prior to the Scheduled Closing Date.

Section 6.10 Waiver of Closing Actions . SC may waive each of the Closing Actions set forth in Section 6.8(a) by written notice to Ashland. Ashland may waive each of the Closing Actions set forth in Section 6.8(b) by written notice to SC. Ashland and SC may jointly waive the Closing Actions set forth in Section 6.8(c), Section 6.8(d) and Section 6.8(e) by joint written declaration. The effect of a waiver shall be limited to eliminating the need that the respective Closing Action is being performed at the Closing and shall not prejudice any claims either Party may have on the basis of any circumstances relating to the non-performance of such Closing Action (including, without limitation, claims either Party may have in accordance with Section 9.1(d)).

Section 6.11 Closing Confirmation . After all Closing Actions have been taken, Ashland and SC shall confirm in a written document (the " Closing Confirmation ") that all Closing Conditions have been fulfilled and that all Closing Actions have been performed and that therefore the Closing has occurred.

Section 6.12 Rescission . In the event that any Closing Action has not been performed or waived within sixty (60) Business Days as of Scheduled Closing Date, either Ashland or SC may rescind from this Agreement by written notice to the respective other Party, unless the non-performance of the Closing Actions not being performed is within the control of the Party stating the rescission, and provided that the rescission shall be deemed void and shall not have any effect if at the time when the notice is received by the respective other Party all Closing Actions have been performed. As long as Ashland and SC have a bona-fide dispute as to whether all Closing Actions have been fulfilled, the right of rescission under this Section 6.12 is suspended. The effect of such rescission shall be limited to eliminating the obligation of either Party to consummate this Agreement, but shall not limit or prejudice any claims either Party may have against the respective other Party in case of a non-fulfillment of a Closing Condition. In case of a rescission pursuant to this Section, all agreements concluded by the Parties hereunder shall automatically be null and void; however, ARTICLE XI, ARTICKE XII and ARTICLE XIII of this Agreement shall survive for a period of five (5) years of the day the withdrawal becomes effective.

Section 6.13 Local Closing Date . In the event that on the Closing Date any Local Closing Condition applicable to a particular Local Contribution or Sale Agreement with the exception of those listed in Section 6.1(b)(vii) and in Section 6.1(c)(vii) has not been fulfilled, the respective Local Contribution or Sale Agreement shall on the Closing Date not be performed, but the performance of such Local Contribution or Sale Agreement shall be deferred until the relevant Local Closing Conditions have been fulfilled. This shall not affect the obligation of Ashland, ASK and SC to proceed with the Closing and the execution and consummation of the other Local Contribution of Sale Agreements. Each Party shall after the

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Closing Date continue to use reasonable best efforts to ensure that any Local Closing Condition not fulfilled on the Closing Date will be fulfilled as soon as possible. Within ten (10) Business Days after which the relevant Local Closing Conditions have been fulfilled, or on such other date as agreed upon between Ashland and SC, the Parties shall procure that the relevant Local Parties perform the respective Local Contribution or Sale Agreement (the day on which the respective Local Contribution or Sale Agreement is performed, the " Local Closing Date ").

Section 6.14 Period until Local Closing . In the event that a Local Contribution or Sale Agreement is subject to a Local Closing Condition and such Local Closing Condition is not fulfilled until or on the Closing Date, the relevant Party shall or shall cause its relevant Local Party to operate such local business during the period between the Closing Date and the Local Closing Date (the " Local Interim Period ") in the ordinary course of business and, if permitted by applicable law, in accordance with the reasonable instructions given by the management of the relevant Group Company. During the Local Interim Period the respective local business shall be operated for the account of the Group, i.e. all benefits, costs and risks of operating the respective local business during the Local Interim Period shall be for the account of the Group and the provisions of Section 9.1 shall pertain to said operation. Notwithstanding anything to the contrary in Article XIV of the Shareholders' Agreement (Non-Competition Obligation) the relevant Local Party may continue to own and operate such local business during the Local Interim Period.

Section 6.15 Disposal of Local Businesses . In the event that the Local Closing Conditions applicable to any particular Local Contribution or Sale Agreement are not completely fulfilled within twelve (12) months after the Closing Date, Ashland or SC, as the case may be (i) shall be free to sell or to otherwise dispose of the respective local business or company in whole or in part to any third party, including without limitation, a Competitor (as defined in Section 14.1(a) of the Shareholders' Agreement), and (ii) shall pay to the Group irrespective of the actual proceeds received from the disposal such purchase price or value, as the case may be, provided for in the High Level Step Plan. The costs of the disposal shall be borne by the disposing Party.

ARTICLE VII

COMPENSATION; NET ASSET VALUE IMBALANCE

Section 7.1 Compensation Payments to Ashland and SC .

As shown in the Contemplated Group Structure, Ashland and SC will each become a 50% owner of the interest in the Group subsequent to the Closing of the Transaction. Such interest is granted as a compensation for the transfers and contributions by Ashland and Ashland's Affiliates and SC and SC's Affiliates, as the case may be, under the Master

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Contribution and Sale Agreement and the agreements contemplated thereunder. Ashland and SC will in addition to their 50% interest in the Group receive payments from ASK and other Group Companies set forth in detail in Exhibit 7.1 (the " Compensation Payments ) to the Ashland Bank Account and to the SC Bank Account respectively on the Scheduled Closing Date; provided however (i), that if a Local Contribution or Sale Agreement with respect to any Ashland Transferred Company and/or Ashland Transferred Shares is not performed on the Closing Date, the value (as shown in the High Level Step Plan) of the relevant Ashland Transferred Company and/or Ashland Transferred Shares shall be deducted from the Compensation Payment to Ashland or (ii) that if the Local Contribution or Sale Agreement with respect to SC China Business as defined in the Master Contribution and Sale Agreement is not performed on the Closing Date the value has shown in the High Level Step Plan of he SC China Business shall be deducted from the Compensation Payment to SC, and shall be paid on the date of the relevant Local Closing Date. Except as provided for in this ARTICLE VII neither Ashland nor SC shall be entitled to any consideration or compensation for the transfers and contributions under the Master Contribution and Sale Agreement and the agreements contemplated thereunder.

Section 7.2 Net Asset Value Imbalance

(a) Agreed Net Asset Values

Prior to the Signing Date, Ashland and SC have agreed on

(i) certain net asset values (comprising net debt and working capital) for the Ashland Business attached hereto as Exhibit 7.2(a)(i) (the " Agreed Ashland Net Debt " and the " Agreed Ashland Working Capital ", together the " Agreed Ashland Net Asset Values ") set forth as Euro amount on Exhibit 7.2(a)(i) (in the case of the Agreed Ashland Net Debt) and to be calculated in accordance with the definition set forth in Exhibit 7.2(a)(i) (in the case of the Agreed Ashland Working Capital); and

(ii) certain net asset values (comprising net debt and working capital) for the SC Business attached hereto as Exhibit 7.2(a)(ii) (the " Agreed SC Net Debt " and the " Agreed SC Working Capital ", together the " Agreed SC Net Asset Values ") set forth as Euro amount on Exhibit 7.2(a)(ii) (in the case of the Agreed SC Net Debt) and to be calculated in accordance with the definition set forth in Exhibit 7.2(a)(ii) (in the case of SC Agreed Working Capital)

(the Agreed Ashland Net Asset Values and the Agreed SC Net Asset Values together the " Agreed Net Asset Values ").

(b) Closing Date Net Asset Values

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In accordance with the provisions provided for in greater detail in Section 7.3 below

(i) the net asset values (comprising net debt, and working capital) for the Ashland Business as per the Closing Date shall be determined (the " Ashland Closing Date Net Debt " and the " Ashland Closing Date Working Capital ", together the " Ashland Closing Date Net Asset Values "); and

(ii) the net asset values (comprising net debt and working capital) for the SC Business as per the Closing Date shall be determined (the " SC Closing Date Net Debt ", and the " SC Closing Date Working Capital ", together the " SC Closing Date Net Asset Values ")

(the Ashland Closing Date Net Asset Value and the SC Closing Date Net Asset Value together the " Closing Date Net Asset Values ").

In order to balance unequal variations of the Closing Date Net Asset Values from the Agreed Net Asset Values (i) Ashland or its designee shall be entitled to a compensation from ASK (the " Ashland Imbalance Payment "), if and to the extent the product of the following formula is a negative number, and (ii) SC or its designee shall be entitled to a compensation from ASK (the " SC Imbalance Payment "), if and to the extent the product of the following formula is a positive number:

((Agreed Ashland Net Debt minus Ashland Closing Date Net Debt) + (Agreed Ashland Working Capital minus Ashland Closing Date Working Capital))

minus

((Agreed SC Net Debt minus SC Closing Date Net Debt) + (Agreed SC Working Capital minus SC Closing Date Working Capital))

In the above formula, net assets will be expressed as positive numbers and net liabilities will be expressed as negative numbers.

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Section 7.3 Preparation of the Closing Date Balance and Net Asset Values Statement . Ashland and SC shall procure that the Group will within 90 calendar days after the Closing Date prepare:

(a) audited balance sheets of the Group Companies as per the Closing Date, provided however, that the AS-Group Business shall not form part of such balance sheets (" Closing Date Balance Sheets "); and

(b) an unaudited statement of the Closing Date Net Asset Values " Closing Date Net Asset Values Statement ") which shall set forth:

(i) the Ashland Closing Date Net Asset Value, comprising the Ashland Closing Date Net Debt and the Ashland Closing Date Working Capital, each as defined and to be determined in accordance with the principles set forth in Exhibit 7.3(b) (i) (including the principles underlying the sample calculation contained therein); and

(ii) the SC Closing Date Net Asset Value, comprising the SC Closing Date Net Debt and the SC Closing Date Working Capital, each as defined and to be determined in accordance with the principles set forth in Exhibit 7.3(b) (ii) (including principles underlying the sample calculation contained therein).

The Closing Date Balance Sheets shall be prepared in accordance with US GAAP to the extent relating to the Ashland Business and IFRS to the extent relating to the SC Business, in each case applied on a basis consistent with past accounting and consolidation practice of Ashland and SC, respectively. The Closing Date Balance Sheet shall be audited by Ernst & Young Global Limited, provided however, that the scope of the audit shall not include fixed assets.

The Closing Date Balance Sheets and the Closing Date Net Asset Values Statement together shall be referred to as the " Closing Date Balance and Net Asset Values Statement ").

Section 7.4 Review of the Closing Date Balance and Net Asset Values Statement by Ashland and SC; Disputes .

(a) Ashland and PriceWaterhouseCoopers International Limited (" Ashland's Auditor ") and SC and KPMG International (" SC's Auditor ") or any other advisor retained by SC or Ashland, as the case may be, shall have the right to review the Closing Date Balance and Net Asset Values Statement. Ashland and SC shall procure that the Group shall

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provide the respective other Party and Ashland's Auditor as well as SC's Auditor are provided with all necessary assistance, documentation and information which is relevant for reviewing the Closing Date Balance and Net Asset Values Statement.

(b) Any objections of Ashland and/or SC to the Closing Date Balance and Net Asset Values Statement must be stated within sixty (60) calendar days of receipt of it by providing the respective other Party with a written statement of objections, specifying such line items which is objected and delivering a revised version of the Closing Date Balance and Net Asset Values Statement taking such objections into account (in each case a " Revised Closing Date Balance and Net Asset Values Statement "). The Revised Closing Date Balance and Net Asset Values Statement shall also specify in reasonable detail the grounds for the objections, but failure to provide such detail shall not affect the validity of the objections. In the absence of objections in accordance with the requirements and within the period of the preceding sentence or if Ashland and SC consent in writing to the Closing Date Balance and Net Asset Values Statement, the Closing Date Balance and Net Asset Values Statement shall become final and binding upon Ashland and SC. The objecting Party and the objecting Party's auditor shall provide the respective other Party and the respective other Party's auditor with all necessary assistance, documentation and information which is relevant for reviewing the objections (including the Revised Closing Date Balance and Net Asset Values Statement).

(c) In case of any objections of either Ashland or SC to the Closing Date Balance and Net Asset Values Statement in accordance with the requirements of Section 7.4(b), Ashland and SC shall attempt in good faith to resolve such objections. If Ashland and SC cannot resolve such objections within thirty (30) Business Days after the lapse of the sixty (60) calendar days period referred to in Section 7.4(b), either Ashland or SC may present the matter to BDO or any other auditing firm the Parties agree upon (" Neutral Auditor "). SC and Ashland shall jointly instruct the Neutral Auditor to decide the issues in dispute in accordance with the provisions of this Agreement. If BDO or the other auditing firm the Parties may have agreed upon, as the case may be, is not willing to accept the assignment as Neutral Auditor, the Neutral Auditor shall be appointed at the request of either Party by the chairman of the German Institute of Chartered Accountants ( Institut der Wirtschaftsprüfer in Deutschland e.V. , Düsseldorf).

(d) Unless jointly instructed otherwise by Ashland and SC, the Neutral Auditor shall limit its decision to the issues in dispute, provided however that if the issue relates to a certain line item of a Party's Business the Neutral Auditor shall also take into consideration the corresponding line item of the other Party's Business, but shall on the basis of such decisions and the undisputed parts of the Closing Date Balance and Net Asset Values Statement determine the Closing Date Business Value in its entirety. In respect of the issue in dispute, the decisions of the Neutral Auditor shall fall between the positions taken by Ashland and SC. To the extent necessary, the Neutral Auditor shall also be entitled to decide on the interpretation of this Agreement. The Neutral Auditor shall act as an expert ( Schiedsgutachter ) and not as an arbitrator.

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(e) Ashland and SC shall make available to the Neutral Auditor the Closing Date Balance and Net Asset Values Statement, the statement(s) of objection, the Revised Closing Date Balance and Net Asset Values Statement(s) and other data reasonably required by the Neutral Auditor to make the required decisions and determination. The Neutral Auditor shall immediately submit copies of all documents and other data made available by a Party to the respective other Party. Before deciding on the issues submitted to it by Ashland and SC, the Neutral Auditor shall grant Ashland and SC the opportunity to present their respective positions, which shall include the opportunity of at least one oral hearing in the presence of Ashland and SC and their professional advisers. Ashland and SC shall instruct the Neutral Auditor to use its best efforts to deliver its written opinion with reasons for its decisions as soon as reasonably practical, but no later than within ninety (90) Business Days from the issues in dispute having been referred to the Neutral Auditor. The Neutral Auditor's decisions and the Closing Date Balance and Net Asset Values Statement as determined by the Neutral Auditor shall be final and binding upon Ashland and SC.

Section 7.5 Final Determination of the Imbalance Payment

(a) The Ashland Imbalance Payment or the SC Imbalance Payment, as the case may be, shall be considered finally determined once the Closing Date Balance and Net Asset Values Statement becomes final and binding upon Ashland and SC in accordance with Section 7.3 and Section 7.4.

(b) The Ashland Imbalance Payment or the SC Imbalance Payment, as the case may be, shall become due and payable within ten (10) Business Days from the date on which the Closing Date Balance and Net Asset Values Statement has become final and binding upon the Parties and shall bear interest from and including the Closing Date to, but excluding, the date of actual payment at a rate of Euribor plus 3% p.a.

Section 7.6 General Rules for Payment

(a) Any payments under this Agreement shall be made by irrevocable wire transfer in immediately available funds, value as of the relevant due date set out in this Agreement or as otherwise provided by law, free of bank and other charges.

(b) Any payments to ASK, Ashland and SC under this Agreement shall be made with discharging effect to the bank account of ASK (the " ASK Bank Account "), of Ashland (the " Ashland Bank Account ") or SC (the " SC Bank Account "), as the case may be; each of such bank account is set forth in Exhibit 7.6(b) .

(c) Any payments and obligations due under this Agreement shall bear interest from and including the respective due date to, but not including the date of actual payment or fulfillment of the obligation. The interest rate shall be 8 per cent above base interest rate ( Basiszinssatz ) pursuant to Sec. 247 of the German Civil Code.

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ARTICLE VIII

COSTS

Section 8.1 Costs in connection with the Transfer of Businesses and the Implementation of the Step Plan.

(a) Except for the specific provisions of cost sharing contained in Exhibit 8.1(a) , SC shall bear the Costs for the contribution or, as the case may be, transfer of the SC Transferred Business Assets (as defined in the Master Contribution and Sale Agreement) and Ashland shall bear the Cost for the contribution or, as the case may be, transfer of the Ashland Transferred Business Assets (as defined in the Master Contribution and Sale Agreement), which in either case shall include the Cost which relate to the implementation of the Steps Towards Closing. Neither Party shall have the right to invoice or forward such costs, duties, taxes and/or expenses to the other Parties.

" Costs "for the purpose of this Section 8.1 shall mean any costs, duties, taxes, internal and external expenses, including with relation to (i) professional advice, (ii) the requirement to obtain third party consents, (iii) information technology transfer or set up-requirements, and (iv) human resources (e.g., employee transfer or set-up).

(b) Costs for the formation and capitalization of the relevant NewCos to which the respective Business is transferred shall be borne by ASK Chemicals.

Section 8.2 Costs for the Preparation and Finalization of the Closing Date Balance and Net Asset Values Statement .

(a) The Group shall bear the costs for the preparation of the Closing Date Balance and Net Asset Values Statement and each of Ashland and SC shall bear the costs for their respective review of the Closing Date Balance and Net Asset Values Statement.

(b) The costs of the Neutral Auditor, if any, shall be borne by Ashland and SC pro-rata to the amounts by which the Ashland Closing Date Net Asset Values and/or the SC Closing Date Net Asset Values as determined by Ashland and SC, respectively, deviates from the Ashland Closing Date Net Asset Values and/or the SC Closing Date Net Asset Values as determined by the Neutral Auditor.

(c) All Costs incurred by SKW Giesserei GmbH in connection with the registration of its correct company name with any patent and trademark registers for Patents and Trademarks that have been transferred as part of the SC Transferred Business Assets (each as defined in the Master Contribution and Sale Agreement) shall be borne by SC.

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ARTICLE IX

COVENANTS

Section 9.1 Conduct of Business Prior to Closing.

(a) After the Signing Date and prior to the Closing Date, Ashland agrees that, except (i) as contemplated in or permitted by this Agreement, (ii) as provided for in the annual budgets or capital budgets for the Ashland Business, (iii) as required by law, or (iv) to the extent SC shall otherwise consent, provided that such consent shall not be unreasonably withheld:

(i) neither Ashland nor its Affiliates shall take any action that would trigger a Material Change (as defined in Section 6.12 of the Master Contribution and Sale Agreement) of the Ashland Business;

(ii) the Ashland Business shall be conducted in the ordinary course of business consistent with past practice and Ashland and its Affiliates shall use their respective reasonable best efforts to (A) preserve their business organizations intact and maintain existing relations and goodwill with customers, suppliers, creditors, lessors and business associates, and (B) maintain the assets pertaining to the Ashland Business in substantially the same condition (except for normal wear and tear) existing on the Signing Date;

(iii) capital expenditures for the Ashland Business shall be incurred on a basis that is generally consistent with the Ashland Capital Budget;

(iv) neither Ashland nor its Affiliates shall take any action that could reasonably be expected to, in any material respect, (A) impose any delay in the expiration of any applicable waiting period or impose any delay in the obtaining of, or increase the risk of not obtaining, any authorizations, consents, orders, declarations or approvals of any Governmental Authority necessary to consummate the Transaction, (B) increase the risk of any Governmental Authority entering an order prohibiting the Transaction or (C) delay or impede the consummation of the Transaction;

(v) Ashland shall keep in full force and effect insurance policies with respect to the Ashland Business substantially similar in coverage and amounts to the insurance maintained with respect thereto on the Signing Date.

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(b) After the Signing Date and prior to the Closing Date, SC agrees that, except (i) as contemplated in or permitted by this Agreement, (ii) as provided for in the annual budgets or capital budgets for the SC Business, (iii) as required by law, or (iv) to the extent Ashland shall otherwise consent, provided that such consent shall not be unreasonably withheld:

(i) neither SC nor its Affiliates shall take any action that would trigger a Material Change (as defined in Section 6.12 of the Master Contribution and Sale Agreement) of the SC Business;

(ii) the SC Business shall be conducted in the ordinary course of business consistent with past practice and SC and its Affiliates shall use their respective reasonable best efforts to (A) preserve their business organization intact and maintain existing relations and goodwill with customers, suppliers, creditors, lessors and business associates and (B) maintain the assets pertaining to the Ashland Business in substantially the same condition (except for normal wear and tear) existing on the Signing Date;

(iii) capital expenditures for the SC Business shall be incurred on a basis that is generally consistent with the SC Capital Budget;

(iv) neither SC nor its Affiliates shall take any action that could reasonably be expected to, in any material respect, (A) impose any delay in the expiration of any applicable waiting period or impose any delay in the obtaining of, or increase the risk of not obtaining, any authorizations, consents, orders, declarations or approvals of any Governmental Authority necessary to consummate the Transaction, (B) increase the risk of any Governmental Authority entering an order prohibiting the Transaction or (C) delay or impede the consummation of the Transaction;

(v) SC shall keep in full force and effect insurance policies with respect to the SC Business substantially similar in coverage and amounts to the insurance maintained with respect thereto on the Signing Date.

(c) For the avoidance of doubt, none of the covenants set forth in Section 9.1(a) and Section 9.1(b) are intended to or shall impose any restriction on the respective operations of Ashland or SC or their respective Affiliates' activities that are not related to the Business.

(d) In case Ashland or SC are in breach of Section 9.1(a) and Section 9.1(b), respectively, and such breach is not cured within thirty (30) calendar days after its occurrence (or if such breach is not reasonably capable being cured during said thirty (30) day period, said period shall be extended for an additional thirty (30) day period if efforts to cure

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such breach have been commenced and are being diligently pursued), then after the Closing Date the respective breaching Party shall put the respective other Party into a position it would have been in if such breach would not have occurred; provided however, that the provisions of the Master Contribution and Sale Agreement shall prevail, if and to the extent the relevant breach of Section 9.1(a) and Section 9.1(b) of this Agreement, as the case may be, constitutes a Breach (as defined in Section 7.1 of the Master Contribution and Sales Agreement).

Section 9.2 Further Assurances . From time to time, as and when requested by any Party, the other Party or Parties, as the case may be, shall use its or their reasonable best efforts to execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as such Party or such Parties may reasonably deem necessary or desirable to consummate the Transaction. No Party shall, without prior written consent of the other Parties, take or fail to take any action which might reasonably be expected to prevent or materially impede, interfere with or delay the Transaction.

Section 9.3 Performance by the Group Companies . Ashland and SC agree to cause (by exercise of their direct or indirect voting power or otherwise) their respective Affiliates and the Group Companies to timely perform their respective obligations under this Agreement and the agreements concluded hereunder.

Section 9.4 Access to Information . Each of the Parties shall, and shall cause its Affiliates to, afford to the other Party and its representatives reasonable access, during normal business hours during the period prior to the Closing Date, to all their respective properties, personnel, books, contracts and records as may be reasonably requested by the other Party, in each case, in connection with any filings, applications or approvals required or contemplated by this Agreement or for any other reason related to the Transaction; provided, that in no event shall a Party be obligated to provide any access or information if such Party determines, in good faith, that providing such access or information may violate applicable law, cause such Party or any of its Affiliates to breach a confidentiality obligation to which it is bound or jeopardize any recognized privilege available to such Party or any of its Affiliates. Prior to the Closing Date, each Party will upon reasonable request make available to the other Party at a reasonable place and time, the officers and employees and independent accountants of such Party for interviews to verify all information furnished to it and to become familiar with such Party's Transferred Business. Prior to the Closing Date, neither Ashland nor SC shall, however, conduct any environmental testing or sampling on any of the business or property sites of the respective other Party and its Affiliates.

Section 9.5 Notice of Claims . Prior to the Closing Date, (a) each of Ashland and SC shall without undue delay give notice to the other Parties of (a) any claim or filed, threatened or contemplated litigation or other event which would have or would reasonably be expected to have a Group Material Adverse Change on the Ashland Business or the SC Business, as the case may be, or (b) ASK shall without undue delay give notice to the other Parties of any

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claim or filed, threatened or contemplated litigation which would have or would reasonably expected to have a AS-Group Material Adverse Change or (c) each of the Parties shall give notice to the other Parties of the occurrence of any other circumstance that would or would reasonably be expected to materially impair such Party's or its Affiliates' ability to perform its respective obligations under this Agreement or any other Transaction Document.

Section 9.6 Public Announcements . The initial press releases issued by each of Ashland and SC announcing the Transaction shall be in a form that is reasonably acceptable to the respective other Party. Thereafter, Ashland and SC shall consult with one another before issuing any press releases or otherwise making any public announcements with respect to the Transaction, and except as may be required by applicable laws or by the rules and regulations of any national securities exchange shall use reasonable efforts not to issue any such press release or make any such announcement prior to such consultation.

ARTICLE X

FURTHER CONTRACTUAL ARRANGEMENTS

Section 10.1 Supply Relations

(a) On the Scheduled Closing Date the Parties shall enter or cause their relevant Affiliates to enter into the Ancillary Agreements.

(b) If after the Signing Date the Management Board determines that the Group received supplies from SC and/or Ashland and/or their respective Affiliates prior to the Signing Date which are material for the conduct of the Business after the Closing Date, it shall have the right to request from SC and/or Ashland and SC and/or Ashland shall be obliged (and be obliged to cause their relevant Affiliates) to enter into good faith negotiations with the Group for the entering into a respective supply agreement.

Section 10.2 Corporate Names/Use of Names . As soon as reasonably practicable after the Closing Date (but in any event not longer than one hundred eighty (180) days from the Closing Date), Ashland and SC shall cause (by exercise of their direct of indirect voting power or otherwise) each of the Group Companies to change their corporate name to a name that does not include the names "Ashland or "Süd-Chemie" (or any derivation thereof), but that does include the name "ASK Chemicals", and in particular to change ASK's legal name into ASK Chemicals GmbH.

Ashland and SC undertake to cause the Group Companies to, as soon as reasonably practicable, remove the "Ashland" or "Süd-Chemie" names from trade names and domain names, provided however that the Group Companies may continue to use for a two (2) year period from the Closing Date the "Ashland" or "Süd-Chemie" names in connection with the

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Group Companies' stationary, business cards, signage, literature, promotional materials and the like so as to designate that the Group Companies are jointly owned by Ashland and SC, where after they shall be deleted.

ARTICLE XI

CONFIDENTIALITY

Section 11.1 Confidentiality . Each Party undertakes to treat, and shall procure that its Affiliates treat, Proprietary Information strictly confidential and refrain from using the same for any purpose other than in connection with the consummation of the Transaction disclosing it to any third parties, unless such disclosure is explicitly permitted by this Agreement.

Section 11.2 Proprietary Information . " Proprietary Information " shall mean:

(a) with respect to the non-use and confidentiality obligations of any Party: the contents of (i) this Agreement, (ii) any related agreements or documents (whether legally binding or not), and (iii) any accompanying discussions and negotiations;

(b) with respect to the non-use and confidentiality obligations of Ashland and ASK: any information obtained in connection with the preparation, negotiation, execution or consummation of this Agreement and the Transaction about SC, SC's Affiliates and their representatives;

(c) with respect to the non-use and confidentiality obligations of SC and ASK: any information obtained in connection with the preparation, negotiation, execution or consummation of this Agreement and the Transaction about Ashland, Ashland's Affiliates and their representatives;

(d) with respect to the non-use and confidentiality obligations pertaining to the confidential information of ASK: any information obtained in connection with the preparation, negotiation, execution or consummation of this Agreement and the Transaction about Ashland, Ashland's Affiliates and their representatives

except for information that (i) in the case of items (a), (b), (c) and (d) has come into the public domain or (ii) in the case of items (b), (c) and (d) has been received from an independent source, save in either case where such information has come into the public domain or been received from an independent source following a breach by the breaching Party, its

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Affiliates or their respective representatives of any confidentiality obligation provided for in this Section 11.

Section 11.3 Consented Disclosures . A Party may disclose Proprietary Information to any third party if (i) the Party who owns such Proprietary Information has given its consent hereto prior to the disclosure and (ii) if the recipient is either on the basis of law, contract or enforceable rules of conduct subject to confidentiality obligations equivalent to the confidentiality obligations of the disclosing Party under this Section 11.

Section 11.4 Mandatory Disclosures . A Party may disclose Proprietary Information if and to the extent that such disclosure is mandatory pursuant to applicable law, governmental or court order, stock exchange regulations, accounting principles or required by any governmental, supervisory or regulatory body. Prior to making a mandatory disclosure, the disclosing Party shall inform the Party whose information is to be disclosed in writing of the need to make such disclosure and the circumstances requiring it and the Parties shall discuss and agree in good faith upon defense measures, if any, or other appropriate means to protect the Party's whose information is to be disclosed interests.

Section 11.5 Termination of Obligations . The obligations under this Section 11 shall remain in force during the term of this Agreement until the fifth (5 th ) anniversary of the Closing.

ARTICLE XII

NOTICES

Section 12.1 Notices . Any notice, demand or request provided for in this Agreement, or served, given or made in connection with it, shall be in writing and shall be deemed properly served, given or made if delivered in person or sent by facsimile or registered mail or by a nationally recognized courier service that provides a receipt of delivery, in each case, to the addresses specified below (or to such other addresses or facsimile numbers notified in the future by one Party to the other Party):

(a) If to Ashland:

Ashland Inc.

Attn: David L. Hausrath, General Counsel

P.O. Box 391, 50 E. RiverCenter Boulevard

Covington, KY 41012-0391

USA

Fax+1859 815-5053

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(b) If to SC:

Süd-Chemie Aktiengesellschaft

Attn: Dr. Ulrich Müller, General Counsel

Lenbachplatz 6

80333 München

Germany

Facsimile: +49-(0)89-5110407

Ashland-Südchemie-Kernfest GmbH

Attn: CEO, Dr. Thomas Oehmichen

Reisholzstraße 16-18

40721 Hilden

Germany

Facsimile: +49-(0)221-716493

Section 12.2 Effectiveness . Notice given by personal delivery, certified mail or courier service shall be effective upon physical receipt. Notice given by facsimile shall be effective as of the date of confirmed delivery if delivered before 6:00 P.M. Central European Time on any Business Day at the place of receipt or the next succeeding Business Day if confirmed delivery is after 6:00 P.M. Central European Time on any Business Day or during any non-Business Day at the place of receipt.

ARTICLE XIII

MISCELLANEOUS

Section 13.1 Expenses . Except as otherwise set forth herein, each Party shall bear its own cost and expenses incurred in anticipation of, relating to and in connection with the negotiation and execution of this Agreement and the Transaction, it being understood that neither Party shall, directly or indirectly, pass on such cost and expenses to an entity or person which will become part of the Group.

Section 13.2 Foreign Currencies . Except as otherwise agreed herein, any currency conversions shall be determined using the European Central Bank's fixing rates as published on its website (www.ecb.int) shortly after 2.15 p.m. Central European Time on the Business Day immediately preceding the date on which the respective payment becomes due and payable.

Section 13.3 Calculations . Unless otherwise provided for herein, for calculation purposes any amounts in currencies other than Euro shall be converted into Euro on the basis of the cumulative monthly averages of the relevant exchange rate (as published by the

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European Central Bank) in the last twelve (12) completed months prior to the relevant reference date as applied by this Agreement divided by twelve (12). In case that a specific measure is completed or made in a period shorter than twelve months, the relevant calculation base shall be adjusted accordingly.

Section 13.4 Language . All notices, communications and statements to be made by any Party under or in connection with this Agreement shall be made in the English language.

Section 13.5 Amendments . Any amendments to this Agreement (including amendments to this clause) shall be valid only, if made in writing, unless mandatory law provides for stricter form requirements.

Section 13.6 Consent Requirements . Except where explicitly stated otherwise herein, whenever in this Agreement any action of a Party is subject to the consent of another Party, such consent must not be unreasonably withheld or delayed or granted subject only to unreasonable conditions.

Section 13.7 Exhibits . All exhibits to this Agreement (the " Exhibits ") constitute an integral part of this Agreement. In the case of a conflict between any Exhibit and the provisions of this Agreement, the provisions of this Agreement shall prevail.

Section 13.8 Entire Agreement . This Agreement including its Exhibits together with the Transaction Documents constitutes the entire agreement of the Parties concerning the subject matter hereof and supersedes all prior discussions and agreements among the Parties with respect to the subject matter hereof, including the Secrecy Agreement dated June 6, 2007 and the Memorandum of Understanding dated June 18, 2008.

Section 13.9 No Third Party Beneficiary . The terms and provisions of this Agreement are intended solely for the benefit of the Parties and their respective successors or permitted assigns, and it is not the intention of the Parties to confer any rights or remedies, neither directly or by way of a contract for the benefit of a third party, upon any person or entity other than the Parties, except as expressly otherwise provided for herein.

Section 13.10 Assignment . Without the written consent of the other Party, no Party shall be entitled to assign any rights or claims under this Agreement.

Section 13.11 Exclusion of Remedies . Except as provided otherwise herein, no Party shall be entitled (i) to set-off any rights and claims it may have against any rights or claims any other Party may have under this Agreement, or (ii) to refuse to perform any obligation it may have under this Agreement on the grounds that it has a right of retention, unless the rights or

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claims of the relevant Party claiming a right of set-off or retention have been acknowledged in writing by the relevant other Party or have been confirmed by final decision of the competent arbitral tribunal.

Section 13.12 Interpretation . The headings in this Agreement are inserted for convenience only and shall not affect the interpretation of this Agreement. Except as set forth otherwise, all references to "Section" refer to the corresponding Section of this Agreement. The word "including" shall not limit the preceding words or terms.

Section 13.13 Set-off and Retention . Except as explicitly provided for herein, no Party shall be entitled to any set-off ( Aufrechnung ) or retention ( Zurückbehaltung ) with respect to any rights or claims under this Agreement unless the right or claim of the Party claiming a right of set-off or retention has been acknowledged in writing by the relevant other Party or has been confirmed by a final decision of the competent arbitral tribunal.

Section 13.14 Interest . Interest shall accrue from day to day and shall be calculated on the basis of a year of 360 days and the actual number of days elapsed.

Section 13.15 Invalid Provisions . In the event that one or more provisions of this Agreement shall, or shall be deemed to, be invalid or unenforceable, the validity and enforceability of the other provisions of this Agreement shall not be affected thereby. In such case, the Parties agree to recognize and give effect to such valid and enforceable provision or provisions which correspond as closely as possible with the original commercial intent of the Parties. The same shall apply in the event that this Agreement contains any gaps or loopholes.

Section 13.16 Governing Law . This Agreement shall be governed by and construed in accordance with laws of Germany, without giving effect to any conflict or choice of law provision that would result in the imposition of another jurisdiction's law. The UN Convention on Contracts for the International Sale of Goods shall not be applicable.

Section 13.17 Arbitration

(a) Any dispute, controversy or claim arising out of or relating to this Agreement or the breach, termination or validity thereof (" Dispute ") shall be finally settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce (" Rules ") then in effect. The Parties recognize that it is in their best interests to resolve any Dispute as expeditiously as possible.

(b) The place of arbitration shall be Munich, Germany. Any meetings and hearings related to the arbitration shall be held in the English language. There shall be three arbitrators of whom, (i) one shall be nominated by the claimant, (ii) one shall be

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nominated by the respondent and (iii) one by the two arbitrators so nominated, in accordance with the Rules, which arbitrator shall serve as chairman of the Arbitral Tribunal (as defined in the Rules), within one (1) month following the confirmation of the nomination of the second (2nd) arbitrator. Where there are multiple parties to the Dispute, whether as claimant or respondent, the multiple claimants, jointly, and the multiple respondents, jointly, shall nominate their respective arbitrator. If any of the arbitrators are not timely nominated, then upon request of any Party, any arbitrator(s) not timely nominated shall be appointed by the International Court of Arbitration of the International Chamber of Commerce, within two (2) weeks following receipt of a request in accordance with the Rules, provided, however, that if multiple claimants in their request for arbitration or multiple respondents within 15 days as from receipt of the request for arbitration cannot agree on an arbitrator, the ICC Court of Arbitration shall appoint each member of the Arbitral Tribunal in accordance with Art. 10 (2) of the ICC Rules.

(c) The Terms of Reference (as defined in the Rules) shall be signed by the Parties as expeditiously as possible, however, no later than one (1) months after the confirmation of the appointment of the third (3rd) arbitrator. The hearing on the merits shall be held as expeditiously as possible, but no later than three (3) months after the signing of the Terms of Reference unless otherwise decided by the Arbitral Tribunal.

(d) The arbitrators shall be bound by the terms and conditions of this Agreement and shall apply the substantive laws of Germany. If and to the extent that the Arbitral Tribunal should, notwithstanding the choice of law provided for under Section 13.16 hereof, be required to resolve on any conflicts of law, such conflicts shall exclusively be resolved applying the rules on conflicts of law as set forth in Articles 3 to 47 of the Introductory Act to the German Civil Code ( Einführungsgesetz zum Bürgerlichen Gesetzbuch ). The Arbitral Tribunal is empowered to award damages, declaratory relief and injunctive relief with regard to any Dispute only in accordance with the terms of this Agreement. Any award or final decision of the Arbitral Tribunal shall include a decision on costs, including, without limitation, fees of counsel. The Arbitral Tribunal shall order the Parties to bear the costs of the arbitration proceedings pro rata, i.e. to the extent they have prevailed with their claims in the arbitration.

(e) The award shall be rendered within one (1) month following the close of the hearing (and, except if otherwise expressly agreed to by the Parties, specifically excluding any extension of this time limit that may be ordered by the International Court of Arbitration pursuant to the Rules either at the request of the Arbitral Tribunal or upon its own initiative). The award shall be final and binding upon the Parties, and shall be the sole and exclusive remedy among the Parties regarding any claims, counterclaims or other issues presented to the Arbitral Tribunal.

(f) The Parties agree that if an Arbitral Tribunal has been appointed, the same Arbitral Tribunal shall be appointed to resolve any further dispute between the same parties and/or additional Parties governed by this Agreement if, as determined in the

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discretion of the Arbitral Tribunal, the further dispute is based on substantially similar facts or substantially similar issues or if the Arbitral Tribunal finds that it would be cost-efficient to consolidate such proceedings. Should the Arbitral Tribunal not be prepared to resolve the further dispute, a new tribunal shall be appointed with respect to the new dispute in accordance with Section 13.17(b).

(g) Notwithstanding Section 13.17(a), each Party shall be entitled to request injunctive relief or to initiate attachment proceedings in the competent ordinary courts of any jurisdiction with the exception of courts in the United States of America, provided however, that such exception shall not apply to injunctive relief proceedings in connection with Article XI.

(h) Notwithstanding the provisions of Section 13.17(a), each Party hereto shall be entitled to issue a third party notice (" Streitverkündung ") to the other Party in the event that it has initiated or is otherwise involved in litigation with a third party or third parties before the ordinary courts of any jurisdiction in accordance with the procedural rules of the respective jurisdiction.

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each Party as of the date first above written.

The Fees for the notarization of this Agreement shall be borne by Ashland Inc. and Süd-Chemie AG one half each.

Reference is made to Exhibit 4 (Master Contribution and Sale Agreement), Exhibit 6.8(a)(i)(2) (Letter Agreement) and Exhibit 6.8(a)(i)(4) (Exaloid Share Sale Agreement), which constitute an integral part of this Agreement (section 9 para. 1 sentence 2 BeurkG). These Exhibits were read aloud by the Notary Public.

Exhibits 2.3(a)(i) und 2.3(a)(ii), which are already part of the reference deed, are attached to this deed for the purpose of proof and evidence.

-40-

In witness thereof this Notarial Deed and the Exhibit 4, 5.1-1 (A) and 6.8(a)(i)(4) have been read aloud to the persons appearing by the Notary Public or in presence of the officiating Notary Public, approved by the persons appearing and signed by them in their own handwriting:

/s/ Mark A. Stach

/s/ Ulrich M ü ller

/s/ Thiemo Heinzen

/s/ Dieter Mayer, Notary

-41-

EXHIBIT 10.27

Master Contribution and Sale Agreement

Today the fourteenth day of July 2010

-14.07.2010 -

appeared before me, the undersigned

Prof. Dr. Dieter Mayer

Notary Public

with office in Pacellistraße 14, D-80333 M ϋ nchen, Germany,

1. Mr.Mark Alan Stach, born on 16.12.1961,

with business address at 50E. River Center Blvd. Covington, KY 41012-0391, U.S.A. acting not in his own behalf but with the provisio of subsequent approval (vorbehaltlich Genehmigung), whereby the approval is seen as communicated and legally effective as of receipt by the notary public, for

Ashland Inc.

seated in Covington, KY 41012-0391, U.S.A.,

business address: 50E. River Center Blvd. Covington,

KY 41012-0391, U.S.A.,

Ashland Internaetional Holdings Inc.

seated in Sitz in Covington, KY 41012-0391, U.S.A.,

business address: 50E. River Center Blvd. Covington, KY 41012-0391, U.S.A.,

2. Mr. Dr. Ulrich M ϋ ller , born on 10.06.1963,

with business address at Lenbachplatz 6, 80333 Munich, acting not in his own behalf but with the provisio of subsequent approval

(vorbehaltlich Genehmigung), whereby the approval is seen as communicated and legally effective as of receipt by the notary public, for

Sud-Chemie Aktiengesellschaft,

seated in Mϋnchen,

business address: Lenbachplatz 6, 80333 Munich,

(Commercial Register Munich, HRB 1019)

3. Mr. Thiemo Heinzen , born on 16.10.1965,

with business address at Lenbachpiatz 6, 80333 Munich, acting not in his own behalf but with the provisio of subsequent approval (vorbehaltlich Genehmigung), whereby the approval is seen as communicated and legally effective as of receipt by the notary public, for

Ashland-Sudchemie-Kernfest GmbH,

seated in Hilden,

business address: Reisholzstraße 16-18, 40721 Hilden,

(Commercial Register Dϋsseldorf, HRB 44968)

4. Mr. Markus Born , born on 07.05.1970,

Tecpro Holding Corporation Inc.,

seated in DE 19801 Wilmington, U.S.A.,

business address: Corporation Trust Centre, 1209 Orange Street,

DE 19803 Wilmington, U.S.A.

The persons appearing identified themselves through presentation of their photo identity papers.

Notary Public, the persons appearing waived the right to obtain the assistance of a sworn interpreter and the right to obtain a certified translation of this Deed.

The persons appearing requested notarization of the following:

On July 13 th and 14 th , 2010 in order to facilitate the notarization of this Agreement all appendixes referring to the following have been notarized separately by the officiating notary public Prof. Dr. Dieter Mayer in Munich, Role of Deeds No. M 1539/2010 (the "Reference Deed"). Reference is made to the Reference Deed according to section 13 a BeurkG. The Parties declare that the Reference Deed - the original of which was available during the notarization - is well known to them. They waive their right to nave the Reference Deed being read aloud by the officiating notary public as well as their right to have the Reference Deed being attached to this deed.

The Parties hereby approve (genehmigen) the Reference Deed and explicitly enter the agreements that are part of the Reference Deed as defined below.

MASTER CONTRIBUTION AND SALE AGREEMENT

by and among

ASHLAND INC.

and

Ashland International Holdings, Inc.

and

Süd-Chemie Aktiengesellschaft

and

Tecpro Holding Corporation Inc.

and

Ashland-Südchemie-Kernfest GmbH

TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS			12
ARTICLE II TRANSFERRED BUSINESS ASSETS			22
	Section 2.1	Ashland Transferred Business Assets	22
	Section 2.2	SC Transferred Business Assets	26
	Section 2.3	Transferor and Transferors	28
	Section 2.4	Transferee and Transferees	28
	Section 2.5	Sale and Transfer	28
ARTICLE III SCOPE OF CARVE-OUT BUSINESS			28
	Section 3.1	General Scope of Carve-Out Business	28
	Section 3.2	Transferred Assets	29
	Section 3.3	Accounting Documentation	31
	Section 3.4	Licensed Intellectual Property Rights	32
	Section 3.5	Assumed Liabilities	32
	Section 3.6	Assumed Agreements	32
	Section 3.7	Carve-Out Employees	33
	Section 3.8	Further Business Items	34
	Section 3.9	Excluded Further Business Items	34
ARTICLE IV CONTRIBUTIONS, SALE AND TRANSFERS			34
	Section 4.1	Local Contribution or Sale Agreements	34
	Section 4.2	Transfer by Ashland	35
	Section 4.3	Transfer by SC	36
	Section 4.4	Transfer of Non-Current Assets	36
ARTICLE V TRANSFER PROVISIONS			37
	Section 5.1	Form of Local Contribution or Sale Agreements	37
	Section 5.2	Relationship between Local Contribution or Sale Agreements and this Agreement	38
	Section 5.3	Exclusion of Further Claims	38
	Section 5.4	Passing of Risk and Benefits	38
	Section 5.5	Licensing of Licensed Intellectual Property Rights	38
	S ection 5.6	Commercial Records	40
	Section 5.7	Assumption of Liabilities	40
	Section 5.8	Assumption of Agreements	40
	Section 5.9	Transfer, Termination and Rehiring of Carve-Out Employees; Reasonable Efforts	42

	Section 5.10	Treatment of Claims of Transferred Companies	45
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF ASHLAND AND SC			45
	Section 6.1	Organization	46
	Section 6.2	Authority; Binding Agreement	46
	Section 6.3	No Insolvency	46
	Section 6.4	Consents and Approvals; No Violations	46
	Section 6.5	Ownership of Assets; Good Title Conveyed	47
	Section 6.6	Condition of Assets	47
	Section 6.7	Transferred Companies	48
	Section 6.8	Accounting Statements	49
	Section 6.9	Books and Records	51
	Section 6.10	Accounts Receivable, Inventory	51
	Section 6.11	Disputed Accounts Payable	51
	Section 6.12	Absence of Certain Changes	52
	Section 6.13	Real Property	53
	Section 6.14	Leases	55
	Section 6.15	Plant and Equipment	55
	Section 6.16	Environmental Matters	55
	Section 6.17	Material Agreements	56
	Section 6.18	Suppliers	59
	Section 6.19	Licenses	59
	Section 6.20	Insurance	60
	Section 6.21	Litigation; Product Liability	60
	Section 6.22	Compliance with Laws	60
	Section 6.23	Employees	62
	Section 6.24	Individual and Collective Labor Matters	63
	Section 6.25	Tax Matters	64
	Section 6.26	Intellectual Property	66
	Section 6.27	Brokers or Finders	67
	Section 6.28	Currency Conversion	67
ARTICLE VII REMEDIES FOR BREACH OF WARRANTY AND LIMITATIONS			67
	Section 7.1	Breach	67
	Section 7.2	Exclusion of Claims for Breach	68
	Section 7.3	De Minimis Amount; Deductible; Cap	68
	Section 7.4	Time Limitations	69
ARTICLE VIII FURTHER INDEMNIFICATIONS			69

	Section 8.1	Indemnification for Excluded Liabilities	69
	Section 8.2	Environmental Indemnification	70
	Section 8.3	Taxes	74
	Section 8.4	Special Indemnifications	78
	Section 8.5	Missing/Invalid Permits	81
	Section 8.6	Claim against Parent Companies	81
	Section 8.7	No "Double Dip"	81
	Section 8.8	ASK's Indemnification	81
ARTICLE IX PROVISIONS PERTAINING TO BOTH REMEDIES FOR BREACH AND INDEMNIFICATIONS			82
	Section 9.1	Procedures	82
	Section 9.2	Sole and Exclusive Remedies	83
	Section 9.3	Waiver of Punitive and Consequential Damages	83
	Section 9.4	General	84
ARTICLE X TERMINATION OF ASHLAND GROUP FINANCING			85
	Section 10.1	Profit Distribution	85
ARTICLE XI TERMINATION OF SC GROUP FINANCING			85
	Section 11.1	Profit Distribution	85
	Section 11.2	Termination of Profit and Loss Transfer Agreements	85
	Section 11.3	Settlement of SC Cash Pool Agreements	87
	Section 11.4	Termination of Shareholder Loans	87
	Section 11.5	Payments	87
ARTICLE XII MISCELLANEOUS			88
	Section 12.1	Miscellaneous	88
	Section 12.2	Survival of Rights and Obligations in case of a Change of Control	88

III

LIST OF EXHIBITS

Page

Exhibit 1.1-1(a)	SC Domain Names	13
Exhibit 1.1-1(b)	Ashland Domain Names	13
Exhibit 1.1-2(a)	SC Patents	18
Exhibit 1.1-2(b)	Ashland Patents	18
Exhibit 1.1-3	Permitted Encumbrance	19
Exhibit 1.1-4(a)	SC Trademarks	21
Exhibit 1.1-4(b)	Ashland Trademarks	21
Exhibit 1.1-5(a)	SC Utility Models	22
Exhibit 1.1-5(b)	Ashland Utility Models	22
Exhibit 3.2(a)(i)	Transferred Real Estate	29
Exhibit 3.2(a)(iv)	Documents of Assignment for Transferred IP Rights	30
Exhibit 3.4	Form License Agreement (Use of Licensed IP)	32
Exhibit 3.6(c)(iv)	List of Specifically Excluded Agreements	33
Exhibit 4.2(a)	Non-Current Asset Listing of Ashland Canada Business	35
Exhibit 4.2(b)	Non-Current Asset Listing of Ashland China Business	35
Exhibit 4.2(c)	Non-Current Asset Listing of Ashland India Business	35
Exhibit 4.2(d)	Non-Current Asset Listing of Ashland Italy Business	35
Exhibit 4.2(e)	Non-Current Asset Listing of Ashland Mexico Business	35
Exhibit 4.2(f)	Non-Current Asset Listing of Ashland Pacific Business	35
Exhibit 4.2(g)	Non-Current Asset Listing of Ashland UK Business	35
Exhibit 4.2(h)	Non-Current Asset Listing of Ashland US Business	35
Exhibit 4.2(i)	Listing of Rep. Office Ashland Russia Business	36
Exhibit 4.3	Non-Current Asset Listing of SC China Business	36
Exhibit 5.1-1	Form of Asset Contribution or Sale Agreement	38
Exhibit 5.1-2	Form of Share Contribution or Sale Agreement	38
Exhibit 5.5(b)	Form of Back License Agreement	39
Exhibit 5.9(a)-1	Business Employees as of Signing Date	42
Exhibit 5.9(a)-2	Employees Eligible for Ashland Plan	43
Exhibit 5.9(a)-3	Ashland's Severance Policy	43
Exhibit 8.2(a)	Known Contamination	70

LIST OF SCHEDULES

Page

Schedule 6.1	Organization Disclosures	46
Schedule 6.7(a)	Shareholding Disclosures	48
Schedule 6.8(a)	Management Accounts	49
Schedule 6.8(b)	Carve-Out Statements	49
Schedule 6.8(c)	Individual Financial Statements	50
Schedule 6.11	Disputed Accounts Payable	51
Schedule 6.12	Material Changes	52
Schedule 6.13(a)-1	Transferred Real Property	53
Schedule 6.13(a)-2	Proceedings, Claims, etc. affecting Transferred Real Property	53
Schedule 6.13(b)	Transferred Real Property Ownership Disclosures	54
Schedule 6.13(c)	Transferred Real Property Approvals Disclosures	54
Schedule 6.13(d)	Real Estate Lease Agreements	54
Schedule 6.14	Leases	55
Schedule 6.16(b)	Environmental Disclosures	55
Schedule 6.16(c)	Environmental Claim	56
Schedule 6.16(d)	Materials of Environmental Concern Disclosures	56
Schedule 6.16(f)	Environmental Assessment / Remediation Requirements	56
Schedule 6.17(a)	Material Agreements	56
Schedule 6.17(b)	Material Agreements Disclosures	59
Schedule 6.21(b)	Product Defects Disclosure	60
Schedule 6.22(a)	Non-Compliance with Laws Disclosure	60
Schedule 6.22(d)-1	Missing Permits Disclosure	61
Schedule 6.22(d)-2	Invalid, challenged, etc. Permits	61
Schedule 6.22(e)	Public Subsidies	61
Schedule 6.23(a)	Material Employees	62
Schedule 6.23(b)	Material Personnel Contracts Disclosures	62
Schedule 6.23(c)-1	List of Transferred Plans	62
Schedule 6.23(c)-2	List of Excepted Plans	62
Schedule 6.23(d)	Collective Agreements	63
Schedule 6.23(e)	Key Employees	63
Schedule 6.24(a)	Labor Disputes	63
Schedule 6.24(c)	Labor Disclosures	64
Schedule 6.25(a)	Contested Taxes	64
Schedule 6.25(d)	Tax Rulings / Agreements with Tax Authorities	65
Schedule 6.25(i)	Challenged Tax Carry Forwards	65
Schedule 6.26(b)	IP Registration Disclosures	66
Schedule 6.26(d)-1	IP Infringement by Third Parties Dislcosures	66
Schedule 6.26(d)-2	IP Infringement Disclosures	66
Schedule 6.26(e)	Missing Consents affecting IP	67
Schedule 6.26(f)	IP Consents / Arrangements	67

Index of Defined Terms

Accounting Documentation	22
Affiliate	2
Agreement	1
AIHI	1
ALIP	16
AMSC	17
AMSC Shares	17
AMSC Shares Purchase Obligation	27
Ancillary Agreements	2
ASAV	1
ASAV Ashland Shares	13
ASAV SC Shares	17
AS-Group	2
Ashland	1
Ashland Business	2
Ashland Canada	15
Ashland Canada Business	15
Ashland Carve-Out Business	16
Ashland China	15
Ashland China Business	15
Ashland China Holding	15
Ashland China Holding Business	15
Ashland Iberia	14
Ashland Iberia Shares	14
Ashland India	15
Ashland India Business	15
Ashland Italy	15
Ashland Italy Business	15
Ashland Japan	13
Ashland Japan Shares	13
Ashland Korea	14
Ashland Korea Shares	14
Ashland Mexico	15
Ashland Mexico Business	15
Ashland Non-Current Asset Listings	25
Ashland Operating China Business	15
Ashland Pacific	15
Ashland Pacific Business	16
Ashland Portugal	14
Ashland Portugal Shares	14
Ashland Resinas	13
Ashland Resinas Shares	13
Ashland Tax Contest Control Notice	69
Ashland Transferred Business Assets	13
Ashland Transferred Companies	14

Ashland Transferred Shares	14
Ashland UK	16
Ashland UK Business	16
Ashland US Business	16
Ashland Warranties	36
ASK	1
Asset Transferee	18
Asset Transferees	18
Asset Transferor	18
Asset Transferors	18
Assumed Agreements	23
Assumed Liabilities	2
Basket Amount	60
Breach	59
Business	6
Business Day	3
Business Employees	33
Cap	60
Carve-Out Employees	24
Carve-Out Business	3
Carve-Out Statements	40
Cash Pool Participants	80
Cash Pool Termination Date	80
Claimant	62
Cleanup	3
Closing	3
Closing Date	3
Code	3
Collective Agreements	54
Commercial and Technical Records	20
Copyrights	3
Data Room	3
De Minimis Amount	60
Displaced Employee	35
Domain Names	3
Employee Eligible for Ashland Plan	33
Employee Notification	34
Encumbrance	4
Environmental Claim	4
Environmental Laws	4
Environmental Loss	4
ERISA	4
ERISA Affiliate	5
Excluded Agreements	23
Excluded Assets	21
Excluded Further Business Items	24

VII

Excluded Liabilities	5
Further Business Items	24
GAAP	5
Global Business Plan	6
Governmental Entity	6
Group	6
Group Companies	6
Group-Owned Intellectual Property Rights	30
HITECH	17
HITECH Shares	17
IFRS	6
Individual Financial Statements	41
Insurance Policies	51
Kemen Manguitos	14
Kemen Manguitos Shares	14
Key Employee Contracts	54
Key Employees	54
Know-how	6
Knowledge of Ashland, SC or a Transferor	6
Law	6
Leases	46
Liabilities	6
License Agreements	7
Licensed Copyrights	7
Licensed Information Technology	7
Licensed Intellectual Property Rights	7
Licensed Know-how	7
Licensed Patents	7
Licensed Personal Rights	7
Licensed Trademarks	8
Licensed Utility Models	8
Local Closing Date	8
Local Contribution or Sale Agreements	28
Loss	8
Losses	8
Management Accounts	40
Master Formation Agreement	8
Material Agreements	48
Material Change	43
Material Employees	53
Material Personnel Contracts	53
Materials of Environmental Concern	8
Neutral Environmental Expert	63
New Agreement	33
New Ashland Plan	33
Non-Current Asset Listings	27

VIII

Ordinary Disposed Fixed Assets	27
Parties	1
Party	1
Patents	8
Payment Date	81
Permits	8
Permitted Encumbrance	9
Person	9
Personal Rights	9
Plan	9
Pre-Closing Periods	10
Public Subsidies	53
Real Estate Lease Agreement	46
Real Property	10
Remedial Measures	62
Remediation Standard	10
Rep. Office Ashland Russia Business	16
Responding Party	62
SC	1
SC Business	10
SC Carve-Out Business	18
SC Cash Pool	80
SC Cash Pool Agreement	80
SC CHI	18
SC China Business	18
SC Non-Current Asset Listings	26
SC Tax Contest Control Notice	69
SC Transferred Business Assets	16
SC Transferred Companies	18
SC Transferred Shares	18
SC Warranties	36
SCF	10
Separation	33
Share Transferee	18
Share Transferees	18
Share Transferor	18
Share Transferors	18
Shareholders' Agreement	10
Signing Date	10
SKW	17
SKW Profit and Loss Transfer Agreement	79
SKW Shares	17
Straddle Period	10
Tax Authority or Tax Authorities	11
Tax Claim Notice	68
Tax Contest	68

Tax or Taxes	10
Tax Payables	66
Tax Refund	67
Tax Return or Tax Returns	11
Tax Sharing Agreement	11
TECPRO	18
Tecpro Holding	1
TECPRO Shares	18
Third-Party Claim	75
Trademarks	11
Transferee	19
Transferees	19
Transferor	18
Transferor Parts	32
Transferors	18
Transferred Assets	19
Transferred Business	11
Transferred Business Assets	19
Transferred Companies	18
Transferred Employee	34
Transferred Information Technology	12
Transferred Intellectual Property Rights	12
Transferred Liabilities	12
Transferred Plans	54
Transferred Real Property	45
Transferred Shares	18
US Carve-Out Employee	33
US Limited Partnership	2
WD	17
WD Profit and Loss Transfer Agreement	78
WD Shares	17

MASTER CONTRIBUTION AND SALE AGREEMENT

This MASTER CONTRIBUTION AND SALE AGREEMENT (this " Agreement ") is made and entered into by and among

(i) Ashland Inc. , a publicly listed stock corporation organized and existing under the laws of the Commonwealth of Kentucky, USA, having its registered office at 50 East RiverCenter Boulevard, Covington, Kentucky 41012, USA (" Ashland "),

(ii) Ashland International Holdings, Inc. , a company organized and existing under the laws of the State of Delaware, U.S.A., having its registered office at 1209 Orange Street, Wilmington, DE 19801, USA(" AIHI "),

(iii) Süd-Chemie Aktiengesellschaft , a publicly listed stock corporation organized and existing under the laws of the Federal Republic of Germany, having its registered office at Lenbachplatz 6, 80333 Munich, Germany (" SC "),

(iv) Tecpro Holding Corporation Inc. , a company organized and existing under the laws of the Delaware, USA, having its registered office at c/o Corporation Trust Centre, 1209 Orange Street, Delaware 19801 Wilmington, USA (" Tecpro Holding "),and

(v) Ashland-Südchemie-Kernfest GmbH , a limited liability company organized and existing under the laws of the Federal Republic of Germany, having its registered office at Reisholzstrasse 16 – 18, 40721 Hilden, Germany (" ASK ").

Ashland, SC and ASK shall hereinafter collectively be referred to as the " Parties " or individually as a " Party ."

W I T N E S S E T H

WHEREAS, Ashland and SC have joint interests in ASK and Ashland-Avébène S.A.S., a stock corporation incorporated and existing under the laws of France with registered office at 20, rue Croix du Vallot, 27600 Saint Pierre La Garenne, France (" ASAV ") and ASK's and ASAV's respective businesses in customized chemical products for the foundry industry and of specialty resins, particularly for the paint and coatings industry under the roofs of ASK and ASAV, which are jointly controlled by Ashland and SC.

WHEREAS, Ashland and SC have entered into a certain Master Formation Agreement by which Ashland and SC undertake to further combine the Ashland Business and SC Business (as defined in Sections 3.1(a) and 3.1(b), respectively of the Master Formation

Agreement) at the level of ASK and a limited partnership to be founded in accordance of the provisions of the Master Formation Agreement (" US Limited Partnership ").

NOW THEREFORE, in consideration of the mutual agreements contained herein, the Parties to this Agreement agree as follows:

ARTICLE I

DEFINITIONS

Definitions . As used in this Agreement, the following capitalized terms have the meanings set forth below:

"Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the person specified, excluding the Group Companies and the members of the AS-Group, as the case may be. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether through ownership of voting securities or ownership interests, by contract or otherwise, provided that the direct or indirect ownership of fifty per cent (50%) or more of the voting share capital of a person is deemed to constitute control of such person, and "controlling" and "controlled" have corresponding meanings.

"Ancillary Agreements" has the meaning given to it in Section 1 of the Master Formation Agreement.

"AS-Group" means ASK together with its subsidiaries and ASAV.

"Ashland Business" has the meaning given to it in Section 3.1(a) of the Master Formation Agreement.

" Assumed Liabilities " means:

(i) all Liabilities owed by the respective Asset Transferor to the extent reflected, accrued or expressly reserved in the Closing Date Net Asset Value Statement (as defined in Section 7.3 of the Master Formation Agreement) as such Closing Date Net Asset Value Statement is agreed upon or determined to be final in accordance with Section 7.4 of the Master Formation Agreement; and

(ii) any Liabilities of the respective Asset Transferor under the Assumed Agreements arising after the Closing Date, except for any Liability arising out of or relating to (A) any breach of, or failure to comply with, prior to the Closing Date, any covenant or obligation in any such Assumed Agreement or (B) any event that occurred prior to the Closing Date which, with or without notice, lapse of time or both, would constitute such a breach or failure.

"Business Day" means a day other than Saturday, Sunday and public holidays in Munich, Germany and in New York, NY, USA.

" Carve-Out Business "" means each Ashland Carve-Out Businesses and each SC Carve-Out Business.

"Cleanup" shall mean all actions required to: (1) cleanup, remove, treat or remediate Materials of Environmental Concern in the indoor or outdoor environment; (2) prevent the release of Materials of Environmental Concern so that they do not migrate, endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (3) perform pre-remedial studies and investigations and post-remedial monitoring and care; or (4) respond to any requests by a Governmental Entity for information or documents in any way relating to cleanup, removal, treatment or remediation or potential cleanup, removal, treatment or remediation of Materials of Environmental Concern in the indoor or outdoor environment.

"Closing" has the meaning given to it in the Master Formation Agreement.

"Closing Date" has the meaning given to it in the Master Formation Agreement.

"Code" shall mean the U.S. Internal Revenue Code of 1986, as amended.

" Copyrights " shall mean all copyrights, including any and all registrations, for copyrightable subject matter owned by Ashland or SC or any of their respective Affiliates (including any Transferor) and used or held for use (in each case exclusively or predominantly) in the operation of the Transferred Business on the Closing Date.

"Data Room" means the virtual data room for "Project Ironman" accessible on the website https://services.intralinks.com/login/.

"Domain Names" means those domain names that are the subject of the rights provided by the domain name registrations set forth on Exhibit 1.1-1(a) and Exhibit 1.1-1(b) .

"Encumbrance" means any mortgage, charge, pledge, lien, option, restriction, assignment, hypothecation, right of first refusal, right of pre-emption, or right to acquire or restrict, any adverse claim or right or third party right or interest, any other encumbrance or security interest of any kind, and any other type of preferential arrangement (including, without limitation, title transfer and retention arrangements) having a similar effect.

"Environmental Claim" means any claim, action, cause of action, suit, proceedings, investigation order, demand or notice (whether written or oral, formal or informal) by any Person alleging actual or potential liability (including, without limitation, actual or potential liability for investigatory, Cleanup costs imposed by a Governmental Entity, or natural resources or property damages, or personal injuries, attorney's fees or penalties) arising out of, based on, resulting from or relating to (whether actual or alleged) (i) the presence, or release into the environment, of, or exposure to, any Materials of Environmental Concern at any location, including: (x) the contamination of the soil of any Transferred Real Property or the buildings or other fixtures on such Transferred Real Property, (y) the presence of Materials of Environmental Concern in the groundwater originating from such Transferred Real Property, or (z) the generation, use, handling, processing, storage, treatment, transportation, recycling, emission, discharge, release or disposal of any Materials of Environmental Concern at any offsite location or any pollution of the groundwater caused thereby, or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.

"Environmental Laws" means any federal, state, local and foreign laws, regulations, ordinances, requirements of and authorizations by Governmental Entities, and common law relating to pollution, protection or preservation of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata, and natural resources), including, without limitation, laws and regulations relating to (i) emissions, discharges, releases or threatened releases of or exposure to Materials of Environmental Concern, (ii) the manufacturing, processing, distribution, use, treatment, generation, storage, containment (whether above ground or underground), disposal, transport or handling of Materials of Environmental Concern, (iii) recordkeeping, notification, disclosure and reporting requirements regarding Materials of Environmental Concern, (iv) endangered or threatened species of fish, wildlife and plant and the management or use of natural resources, or (v) the preservation of the environment or mitigation of adverse effects on or to human health or the environment.

" Environmental Loss" shall mean any Loss resulting from an Environmental Claim; provided that such Loss: (i) is incurred in connection with the Cleanup of Materials of Environmental Concerns and such Cleanup is not triggered by any post-Closing change in use of the property at which the Cleanup is conducted; or (ii) is incurred to remedy any violations of Environmental Law that existed as of the Closing Date.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"ERISA Affiliate" means any trade or business, whether or not incorporated, that together with any Person would be deemed a "single employer" within the meaning of Section 4001(b) of ERISA.

" Excluded Liabilities" mean any Liabilities (including reasonable legal, accounting and other fees and expenses of professional advisers in connection with the defense against potential Liabilities) other than (i) the Assumed Liabilities and (ii) the Transferred Liabilities, and including but not limited to:

(a)

all Liabilities arising out of or relating to any Excluded Asset;

(b)

all Liabilities under any contract that is not an Assumed Agreement;

(c)

all Liabilities under any contract that is an Excluded Agreement;

(d)

all Liabilities arising out of or relating to product liability, indemnity, warranty, infringement, misappropriation or similar claims by any Person in connection with any tangible or intangible products or services used, sold or licensed by the Ashland Business or the SC Business, Ashland or SC, or any of their respective Transferors;

(e)

all Liabilities related to Taxes other than to the extent reflected in the Closing Date Net Asset Values Statement;

(f)

all Environmental Losses arising out of or relating to the operation of the Ashland Business or the SC Business or the leasing, ownership or operation of real property by Ashland or SC, as the case may be, or any of their respective Transferors;

(g)

all Liabilities arising out of or relating to a breach of anti-trust, anti-corruption or other applicable laws in connection with the operation of the Ashland Business or the SC Business;

(h)

all Liabilities under or relating to any contractual or other relationship between the Carve-Out Employees and Ashland or SC or their respective Affiliates; and

(i)

all Liabilities arising out of or relating to any Plans, except for Liabilities arising out of or relating to Transferred Plans.

"GAAP" means generally accepted accounting principles, consistently applied throughout the periods presented.

"Global Business Plan" has the meaning given to it in the Master Formation Agreement.

"Governmental Entity" means any governmental or public body or authority, including without limitation, any national, state, provincial, regional, municipal or local authority, body, agency, ministry, court, judicial or administrative body or other governmental organization.

"Group" means ASK and US Limited Partnership and each of their subsidiaries.

"Group Companies" means, collectively, ASK and US Limited Partnership and the subsidiaries of ASK and US Limited Partnership as envisaged in the Contemplated Group Structure (as defined in Section 2.6 of the Master Formation Agreement) and " Group Company " means any of them.

"IFRS" means International Financial Reporting Standards.

"Knowledge of Ashland, SC or a Transferor" concerning a particular subject, area or aspect of the Business or affairs means the knowledge of each of the officers and directors of Ashland, SC and their Affiliates or such Transferor and all knowledge which was or could have been obtained upon inquiry by such persons of those employees of Ashland, SC and their Affiliates or the Transferor whose duties would, in the normal course of Ashland, SC and their Affiliates or such Transferor result in such employees having knowledge concerning such subject, area or aspect.

"Know-how" shall mean any know-how, technology and business information (including trade secrets) owned by Ashland or SC or any of their respective Affiliates (including any Transferor) used or held for use (in each case exclusively or predominantly) in the operation of the Transferred Business on the Closing Date. For the avoidance of doubt, “ Know-how ” shall include pre-development results and development results already in existence on the Signing Date or which may be conceived until the Closing Date including those in electronic form, such as specifications, designs, drawings, plans and the like.

"Law" means any federal, state, county, municipal, local or foreign statute, ordinance, rule, regulation, law, judgment, order, decree, injunction or other authorization.

" Liabilities" means any liability of any kind whatsoever, whether known or unknown, asserted or unasserted, accrued or fixed, contingent or absolute, determined or determinable, or otherwise, including those arising under any law, action or order of a Governmental Entity and those arising under any contract

" License Agreements " means the license agreements related to the Licensed Intellectual Property pursuant to Section 5.5(a) hereunder.

" Licensed Copyrights " shall mean all Copyrights, including any and all registrations, for copyrightable subject matter owned by Ashland or SC or any of their respective Affiliates (including any Transferor) and used or held for use (but not exclusively or predominantly) in the operation of the Transferred Business on the Closing Date.

" Licensed Intellectual Property Rights " shall mean the Licensed Copyrights, Licensed Know-how, Licensed Patents, Licensed Personal Rights, Licensed Trademarks, and Licensed Utility Models.

" Licensed Information Technology" means all computer hardware, software, databases, networks and other information technology assets that have been licensed by the Transferred Business and used by or are necessary to conduct (in each case not exclusively or predominantly) the Transferred Business as conducted on the Closing Date.

" Licensed Know-how" shall mean all Know-how, technology and business information (including trade secrets), owned by Ashland or SC or any of their respective Affiliates (including any Transferor) and used or held for use (but not exclusively or predominantly) in the operation of the Transferred Business on the Closing Date. For the avoidance of doubt, “ Licensed Know-how ” shall include pre-development results and development results already in existence on the Signing Date or which may be conceived until the Closing Date including those in electronic form, such as specifications, designs, drawings, plans and the like.

" Licensed Patents " shall mean all U.S. and foreign patents, patent applications, patent disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions, and extensions thereof owned by Ashland or SC or any of their respective Affiliates (including any Transferor) and used or held for use (but not exclusively or predominantly) in the operation of the Transferred Business on the Closing Date.

" Licensed Personal Rights " shall mean any rights of publicity or moral rights and rights of attribution and integrity owned by Ashland or SC or any of their respective Affiliates (including any Transferor) and used or held for use (but not exclusively or predominantly) in the operation of the Transferred Business on the Closing Date.

" Licensed Trademarks " shall mean all trademarks, service marks, names, corporate names, trade names, logos, slogans, trade dress, design rights, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, owned by Ashland or SC or any of their respective Affiliates (including any Transferor) and used or held for use (but not exclusively or predominantly) in the operation of the Transferred Business on the Closing Date, provided that , “ Licensed Trademarks ” shall not include any rights

in or to the trademarks, service marks, names, corporate names, trade names “Ashland” or “Süd Chemie” (including registrations for the same).

"Licensed Utility Models" shall mean all utility models in registered and unregistered form owned by Ashland or SC or any of their respective Affiliates (including any Transferor) and used (but not exclusively or predominantly) in the operation of the Transferred Business on the Closing Date, including all utility models establishing priority, being filed claiming priority or being branched-off from Licensed Patents.

"Local Closing Date" has the meaning given to it in Section 6.13 of the Master Formation Agreement.

" Loss " means any claim, Liability, direct and indirect damage (including consequential damages), interest, fine, penalty and cost (including reasonable legal, accounting and other fees and expenses of professional advisers) and other loss (collectively " Losses ").

"Master Formation Agreement" means the Master Formation Agreement of even date between Ashland and SC.

"Materials of Environmental Concern" shall mean all, substances defined as, or regulated as, hazardous substances, hazardous wastes, pollutants, contaminants, toxins, toxic substances, or words of similar import, under any Environmental Laws; all petroleum and petroleum products; asbestos or asbestos-containing materials or products; polychlorinated biphenyls; lead or lead-based paints or materials; radon, fungus, mold, and mycotoxins.

"Patents" means the patents and patent applications, set forth on Exhibit 1.1-2(a) and Exhibit 1.1-2(b) , and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions, and extensions thereof.

" Permits " means all permits (including such permits as are required by the Environmental Laws as applicable to the Transferred Business), licenses and other governmental or public law approvals which are necessary or required by a Transferor or a Transferred Company to (i) conduct its Transferred Business, (ii) own, lease and operate the Transferred Business Assets, and (iii) to carry on the Transferred Business as contemplated by the Global Business Plan.

"Person" means a natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Entity or other entity or organization.

" Personal Rights " shall mean any rights of publicity, or moral rights and rights of attribution and integrity owned by Ashland or SC or any of their respective Affiliates (including any Transferor) and used or held for use (in each case exclusively or predominantly) in the operation of the Transferred Business on the Closing Date.

"Permitted Encumbrance" means (i) any of the Encumbrances set forth on Exhibit 1.1-3 ; (ii) statutory Encumbrances arising out of operation of law with respect to a liability incurred in the ordinary course of business consistent with prior practice and which is not delinquent or is being actively contested in good faith; (iii) such Encumbrances (other than monetary liens) and other imperfections of title as do not materially detract from the value or impair the use of the property subject thereto; (iv) liens for Taxes not delinquent or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been made in the Individual Financial Statements in accordance with IFRS or local GAAP; (v) mechanics', materialmens', carriers', workmens', warehousemens', repairmens', landlords' or other like liens and security obligations with respect to liabilities that are not delinquent or are being actively contested in good faith; or (vi) industrial use restrictions which do not materially impair the current use of the property of the Business.

"Plan" means collectively:

(i)

each deferred compensation, each incentive compensation, stock purchase, stock option and other equity compensation plan, program, agreement or arrangement; each severance or termination pay, medical, surgical, hospitalization, life insurance and other "welfare" plan, fund or program (including those within the meaning of Section 3(1) of ERISA);

(ii)	each material profit-sharing, stock bonus or other "pension" plan, fund or program (including those within the meaning of Section 3(2) of ERISA);

(iii)

each other employee benefit plan, fund, program, agreement or arrangement (including, but not limited, those regarding medical, surgical, hospitalization, death, pensions, retirement or similar benefits) that is sponsored, maintained or contributed to or required to be contributed to by SC, Ashland, any of SC's or Ashland's Affiliates or by any ERISA Affiliate of SC or Ashland, or to which SC, Ashland, any of SC's or Ashland's Affiliate or an ERISA Affiliate of SC or Ashland is party, whether written or oral, currently providing benefits to the Transferred Employees; provided, however, that any plan, fund, program, agreement or arrangement mandated by local law, including without limitation any plan, fund, program, agreement or arrangement requiring the mandatory payment of social insurance taxes to a government fund, shall not be considered a "Plan" for these purposes; and

(iv)	all agreements and other commitments, whether of an individual or collective nature and including commitments based on works custom ( betriebliche Übung ), regarding pensions.

"Pre-Closing Periods" means any taxable year or other taxable period that ends on or before the Closing Date.

"Real Property" means all real property that is owned, leased or used (including without limitation pursuant to any permit or right-of-way agreement) by the Ashland Business or the SC Business.

"Remediation Standard" shall mean a numerical standard that defines the concentrations of Materials of Environmental Concern that may be permitted to remain in any environmental media after an investigation, remediation or containment of a release of Materials of Environmental Concern.

"SC Business" has the meaning given to it in Section 3.1(b) of the Master Formation Agreement.

"SCF" means Süd-Chemie Finance GmbH ( i.e. , a subsidiary of SC).

"Shareholders' Agreement" means collectively: (i) the shareholders' agreement between Ashland's Affiliate AIHI, SC and SC Finance GmbH with respect to the governance and shareholdings in ASK, and (ii) the Limited Partnership Agreement between Ashland, TECPRO and ASK with respect to the governance and partnership interests in US Limited Partnership as of the date hereof as set forth in Section 5.1 of the Master Formation Agreement.

"Signing Date" means the date of this Agreement.

"Straddle Period" means any taxable year or other taxable period commencing on or prior to, and ending after, the Closing Date.

"Tax" or "Taxes" means (i) all taxes, charges, fees, duties, levies, imposts, duties, penalties or other assessments imposed or required to be withheld by any federal, state, local or foreign Tax Authority, including in particular income taxes (e.g., income and profit taxes) as well as other taxes (e.g., gross receipts, excise, property, sales, ad valorem, property, gain, use, license, custom duty, unemployment, share capital, transfer, franchise, payroll, withholding, social security, minimum estimated, profit, gift, severance, value added, disability, premium, recapture, credit, occupation, service, leasing, employment, wage, workers

compensation, environmental, estimated, stamp and other taxes), (ii) secondary liability for other person's Taxes ( Steuerhaftungsbeträge ) based on applicable law ( e.g. , wage tax, reverse charged VAT, withholding tax, due to tax groups, fiscal unities, acquisition of businesses), (iii) any payments for non-compliance with transfer pricing obligations and (iv) shall include interest, penalties or additions attributable thereto or attributable to any failure to comply with any requirement regarding Tax Returns.

"Tax Authority" or "Tax Authorities" means any Governmental Entity anywhere in the world exercising the authority to impose Taxes, or to regulate or administer the imposition or collection of Taxes.

"Tax Return" or "Tax Returns" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any such document prepared on a consolidated, combined or unitary basis and also including any schedule or attachment thereto, and including any amendment thereof.

“Tax Sharing Agreement” means any Tax indemnity, Tax sharing, Tax allocation agreement or similar contract or arrangement, whether written or unwritten (including any such agreement, contract or arrangement included in any purchase or sale agreement, merger agreement, joint venture agreement or other document); provided, however, that a Tax Sharing Agreement does not include this Agreement and the contracts contemplated hereby.

"Trademarks" means those trademarks, service marks, names, corporate names, trade names, logos, slogans, trade dress, design rights, and other similar designations of source or origin set forth on Exhibit 1.1-4(a) and Exhibit 1.1-4(b) .

"Transferred Business" means the Ashland Business and the SC Business.

"Transferred Intellectual Property Rights" means all (i) Patents, (ii) Trademarks, (iii) Domain Names, (iii) Copyrights, (iv) Personal Rights, (vi) Know-How, and (v) Utility Models.

"Transferred Information Technology" means all computer hardware, software, databases, networks and other information technology assets used by or necessary (in each case exclusively or predominantly) to conduct the Transferred Business as conducted on the Closing Date.

"Transferred Liabilities" means:

(i) all Liabilities of a Transferred Company to the extent reflected, accrued or expressly reserved in the Closing Date Net Asset Value Statement (as defined in Section 7.3 of the Master Formation Agreement), as such Closing Date Net Asset Value Statement is agreed upon or determined to be final in accordance with Section 7.4 of the Master Formation Agreement; and

(ii) any Liabilities arising after the Closing Date under agreements to which a Transferred Company is party and which have been entered into prior to the Closing Date (" Transferred Agreements "), except for any Liability arising out of or relating to (A) any breach of, or failure to comply with, prior to the Closing Date, any covenant or obligation in any such Transferred Agreement or (B) any event that occurred prior to the Closing Date which, with or without notice, lapse of time or both, would constitute such a breach or failure; provided however, that Transferred Agreements shall only comprise such Material Agreements that have been disclosed on Schedule 6.17(a).

"Utility Models" all utility models in registered and unregistered form owned by Ashland or SC or any of their respective Affiliates (including any Transferor) and used (in each case exclusively or predominantly) in the operation of the Transferred Business on the Closing Date, including in particular, but without limitation, those set forth on Exhibit 1.1-5 (a) and Exhibit 1.1-5(b) , and all other utility models establishing priority, being filed claiming priority or being branched-off from Patents.

ARTICLE II

TRANSFERRED BUSINESS ASSETS

Section 2.1 Ashland Transferred Business Assets . For the purposes of this Agreement, the " Ashland Transferred Business Assets " shall comprise the Ashland Transferred Shares (as defined in Section 2.1(a)) (including the assets transferring indirectly with the Ashland Transferred Shares) and the Ashland Carve-Out Business (as defined in Section 2.1(b)). The Ashland Transferred Business Assets will partly be sold against cash consideration and partly be contributed into the Group Companies.

(a) Ashland Transferred Shares (Share Deals) .

Ashland holds, directly or indirectly, shares in the following legal entities through which the Ashland Business is being conducted:

(i) 24,000 shares in the nominal value of EUR 25.00 each (comprising 50% of the total outstanding shares in ASAV (the " ASAV

Ashland Shares ") which has a total authorized capital in the amount of EUR 1,200,000; the remaining outstanding shares in ASAV are owned by SC (see below);

(ii) 19,497,632 shares in the nominal value of R$1,00 each (comprising 100% of the total outstanding shares) in Ashland Resinas Ltda., a company incorporated under the laws of the Federative Republic of Brazil with registered office at Via Anhanguera, km 103 - Bairro Nova Aparecida, 13065-616, Campinas. (" Ashland Resinas ") (the " Ashland Resinas Shares ") which has a total authorized capital in the amount of BRL 19,497,632;

(iii) 37,625 shares without par value (comprising 100% of the total outstanding shares) in Ashland Japan Co. Ltd., a company incorporated under the laws of Japan with registered office at Bashamichi 450 Bldg., 7 th Floor, 50 Otamachi 4-Chome, Naka-Ku, Yokohama, Japan (" Ashland Japan ") (the " Ashland Japan Shares ") which has a total authorized capital in the amount of JPY 99,000,000;

(iv) 133,000 shares (132,900 thereof common shares and 100 thereof preferred shares) in the nominal value of KWR 10,000 each (comprising 50.02% of the total outstanding shares) in Ashland Korea Foundry Products Ltd., a company incorporated under the laws of Korea with registered office at 332 Hwansan Onsan, Ulju, Ulsan 689-890, Republic of Korea (" Ashland Korea ") (the " Ashland Korea Shares ") which has a total outstanding capital in the amount of KRW 2,659,000,000; the remaining outstanding shares in Ashland Korea are owned by ABC Co., Ltd. (i.e., 132,900 common shares);

(v) 37,142 shares in the nominal value of EUR 6.01 each (comprising 100% of the total outstanding shares; in Iberia Ashland Chemical, S.A., a company incorporated under the laws of Spain with registered office at Getxo (Vizcaya) at Muelle Tomás Olabarri nº 4, 3 (" Ashland Iberia ") (the " Ashland Iberia Shares ") which has a total authorized capital in the amount of EUR 223,223.42; 35,285 shares in Ashland Iberia are held by Ashland and 1,857 shares in Ashland Iberia are treasury shares held by Ashland Iberia;

(vi) 1 share in the nominal value of EUR 15,000 (comprising 60% of the total outstanding shares (which shares are owned by Ashland Iberia) in Ashland Quimica Portuguesa Lda., a company incorporated under the laws of Portugal with registered office at Rua Cova da Moura, 2 - 6°, 1399-033 Lisboa, Portugal (" Ashland Portugal ") (the " Ashland Portugal Shares ") which has a total authorized capital in the amount of EUR 25,000; the

remaining shares in the nominal value of EUR 10,000 in Ashland Portugal are owned by Salmon & Companhia Limitada; and

(vii) 313,843 shares in the nominal value of EUR 1.90 each (comprising 100% of the total outstanding shares) in Kemen Manguitos S.A., a company incorporated under the laws of Spain with registered office at Getxo (Vizcaya) at Muelle Tomás Olabarri nº 4, 3 (" Kemen Manguitos ") (the " Kemen Manguitos Shares ") which shares are owned by Ashland Iberia.

ASAV, Ashland Resinas, Ashland Japan, Ashland Korea, Ashland Iberia, Ashland Portugal and Kemen Manguitos shall hereinafter collectively be referred to as the " Ashland Transferred Companies ".

The ASAV Ashland Shares, the Ashland Resinas Shares, the Ashland Japan Shares, the Ashland Korea Shares, the Ashland Iberia Shares and the Ashland Portugal Shares, Kemen Manguitos Shares shall hereinafter collectively be referred to as the " Ashland Transferred Shares ".

(b) Ashland Carve-Out Business (Asset Deals) .

In addition to the Ashland Transferred Companies, the following legal entities conduct inter alia activities pertaining to the Ashland Business at the following locations:

(i) Ashland Canada Corp. (" Ashland Canada "), a company incorporated under the laws of Canada with registered office at Baker & McKenzie, 181 Bay St., Suite 2100, Toronto, Ontario M5J 2T3 Canada , conducts its activities pertaining to the Ashland Business in Mississauga, Ontario, Canada (the " Ashland Canada Business ");

(ii) Ashland (China) Holdings, Co., Ltd. (" Ashland China Holding "), a company incorporated under the laws of the People's Republic of China with registered office at 1089 Zhongshan No. 2 Road (S)m, Xuhuiyuan Building, conducts its activities pertaining to the Ashland Business in Shanghai, People's Republic of China, 200030 (the " Ashland China Holding Business ");

(iii) Ashland (Changzhou) Advanced Chemical Co., Ltd. (" Ashland Operating China "), a company incorporated under the laws of the People's Republic of China with registered office at 68 Hua Shan Road Changzhou New District, Changzhou City, Jiang Su Province, People's Republic of China, 213022 , conducts its activities pertaining to the Ashland Business in

Changzhou City (the " Ashland Operating China Business " and together with the Ashland Holding China Business, the " Ashland China Business ");

(iv) Ashland India Pvt. Ltd. (" Ashland India "), a company incorporated under the laws of India with registered office at Off .No. 601, 606 – 608, Platinum Technopark - Plot No. 17-18, Sector - 30A, Vashi, Navi Mumbai - 400 705 , conducts its activities pertaining to the Ashland Business in Mumbai (India) (the " Ashland India Business ");

(v) Ashland Italia S.p.A. (" Ashland Italy "), a company incorporated under the laws of Italy with registered office at 3 Piazza Meda 20121 Milano, Italy , conducts its activities pertaining to the Ashland Business in Milano, Italy (the " Ashland Italy Business ");

(vi) Ashland Chemical de Mexico, S.A. de C.V. (" Ashland Mexico "), a company incorporated under the laws of Mexico with registered office at Alatcomulco 1 Colonia San Esteban, C.P. 53350, Naucalpan De Juarez, Mexico, conducts its activities pertaining to the Ashland Business in Apodaca N.L. Mexico (the " Ashland Mexico Business ");

(vii) Ashland Pacific Pty. Ltd. (Australia) (" Ashland Pacific "), a company incorporated under the laws of Australia with registered office at 26 th Floor, AMP Center, 50 Bridge St. Sydney NSW Australia, conducts its activities pertaining to the Ashland Business in Sydney NSW Australia (the " Ashland Pacific Business ");

(viii) Ashland UK Limited (" Ashland UK "), a company incorporated under the laws of England with registered office at Vale Industrial Estate, Stourport Road, Kidderminster, Worcestershire, DY11 7QU, England, conducts its activities pertaining to the Ashland Business in Kidderminster, Worcestershire, England (the " Ashland UK Business ");

(ix) Ashland conducts its activities pertaining to the Business in various locations in the United States directly, and further, Ashland Licensing and Intellectual Property LLC, a limited liability company incorporated under the laws of Delaware, USA (" ALIP "), owns substantially all intellectual property rights used to operate or held for use in the operation of the Ashland Business and indirectly by means of licensing to Ashland and subsequent sublicensing by Ashland, licenses the same to the Ashland Transferred Companies and the Ashland Carve-Out Business (the direct conduct of the U.S. Business by Ashland and licensing activities by ALIP and sublicensing activities

by Ashland being hereinafter collectively referred to as the " Ashland US Business "); and

(x) Ashland conducts its activities pertaining to the Ashland Business in St. Petersburg (Russia) (the " Rep. Office Ashland Russia Business ").

The Ashland Canada Business, the Ashland China Business, the Ashland Germany Business, the Ashland India Business, the Ashland Italy Business, the Ashland Mexico Business, the Ashland Poland Business, the Ashland Pacific Business, the Ashland UK Business, the Ashland US Business and the Rep. Office Ashland Russia Business shall hereinafter collectively be referred to as the " Ashland Carve-Out Business "

Section 2.2 SC Transferred Business Assets . For the purposes of this Agreement, the " SC Transferred Business Assets " shall comprise the SC Transferred Shares (as defined in Section 2.2(a)) (including the assets transferring indirectly with the SC Transferred Shares) and the SC Carve-Out Business (as defined in Sectuib 2.2(b)). The SC Transferred Business Assets will partly be sold against cash consideration and partly be contributed into the Group Companies.

(a) SC Transferred Shares (Share Deals) .

SC holds, directly or indirectly, shares in the following legal entities through which the SC Business is being conducted:

(i) 24,000 shares in the nominal value of EUR 25.00 each (comprising 50% of the total outstanding shares) in ASAV (the " ASAV SC Shares ") which has a total authorized capital in the amount of EUR 1,200,000; the remaining outstanding shares in ASAV are owned by Ashland (see above);

(ii) 50,911 shares in the nominal value of INR 100.00 each (comprising 51% of the total outstanding shares) in Ajay Metachem Süd-Chemie Pvt. Ltd., a company incorporated under the laws of India with registered office at Office No 9 & 10, 5 th Floor, Akshay Complex, Pushpak Park, ITI Road, Aundh, Pune, India 411007 (" AMSC ") (the " AMSC Shares "); the remaining outstanding shares in AMSC are owned by the Indian Shareholders as defined in the AMSC shareholders' agreement;

(iii) 1 share in the nominal value of EUR 51,000 (comprising 100% of the total outstanding shares) in SKW Giesserei GmbH (" SKW ") (the " SKW Shares "); SKW is a limited liability company ( Gesellschaft

mit beschränkter Haftung ) organized and existing under the laws of the Federal Republic of Germany with registered seat in Unterneukirchen, Germany and registered with the local court of Traunstein under HRB 15983;

(iv) 41,150 shares in the nominal value of EUR 1.00 each (comprising 100% of the total outstanding shares) in WD-Giesserei-Technik GmbH (" WD ") (the " WD Shares "); WD is a limited liability company ( Gesellschaft mit beschränkter Haftung ) organized and existing under the laws of the Federal Republic of Germany with registered seat in Fuldabrück, Germany and registered with the local court of Kassel under HRB 4166;

(v) 100 shares in the nominal value of USD 0.01 each (comprising 100% of the total outstanding shares) in Süd-Chemie Hi-Tech Ceramics Inc., a company incorporated under the laws of Delaware with registered office at 1209 Orange Street, 19801 Wilmington, DE, USA (" HITECH ") (the " HITECH Shares "); and

(vi) 700,000 shares in the nominal value of USD 1.00 each (comprising 100% of the total outstanding shares) in Tecpro Corporation Inc., a company incorporated under the laws of the State of Georgia with registered offices at 3555 Atlanta Industrial Parkway, GA 30331, Atlanta, USA (" TECPRO ") (the " TECPRO Shares ") which has a total authorized capital in the amount of USD 700,000.

ASAV, AMSC, SKW, WD, HITECH and TECPRO hereinafter collectively being referred to as the " SC Transferred Companies " and together with the Ashland Transferred Companies as the " Transferred Companies ".

The ASAV SC Shares, the AMSC Shares, the SKW Shares, the WD Shares, the HITECH Shares and the TECPRO Shares shall hereinafter collectively be referred to as the " SC Transferred Shares ".

(b) SC Carve-Out Business (Asset Deal) .

In addition to the SC Transferred Companies, Jiangsu Süd-Chemie Chemicals Materials Co., Ltd./China (" JSCCM "), a company incorporated under the laws of the Republic of China with registered office at South of Yin He Road / West of Heng Shan Road Aqueduct, Da Gang Pian, Zhenjiang, China, conducts inter alia activities pertaining to the SC Business in Zhenjiang (China) (the " SC China Business " or the " SC Carve-Out Business ").

Section 2.3 Transferor and Transferors . Each Affiliate of Ashland holding Ashland Transferred Shares and each Affiliate of SC holding SC Transferred Shares shall in the following be referred to as a " Share Transferor " and collectively as the " Share Transferors ".

Each Affiliate of Ashland or SC, as the case may be, conducting a Carve-Out Business shall in the following be referred to as an " Asset Transferor " and collectively as the " Asset Transferors ".

" Transferor " shall mean either a Share Transferor or an Asset Transferor and " Transferors " shall collectively mean any of them.

Section 2.4 Transferee and Transferees . ASK, US Limited Partnership or any of their respective Affiliates acquiring or assuming Ashland Transferred Shares or SC Transferred Shares (together the " Transferred Shares ") shall in the following be referred to as a " Share Transferee " and collectively as the " Share Transferees ".

ASK, US Limited Partnership or any of its Affiliates acquiring or assuming a 'Carve-Out Business' shall in the following be referred to as an " Asset Transferee " and collectively as the " Asset Transferees ".

" Transferee " shall mean, either a Share Transferee or an Asset Transferee and " Transferees " shall collectively mean any of them.

Section 2.5 Sale and Transfer . The contribution or, as the case may be, sale and transfer of the Ashland Transferred Business Assets and the SC Transferred Business Assets (together the " Transferred Business Assets ") and, for the avoidance of doubt, the assumption of the Assumed Liabilities shall, subject to the fulfillment or waiver of the Closing Conditions as set forth in Section 6.1 of the Master Formation Agreement, be effected by consummation of Local Sale or Contribution Agreements as provided for in Section 5.1 with effect as of the Closing Date, and Closing will be deemed to have occurred as of the end of the Closing Date (i.e., 12:00 pm/00:00 am, i.e. midnight) in each of the local jurisdictions.

ARTICLE III

SCOPE OF CARVE-OUT BUSINESS

Section 3.1 General Scope of Carve-Out Business .

Each Carve-Out Business shall consist of certain

(a) Transferred Assets, as defined in Section 3.2;

(b) Assumed Liabilities;

(d) Carve-Out Employees, as defined in Section 3.7;

(e) Further Business Items, as defined in Section 3.8; and except for the

(f) Excluded Further Business Items, as defined in Section 3.9.

Section 3.2 Transferred Assets .

(a) Transferred Assets . Each Carve-Out Business shall, subject to Section 3.2(b), Section 3.2(c) and Section 3.2(d), include the following assets to the extent they pertain exclusively or predominantly (in each case owned or used) to the Transferred Business as of the Closing Date (the " Transferred Assets "):

(i) Real Estate . The real estate and similar real property rights ( e.g. , hereditary building rights) set forth on Exhibit 3.2(a)(i) .

(ii) Fixed Assets . All fixed assets, technical equipment, tools (as applicable) and machinery and further business equipment (including hardware and network components and related software licenses) by the respective Transferor.

(iii) Current Assets

(1) Inventory . All raw materials, auxiliary materials and supplies, tools (as applicable), unfinished goods and finished and trading goods.

(2) Trade Accounts and Other Receivable . All trade accounts and other receivable of the respective Transferor originating from business with third parties (excluding those from inter-company relationships) to the extent not assigned ( e.g. , in connection with any factoring arrangement).

(iv) Transferred Intellectual Property Rights . The Transferred Intellectual Property Rights shall be transferred pursuant to the

documents of assignment substantially in the form attached as Exhibit 3.2(a)(iv) , and, to the extent the Transferred Intellectual Property Rights are owned by ALIP or any other Affiliate of Ashland not being a Transferor, Ashland shall cause ALIP or such other Affiliate of Ashland to transfer such Transferred Intellectual Property Rights to the US Limited Partnership pursuant to the Local Contribution and Sale Agreement for the Ashland US Business and the documents of assignment substantially in the form attached as Exhibit 3.2(a)(iv). The Parties shall not, at any time on or after the Closing Date, dispute or contest, directly or indirectly, the Transferred Business’s exclusive right and title to the Transferred Intellectual Property Rights or the validity thereof.

(v) Commercial and Technical Records . Commercial records in tangible (including electronic) form, including master data of suppliers and customers, copies of files thereof, bills and relating correspondence, price lists, sales aids, sales literature and other commercial records, and drawings, engineering data, manufacturing data, test data, patent disclosures, quality control data including sample and their respective analysis and other technical records which pertain exclusively or predominantly to the Transferred Business or are necessary for the continuation of the Transferred Business as contemplated by the Global Business Plan (the " Commercial and Technical Records "), provided that the Transferor may redact from any such Commercial and Technical Record any information not related to the Transferred Business. The Transferor shall have a right to retain a copy of such Commercial and Technical Records.

(b) Changes Until Closing . For the avoidance of doubt, Transferred Assets, which have been or will be disposed of by the respective Transferor in the ordinary course of business up to and including the Closing Date, or which will no longer be in existence as of the Closing Date, shall not constitute Transferred Assets. Subject to Section 4.4, assets within the categories set forth in Section 3.2(a) above acquired by the Transferor for the operation of the Transferred Business in the ordinary course of business up to and including the Closing Date, including any replacements of any such assets, shall constitute Transferred Assets.

(c) Expectancy Rights . In the case that assets which fall under a category set forth in Subsection (a) above are not owned, but are subject to an expectancy right of the respective Transferor ( e.g. , because they are subject to a retention of title by a third party), such assets shall nevertheless constitute Transferred Assets. In respect of these assets, ownership shall, for all purposes of this Agreement, be considered replaced by the respective expectancy right.

(d) Excluded Assets . The Transferred Assets shall not include any of the following assets (the " Excluded Assets "):

(i) assets which are for any reason located at the location of the respective Carve-Out Business without forming part of or not exclusively or predominantly used for the Carve-Out Business;

(ii) any cash and cash equivalents;

(iii) to the extent not accounted for in the Closing Date Balance Sheet or Closing Date Net Asset Values Statement (each as defined in the Master Formation Agreement), any claims of the respective Transferor: (a) against any Tax Authorities, (b) relating in any way to (1) the Carve-Out Business’s purchase or procurement of any good, service or product or (2) the purchase or procurement by said Transferor of any good, service or product for, or on behalf of, the Carve-Out Business, in each case, at any time up until the Closing Date, along with any and all recoveries by settlement, judgment or otherwise in connection with any such claims, and (c) under the Insurance Policies (the " Excluded Claims ");

(iv) any assets which are neither owned by the respective Transferor nor subject to an expectancy right;

(v) the Accounting Documentation;

(vi) the Licensed Intellectual Property Rights; and

(vii) any assets with respect to any Plan, whether held in trust or otherwise, except for assets with respect to Transferred Plans.

For the avoidance of doubt, the Ashland Carve-Out Business shall in particular not include the real property and the manufacturing related assets of (i) Kidderminster, UK, (ii) Missasauga, Ontario, Canada, (iii) Changzhou, PRC, (iv) Castro Spain and (v) Milano, Italy.

Section 3.3 Accounting Documentation . The Transferred Assets shall not include the accounting and financial documentation of the respective Transferor (the " Accounting Documentation "). During the periods for which the respective Transferor is under applicable law obliged to retain Accounting Documentation, Ashland or SC, as the case may be, shall procure that ASK or the respective Transferee shall, upon legitimate written request, be granted access during regular business hours to those parts of such Accounting Documentation that pertain to the respective Carve-Out Business. The respective Transferee shall be permitted to have copies made of such Accounting Documentation at its own expense. Notwithstanding the foregoing, ASK or the respective Transferee shall be entitled to receive the documents

relating to the Carve-Out Business such as agreements, customer and supplier data (including Commercial and Technical Records) and data related to the Carve-Out Employees.

Section 3.4 Licensed Intellectual Property Rights . The use of Licensed Intellectual Property Rights shall be granted to the respective Transferee in accordance with Section 5.5(a) and pursuant to license agreements substantially in the form attached as Exhibit 3.4 .

Section 3.5 Assumed Liabilities

Each Carve-Out Business shall include the Assumed Liabilities with respect to such Carve-Out Business and shall not include, for the avoidance of doubt, Excluded Liabilities.

Section 3.6 Assumed Agreements .

(a) Assumed Agreements . Each Carve-Out Business shall include all agreements, including such agreements which have been fulfilled, outstanding orders and other contractual offers concluded, made or received by a Transferor as of the date hereof and those of such agreements entered into between the date hereof and the Closing Date pursuant to Section 3.6(b) with any third party (including Ashland, SC or their Affiliates), irrespective of whether in written, electronic or oral form or having been fulfilled up to and including the Closing Date, which pertain exclusively or predominantly to the Transferred Business (the " Assumed Agreements "). Without limiting the generality of the foregoing, the Assumed Agreements shall in particular include all related trade relationships with external customers.

(b) Changes Until Closing . Agreements which will be concluded by the respective Transferor up to and including the Closing Date which do not constitute a Material Change and which fall under the scope of Section 3.6(a) above shall constitute Assumed Agreements. Agreements which have been terminated up to and including the Closing Date shall not constitute Assumed Agreements.

(c) Excluded Agreements . The following agreements of the respective Transferor shall not form part of the Assumed Agreements (the " Excluded Agreements "):

(i) agreements with banks, other credit institutions or other third-party lenders, including financing agreements with Ashland's, SC's or any of their Affiliates;

(ii) Insurance Agreements;

(iii) any other agreement that is not an Assumed Agreement; and

(iv) all agreements listed on Exhibit 3.6(c)(iv) .

(d) Shared Agreements . Agreements which pertain in part (but not predominantly) to the Carve-Out Business and in part to any other business unit or other business activity of Ashland, SC or any of their Affiliates shall not form part of the Carve-Out Business. The same shall apply to software licenses, services, business applications or hardware and network components which are not exclusively or predominantly used by the Carve-Out Business and which shall therefore also not form part of the Carve-Out Business, but will, to the extent possible and permissible, be provided to the respective Transferee on the basis of the Ancillary Agreements (as defined in the Master Formation Agreement).

Section 3.7 Carve-Out Employees .

(a) Carve-Out Employees . Each Carve-Out Business shall include listed employees (including apprentices and part-time employees) of the respective Transferor who are exclusively or predominantly employed in the Carve-Out Business on the Closing Date, including employees who are absent from active employment on the Closing Date on account of vacation, ordinary sick leave reasonably expected to result in an absence of short duration, leave under any applicable law which preserves employment or reemployment rights for the individual, or any other reason that is temporary in nature (the " Carve-Out Employees "). The Parties are in agreement that the Carve-Out Employees (with the exception of the Displaced Employees) shall be transferred to the Transferees, or terminated by Transferors and hired by Transferees, in any case, in accordance with the provisions of Section 5.9.

(b) Changes until Closing . Other than as specified in Section 3.7(a), employees who are on the Closing Date for any reason no longer employed with a Transferor in a Carve-Out Business shall not constitute Carve-Out Employees. Employees hired by a Transferor within a Carve-Out Business until the Closing Date which do not cause a Material Change shall constitute Carve-Out Employees.

(c) Voluntary Employees. In addition to the Carve-Out Employees, ASK or the respective Transferee shall also assume the employment relationships of those employees who shall, subject to their consent, transfer to ASK or the respective Transferee based on an agreement of the Parties. Such employees shall have at least the same rights as the Carve-Out Employees under or in connection with this Agreement, unless otherwise agreed with such employee.

Section 3.8 Further Business Items . Any and all further assets (whether tangible or intangible), liabilities, agreements and employees which pertain exclusively or predominantly to the Transferred Business – with the exception of the Excluded Assets, the Excluded Liabilities and the Excluded Agreements– shall be contributed or sold and transferred, as applicable under this Agreement or the Local Contribution or Sale Agreements, irrespective of whether such further assets (whether tangible or intangible), liabilities, agreements and employees are identified, described, listed, named or referred to in this Agreement or the Local Contribution or Sale Agreements (including their annexes, save for those which expressly shall have a conclusive character), provided, however, that they are owned by Ashland, SC or any of their Affiliates (including the Transferors) (collectively, the " Further Business Items "). The Parties shall take all actions, or procure that all required actions are taken, to effect and consummate the contribution or, as the case may be, sale, and transfer of such Further Business Items to the relevant Transferee. For the avoidance of doubt, if such Further Business Items are identified after the execution of this Agreement, except for the rights of the Parties to the transfer of such Further Business Items, neither Party shall be entitled to any claims or rights against the other Parties, in particular no Party shall be entitled to request an adjustment of the valuations as set forth in the Master Formation Agreement.

Section 3.9 Excluded Further Business Items . Those further assets (whether tangible or intangible), liabilities, agreements and employees which do not or do no longer pertain exclusively or predominantly to the Carve-Out Business on the Closing Date shall not be contributed or sold and transferred under this Agreement (collectively, the " Excluded Further Business Items "). The Parties shall, or shall procure, as the case may be, that the Excluded Further Business Items as well as any of the Excluded Assets, the Excluded Liabilities or the Excluded Agreements which have erroneously been transferred by the Transferor to the Transferee, shall, at Ashland's or SC's own cost, as the case may be, be retransferred without undue delay from the respective Transferee to the respective Transferor.

ARTICLE IV

CONTRIBUTIONS, SALE AND TRANSFERS

Section 4.1 Local Contribution or Sale Agreements . The contribution or, as the case may be, sale and transfer of the Transferred Business Assets shall, subject to the fulfillment or waiver of the Closing Conditions as set forth in Section 6.1 of the Master Formation Agreement, be effected by consummation of Local Contribution or Sale Agreements as provided for in Section 5.1 with effect as of the Closing Date. In case that the execution of a Local Contribution or Sale Agreement will in accordance with Section 6.13 of the Master Formation Agreement be deferred on the Closing Date, the contribution or, as the case may be, sale and transfer of the respective local Ashland Transferred Business Assets or the respective local SC Transferred Business Assets, as the case may be, shall be made with effect as of the respective Local Closing Date. In such case all related provisions contained in ARTICLE VI concerning the Transferred Assets, the Assumed Liabilities, the Assumed Agreements and the

Carve-Out Employees as well as the Licensed Intellectual Property Rights and in ARTICLE VI concerning the Ashland Warranties and the SC Warranties shall, with respect to the affected local Ashland Transferred Business Assets or the affected local SC Transferred Business Assets only, be read and understood in a way that the term "Closing Date" shall be deemed to have been replaced by the term "Local Closing Date".

Section 4.2 Transfer by Ashland . Ashland shall transfer the Ashland Transferred Shares and the Ashland Carve-Out Business to the Group Companies in accordance with the Ashland Step Plan (as defined in the Master Formation Agreement). The Ashland Carve-Out Business comprises, amongst other assets, of the non-current assets as described in the listings set forth below (such listings shall not include Transferred Intellectual Property Rights and Real Estate); collectively the (" Ashland Non-Current Asset Listings "). The Ashland Non-Current Asset Listings have been prepared as of March 31, 2010:

(a) the non-current asset listing of the Ashland Canada Business attached hereto as Exhibit 4.2(a) ;

(b) the non-current asset listing of the Ashland China Business attached hereto as Exhibit 4.2(b) );

(d) the non-current asset listing of the Ashland Italy Business attached hereto as Exhibit 4.2(d) );

(e) the non-current asset listing of the Ashland Mexico Business attached hereto as Exhibit 4.2(e) );

(f) the non-current asset listing of the Ashland Pacific Business attached hereto as Exhibit 4.2(f) );

(g) the non-current asset listing of the Ashland UK Business attached hereto as Exhibit 4.2(g) );

(h) the non-current asset listing of the Ashland US Business attached hereto as Exhibit 4.2(h) ); and

(i) the non-current asset listing of the Rep. Office Ashland Russia Business attached hereto as Exhibit 4.2(i) .

The Ashland Non-Current Asset Listings, listings of the relevant Transferred Intellectual Property, of the relevant Real Estate and of the relevant Assumed Agreements shall form part of the Local Contribution or Sale Agreements by which the Ashland Carve-Out Businesses are transferred.

Section 4.3 Transfer by SC . SC shall transfer the SC Transferred Shares and the SC Carve-Out Business to the Group Companies in accordance with the SC Step Plan (as defined in the Master Formation Agreement). The SC Carve-Out Business comprises, amongst other assets, of the non-current asset listing of the SC China Business attached hereto as Exhibit 4.3 (the " SC Non-Current Asset Listings "). The SC Non-Current Asset Listings shall, together with listings of the relevant Transferred Intellectual Property, of the relevant Real Property and of the relevant Assumed Agreements, form part of the Local Contribution or Sale Agreement under which the SC China Business is transferred. The SC Non-Current Asset Listings have been prepared as of March 31, 2010.

The Parties are further in agreement, that the Local Contribution or Sale Agreement for the transfer of the AMSC Shares shall include the assumption of the certain share purchase obligations pursuant to the share purchase agreement dated April 4, 2008 between SC and the Indian Shareholders (as defined therein) (" AMSC Shares Purchase Obligation ") by the relevant Group Company by way of assumption of the obligations with full discharge of SC. If the relevant Group Company has not validly executed the respective Local Contribution or Sale Agreement or has for other reasons not validly assumed the AMSC Shares Purchase Obligation, such AMSC Shares Purchase Obligation shall be deemed to be assumed by the relevant Group Company. If, and to the extent that, the assumption of the AMSC Shares Purchase Obligation with full discharge of SC requires the consent of the Indian Shareholders, SC shall and ASK shall cause the relevant Group Company to use, reasonable best efforts to obtain such consent without undue delay. SC and ASK shall keep each other informed about these efforts and about the status of the discussions with the respective seller. For as long as the consent is not granted, ASK shall fulfill, or shall cause the relevant Group Company to fulfill, the AMSC Shares Purchase Obligation on behalf of SC but for the account of ASK or the relevant Group Company.

Section 4.4 Transfer of Non-Current Assets . Non-current assets reflected in the Ashland Non-Current Asset Listings and the SC Non-Current Asset Listings (together the " Non-Current Asset Listings ") have been listed as of March 31, 2010. On the Closing Date, or the Local Closing Date, as the case may be,

(i) Ashland shall procure that the relevant Transferors shall transfer any non-current assets pertaining to the Ashland Business, including such non-current assets listed in the Ashland Non-Current Asset Listings to the relevant Group Company, and

(ii) SC shall procure that the relevant Transferor(s) shall transfer any non-current asset pertaining to the SC Business, including such non-current assets listed in the SC Non-Current Assets Listings to the relevant Group Company,

in each case to the extent such non-current assets have not been disposed of in the ordinary course of business (the " Ordinary Disposed Non-Current Assets "); provided however, that Ashland and SC, as the case may be, shall procure that the relevant Transferors shall transfer any replacement of an Ordinary Disposed Non-Current Asset on the Closing Date, or on the Local Closing Date, as the case may be to the relevant Group Company. If a non-current asset which is listed on the Non-Current Asset Listing and which is not an Ordinary Disposed Non-Current Asset is not transferred on the Closing Date, or on the Local Closing Date, as the case may be, Ashland and SC, as the case may be, shall procure that

(iii) if, and to the extent that, the relevant Transferor has an enforceable claim against a third party (including any claims against insurers) relating to such non-current asset (including any claims for consequential damages arising out of the fact that such non-current asset is not transferred on the Closing Date or Local Closing Date, as the case may be), such claim shall be transferred to ASK or, at the election of ASK, to the relevant Group Company on the Closing Date, or on the Local Closing Date, as the case may be; and

(iv) if, and to the extent that, the relevant Transferor has no enforceable claim against a third party relating to such non-current asset, the relevant Transferor shall transfer an amount equal to the replacement value of such non-current asset to ASK or, at the election of ASK, to the relevant Group Company on the Closing Date, or on the Local Closing Date, as the case may be.

ARTICLE V

TRANSFER PROVISIONS

Section 5.1 Form of Local Contribution or Sale Agreements . Ashland shall or shall procure, as the case may be, that the relevant Transferor contributes or, as the case may be, sells, and transfers the Ashland Transferred Business Assets to the relevant Transferees in accordance with the Ashland Step Plan (as defined in the Master Formation Agreement), in each

case, by execution of an individual local asset contribution or sale agreement and share contribution or sale agreements (collectively, the " Local Contribution or Sale Agreements ").

SC shall or shall procure, as the case may be, that the relevant Transferor contributes or, as the case may be, sells, and transfers the SC Transferred Business Assets to the relevant Transferees in accordance with the SC Step Plan (as defined in the Master Formation Agreement), in each case, by execution of an individual Local Contribution or Sale Agreement.

The Local Contribution or Sale Agreements shall be substantially in the form as attached hereto as Exhibit 5.1-1 (form of asset contribution or sale agreement) and Exhibit 5.1-2 (form of share contribution or sale agreement), respectively, subject in each case to customary and reasonable Local Closing Conditions (as defined in the MFA). The Local Contribution or Sale Agreements shall be amended prior to the Closing Date to implement the terms of this Agreement as applicable to the relevant Ashland Transferred Business Assets and the relevant SC Transferred Business Assets, respectively. The Parties agree that the values assigned to the Ashland Transferred Business Assets, SC Transferred Business Assets, and each Ashland Transferred Company and SC Transferred Company, respectively, are consistent arm's length pricing. Annexes shall be attached to the respective Local Contribution or Sale Agreements immediately prior to the Closing Date in accordance with Sectuib 4.2 and Section 4.3.

Section 5.2 Relationship between Local Contribution or Sale Agreements and this Agreement . The Local Contribution or Sale Agreements shall solely serve to implement the terms of this Agreement and shall not alter in any way the allocation of rights, obligations, benefits, costs and risk established between the Parties under this Agreement. Therefore, in case of any inconsistencies between a Local Contribution or Sale Agreement and the provisions of this Agreement, the provisions of this Agreement shall take priority. In case, however, that a Local Contribution or Sale Agreement contains any invalid or unenforceable provisions or any unintentional or unforeseen gaps, the Parties shall negotiate in good faith and shall mutually agree in writing on any necessary amendments to the Local Contribution or Sale Agreement which correspond as closely as possible with the original commercial intent of the Parties taking into account the provisions of this Agreement and the commercial intentions of the Parties connected therewith. Any and all claims relating to the Ashland Transferred Business Assets and the SC Transferred Business Assets shall be governed by the terms of this Agreement and exclusively be settled or arbitrated between the Parties.

Section 5.3 Exclusion of Further Claims . Ashland, SC and ASK shall and shall procure that their Affiliates and the Transferees shall in no event raise any claims against any Transferor under the Local Contribution or Sale Agreements except in accordance with Section 9.1.

Section 5.4 Passing of Risk and Benefits . The risk of any incidental loss or any incidental deterioration of the Ashland Transferred Business Assets and the SC Transferred Business Assets, as the case may be, shall pass, and the benefits and burdens of the Ashland Transferred Business Assets and the SC Transferred Business Assets, as the case may be, shall accrue, to the respective Transferee as from the Closing Date.

Section 5.5 Licensing of Licensed Intellectual Property Rights .

(a) License of Licensed Intellectual Property Rights . Ashland or SC, as the case may be, shall procure that the respective Transferor shall grant to US Limited Partnership (in the case of Ashland and its Transferors) or ASK (in the case of SC and its Transferors) the non-transferable, worldwide, irrevocable right to use the Licensed Intellectual Property Rights exclusively in the Transferred Business, pursuant to license agreements substantially in the form attached as Exhibit 3.4. The royalties which otherwise would have been payable under said license agreements have been taken into account as part of the calculation of the Compensation Payment to Ashland and no on-going royalties shall be paid in connection with such license agreements.

(b) Retention of Use of Transferred Intellectual Property Rights (Back License) . Ashland and Ashland's Affiliates with regard to Transferred Intellectual Property Rights which shall be transferred by them pursuant to this Agreement and SC and SC's Affiliates with regard to Transferred Intellectual Property Rights which shall be transferred by them pursuant to this Agreement (in each case, including any Transferor) shall be granted an irrevocable, exclusive, perpetual, worldwide, fully-paid up and transferable right to use such Transferred Intellectual Property Rights, as well as any intellectual property rights owned by the Transferred Companies on or after the Closing Date (the " Group-Owned Intellectual Property Rights "), and the Group-Owned Intellectual Property Rights in connection with their activities outside the Transferred Business, as such activities are conducted as of the Signing Date, pursuant to a license agreement substantially in the form attached as Exhibit 5.5(b) .

(c) Status of Intellectual Property Rights . The Parties hereby agree and acknowledge and ASK shall, or shall procure, that all Transferees agree and acknowledge:

(i) that the Transferred Intellectual Property Rights, the Group-Owned Intellectual Property Rights, the Licensed Intellectual Property Rights, and any license or sublicense to use intellectual property rights granted or transferred hereunder can only be transferred or licensed to US Limited Partnership and ASK and the Transferees in the form, with the content and with the Encumbrances as existing on the Closing Date;

(ii) that all rights granted by Ashland, SC or any of Ashland's or SC's Affiliates prior to the Closing Date to third parties shall be deemed to be valid and shall remain unaffected by the transfer or licensing of the Transferred Intellectual Property Rights, the Group-Owned Intellectual Property Rights, and the Licensed Intellectual Property Rights hereunder; and

(iii) to be bound by the Encumbrances relating to the Transferred Intellectual Property Rights, the Group-Owned Intellectual Property Rights, and the Licensed Intellectual Property Rights agreed to by Ashland, SC or any of their respective Affiliates with third parties and to adhere to all related

obligations undertaken by Ashland, SC or any of their respective Affiliates and to pass on such Encumbrances to any acquirers of such intellectual property rights.

Ashland and SC each agree that neither of them shall either initiate any attack against the Transferred Intellectual Property Rights including nullity proceedings and oppositions or encourage or assist any third party to do so.

Section 5.6 Commercial Records .

Commercial and Technical Records electronically saved shall be transferred to ASK or the relevant Transferee in a form ready to be used by the applicable electronic data processing system.

Section 5.7 Assumption of Liabilities .

(a) Assumption . ASK shall procure that the Assumed Liabilities shall be assumed by the respective Transferee in the Local Contribution or Sale Agreement by way of assumption of debt with full discharge of the original debtor. If for any Carve-Out Business the respective Transferee has not validly executed the respective Local Contribution or Sale Agreement or has for other reasons not validly assumed the relevant Assumed Liabilities, such Assumed Liabilities shall be deemed to be assumed by ASK.

(b) Third-party Consent . If and to the extent that the assumption of Assumed Liabilities with full discharge of the original debtor requires the consent of the respective third-party creditor, the relevant Parties shall jointly use, and shall cause the respective Transferor and Transferee to use, reasonable best efforts to obtain such consent without undue delay. The relevant Parties shall keep each other informed about these efforts and about the status of the discussions with the respective third-party creditor. For as long as the consent is not granted, ASK shall fulfill, or shall cause the respective Transferee to fulfill, the Assumed Liability on behalf of Ashland or, as the case may be, SC, and the respective Transferor, but for the account of ASK or the respective Transferee. If ASK or the respective Transferee does not fulfill such obligation, Ashland, SC or the respective Transferor shall be entitled to fulfill the respective Assumed Liability for the account of ASK and the respective Transferee.

Section 5.8 Assumption of Agreements .

(a) Assumption . ASK shall procure that the Assumed Agreements shall be assumed by the respective Transferee in the Local Contribution or Sale Agreement by way of assumption of a contract with full discharge of the original party. If for any Carve-Out Business the respective Transferee has not validly executed the respective Local Contribution or Sale Agreement or has for other reasons not validly assumed the relevant Assumed Agreements, such Assumed Agreements shall be deemed to be assumed by ASK.

(b) Third-party Consent . If and to the extent that the assumption of Assumed Agreements with full discharge of the original party requires the consent of the respective third party to such Assumed Agreement, the relevant Parties shall jointly use, and shall cause the respective Transferor and Transferee to use, reasonable best efforts to obtain such consent without undue delay. The relevant Parties shall keep each other informed about these efforts and about the status of the discussions with the respective third party. If the third party makes its consent dependent on the acceptance of certain conditions (including changes to the respective Assumed Agreement) which are not materially disadvantageous, ASK shall accept and implement, or shall cause the respective Transferee or its other Affiliates to accept and implement, these conditions. If the consent of the respective third party cannot be obtained or can only be obtained under conditions which are materially disadvantageous, the relevant Parties shall inform each other without undue delay. In this case, the respective Transferor shall in respect of the external relationship, remain the party to the relevant Assumed Agreement, but shall, in respect of the internal relationship with ASK and the respective Transferee, be treated as if the third party has consented to the assumption of the Assumed Agreement. If permitted by the Assumed Agreement and the relevant third party thereto, ASK shall at the request of Ashland or, as the case may be, SC, cause the respective Transferee to perform the respective Assumed Agreement vis-à-vis the third party as subcontractor, in particular, to fulfill all outstanding warranty claims thereunder on behalf of Ashland or, as the case may be, SC, and the relevant Transferor. If such sub-contraction is not permitted or feasible, the respective Transferor shall be entitled to terminate the relevant agreement after consultation with Ashland or, as the case may be, SC without any further obligation or liability to ASK or the respective Transferee.

(c) Payments after the Closing Date . If, after the Closing Date, either (i) the Group Companies, or (ii) the Transferors of the Ashland Transferred Business Assets or, as the case may be, the Transferors of the SC Transferred Business Assets, receive any amounts under the Assumed Agreements or the Excluded Agreements, as the case may be, including, for the avoidance of doubt, under any contract for the performance of a continuing obligation, which should, in accordance with the terms of this Agreement, have been paid to another party then SC, Ashland or ASK, as the case may be, shall procure that the party having received such amount shall forward any such amount, which it has incorrectly received, as follows:

(i) The Transferors of the Ashland Transferred Business Assets jointly, the Transferors of the SC Transferred Business Assets jointly and the Group Companies jointly, shall, by the end of each month, for a period of twelve (12) months after the Closing Date, provide to each other monthly statements showing the amounts owed to, or to be claimed from, the respective other parties as a result of any such incorrect payment.

(ii) Any such amount shall be deemed to be set off against each other immediately after receipt of the respective monthly statements and the residual balance amount owed by one party shall become due and payable no later than on the third (3 rd ) Business Day of the subsequent calendar month.

(iii) Should the Transferors of the Ashland Transferred Business Assets, or, as the case may be, the Transferors of the SC Transferred Business Assets and the Group Companies, after having received the relevant monthly statements, after reasonable consultation, disagree as to the amounts which shall be deemed to be set off, then (i) Ashland or, as the case may be, SC, and (ii) ASK shall jointly refer the matter in dispute to the Neutral Auditor (as defined in Section 7.4(c) of the Master Formation Agreement), which shall, with binding effect for all Parties, determine any balance amount which would be payable by either (i) the Transferors of the Ashland Transferred Business Assets or, as the case may be, Transferors of the SC Transferred Business Assets or (ii) the Group Companies as a result of the relevant set off.

(d) Separation of Agreements. If and to the extent parts of Assumed Agreement do not pertain to the Carve-Out Business (the " Transferor Parts ") the relevant Parties shall jointly use, and shall cause the respective Transferor and Transferee to use, commercially reasonable efforts to separate such Transferor Parts into a new agreement which shall be between the relevant Transferor and the relevant third party to such agreement (the " New Agreement ") and amend the relevant Assumed Agreement to exclude the Transferor Parts from it (together the " Separation "). If and to the extent that the Separation requires the consent of the relevant third party, the relevant Parties shall jointly use, and shall cause the respective Transferor and Transferee to use, commercially reasonable efforts to obtain such consent without undue delay. The relevant Parties shall keep each other informed about these efforts and about the status of the discussions with the respective third party. If the third party makes its consent dependent on the acceptance of certain conditions which are not materially disadvantageous, the relevant Parties shall or shall cause the respective Transferor and Transferee to accept and implement these conditions. If the consent of the respective third party cannot be obtained or can only be obtained under conditions which are materially disadvantageous, the relevant Parties shall inform each other without undue delay. In this case, the respective Transferee shall in respect of the external relationship, remain the party to the relevant Assumed Agreement, but shall, in respect of the internal relationship with the Transferor, be treated as if the third party has consented to the Separation and shall pass on any charges under the Assumed Agreement pertaining to the Transferor Parts to the Transferor.

Section 5.9 Transfer, Termination and Rehiring of Carve-Out Employees; Reasonable Efforts .

(a) Transfer of Employment . ASK or the respective Transferees will continue to employ with effect from the Closing Date (where employment continues automatically by operation of law), or, will offer employment to commence on the Closing Date (where employment does not continue automatically by operation of law) to, each Carve-Out Employee (the employees of the Transferred Companies and the Carve-Out Employees are hereinafter collectively referred to as the " Business Employees "). The Business Employees as of the Signing Date are listed in Exhibit 5.9(a)-1 . Such offer of employment, as the case may be, will, with respect to pay, be comparable to the existing pay associated with said Carve Out Employee's employment by the relevant Transferor

immediately prior to the Closing Date and recognize years of service at Transferor in connection with participation in the Transferees' benefit plans. Except as required under applicable law, none of ASK or any of the Transferees shall be required to establish, maintain or contribute to any defined benefit plan for the benefit of Carve-Out Employees employed by the Ashland US Business (each a "US Carve-Out Employee ") or their beneficiaries; and provided further, that (i) each of the U.S. Carve-Out Employees listed in Exhibit 5.9(a)-2 (each an " Employee Eligible for Ashland Plan ") shall be eligible to participate in a non-qualified defined benefit plan to be created by Ashland and identical to the qualified defined benefit plan the relevant employee is currently participating in (each a " New Ashland Plan ") for the period from the Closing Date until the date on which the relevant Employee Eligible for Ashland Plan reaches at least 80 points or age 55 under the relevant New Ashland Plan, and (ii) the U.S. Carve-Out Employees (except for the Employees Eligible for Ashland Plan that have not reached at least 80 points or age 55) shall be eligible to participate in a tax-qualified defined contribution plan following commencement of employment with the Group or the day after the date on which an Employee Eligible for Ashland Plan reaches at least 80 points or age 55 under the New Ashland Plan, respectively. In case the employment of any Transferred Employee pertaining to the Ashland Carve-Out Business is terminated prior to the second anniversary of the Closing Date by a member of the Group other than for cause, ASK shall cause the relevant Group Company to pay the respective Transferred Employee the higher of the amount to be paid under (i) Ashland's severance policy attached hereto as Exhibit 5.9(a)-3 and (ii) applicable statutory law.

To the extent permitted by law, Ashland or, as the case may be, SC shall provide, and shall cause the respective Transferor to provide, ASK or the respective Transferee with reasonable access to the respective Carve-Out Employees in the jurisdictions where employment does not continue by operation of law for the purpose of extending and explaining the offers of employment. As soon as practicable prior to the Scheduled Closing Date, Exhibit 5.9(a)-1 will be updated as of the Scheduled Closing Date to reflect any Business Employees that have been hired, retired or dismissed at any time on or prior to the Scheduled Closing Date.

(b) Transferred Employees Each Carve-Out Employee who (i) continues in employment with ASK or the respective Transferees by operation of law, or (ii) accepts employment with ASK or the respective Transferees pursuant to an offer of employment made pursuant to Section 5.9(a) and commences employment with the applicable employee entity effective as of the Closing Date, as well as each employee of the Transferred Companies, will be referred to in this Agreement as a " Transferred Employee ". ASK agrees to be responsible for, or cause the appropriate Transferee to be responsible for, all Liabilities with respect to the Transferred Employees which accrue on or after the Closing Date.

(c) Information or Notification Obligations . If and to the extent that the applicable employment law requires that prior to or otherwise in connection with the transfer of a Carve-Out Business to an Transferee either the Transferor or the Transferee provide a notification or certain information to the employees (each, an " Employee

Notification "), Ashland or, as the case may be, SC shall cause each respective Transferor, and ASK shall or shall cause each respective Transferee, to duly and timely submit such Employee Notification to the employees. If and to the extent that the Employee Notification to be given by either a Transferee or a Transferor requires information about the respective other side, the relevant Party shall upon the respective Transferee's or Transferor's request procure for the duly and timely provision of such information. The Parties shall, and shall cause their respective affiliates to mutually cooperate in undertaking all reasonably necessary or legally required Employee Notifications or consultations, discussions or negotiations, with employee representative bodies (including any unions or work councils) which represent employees affected by the transactions contemplated by this Agreement.

(d) Objecting or Non-accepting Employees . In case that (i) a Carve-Out Employee duly and timely objects to the transfer of the employment relationship to the respective Transferee, or (ii) a Carve-Out Employee does not accept the offer of employment extended by an Transferee until the Closing Date, or (iii) a Business Employee is for any other reason not transferred to a Transferee, Ashland or, as the case may be, SC shall cause the respective Transferor to determine in good faith whether there is a vacant position available for any such Business Employee (the " Displaced Employee ") with the respective Transferor. In the event a Displaced Employee is terminated and as a result thereof the Transferor is obligated to pay severance to said Displaced Employee, the Group shall reimburse such Transferor for such severance payment so made in the event that it hires said Displaced Employee during the 2-year period following the Closing Date.

(e) No Third Party Beneficiaries . Nothing contained in this Agreement, expressed or implied, is intended to confer upon any individual any benefits under any employee benefit plan, fund or program including severance benefits or the right to employment or continued employment with ASK or any Transferee for any period by reason of this Agreement. In addition, the provisions of this Agreement, in particular this Section 5.9, are for the sole benefits of the parties hereto and their respective Affiliates and are not for the benefit of any third parties.

(f) No Employment; No Solicitation . From the Closing Date until the fifth anniversary thereof, Ashland and SC shall not, without the express written consent of the other party, and shall not permit any of their respective subsidiaries to, employ or solicit for employment with Ashland or SC, as applicable, or any of their respective subsidiaries, any person who is an employee of ASK or any Transferee (or any of their respective subsidiaries) or in any way interfere with the relationship between ASK or any Transferee (or any of their respective subsidiaries) and any such person. The foregoing restrictions shall not apply to any person whose employment with ASK or any Transferee (or any of their respective subsidiaries), as applicable, terminates involuntarily, and shall not apply to general solicitations or advertisements not specifically directed to employees of ASK or any Transferee or their respective subsidiaries, as applicable, or solicitations by search firms or other similar entities that have not been instructed to solicit such employees.

(g) Cooperation . The parties hereto shall cooperate in good faith to implement the provisions of this Section 5.9.

(h) Unions; Work Councils . Prior to the Closing, the Transferred Companies shall fully comply with all notice, consultation, effects bargaining or other bargaining obligations to any labor union, labor organization, works council or group of employees of the Transferred Companies in connection with the transactions contemplated in this Agreement.

Section 5.10 Treatment of Claims of Transferred Companies . To the extent that a Transferred Company is in possession of a claim that would have been an Excluded Claim had it been associated with a Carve-out Business, ASK shall, or shall cause the affected Transferred Company to reimburse Ashland or SC, as the case may be, the payments received with respect to such claim, less any out-of-pocket expenses related to any actions taken by the Transferred Company in connection with the collection of such claim.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF ASHLAND AND SC

Each of Ashland and SC hereby make the following representations and warranties to ASK or, as the case may be, the relevant Group Company as third party beneficiary with an own right, however, without an own right to claim (the " Ashland Warranties " and the " SC Warranties ", respectively). For the avoidance of doubt, the Ashland Warranties are granted with respect to Ashland, the Ashland Business, the Ashland Transferred Business Assets (including the Ashland Transferred Shares, except for the Ashland ASAV Shares) and the respective Transferors of the Ashland Transferred Business Assets only and the SC Warranties are granted with respect to SC, the SC Business, the SC Transferred Business Assets (including the SC Transferred Shares, except for the SC ASAV Shares) and the respective Transferors of the SC Transferred Business Assets only and further, when the term "Transferred Business" is used in this ARTICLE VI, the Ashland Warranties are made only as to the Ashland Business and the SC Warranties are made only as to the SC Business and neither Ashland nor SC makes any warranty with respect to the AS-Group Business.

The Ashland Warranties and the SC Warranties form an independent guarantee within the meaning of Section 311 (1) German Civil Code irrespective of any fault of Ashland or SC, as the case may be. The statements set forth herein are true and correct on the Signing Date, the Closing Date and, to the extent applicable, on the Local Closing Date, provided, however, that

(a) representations which are expressly made as of another specific date need to be true and correct as of such date only;

(b) representations which address any specific circumstances or facts do not allow recourse to a general representation; and

(c) the Parties understand that the representations shall be subject to the conditions and limitations set forth in this ARTICLE VI, ARTICLE VII and IX and, in view of these conditions and limitations, the representations shall not constitute, in whole or in part, a guarantee concerning the quality of the purchased object within the meaning of Section 443 or Section 444 German Civil Code.

Section 6.1 Organization . Except as set forth on Schedule 6.1 each of Ashland, SC, the Transferred Companies and each of the Transferors (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its respective incorporation, (ii) has full corporate power and authority to carry on its respective Transferred Business as it is now being conducted or as it is proposed to be conducted by the Global Business Plan and to own its respective Transferred Business Assets, and (iii) is duly qualified or licensed to do business as a foreign corporation in good standing (to the extent that such concept is known in the relevant jurisdiction) in every jurisdiction in which the conduct of its respective Transferred Business requires such qualification, except where the lack of such qualification would not materially impair its ability to conduct the Transferred Business. Ashland has prior to the Signing Date made available in the Data Room to SC complete and correct copies of the certificate of incorporation and by-laws of each Ashland Transferred Company, as presently in effect, and SC has prior to the Signing Date made available in the Data Room to Ashland complete and correct copies of the certificate of incorporation and by-laws of each SC Transferred Company, as presently in effect.

Section 6.2 Authority; Binding Agreement . Ashland and SC, respectively, have full corporate power and authority to execute and deliver this Agreement and have full corporate power and authority to consummate the transactions contemplated herein. The execution, delivery and performance by Ashland and SC, respectively, of this Agreement has been duly and validly authorized by all requisite corporate action on the part of Ashland and SC, and no other corporate proceedings or approvals on the part of Ashland or SC are necessary to authorize this Agreement or to consummate the transactions contemplated herein. This Agreement has been duly executed and delivered by Ashland and SC and, assuming the due authorization, execution and delivery hereof by each other Party, constitutes the legal, valid and binding obligation of Ashland and SC, enforceable against Ashland and SC in accordance with its terms. Prior to the Closing, Ashland and SC will undertake such actions as are necessary to cause their respective Transferors to have full corporate power and authority to consummate the transactions contemplated herein and under the Local Contribution or Sale Agreements applicable to said Transferors.

Section 6.3 No Insolvency . No insolvency or similar proceedings have been opened or applied for, or, to the Knowledge of Ashland or SC, as the case may be, have been threatened to be, opened or applied for regarding the Transferred Business Assets or the Transferred Companies, and, to the Knowledge of Ashland or SC, as the case may be, there are no circumstances which would require or justify the opening of or application for such proceedings. No Transferor or Transferred Company is illiquid or over-indebted.

Section 6.4 Consents and Approvals; No Violations . None of the execution, delivery or performance of this Agreement by Ashland and SC, respectively, the consummation

by the Transferors of the transactions contemplated herein or compliance by Ashland and SC, respectively, with any of the provisions hereof will (i) conflict with or result in any breach of any provision of the certificates of incorporation, the by-laws or similar organizational documents of Ashland, SC and of any of the Transferors, (ii) except for the filings, permits, authorizations, consents and approvals: (x) as may be required under applicable merger control laws or (y) which are not material in nature, require any filing with, or permit, authorization, consent or approval of, any Governmental Entity, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Transferors or the Transferred Business Assets.

Section 6.5 Ownership of Assets; Good Title Conveyed . The Ashland Non-Current Asset Listings and the SC Non-Current Asset Listings prepared in accordance with Section 4.2 and Section 4.3 are complete and accurate for the Transferred Business Assets as of March 31, 2010. The Transferors together hold of record and own beneficially, and have good and marketable title to, the Transferred Business Assets, in each case free and clear of any Encumbrance, except for the Permitted Encumbrances. The consummation of the transactions contemplated herein shall effectively vest in the Group Companies good, valid and marketable title to, and ownership of, all of the Transferred Business Assets free and clear of all Encumbrances, except for Permitted Encumbrances .

Section 6.6 Condition of Assets .

(a) All of the equipment, fixtures and tangible assets included within the Transferred Business Assets have been maintained in accordance with prudent industry practices, including manufacturers' recommendations, and taken as a whole are in good repair and proper operating condition (ordinary wear and tear excepted) and are generally suitable for the purposes for which they are employed, and there was and is no material defect, hazard or dangerous condition with respect to any such asset of the Transferred Business Assets.

(b) The Transferred Business Assets constitute all the material assets, properties, interests in properties and rights necessary for the conduct of the Ashland Business and SC Business, as the case may be, and for the continued conduct of the Business as contemplated by the Global Business Plan, provided, however, (i) that no representation or warranty or guarantee is made under this Section 6.6 regarding the validity or scope of the Transferred Intellectual Property Rights or Licensed Intellectual Property Rights which shall be exclusively dealt with under Section 6.26 and (ii) save for any Ancillary Agreements which will be entered into between Ashland or SC, or their respective designated Affiliates, on the one hand and ASK on the other hand in order to safeguard the operation of the Transferred Business after the Closing Date as contemplated by the Global Business Plan.

(c) Each Transferor or Transferred Company either owns or holds valid leases and/or licenses to the Transferred Information Technology and the Licensed Information Technology. The Transferred Information Technology and the Licensed Information Technology used by the Transferors or Transferred Companies has the capacity and performance necessary to meet, in all material respects, the requirements of the Transferred Business.

This Section 6.6 shall not be construed as a performance guarantee for the achievement of the Global Business Plan.

Section 6.7 Transferred Companies .

(a) Section 2.1(a) sets forth the name, jurisdiction of incorporation and authorized and outstanding capital of each Ashland Transferred Company and Section 2.2(a) sets forth the name, jurisdiction of incorporation and authorized and outstanding capital of each SC Transferred Company. Except as set forth in Schedule 6.7(a ) , the outstanding capital stock of each Ashland Transferred Company and each SC Transferred Company is owned by the Share Transferors as set forth in Section 2.1(a) and Section 2.2(a), respectively, and such capital stock is free and clear of all Encumbrances and all material claims or charges of any kind or otherwise released of such Encumbrances and claims or charges as of the Closing Date, and is validly issued and non-assessable, and there are no outstanding options, rights or agreements of any kind relating to the issuance, sale or transfer of any capital stock or other equity securities of any such Ashland Transferred Companies and SC Transferred Companies, respectively. Except as set forth in Schedule 6.7(a), no pre-emptive rights, rights of first refusal, subscription rights, option rights, conversion rights or similar rights exist in respect of the Transferred Shares. There are no agreements which require the allotment, issue or transfer of any debentures in or securities of the Transferred Companies.

(b) With the exception of SKW and WD none of the Transferred Companies is a party to any enterprise agreement within the meaning of Section 291 et seq. German Stock Corporation Act or any equivalent agreement under the laws of any jurisdiction. No Transferred Company holds any interests in any legal entities with the exception of Ashland Iberia which holds 60% of the outstanding shares in Ashland Portugal and 100% of the outstanding shares in Kemen Manguitos.

(c) The corporate documents (including any shareholders' agreements) accurately reflect the current corporate status of the Transferred Companies. No resolutions or other statements to amend the corporate documents have been made, and no filings with any commercial register (or with an equivalent corporate authority) in respect of any Transferred Company are pending. No shareholders' or partners' resolution of any Transferred Company entered into since January 1, 2008 is void or has been challenged or, to the Knowledge of Ashland or SC, as the case may be, threatened to be challenged, by any shareholder or partner of such Transferred Company or any third party. No party to a shareholders' agreement to which a Transferred Company is party has given, or, to the Knowledge of Ashland or SC, as the case may be, is reasonably likely to give, notice of termination of, and, to the Knowledge of Ashland or SC, as the case may be, no circumstances exist which give any party to a shareholders' agreement to which a Transferred Company is party the right to terminate or to modify such shareholders' agreement. Except as set forth in Schedule 6.7(a), the execution and performance of this Agreement or the transactions contemplated hereunder do not trigger any rights of any party under any shareholders' agreement to which a Transferred Company is party.

(d) The Transferred Shares are fully paid up. All contributions have been made in compliance with applicable law and have not been repaid or returned, in whole or in part, whether open or disguised, directly or indirectly. There are no obligations to make further contributions.

(e) No Transferred Company is a party to any agreement relating to the acquisition or sale of, or an economically equivalent transaction involving, any interests in other legal entities or any business or parts thereof, other than agreements where the material obligations have already been fully performed by all parties thereto.

Section 6.8 Accounting Statements The unaudited management accounts for the Ashland Business and for the SC Business for the financial years 2008 and 2009 (collectively, together with the related notes thereto) (the " Management Accounts ") are attached hereto as Schedule 6.8(a) . The Management Accounts have been prepared on a consistent basis in accordance with the accounting principles of Ashland or SC, respectively; further, the Management Accounts

(i) for the Ashland Business present in accordance with such accounting principles, if interpreted in accordance with US GAAP, fairly in all material respects; and

(ii) for the SC Business present in accordance with such accounting principles, if interpreted in accordance with IFRS, a true and fair view of

the assets, fixed or contingent liabilities, earnings and financial position of the Ashland Business and the SC Business, respectively, for the respective period to which they relate.

(b) The carve-out statements for the Ashland Business and for the SC Business as of December 31, 2009 (collectively, together with the related notes thereto) (the " Carve-Out Statements ), which are attached hereto as Schedule 6.8(b) , contain unaudited (i) consolidated carve-out balance sheets for the Ashland Business and the SC Business, respectively, and (ii) consolidated carve-out profit and loss statements for the Ashland Business and the SC Business. respectively. The Carve-Out Statements have been in accordance with Ashland's or SC's policies and procedures, which are in accordance with GAAP and IFRS, respectively; further, the Carve-Out Statements

(i) for the Ashland Business present, if interpreted in accordance with US GAAP, fairly in all material respects; and

(ii) for the SC Business present, if interpreted in accordance with IFRS, a true and fair view of

the assets, fixed or contingent liabilities, earnings and financial position of the Ashland Business and the SC Business for the respective period to which they relate.

(c) The individual financial statements of the Transferred Companies for the financial years 2008 and 2009 (collectively, together with the related notes thereto) (the " Individual Financial Statements ) are attached hereto as Schedule 6.8(c) . The Individual Financial Statements have been prepared in accordance with IFRS or local GAAP, as the case may be; further the Individual Financial Statements

(i) for the Ashland Business present, if interpreted in accordance with US GAAP, fairly in all material respects; and

(ii) for the SC Business present, if interpreted in accordance with IFRS, a true and fair view of

the assets, fixed or contingent liabilities, earnings and financial position of the Transferred Companies for the respective period to which they relate.

(d) The Management Accounts, the Carve-Out Statements and the Individual Financial Statements were prepared using accounting practices, including capitalization rights and valuation principles, consistent with past accounting practices of Ashland and SC, respectively. Without limiting the generality of the foregoing:

(i) the inventories shown in the Management Accounts, the Carve-Out Statements and the Individual Financial Statements are valued at the lower of cost or net realizable market value, taking into account sufficient adjustments for obsolete or otherwise non-marketable items; and

(ii) sufficient adjustments were made in the Management Accounts, the Carve-Out Statements and the Individual Financial Statements for bad debts or non-collectible receivables, and the accounts receivable are collectible in the ordinary course of business without any withholding rights, rights of set-off or rights of deduction.

(e) Except (i) as disclosed in the Management Accounts, the Carve-Out Statements and the Individual Financial Statements and (ii) for liabilities and obligations incurred in the ordinary course of business and consistent with past practice since the date of such statements, there exists no liability or obligation of any nature, whether or not accrued, contingent or otherwise relating to the Transferred Business. The provisions ( Rückstellungen ) reflected in the Management Accounts, the Carve-Out Statements and the Individual Financial Statements are adequate, appropriate and reasonable and have been calculated in a consistent manner to the extent they relate to the Transferred Business. The Transferred Business Assets do not have any liabilities with respect to the Transferred Business other than the respective Assumed Liabilities. The NewCos (as defined in the Section 2.5(a) of the Master Formation Agreement), which are to be incorporated by Ashland, SC and ASK do not have any liabilities other then liabilities incurred in connection with their incorporation.

Section 6.9 Books and Records . The books and accounting and other records of the Transferors to the extent they relate to the Transferred Business Assets (i) are in all material respects up to date and contain complete details of all matters required to be recorded under applicable accounting standards or applicable IFRS and (ii) have been maintained in accordance with applicable legal requirements on a proper and consistent basis in each case if and to the extent such books and accounting and other records relate to the Transferred Business.

Section 6.10 Accounts Receivable, Inventory .

(a) Those accounts receivable constituting Transferred Business Assets represent sales actually made in the ordinary course of business, and, except to the extent reserved against, are current and collectible. Subject to such reserves, each of the accounts receivable either has been collected in full or, to the Knowledge of Ashland or SC, as the case may be, will be collected in full, without any set-off, within one hundred and eighty (180) days after the day on which it became due and payable.

(b) All inventory constituting Transferred Business Assets conforms in all material respects with all applicable specifications and warranties, is not obsolete, is useable or saleable in the ordinary course of business and, if saleable, is saleable at values not less than the book value amounts thereof, except to the extent adequately reserved.

(c) The Transferred Business Assets do not comprise unrecorded liabilities for the purchase or procurement of any good, service or products other than and to the extent reflected in the Closing Balance Sheets.

Section 6.11 Disputed Accounts Payable . Except as set forth in Schedule 6.11 , there are no unpaid invoices or bills representing amounts in excess of EUR 50,000 alleged to be owned on account of the Transferred Business or other alleged obligations of the Transferred Business, which have been disputed or determined to be disputed or refused to pay.

Section 6.12 Absence of Certain Changes . Except as listed in Schedule 6.12 , since December 31, 2009, no Transferor or Transferred Company (provided that subsection (h) shall apply to Transferred Companies only) has with respect to the Transferred Business (each a " Material Change "):

(a) sold, leased, transferred or assigned any of the assets of the Transferred Business Assets, tangible or intangible, other than in the ordinary course of business;

(b) accelerated, terminated, materially modified, or canceled any contract, lease, sublease, license, or sublicense (or series of related contracts, leases, subleases, licenses, and sublicenses) involving more than EUR 50,000 p.a. to which it is a party other than in the ordinary course of business;

(c) canceled, compromised, waived, or released any right or claim (or series of related rights and claims) involving more than EUR 50,000 other than in the ordinary course of business;

(d) granted any license or sublicense of any rights under or with respect to any intellectual property rights other than in the ordinary course of business;

(e) created or suffered to exist any Encumbrance other then a Permitted Encumbrance upon any of the Transferred Business Assets, tangible or intangible other than in the ordinary course of business, except for any customary retention of title;

(f) granted any extensions of credit other than in the ordinary course of business;

(g) entered into or modified any agreement with or increased the compensation of a manager, executive, officer, director, employee, consultant or agent any of its employees other than in the ordinary course of business;

(h) issued, sold, otherwise disposed of or reacquired any of its capital stock, or granted or reacquired any options, warrants, or other rights to purchase or obtain (including upon conversion or exercise) any of its capital stock, or any securities convertible or exchangeable into any of its capital stock or otherwise changed its capital structure or equity ownership in any way;

(i) entered into financial arrangements for the benefit of any shareholder of the respective Transferor or Transferred Company;

(j) unless included in existing Capex budgets made or committed to make any capital expenditures or entered into any other transaction involving an expenditure in excess of EUR 100,000;

(k) amended or modified any Plan ;

(l) made any change in (i) its methods of accounting or accounting practices, except as required by IFRS or local GAAP, or (ii) its pricing policies or payment or credit practices;

(m) closed any facility or terminated any business with an annual turnover in excess of EUR 50,000;

(n) made any loan, advance or capital contributions to, or any other investment in, any Person other than in the ordinary course of business;

(o) written up or written down any of the Transferred Business Assets other than in the ordinary course of business;

(p) failed in any respect to perform obligations or suffered the occurrence of any default under any contractual obligation in excess of EUR 50,000;

(q) entered into any consultancy agreement involving an annual expenditure in excess of EUR 50,000;

(r) entered into any material business transaction outside of the ordinary course of business or not at arms length’s terms in excess of EUR 50,000; or

(s) committed (orally or in writing) to any of the foregoing.

Section 6.13 Real Property .

(a) Schedule 6.13(a)-1 sets forth lists and the locations of all Real Property of the Transferred Business to be transferred as part of the transactions contemplated herein (the " Transferred Real Property ). True and complete copies of (i) all deeds, title Insurance Policies and surveys relating to such Transferred Real Property and (ii) all documents evidencing all Encumbrances upon such Transferred Real Property have heretofore been furnished to Ashland and SC, as applicable. Except as set forth in Schedule 6.13 (a)-2 , there are no proceedings, claims, disputes or conditions affecting such Transferred Real Property that

might curtail or interfere with the use of such property in any material fashion. Neither the whole nor any portion of such Transferred Real Property is subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefore, nor has any such condemnation, expropriation or taking been proposed. No Transferor or Transferred Company is a party to any assignment or similar arrangement under which such Transferor or Transferred Company is assignor of any Transferred Real Property.

(b) Except as listed in Schedule 6.13(b) , each Transferor or Transferred Company is the unrestricted legal and beneficial owner of the Transferred Real Property listed and no piece of Transferred Real Property is (i) encumbered with any land charges or mortgages, planning obligations, covenants, options or other encumbrances, other than the Encumbrances set forth in the documents furnished under Section 6.13(a) or the Permitted Encumbrances, (ii) subject to any unregistered or otherwise pending transfer or other disposition or any sale, contribution or other contractual arrangement creating an obligation to transfer any real estate or to create, change or remove any encumbrances, or (iii) subject to any claims for restitution under any laws applicable in the relevant jurisdiction.

(c) The respective Transferor or Transferred Company has obtained all appropriate certificates of occupancy, licenses, easements and rights of way, including proofs of dedication, required to use and operate the Transferred Real Property in the manner in which such Transferred Real Property is currently being used and operated. Each Transferor or Transferred Company has all approvals, permits and licenses necessary to own or operate the Transferred Real Property as currently owned and operated or as proposed to be owned and operated in accordance the Global Business Plan, and, except as set forth in Schedule 6.13(c) , no such approvals, permits or licenses will be required, as a result of the transactions contemplated herein, to be issued after the date hereof in order to permit the Group Companies, following the Closing Date, to continue to own or operate the Transferred Real Property in the same manner as heretofore or as contemplated by the Global Business Plan, other than any such approvals, permits and licenses that are ministerial in nature and are normally issued in due course upon application therefore without further action by the applicant.

(d) Schedule 6.13(d) sets forth a list of all real estate lease agreements and heritage rights with any Transferor (to the extent such agreement of heritage right relates to the Transferred Business) or Transferred Company as lessee or lessor involving an annual rent (without ancillary costs) in excess of USD 50,000 or with a termination period of 12 months or longer (each a " Real Estate Lease Agreement ). Each of the Real Estate Agreements is, to the Knowledge of Ashland or SC, as the case may be, in full force and effect and enforceable against the parties thereto in accordance with their terms, (ii) no party to a Real Estate Agreement has given or, to the Knowledge of a Transferor or a Transferred Company, as the case may be is reasonably likely to give, notice of termination, and, no circumstances exist which give any party to a Real Estate Lease Agreement the right to terminate or modify such Real Estate Lease Agreement and (iii) to the Knowledge of Ashland or SC, as the case may be, no party to a Real Estate Lease Agreement is in breach of such agreement or is, or is reasonably likely to become,

unable to meet its obligations, and (iv) no Real Estate Lease Agreement requires the consent or approval of the other party thereto in connection with the assignment thereof in order to effectuate the transactions contemplated herein.

Section 6.14 Leases . Schedule 6.14 contains accurate and complete lists of each lease (other than Real Estate Lease Agreement) constituting a Transferred Business Asset with annual lease payment obligations in excess of USD 50,000, net of any VAT or ancillary expenses or which cannot be terminated within a period of 12 months (" Leases "). The Leases are, to the Knowledge of Ashland or SC, as the case may be, in full force and effect and enforceable against the parties thereto in accordance with their terms. The leasehold estate created by each such Lease is free and clear of all Encumbrances. There are no existing defaults by any Transferor or Transferred Company under any of such Leases. No event has occurred that (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute a default under any such Lease and, to the Knowledge of Ashland or SC, as the case may be, no party of any of such Lease is, or is reasonably likely to become, unable to meet its obligations thereunder . No Transferor or Transferred Company has a reason to believe that any lessor under any such Lease will not consent (where such consent is necessary) to the consummation of the transactions contemplated herein without requiring any modification of the rights or obligations of the lessee thereunder. No lessor under any such Lease has given, or to the Knowledge of Ashland or SC, as the case may be, threatened to give, notice of termination of any such Lease and the execution or consummation of this Agreement or the transactions contemplated herein do not trigger any rights of any party to a Lease.

Section 6.15 Plant and Equipment . The plants, structures and equipment included within the Transferred Business Assets are structurally sound and to the Knowledge of Ashland or SC, as the case may be, have no material defects, are in good operation condition and repair and are adequate for the uses to which they are presently being put. None of such plants, structures or equipment are in need of maintenance or repairs except for ordinary, routine maintenance and repairs which are not material in nature or cost. The roof of each such structure is watertight and in good repair and condition. No Transferor or Transferred Company has received notification by a competent authority that it is in violation of any applicable building, zoning, health or other law, ordinance or regulation in respect of its plants, structures or operations.

Section 6.16 Environmental Matters .

(a) The Transferred Business as operated by each Transferor and Transferred Company is in compliance in all material respects with the Environmental Laws applicable to the Transferred Business and, to the Knowledge of Ashland or SC, as the case may be, there are no circumstances that may prevent or interfere with such full compliance in the future.

(b) Except as set forth on Schedule 6.16(b) , in the past 3 years prior to the Signing Date no Transferor or Transferred Company has received any communication written or oral, whether from a Governmental Entity, citizens, group or employee of such

Transferor or Transferred Company, that alleges that such Transferor or Transferred Company is not in full compliance with any Environmental Laws with respect to operation of the Transferred Business.

(c) Except as set forth on Schedule 6.16(c) , there is no Environmental Claim by any Person that is pending, or, to the Knowledge of Ashland or SC, as the case may be, threatened, against any Transferor or Transferred Company with respect to any Transferred Business Asset, or, insofar as it may pertain to any Transferred Business Asset, against any Person whose liability for any Environmental Claim any Transferor or Transferred Company has retained or assumed either contractually or by operation of law.

(d) Except as set forth on Schedule 6.16(d) , to the knowledge of Ashland or SC, with respect to any Transferred Business Asset, within the last three years prior to the Signing Date there have neither occurred nor are there any ongoing actions, activities, circumstances, conditions, events or incidents, including the release, emission, discharge, presence or disposal of any Materials of Environmental Concern, that could, form the basis of any Environmental Claim against any Transferor or Transferred Company or, insofar as it may pertain to any Transferred Business Asset, against any Person whose liability for any Environmental Claim any Transferor or Transferred Company has retained or assumed either contractually or by operation of law, or otherwise results in any costs or liabilities under Environmental Law.

(e) Ashland made available to SC and SC made available to Ashland, in each case in the Data Room prior to the Signing Date, a copy of each material assessment, report, datum, result of investigations or audit that has been developed or issued in the past 3 years prior to the Signing Date and is in the possession of or reasonably available to the Transferors regarding environmental matters pertaining to or the environmental condition of the Transferred Business, or the compliance (or noncompliance) by any Transferor or Transferred Company with any Environmental Laws.

(f) Except as set forth on Schedule 6.16(f) , with respect to any Transferred Business Asset, no Transferor or Transferred Company is, by virtue of the transactions set forth herein and contemplated hereby or as a condition to the effectiveness of transactions, required to: (i) perform any site assessment for Materials of Environmental Concern or (ii) remove or remediate any Materials of Environmental Concern.

Section 6.17 Material Agreements .

(a) Except for the agreements listed in Schedule 6.17(a) , none of the Transferors or Transferred Companies is a party to any of the following agreements to the extent pertaining to the Transferred Business (the " Material Agreements "):

(i) Partnership agreements, stockholder agreements, voting agreements, vote pooling agreements or similar arrangements;

(ii) Enterprise agreements in the meaning of § 291 AktG, i.e. profit and loss transfer or domination agreement or similar agreements between a Transferor and a Transferred Company;

(iii) agreements for carve-outs, split-ups, mergers, amalgamations, spin-offs and other types of restructurings (including asset deals);

(iv) agreements for joint ventures, syndicates, associations, consortiums, co-operations;

(v) loan agreements, credit lines, debt acknowledgements, loan commitments or other funding with banks/financial institutions or any Transferor or Transferred Company as borrower or lender and other instruments evidencing financial indebtedness of or owed to any bank or Transferor or Transferred Company (including cash pool agreements), in each case with outstanding amounts (including interests) in excess of USD 150,000;

(vi) security interests, guarantees, suretyships, letters of comfort, performance or warranty bonds and similar instruments issued by any third party, including, for the avoidance of doubt, any other Affiliate of Ashland and SC, respectively in excess of USD 150,000, to secure any indebtedness or other obligation of any Transferor or Transferred Company or issued by any Transferor or Transferred Company to secure any indebtedness or other obligation of another Affiliate of Ashland, SC or any third party;

(vii) agreements regarding swaps, options, forward sales or purchases, futures and other financial derivatives and combinations thereof;

(viii) factoring agreements, leasing agreements (including financial and operating leasing as well as sale and lease back) and credit sale agreements involving aggregate payments in an amount exceeding USD 250,000;

(ix) agreements relating to any disposition or acquisition of any assets or rights by or to a Transferor or Transferred Company that have not yet been performed, other than dispositions or acquisitions of inventory or equipment in the ordinary course of business involving aggregate payments of less than USD 150,000;

(x) agreements relating to capital expenditures involving an amount exceeding USD 200,000;

(xi) license agreements with any Transferor or Transferred Company as licensee or licensor which resulted during the last fiscal year, or are likely to result during the current fiscal year, in annual royalties in excess of USD 75,000;

(xii) lease agreements regarding the Transferred Business Assets other than real estate with any Transferor or Transferred Company as lessee or lessor involving an annual rent in excess of USD 50,000;

(xiii) agreements with customers which resulted during the last fiscal year, or are likely to result in an annual net revenue exceeding USD 1,000,000;

(xiv) purchase or service orders or other purchase or service commitments by customers of the Transferors or Transferred Companies for any goods or services with a purchase price or other consideration exceeding USD 100,000 or longer with term longer than three (3) years;

(xv) agreements with suppliers of any goods or services which resulted during the last fiscal year, or are likely to result during the current fiscal year, in payments in excess of USD 300,000 or with supply restrictions for a Transferor or a Transferred Company;

(xvi) purchase or service orders or other purchase or service commitments by a Transferor or Transferred Company to suppliers for any goods or services with a purchase price or other consideration exceeding USD 50,000 or which cannot be terminated within a period 12 months;

(xvii) service or delivery contracts with utility providers with an annual consideration of more than USD 100,000;

(xviii) agreements with commercial agents, authorized dealers, franchisees, distributor and other sales agents;

(xix) agreements with Governmental Entities excluding however such agreements by which the public authorities is a customer;

(xx) consultancy agreements and research and development agreements providing for an annual remuneration exceeding USD 50,000;

(xxi) agreements with suppliers and competitors which contain non-compete provisions or other clauses regarding price maintenance or supply restrictions;

(xxii) agreements with Ashland, SC and Affiliates of Ashland and SC, as the case may be, to the extent they are not being transferred to the Group in accordance with the transactions contemplated hereunder; and

(xxiii) agreements outside the ordinary course of business or not concluded at arms length's terms containing obligations of the Transferor or a Transferred Company in excess of USD 50,000.

To the extent an agreement is described above reasonable complete details of such agreement have been made available to the other Party via the Data Room.

(b) Except as listed in Schedule 6.17(b) , (i) the Material Agreements are, to the Knowledge of Ashland or SC, as the case may be, in full force and effect and enforceable against the parties thereto in accordance with their terms, (ii) no party to a Material Agreement has given or, to the Knowledge of Ashland or SC, as the case may be is reasonably likely to give, notice of termination, and, to the Knowledge of Ashland or SC, as the case may be, no circumstances exist which give any party to a Material Agreement the right to terminate or modify such Material Agreement and (iii) to the Knowledge of Ashland or SC, as the case may be, no party to a Material Agreement is in breach of such agreement or is, or is reasonably likely to become, unable to meet its obligations, and (iv) the execution or consummation of this Agreement or the transactions contemplated herein do not trigger any rights of any party to a Material Agreement.

Section 6.18 Suppliers. With respect to the Transferred Business, since January 1, 2010, there has not been any material adverse change in the business relationship with any supplier from whom a Transferor or Transferred Company purchased more than 20 % of the goods or services (on a consolidated basis) which it purchased during the past twelve months.

Section 6.19 Licenses . With respect to the Transferred Business, since January 1, 2010, no material licensor or licensee has cancelled or otherwise modified its relationship with any Transferor or Transferred Company and (i) no such Person has advised Ashland or SC, as the case may be, of its intent to do so, and (ii) the consummation of the transactions contemplated herein will not adversely affect any of such relationships.

Section 6.20 Insurance .

(a) The insurance policies maintained for the Transferred Business (the " Insurance Policies ") provide insurance against all risks against which insurance is customarily sought for businesses comparable to the Transferred Business and the coverage is sufficient to adequately cover such risks. The Transferors and Transferred Companies have duly paid all premiums and, since January 1, 2009 have complied with all other material obligations under the Insurance Policies.

(b) There are no claims pending under any Insurance Policy with respect to the Transferred Business in excess of EUR 250,000, other than excluded Claims and there are no facts which could give rise to any such claims.

Section 6.21 Litigation; Product Liability .

(a) There is no action, suit, inquiry, proceeding or investigation by or before any court or Governmental Entity pending, or to the Knowledge of Ashland or SC, as the case may be, threatened, against or involving the Transferred Business, or which questions or challenges the validity of this Agreement or any action taken or to be taken in connection with the transactions contemplated herein; and, to the Knowledge of Ashland or SC, as the case may be, there is no valid basis for any such action, proceeding or investigation. No Transferor or Transferred Company is subject to any judgment, order or decree which, to the Knowledge of the Transferor may have an adverse effect on the business practices or conduct of the Transferred Business as contemplated by the Global Business Plan or on its ability to acquire any property.

(b) Except as listed in Schedule 6.21(b) the products designed, manufactured or distributed in connection with the Transferred Business and the services rendered in relation thereto prior to the Closing Date do not suffer from any defects which give or could give rise to any product liability or warranty claims and no such claims have been raised against any Transferor or Transferred Company within the last twenty-four (24) months.

Section 6.22 Compliance with Laws .

(a) Unless otherwise disclosed in Schedule 6.22(a) , the Transferors and Transferred Companies have complied and will be in compliance in all material respects with all laws, rules and regulations, ordinances, judgments, decrees, orders, writs and injunctions of all applicable federal, state, local and foreign Governmental Entities that affect the Ashland Business and/or the Ashland Transferred Business Assets or the SC Business and/or the SC Transferred Business Assets, as the case may be, and, since June 1, 2007, no notice, charge, claim, action or assertion has been received by any Transferor or Transferred Company or has been filed, commenced or, to the Knowledge of Ashland or SC, threatened, against any Transferor or Transferred Company alleging any material violation of any of the foregoing.

Since June 1, 2007, no Governmental Entity has at any time challenged or questioned the legal right of a Transferor or Transferred Company to design, market, offer or sell any of the services or products of the Transferred Business in the present manner or style. The representations set in Section 6.22(a), Section 6.22(b), Section 6.22(c) and Section 6.22(e) are not made with respect to Environmental Laws, which are the subject of Section 6.16.

(b) Neither Ashland nor SC nor any of their respective Transferors or Transferred Companies, including each of their respective Directors, Officers and employees, has, directly or indirectly, in connection with the Transferred Business (i) used any funds for bribes, other unlawful purposes or political contributions in violation of applicable laws, (ii) requested or accepted any bribes or other unlawful benefits, (iii) established or maintained any funds or assets that have not been properly recorded in the books and records of the Transferors or Transferred Companies, or (iv) have otherwise violated any statutory provisions prohibiting unlawful or unethical business practices, including the FCPA.

(c) Neither Ashland nor SC nor their respective Transferors or Transferred Companies has directly or indirectly, in connection with the Transferred Business engaged in any unlawful antitrust practices, including but not limited to the fixation of prices, abuse of a dominant position or the like.

(d) Except as set forth on Schedule 6.22(d)-1 each Transferor and Transferred Company holds Permits. Except as set forth in Schedule 6.22(d)-2 the Permits are (i) in full force and effect and have not been challenged by any third party and there are no circumstances which would justify such a challenge and (ii) no proceedings regarding a revocation or withdrawal of any Permit have been initiated or to the Knowledge of Ashland or SC, as the case may be, threatened and (iii) each Transferor and Transferred Company is and within the last three (3) years prior to the Signing Date has been in compliance in all material respects with the terms and conditions of the Permits (including without limitation any ancillary provisions thereto).

(e) All public grants, allowances, aids and other subsidies in whatever form (the " Public Subsidies ") received by the (i) Transferors relating to the Transferred Business and (ii) Transferred Companies since June 1, 2007 are listed in Schedule 6.22(e) and such list indicates the nature of the Public Subsidy and dates of any administrative orders, agreements or other instruments on which basis the Public Subsidy was given, the entity which received the Public Subsidy and the amounts received. No proceedings regarding a revocation or withdrawal of a Public Subsidy have been initiated, or to the Knowledge of Ashland or SC, as the case may be, threatened, and there are no circumstances, which would justify the initiation of such proceedings. Each Transferor or Transferred Company is in full compliance with its obligations under or in connection with the Public Subsidies, including the obligations under any ancillary provisions in the respective orders or agreements thereto. No Transferor or Transferred Company is obliged under the Public Subsidies to maintain a certain level of employees or to

make any investments. No Public Subsidy will have to be repaid in whole or in part due to the execution or consummation of this Agreement or the transactions contemplated hereunder.

Section 6.23 Employees .

(a) Schedule 6.23(a) includes for each Transferor (with regard to Carve-Out Employees) and Transferred Company a correct and complete list of its (i) directors and officers and (ii) employees with (a) a fixed annual gross salary in excess of EUR 100,000, (b) a fixed term of employment of more than two (2) years, (c) a notice period of more than six (6) months, (d) a contractual entitlement to a severance payment in excess of three (3) monthly gross salaries, or (e) other contractual entitlements to cash or non-cash benefits the aggregate individual or annual value of which exceeds EUR 50,000, in each case provided that such individuals pertain to the Transferred Business (collectively the " Material Employees "). Such list correctly states for each Material Employee the date of his/her service or employment contract and the nature and date of all ancillary agreements, amendments, side letters, waivers and similar documents, if any (such contracts are hereinafter referred to as the " Material Personnel Contracts ").

(b) Except as listed in Schedule 6.23(b) , (i) the Material Personnel Contracts are in full force and effect and enforceable against the parties thereto in accordance with their terms, (ii) no party to a Material Personnel Contract has given, or to the Knowledge of Ashland or SC, as the case may be, or is reasonably likely to give, notice of termination, and, to the Knowledge of Ashland or SC, as the case may be, no circumstances exist which give any party to a Material Personnel Contract the right to terminate or modify such Material Personnel Contract and (iii) no Transferor or Transferred Company is in breach of a Material Personnel Contract or is reasonably likely to become unable to meet its obligations thereunder, and (iv) the execution or consummation of this Agreement or the transactions contemplated herein do not trigger any rights of any party to a Material Personnel Contract other than notice, consultation and other similar rights as required by applicable law.

(c) After the Closing Date no Plan will apply to the Transferred Employees and no Group will be subject to any Plan or any liability, commitment or obligation under any Plan to which any Transferor, Transferred Company or ERISA Affiliate was or is subject, in each case other than those listed in Schedule 6.23(c)-1 ( the " Transferred Plans "). Each Transferred Plan has been operated and administered in all material respects in accordance with its terms and applicable law, including ERISA and the Code. All obligations under or in connection with the Transferred Plans have been fulfilled. With the exception of such Transferred Plans listed in Schedule 6.23(c)-2 , all funding obligations under or in connection Transferred Plans appertaining to periods until the Closing Date are fully funded according to the requirements established by law and the Transferred Plans documents based upon the funding assumptions used in the most recent financial or actuarial reports prepared for the commitments under the Transferred Plans.

(d) Schedule 6.23(d) includes with respect to all Transferred Employees a correct and complete list of any applicable (i) reconciliation of interest agreements ( Interessenausgleiche ) and social plans ( Sozialpläne ); (ii) collective arrangements, whether in the form of general commitments ( Gesamtzusagen ), standard terms of employment ( vertragliche Einheitsregelungen ), works agreements ( Betriebsvereinbarungen ), collective bargaining agreements ( Tarifverträge ); and (iii) any other employment-related documents or arrangements which restrict the employer's freedom to dismiss any employee or to change the terms of their employment (including restrictions in the form of an obligation to make, in the case of dismissals or changes to terms of employment, any payments) (the " Collective Agreements ").

(e) Schedule 6.23(e) includes a list of those Transferred Employees who have been identified by ASK as " Key Employees ". Except as set forth in Schedule 6.23(e) as of the Signing Date (i) the service or employment agreements of each of the Key Employees (the " Key Employee Contracts ") are in full force and effect and enforceable against the parties thereto in accordance with their terms, (ii) no party to a Key Employee Contract has given, or to the Knowledge of Ashland or SC, as the case may be, or is reasonably likely to give notice of termination, and to the Knowledge of Ashland or SC, as the case may be, no circumstances exist which give any party to a Key Employee Contract the right to terminate or modify such Key Employee Contract, (iii) to the Knowledge of Ashland or SC, as the case may be, no party to a Key Employee Contract is in breach of such agreement or is reasonably likely to become unable to meet its obligations, and (iv) the execution or consummation of this Agreement or the transactions contemplated herein do not trigger any rights of any party to a Key Employee Contract.

(f) To the Knowledge of Ashland or SC, as the case may be, there are no indications that any director, officer or employee of any of the Transferred Companies or any of the Transferred Employees suffers from any occupational disease and no such indications have been notified to any (including statutory) insurance provider (if any).

Section 6.24 Individual and Collective Labor Matters .

(a) Except as set forth on Schedule 6.24(a) , the Transferors and Transferred Companies have in the last three (3) years prior to the Closing Date not experienced any disputes with Governmental Entities with respect to labor matters (in particular, regarding disabled Persons and repayment duties).

(b) The Transferors and Transferred Companies are with respect to the Transferred Business in compliance in all material respects with those laws and regulations dealing with wages and any other remuneration, hours and working time, vacations and working conditions for their employees, including health and safety regulations. All compensation and withholding obligations of the Transferors and Transferred Companies to or in respect of their current and former employees within the Transferred Business for periods prior to the Closing Date have been fulfilled or have been properly provided for in the Management Accounts.

(i) no Transferor or Transferred Companies are, with respect to the Transferred Business, party to, or bound by, any labor agreement, collective bargaining agreement, any labor union, labor organization or works council;

(ii) no labor union, labor organization, works council, or group of employees of the Transferred Business has made a pending demand for recognition or certification, and, to the Knowledge of Ashland or SC, as the case may be, there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened in writing to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority; and

(iii) to the Knowledge of Ashland or SC, as the case may be, there are no labor union organizing activities with respect to any employees of the Transferred Business.

(d) In the last three (3) years prior to the Closing Date, there has been no actual or, to the Knowledge of Ashland or SC, as the case may be, threatened material arbitrations, material grievances, labor disputes, strikes, lockouts, slowdowns or work stoppages against or affecting the Transferred Business.

Section 6.25 Tax Matters .

(a) All Tax Returns required to be filed on or before the Closing Date with respect to the Transferred Business have been or will be timely filed by each Transferor or Transferred Company on or before the Closing Date in all jurisdictions in which such Tax Returns are required to be filed and all such Tax Returns are or will be true, correct, and complete. All Taxes shown to be due on such Tax Returns have been or will be timely paid in full, except for Taxes being contested in good faith and for which adequate reserves have been established and maintained in accordance with applicable IFRS or local GAAP, specifically listed on Schedule 6.25(a) . All social security ( Sozialversicherungsbeiträge ) or other similar contributions imposed by any Governmental Entity have duly been paid.

(b) All Transferred Companies have maintained sufficient and accurate records, especially information required to support Tax Returns, information that has been or may be filed, lodged or submitted to any Tax Authority or is required to be kept under any applicable Tax law, including documentation legally required for transfer pricing purposes.

(c) No statute of limitations of any jurisdiction regarding the assessment or collection of Taxes with respect to the Transferred Business has been extended or waived, or such extension or waiver has been requested.

(d) Except as listed in Schedule 6.25(d)

(i) there are no audits other than routine audits in the ordinary course of business, claims, assessments, levies, administrative proceedings, or lawsuits pending, or to the Knowledge of Ashland or SC, as the case may be, threatened or proposed, against the Transferred Business by any Tax Authority; and

(ii) no Transferor or Transferred Company has received any written Tax ruling or entered into or is currently under negotiations to enter

(iii) into any agreement with any Tax Authority, which could reasonably be expected to affect any taxable year or other taxable period ending after the Closing Date or for which the statute of limitations has not expired.

(e) None of the Transferred Companies (i) is a party to, is bound by, or has any obligation under any Tax Sharing Agreement, or (ii) has any potential liability or obligation (for Taxes or otherwise) to any person as a result of, or pursuant to, any such Tax Sharing Agreement.

(f) There are no liens for Taxes on any of the Transferred Business Assets, except for Taxes not yet due and payable.

(g) No claim has ever been made by a Tax Authority in a jurisdiction where a Tax Return is not filed by, or with respect to the Transferred Business, that any Transferor or any of the Transferred Companies are or may be subject to taxation in that jurisdiction.

(h) Each Transferor and Transferred Company has withheld and paid in full all Taxes required to have been paid in connection with amounts paid or owing to any employee, independent contractor, creditor, member or other third party.

(i) The tax loss carry forwards of the Transferred Companies exist in the amounts as may be calculated from the Individual Financial Statements. Except as set forth on Schedule 6.25(i) such tax loss carry forwards are not the subject of any litigation or challenge by any Tax Authorities and there are no circumstances that would justify such challenge.

(j) Except for SKW and WD (" Steuerliche Organschaft "), none of the Transferred Companies have or will have, with respect to any Pre-Closing Period or Straddle Period, any liability for the Taxes of any other Person, as a transferee or successor, or as a result of (i) operation of law or (ii) the relevant Transferred Company being a member of an affiliated, consolidated, unitary, combined or similar Tax group.

(k) None of the Transferred Companies is a party to any "listed transaction", as defined in Treasury regulation section 1.6011 – 4.

(l) No power of attorney regarding Tax matters that currently is in effect has been granted by any of the Transferred Companies.

Section 6.26 Intellectual Property .

(a) The respective Transferors, the Transferred Companies and ALIP are (i) the sole and exclusive owner of the Transferred Intellectual Property Rights and of all Licensed Intellectual Property Rights free and clear of all Encumbrances, except for Permitted Encumbrances.

(b) Except as set forth on Schedule 6.26(b) all registrations and applications for Patents and Trademarks have been duly maintained and have not lapsed, expired or been abandoned, and no registration or application therefore is the subject of any opposition, interference, cancellation proceeding or other legal or governmental proceeding before any Governmental Entity in any jurisdiction.

(c) There are no obligations for compensation and other claims of employee inventors pertaining to the Transferred Intellectual Property Rights.

(d) Except as set forth on Schedule 6.26(d)-1 , to the Knowledge of Ashland or SC, as the case may be, there is no infringement or other violation of any Transferred Intellectual Property Rights or Licensed Intellectual Property Rights by any third party and the conduct of the Transferred Business as currently conducted does not conflict with, infringe, dilute or misappropriate in any way on any intellectual property right of any third party. Except as set forth on Schedule 6.26(d)-2 , there is no suit, action or proceeding pending, or to the Knowledge of Ashland or SC, as the case may be, there is no claim, and action or proceeding threatened, against any Transferor or Transferred Company (i) alleging any infringement, violation, dilution or misappropriation of any third party's intellectual property rights or (ii) challenging the ownership, use, validity or enforceability of the Transferred Intellectual Property Rights or the Licensed Intellectual Property Rights.

(e) Except as set forth on Schedule 6.26(e) , all consents, and authorizations by or with Governmental Entities necessary with respect to the consummation of the transactions contemplated herein, as they may affect the Transferred Intellectual Property Rights and the Licensed Intellectual Property Rights, have been obtained or will be obtained prior to the Closing Date.

(f) Except as set forth on Schedule 6.26(f) , neither a Transferor, a Transferred Company or ALIP has entered into any consent, indemnification, forbearance to sue, settlement agreement or cross-licensing arrangement with any Person relating to the Transferred Intellectual Property Rights or the Licensed Intellectual Property Rights, or in connection with the Transferred Business, relating to the intellectual property rights of any third party.

(g) No Transferor, Transferred Company or ALIP is, or will be as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any license, sublicense or other agreement relating to the Transferred Intellectual Property Rights or Licensed Intellectual Property Rights.

Section 6.27 Brokers or Finders . No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated herein.

Section 6.28 Currency Conversion . For the purposes of this ARTICLE VI the currency conversions shall be determined using the European Central Bank's fixing rates as published on its website (www.ecb.int) shortly after 2.15pm. Central European Time on June 1, 2010.

ARTICLE VII

REMEDIES FOR BREACH OF WARRANTY AND LIMITATIONS

Section 7.1 Breach . In the event that any of the representations contained in ARTICLE VI is incorrect, incomplete or misleading (a " Breach "), Ashland or SC, as the case may be, shall subject to the application of ARTICLE VIII and the remainder of this ARTICLE VII, put ASK, and/or at ASK's election, the Group Company affected by such Breach, in the same position they would be in if the representation had been correct and complete or not misleading, either by: (i) providing for such position in kind, or, (ii) if it is impractical to provide such position in kind, by paying to ASK, and/or at ASK's election, the Group Company affected by such Breach the monetary amount necessary to compensate ASK and/or the Group Company affected by such Breach for the Losses associated with such Breach. If and to the extent that the remediation in kind with respect to Losses creates a taxable income for ASK or the Group Companies, the Losses shall include the amount of the resulting taxes. Any advantages resulting from the Breach shall be taken into account only as and when they have actually been received. Unless provided otherwise herein, Sections 249 through 254 German Civil Code shall apply.

Section 7.2 Exclusion of Claims for Breach . Ashland and SC shall not be liable for a Breach, if and to the extent that

(a) any of the Group Companies have caused or aggravated such Breach or any Loss resulting therefrom or failed to mitigate Losses;

(b) the amount of the Losses caused by such Breach (i) is recovered, (ii) could with reasonable efforts be recovered, or (iii) could with reasonable efforts have been recovered in each case from a third party, including under an Insurance Policy;

(c) the circumstances giving rise to the Breach are specifically reflected or reserved against in the respective Closing Date Balance Sheet or Closing Date Net Asset Values Statement (each as defined in the Master Formation Agreement);

(d) the payment or settlement of the Losses results in a Tax relief or other benefit to any of the Group Companies;

(e) the facts, circumstances or events forming the basis of a Breach have been specifically disclosed in those schedules, which are relevant to the representations contained in ARTICLE VI, and for purposes hereof, disclosure of any matter, fact, or circumstance in any schedule to this Agreement shall be deemed to be disclosure thereof for purposes of any other schedule to the extent the relevance of such disclosure is reasonably apparent and could have been reasonably expected under such other schedule; the limitation under this Section 7.2(e) shall not apply if the underlying facts have not been disclosed in reasonable detail in the Data Room prior to the Signing Date; or

(f) the Breach results from, or its consequences are after the date of this Agreement increased by, the passing of or any change in any law, statute, ordinance, rule, regulation, common law rule or administrative practice of any Government Entity.

Section 7.3 De Minimis Amount; Deductible; Cap .

(a) Each of Ashland and SC shall not be liable for a Breach under this Agreement unless and until (i) an individual Loss (it being understood that all Losses arising from the same event, condition or set of circumstances shall be considered as an individual Loss for purposes of such calculation) exceeds EUR 25,000 (in words: Euro twenty five thousand) (the " De Minimis Amount "), and (ii) the aggregate Loss exceeding such De Minimis Amount exceed EUR 500,000 (in words: Euro five hundred thousand ) (the " Deductible "). If the Deductible is exceeded, ASK or the relevant Group Company shall be entitled to payment of any Loss (excluding individual Losses falling below the De Minimis Amount) in excess of the Deductible ( Freibetrag ).

(b) Each of Ashland's and SC's aggregate liability for all Breaches and claims under this Agreement, taken together, shall not exceed 20% (twenty percent) of the Transferred Business transferred by each of Ashland or SC, respectively (the " Cap "); provided, however, that the Cap shall not apply for any liability for a Breach of the representations set forth in Section 6.1 to Section 6.5, Section 6.7(a), Section 6.13(b), Section 6.16(a), Section 6.16(c), Section 6.16(d), Section 6.20, Section 6.21, Section 6.22, Section 6.25, Section 6.26(a) and Section 6.26(c), which shall be unlimited.

Section 7.4 Time Limitations . All claims arising under ARTICLE VI of this Agreement shall be time-barred within twenty-four (24) months after the Closing Date, except for claims arising under (i) Section 6.1 to Section 6.5, Section 6.7(a), Section 6.13(b), Section 6.26(a) and Section 6.26(b) which shall be time-barred within 8 years after the Closing Date, and (ii) Section 6.25 which shall be time-barred six (6) months after the relevant Tax assessment has become final, binding and non-appealable, or, in case of a secondary profit and loss transfer Loss, six (6) months after the secondary profit and loss transfer Loss has been raised against WD or SKW, and, or in countries where there is no practice of regular Tax assessments ten (10) years from the Closing Date. For the avoidance of doubt, any claims arising under ARTICLE VIII of this Agreement (Indemnifications) shall constitute an independent liability regime and shall become time-barred in accordance with the specific provisions stipulated therein. All claims for Loss due to Breach shall only be suspended by a timely notification in accordance with Section 9.1 and the filing of a respective lawsuit.

ARTICLE VIII

FURTHER INDEMNIFICATIONS

Section 8.1 Indemnification for Excluded Liabilities .

(a) The Parties intend that only (i) Assumed Liabilities in case of the Carve-Out Businesses and (ii) Transferred Liabilities in case of Transferred Companies shall be economically assumed by or transferred to the Group Companies and all Excluded Liabilities shall remain economically with Ashland and SC respectively. Therefore, each of Ashland and SC, respectively, shall indemnify and hold harmless ASK or, at the election of ASK, the relevant Group Company as third party beneficiary without an own right to claim from and against any Losses resulting from or in connection with an Excluded Liability related to the Ashland Business or the SC Business, as the case may be, in accordance with Section 8.2 and/or Section 8.4 in case of an Environmental Loss and Section 8.3 regarding Taxes. If and to the extent that the indemnification creates a taxable income for the relevant Group Company, the Losses shall include the amount of the resulting taxes. For the avoidance of doubt any indemnification of any Excluded Liabilities related to or arising from an Environmental Loss or a Loss associated with unpaid Taxes shall be governed exclusively by Section 8.2, Section 8.3 and/or Section 8.4.

(b) In furtherance of Section 8.1(a) above, the obligation to indemnify for Excluded Liabilities arising out of or relating to breaches of anti-trust, anti-corruption or

other applicable laws in connection with the operation of the Ashland Business or the SC Business (see ARTICLE I, Excluded Liabilities (g)) (" Compliance Breaches ") shall also apply with respect to Compliance Breaches that have been committed prior to the Closing Date but continued thereafter (e.g. undiscovered fixing of prices) without Knowledge of ASK; provided however, that this shall not apply for Compliance Breaches committed after the second anniversary of the Closing Date. For the purposes of this Section 8.1(c) "Knowledge of ASK" shall mean positive knowledge of the management board of ASK and such knowledge the management board of ASK could have obtained had it conducted its affairs without gross negligence.

(c) No right under this Section 8.1 shall be limited, time barred or restricted by the limitation set forth in ARTICLE VII or Section 8.2 through Section 8.8, provided however, that any claim under this Section 8.1 shall become time barred 30 years after it has arisen ( Anspruch entstanden within the meaning of Sec. 199 of the German Civil Code ( BGB )).

Section 8.2 Environmental Indemnification .

(a) Environmental Indemnification . The indemnification under Section 8.1 shall, subject to this Section 8.2, apply in case of any Environmental Loss attributable to the Ashland Business or the SC Business, as the case may be, to the extent such Environmental Loss relates to or arises out of actions, events, or conditions first originating or occurring on or before the Closing Date. ASK shall indemnify and hold harmless Ashland and/or SC, as the case may be, at the election of Ashland and/or SC, the relevant Affiliate of Ashland and/or SC as third party beneficiary without an own right to claim from any Environmental Loss, which relates to or arises out of actions, events, or conditions first originating or occurring after the Closing Date. Without altering or affecting in any manner the provisions of Section 8.2(e) or Section 8.2(f), to the extent that two or more of Ashland or SC or their respective Transferors and ASK or any Transferee are liable hereunder with respect to the same Environmental Loss, the Environmental Loss will be apportioned among Ashland or SC or the applicable Transferor and ASK or the applicable Transferee in proportion to the extent to which the activities of each party contributed to the cause of the Environmental Loss, taking into consideration all pertinent factors, including the length of ownership by such parties of the affected property during the time of the act, event or occurrence giving rise to the Environmental Loss and the use made of such property by such parties. Without limiting the generality of the foregoing, the Parties are in agreement, that Losses incurred in connection with the subject matters set forth on Exhibit 8.2(a) shall constitute Environmental Losses which shall be deemed to relate to or arise out of actions, events, or conditions originating or occurring on or before the Closing Date.

(b) Procedure for Asserting Environmental Losses . In the event that after the Closing Date any Party shall suffer an Environmental Loss subject to indemnification under Section 8.2(a), such Party (the " Claimant ") shall as soon as reasonably practical after discovery of the relevant facts give the Party responsible for the indemnification of such Environmental Loss is made (the " Responding Party ") written notice of such Environmental

Claim. Before taking any measures to remediate the issues associated with the Environmental Claim (the " Remedial Measures "), other than such measures which are necessary to remove an immediate danger to the human health, natural resources or material assets, the Responding Party shall give the Claimant the reasonable opportunity to comment upon the Remedial Measures and shall take the Claimant's comments into reasonable consideration. The Responding Party shall have the right to direct and control (A) any Remedial Measures, including determining the scope, extent, duration and cost of such Remedial Measures, (B) the defense of any Environmental Claims raised by a third party (C) all discussions, negotiations and proceedings with Governmental Entities and third parties in connection therewith; provided that the Responding Party shall not (i) unreasonably interfere with any ongoing operations or the conduct of the Claimant's business or (ii) select Remedial Measures that would materially interfere with the Claimant's operations or business or materially impair the value of the Claimant's property, business or assets.

(c) Appointment of Neutral Environmental Expert . If the Responding Party objects to the basis for the assertion of the Environmental Claim, it shall deliver to the Claimant, on a timely basis, a notice setting forth the basis for such objection and the Parties to the dispute shall attempt in good faith to settle the disagreement considering the factors set forth in the last sentence of Section 8.2(a). If said Parties cannot settle the disagreement within three months after receipt of the statement of objections, then said Parties may present the matter to a neutral environmental expert from a recognized environmental consulting firm to be jointly designated by the disputing Parties (the " Neutral Environmental Expert "). If the disputing Parties cannot agree on the Neutral Environmental Expert within ten Business Days after the respective request for such designation, the Neutral Environmental Expert shall be appointed by the president of the Munich chamber of commerce and industry ( Industrie- und Handelskammer, München ) at the request of either Party to the dispute after consideration of the proposals and comments by the disputing Parties. The disputing Parties shall jointly instruct the Neutral Environmental Expert to decide the issues in dispute in accordance with the provisions of this Section 8.2. The costs and expenses of the Neutral Environmental Expert shall be borne by the disputing Parties in equal parts.

(d) Determination of Causation by Neutral Environmental Expert . In case the cause of the Environmental Loss cannot be evidently assigned to any of the Parties, said Environmental Loss shall be split between the Parties on the basis of the ratio of liability ( Haftungsquote ) determined with binding effect for each Party by the Neutral Environmental Expert, whereas the ratio of liability shall be assigned by the Neutral Environmental Expert on the basis of the assumed probability of the causal share in the causation.

(e) Sliding Scale . In case the allocation of the Environmental Loss cannot be determined by the disputing Parties under Section 8.2(c) or by the Neutral Environmental Expert, the Environmental Loss shall be split between the disputing Parties as follows:

Number of Years Commenced following the Year in which the Closing Date Occurs	Ratio of Environmental Loss Assigned to Ashland or SC	Ratio of Environmental Loss Assigned to the Group
1	n*/(n+1)	1/(n+1)
…2	n/(n+2)	2/(n+2)
…
20**	n/(n+20**)	20/(n+20)

* Whereas n shall be defined as the number of years in which the business activity giving rise to the Environmental Loss was conducted by Ashland or SC, as the case may be.

** The number 20 shall be replaced by the number 30 for all Environmental Losses that are subject to the thirty (30) year time limitation in accordance with Section 8.2(f)(i) below.

The ratio of Environmental Loss assigned to the Parties pursuant to the above table shall be determined as of the date on which the Party notified in writing the other Party of the respective Environmental Claim.

(f) Statute of Limitations .

(i) Except as set forth in the following sentence, any claims for an Environmental Loss by ASK or any Group Company under this Section 8.2 shall become time-barred if not asserted within twenty (20) years from the Closing Date. Notwithstanding the foregoing, any claims by ASK or any Group Company for an Environmental Loss attributable to the Cleveland East site or the Cleveland West site of the Ashland Business or to the Mundwa site of or the Wadki site of AMSC shall become time barred if not asserted within thirty (30) years from the Closing Date. Claims for Environmental Losses that have been asserted within the twenty (20) or thirty (30) year time period set forth above in this Section 8.2(f)(i) shall not become time barred and be unlimited, provided however, that any such claim shall become time barred 30 years after it has arisen (Anspruch entstanden within the meaning of Sec. 199 of the German Civil Code ( BGB )).

(ii) The claims for Environmental Losses related to those matters set forth on Exhibit 8.2(a) shall be deemed to have been asserted on the Closing Date for the purposes of this Section 8.2.

(g) Cooperation; Access . In the event that the Responding Party undertakes Remedial Measures, the Claimant shall:

(i) cooperate with Responding Party in (a) handling any claim; (b) performing and completing any Remedial Measures, including, without limitation, executing, as soon as practicable, all permits, applications, filings, assignments and other instruments required by applicable Governmental Entities and providing copies of all materials requested by Responding Party relating to Remedial Measures; (c) upon request, and as soon as practicable thereafter, delivering to Responding Party copies of all files, records, documents, instruments and certificates in the possession and control of the Claimant and not previously provided to Responding Party, relating to the Transferred Real Property, the presence of Materials of Environmental Concern thereat and other conditions which are of reasonable interest to Responding Party; and (d) the performance of any further ministerial actions (include Claimant’s consent to and effectuation of such use restrictions or controls (via methods including a deed restriction or other institutional controls requiring continued industrial use of the Transferred Real Property)) reasonably necessary to effectuate completion of any Remedial Measures;

(ii) grant to the Responding Party, its employees, consultants, contractors or designated representatives license to enter upon any Transferred Real Property in order to conduct any such Remedial Measures or take such other actions as may be required to meet its obligations under this Agreement, including the taking of soil samples or installation of groundwater monitoring wells and the sampling soils and wells as needed in specific areas of concern. The license granted herein will terminate at such time as Responding Party’s obligations under this Agreement terminate.

(h) Any indemnification obligations for Environmental Losses shall further be limited as set forth below:

(i) A Responding Party shall be responsible for Environmental Losses related to the Cleanup of Materials of Environmental Concern only to the extent that: (A) the Remedial Measures selected use the least stringent Remediation Standards (including, without limitation, the use of institutional controls or deed restrictions) allowed under applicable Environmental Law; and (B) such Cleanup is conducted using the most cost effective methods

for investigation, removal, remediation and/or containment consistent with applicable Environmental Law or the requirements of any Governmental Entity having jurisdiction over such Cleanup.

(ii) A Responding Party shall have no responsibility for any Environmental Losses to the extent that such Environmental Loss is incurred: (A) in connection with any capital improvements and repairs and modifications to capital improvements associated with any property; (B) due to any change related to the property after the Closing or arising from the closure or sale of a facility or business, the construction of new structures or equipment, a modification to existing structures or equipment, the excavation or movement of soil, or a change in use of the facilities from manufacturing to any other use, or (C) as a result of any investigation, assessment, study or other remedial action that voluntarily initiated, performed or caused to be performed after the Closing.

(iii) no Claimant shall settle, compromise or otherwise resolve any Environmental Claims raised by a third party without the prior written approval of the Responding Party, even if such Responding Party has expressly declined to direct and control the defense of such Environmental Claim raised by a third party under Section 8.2(b) in which case such approval shall not be unreasonably withheld.

Section 8.3 Taxes .

(a) Tax Indemnification . The indemnification under Section 8.1 shall, subject to the provisions of this Section 8.3, apply in case of any Loss associated with unpaid Taxes arising in relation to any event, act or omission occurring on or before the Closing Date or in relation to any income, profits or gains earned, accrued or received in any period ending on or before the Closing Date, including Taxes in connection with the Profit and Loss Transfer Agreements, their termination or the non-recognition by the tax authorities for tax transfer purposes, regardless of whether assessed or raised as secondary profit and loss transfer Loss, to the extent such Loss exceeds the amount which has been taken into account as (" Tax Payables ") in the Net Asset Value Imbalance pursuant to Section 7.2 of the Master Formation Agreement. Any payment or set off under this indemnification shall be treated as an adjustment of the transaction values of the Transferred Assets by Ashland or SC, as the case may be.

(b) Time for Payment . The indemnification under this Section 8.3 shall become due and payable at the same time the respective Tax becomes due and payable for the relevant Group Company, but in no event earlier than fifteen (15) Business Days after Ashland or SC, as the case may be, has received notice from ASK under Section 9.1.

(c) Statute of Limitations . Any claims under this Section 8.3 shall become time-barred six (6) months after the relevant Tax assessment has become final, binding and non-appealable, or, in case of a secondary profit and loss transfer Loss, six (6) months after the secondary profit and loss transfer Loss has been raised against WD or SKW, and, or in countries where there is no practice of regular Tax assessments ten (10) years from the Closing Date.

(d) Tax Refunds . ASK shall pay to Ashland or SC, as the case may be, as an additional portion of the Compensation Payment the amount of Tax Refunds (as defined below) received by any Group Company after the Closing Date and relating to any period prior

(e) to the Closing Date if and to the extent such Tax Refunds exceed the amount which has been taken into account as "prepaid taxes and tax receivables " in the Closing Date Net Asset Values pursuant to Section 7.2(b) of the Master Formation Agreement. ASK shall notify Ashland or SC, as the case may be, without undue delay in writing of the receipt of the Tax Refund. Any amount payable to Ashland or SC, as the case may be pursuant to this Section 8.3(d) shall be due and payable within fifteen (15) Business Days after the Tax Refund has been received by the relevant Group Company unless and to the extent Ashland or SC, as the case may be, has not set-off the respective claims against any payment obligation pursuant to this Agreement or the Master Formation Agreement. If any Tax Refund is reduced after Ashland or SC, as the case may be, has received the benefit of it (e.g. after ASK has paid it to Ashland or SC, as the case may be, or it has reduced, in whatsoever way, a claim of ASK against Ashland or SC, as the case may be), then Ashland or SC, as the case may be, shall pay an amount equal to such reduction to ASK; sentence 3 and 4 of this Section 8.3(d) shall (with regard to the due date of such payment and any default) apply mutatis mutandis .

" Tax Refund " means any repayment of any Tax received by any Group Company and any claim for repayment of any Tax assessed and in favor of any Group Company and paid out by a Tax Authority, in each case relating to any Pre-Closing Period.

(e) Tax Benefits . In calculating the indemnification under this Section 8.3 payable to ASK or the relevant Group Company, the amount of any indemnified Loss shall be determined without duplication of any other Loss for which an indemnification claim has been made under any other representation, warranty, or agreement and shall be computed net of any Tax benefit of ASK or the relevant Group Company, as the case may be, with respect to such Losses to the extent actually received in the form of a reduction in Taxes otherwise payable by ASK or the relevant Group Company. If ASK or the relevant Group Company actually receives such a Tax benefit subsequent to the payment of any indemnified Losses, then ASK or the relevant Group Company, as the case may be, shall make a payment within four (4) weeks to either Ashland or SC, as the case may be, if, when and to the extent such Tax benefit is actually received.

(f) Ashland, SC and ASK shall reasonably cooperate, and shall cause their respective Affiliates, officers, employees, agents, auditors and representatives to reasonably cooperate, in preparing and filing all Tax Returns of the Transferred Companies, and in resolving

all Tax Contests with respect to all Pre-Closing Periods and Straddle Periods (including by providing appropriate powers of attorney). ASK recognizes that from time to time, after the Closing Date, Ashland and SC may need access to certain accounting and Tax records and information held by the Transferred Companies to the extent such records and information pertain to events occurring on or prior to the Closing Date; therefore, Ashland, SC and ASK agree that, from and after the Closing Date, ASK shall, and shall cause the Transferred Companies to, (a) retain and maintain such records and information until six months after the applicable statute of limitations (taking into account all extensions) with respect to the Tax for which such records or information relate, and (b) allow Ashland and SC (and their agents and representatives) to inspect, review and make copies of such records and information as Ashland and SC or their agents and representatives reasonably request from time to time during normal business hours and after appropriate prior notification.

(g) Ashland, SC and ASK agree and shall cause their respective Affiliates, officers, employees, agents, auditors and representatives to cooperate in providing Ashland or SC, as the case may be, access to certain accounting and Tax records and information held by the Group Companies, for purposes of preparing Tax Returns, including, but not limited to Tax records and information necessary (i) for filing Internal Revenue Service Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations) or Form 8858 (Information Return of U.S. Persons With Respect To Foreign Disregarded Entities) for the Group Companies; (ii) for filing Internal Revenue Service Form 1118 (Foreign Tax Credit-Corporations) and substantiating, through the provision of receipts for Tax payments and Tax Returns, foreign tax credits claimed on Internal Revenue Service Form 1118.

(h) ASK shall deliver a written notice to Ashland and SC in writing promptly following any demand, claim or notice (a " Tax Claim Notice ") of commencement of a claim, proposed adjustment, assessment, audit, examination or other suit with respect to Taxes of any of the Transferred Companies for which Ashland or SC may reasonably be expected to be liable hereunder (any of the foregoing, a " Tax Contest ") and shall describe therein in reasonable detail (to the extent known by ASK) the facts constituting the basis for such Tax Contest, the nature of the relief sought, and the amount of the claimed Losses (including Taxes), if any, and shall include therewith a copy of any demand, claim, notice or other written evidence of such Tax Contest to the extent that such demand, claim, notice or other written evidence has been received by ASK or any Transferred Company or by any attorney or other agent thereof; provided, that the failure or delay to so notify Ashland or SC will not operate to relieve Ashland or SC of any obligation or liability that Ashland or SC may have to ASK in respect of any such Loss.

(i) With respect to any Ashland Tax Contest for Taxes of any Ashland Transferred Companies for any Pre-Closing Period, Ashland may elect to assume and control the defense or settlement of such Ashland Tax Contest by providing written notice (such notice, an " Ashland Tax Contest Control Notice ") to ASK and SC within 30 days after delivery by ASK of the Ashland Tax claim notice. If Ashland provides an Ashland Tax Contest control notice then

Ashland (i) shall bear its own costs and expenses incurred or sustained in connection therewith, (ii) will be entitled to engage its own counsel with respect thereto, and (iii) may (A) pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any Tax Authority, (B) either pay the Tax claimed or sue for refund under circumstances in which applicable Law permits such refund suit or (C) contest, settle or compromise the Ashland Tax Contest in any manner permissible by applicable Law; provided, however, that Ashland shall not settle or compromise (or take any actions described in the foregoing clause (iii) with respect to) any Ashland Tax Contest without the prior written consent of ASK and SC. If Ashland provides an Ashland Tax Contest control notice then Ashland shall (1) keep ASK and SC reasonably informed of all material developments and events relating to such Ashland Tax Contest, (2) consult with ASK and SC in connection with the defense or prosecution of any such Ashland Tax Contest and (3) provide such cooperation and information as ASK and SC reasonably request in connection with such Ashland Tax Contest.

(ii) With respect to any SC Tax Contest for Taxes of any SC Transferred Companies for any Pre-Closing Period, SC may elect to assume and control the defense or settlement of such SC Tax Contest by providing written notice (such notice, an " SC Tax Contest Control Notice ") to ASK and Ashland within 30 days after delivery by ASK of the SC Tax claim notice. If SC provides an SC Tax Contest control notice then SC (i) shall bear its own costs and expenses incurred or sustained in connection therewith, (ii) will be entitled to engage its own counsel with respect thereto and (iii) may (A) pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any Tax Authority, (B) either pay the Tax claimed or sue for refund under circumstances in which applicable Law permits such refund suit or (C) contest, settle or compromise the SC Tax Contest in any manner permissible by applicable Law; provided, however, that SC shall not settle or compromise (or take any actions described in the foregoing clause (iii) with respect to any SC Tax Contest without the prior written consent of ASK and Ashland. If SC provides an SC Tax Contest control notice then SC shall (1) keep ASK and Ashland reasonably informed of all material developments and events relating to such SC Tax Contest, (2) consult with ASK and Ashland in connection with the defense or prosecution of any such SC Tax Contest and (3) provide such cooperation and information as ASK and Ashland reasonably request in connection with such SC Tax Contest.

(iii) In connection with any Tax Contest that relates to Taxes of any of the Transferred Companies for which Ashland or SC do not provide a Tax contest control notice in accordance with Section 8.3(h)) (i) and (ii), ASK shall control the defense and settlement of such Tax Contests (or shall cause the defense and settlement of such Tax Contests to be controlled) in good faith; provided, however, that ASK shall not settle or compromise any such Tax

Contests without the prior written consent of Ashland and SC; provided however, that the consent may not be withheld by either Party without reasonable substantive supporting arguments.

(iv) ASK at its sole expense, shall control the defense and settlement of all Tax Contests that relate to Taxes for any Straddle Period; provided, however, that ASK shall not settle or compromise any such Tax Contest without the prior written consent of Ashland and/or SC; provided however, that the consent may not be withheld by either Party without reasonable substantive supporting arguments.

(v) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing Date, Ashland and SC shall not cause or permit the Transferred Companies to make any material Tax elections (except as provided herein), file any material amended Tax Return, enter into any material closing agreement, settle any material Tax claim or assessment, surrender any material right to claim a refund of Taxes, or consent to any extension or waiver of the limitation period applicable to any material Tax claim or assessment, or take any other similar action, or omit to take any action relating to the filing of any material Tax Return or the payment of any material Tax; change any annual accounting periods, adopt or change any method of accounting or reverse any accruals (except as required by a change in Law or Applicable GAAP), change the fiscal year, in each case unless agreed to in writing by Ashland and SC. Notwithstanding the foregoing, (i) the fiscal year of WD and SKW may be changed in order to allow for the termination of the WD Profit and Loss Transfer Agreement and the SKW Profit and Loss Transfer Agreement as contemplated hereunder, and (ii) on or after the Closing Date the Group Companies other than ASK and US LP shall make U.S. federal income tax entity classification elections on Internal Revenue Service Form 8832 at the direction of Ashland, without any further consent of SC or ASK being required, provided such elections would not have a material adverse effect on SC. The elections can be made effective as of or prior to the Closing Date. In addition, at the request of SC, US Limited Partnership shall make an election described in Section 754 of the Code effective for the first taxable year of US Limited Partnership.

Section 8.4 Special Indemnifications.

(a) Ashland shall indemnify and hold harmless, ASK or, at the election of ASK, the relevant Group Company as third party beneficiary without an own right to claim, from and against

(i) any Loss attributable to the actual or alleged non-compliance of Ashland Resinas and/or its activities with applicable zoning law (including, but not limited to, law no. 6031/1988) at its Campinas site in Brazil, provided such non-compliance is asserted by a Governmental Authority and except to the extent such non-compliance results from any extensions activities at the Campinas site beyond the currently conducted by the Group after the Closing Date; Losses under this Section 8.4(a)(i) shall include, but not be limited to, Losses: (a) incurred in connection with Cleanups, (b) related to the curtailment of the business as currently conducted at the Campinas site, the potential partial or total prohibition of operations at and/or closure of the Campinas site and, (c) incurred in connection with, in the event of the partial or total prohibition of operations at and/or closure of the Campinas site, the development and installation of an alternative site in lieu of the Campinas site and/or (d) any related administrative, civil or criminal penalties of any kind (and not only directly related to zoning law); and

(ii) the actual or alleged exposure of individuals (including, but not limited to, employees of Ashland and employees of customers of Ashland) on or prior to the Closing Date to airborne silica which has been produced, processed, used and/or applied in the Ashland Business; provided, that the respective Loss shall be split between Ashland and the Group

(1) in accordance with the ratio the period of the actual or alleged exposure of the respective individual on or prior to the Closing Date (ratio of Loss assigned to Ashland) bears to the period of the actual or alleged exposure of the respective individual after the Closing Date (ratio of Loss assigned to the Group), provided there is reasonable evidence that allows for the establishment of such periods (the duration of employment of the respective individual at the employer and in the function where she or he was actually or allegedly exposed to airborne silica on or prior to the Closing Date (ratio of Loss assigned to Ashland) and after the Closing Date (ratio of Loss assigned to the Group) shall be deemed as reasonable evidence, unless a Party rebuts such presumption by providing reasonable counter-evidence);

and in the absence of evidence of relative periods of exposure

(2) as follows:

Number of Years

Commenced following

Ratio of Loss

Assigned to the

the Year in which the Closing Date Occurs	Assigned to Ashland	Group
1	n*/(n+1)	1/(n+1)
…2	n/(n+2)	2/(n+2)
…
20	n/(n+20)	20/(n+20)

* Whereas n shall be defined as the number of years in which the business activity giving rise to the Loss was conducted by Ashland.

(b) SC shall indemnify and hold harmless, ASK or, at the election of ASK, the relevant Group Company as third party beneficiary without an own right to claim, from and against any Loss attributable to the lack of the following licenses, registrations, approvals, as the case may be, (the " Lack of License ")

(i) at the Mundwa site of AMSC: (A) NOC from Fire Department; (B) Factory License; and

(ii) at the Wadki site of AMSC: (A) NOC from Fire Department; (B) Explosive License for Storage of LPG/HSD/LDO under Explosive Act or Gas Cylinders Rules;

provided, in each case, such Lack of License is asserted by a Governmental Authority.

(c) No rights under this Section 8.4 shall be limited, time barred or restricted by the limitation set forth in ARTICLE VII and ARTICLE VIII, provided however, that any claim under this Section 8.4 shall become time barred 30 years after it has arisen ( Anspruch entstanden within the meaning of Sec. 199 German Civil Code (BGB)). Notwithstanding the foregoing, any claims by ASK or any Group Company under (i) Section 8.4(a)(i) shall become time barred on the day the competent Governmental Authority releases a final and non-appealable decree setting forth that Ashland Resinas and its activities as

conducted on the Closing Date are in full compliance with all applicable zoning law (including, but not limited to, law no. 6031/1988) and that it will not assert any claims against Ashland Resinas due to its potential non-compliance with applicable zoning law at its Campinas site prior to the release of such decree, and (ii) under Section 8.4(b) shall become time barred on the day the new site of AMSC, which will be opened in lieu of the Mundwa and Wadki site of AMSC, commences its operation, unless any such Loss is attributable to the Lack of License relating to the period prior to such date.

(d) The indemnification provided under this Section 8.4 shall be subject to the third sentence of Section 8.2(b), Section 8.2(g) and Section 8.2(h); the other provisions of Section 8.2 shall not apply with respect to the subject matters contemplated under Section 8.4.

Section 8.5 Missing/Invalid Permits . Each of Ashland and SC, respectively shall indemnify and hold harmless ASK or, at the election of ASK the relevant Group Company as third party beneficiary without an own right to claim from and against any Losses resulting from or in connection with the lack of a Permit (whether or not set forth in Schedule 6.22 (d)-1) or from the invalidity of or challenge against a Permit (whether or not set forth in Schedule 6.22(d)-2) or failure to comply in all material respects with any such Permit. The foregoing shall not apply with respect to the subject matters contemplated under Section 8.4(a)(i) and Section 8.4(b) of this Agreement and the lack of or the non-compliance with the Permit set forth in Section 6.1(c)(viii) of the Master Formation Agreement. Section 8.1(c) shall apply mutatis mutandis to this Section 8.5.

Section 8.6 Claim against Parent Companies . The provisions of this ARTICLE VIII shall apply mutatis mutandis for the benefit of SC or Ashland and/or the limited partners of US Limited Partnership (each a " Parent Company "), if and to the extent a Parent Company becomes subject to Third Party Claims or Environmental Claims raised by a third party (including claims under any agreement for the sale of the Shares (as defined in Article 11 of the Shareholders' Agreement) to said third party) and against which claims ASK or a relevant Group Company would be indemnified under this ARTICLE VIII.

Section 8.7 No "Double Dip" . The Parties are in agreement that where one and the same set of facts ( Sachverhalt ) qualifies under more than one provision entitling a Party to a claim or indemnification under this Agreement, there shall be only one claim or indemnification. In particular, the foregoing shall apply if one and the same set of facts ( Sachverhalt ) qualifies under the representations made in ARTICLE VI and under the indemnifications contained in ARTICLE VIII.

Section 8.8 ASK's Indemnification .

(a) ASK shall, and shall procure that the respective Transferee shall, as joint and several debtors, indemnify and hold harmless Ashland and the relevant Ashland

Transferor or SC and the relevant SC Transferor from and against any Losses resulting from or in connection with any Assumed Liability, in particular any default in the fulfillment of an Assumed Liability after the Closing Date.

(b) ASK shall, and shall procure that the respective Transferee shall, as joint and several debtors, indemnify and hold harmless Ashland and the relevant Ashland Transferor or SC and the relevant SC Transferor from and against any Losses resulting from or in connection with any Transferred Liability, in particular any default in the fulfillment of a Transferred Liability after the Closing Date.

(c) The rights of Ashland, the relevant Ashland's Transferors, SC and the SC's relevant Transferor to such indemnification shall be time-barred no earlier than twelve (12) months after the relevant Assumed Liability itself has become time-barred in accordance with the provisions applying to such liability.

ARTICLE IX

PROVISIONS PERTAINING TO BOTH REMEDIES FOR BREACH AND INDEMNIFICATIONS

Section 9.1 Procedures .

(a) If any Party (in such capacity, the "Indemnitee ") becomes aware of any facts or circumstances which may reasonably be expected to give rise to a Loss associated with a claim for Breach under ARTICLE VII or for which it may seek indemnification under ARTICLE VIII (other than Environmental Losses, which have separate procedures under Section 8.2(b)), said Indemnitee, in its own name (or, in the case of ASK, on behalf of the relevant Group Company) shall without undue delay, but in any event within ten (10) Business Days, give the Party against whom it is anticipated that such claim will be asserted (in such capacity, the "Indemnitor ") written notice of such claim and shall provide the Indemnitor with all documents, other materials, information and assistance reasonably required by the Indemnitor to evaluate such claim.

(b) In the event the Indemnitee becomes aware of a claim by a third party or a Governmental Entity (each, a " Third-Party Claim "), which may reasonably be expected to give rise to a claim for Breach under ARTICLE VII or for which it may seek indemnification under ARTICLE VIII, it shall refrain from making any admission of liability and said Third-Party Claim shall not be compromised, disposed of or settled, without the prior written consent of the Indemnitor. The Indemnitor shall be entitled at its own discretion to take such action to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest such Third-Party Claim (including making counter-claims or other claims against third parties) in the name of and on behalf of the Indemnitee (and in the case that ASK is the Indemnitee, the affected Group Companies concerned) and Indemnitee shall

give, and cause its Affiliates to give, all such documents, other materials, information and assistance, as described above, including access to premises and personnel and including the right to examine and copy or photograph any assets, accounts, documents and records for the purpose of avoiding, disputing, denying, defending, resisting, appealing, compromising or contesting any Third-Party Claim as the Indemnitor may request.

(c) Payments under ARTICLE VIII shall become due and payable at the same time the respective payment that constitute the relevant Loss becomes due and payable for the relevant Group Company. For the avoidance of doubt, if a Group Company incurs Losses in connection with defense measures (the " Defense Measure Losses ") against a potential Excluded Liability, such Losses also constitute an Excluded Liability. In case the Parties are in disagreement whether or not the Liability triggering Defense Measure Losses constitutes an Excluded Liability or not, Ashland or SC, as the case may be, shall nonetheless indemnify and hold harmless ASK or, at the election of ASK, the relevant Group Company as third party beneficiary without an own right to claim for the Defense Measure Losses, unless it is held by a final and binding arbitral award that the relevant Liability is not an Excluded Liability in which case the Party who made respective indemnification payments shall have the right to request repayment. Defense Measure Losses shall be paid to the relevant Group Company within one month after they have been incurred by the Group Company.

(d) To the extent that in connection with the Third-Party Claim the Indemnitor is in Breach, all costs and expenses reasonably incurred by Ashland or SC in defending such Third-Party Claim shall be borne by Ashland in case of an Ashland Breach or by SC in case of an SC Breach; if it turns out that Ashland or SC are not in Breach, such costs and expenses shall be borne and reimbursed by the relevant Group Company.

Section 9.2 Sole and Exclusive Remedies . Absent fraud, the claims and remedies which any Party may have against the other for Losses associated with Breach or Losses (and as limited by ARTICLE VII, ARTICLE VIII and this ARTICLE IX), shall be the sole and exclusive remedies available to affected Party and any further claims and remedies, irrespective of their nature, amount or legal basis with respect thereto, are hereby expressly waived and excluded, in particular, without limitation, claims under pre-contractual fault (Section 311 para. 2 and 3 German Civil Code), breach of contract or liability in tort, and any right to rescind or otherwise wind-up this Agreement. The foregoing shall not limit the right of any Party to request specific performance.

Section 9.3 Waiver of Punitive and Consequential Damages .

(a) Pre-Closing Waiver . Notwithstanding anything to the contrary contained in any other provision of this Agreement, in the event that the Closing does not occur, neither Ashland nor SC shall be required to indemnify, or be liable to, the other Party, ASK or any of their respective Affiliates for punitive damages (as interpreted under U.S. law).

(b) Post-Closing Waiver . Notwithstanding anything to the contrary contained in any other provision of this Agreement, in the event that the Closing occurs, neither Ashland nor SC shall be required to indemnify the other Party hereunder, ASK or any of their respective Affiliates for any indirect, consequential, special, exemplary (as interpreted under U.S. law) or punitive (as interpreted under U.S. law) damages except for indirect, consequential, special, exemplary (as interpreted under U.S. law) or punitive (as interpreted under U.S. law) damages actually paid to any third party by the Indemnified Party seeking indemnity hereunder.

Section 9.4 General .

(a) Notwithstanding anything to contrary set forth herein, the liability of Ashland under ARTICLE VI and the indemnification provided by Ashland under ARTICLE VIII shall pertain only to the Ashland Business and/or the Ashland Transferred Business Assets and the liability of SC under ARTICLE VI and the indemnification provided by SC under ARTICLE VIII shall pertain only to the SC Business and/or the SC Transferred Business Assets; the liability of Ashland and SC hereunder is several and not joint.

(b) Ashland and SC acknowledge that, while ASK and the Group Companies are expected in most circumstances to be the primary beneficiary of indemnification claims, each of them may also have a Claim against the other under ARTICLE VIII. It is intended, however, that ASK shall have the primary claim for indemnity in any matter related to the property, assets and liabilities of the Group Companies and that Ashland and SC shall be entitled to indemnification compensation only to the extent either of them or any of their respective Affiliates (other than ASK or any Group Company) suffers a direct Loss, as opposed to indirect harm, as a result of Losses or claims with respect to the Transferred Business.

(c) In pursuing claims hereunder, ASK shall act in good faith and shall treat Ashland and SC fairly (including decisions with respect to whether to pursue a claim and the pursuit of such claim) with respect to all such claims. ASK shall also use best efforts that are (i) consistent with reasonable commercial practices and (ii) prudently protective of human health and the environment in light of all known and reasonably suspected facts and conditions to assure the fair and equitable treatment of Ashland and SC with respect to all matters that are the subjects of ARTICLE VII and ARTICLE VIII.

ARTICLE X

TERMINATION OF ASHLAND GROUP FINANCING

Section 10.1 Profit Distribution . Ashland shall have the right to all distributable profits generated by the Ashland Transferred Companies until the Closing Date (including).

ARTICLE XI

TERMINATION OF SC GROUP FINANCING

Section 11.1 Profit Distribution . SC shall have the right to all distributable profits generated by the SC Transferred Companies until the Closing Date (including).

Section 11.2 Termination of Profit and Loss Transfer Agreements .

(a) WD Profit and Loss Transfer Agreement . SC and WD have entered into a profit and loss transfer agreement, dated as of April 24, 2008 (the " WD Profit and Loss Transfer Agreement ") .

(i) Termination . SC shall procure that the WD Profit and Loss Transfer Agreement is terminated effective as of Closing. Any profits and losses of WD generated through the Closing Date belong to or are to be borne by SC. Payments due under the WD Profit and Loss Transfer Agreement shall be made on the Payment Date as shown in the respective financial statements of the stub fiscal year to be established by WD ending as of the Closing Date. SC shall indemnify and hold harmless ASK, and, at the election of ASK, WD from any negative tax consequences arising in connection with or from the non-compliance of SC with the obligation to make WD establish a stub fiscal year ending as of the Closing Date.

(ii) ASK Indemnification . Subject to the occurrence of the Closing Date, SC shall indemnify and hold harmless ASK or, at the election of ASK, WD from any claim of SC against WD arising under or in connection with the WD Profit and Loss Transfer Agreement, including claims for outstanding profit distributions for previous business years.

(iii) Overpayments . Subject to the occurrence of the Closing Date,

(1) SC shall reimburse WD for overpayments made by WD to SC or for payments which SC should have made (but did not make) to WD under the Profit and Loss Transfer Agreement;

(2) ASK shall cause WD to reimburse SC for overpayments made by SC to WD or for payments which SC should have made (but did not make) to WD under the Profit and Loss Transfer Agreement

should financial statements of WD for financial years relating to periods ending on or prior to the Closing Date be incorrect and as a result thereof such overpayments or payments will be required to be made.

(b) SKW Profit and Loss Transfer Agreement . SCF and SKW have entered into a profit and loss transfer agreement, dated as of September 24, 2004 (the " SKW Profit and Loss Transfer Agreement ") .

(i) Termination . SC shall procure that the SKW Profit and Loss Transfer Agreement is terminated effective as of Closing. Any profits and losses of SKW generated through the Closing Date belong to or are to be borne by SCF. All payments due under the SKW Profit and Loss Transfer Agreement shall be made on the Payment Date as shown in the respective financial statements of the stub fiscal year to be established by SKW ending as of the Closing Date. SC shall indemnify and hold harmless ASK, and, at the election of ASK, SKW from any negative tax consequences arising in connection with or from the non-compliance of SCF with the obligation to make SKW establish a stub fiscal year ending as of the Closing Date.

(ii) ASK Indemnification . Subject to the occurrence of the Closing Date, SC shall indemnify and hold harmless ASK or, at the election of ASK, SKW from any claim of SCF against SKW arising under or in connection with the SKW Profit and Loss Transfer Agreement, including claims for outstanding profit distributions for previous business years.

(iii) Overpayments . Subject to the occurrence of the Closing Date,

(1) SC shall reimburse SKW for overpayments made by SKW to SCF or for payments which SCF should have made (but did not make) to SKW under the Profit and Loss Transfer Agreement;

(2) ASK shall cause SKW to reimburse SC for overpayments made by SCF to SKW or for payments which SCF should have made (but did not make) to SKW under the Profit and Loss Transfer Agreement

should financial statements of SKW for financial years relating to periods ending on or prior to the Closing Date be incorrect and as a result thereof such overpayments or payments will be required to be made.

Section 11.3 Settlement of SC Cash Pool Agreements .

SC is operating a cash pool arrangement (the " SC Cash Pool ") pursuant to which the balances on the SC Cash Pool Accounts (as defined below) of the SC Cash Pool Participants (as defined below) are set to zero on a daily basis by physical fund transfers between the SC Cash Pool Participants and SC (the " SC Cash Pool Agreement "). Amongst others, ASK and certain Group Companies are participants in the SC Cash Pool.

SC shall procure that the participation of ASK and any other Group Company that participates in the SC Cash Pool Agreement (together the " Cash Pool Participants ") shall be terminated with economic effect one Business Day prior to the Scheduled Closing Date (the " Cash Pool Termination Date ").

All borrowings and lendings (including any interest accrued thereon) between SC and the Cash Pool Participants under the SC Cash Pool Agreement shall be netted, by way of set-off, as of the Cash Pool Termination Date. On the Payment Date, the net amount of such balance (including any interest accrued) shall be paid

(a) by SC to ASK, if such net amount is a receivable of the Cash Pool Participants; or

(b) by ASK to SC, if such net amount is a receivable of SC.

Section 11.4 Termination of Shareholder Loans.

All intercompany loans granted by SC and/or SCF to any of the SC Transferred Companies or vice-versa shall be terminated with effect of the Scheduled Closing Date and repaid to the respective lenders on the Payment Date.

Section 11.5 Payments .

All payments due under this Section 11 shall be made within three Business Days after they have been determined by SC (the " Payment Date ") and the Parties will procure that the respective payments will be made. SC shall promptly and the Parties shall procure that the Group will assist SC to promptly after the Closing Date determine the payments to be made under this Section 11, provided however, that any payments to be made under Section 11.2 will not be determined prior to the date on which the Closing Date Balance and Net Asset Values

Statement (as defined in the Master Formation Agreement) has become final and binding in accordance with Section 7.4 of the Master Formation Agreement.

ARTICLE XII

MISCELLANEOUS

Section 12.1 Miscellaneous . Articles XI (Confidentiality), XII (Notices) and XIII (Miscellaneous) of the Master Formation Agreement shall apply respectively for this Agreement.

Section 12.2 Survival of Rights and Obligations in case of a Change of Control . The Parties are in agreement that any and all rights and obligations the Parties may have under this Agreement shall survive and not be affected by any direct or indirect change in the ownership of the interest (including by way of transfer, issuance or redemption of shares) in ASK and/or US Limited Partnership (including, for the avoidance of doubt, the transfer of 100% of the Parties' interest in ASK and/or US Limited Partnership).

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each Party as of the date first above written.

The Fees for the notarization of this Agreement shall be borne by Ashland Inc. and Süd-Chemie AG one half each.

In witness thereof this Notarial Deed has been read aloud to the persons

appearing by the Notary Public or in presence of the officiating Notary Public,

approved by the persons appearing and signed by them in their own handwriting:

/s/ Mark A. Stach

/s/ Ulrich M üller

/s/ Thiemo Heinzen

/s/ Prof. Dr. Dieter Mayer, Notary

												EXHIBIT 12
ASHLAND INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions)



	Years ended September 30
	2006			2007			2008			2009		2010
EARNINGS

Income from continuing operations	$	183		$	201		$	175		$	78	$	301
Income tax expense		29			58			86			80		91
Interest expense		8			9			9			163		117
Interest portion of rental expense		18			20			21			25		26
Amortization of deferred debt expense		-			1			-			52		81
Distributions (less than) in excess of earnings
of unconsolidated affiliates		(6	)		(5	)		(10	)		1		(2	)
	$	232		$	284		$	281		$	399	$	614

FIXED CHARGES

Interest expense	$	8		$	9		$	9		$	163	$	117
Interest portion of rental expense		18			20			21			25		26
Amortization of deferred debt expense		-			1			-			52		81
Capitalized interest		3			2			-			3		2
	$	29		$	32		$	30		$	243	$	226

RATIO OF EARNINGS TO FIXED CHARGES		8.00			8.88			9.37			1.64		2.72

LIST OF SUBSIDIARIES

Subsidiaries of Ashland Inc. (“AI”) at September 30, 2010, included the companies listed below. Ashland has numerous unconsolidated affiliates, which are primarily accounted for on the equity method, and majority-owned consolidated subsidiaries in addition to the companies listed below. Such affiliates and subsidiaries are not listed below since they would not constitute a significant subsidiary considered in the aggregate as a single entity.

Company	Jurisdiction of Incorporation	Immediate Parent*

Aqualon Company	Delaware	HI 99.4182% - WSP 0.5818%
ARA Quimica S.A.	Brazil	ABL 50% - ARL 50%
ASH GP LLC (“ASH GP”)	Delaware	AIHI
ASH LP LLC (“ASH LP”)	Delaware	AIHI
Ashland Brasil Ltda. (“ABL”)	Brazil	AHBV 99.9999% - AI 0.00001%
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 62% - HH 37.4% - AI 0.6%
Ashland-Especialidades Quimicas Ltda.	Brazil	AHBV 99.9999 - ABL 0.00001
Ashland Finland Oy	Finland	AHBV 51% - ACC 49%
Ashland France SAS (“AF”)	France	AHBV
Ashland Holdings B.V. (“AHBV”)	Netherlands	ATCV
Ashland Industries Belgium BVBA (“AIBBV”)	Belgium	HH 99.999% - AINBV 0.001%
Ashland Industries Deutschland GmbH (“AID”)	Germany	ADG
Ashland Industries Europe GmbH (“AIEG”)	Switzerland	AINBV
Ashland Industries Nederland B.V. (“AINBV”)	Netherlands	HINBV
Ashland International Holdings, Inc. (“AIHI”)	Delaware	AI 96.46% - HI 3.54%
Ashland Italia S.p.A.	Italy	AHBV
Ashland Japan Co., Ltd.	Japan	AIHI
Ashland Nederland B.V.	Netherlands	AHBV
Ashland Polyester SAS	France	ACF
Ashland Resinas Ltda. (“ARL”)	Brazil	ABL 99.9999% - AIHI 0.00001%
Ashland Services B.V.	Netherlands	AHBV
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	ACHC
CVG Capital II LLC	Delaware	AI
Ever Success Overseas Limited (“ESOL”)	British Virgin Islands	AIEG
Hercules Chemicals (Nanjing) Company Limited	China	ESOL
Hercules do Brasil Produtos Quimicos Ltda.	Brazil	HI
Hercules Doel BVBA (“HD”)	Belgium	AIBBV 99.8793% - AINBV 0.0002% - HHBV 0.1205%
Hercules Europe BVBA	Belgium	HH 79.54% - AIBBV 8.76% - HD 11.7%
Hercules Holding BV BVBA (“HH”)	Belgium	HINBV
Hercules Incorporated (“HI”)	Delaware	AI
Hercules International Trade Corporate Limited	Bahamas	HI 96% - HPH 4%
Hercules Investment ApS	Denmark	HH
Hercules Investments Netherlands B.V. (“HINBV”)	Netherlands	HIS
Hercules Investments Sarl (“HIS”)	Luxembourg	HI
Hercules Paper Holdings, Inc. (“HPH”)	Delaware	HI
Hercules Tianpu Chemicals Company Limited (JV)	China	ESOL 40%
Iberia Ashland Chemical S. A.	Spain	AIHI
Valvoline (Australia) Pty. Limited	Australia	AHBV
Valvoline (Deutschland) GmbH & Co. Kg	Germany	ADG 99.9% - AID 0.1%
Valvoline International, Inc	United States	AIHI
WSP, Inc. (“WSP”)	Delaware	HI

*100% of the voting securities are owned by the immediate parent except as otherwise indicated.

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-54766-99 and 333-127348) pertaining to the Amended and Restated Ashland Inc. Incentive Plan, in the Registration Statement on Form S-8 (No. 333-131792) pertaining to the 2006 Ashland Inc. Incentive Plan, in the Registration Statement on Form S-8 (No. 33-62091-99) pertaining to the Ashland Inc. Deferred Compensation Plan, in the Registration Statement on Form S-8 (No. 33-52125-99) pertaining to the Ashland Inc. Deferred Compensation Plan for Non-Employee Directors, in the Registration Statement on Form S-8 (No. 333-122269-99) pertaining to the Ashland Inc. Deferred Compensation Plan for Employees (2005), in the Registration Statement on Form S-8 (No. 333-122270-99) pertaining to the Ashland Inc. Deferred Compensation Plan for Non-Employee Directors (2005), in the Registration Statements on Form S-8 (Nos. 33-32612-99 and 333-157040) pertaining to the Ashland Inc. Employee Savings Plan, in the Registration Statement on Form S-8 (No. 33-49907-99) pertaining to the Ashland Inc. Leveraged Employee Stock Ownership Plan, in the Registration Statement on Form S-8 (No. 333-155386) pertaining to the Hercules Incorporated Amended and Restated Long Term Incentive Compensation Plan and the Hercules Incorporated Omnibus Equity Compensation Plan for Non-Employee Directors, in the Registration Statement on Form S-8 (No. 333-155396) pertaining to the Hercules Incorporated Savings and Investment Plan and in the Registration Statement on Form S-3 (No. 333-162919) pertaining to shares of Ashland Common Stock held by the Trustee of the Ashland Hercules Pension Plan, of our report dated November 22, 2010, relating to the consolidated financial statements, financial statement schedule, and effectiveness of internal control over financial reporting, which appears in Ashland Inc.'s Annual Report on Form 10-K for the year ended September 30, 2010.

/s/ PricewaterhouseCoopers LLP

Cincinnati, Ohio

November 22, 2010

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Forms S-8 Nos. 333-54766-99 and 333-127348) pertaining to the Amended and Restated Ashland Inc. Incentive Plan, in the Registration Statement (Form S-8 No. 333-131792) pertaining to the 2006 Ashland Inc. Incentive Plan, in the Registration Statement (Form S-8 No. 33-62091-99) pertaining to the Ashland Inc. Deferred Compensation Plan, in the Registration Statement (Form S-8 No. 33-52125-99) pertaining to the Ashland Inc. Deferred Compensation Plan for Non-Employee Directors, in the Registration Statement (Form S-8 No. 333-122269-99) pertaining to the Ashland Inc. Deferred Compensation Plan for Employees (2005), in the Registration Statement (Form S-8 No. 333-122270-99) pertaining to the Ashland Inc. Deferred Compensation Plan for Non-Employee Directors (2005), in the Registration Statements (Forms S-8 Nos. 33-32612-99 and 333-157040) pertaining to the Ashland Inc. Employee Savings Plan, in the Registration Statement (Form S-8 No. 33-49907-99) pertaining to the Ashland Inc. Leveraged Employee Stock Ownership Plan, in the Registration Statement (Form S-8 No. 333-155386) pertaining to the Hercules Incorporated Amended and Restated Long Term Incentive Compensation Plan and the Hercules Incorporated Omnibus Equity Compensation Plan for Non-Employee Directors, in the Registration Statement (Form S-8 No. 333-155396) pertaining to the Hercules Incorporated Savings and Investment Plan, and in the Registration Statement (Form S-3 No. 333-162919) of Ashland Inc. and in the related Prospectus pertaining to shares of Ashland Common Stock held by the Trustee of the Ashland Hercules Pension Plan, of our report dated November 25, 2008, with respect to the statements of consolidated income, stockholders’ equity, and cash flows of Ashland Inc. and consolidated subsidiaries for the year ended September 30, 2008, and the related financial statement schedule of Ashland Inc. and consolidated subsidiaries as of September 30, 2008 and for the year then ended, included in Ashland Inc.’s Annual Report on Form 10-K for the year ended September 30, 2010.

/s/ Ernst & Young LLP

Cincinnati, Ohio

November 22, 2010

EXHIBIT 23.3

CONSENT OF HAMILTON, RABINOVITZ & ASSOCIATES, INC.

We hereby consent to being named in Ashland Inc.’s Annual Report on Form 10-K for the year ended September 30, 2010 in the form and context in which we are named. We do not authorize or cause the filing of such Annual Report and do not make or purport to make any statement other than as reflected in the Annual Report.

/s/ Francine F. Rabinovitz

___________________________________

Hamilton, Rabinovitz & Associates, Inc.

November 22, 2010

Annual Report on Form 10-K

RESOLVED, that the Corporation’s Annual Report to the Securities and Exchange Commission (the “SEC”) on Form 10-K (the “Form 10-K”) in the form previously circulated to the Board in preparation for this meeting be, and it hereby is, approved with such changes as the Chief Executive Officer, Chief Financial Officer, any Vice President, the Corporate Secretary or the Corporation’s counsel (“Authorized Persons”) shall approve, the execution and filing of the Form 10-K with the SEC to be conclusive evidence of such approval;

FURTHER RESOLVED, that the Authorized Persons be, and each of them hereby is, authorized to file with the SEC the Form 10-K and any amendments thereto on Form 10-K/A and/or any other applicable form; and

FURTHER RESOLVED, that the Authorized Persons be, and each of them hereby is, authorized to take all such further actions as in their judgment may be necessary or advisable to accomplish the purposes of the foregoing resolutions.

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors and Officers of ASHLAND INC., a Kentucky corporation, which is about to file an Annual Report on Form 10-K with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints JAMES J. O’BRIEN, DAVID L. HAUSRATH and LINDA L. FOSS, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power to act without the others to sign and file such Annual Report and the exhibits thereto and any and all other documents in connection therewith, and any such amendments thereto, with the Securities and Exchange Commission, and to do and perform any and all acts and things requisite and necessary to be done in connection with the foregoing as fully as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.

Dated: November 18, 2010

/s/ James J. O’Brien		/s/ Vada O. Manager
James J. O’Brien, Chairman of the Board,		Vada O. Manager, Director
Chief Executive Officer and Director
(Principal Executive Officer)

/s/ Lamar M. Chambers		/s/ Barry W. Perry
Lamar M. Chambers, Senior Vice President		Barry W. Perry, Director
and Chief Financial Officer
(Principal Financial Officer)

/s/ J. William Heitman		/s/ Mark C. Rohr
J. William Heitman, Vice President		Mark C. Rohr, Director
and Controller
(Principal Accounting Officer)

/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/ Michael J. Ward
		Michael J. Ward, Director

I, James J. O’Brien, certify that:

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;

The registrant’s 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:

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;

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 registrant’s 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

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.

Date: November 22, 2010

	/s/ James J. O'Brien
	James J. O’Brien
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

I, Lamar M. Chambers, certify that:

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;

c)	Evaluated the effectiveness of the registrant’s 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

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.

Date: November 22, 2010

	/s/ Lamar M. Chambers
	Lamar M. Chambers
	Chief Financial Officer
	(Principal Financial Officer)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Ashland Inc. (the “Company”) on Form 10-K for the period ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, James J. O’Brien, Chief Executive Officer of the Company, and Lamar M. Chambers, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(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.


/s/ James J. O'Brien
James J. O'Brien
Chief Executive Officer
November 22, 2010


/s/ Lamar M. Chambers
Lamar M. Chambers
Chief Financial Officer
November 22, 2010