VALVOLINE INC (Form: 10-K, Received: 12/19/2016 09:16:07)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________

FORM 10-K



þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2016



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 001-37884

VALVOLINE INC.



Kentucky (State or other jurisdiction of incorporation or organization)	30-0939371 (I.R.S. Employer Identification No.)

3499 Blazer Parkway

Lexington, Kentucky 40509

Telephone Number (859) 357-7777

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 $0.01 per share	New York Stock Exchange

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

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

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 o 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. þ

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 o	Accelerated Filer o
Non-Accelerated Filer þ	Smaller Reporting Company o
(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

The Registrant completed the initial public offering of its common stock on September 28, 2016. Accordingly, there was no public market for the Registrant ’ s common stock as of March 31, 2016, the last business day of the Registrant ’ s most recently completed second fiscal quarter.

At November 30, 2016, there were 204,529,622 shares of the Registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement (“Proxy Statement”) for its January 24, 2017 Annual Meeting of Shareholders, which will be filed within 120 days of the Registrant’s fiscal year end, are incorporated by reference into Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS



			Page
PART I
	Item 1.	Business	4
	Item 1A.	Risk Factors	9
	Item 1B.	Unresolved Staff Comments	22
	Item 2.	Properties	22
	Item 3.	Legal Proceedings	22
	Item 4.	Mine Safety Disclosures	22
	Item X.	Executive Officers of Valvoline	23

PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
	Item 6.	Selected Financial Data	24
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	26
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	49
	Item 8.	Financial Statements and Supplementary Data	49
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	49
	Item 9A.	Controls and Procedures	49
	Item 9B.	Other Information	49

PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	49
	Item 11.	Executive Compensation	49
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	50
	Item 14.	Principal Accounting Fees and Services	50

PART IV
	Item 15.	Exhibits and Financial Statement Schedules	50

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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Valvoline has identified some of these forward-looking statements with words such as “anticipates,” “believes,” “expects,” “estimates,” “is likely,” “predicts,” “projects,” “forecasts,” “may,” “will,” “should” and “intends” and the negative of these words or other comparable terminology. In addition, Valvoline may from time to time make forward-looking statements in its annual report, quarterly reports and other filings with the Securities and Exchange Commission (“SEC”), news releases and other written and oral communications.

These forward-looking statements are based on Valvoline’s current expectations and assumptions regarding, as of the date such statements are made, Valvoline’s future operating performance and financial condition, including Valvoline’s separation from Ashland (the “Separation”), the expected timetable for Ashland’s potential distribution of its remaining Valvoline common stock to Ashland shareholders (the “Stock Distribution”) and Valvoline’s future financial and operating performance, strategic and competitive advantages, leadership and future opportunities, as well as the economy and other future events or circumstances. Valvoline’s expectations and assumptions include, without limitation, 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, and the ability to recover raw-material cost increases through price increases), and risks and uncertainties associated with the following: demand for Valvoline’s products and services; sales growth in emerging markets; the prices and margins of Valvoline’s products and services; the strength of Valvoline’s reputation and brand; Valvoline’s ability to develop and successfully market new products and implement its digital platforms; Valvoline’s ability to retain its largest customers; potential product liability claims; achievement of the expected benefits of the Separation; Valvoline’s substantial indebtedness (including the possibility that such indebtedness and related restrictive covenants may adversely affect Valvoline’s future cash flows, results of operations, financial condition and Valvoline’s ability to repay debt) and other liabilities; operating as a stand-alone public company; Valvoline’s ongoing relationship with Ashland; failure, caused by Valvoline, of Ashland’s Stock Distribution of Valvoline common stock to Ashland shareholders to qualify for tax-free treatment, which may result in significant tax liabilities to Ashland for which Valvoline may be required to indemnify Ashland; and the impact of acquisitions and/or divestitures Valvoline has made or may make (including the possibility that Valvoline may not realize the anticipated benefits from such transactions). These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this annual report on Form 10-K may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although Valvoline believes that the expectations reflected in these forward-looking statements are reasonable, Valvoline cannot guarantee future results, level of activity, performance or achievements. In addition, neither Valvoline nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by Valvoline or any other person that Valvoline will achieve its objectives and plans in any specified time frame, or at all. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K. Except as required by law, Valvoline assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Other important factors that could cause actual results to differ materially from those contained in these forward-looking statements are discussed under “Use of estimates, risks and uncertainties” in Note 2 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 Valvoline’s expectations and operations, see “Item 1A. Risk Factors” in this annual report on Form 10-K.

All forward-looking statements attributable to Valvoline are expressly qualified in their entirety by these cautionary statements as well as others made in this annual report on Form 10-K, and hereafter in Valvoline’s other SEC filings and public communications. You should evaluate all forward-looking statements made by Valvoline in the context of these risks and uncertainties.

A PART I

ITEM 1. BUSINESS

General

Valvoline Inc. is a Kentucky corporation, with its principal executive offices located at 3499 Blazer Parkway, Lexington, Kentucky 40509 (Telephone: (859) 357-7777). The terms “Valvoline,” the “Company,” “we,” “us,” and “our” as used herein include Valvoline Inc., its predecessors and its consolidated subsidiaries, except where the context indicates otherwise. Valvoline is a controlled subsidiary of Ashland Global Holdings Inc. The term “Ashland” or "Parent" refers to Ashland Global Holdings Inc., its predecessors and its consolidated subsidiaries, except where the context indicates otherwise.

Valvoline is a leading worldwide producer and distributor of premium-branded automotive, commercial and industrial lubricants, and automotive chemicals. Valvoline is one of the most recognized and respected premium consumer brands in the global automotive lubricant industry, known for its high quality products and superior levels of service. Established in 1866, Valvoline’s heritage spans 150 years, during which it has developed powerful name recognition across multiple product and service channels. With approximately 5,150 employees worldwide, Valvoline services the United States in all of the key lubricant sales channels, and has a strong international presence with products sold in approximately 140 countries.

Valvoline has a history of leading innovation with revolutionary products such as All Climate™, DuraBlend™, and MaxLife™. I n addition to the iconic Valvoline-branded passenger car motor oils and other automotive lubricant products, Valvoline provides a wide array of lubricants used in heavy duty equipment, as well as automotive chemicals and fluids designed to improve engine performance and lifespan. Premium branded product offerings enhance Valvoline’s high quality reputation and provide customers with solutions that address a wide variety of needs.

Reportable Segments

Valvoline’s reporting structure is principally composed of three reportable segments: Core North America, Quick Lubes and International. Additionally, certain corporate and other costs are included in an Unallocated and other segment.

Core North America - The Core North America segment sells Valvoline™ and other branded and private label products in the United States and Canada to both consumers who perform their own automotive maintenance, referred to as “Do-It-Yourself” or “DIY” consumers, as well as to installer customers who use Valvoline products to service vehicles owned by “Do-It-For-Me” or “DIFM” consumers. Valvoline sells to its DIY consumers through retail auto parts stores, such as AutoZone, O’Reilly Auto Parts and Advance Auto Parts, as well as leading mass merchandisers and independent auto part stores. Valvoline also sells branded products and services to installer customers such as car dealers, general repair shops and third-party quick lube locations, including Goodyear, Monro, Express Oil Change, TBC Retail Group and Sears, directly through distributors. The Valvoline team also sells branded products and solutions to heavy duty customers, such as on-highway fleets and construction companies, and has a strategic relationship with Cummins Inc. (“Cummins”), a leading heavy duty engine manufacturer, for co-branding products in the heavy duty business.

Quick Lubes - The Quick Lubes segment services the passenger car and light truck quick lube market through two platforms: Valvoline’s company-owned and franchised Valvoline Instant Oil Change ^SM (“VIOC”) stores, the second largest U.S. retail quick lube service chain by number of stores; and Express Care™, a quick lube customer platform developed for independent operators who purchase Valvoline motor oil and other products pursuant to contracts while displaying Valvoline branded signage. VIOC centers offer customers a quick, easy, and trusted way to maintain their vehicles, utilizing well-trained technicians who have access to a proprietary service process that sets forth rigorous protocols for both the steps that must be followed in the service of vehicles and for interactions with customers. As of September 30, 2016, the VIOC network consisted of 342 company-owned and 726 franchised centers and operated in 44 states. The Express Care™ platform supports smaller (typically single store) operators that do not fit Valvoline’s franchised model and typically offer other non-quick lube services such as auto repairs and car washes. As of September 30, 2016, there were 347 Express Care™ locations.

International - Valvoline’s International segment sells Valvoline™ and other branded products through wholly-owned affiliates, joint ventures, licensees and independent distributors in approximately 140 countries outside of the United States and Canada. Key international markets include China; India; Europe, Middle East, and Africa (“EMEA”); Latin America; and Australia Pacific. International sales include both passenger car products and heavy duty products used in a wide variety of heavy duty equipment. Passenger car, motorcycle and light duty truck products are sold internationally mostly through distributors in DIFM sales channels to installer customers. Heavy duty products are sold either directly to key customers, or through distributors. Valvoline goes to market in its International business segment in three ways: (1) through its own local sales, marketing, and back office support teams; (2) through

joint ventures; and (3) through independent distributors. Valvoline has 50/50 joint ventures with Cummins in India and China and smaller joint ventures in select countries in Latin America and Asia.

Unallocated and other - Valvoline’s Unallocated and other segment generally includes items such as components of pension and other postretirement benefit plans and certain significant restructuring activities that are not directly attributable to any of the other segments described above, including costs related to the Separation of Valvoline from Ashland and legacy costs.

The majority of the Company’s sales comes from the sale of lubricant products which were approximately 89% of Valvoline’s total consolidated sales for fiscal 2016. For 2016 sales and other information by reportable segment and by geography, see “Management’s Discussion and Analysis of Financial Condition and Results of Operation-Business Overview-Business Results.”

Available Information

More information about Valvoline is available at Valvoline’s internet address, http://www.valvoline.com. On this website, Valvoline 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 are available as soon as reasonably practicable after they are electronically filed with, or electronically furnished to, the Securities and Exchange Commission (“SEC”). Valvoline also makes available, free of charge on its website, its Corporate Governance Guidelines, Board Committee Charters, Director Independence Standards and the code of business conduct that applies to Valvoline’s directors, officers and employees. These documents are also available in print to any shareholder who requests them. Information contained on Valvoline’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 Valvoline 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 September 22, 2016, Ashland and Valvoline announced the pricing of the IPO of 30 million shares of Valvoline’s common stock at a price to the public of $22.00 per share and closed the IPO on September 28, 2016. The underwriters exercised an option to purchase an additional 4.5 million shares of Valvoline’s common stock to cover over allotments. The total net proceeds, after underwriter’s discount and other offering expenses, received from the IPO were $712 million. Valvoline’s common stock is listed on the New York Stock Exchange under the symbol “VVV.” After completing the IPO, Ashland owns 170 million shares of Valvoline’s common stock, representing approximately 83% of the total outstanding shares of Valvoline’s common stock. Ashland presently intends to distribute the remaining shares of Valvoline common stock to Ashland’s stockholders following the release of second fiscal quarter of 2017 financial results by both Ashland and Valvoline subject to final Ashland board approval as well as the satisfaction or waiver by Ashland of a number of conditions. Ashland may determine not to complete the separation if, at any time, the Board of Directors of Ashland determines, in its sole and absolute discretion, that the distribution is not in the best interest of Ashland or its stockholders or is otherwise not advisable.

As of September 30, 2016, Valvoline includes substantially all of the historical Valvoline business reported by Ashland, as well as certain other assets and liabilities transferred to Valvoline by Ashland. The largest transferred liabilities are the net pension and other postretirement plan liabilities. Other transferred assets and liabilities primarily consist of deferred compensation, certain Ashland legacy business insurance reserves, tax attributes, and certain trade payables. Additionally, any deferred tax assets and liabilities that relate specifically to these assets and liabilities have been transferred to Valvoline, as well as certain other tax liabilities and indemnities as a result of the Tax Matters Agreement entered into between Ashland and Valvoline.

Industry Overview

Valvoline participates primarily in the global finished lubricants market. The global finished lubricants market is an approximately $60 billion market with demand for over 11 billion gallons of lubricants. Demand for passenger car motor oil and motorcycle oil accounted for approximately 24% of global lubricant demand, while the remaining 76% of demand was for commercial and industrial products. The United States has historically accounted for the largest amount of lubricant demand, followed by China and India. The lubricants market is impacted by the following key drivers and trends:


•	Global lubricants market demand is shifting towards higher performance finished lubricants, largely driven by advancements in vehicle/equipment design and original equipment manufacturer (“OEM”) requirements for improved efficiency, reduced carbon footprints and optimized fuel consumption.


•	There has been increasingly stringent regulation, particularly in North America and Europe aimed at reducing toxic emissions, which has led to a continuous drive for innovation given changing specifications for lubricants.

•

Between 2007 and 2012, the North American transport lubes market experienced average annual volume declines of 2.7% per annum, due in part to an increase in oil change intervals, which have resulted from changing OEM recommendations and advancements in engine technology. However, this trend has reversed over the past two years as an increase in the number of cars on the road and miles driven has led to stable market volumes.


•	A surge in the number of cars on the road has led to rapid expansion of passenger vehicle lubricant sales in developing regions.

Business and Growth Strategies

The strength of Valvoline’s business model is the ability to generate profitable sales across multiple channels to market, leveraging the Valvoline brand through effective marketing, innovative product technology and the capabilities of the Valvoline team. Valvoline has delivered strong profits and return on capital, with balanced results. Today, Valvoline is a high margin, high free cash flow generating business, with significant growth opportunities. Valvoline’s key business and growth strategies include:

•

growing and strengthening Valvoline’s quick lube network through organic store expansion, opportunistic, high-quality acquisitions in both core and new markets within the VIOC system and strong sales efforts to partner with new Express Care operators, in addition to continued same-store sales growth and profitability within Valvoline’s existing VIOC system stores as a result of attracting new customers and increasing customer satisfaction, customer loyalty and average ticket size;


•	accelerating international growth across key markets where demand for premium lubricants is growing, such as China, India and select countries in Latin America, by building strong distribution channels in under-served geographies, replacing less successful distributors and improving brand awareness among installer customers in those regions; and


•	leveraging innovation, both in terms of product development, packaging, marketing and the implementation of Valvoline’s new digital infrastructure, to strengthen market share and profitability.

Valvoline’s Products

Valvoline offers a wide variety of branded, co-branded, and private label products to meet the needs of light-duty and heavy duty engine and automotive maintenance customers in approximately 140 countries around the world. Valvoline’s portfolio is designed to deliver quality product solutions to meet the needs of its wide variety of customers with varying needs.



Product Line		% of 2016 Sales	Description
Lubricants	Passenger Car / Light Duty	89%	Comprehensive assortment meeting the needs of passenger car, motorcycle and other light duty engines, including motor oil, transmission fluid, greases and gear oil
	Heavy Duty		Lubricating solutions for a wide range of heavy duty applications ranging from on-road (Class 4 – Class 8 vehicles) to off-road construction, mining and power generation equipment
Antifreeze	Antifreeze / Coolants	4%	Antifreeze/coolants for OEMs; full assortment of additive technologies and chemistries to meet virtually all light-duty and heavy duty engine applications and heat transfer requirements of batteries and fuel cells used to power today’s electric vehicles

Chemicals	Maintenance Chemicals	4%	Functional and maintenance chemicals ranging from brake fluids and power steering fluids to chemicals specifically designed to clean and maintain optimal performance of fuel, cooling and drive train systems
	Coatings		Specialty coatings designed to target rust prevention, sound absorption and release agents for automotive and industrial applications
Filters	Filters	2%	Oil and air filters meeting the needs of light-duty vehicles

Other	Other Complementary Products	1%	Windshield wiper blades, light bulbs, serpentine belts and drain plugs

In addition to Valvoline’s branded offerings, Valvoline sells private-label products to OEMs, lubricant marketers and aftermarket retailers. Valvoline’s private label products include lubricants, coolants and chemicals bearing the brand names of some of the world’s most recognized marketers.

Competition

The industry is highly competitive and Valvoline faces competition in all product categories and subcategories. In the United States and Canada, Valvoline’s principal competitors for retail customers are global integrated oil brands, such as Shell, which produces Pennzoil and Quaker State, BP, which produces Castrol, and Exxon Mobil, which produces Mobil1, mid-tier brands, and private label producers. With respect to installer customers in the United States and Canada, Valvoline competes with these major integrated oil brands and regional private label companies.

The Quick Lubes segment competes with other major franchised brands that offer a turn-key operations management system, such as Jiffy Lube (owned by Shell), Grease Monkey and Express Oil Change, as well as national branded companies that offer a professional signage program with limited business model support, similar to Valvoline’s Express Care network, and regional players such as Super-Lube and American Lube Fast that are not directly affiliated with a major brand. Valvoline also competes to some degree with automotive dealerships and service stations, which provide quick lube and other preventative maintenance services. Valvoline believes there are over 9,000 existing quick lube stores currently operating in the U.S. market. Jiffy Lube is currently the largest player, with just over 1,900 stores, all of which are owned and operated by franchisees.

Major competitors of Valvoline’s International business vary by region. Valvoline generally faces strong competition from global integrated oil brands, as these companies have a particularly strong presence in Europe and Asia. In certain markets Valvoline also competes with regional brands, including brands produced by national oil companies, such as Sinopec in China and Indian Oil in India.

Competitive factors in all of these markets include price, product or service technology, brand awareness and loyalty, customer service, and sales and marketing. Valvoline’s Core North America and International businesses also compete on the basis of shelf space and product packaging.

Marketing and Advertising

Valvoline places a high priority on sales and marketing and focuses marketing efforts on areas expected to yield the highest rate of return. Valvoline has dedicated marketing resources in each business segment, which are well qualified to reach target customers. The majority of Valvoline’s large customers are supported by direct sales representatives with a number of key customers having dedicated Valvoline teams. Consistent with Valvoline’s belief and value that it “all starts with our people,” Valvoline also has a keen focus on sales force effectiveness, with a cross functional team regularly evaluating the recruiting, compensation, performance management and employee development of sales teams.

Valvoline uses a variety of marketing techniques to build awareness of, and create demand for, Valvoline products and services. Valvoline advertises through social and digital media, as well as traditional media outlets such as television, print and radio. In addition, Valvoline selectively sponsors teams in high performance racing series, including a current sponsorship of Hendrick Motorsports, featuring drivers Dale Earnhardt Jr., Chase Elliott, Jimmie Johnson and Kasey Kahne.

Valvoline has also embarked on a digital infrastructure initiative that will enable the use of technology across the entire enterprise. Valvoline believes its digital marketing infrastructure will drive more effective engagement to deliver growth, customer retention and acquisition as a strategic business partner.

Research and Development

Valvoline’s innovation is central to the successful performance of its business. Valvoline research and development is focused on developing new and innovative products to meet the current and future needs of its customers. These products are developed through Valvoline’s “Hands on Expertise” innovation approach, which begins with the mathematical modeling of critical product design elements and extends through field testing. In addition, Valvoline technology centers, located in the Americas, Europe and Asia Pacific regions, develop solutions for existing and emerging on and off-road equipment. Valvoline’s research and development team also leverages its strong relationships with customers and suppliers to incorporate their feedback into the research and development process. In addition to its own research and development initiatives, Valvoline also conducts limited testing for other entities, which builds its expertise and partially offsets its research and development costs.

Intellectual Property

Valvoline is continually seeking to develop new technology and enhance its existing technology. Valvoline has been issued 33 U.S. and 59 international patents, and has 13 U.S. and 42 international patent applications pending or published. Valvoline also holds approximately 2,450 trademarks in various countries around the world, which Valvoline believes are some of its most valuable assets, and Valvoline dedicates significant resources to protecting them. These trademarks include the Valvoline trademark and the famous “V” brand logo trademark, which are registered in over 150 countries. Valvoline owns over 700 domain names that are used to promote Valvoline products and services and provide information about the Company.

Raw Material Supply and Prices

The key raw materials used in Valvoline’s business are base oils, additives, packaging materials (high density polyethylene bottles and steel drums) and ethylene glycol. Valvoline continuously monitors global supply and cost trends of these key raw materials and obtains these raw materials from a diversified network of large global suppliers and regional providers. Valvoline’s sourcing strategy is to ensure supply through contracting a diversified supply base while leveraging market conditions to take advantage of spot opportunities whenever such conditions are available. Valvoline leverages worldwide spend to obtain favorable contract terms from the global suppliers and use the regional providers to ensure market competitiveness and reliability in its supply chain. For materials that must be customized, Valvoline works with market leaders with global footprints and well developed business continuity plans. Valvoline also utilizes the Company’s research and development resources to develop alternative product formulations, which provide flexibility in the event of supply interruptions. Valvoline closely monitors the Company’s supply chain and conducts annual supply risk assessments of its critical suppliers to reduce risk.

Valvoline seeks to actively manage fluctuations in supply costs, product selling prices and the timing thereof to preserve unit margins. The prices of many of Valvoline’s products fluctuate based on the price of base oil, which is a large percentage of Valvoline’s cost of sales. Historically, base oil prices have been volatile, which sometimes causes sharp cost increases during periods of short supply, which was the case in 2011. Since that time, base oil supply has increased dramatically while global demand has generally grown at a steady and moderate rate. Although base oil, a derivative of crude, is highly correlated to the global oil market, excess supply of base oil in recent years has contributed to reduced volatility in the base oil market. Base oil prices generally follow crude prices, but the lag period between changes in the price of crude oil and changes in the price of base oil is influenced by whether there is an excess of or shortness in the supply of base oil.

Valvoline has generally been successful in adjusting product selling prices to account for changes in base oil costs in order to preserve unit margins. As part of the strategy to mitigate the impact of base oil volatility, Valvoline has negotiated base oil supply contracts with terms that have reduced the impact of changes in the base oil market on Valvoline’s financial results. Valvoline has revised contracts in several of the Company’s sales channels to accelerate the timing of adjustments to selling prices in response to changes in raw material prices. Pricing adjustments to product sold to Valvoline’s larger national or regional accounts in its installer channel tend to be made pursuant to contract and are often based on movements in published base oil indices. Pricing for product sold to Valvoline’s franchisees is adjusted on a periodic basis pursuant to an agreed upon index (weighted combination of published base oil indices), the composition and weighting of which may be updated from time to time by Valvoline and representatives of Valvoline’s franchisees. Pricing adjustments for product sold in Valvoline’s DIY channel, private label products in the United States and product sold to smaller accounts in its installer channel are generally market driven, based on negotiations in light of base oil costs and the pricing strategies of Valvoline’s competitors.

Seasonality

Overall, there is little seasonality in Valvoline’s business. Valvoline Quick Lubes business and, to a lesser extent, its Core North America business tend to experience slightly higher sales volume in the summer months due to summer vacations and increased driving, as well as during the periods of time leading into holidays. Both businesses also tend to slow a little from October to February due to inclement weather in parts of the United States and Canada. Valvoline’s International business experiences almost no seasonality due to its geographic diversity and the high percentage of its business in the commercial and industrial lubricants market, which is less influenced by weather.

Environmental Health and Safety

Valvoline is subject to numerous foreign, federal, state and local Environmental Health and Safety (“EHS”) laws and regulations. These laws and regulations govern matters such as safe working conditions; product stewardship; air emissions; discharges to the land and surface waters; generation, handling, storage, transportation, treatment and disposal of hazardous substances and waste materials; and the registration and evaluation of chemicals. Valvoline maintains policies and procedures to control EHS risks and monitor compliance with applicable EHS laws and regulations. These laws and regulations also require Valvoline to obtain, and comply with, permits, registrations or other authorizations issued by governmental authorities. These authorities can modify or revoke the Company's permits, registrations or other authorizations and can enforce compliance through fines and injunctions.

Valvoline expects to incur ongoing costs to comply with existing and future EHS requirements, including the cost of a dedicated EHS group that will be responsible for ensuring its business maintains compliance with applicable laws and regulations. This responsibility will be carried out through training; widespread communication of EHS policies; formulation of policies, procedures and work practices; design and implementation of EHS management systems; internal auditing by a separate auditing group; monitoring legislative and regulatory developments that may affect Valvoline's operations; and incident response planning.

Government Regulation

Valvoline is subject to regulation by various U.S. federal regulatory agencies and by the applicable regulatory authorities in countries in which Valvoline’s products are manufactured and sold. Such regulations principally relate to the ingredients, labeling, packaging, advertising and marketing of Valvoline’s products. In addition, as a result of Valvoline’s commercial operations overseas, the Company is subject to the Foreign Corrupt Practices Act and other countries’ anti-corruption and anti-bribery regimes, such as the U.K. Bribery Act.

Employees

As of September 30, 2016, Valvoline and its consolidated subsidiaries had approximately 5,150 employees (excluding contract employees).

ITEM 1A. RISK FACTORS

The following discussion of “risk factors” identifies the most significant factors that may adversely affect Valvoline’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 included in this annual report on Form 10-K. The following discussion of risks is designed to highlight what Valvoline 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.

Risks Related to Valvoline’s Business

Damage to Valvoline’s brand and reputation could have an adverse effect on its business.

Maintaining Valvoline’s strong reputation with both consumers and customers is a key component of its business. Product or service complaints or recalls, its inability to ship, sell or transport affected products and governmental investigations may harm its reputation with consumers and customers, which may materially and adversely affect its business operations, decrease sales and increase costs.

Valvoline manufactures and markets a variety of products, such as automotive and industrial lubricants and antifreeze, and provide automotive maintenance services. If allegations are made that some of Valvoline’s products have failed to perform up to consumers’ or customers’ expectations or have caused damage or injury to individuals or property, or that Valvoline’s services were not provided in a manner consistent with its vision and values, the public may develop a negative perception of its brands. In addition, if Valvoline’s franchisees or Express Care operators do not successfully operate their quick lube service centers in a manner consistent with Valvoline’s standards, its brand, image and reputation could be harmed, which in turn could negatively impact its business and operating results. A negative public perception of Valvoline’s brands, whether justified or not, could impair its reputation, involve it in litigation, damage its brand equity and have a material adverse effect on its business. In addition, damage to the reputation of Valvoline’s competitors or others in its industry could negatively impact Valvoline’s reputation and business.

Valvoline has set aggressive growth goals for its business, including increasing sales, cash flow, market share and margins, in order to achieve its long-term strategic objectives. Execution of Valvoline’s growth strategies and business plans to facilitate that growth involves a number of risks.

Valvoline has set aggressive growth goals for its business in order to meet its long-term strategic objectives and improve shareholder value. Valvoline’s failure to meet one or more of these goals or objectives would negatively impact its business and is one of the most important risks that Valvoline faces. Aspects of that risk include, among others, changes to the economic environment, changes to the competitive landscape, including those related to automotive maintenance recommendations and consumer preferences, attraction and retention of skilled employees, the potential failure of product innovation plans, failure to comply with existing or new regulatory schemes, failure to maintain a competitive cost structure and other risks outlined in greater detail in this “Risk Factors” section.

Demand for Valvoline’s products and services could be adversely affected by consumer spending trends, declining economic conditions, trends in Valvoline’s industry and a number of other factors, all of which are beyond its control.

Demand for Valvoline’s products and services may be affected by a number of factors it cannot control, including the number and age of vehicles in current service, regulation and legislation, technological advances in the automotive industry and changes in engine technology, including the adoption rate of electric or other alternative engine technologies. In addition, during periods of declining economic conditions, consumers may defer vehicle maintenance. Similarly, increases in energy prices may cause miles driven to decline, resulting in less wear and tear and lower demand for maintenance, which may lead to consumers deferring purchases of Valvoline’s products and services. All of these factors, which impact metrics such as drain intervals and oil changes per day, could result in a decline in the demand for Valvoline’s products and services and adversely affect its sales, cash flows and overall financial condition. Between 2007 and 2012, U.S. passenger car motor oil volumes declined. This decline in demand is a result of, among other factors, changing automotive OEM specifications and longer recommended intervals between oil changes. Over the past two years, however, market volume has increased, largely due to the increase in the number of cars on the road and miles driven.

The success of Valvoline’s growth initiatives depends on its ability to successfully develop and implement one or more integrated digital platforms that will help it better understand consumers and more effectively engage them.

Valvoline is in the process of designing and implementing a number of digital platforms that will integrate its operations with customer and consumer data. The successful development and implementation of these digital platforms will depend on Valvoline’s ability to identify an appropriate strategy, dedicate adequate resources and select technologies that will provide it with adequate flexibility to adapt to future developments in the marketplace and changes in consumer and customer behavior. Valvoline has incurred and expect to incur significant upfront investments to develop these digital platforms. There is a risk that once implemented, these digital platforms will not deliver all or part of the expected benefits, including additional sales. As Valvoline develops and implements its digital platforms, it may elect to modify, replace or abandon certain technology initiatives, which could result in write-downs.

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

Valvoline’s success depends on its ability to attract and retain key personnel, and it relies heavily on its senior management team. The inability to recruit and retain key personnel or the unexpected loss of key personnel may adversely affect Valvoline’s operations. This risk of unwanted employee turnover is substantial in positions that require certain technical expertise. This risk is also substantial in developing international markets Valvoline has targeted for growth and in North America, where attracting marketing and technical expertise to geographies necessary to support its management is important to its success. This risk is further enhanced by the

Separation from Ashland. In addition, because of Valvoline’s reliance on its senior management team, its future success depends, in part, on its ability to identify and develop or recruit talent to succeed its senior management and other key positions throughout the organization. If Valvoline fails to identify and develop or recruit successors, it is at risk of being harmed by the departures of these key employees.

Valvoline faces significant competition from other companies, which places downward pressure on prices and margins and may adversely affect Valvoline’s business and results of operations.

Valvoline operates in highly competitive markets, competing against a number of domestic and foreign companies. Competition is based on several key criteria, including brand recognition, product performance and quality, product price, product availability and security of supply, ability to develop products in cooperation with customers and customer service, as well as the ability to bring innovative products or services to the marketplace. Certain key competitors, including Shell/Pennzoil and Jiffy Lube, BP/Castrol and Exxon/Mobil, are significantly larger than Valvoline and have greater financial resources and more diverse portfolios of products and services, leading to greater operating and financial flexibility. As a result, these competitors may be better able to withstand adverse changes in conditions within the relevant industry, the prices of raw materials and energy or general economic conditions. In addition, competitors’ pricing decisions could compel Valvoline to decrease its prices, which could negatively affect Valvoline’s margins and profitability. Additional competition in markets served by Valvoline could adversely affect margins and profitability and could lead to a reduction in market share. Also, Valvoline competes in certain markets that are declining, such as the U.S. passenger car motor oil market. If Valvoline’s strategies for dealing with declining markets and leveraging market opportunities are not successful, its results of operations could be negatively affected.

Because of the concentration of Valvoline’s sales to a small number of retailers, the loss of one or more of, or a significant reduction in orders from, its top retail customers could adversely affect its financial results, as could the loss of one of its distributor relationships.

Valvoline’s Core North America segment’s sales represented approximately 51% of Valvoline’s total sales in fiscal 2016. NAPA Auto Parts, AutoZone, Advance Auto Parts, O’Reilly Auto Parts and another large national retailer together accounted for 47% of Core North America’s fiscal 2016 sales and 47% of Core North America’s outstanding trade accounts receivable as of September 30, 2016. NAPA Auto Parts accounted for greater than 10% of Core North America’s fiscal 2016 sales. Valvoline’s volume of sales to these customers fluctuates and can be influenced by many factors, including product pricing, purchasing patterns and promotional activities. The loss of, or significant reduction in orders from, one of Valvoline’s top five retail customers or any other significant customer could have a material adverse effect on its business, financial condition, results of operations or cash flows, as could customer disputes regarding shipments, fees, merchandise condition or related matters. Valvoline’s inability to collect accounts receivable from one of its major customers, or a significant deterioration in the financial condition of one of these customers, including a bankruptcy filing or a liquidation, could also have a material adverse effect on Valvoline’s financial condition, results of operations or cash flows. Valvoline also relies on independent distributors to sell and deliver its products. Disagreements or the loss of Valvoline’s relationship with a distributor could also have a material adverse effect on its financial condition, results of operations or cash flows.

Valvoline’s marketing activities may not be successful.

Valvoline invests substantial resources in advertising, consumer promotions and other marketing activities in order to maintain and strengthen its brand image and product awareness. The Valvoline name and brand image are integral to the growth of its business and its expansion into new markets. Failure to adequately market and differentiate its products and services from competitive products and services could adversely affect Valvoline’s business. There can be no assurances that Valvoline’s marketing strategies will be effective or that its investments in advertising activities will result in a corresponding increase in sales of its products. If Valvoline’s marketing initiatives are not successful, it will have incurred significant expenses without the benefit of higher sales of its products. In addition, if any party with whom Valvoline has a sponsorship relationship were to generate adverse publicity, Valvoline’s brand image could be harmed.

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

The development, manufacture and sale of automotive, commercial and industrial lubricants, automotive chemicals and the provision of automotive maintenance services involve an inherent risk of exposure to product liability claims, false advertising claims, product recalls, workplace exposure, product seizures and related adverse publicity. A product liability claim, false advertising claim or related judgment against the Company could also result in substantial and unexpected expenditures, affect consumer or customer confidence in Valvoline’s products, and divert management’s time and attention from other responsibilities. Although Valvoline maintains product liability insurance, there can be no assurance that the type or level of coverage it has is adequate or that it 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 product liability judgment against Valvoline could have a material adverse effect on its reputation, results of operations and financial condition.

Failure to develop and market new products and production technologies could impact Valvoline’s competitive position and have an adverse effect on its business and results of operations.

The lubricants industry is subject to periodic technological change and ongoing product improvements. In order to maintain margins and remain competitive, Valvoline must successfully develop and introduce new products or improvements that appeal to its customers and ultimately to global consumers. Changes in additive technologies, base oil production techniques and sources, and the demand for improved performance by OEMs and consumers place particular pressure on Valvoline to continue to improve its product offerings. Valvoline’s efforts to respond to changes in consumer demand in a timely and cost-efficient manner to drive growth could be adversely affected by difficulties or delays in product development and service innovation, including the inability to identify viable new products, successfully complete research and development, obtain regulatory approvals, obtain intellectual property protection or gain market acceptance of new products or service techniques. Due to the lengthy development process, technological challenges and intense competition, there can be no assurance that any of the products Valvoline is currently developing, or could develop in the future, will achieve substantial commercial success. The time and expense invested in product development may not result in commercial products or provide revenues. Valvoline could be required to write-off its investment in a new product that does not reach commercial viability. Moreover, Valvoline may experience operating losses after new products are introduced and commercialized because of high start-up costs, unexpected manufacturing costs or problems, or lack of demand.

The impact of changing laws or regulations or the manner of interpretation or enforcement of existing laws or regulations could adversely impact Valvoline’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 Valvoline’s cost of doing business and restrict its ability to operate its business or execute its strategies. This risk includes, among other things, the possible taxation under U.S. law of certain income from foreign operations, the possible taxation under foreign laws of certain income Valvoline reports in other jurisdictions, regulations related to the protection of private information of its employees and customers, regulations issued by the U.S. Federal Trade Commission (and analogous non-U.S. agencies) affecting Valvoline and its customers, compliance with the REACH regulation (and analogous non-EU initiatives). In addition, compliance with laws and regulations is complicated by Valvoline substantial and growing global footprint, which will require significant and additional resources to ensure compliance with applicable laws and regulations in the approximately 140 countries where Valvoline conducts business.

Valvoline’s global operations exposes it to trade and economic sanctions and other restrictions imposed by the United States, the European Union and other governments and organizations. The U.S. Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the Foreign Corrupt Practices Act (the “FCPA”) and other federal statutes and regulations, including those established by the Office of Foreign Assets Control (“OFAC”). Under these laws and regulations, as well as other anti-corruption laws, anti-money-laundering laws, export control laws, customs laws, sanctions laws and other laws governing Valvoline’s operations, various government agencies may require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs, which may increase compliance costs, and may subject Valvoline to fines, penalties and other sanctions. A violation of these laws or regulations could adversely impact Valvoline’s business, results of operations and financial condition.

Although Valvoline has implemented policies and procedures in these areas, it cannot assure you that its policies and procedures are sufficient or that directors, officers, employees, representatives, distributors, consultants and agents have not engaged and will not engage in conduct for which Valvoline may be held responsible, nor can Valvoline assure you that its business partners have not engaged and will not engage in conduct that could materially affect their ability to perform their contractual obligations to Valvoline or even result in its being held liable for such conduct. Violations of the FCPA, OFAC restrictions or other export control, anti-corruption, anti-money-laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and Valvoline may be subject to other liabilities, which could have a material adverse effect on its business, financial condition, cash flows and results of operations.

Imposition of new taxes, disagreements with tax authorities or additional tax liabilities could adversely affect Valvoline’s business, financial condition, reputation or results of operations.

Valvoline’s products are made, manufactured, distributed or sold in approximately 140 countries and territories. As such, Valvoline is subject to a myriad of tax laws and regulations applicable in those countries and territories, as well as those of the United States and its various state and local governments. Economic and political pressure to increase tax revenues in jurisdictions where Valvoline operates or does business, or the adoption of new or reformed tax regulations, may make resolving tax disputes more difficult, and the final resolution of tax audits and any related litigation may differ from historical provisions and accruals resulting in an adverse impact on Valvoline’s business, financial condition, reputation or results of operations. In addition to tax reform strategies being considered in the United States, many other countries are actively considering changes to existing tax laws. Changes in how United States

multinational corporations are taxed on earnings, including changes to currently enacted tax rates, could adversely affect Valvoline’s business, financial condition or results of operations.

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

Sales from Valvoline’s International business segment accounted for 26% of its sales for fiscal 2016. Valvoline expects sales from international markets to continue to represent an even larger portion of its sales in the future. Also, a significant portion of Valvoline’s manufacturing capacity is located outside of the United States. Accordingly, its business is subject to risks related to the differing legal, political, cultural, social and regulatory requirements and economic conditions of many jurisdictions.

The global nature of Valvoline’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 Valvoline’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 Valvoline’s financial performance. In addition, joint ventures, particularly Valvoline’s existing joint ventures with Cummins in India and China, are an important part of its growth strategy internationally. If Valvoline’s relationship with one of its joint venture partners were to deteriorate, it could negatively impact its ability to achieve its growth goals internationally.

Certain legal and political risks are also inherent in the operation of a company with Valvoline’s global scope. For example, it may be more difficult for Valvoline 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 Valvoline operates. In certain countries or regions, terrorist activities and the response to such activities may threaten Valvoline’s operations more than in the United States. Social and cultural norms in certain countries may not support compliance with Valvoline’s corporate policies including those that require compliance with substantive laws and regulations. Also, changes in general economic and political conditions in countries where Valvoline operates, particularly in Europe, the Middle East and emerging markets, are a risk to Valvoline’s financial performance and future growth. For example, Valvoline exited its Venezuelan joint venture in 2015 due in part to the continued lack of exchangeability between the Venezuelan bolivar and U.S. dollar and other Venezuelan regulations. In addition, in executing its global growth strategies, Valvoline has entered into several important strategic relationships with joint venture partners, such as Cummins, unaffiliated distributors, toll manufacturers and others. The need to identify financially and commercially strong partners to fill these roles who will comply with the high manufacturing and legal compliance standards Valvoline requires is a risk to Valvoline’s financial performance.

As Valvoline 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 Valvoline’s multinational operations will not have an adverse effect on its business, financial condition or results of operations.

The competitive nature of Valvoline’s markets may delay or prevent it from passing increases in raw material costs on to its customers. In addition, certain of Valvoline’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 Valvoline’s results of operations.

Rising and volatile raw material prices, especially for base oil and lubricant additives, may negatively impact Valvoline’s costs, results of operations and the valuation of its inventory. Valvoline is not always able to raise prices in response to increased costs of raw materials, and its ability to pass on the costs of such price increases is dependent upon market conditions. Likewise, reductions in the valuation of Valvoline’s inventory due to market volatility may not be recovered and could result in losses.

Valvoline purchases certain products and raw materials from suppliers, often pursuant to written supply contracts. If those suppliers are unable to meet Valvoline’s orders in a timely manner or choose to terminate or otherwise avoid contractual arrangements, Valvoline may not be able to make alternative supply arrangements. For base oils, Valvoline’s suppliers are primarily large oil producers, many of whom operate oil lubricant production and sales businesses as part of their enterprise. There are risks inherent in obtaining important raw materials from actual or potential competitors, including the risk that applicable antitrust laws may be inadequate to mitigate Valvoline’s exposure to these risks. Valvoline purchases substantially all of its lubricant additives from the following four suppliers: Afton Chemical Corporation, Chevron Oronite Company LLC, the Infineum group of companies and Lubrizol Corporation. Because the industry is characterized by a limited number of lubricant additives suppliers, there are a limited number of alternative suppliers with whom Valvoline could transact in the event of a disruption to its existing supply relationships. The inability of Valvoline’s suppliers to meet its supply demands could also have a material adverse effect on its business.

Also, domestic and global government regulations related to the manufacture or transport of certain raw materials may impede Valvoline’s ability to obtain those raw materials on commercially reasonable terms. If Valvoline 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 or grow its business successfully could be adversely affected.

Acquisitions, strategic alliances and investments could result in operating difficulties, dilution and other harmful consequences that may adversely impact Valvoline’s business and results of operations.

Acquisitions, particularly for Valvoline’s VIOC business, and building strategic alliances for distribution and manufacturing, particularly in international markets, including through joint venture partnerships, product distribution and toll manufacturing arrangements, are important elements of its overall growth strategy. Valvoline expects to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions. These transactions and agreements could be material to Valvoline’s financial condition and results of operations. In addition, the process of integrating an acquired company, business, or product may create unforeseen operating difficulties or expenditures. The areas where Valvoline faces risks include:


•	diversion of management’s time and attention from operating Valvoline’s business to acquisition integration challenges;


•	failure to successfully grow the acquired business or product lines;


•	implementation or remediation of controls, procedures and policies at the acquired company;


•	integration of the acquired company’s accounting, human resources and other administrative systems, and coordination of product, engineering and sales and marketing functions;


•	transition of operations, users and customers onto Valvoline’s existing platforms;


•	reliance on the expertise of Valvoline’s strategic partners with respect to market development, sales, local regulatory compliance and other operational matters;


•	failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval under competition and antitrust laws which could, among other things, delay or prevent Valvoline from completing a transaction, or otherwise restrict its ability to realize the expected financial or strategic goals of an acquisition;


•	in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;


•	cultural challenges associated with integrating employees from the acquired company into Valvoline’s organization, and retention of employees from the companies that Valvoline acquires;


•	liability for, or reputational harm from, activities of the acquired company before the acquisition or from Valvoline’s strategic partners, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and


•	litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former securityholders or other third parties.

Valvoline’s failure to address these risks or other problems encountered in connection with its past or future acquisitions, investments or strategic alliances could cause Valvoline to fail to realize the anticipated benefits of such acquisitions, investments or strategic alliances, incur unanticipated liabilities and harm Valvoline’s business generally.

Valvoline’s acquisitions, investments and strategic alliances could also result in dilutive issuances of its equity securities, the incurrence of debt, contingent liabilities or amortization expenses, impairment of goodwill or purchased long-lived assets and restructuring charges, any of which could harm its financial condition, results of operations and cash flows. Also, the anticipated benefits of Valvoline’s acquisitions may not be realized. Valvoline’s balance sheet includes goodwill primarily related to acquisitions and future acquisitions may result in Valvoline’s recognition of additional goodwill. The impairment of a significant portion of this goodwill would negatively affect its financial results.

The business model for Valvoline’s VIOC business, including its dependence on franchised oil change centers, presents a number of risks.

VIOC is made up of a nation-wide network of both company-owned and franchised stores. Valvoline’s success relies in part on the financial success and cooperation of its franchisees. However, Valvoline has limited influence over their operations. Valvoline’s franchisees manage their businesses independently and are responsible for the day to day operations of approximately 68% of VIOC stores as of September 30, 2016. Valvoline’s revenue and income growth from franchised stores are largely dependent on the ability of its franchisees to grow their sales. Valvoline’s franchisees may have limited or no sales growth, and Valvoline’s revenues and margins could be negatively affected as a result. In addition, if sales or business performance trends worsen for franchisees, their financial results may deteriorate, which could result in, among other things, VIOC store closures, delayed or reduced payments to Valvoline and reduced growth in the number of VIOC stores.

Valvoline’s success also depends on the willingness and ability of its independent franchisees to implement major initiatives, which may require additional investment by them, and remain aligned with Valvoline on operating, promotional and capital intensive reinvestment plans. The ability of Valvoline’s franchisees to contribute to the achievement of Valvoline’s overall plans is dependent in large part on the availability of funding to its franchisees at reasonable interest rates and may be negatively impacted by the financial markets in general or the creditworthiness of individual franchisees.

Valvoline’s operating performance and reputation could also be negatively impacted if its independent franchisees experience service failures or otherwise operate in a manner that projects a brand image inconsistent with Valvoline’s values, particularly if Valvoline’s contractual and other rights and remedies are limited, costly to exercise or subject to litigation. If Valvoline’s franchisees do not successfully operate VIOC stores in a manner consistent with Valvoline’s standards, Valvoline’s brand, image and reputation could be harmed, which in turn could negatively impact its business and operating results.

The ownership mix of company-owned and franchised VIOC stores also affects Valvoline’s results and financial condition. The decision to own stores or to operate under franchise or license agreements is driven by a large number of factors with a complex and changing interrelationship. The size of Valvoline’s largest franchisees creates additional risk due to Valvoline’s dependence on their particular growth, financial and operating performance and cooperation and alignment with Valvoline’s initiatives.

Valvoline is the primary supplier of products to all VIOC stores. The growth and performance of Valvoline’s lubricants and other product lines depends in large part on the performance of its VIOC business, potentially amplifying the negative affect of the other risks related to the VIOC business model. Poor performance by VIOC stores would negatively impact revenues and income for other Valvoline reporting segments.

Adverse developments in the global economy or in regional economies and potential disruptions of financial markets could negatively impact Valvoline’s customers and suppliers, and therefore have a negative impact on its results of operations.

A global or regional economic downturn may reduce customer demand or inhibit Valvoline’s ability to produce and sell products. Valvoline’s business and operating results are sensitive to global and regional economic downturns, credit market tightness, declining consumer and business confidence, fluctuating commodity prices, volatile exchange rates, changes in interest rates, sovereign debt defaults and other challenges, including those related to international sanctions and acts of aggression or threatened aggression that can affect the global economy. With 74% of Valvoline’s sales coming from North America in fiscal 2016, Valvoline is particularly sensitive to the risk of an economic slowdown or downturn in that region. In the event of adverse developments or stagnation in the economy or financial markets, Valvoline’s customers may experience deterioration of their businesses, reduced demand for their products, cash flow shortages and difficulty obtaining financing. As a result, existing or potential customers might delay or cancel plans to purchase products and may not be able to fulfill their obligations to Valvoline in a timely fashion. Further, suppliers may experience similar conditions, which could impact their ability to fulfill their obligations to Valvoline. A weakening or reversal of the global economy or a substantial part of it could negatively impact Valvoline’s business, results of operations, financial condition and ability to grow.

Valvoline uses information technology systems to conduct business, and these systems are at risk from cyber security threats.

The nature of Valvoline’s business, the markets it serves and the geographic profile of its operations make it a target of cyber security threats. Despite steps Valvoline takes to mitigate or eliminate them, cyber security threats to its systems are increasing and becoming more advanced and could occur as a result of the activity of hackers, employee error or employee misconduct. A breach of Valvoline’s information technology systems could lead to the loss and destruction of trade secrets, confidential information, proprietary data, intellectual property, customer and supplier data and employee personal information, and could disrupt business operations which could adversely affect Valvoline’s relationships with business partners and harm its brands, reputation and financial results. Valvoline’s customer data may include names, addresses, phone numbers, email addresses and payment account information, among other information. Depending on the nature of the customer data that is compromised, Valvoline may also have obligations to notify users, law enforcement or payment companies about the incident and may need to provide some form of remedy, such as refunds for the individuals affected by the incident.

Valvoline may fail to adequately protect its intellectual property rights or may be accused of infringing the intellectual property rights of third parties.

Valvoline relies heavily upon its trademarks, domain names and logos to market its brands and to build and maintain brand loyalty and recognition, as well as upon trade secrets. Valvoline also relies on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others, to establish and protect its various intellectual property rights. For example, Valvoline has generally registered and continue to register and renew, or secure by contract where appropriate, trademarks and service marks as they are developed and used, and reserve, register and renew domain names as appropriate. Effective trademark protection may not be available or may not be sought in every country in which Valvoline’s products are made available and contractual disputes may affect

the use of marks governed by private contract. Similarly, not every variation of a domain name may be available or be registered, even if available.

Valvoline generally seeks to apply for patents or for other similar statutory protections as and if it deems appropriate, based on then-current facts and circumstances, and will continue to do so in the future. No assurances can be given that any patent application Valvoline has filed or will file will result in a patent being issued, or that any existing or future patents will afford adequate or meaningful protection against competitors or against similar technologies. In addition, no assurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon patents Valvoline owns.

Despite these measures, Valvoline’s intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights could arise or third parties could copy or otherwise obtain and use Valvoline’s intellectual property without authorization. The occurrence of any of these events could result in the erosion of Valvoline’s brands and limit its ability to market its brands using its various trademarks, as well as impede its ability to effectively compete against competitors with similar products and services, any of which could adversely affect its business, financial condition and results of operations.

From time to time, Valvoline has been subject to legal proceedings and claims, including claims of alleged infringement of trademarks, copyrights, patents and other intellectual property rights held by third parties. In the future, third parties may sue Valvoline for alleged infringement of their proprietary or intellectual property rights. Valvoline may not be aware of whether its products do or will infringe existing or future patents or the intellectual property rights of others. In addition, litigation may be necessary to enforce Valvoline’s intellectual property rights, protect its trade secrets or determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect Valvoline’s business, financial condition and results of operations.

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

In connection with Valvoline’s separation from Ashland, Valvoline assumed certain of Ashland’s historical other postretirement benefit plans and qualified and non-qualified pension liabilities. The funded status of Valvoline’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 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 Valvoline’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 Valvoline’s pension plans and future contributions. Similarly, an increase in discount rates could increase the periodic pension cost in subsequent fiscal years. Valvoline’s policy to recognize changes in the fair value of the pension assets and liabilities annually through mark to market accounting could result in volatility in Valvoline’s results of operations, which could be material. In addition, Valvoline’s pension and other postretirement benefit plan obligations are currently underfunded, and Valvoline may have to make significant cash payments to some or all of these plans, which would reduce the cash available for its businesses.

Under the Employee Retirement Income Security Act of 1974, as amended, the Pension Benefit Guaranty Corporation (“PBGC”) has the authority to terminate an underfunded tax-qualified pension plan under limited circumstances. In the event Valvoline’s tax-qualified pension plans are terminated by the PBGC, Valvoline could be liable to the PBGC for some portion of the underfunded amount.

Business disruptions from natural, operational and other catastrophic risks could seriously harm Valvoline’s operations and financial performance. In addition, a catastrophic event at one of Valvoline’s facilities or involving its products or employees could lead to liabilities that could further impair its operations and financial performance.

Business disruptions, including those related to operating hazards inherent with the production of lubricants, natural disasters, severe weather conditions, supply or logistics disruptions, increasing costs for energy, temporary plant and/or power outages, information technology systems and network disruptions, cyber-security breaches, terrorist attacks, armed conflicts, war, pandemic diseases, fires, floods or other catastrophic events, could seriously harm Valvoline’s operations, as well as the operations of Valvoline’s customers and suppliers, and may adversely impact Valvoline’s financial performance. Although it is impossible to predict the occurrence or consequences of any such events, they could result in reduced demand for Valvoline’s products, make it difficult or impossible for Valvoline 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. In addition to leading to a serious disruption of Valvoline’s businesses, a catastrophic event at one of Valvoline’s facilities or involving its products or employees could lead to substantial legal liability to or claims by parties allegedly harmed by the event.

While Valvoline maintains business continuity plans that are intended to allow it to continue operations or mitigate the effects of events that could disrupt its business, Valvoline cannot provide assurances that its plans would fully protect it from all such events. In

addition, insurance maintained by Valvoline to protect against property damage, loss of business and other related consequences resulting from catastrophic events is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of Valvoline’s damages or damages to others in the event of a catastrophe. 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.

Valvoline has incurred, and will continue to incur, costs as a result of environmental, health and safety (“EHS”), and hazardous substances liabilities and related compliance requirements. These costs could adversely impact Valvoline’s cash flow, and, to the extent they exceed its established reserves for these liabilities, its results of operations or financial condition.

Valvoline 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, as well as the generation, storage, handling, treatment, disposal and remediation of hazardous substances and waste materials. Valvoline has incurred, and will continue to incur, costs and capital expenditures to comply with these laws and regulations.

EHS regulations change frequently, and such regulations and their enforcement have tended to become more stringent over time. Accordingly, changes in EHS laws and regulations and the enforcement of such laws and regulations could interrupt Valvoline’s operations, require modifications to its facilities or cause it to incur significant liabilities, costs or losses that could adversely affect its profitability. Actual or alleged violations of EHS 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.

Valvoline’s business involves the production, storage and transportation of hazardous substances. Under some environmental laws, Valvoline may be strictly liable and/or jointly and severally liable for environmental damages caused by releases of hazardous substances and waste materials into the environment. For instance, under relevant laws and regulations Valvoline may be deemed liable for soil and/or groundwater contamination at sites it currently owns and/or operates even though the contamination was caused by a third party such as a former owner or operator, and at sites it formerly owned and operated if the release of hazardous substances or waste materials was caused by it or by a third party during the period it owned and/or operated the site. Valvoline also may be deemed liable for soil and/or groundwater contamination at sites to which it sent hazardous wastes for treatment or disposal, notwithstanding that the original treatment or disposal activity accorded with all applicable regulatory requirements.

Valvoline is responsible for, and has financial exposure to, liabilities from pending and threatened claims which could adversely impact its results of operations and cash flow.

There are various claims, lawsuits and administrative proceedings pending or threatened against Valvoline. Such actions are with respect to commercial matters, false advertising, 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. Valvoline’s results could be adversely affected by financial exposure to these liabilities. Further, as a potential successor to Ashland, Valvoline may be subject to a consent order dated January 5, 1998 with the U.S. Federal Trade Commission arising out of charges that ads for Valvoline’s TM8 Engine Treatment product contained claims that were unsubstantiated. Under the consent order, which expires January 5, 2018, Valvoline may not make unsubstantiated claims about the performance or attributes of any engine treatment in the future or misrepresent results of tests or studies used to support Valvoline’s claims. Valvoline has agreed to indemnify Ashland for any liability arising out of the consent order. Valvoline could also be subject to additional legal proceedings in the future that may adversely affect its business, including administrative proceedings, class actions, employment and personal injury claims, disputes with current or former suppliers, claims by current or former franchisees and intellectual property claims.

Insurance maintained by Valvoline to protect against claims for damages alleged by third parties is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of Valvoline’s liabilities to others. 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.

Valvoline’s substantial indebtedness may adversely affect its business, results of operations and financial condition.

As a result of indebtedness Valvoline incurred in connection with the IPO, Valvoline has substantial indebtedness and financial obligations. As of November 30, 2016, Valvoline had outstanding indebtedness with a principal amount of approximately $677 million. Valvoline’s substantial indebtedness could adversely affect its business, results of operations and financial condition by, among other things:


•	requiring Valvoline to dedicate a substantial portion of its cash flow from operations to pay principal and interest on its debt, which would reduce the availability of its cash flow to fund working capital, capital expenditures, acquisitions, execution of its growth strategy and other general corporate purposes;


•	limiting Valvoline’s ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of its growth strategy and other purposes;


•	making Valvoline more vulnerable to adverse changes in general economic, industry and regulatory conditions and in its business by limiting its flexibility in planning for, and making it more difficult for it to react quickly to, changing conditions;


•	placing Valvoline at a competitive disadvantage compared with its competitors that have less debt and lower debt service requirements;


•	making Valvoline more vulnerable to increases in interest rates since some of its indebtedness is subject to variable rates of interest; and


•	making it more difficult for Valvoline to satisfy its financial obligations.

In addition, Valvoline may not be able to generate sufficient cash flow from its operations to repay its indebtedness when it becomes due and to meet its other cash needs. If Valvoline is not able to pay its debts as they become due, it could be in default under the terms of its indebtedness. Valvoline might also be required to pursue one or more alternative strategies to repay indebtedness, such as selling assets, refinancing or restructuring its indebtedness or selling additional debt or equity securities. Valvoline may not be able to refinance its debt or sell additional debt or equity securities or its assets on favorable terms, if at all, and if it must sell its assets, it may negatively affect its ability to generate revenues.

If Valvoline is unable to access the capital markets or obtain bank credit, its financial position, growth plans, liquidity and results of operations could be negatively impacted.

Valvoline is dependent on a stable, liquid, and well-functioning financial system to fund its operations and capital investments. In particular, Valvoline may rely on the public or private debt markets to fund portions of its capital investments and the commercial paper market and bank credit facilities to fund seasonal needs for working capital. Valvoline’s access to these markets depends on multiple factors including the condition of debt capital markets, its operating performance and credit ratings. If rating agencies lower Valvoline’s credit ratings, it could adversely impact its ability to access the debt markets, its cost of funds and other terms for new debt issuances. Each of the credit rating agencies reviews its rating periodically, and there is no guarantee Valvoline’s current credit rating will remain the same.

Valvoline is subject to payment-related risks for owned VIOC stores.

At company-owned VIOC stores, Valvoline accepts a variety of payment methods, including credit cards and debit cards. Accordingly, Valvoline is, and will continue to be, subject to significant and evolving regulations and compliance requirements, including obligations to implement enhanced authentication processes that could result in increased costs, reduce the ease of use of certain payment methods and expand liability for Valvoline. For certain payment methods, including credit and debit cards, Valvoline pays interchange and other fees, which may increase over time. Valvoline relies on independent service providers for payment processing, including credit and debit cards. If these independent service providers become unwilling or unable to provide these services to Valvoline, or if the cost of using these providers increases, Valvoline’s business could be harmed. Valvoline is also subject to payment card association operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for Valvoline to comply. If Valvoline fails to comply with these rules or requirements, or if its data security systems are breached or compromised, Valvoline may be liable for losses incurred by card issuing banks or consumers, subject to fines and higher transaction fees, lose its ability to accept credit and debit card payments from its customers or process electronic fund transfers or facilitate other types of payments and its brand, business and results of operations could be significantly harmed.

Risks Related to Valvoline’s Separation from Ashland

The Stock Distribution may not occur and the Separation may not be successful.

Although it became a stand-alone public company upon completion of the IPO on September 28, 2016, Valvoline continues to be controlled by Ashland. Ashland has announced its intention to distribute the remaining shares of Valvoline common stock in 2017 following the release of the second fiscal quarter end financial results by both Ashland and Valvoline. Ashland is subject to a lockup agreement which prohibits Ashland from selling or distributing its ownership in Valvoline until after a period of 180 days from the date of IPO. However, Ashland may abandon or change the structure of the Stock Distribution if it determines, in its sole discretion, that the Stock Distribution is not in the best interest of Ashland or its shareholders. Such determination may take into account, without limitation, the potential impact on the Stock Distribution of a change in control of Ashland.

In addition, the process of operating as a stand-alone public company may distract Valvoline’s management from focusing on its business and strategic priorities. Further, although Valvoline expects to maintain direct access to the debt and equity capital markets, Valvoline may not be able to issue debt or equity on terms acceptable to it or at all. Moreover, even with equity compensation tied to Valvoline’s business, Valvoline may not be able to attract and retain employees as desired. Valvoline also may not fully realize the anticipated benefits of being a stand-alone public company if any of the risks identified in this “Risk Factors” section, or other events,

were to occur. If Valvoline does not realize these anticipated benefits for any reason, its business may be negatively affected. In addition, the Separation could adversely affect Valvoline’s operating results and financial condition.

As long as Ashland controls Valvoline, other shareholders’ ability to influence matters requiring shareholder approval will be limited.

Ashland owns approximately 83% of the total outstanding shares of Valvoline common stock, and three members of Valvoline’s board of directors, William A. Wulfsohn, Stephen F. Kirk and Vada O. Manager, are also members of the Ashland board of directors. For so long as Ashland beneficially owns shares of Valvoline common stock representing at least a majority of the votes entitled to be cast by the holders of Valvoline’s outstanding common stock, other shareholders will not be able to affect the outcome of any shareholder vote and Ashland will be able to control, directly or indirectly, significant matters affecting Valvoline, including the election and removal of Valvoline’s directors, amendments to Valvoline’s articles of incorporation, determinations with respect to mergers, business combinations, dispositions of assets or other extraordinary corporate transactions and agreements that may adversely affect Valvoline. In addition, if Ashland does not provide any requisite affirmative vote on matters requiring shareholder approval, Valvoline will not be able to take these corporate actions and, as a result, its business and results of operations may be adversely affected. Ashland’s interest may conflict with the interests of Valvoline’s other shareholders.

The Stock Distribution could result in significant tax liability to Ashland, and in certain circumstances, Valvoline could be required to indemnify Ashland for material taxes pursuant to indemnification obligations under the Tax Matters Agreement.

Ashland expects to obtain a written opinion of counsel to the effect that the Stock Distribution should qualify for non-recognition of gain and loss under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”). The opinion of counsel would not address any U.S. state or local or foreign tax consequences of the Stock Distribution. The opinion will assume that the Stock Distribution will be completed according to the terms of the Separation Agreement entered into between Ashland and Valvoline (“Separation Agreement”) and will rely on the facts as described in the Separation Agreement, the Tax Matters Agreement, other ancillary agreements, the information statement to be distributed to Ashland’s shareholders in connection with the Stock Distribution and a number of other documents. In addition, the opinion will be based on certain representations as to factual matters from, and certain covenants by, Ashland and Valvoline. The opinion cannot be relied on if any of the assumptions, representations or covenants is incorrect, incomplete or inaccurate or is violated in any material respect.

The opinion of counsel will not be binding on the Internal Revenue Service (the “IRS”) or the courts, and there can be no assurance that the IRS or a court will not take a contrary position. Ashland has not requested, and does not intend to request, a ruling from the IRS regarding the U.S. federal income tax consequences of the Stock Distribution.

If the Stock Distribution were determined not to qualify for non-recognition of gain and loss, then Ashland would recognize a gain as if it had sold its Valvoline common stock in a taxable transaction in an amount up to the fair market value of the common stock it distributed in the Stock Distribution. In addition, certain reorganization transactions undertaken in connection with the Separation and the Stock Distribution could be determined to be taxable, which could result in additional taxable gain. Under certain circumstances, Valvoline could have an indemnification obligation to Ashland with respect to tax on some or all of such gain.

Valvoline could have an indemnification obligation to Ashland if events or actions subsequent to the Stock Distribution cause the Stock Distribution to be taxable.

If, due to breaches of covenants that Valvoline has agreed to in connection with the Separation or will agree to in connection with the Stock Distribution, it were determined that the Stock Distribution did not qualify for non-recognition of gain and loss, Valvoline could be required to indemnify Ashland for the resulting taxes (and reasonable expenses). In addition, Section 355(e) of the Code generally creates a presumption that the Stock Distribution would be taxable to Ashland, but not to its shareholders, if Valvoline or its shareholders were to engage in transactions that result in a 50% or greater change (by vote or value) in the ownership of Valvoline’s stock during the four-year period beginning on the date that begins two years before the date of the Stock Distribution, unless it were established that such transactions and the Stock Distribution were not part of a plan or series of related transactions. If the Stock Distribution were taxable for U.S. federal income tax purposes to Ashland due to a breach of Valvoline’s covenants or a 50% or greater change in the ownership of Valvoline’s stock, Ashland would recognize gain as if it had sold Valvoline common stock in a taxable transaction in an amount up to the fair market value of the stock held by it immediately before the Stock Distribution, and Valvoline generally would be required to indemnify Ashland for the tax on such gain and related expenses, as well as any additional gain in connection with certain reorganization transactions undertaken to effect the Separation and the Stock Distribution. Any such obligation could have a material impact on Valvoline’s operations.

Valvoline has agreed to numerous restrictions to preserve the tax-free nature of the Stock Distribution, which may reduce its strategic and operating flexibility.

Valvoline has agreed in the Tax Matters Agreement to covenants and indemnification obligations designed to preserve the tax-free nature of the Stock Distribution. These covenants and indemnification obligations may limit Valvoline’s ability to pursue strategic transactions or engage in new businesses or other transactions that might be beneficial and could discourage or delay a strategic transaction that its shareholders may consider favorable.

Although Valvoline entered into a Tax Matters Agreement under which the amount of its tax sharing payments to Ashland after the IPO will generally be determined as if Valvoline filed its own consolidated, combined or separate tax returns, Valvoline nevertheless will have joint and several liability with Ashland for the consolidated U.S. federal income taxes of the Ashland consolidated group for the taxable periods in which Valvoline was part of the Ashland consolidated group. In addition, Valvoline has agreed to indemnify Ashland for certain pre-IPO U.S. taxes that arise on audit and are directly attributable to neither the Valvoline business nor Ashland’s specialty ingredients and performance materials businesses (collectively, the “Chemicals business”).

Valvoline will be included in the U.S. federal consolidated group tax return, and possibly certain combined or similar group tax returns, with Ashland (“Ashland Group Returns”) for the period starting approximately on the date of the closing of the IPO and through the date of the Stock Distribution (the “Interim Period”). Under the Tax Matters Agreement, Ashland will generally make all necessary tax payments to the relevant tax authorities with respect to Ashland Group Returns, and Valvoline will make tax sharing payments to Ashland. The amount of Valvoline’s tax sharing payments will generally be determined as if Valvoline and each of its relevant subsidiaries included in the Ashland Group Returns filed its own consolidated, combined or separate tax returns for the Interim Period that include only Valvoline and/or its relevant subsidiaries, as the case may be.

For taxable periods that begin on or after the day after the date of the Stock Distribution, Valvoline will no longer be included in any Ashland Group Returns and will file tax returns that include only Valvoline and/or its subsidiaries, as appropriate. Valvoline will not be required to make tax sharing payments to Ashland for those taxable periods. Nevertheless, Valvoline has (and will continue to have following the Stock Distribution) joint and several liability with Ashland to the IRS for the consolidated U.S. federal income taxes of the Ashland consolidated group for the taxable periods in which Valvoline was part of the Ashland consolidated group.

Pursuant to the terms of the Tax Matters Agreement, Valvoline will indemnify Ashland for certain U.S. federal, state or local taxes for any tax period (prior to the closing of the IPO) of Ashland and/or its subsidiaries for that period that arise on audit or examination and are directly attributable to neither the Valvoline business nor the Chemicals business. Any payment obligations that may arise as a result of Valvoline assuming liability for such taxes could negatively affect its financial position and cash flows.

Valvoline has only been a stand-alone public company since September 2016, and its historical financial information is not necessarily representative of the results it would have achieved as a stand-alone public company prior to September 2016 and may not be a reliable indicator of its future results.

The historical financial information Valvoline has included in this annual report on Form 10-K does not reflect what its financial position, results of operations or cash flows would have been had it been a stand-alone entity during the historical periods presented, or what its financial position, results of operations or cash flows will be in the future.

If Ashland experiences a change in control, Valvoline’s current plans and strategies could be subject to change.

As long as Ashland controls Valvoline, it will have significant influence over Valvoline’s plans and strategies, including strategies relating to marketing and growth. In the event Ashland experiences a change in control, a new Ashland owner may attempt to cause Valvoline to revise or change its plans and strategies, as well as the agreements between Ashland and Valvoline, referenced in this annual report on Form 10-K. A new owner may also have different plans with respect to the contemplated Stock Distribution of Valvoline common stock to Ashland shareholders, including not affecting such a Stock Distribution.

Valvoline’s ability to operate its business effectively may suffer if it is unable to cost-effectively establish its own administrative and other support functions in order to operate as a stand-alone company after the expiration of its shared services and other intercompany agreements with Ashland.

As a business segment of Ashland, Valvoline relied on administrative and other resources of Ashland, including information technology, accounting, finance, human resources and legal, to operate Valvoline’s business. In connection with the IPO, Valvoline entered into various service agreements to retain the ability for specified periods to use these Ashland resources. These services may not be provided at the same level as when Valvoline was a business segment within Ashland, and Valvoline may not be able to obtain the same benefits that it received prior to the IPO. These services may not be sufficient to meet Valvoline’s needs, and after Valvoline’s agreements with Ashland expire (which will generally occur within 24 months following the closing of the IPO), Valvoline may not be able to replace these services at all or obtain these services at prices and on terms as favorable as it currently has with Ashland.

Valvoline will need to create its own administrative and other support systems or contract with third parties to replace Ashland’s systems. In addition, Valvoline has received informal support from Ashland which may not be addressed in the agreements it has entered into with Ashland, and the level of this informal support may diminish as Valvoline becomes a more independent company. Any failure or significant downtime in Valvoline’s administrative systems or in Ashland’s administrative systems during the transitional period could result in unexpected costs, impact Valvoline’s results and/or prevent Valvoline from paying its suppliers or employees and performing other administrative services on a timely basis.

After the IPO, Valvoline is a smaller company relative to Ashland, which could result in increased costs because of a decrease in Valvoline’s purchasing power.

Prior to the IPO, Valvoline was able to take advantage of Ashland’s size and purchasing power in procuring goods, technology and services, including insurance, employee benefit support and audit and other professional services. Valvoline is a smaller company than Ashland, and Valvoline cannot assure you that it will have access to financial and other resources comparable to those available to it prior to the IPO. As a stand-alone company, Valvoline may be unable to obtain office space, goods, technology and services at prices or on terms as favorable as those available to it prior to the IPO, which could increase its costs and reduce its profitability.

In order to preserve the ability for Ashland to distribute its shares of Valvoline common stock on a tax-free basis, Valvoline may be prevented from pursuing opportunities to raise capital, to effectuate acquisitions or to provide equity incentives to its employees, which could hurt its ability to grow.

Beneficial ownership by Ashland of at least 80% of the total voting power of Valvoline’s classes of voting stock and 80% of each class of its non-voting stock is required in order for Ashland to effect the Stock Distribution of Valvoline or certain other tax-free transactions. Valvoline has agreed that, so long as the Stock Distribution could, in the reasonable discretion of Ashland, be effectuated, Valvoline will not knowingly take or fail to take, or permit any of its affiliates to knowingly take or fail to take, any action that could reasonably be expected to preclude Ashland’s ability to effectuate the Stock Distribution. As a result, Valvoline may be precluded from pursuing certain growth initiatives, including the creation of a class of non-voting stock.

Ashland has agreed to indemnify Valvoline for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure Valvoline against the full amount of such liabilities, or that Ashland’s ability to satisfy its indemnification obligation will not be impaired in the future.

Pursuant to the Separation Agreement and certain other agreements with Ashland, Ashland has agreed to indemnify Valvoline for certain liabilities. However, third parties could also seek to hold Valvoline responsible for any of the liabilities that Ashland has agreed to retain, and there can be no assurance that the indemnity from Ashland will be sufficient to protect Valvoline against the full amount of such liabilities, or that Ashland will be able to fully satisfy its indemnification obligations in the future. Even if Valvoline ultimately succeeded in recovering from Ashland any amounts for which Valvoline is held liable, Valvoline may be temporarily required to bear these losses. Each of these risks could negatively affect Valvoline’s business, financial position, results of operations and cash flows.

Some of Valvoline’s directors and executive officers own Ashland common stock, restricted shares of Ashland common stock or options to acquire Ashland common stock and hold positions with Ashland, which could cause conflicts of interest, or the appearance of conflicts of interest, that result in Valvoline not acting on opportunities it otherwise may have.

Some of Valvoline’s directors and executive officers own Ashland common stock, restricted shares of Ashland stock or options to purchase Ashland common stock. In addition, Mr. Wulfsohn serves as Non-Executive Chairman of Valvoline’s board of directors and as Chairman and Chief Executive Officer of Ashland, and Stephen F. Kirk and Vada O. Manager, who serve on Valvoline’s board of directors, are independent directors of Ashland.

Ownership of Ashland common stock, restricted shares of Ashland common stock and options to purchase Ashland common stock by Valvoline’s directors and executive officers and the presence of executive officers or directors of Ashland on Valvoline’s board of directors could create, or appear to create, conflicts of interest with respect to matters involving both Valvoline and Ashland that could have different implications for Ashland than they do for Valvoline. For example, potential conflicts of interest could arise in connection with the resolution of any dispute between Ashland and Valvoline regarding terms of the agreements entered into by Ashland and Valvoline governing the Separation and the relationship between Ashland and Valvoline thereafter, including the Separation Agreement, the Tax Matters Agreement, the Employee Matters Agreement (“Employee Matters Agreement”), the Transition Services Agreement (“Transition Services Agreement”), Reverse Transition Services Agreement entered (“Reverse Transition Services Agreement”) and certain commercial agreements. Potential conflicts of interest could also arise if Valvoline entered into commercial arrangements with Ashland in the future. As a result of these actual or apparent conflicts of interest, Valvoline may be precluded from pursuing certain growth initiatives.

Valvoline’s inability to resolve favorably any disputes that arise between Valvoline and Ashland with respect to their past and ongoing relationships may adversely affect its operating results.

Disputes may arise between Ashland and Valvoline in a number of areas relating to their past and ongoing relationships, including:


•	labor, tax, employee benefit, indemnification and other matters arising from Valvoline’s separation from Ashland;


•	employee retention and recruiting;


•	business combinations involving Valvoline; and


•	the nature, quality and pricing of services that Valvoline and Ashland have agreed to provide each other.

Valvoline may not be able to resolve potential conflicts, and even if it does, the resolution may be less favorable than if Valvoline were dealing with an unaffiliated party.

The agreements Valvoline entered into with Ashland may be amended upon agreement between the parties. While Valvoline is controlled by Ashland, Valvoline may not have the leverage to negotiate amendments to these agreements, if required, on terms as favorable to Valvoline as those Valvoline would negotiate with an unaffiliated third party.

Valvoline may have received better terms from unaffiliated third parties than the terms it received in the agreements it entered into with Ashland.

The agreements Valvoline entered into with Ashland in connection with the Separation, including the Separation Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Transition Services Agreement, the Reverse Transition Services Agreement, the equity registration rights agreement with respect to Ashland’s continuing ownership of Valvoline common stock, a shared environmental liabilities agreement and certain commercial agreements, were prepared in the context of the Separation while Valvoline was still a wholly owned subsidiary of Ashland. Accordingly, during the period in which the terms of those agreements were prepared, Valvoline did not have an independent board of directors or a management team that was independent of Ashland. As a result, the terms of those agreements may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties.

Failure to achieve and maintain effective internal controls in accordance with Section 404 of Sarbanes- Oxley could have a material adverse effect on Valvoline’s business and stock price.

As a public company, Valvoline is subject to Section 404 of Sarbanes-Oxley, which, beginning with Valvoline’s annual report for the fiscal year ending September 30, 2017, requires annual assessments by Valvoline’s management of the effectiveness of Valvoline’s internal control over financial reporting and annual reports by Valvoline’s independent registered public accounting firm that address the effectiveness of internal control over financial reporting. During the course of its testing, Valvoline may identify deficiencies which it may not be able to remediate in time to meet its deadline for compliance with Section 404. Testing and maintaining internal control can divert management’s attention from other matters that are important to the operation of Valvoline’s business. Valvoline also expect the regulations under Sarbanes-Oxley to increase its legal and financial compliance costs, make it more difficult to attract and retain qualified officers and members of its board of directors, particularly to serve on Valvoline’s audit committee, and make some activities more difficult, time consuming and costly. Valvoline may not be able to conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with Section 404 or Valvoline’s independent registered public accounting firm may not be able or willing to issue an unqualified report on the effectiveness of Valvoline’s internal control over financial reporting. If Valvoline concludes that its internal control over financial reporting is not effective, Valvoline cannot be certain as to the timing of completion of its evaluation, testing and remediation actions or their effect on its operations because there is presently no precedent available by which to measure compliance adequacy. If either Valvoline is unable to conclude that it has effective internal control over financial reporting or its independent auditors are unable to provide it with an unqualified report as required by Section 404, then investors could lose confidence in Valvoline’s reported financial information, which could have a negative effect on the trading price of Valvoline’s stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Valvoline’s corporate headquarters is located in Lexington, Kentucky. Valvoline owns or leases approximately 40 facilities throughout the United States, Australia, Brazil, Canada, China, Croatia, India, Indonesia, the Netherlands, New Zealand, the Philippines, Russia, Singapore, the U.K. and Vietnam that comprise over 2,000,000 square feet of blending, packaging, distribution, warehouse and office space. In addition, Valvoline owns or leases the property associated with 342 quick lubes stores under the VIOC and Oil Can Henry’s brands throughout the United States. The properties leased by Valvoline have expiration dates ranging from less than one year to more than 25 years (including certain renewal options).

Valvoline leases approximately 247,000 square feet for its corporate headquarters in Lexington, Kentucky pursuant to a lease that will expire in 2017. Valvoline has already entered into a long-term lease for a new 162,500 square foot facility in Lexington, Kentucky, which is currently under construction, and Valvoline plans to relocate its corporate headquarters to that facility in conjunction with the expiration of the lease for its current corporate headquarters.

The following table provides a summary of Valvoline’s major facilities:



	Approx. Area
Location	(Sq. Ft.)		Principal Use
Leased Properties:
Sydney, Australia		60,000	Blending & Packaging
Lexington, Kentucky		247,000	Current Corporate Headquarters
West Chester, Ohio		320,000	Warehouse & Distribution
Leetsdale, Pennsylvania		125,000	Warehouse & Distribution
Willow Springs, Illinois		95,000	Blending & Packaging
Dordrecht, Netherlands		150,000	Blending, Packaging & Warehouse

Owned Properties:
Mississauga, Canada		63,000	Warehouse & Distribution
Santa Fe Springs, California		100,000	Blending & Packaging
St. Louis, Missouri		78,000	Blending & Packaging
Cincinnati, Ohio		140,000	Blending, Packaging & Warehouse
Freedom (Rochester), Pennsylvania		88,000	Blending & Packaging
Deer Park, Texas		87,000	Blending & Packaging

In addition, throughout North America, Valvoline contracts with third parties to provide blending and packaging and warehousing and distribution services. Lastly, Valvoline is part of a joint venture that operates a blending and packaging facility in Ambarnath, India and warehouses and distributes products throughout India via numerous facilities around the country. Principal manufacturing, marketing and other materially important physical properties of Valvoline and its subsidiaries are described within the applicable business units under “Item 1” in this annual report on Form 10-K. All of Valvoline’s physical properties are owned or leased. Valvoline believes its physical properties are suitable and adequate for the Company’s business. Additional information concerning certain leases may be found in Note 10 of Notes to Consolidated Financial Statements in this annual report on Form 10-K.

ITEM 3. LEGAL PROCEEDINGS

From time to time Valvoline is involved in claims and legal actions that arise in the ordinary course of business. While Valvoline cannot predict with certainty the outcome, costs recognized with respect to such actions were immaterial during the year ended September 30, 2016. Valvoline does not have any currently pending claims or litigation which Valvoline believes, individually or in the aggregate, will have a material adverse effect on its financial position, results of operations, liquidity or capital resources.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM X. EXECUTIVE OFFICERS OF VALVOLINE

The following is a list of Valvoline’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 Valvoline’s Executive Committee).

SAMUEL J. MITCHELL, JR. (age 55) is Chief Executive Officer and Director of Valvoline. Mr. Mitchell was appointed as a director and Chief Executive Officer in May 2016 and September 2016, respectively. He served as Senior Vice President of Ashland from 2011 to September 2016 and President of Valvoline from 2002 to September 2016. As Chief Executive Officer, Mr. Mitchell’s significant experience and knowledge in the areas of finance, accounting, business operations, management, manufacturing, safety, risk oversight

and corporate governance, as well as his experience in the lubricants industry, provide him with the qualifications and skills to serve as a director on Valvoline’s board of directors.

MARY E. MEIXELSPERGER (age 56) is Chief Financial Officer of Valvoline since June 2016. Prior to joining Valvoline, Ms. Meixelsperger was Senior Vice President and Chief Financial Officer of DSW Inc. from April 2014 to June 2016 and held the roles of Chief Financial Officer, Controller and Treasurer at Shopko Stores from 2006 to 2014. Ms. Meixelsperger also served as Chief Financial Officer for two non-profit organizations from 1993 to 2004 and for Worldmark Group, a private equity firm, from 1986 to 1991. Ms. Meixelsperger started her career in public accounting at Arthur Young and Company.

JULIE M. O’DANIEL (age 49) is General Counsel and Corporate Secretary of Valvoline since September 2016. She served as Lead Commercial Counsel of Valvoline from April 2014 to September 2016. Ms. O’Daniel previously served as Litigation Counsel of Valvoline from July 2007 to April 2014.

THOMAS A. GERRALD II (age 52) is Senior Vice President, Core North America of Valvoline since September 2016. He served as Senior Vice President, U.S. Installer Channel, of Valvoline from June 2012 to September 2016. Prior to that, Mr. Gerrald served as Vice President, Supply Chain - Order-To-Cash, of Ashland from October 2010 to June 2012.

FRANCES E. LOCKWOOD (age 66) is Chief Technology Officer of Valvoline since September 2016. She served as Senior Vice President, Technology, of Valvoline from May 1994 to September 2016.

HEIDI J. MATHEYS (age 44) is Chief Marketing Officer of Valvoline since September 2016. She served as Senior Vice President, Do-It-Yourself Channels, of Valvoline from August 2013 to September 2016. Ms. Matheys previously served as Vice President, Global Brands, of Valvoline from September 2012 to August 2013. From May 2012 to September 2012, Ms. Matheys was the owner of Empatico LLC, a marketing and consulting firm, and from March 2008 to June 2012, she served as Global Marketing Director at Novartis (Alcon & Cibavision).

CRAIG A. MOUGHLER (age 59) is Senior Vice President, International & Product Supply of Valvoline since September 2016. He served as Senior Vice President and Managing Director, International, of Valvoline from October 2002 to September 2016.

ANTHONY R. PUCKETT (age 54) is President, Quick Lubes of Valvoline since September 2016. He served as President of Valvoline Instant Oil Change from August 2007 to September 2016.

VICTOR T. RIOS (age 47) is Chief Information Officer and Chief Digital Officer since June 2016. Prior to joining Valvoline, Mr. Rios was Chief Information Officer for Consumer Medical Technologies of Johnson & Johnson from November 2013 to February 2016 and held the roles of Chief Information Officer of Vision Care and Vice President of IT, Global Solutions Delivery at Johnson & Johnson from 2011 to 2013.

DAVID J. SCHEVE (age 41) is Chief Accounting Officer and Controller of Valvoline, effective October 2016. He joined the Company from Southern Graphic Systems, a supplier of design-to-print brand development products and services, where he started in June 2007 as its Global Corporate Controller and was most recently its Chief Financial Officer and Vice President of Finance, responsible for, among other things, overseeing all finance and accounting staff globally.

SARA K. STENSRUD (age 49) is Chief People and Communication Officer of Valvoline. Prior to joining Valvoline, Ms. Stensrud was Executive Vice President Chief Human Resources Officer of Chico’s FAS, Inc. from 2010 to 2016 and was Senior Vice President of Human Resources of Shopko Stores from 2006 to 2010.

Each executive officer is elected by the Board of Directors of Valvoline (the “Board”) at the Board’s annual meeting to a term lasting until the Board’s next annual meeting and until a successor is duly elected, or until the officer’s earlier death, resignation or removal. The term of any executive officer elected other than at an annual meeting also lasts until the next annual meeting of the Board and until a successor is duly elected, or until the officer’s earlier death, resignation or removal.

PART II

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

Use of Proceeds from Registered Securities

On September 22, 2016, Valvoline’s registration statement on Form S-1 (File No. 333-211720) (the “registration statement”) was declared effective by the SEC for Valvoline’s initial public offering, pursuant to which Valvoline sold an aggregate 34.5 million shares of its common stock, including 4.5 million shares pursuant to the underwriters’ option to purchase additional shares. The IPO was completed on September 28, 2016 at a price to the public of $22.00 per share, resulting in net proceeds, net of underwriting discounts and other expenses, of approximately $712 million. Valvoline used approximately $637 million of these net proceeds to repay indebtedness incurred by Valvoline prior to the completion of the IPO and approximately $75 million of these net proceeds were retained for general corporate purposes. This does not represent any material change from Valvoline’s planned use for IPO proceeds as described in the final prospectus filed with the SEC on September 26, 2016 pursuant to Rule 424(b).

The proceeds of the indebtedness incurred by Valvoline prior to the completion of the IPO were transferred to Ashland. Other than these transfers, no payments were made from the proceeds of the IPO by Valvoline to its directors, officers or persons owning ten percent or more of Valvoline’s common stock or to their associates, or to any of Valvoline’s affiliates. Ashland paid approximately $7 million of offering expenses in connection with the IPO. Other than these expenses, none of the underwriting discounts or other offering expenses were incurred by or paid to Valvoline directors or officers or their associates or persons owning ten percent or more of Valvoline common stock or to any of Valvoline’s affiliates.

Market Information

Valvoline’s common stock began trading on the New York Stock Exchange under the symbol “VVV” on September 23, 2016. Valvoline’s common stock also has trading privileges on NASDAQ. Prior to September 23, 2016, there was no public market for Valvoline’s common stock. As a result, Valvoline has not set forth quarterly information with respect to the high and low prices of its common stock for the most recent fiscal years. As of November 30, 2016, there were approximately 10 holders of record of Valvoline common stock. As of November 30, 2016, Ashland owned approximately 83% of Valvoline’s common stock.

Valvoline did not purchase any of its equity securities, nor did it issue or sell any securities, other than to Ashland upon Valvoline’s formation, pursuant to any unregistered offering, during the period covered by this report. There are currently no authorized repurchase programs in effect under which Valvoline may repurchase shares of its outstanding common stock.

Dividend Policy

Valvoline intends to pay quarterly cash dividends to holders of its common stock beginning with the Company’s first dividend which is payable on December 20, 2016. The declaration and payment of dividends to holders of Valvoline common stock will be at the discretion of the Board in accordance with applicable law after taking into account various factors, including Valvoline’s financial condition, operating results, current and anticipated cash needs, cash flows, impact on Valvoline’s effective tax rate, indebtedness, legal requirements and other factors that the Board deems relevant. In addition, the instruments governing Valvoline’s indebtedness may limit its ability to pay dividends. Therefore, no assurance is given that Valvoline will pay any dividends to its shareholders, or as to the amount of any such dividends if the Board determines to do so.

ITEM 6. SELECTED FINANCIAL DATA



Valvoline Inc. and Consolidated Subsidiaries
Five-Year Selected Financial Information (a)
	For the years ended September 30
(In millions)	2016			2015			2014			2013			2012
Summary of operations													(unaudited)
Sales	$	1,929		$	1,967		$	2,041		$	1,996		$	2,034
Gross profit	$	761		$	685		$	632		$	658		$	532
Operating income	$	431		$	323		$	264		$	381		$	172
Net income	$	273		$	196		$	173		$	246		$	114

Common stock information
Basic and diluted earnings per share (b)	$	1.33		$	0.96		$	0.84		$	1.20		$	0.55
Dividends per common share	$	—		$	—		$	—		$	—		$	—

Cash flow information
Cash flows from operating activities	$	311		$	330		$	170		$	273		$	138
Less: additions to property, plant and equipment	(66		)	(45		)	(37		)	(41		)	(40		)
Free cash flow (c)	$	245		$	285		$	133		$	232		$	98



	As of September 30
	2016			2015		2014		2013		2012
(In millions)								(unaudited)		(unaudited)
Balance sheet information
Total assets	$	1,817		$	978	$	1,083	$	1,062	$	1,024
Long-term debt (including current portion)	$	743		$	—	$	—	$	—	$	—
Stockholder's (deficit) equity	$	(325	)	$	617	$	725	$	684	$	670



	For the years ended September 30
	2016			2015			2014			2013			2012
Unaudited (in millions)
Other financial data
Lubricant sales volume (gallons)	174.5			167.4			162.6			158.4			158.7
Company-owned same-store sales growth (d)	6		%	8		%	5		%	2		%	4		%
Franchisee same-store sales growth (d)(e)	8		%	8		%	6		%	2		%	2		%
EBITDA (f)	$	468		$	335		$	301		$	416		$	207
Adjusted EBITDA (f)	$	457		$	421		$	368		$	342		$	275

(a)

During the periods presented, Valvoline experienced certain changes in the composition of its assets and liabilities affecting the comparability of financial information between years. These changes include, but are not limited to, the impact of immediately recognizing actuarial gain and loss remeasurements for defined benefit pension and other postretirement benefit plans. During the five years ended September 30 presented above, Valvoline recognized a gain of $18 million in 2016 , a loss of $46 million in 2015 , a loss of $61 million in 2014 , a gain of $74 million in 2013 , and a loss of $68 million in 2012 .


(b)	Per share amounts for periods prior to September 30, 2016 have been presented for comparability only. There were no outstanding shares of Valvoline prior to the IPO in September 2016. The share count utilized for all prior period calculations was the share count as of September 30, 2016.

(c)

Valvoline uses free cash flow as an additional non-GAAP metric of cash flow generation. By deducting capital expenditures from operating cash flows, the Company is able to provide a better indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Unlike cash flow from operating activities, free cash flow includes the impact of capital expenditures, providing a more complete picture of cash generation. Free cash flow has certain limitations, including that it does not reflect adjustments for certain non-discretionary cash flows, such as allocated costs, and includes the pension and other postretirement plan remeasurement losses and gains related to Ashland sponsored benefit plans accounted for as a participation in a multi-employer plan. The amount of mandatory versus discretionary expenditures can vary significantly between periods. Valvoline’s results of operations are presented based on its management structure and internal accounting practices. The structure and practices are specific to Valvoline; therefore, its financial results and free cash flow are not necessarily comparable with similar information for other comparable companies. Free cash flow has limitations as an analytical tool and should not be considered in isolation from, or as an alternative to, or more meaningful than, cash flows provided by operating activities as determined in accordance with U.S. GAAP. In evaluating free cash flow, be aware that in the future Valvoline may incur expenses similar to those for which adjustments are made in calculating free cash. Valvoline’s presentation of free cash flow should not be construed as a basis to infer that its future results will be unaffected by unusual or non-recurring items. Because of these limitations, one should rely primarily on cash flows provided by operating activities as determined in accordance with U.S. GAAP and use free cash flow only as a supplement. Valvoline has historically determined same-store sales growth on a fiscal year basis, with new stores excluded from the metric until the completion of their first full fiscal year in operation.


(d)	Valvoline has historically determined same-store sales growth on a fiscal year basis, with new stores excluded from the metric until the completion of their first full fiscal year in operation.


(e)	Valvoline franchisees are distinct legal entities and Valvoline does not consolidate the results of operations of its franchisees.

(f)

In addition to net income determined in accordance with U.S. GAAP, Valvoline evaluates operating performance using certain non-GAAP measures including EBITDA, which Valvoline defines as net income, plus income tax expense (benefit), net interest and other financing expenses, and depreciation and amortization, and Adjusted EBITDA, which Valvoline defines as EBITDA adjusted for losses (gains) on pension and other postretirement plans remeasurement, net gain (loss) on acquisitions and divestitures, impairment of equity investment, restructuring, other income and (expense) and other items. Valvoline believes the use of non-GAAP measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance of its business by presenting comparable financial results between periods. The non-GAAP information provided is used by management and may not be comparable to similar measures disclosed by other companies, because of differing methods used by other companies in calculating EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA provide a supplemental presentation of Valvoline’s operating performance on a consolidated and reportable segment basis. Adjusted EBITDA generally includes adjustments for unusual, non-operational or restructuring-related activities.

The consolidated financial statements include actuarial gains and losses for defined benefit pension and other postretirement benefit plans recognized annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. Actuarial gains and losses occur when actual experience differs from the estimates used to allocate the change in value of pension and other postretirement benefit plans to expense throughout the year or when assumptions change, as they may each year. Significant factors that can contribute to the recognition of actuarial gains and losses include changes in discount rates used to remeasure pension and other postretirement obligations on an annual basis or upon a qualifying remeasurement, differences between actual and expected returns on plan assets and other changes in actuarial assumptions, for example the life expectancy of plan participants. Management believes Adjusted EBITDA, which includes the expected return on pension plan assets and excludes both the actual return on pension plan assets and the impact of actuarial gains and losses, provides investors with a meaningful supplemental presentation of Valvoline’s operating performance. Management believes these actuarial gains and losses are primarily financing activities that are more reflective of changes in current conditions in global financial markets (and in particular interest rates) that are not directly related to the underlying business and that do not have an immediate, corresponding impact on the compensation and benefits provided to eligible employees and retirees.

EBITDA and Adjusted EBITDA each have limitations as analytical tool and should not be considered in isolation from, or as an alternative to, or more meaningful than, net income as determined in accordance with U.S. GAAP. Because of these limitations, one should rely primarily on net income as determined in accordance with U.S. GAAP and use EBITDA and Adjusted EBITDA only as supplements. In evaluating EBITDA and Adjusted EBITDA, one should be aware that in the future Valvoline may incur expenses similar to those for which adjustments are made in calculating EBITDA and Adjusted EBITDA. Valvoline’s presentation of EBITDA and Adjusted EBITDA should not be construed as a basis to infer that future results will be unaffected by unusual or non-recurring items.

The following table reconciles EBITDA and Adjusted EBITDA to net income for the periods presented.



	For the years ended September 30
(In millions)	2016			2015		2014		2013			2012
Net income	$	273		$	196	$	173	$	246		$	114
Income tax expense	148			101		91		135			58
Net interest and other financing expense	9			—		—		—			—
Depreciation and amortization	38			38		37		35			35
EBITDA (f)	468			335		301		416			207
(Gains) losses on pension and other postretirement plans remeasurement	(18		)	46		61		(74		)	68
Separation costs	6			—		—		—			—
Net loss on acquisition and divestiture	1			26		—		—			—
Impairment of equity investment	—			14		—		—			—
Restructuring	—			—		6		—			—
Adjusted EBITDA (f)	$	457		$	421	$	368	$	342		$	275

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, 2016, 2015 and 2014. Valvoline has included within the following discussion several non-GAAP measures, on both a consolidated and reportable segment basis. These non-GAAP measures include EBITDA, Adjusted EBITDA, free cash flow, EBITDA margin, and Adjusted EBITDA margin. Management believes the use of these non-GAAP measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance of Valvoline’s business by presenting comparable financial results between periods. For more information on these non-GAAP financial measures, including reconciliations to the most directly comparable U.S. GAAP financial measures, see “Results of Operations-Consolidated Review-Use of Non-GAAP Measures.”

Valvoline’s fiscal year ends on September 30 of each year. Valvoline refers to the year ended September 30, 2016 as “fiscal 2016,” the year ended September 30, 2015 as “fiscal 2015,” and the year ended September 30, 2014 as “fiscal 2014.”

BUSINESS OVERVIEW

Valvoline is one of the most recognized and respected premium consumer brands in the global automotive lubricant industry, known for high quality products and superior levels of service. Established in 1866, Valvoline’s heritage spans 150 years, during which it has developed powerful name recognition across multiple product and service channels. Valvoline has significant positions in the United States in all of the key lubricant sales channels, and also has a strong international presence with products sold in approximately 140 countries.

Sales from external customers in the United States represented 72% of total sales in 2016. Sales from external customers in the United States and all other foreign countries for fiscal years 2016, 2015 and 2014 were as follows:



	Sales from external customers
(In millions)	2016		2015		2014
United States	$	1,397	$	1,413	$	1,440
International	532		554		601
	$	1,929	$	1,967	$	2,041

Sales by geography expressed as a percentage of total consolidated sales were as follows:



	For the years ended September 30
Sales by Geography	2016		2015		2014
North America (a)	75	%	74	%	73	%
Europe	7	%	8	%	8	%
Asia Pacific	14	%	14	%	14	%
Latin America & other	4	%	4	%	5	%
	100	%	100	%	100	%


(a)	Valvoline includes only the United States and Canada in its North American designation.

In the United States and Canada, Valvoline’s products are sold to consumers through over 30,000 retail outlets, to installer customers with over 12,000 locations, and through 1,068 Valvoline branded franchised and company-owned stores. Valvoline serves its customer base through an extensive sales force and technical support organization, allowing Valvoline to leverage its technology portfolio and customer relationships globally, while meeting customer demands locally. This combination of scale and strong local presence is critical to the Company’s success.

Valvoline has a history of leading innovation with revolutionary products such as All Climate ^™ , DuraBlend ^™ , and MaxLife ^™ . In addition to the iconic Valvoline-branded passenger car motor oils and other automotive lubricant products, Valvoline provides a wide array of lubricants used in heavy duty equipment, as well as automotive chemicals and fluids designed to improve engine performance and lifespan. Valvoline’s premium branded product offerings enhance its high quality reputation and provide customers with solutions that address a wide variety of needs.

Formation of the Company and Initial Public Offering

On September 22, 2015, Ashland announced that its Board of Directors approved proceeding with a plan to separate into two independent, publicly traded companies comprising of the Valvoline business and the specialty chemicals businesses. Following a series of restructuring steps prior to the IPO, the Valvoline business was transferred from Ashland to Valvoline Inc. such that the Valvoline business includes substantially all of the historical Valvoline business reported by Ashland, as well as certain other assets and liabilities transferred to Valvoline by Ashland. The largest transferred liabilities are the net pension and other postretirement plan liabilities. Other transferred assets and liabilities primarily consist of deferred compensation, certain Ashland legacy business insurance reserves, tax attributes, and certain trade payables. Additionally, any deferred tax assets and liabilities that relate specifically to these assets and liabilities have been transferred to Valvoline, as well as certain other tax liabilities and indemnities as a result of the Tax Matters Agreement entered into between Ashland and Valvoline.

Key elements of the Separation of Valvoline from Ashland’s other businesses include the following:


•	During July 2016, Valvoline completed its issuance of 5.500% senior unsecured notes due 2024 (“2024 Notes.”) with an aggregate principal amount of $375 million. The net proceeds of the offering of $370 million (after deducting initial purchasers’ discounts) were transferred to Ashland.


•	On September 19, 2016 Valvoline Inc. amended and restated its articles of incorporation and by-laws. Among other changes, the amendment and restatement increased Valvoline’s authorized capital stock to 440 million shares, consisting of (1) 40 million shares of preferred stock, having no par value, and (2) 400 million shares of common stock, par value $0.01 per share.

•

On September 26, 2016 Valvoline incurred $875 million in new indebtedness under a credit agreement which provides for an aggregate principal amount of $1,325 million in senior secured credit facilities, comprised of (i) a five-year $875 million term loan A facility and (ii) a five-year $450 million revolving credit facility (including a $100 million letter of credit sublimit). Valvoline fully drew on the term loan A facility, receiving approximately $865 million (after deducting fees and expenses) and borrowed $137 million under the revolving credit facility. These net proceeds were transferred to Ashland.

•

On September 28, 2016 Valvoline completed the IPO and sold 34.5 million shares of common stock, including 4.5 million shares pursuant to the underwriters’ option to purchase additional shares, at a price to the public of $22.00 per share. The total net proceeds, net of underwriting discounts and other expenses, received from the IPO were approximately $712 million. Valvoline used these net proceeds to repay $500 million of the outstanding amounts on the term loan facility, to repay $137 million of the outstanding amounts on the revolving credit facility and retained approximately $75 million for general corporate purposes. As of September 30, 2016, Ashland owned 170 million shares of Valvoline common stock, representing approximately 83% of the total outstanding shares of Valvoline common stock.

The contribution of the Valvoline business by Ashland to Valvoline Inc. was treated as a reorganization of entities under common Ashland control. As a result, the consolidated financial position and results of operations of Valvoline Inc. and its subsidiaries has been retrospectively presented for all periods presented.

Reportable Segments

Sales by each reportable segment expressed as a percentage of total consolidated sales were as follows:



	For the years ended September 30
Sales by Reportable Segment	2016		2015		2014
Core North America	51	%	54	%	55	%
Quick Lubes	24	%	20	%	18	%
International	25	%	26	%	27	%
	100	%	100	%	100	%

Core North America

The Core North America business segment sells Valvoline ^™ and other branded products in the United States and Canada to both consumers who perform their own automotive maintenance, referred to as “Do-It-Yourself” or “DIY” consumers, as well as to installer customers who use Valvoline’s products to service vehicles owned by “Do-It-For-Me” or “DIFM” consumers. Valvoline sells to DIY consumers through over 30,000 retail outlets, such as AutoZone, Advance Auto Parts and O’Reilly Auto Parts, as well as leading mass merchandisers and independent auto parts stores. Valvoline sells to DIFM consumers through installers who collectively operate over 12,000 locations in the United States and Canada. Installer customers include car dealers, general repair shops and third-party quick lube chains. Valvoline directly serves these customers with its sales force and fulfillment capabilities, through retailers such as NAPA, and a network of approximately 140 distributors. Valvoline’s key installer customers include large national accounts such as Goodyear, Monro, Express Oil Change, TBC Retail Group and Sears. The installer channel team also sells branded products and solutions to heavy duty customers such as on-highway fleets and construction companies, and Valvoline has a strategic relationship with Cummins for co-branding products in the heavy duty business.

Quick Lubes

The Quick Lubes business segment services the passenger car and light truck quick lube market through two platforms: company-owned and franchised VIOC stores, which Valvoline believes comprise the industry’s best retail quick lube service chain; and Express Care, a quick lube customer platform developed for independent operators who purchase Valvoline motor oil and other products pursuant to contracts while displaying Valvoline branded signage. VIOC provides fast, trusted service through 726 franchised and 342 company-owned stores. The VIOC stores provide a broad range of preventive maintenance services, including full-service oil changes, OEM mileage-based services (transmission, radiator and gear box fluid exchange services), tire rotations, fuel system services and seasonal air conditioning coolant replacement services. VIOC company-owned stores have had ten years of consecutive same-store sales growth. Valvoline has historically determined same-store sales growth on a fiscal year basis, with new stores excluded from the metric until the completion of their first full fiscal year in operation. VIOC franchisees have also enjoyed strong results and also have achieved ten years of consecutive same-store sales growth. Valvoline also sells its products and provides Valvoline branded signage to independent quick lube operators through the Express Care program. The Express Care platform has been designed to support smaller (typically single store) operators that do not fit the franchised model and typically offer other non-quick lube services such as auto repair and car washes.

International

The International business segment sells Valvoline ^™ and Valvoline’s other branded products in approximately 140 countries. Valvoline’s key international markets include China, India, Latin America, Australia Pacific and EMEA. Valvoline has significant overall market share in India and Australia and a growing presence in a number of markets, with primary growth targets being China, India and select countries within Latin America. The International business segment sells products for both consumer and commercial vehicles and equipment, and is served by company-owned manufacturing facilities in the United States, Australia and the Netherlands, a joint venture-owned facility in India and third-party warehouses and toll manufacturers in other regions. Valvoline’s heavy duty products are used in a wide variety of heavy duty equipment, including on-road trucks and buses, agricultural equipment, construction and mining equipment, and power generation equipment. Valvoline goes to market in its International business in three ways: (1) through its local sales, marketing and back office support teams, which Valvoline refers to as “wholly owned affiliate markets”; (2) through joint ventures; and (3) through independent distributors. In the wholly owned affiliate markets, Valvoline has a direct presence and maintains the sales and marketing teams required to build effective channels. Valvoline also has 50/50 joint ventures with Cummins in India and China and smaller joint ventures in select countries in Latin America and Asia. In other countries, Valvoline goes to market via independent distributors, which provide access to these geographies with limited capital investment.

Unallocated and other segment

Unallocated and other generally includes items such as components of pension and other postretirement benefit plan expenses (excluding service costs, which are allocated to the reportable segments), certain significant company-wide restructuring activities including costs associated with the Separation from Ashland and legacy costs.

Acquisitions and Divestitures

Oil Can Henry’s Acquisition

On December 11, 2015, Ashland announced that it signed a definitive agreement for Valvoline to acquire OCH International, Inc. (“Oil Can Henry’s”), which was the 13 ^th largest quick-lube network in the United States, servicing approximately 1 million vehicles annually with 89 quick-lube stores, 47 of which were company-owned and 42 of which were franchise locations, in Oregon, Washington, California, Arizona, Idaho and Colorado. On February 1, 2016, Ashland completed the acquisition.

The acquisition of Oil Can Henry’s is reported within the Quick Lubes reportable segment. The total purchase price, net of cash acquired, for the acquisition of Oil Can Henry’s was $62 million. See Note 3 of Notes to Consolidated Financial Statements for additional information on this acquisition.

Car Care Products Divestiture

During 2015, Ashland entered into a definitive sale agreement to sell Valvoline’s car care products within the Core North America reportable segment for $24 million, which included Car Brite™ and Eagle One™ automotive appearance products. Prior to the sale, Valvoline recognized a loss of $26 million before tax in 2015 to recognize the assets at fair value less cost to sell. The loss is reported within the net loss on acquisition and divestiture caption within the Consolidated Statements of Comprehensive Income. The transaction closed on June 30, 2015 and Valvoline received net proceeds of $19 million after adjusting for certain customary closing costs and final working capital amounts.

Venezuela Equity Method Investment Divestiture

During 2015, Valvoline sold the equity method investment in Venezuela within the International reportable segment. Prior to the sale, Valvoline recognized a $14 million impairment in 2015, for which there was no tax effect, within the equity and other income caption of the Consolidated Statements of Comprehensive Income.

Valvoline’s decision to sell the equity investment and the resulting impairment charge recorded during 2015 was a result of the continued devaluation of the Venezuelan currency (bolivar) based on changes to the Venezuelan currency exchange rate mechanisms during the fiscal year. In addition, the continued lack of exchangeability between the Venezuelan bolivar and U.S. dollar had restricted the equity method investee’s ability to pay dividends and obligations denominated in U.S. dollars. These exchange regulations and cash flow limitations, combined with other recent Venezuelan regulations and the impact of declining oil prices on the Venezuelan economy, had significantly restricted Valvoline’s ability to conduct normal business operations through the joint venture arrangement.

CERTAIN FACTORS AFFECTING FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Pension and other postretirement plan liabilities

In connection with Valvoline’s separation from Ashland, the Company assumed pension and postretirement benefit obligations and plan assets, of which a substantial portion relates to the U.S. pension and other postretirement plans. The unfunded portion of the pension and postretirement obligations at September 30, 2016 was approximately $900 million. Before the transfer, these plans were accounted for by Valvoline as multi-employer plans in accordance with U.S. GAAP, which provided that an employer that participates in a multi-employer defined benefit plan is required to recognize its expense associated with the plan and is not required to report a liability beyond the contributions currently due and unpaid by the plan. Therefore, in prior periods, no assets or liabilities relative to these retirement plans have been included in the Consolidated Balance Sheets. Amounts recognized within the Consolidated Statements of Comprehensive Income for multi-employer defined benefit pension and other postretirement plans include an allocation to Valvoline on a ratable basis of the net actuarial gains and losses on an annual basis or whenever a plan is determined to qualify for a remeasurement. As announced by Ashland in March 2016, the accrual of pension benefits for participants was frozen effective September 30, 2016. Additionally, Ashland reduced retiree life benefits effective October 1, 2016 and will reduce retiree medical and dental benefits January 1, 2017. The net effect of these plan changes resulted in a curtailment of benefits requiring a remeasurement of the benefit obligation and plan assets. During 2016, Valvoline recognized a gain of $18 million within the Consolidated Statements of Comprehensive Income as a result of the plan remeasurements. The following details the components of the remeasurement impact:



(In millions)	Loss (gain)
March 2016 remeasurement (a)(b)	$	5
August 2016 remeasurement (a)	19
Year-end remeasurement (c)	(42		)
Total 2016 remeasurement gain	$	(18	)


(a)	These remeasurements were allocations to Valvoline accounted for under a multi-employer accounting model.


(b)	The components of the March 2016 remeasurement were a curtailment gain of $18 million and an actuarial loss of $23 million.

(c)

This remeasurement is the year end remeasurement subsequent to the transfer of the plans to Valvoline. As a result of the transfer of the plans to Valvoline, these plans are now accounted for by Valvoline as single-employer plans where Valvoline records the full impact of remeasurements. This gain is the result of a $35 million gain resulting from a change in the discount rate and other actuarial assumptions and a $31 million gain resulting from a change in mortality assumptions partially offset by $24 million in actual losses on plan assets exceeding the expected return on plan assets. For additional information on key assumptions and actual plan asset performance in each year, see “Critical Accounting Policies-Employee benefit obligations-Actuarial assumptions.”

Similar to Valvoline’s current stand-alone defined benefit pension plans, Valvoline will recognize the change in the fair value of plan assets and net actuarial gains and losses for the pension and other postretirement plan liabilities transferred to Valvoline by Ashland annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement within the Consolidated Statements of Comprehensive Income. The remaining components of pension and other postretirement benefits expense will be recorded ratably on a quarterly basis. Valvoline’s policy to recognize these changes annually through mark to market accounting could result in volatility in Valvoline’s results of operations, which could be material.

Pension annuity program

On September 15, 2016, Valvoline utilized pension plan assets to purchase a non-participating annuity contract from an insurer that will pay and administer future pension benefits for 14,800 participants within the qualified U.S. pension plan. Valvoline transferred approximately $378 million of the outstanding pension benefit obligation in exchange for pension trust assets whose value approximated the liability value. The annuity purchase transaction did not generate a material settlement adjustment during 2016. The insurer has unconditionally and irrevocably guaranteed the full payment of benefits to plan participants associated with the annuity purchase and benefit payments will be in the same form that was in effect under the Plan. The insurer has also assumed all investment risk associated with the pension assets that were delivered as annuity contract premiums.

RESULTS OF OPERATIONS – CONSOLIDATED REVIEW

Use of Non-GAAP Measures

Valvoline has included within this document several non-GAAP measures, on both a consolidated and reportable segment basis, which are not defined within U.S. GAAP and do not purport to be alternatives to net income or cash flows from operating activities as a measure of operating performance or cash flows. The following are the non-GAAP measures management has included and how management defines them:


•	EBITDA, which management defines as net income, plus income tax expense (benefit), net interest and other financing expenses, and depreciation and amortization;


•	EBITDA margin, which management defines as EBITDA divided by sales;

•

Adjusted EBITDA, which management defines as EBITDA adjusted for losses (gains) on pension and other postretirement plans remeasurement, net gain (loss) on acquisitions and divestitures, impairment of equity investment, restructuring, other income and (expense) and other items (which can include costs related to the Separation from Ashland, pro forma impact of significant acquisitions or divestitures, or restructuring costs);


•	Adjusted EBITDA margin, which management defines as Adjusted EBITDA, divided by sales; and


•	Free cash flow, which management defines as operating cash flows less capital expenditures and certain other adjustments as applicable.

These measures are not prepared in accordance with U.S. GAAP, contain management’s best estimates of cost allocations and shared resource costs. Management believes the use of non-GAAP measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance of Valvoline’s business by presenting comparable financial results between periods. The non-GAAP information provided is used by Valvoline’s management and may not be comparable to similar measures disclosed by other companies, because of differing methods used by other companies in calculating EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA provide a supplemental presentation of Valvoline’s operating performance on a consolidated and reportable segment basis.

Adjusted EBITDA generally includes adjustments for unusual, non-operational or restructuring-related activities. Valvoline’s consolidated financial statements include actuarial gains and losses for defined benefit pension and other postretirement benefit plans recognized annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. Actuarial gains and losses occur when actual experience differs from the estimates used to allocate the change in value of pension and other postretirement benefit plans to expense throughout the year or when assumptions change, as they may each year. Significant factors that can contribute to the recognition of actuarial gains and losses include changes in discount rates used to remeasure pension and other postretirement obligations on an annual basis or upon a qualifying remeasurement, differences between actual and expected returns on plan assets and other changes in actuarial assumptions, for example the life expectancy of plan participants. Management believes Adjusted EBITDA, which includes the expected return on pension plan assets and excludes both the actual return on pension plan assets and the impact of actuarial gains and losses, provides investors with a meaningful supplemental presentation of Valvoline’s operating performance. Management believes these actuarial gains and losses are primarily financing activities that are more reflective of changes in current conditions in global financial markets (and in particular interest

rates) that are not directly related to the underlying business and that do not have an immediate, corresponding impact on the compensation and benefits provided to eligible employees and retirees. For further information on the actuarial assumptions and plan assets referenced above, see “Management’s Discussion and Analysis of Financial Condition and Results of Operation-Critical Accounting Policies-Employee benefit obligations” and Note 12 of Notes to Consolidated Financial Statements.

Management uses free cash flow as an additional non-GAAP metric of cash flow generation. By deducting capital expenditures, management is able to provide a better indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Unlike cash flow from operating activities, free cash flow includes the impact of capital expenditures, providing a more complete picture of cash generation. Free cash flow has certain limitations, including that it does not reflect adjustments for certain non-discretionary cash flows, such as allocated costs and mandatory debt repayments . The amount of mandatory versus discretionary expenditures can vary significantly between periods.

Valvoline’s results of operations are presented based on Valvoline’s management structure and internal accounting practices. The structure and practices are specific to Valvoline; therefore, Valvoline’s financial results, EBITDA, Adjusted EBITDA and free cash flow are not necessarily comparable with similar information for other comparable companies. EBITDA, Adjusted EBITDA and free cash flow each have limitations as an analytical tool and should not be considered in isolation from, or as an alternative to, or more meaningful than, net income and cash flows provided from operating activities as determined in accordance with U.S. GAAP. Because of these limitations, you should rely primarily on net income and cash flows provided from operating activities as determined in accordance with U.S. GAAP and use EBITDA, Adjusted EBITDA, and free cash flow only as supplements. In evaluating EBITDA, Adjusted EBITDA, and free cash flow, you should be aware that in the future Valvoline may incur expenses similar to those for which adjustments are made in calculating EBITDA, Adjusted EBITDA, and free cash flow. Valvoline’s presentation of EBITDA, Adjusted EBITDA, and free cash flow should not be construed as a basis to infer that Valvoline’s future results will be unaffected by unusual or non-recurring items.

The following table reconciles EBITDA and Adjusted EBITDA to net income for the three annual periods presented.



	For the years ended September 30
(In millions)	2016			2015		2014
Net income	$	273		$	196	$	173
Income tax expense	148			101		91
Net interest and other financing expense	9			—		—
Depreciation and amortization	38			38		37
EBITDA	468			335		301
(Gains) losses on pension and other postretirement plans remeasurement	(18		)	46		61
Separation costs	6			—		—
Net loss on acquisition and divestiture	1			26		—
Impairment of equity investment	—			14		—
Restructuring	—			—		6
Adjusted EBITDA (a)	$	457		$	421	$	368

(a)

Includes net periodic pension and other postretirement income and expense for Valvoline stand-alone plans, multi-employer plans until September 1, 2016 and single-employer plans subsequent to the transfer from Ashland. Fiscal 2016 included income of $7 million. The fiscal 2015 impact was less than $1 million and fiscal 2014 included $1 million of expense. This income and expense is comprised of service cost, interest cost, expected return on plan assets and amortization of prior service credit and is disclosed in further detail in Note 12 of Notes to Consolidated Financial Statements.

Consolidated Review

Net income

Valvoline’s net income is primarily affected by results within operating income, income taxes and other significant events or transactions that are unusual or nonrecurring. Operating income includes an adjustment for the immediate recognition of the change in the fair value of the plan assets and net actuarial gains and losses for defined benefit pension plans and other postretirement benefit plans each fiscal year.

Fiscal years ended September 30, 2016, 2015 and 2014

Key financial results for 2016, 2015 and 2014 included the following:


•	net income amounted to $273 million in 2016, $196 million in 2015 and $173 million in 2014;


•	the effective income tax rate of 35% for 2016 and 34% for each of 2015 and 2014 are generally in line with the U.S. statutory rate; and


•	operating income was $431 million, $323 million and $264 million during 2016, 2015 and 2014, respectively.

For further information on the items reported above, see the discussion in the comparative “Consolidated Statements of Comprehensive Income - Caption Review.”

Operating income

Fiscal years ended September 30, 2016, 2015 and 2014

Operating income amounted to $431 million, $323 million and $264 million in 2016, 2015 and 2014, respectively. The current and prior years’ operating income include certain items that are excluded to arrive at Adjusted EBITDA. These items are summarized as follows:


•	income of $18 million in 2016 and expense of $46 million and $61 million in 2015 and 2014, respectively, from the pension and other postretirement plans remeasurement adjustments;


•	separation costs of $6 million in 2016; and


•	$14 million impairment related to the joint venture equity investment within Venezuela during 2015.

Operating income for 2016, 2015, and 2014 included depreciation and amortization of $38 million, $38 million and $37 million, respectively.

EBITDA and Adjusted EBITDA

EBITDA totaled $468 million, $335 million, and $301 million for 2016, 2015, and 2014, respectively. Adjusted EBITDA totaled $457 million, $421 million, and $368 million for 2016, 2015, and 2014, respectively. For a reconciliation of EBITDA and Adjusted EBITDA to net income, see “Results of Operations-Consolidated Review-Use of Non-GAAP Measures”. The increase in Adjusted EBITDA was primarily due to an increase in Adjusted EBITDA in the Core North America and Quick Lubes reportable segments, while the International reportable segment’s Adjusted EBITDA decreased from the prior year primarily due to the negative impact of foreign currency exchange. Core North America’s Adjusted EBITDA increased $11 million, or 5%, compared to 2015, primarily as a result of a favorable product mix with an increase in the percentage of sales for premium lubricants and increased volumes and lower raw material costs, specifically relating to the price of base oil, which increased gross profit. Quick Lubes’ Adjusted EBITDA increased $23 million, or 21%, compared to 2015. Approximately $8 million of the Adjusted EBITDA increase for Quick Lubes’ was related to a recent acquisition, while the remainder of the improvement was the result of increased volumes and lower raw material costs, specifically relating to the price of base oil, which increased gross profit. Adjusted EBITDA for International decreased $5 million, or 6%, compared to 2015, primarily due to the negative impact of foreign currency exchange.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – CAPTION REVIEW

Fiscal years ended September 30, 2016, 2015 and 2014

A comparative analysis of the Consolidated Statements of Comprehensive Income by caption is provided as follows for the years ended September 30, 2016, 2015 and 2014.



(In millions)	2016		2015		2014		2016 Change			2015 Change
Sales	$	1,929	$	1,967	$	2,041	$	(38	)	$	(74	)

The following table provides a reconciliation of the change in sales between fiscal years 2016 and 2015 and between fiscal years 2015 and 2014.



	2016 Change			2015 Change
(In millions)	2016 Change			2015 Change
Pricing	$	(94	)	$	(53	)
Volume	68			52
Product mix	29			11
Currency exchange	(31		)	(70		)
Divestiture and acquisition, net	(10		)	(14		)
Change in sales	$	(38	)	$	(74	)

2016 compared to 2015

Sales decreased $38 million, or 2%, to $1,929 million in 2016. Lower product pricing and unfavorable foreign currency exchange decreased sales by $94 million, or 5%, and $31 million, or 2%, respectively. Unfavorable foreign currency exchange was due to the U.S. dollar strengthening compared to various foreign currencies, primarily the Australian dollar, Euro and the Yuan. Higher volume levels and changes in product mix increased sales by approximately $68 million, or 3%, and approximately $29 million, respectively. During 2016, lubricant gallons sold increased 4% to 174.5 million. The divestiture of car care products within the Core North America reportable segment during fiscal 2015 decreased sales by $45 million compared to the prior year while acquisitions increased sales by $35 million during 2016.

2015 compared to 2014

Sales decreased $74 million, or 4%, to $1,967 million in 2015. Unfavorable foreign currency exchange and lower product pricing decreased sales by $70 million, or 3%, and $53 million, or 3%, respectively. Unfavorable foreign currency exchange was due to the U.S. dollar strengthening compared to various foreign currencies, primarily the Euro and Australian dollar. Higher volume levels and changes in product mix increased sales by $52 million, or 3%, and $11 million, respectively. During 2015, lubricant gallons sold increased 3% to 167.4 million. The divestiture of car care products within the Core North America reportable segment during fiscal 2015 decreased sales by $14 million compared to the prior year.



(In millions)	2016			2015			2014			2016 Change			2015 Change
Cost of sales	$	1,168		$	1,282		$	1,409		$	(114	)	$	(127	)
Gross profit as a percent of sales	39		%	35		%	31		%

Fluctuations in cost of sales are driven primarily by raw material prices, volume and changes in product mix, currency exchange, losses or gains on pension and other postretirement benefit plan remeasurements, and other certain charges incurred as a result of changes or events within the businesses or restructuring activities.

The following table provides a reconciliation of the changes in cost of sales between fiscal years 2016 and 2015 and between fiscal years 2015 and 2014.



	2016 Change			2015 Change
(In millions)	2016 Change			2015 Change
Product cost	$	(114	)	$	(106	)
Currency exchange	(23		)	(52		)
Volume and product mix	65			43
Divestiture and acquisition, net	(14		)	(11		)
Pension and other postretirement benefit plans income (including remeasurements)	(28		)	(1		)
Change in cost of sales	$	(114	)	$	(127	)

2016 compared to 2015

Cost of sales decreased $114 million during 2016 compared to 2015. Lower raw material costs decreased cost of sales by $114 million primarily due to declining base oil prices in 2016. Favorable foreign currency exchange decreased cost of sales by $23 million, while changes in volume and product mix combined to increase cost of sales by $65 million. The divestiture of car care products during fiscal 2015 decreased cost of sales by $38 million and was partially offset by increased cost of sales of $24 million as a result of the Oil Can Henry’s acquisition during 2016. During 2016, cost of sales decreased compared to 2015 due to increased income of $28 million related to pension and other postretirement benefit plans. Gross profit as a percent of sales increased primarily due to lower cost of sales driven primarily by lower raw material costs during 2016 as compared to 2015.

2015 compared to 2014

Cost of sales decreased $127 million during 2015 compared to 2014 . Lower raw material costs decreased cost of sales by $106 million primarily due to declining base oil prices in 2015. Favorable foreign currency exchange decreased cost of sales by $52 million, while changes in volume and product mix combined to increase cost of sales by $43 million. The divestiture of car care products during fiscal 2015 also decreased cost of sales by $11 million. Gross profit as a percent of sales increased primarily due to lower cost of sales driven primarily by lower raw material costs and favorable foreign currency exchange during 2015 as compared to 2014.



(In millions)	2016			2015			2014			2016 Change			2015 Change
Selling, general and administrative expense	$	270		$	291		$	303		$	(21	)	$	(12	)
As a percent of sales	14		%	15		%	15		%

2016 compared to 2015

Selling, general and administrative expense decreased $21 million, or 7%, during 2016 as compared to 2015. Key drivers of this decrease were:

•

a decrease of $44 million related to the pension and other postretirement costs. Specifically, a gain of $11 million on the pension and other postretirement plans remeasurement and income of $11 million was recognized on the non-service components of the pension and postretirement plans for asset returns in excess of interest costs was recognized during 2016. This compared to a loss on remeasurement of $28 million and income of $6 million for non-service component income recorded in 2015. These amounts, inclusive of both Valvoline specific plans and shared plans accounted for under the multi-employer approach for the first eleven months of 2016 and transferred to Valvoline in September 2016, decreased primarily due to changes in assumptions regarding discount rates and mortality rates and the fact that Valvoline assumed the responsibility for a significant portion of new pension and postretirement plans. See Note 2 of Notes to Consolidated Financial Statements for further discussion on this accounting policy;


•	a decrease in spending of $6 million due to the divestiture of car care products; and


•	a decrease of $5 million due to favorable currency exchange impacts.

These decreases were partially offset by the following significant increases:


•	separation costs of $6 million;


•	increased labor related costs of $6 million;


•	increased spend of $4 million related to Oil Can Henry’s;


•	increased consultant and technology cost of $4 million;


•	increased advertising and sales promotion expenses of $4 million;


•	increased research and development costs of $2 million; and


•	increased bad debt related expense of $2 million.

2015 compared to 2014

Selling, general and administrative expense decreased $12 million, or 4%, during 2015 as compared to 2014. Key drivers of this decrease were:

•

a decrease of $15 million related to the pension and other postretirement costs. Specifically, a loss of $28 million on the pension and other postretirement plans remeasurement was recognized during 2015 compared to a loss of $43 million in 2014. The loss recognized, inclusive of both Valvoline specific plans and shared plans accounted for under the multi-employer approach, decreased primarily due to changes in the discount rate. See Note 2 of Notes to Consolidated Financial Statements for further discussion on this accounting policy;


•	approximately $19 million of cost savings related to restructuring programs;


•	favorable foreign currency exchange of $9 million;


•	increase of $9 million due to costs associated with supply chain operations that, as described below, were included within the corporate expense allocations prior to 2015;


•	increased advertising expense of $5 million;


•	increased legal, consultant and technology cost of $5 million; and


•	increased incentive compensation expense of $4 million.



(In millions)	2016		2015		2014		2016 Change		2015 Change
Corporate expense allocation	$	79	$	79	$	95	$	—	$	(16	)

2016 compared to 2015

Corporate expense allocations were consistent in 2016 compared to 2015.

2015 compared to 2014

Corporate expense allocations decreased $16 million in 2015 compared to 2014 primarily due to a $9 million decrease from a change in reporting of supply chain operations. Prior to 2015, supply chain operations were previously included within corporate allocation; however, in 2015 the reporting of these costs attributable to Valvoline’s operations were realigned in order to be directly reported within selling, general and administrative expense. Additional decreases were the result of cost savings as a result of restructuring programs.



(In millions)	2016		2015			2014		2016 Change			2015 Change
Equity and other income
Equity income (loss)	$	12	$	(2	)	$	10	$	14		$	(12	)
Other income	7		10			20		(3		)	(10		)
	$	19	$	8		$	30	$	11		$	(22	)

2016 compared to 2015

Equity income (loss) increased by $14 million during 2016 compared to 2015, primarily due to the $14 million impairment of a joint venture equity investment within Venezuela in 2015. For additional information see Note 3 of Notes to Consolidated Financial Statements. Other income decreased by $3 million primarily due to a decrease in income due to divestitures and unfavorable currency impacts.

2015 compared to 2014

Equity income (loss) decreased by $12 million during 2015 compared to 2014, primarily due to the $14 million impairment of a joint venture equity investment within Venezuela in 2015. For additional information see Note 3 of Notes to Consolidated Financial Statements. Other income decreased by $10 million primarily due to a favorable arbitration ruling on a commercial contract in 2014. For additional information see Note 3 of Notes to Consolidated Financial Statements.



(In millions)	2016			2015			2014		2016 Change		2015 Change
Net loss on acquisition and divestiture	$	(1	)	$	(26	)	$	—	$	25	$	(26	)

The loss on acquisition and divestiture in 2016 represents costs to complete the Oil Can Henry acquisition while the 2015 amount represents the loss on the disposition of car care products. This loss was a result of the book value exceeding the sales price of the assets sold.



(In millions)	2016			2015			2014			2016 Change		2015 Change
Income tax expense	$	148		$	101		$	91		$	47	$	10
Effective tax rate	35		%	34		%	34		%

The effective tax rates are generally in line with the U.S. statutory rate. For fiscal years 2016 through 2014, the effective tax rate was impacted favorably by the lower tax rate on foreign earnings and net favorable permanent items. These favorable items are offset by the unfavorable impact of state taxes. These adjustments net to an immaterial overall impact to the effective tax rate for each year. The increase in the 2016 tax rate is partially due to the increase in income from pension and other postretirement benefits that generated significant income amounts in higher tax rate jurisdictions.

RESULTS OF OPERATIONS – REPORTABLE SEGMENT REVIEW

Valvoline’s business is managed within three reportable segments: Core North America, Quick Lubes and International. Results of Valvoline’s reportable segments are presented based on its management structure and internal accounting practices. The structure and practices are specific to Valvoline; therefore, the financial results of its reportable segments are not necessarily comparable with similar information for other comparable companies. Valvoline allocates all costs to its reportable segments except for certain significant company-wide restructuring activities and other costs or adjustments that relate to former businesses that Valvoline no longer operates. The service cost component of pension and other postretirement benefits costs is allocated to each reportable segment on a ratable basis; while the remaining components of pension and other postretirement benefits costs are recorded to Unallocated and other. Valvoline 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 the industry or market changes. Revisions to Valvoline’s methodologies that are deemed insignificant are applied on a prospective basis.

The EBITDA and Adjusted EBITDA amounts presented within this section are provided as a means to enhance the understanding of financial measurements that Valvoline has internally determined to be relevant measures of comparison for each reportable segment. Each of these non-GAAP measures is defined as follows: EBITDA (operating income plus depreciation and amortization), Adjusted EBITDA (EBITDA adjusted for key items, which may include pro forma effects for significant acquisitions or divestitures, as applicable), and Adjusted EBITDA margin (Adjusted EBITDA divided by sales). Valvoline does not allocate items to each reportable segment below operating income, such as interest expense and income taxes. As a result, reportable segment EBITDA and Adjusted EBITDA are reconciled directly to operating income since it is the most directly comparable Consolidated Statements of Comprehensive Income caption.

The following table shows sales, operating income and statistical operating information by reportable segment for the years ended September 30, 2016, 2015 and 2014.



	For the years ended September 30
(In millions)	2016			2015			2014
Sales
Core North America	$	979		$	1,061		$	1,114
Quick Lubes	457			394			370
International	493			512			557
	$	1,929		$	1,967		$	2,041

Operating income (loss)
Core North America	$	212		$	200		$	165
Quick Lubes	117			95			79
International	74			65			78
Unallocated and other	28			(37		)	(58		)
	$	431		$	323		$	264

Depreciation and amortization
Core North America	$	16		$	17		$	16
Quick Lubes	17			16			15
International	5			5			6
	$	38		$	38		$	37

Operating information
Core North America
Lubricant sales gallons	101.2			99.9			99.0
Premium lubricants (percent of U.S. branded volumes)	41.4		%	36.6		%	33.7		%
Gross profit as a percent of sales (a)	41.2		%	36.6		%	31.6		%
Quick Lubes
Lubricant sales gallons	20.2			17.4			15.9
Premium lubricants (percent of U.S. branded volumes)	57.1		%	54.5		%	52.2		%
Gross profit as a percent of sales (a)	41.6		%	39.8		%	38.4		%
International
Lubricant sales gallons	53.1			50.1			47.7
Premium lubricants (percent of lubricant volumes)	29.0		%	30.9		%	30.1		%
Gross profit as a percent of sales (a)	31.4		%	30.2		%	27.7		%


(a)	Gross profit is defined as sales, less cost of sales.

Core North America

2016 compared to 2015

Core North America sales decreased $82 million, or 8%, to $979 million in 2016. Lower product pricing and the disposition of car care products decreased sales by $68 million, or 6%, and $45 million, or 4%, respectively. Changes in product mix and higher volume levels increased sales by $27 million, or 3%, and $7 million, respectively. Unfavorable foreign currency exchange decreased sales by $3 million primarily due to the U.S. dollar strengthening compared to the Canadian dollar.

Gross profit increased $15 million during 2016 compared to 2015. Lower product costs, partially offset by lower product pricing, increased gross profit by $12 million, while changes in volume and product mix combined to increase gross profit by $11 million. The divestiture of car care products and unfavorable foreign currency exchange decreased gross profit by $7 million and $1 million, respectively. Gross profit as a percent of sales (or gross profit margin) during the current period increased 4.6 percentage points to 41.2%.

Selling, general and administrative expense (which, for reportable segment purposes, includes corporate expense allocation costs) increased $3 million during the current period, primarily as a result of $4 million of increased consulting and legal costs, $2 million of increased bad debt expense, $2 million of increased research and development expenses and $1 million of salaries expense. These increases were partially offset by cost savings from the divestiture of car care products of $6 million. Equity and other income remained consistent compared to the prior year.

Operating income totaled $212 million in the current period as compared to $200 million in the prior year period. EBITDA increased $11 million to $228 million in 2016. EBITDA margin increased 2.8 percentage points to 23.3% in 2016.

2015 compared to 2014

Core North America sales decreased $53 million, or 5%, to $1,061 million in 2015. Lower product pricing and the disposition of car care products decreased sales by $51 million, or 5%, and $14 million, or 1%, respectively. Higher volume levels and changes in product mix increased sales by $9 million and $8 million, respectively. Unfavorable foreign currency exchange decreased sales by $5 million due to the U.S. dollar strengthening compared to the Canadian dollar.

Gross profit increased $36 million during 2015 compared to 2014. Lower product costs, partially offset by lower product pricing, increased gross profit by $34 million. Increases in volumes and changes in product mix combined to increase gross profit by $7 million, while unfavorable foreign currency exchange decreased gross profit by $2 million. The divestiture of car care products also decreased gross profit by $3 million. Gross profit margin during 2015 increased 5.0 percentage points to 36.6%.

Selling, general and administrative expense increased approximately $1 million during 2015 as compared to 2014, primarily as a result of $5 million of increased advertising costs, $2 million of increased resource costs allocated from Ashland, a $1 million increase in salaries and benefits, and $1 million of increased incentive compensation costs. These increases were partially offset by restructuring savings related to salaries and advertising of $4 million and $4 million, respectively, and cost savings from the divestiture of car care products of $2 million. Equity and other income remained consistent compared to 2014.

Operating income totaled $200 million in 2015 as compared to $165 million in 2014. EBITDA increased $36 million to $217 million in 2015. EBITDA margin increased 4.2 percentage points to 20.5% in 2015.

EBITDA and Adjusted EBITDA reconciliation

The following EBITDA presentation is provided as a means to enhance the understanding of financial measurements that Valvoline has internally determined to be relevant measures of comparison for the results of Core North America. There were no unusual or key items that affected comparability for Adjusted EBITDA for all periods presented herein.



	For the years ended September 30
(In millions)	2016		2015		2014
Operating income	$	212	$	200	$	165
Depreciation and amortization	16		17		16
EBITDA	$	228	$	217	$	181

Quick Lubes

2016 compared to 2015

Quick Lubes sales increased $63 million, or 16%, to $457 million during 2016. Volume increased sales by $34 million as lubricant sales gallons increased to 20.2 million gallons during 2016. Acquisitions increased sales by $35 million, while unfavorable product pricing decreased sales by $8 million. Changes in product mix increased sales $2 million.

Gross profit increased $33 million during 2016 compared to 2015. Increases in volumes and changes in product mix combined to increase gross profit by $13 million. Lower raw material costs, partially offset by unfavorable product pricing, increased gross profit by $9 million, while the acquisition of Oil Can Henry’s increased gross profit by $11 million. Gross profit margin during the current year increased 1.8 percentage points to 41.6%.

Selling, general and administrative expense increased $11 million during 2016. The increase was primarily a result of a $4 million increase in operating costs as a result of the acquisition of Oil Can Henry’s, $4 million of increased allocated resource costs from Ashland, a $1 million increase in advertising and sales promotion costs and a $1 million increase in salaries and incentive compensation costs. Equity and other income was essentially flat in 2016 compared to 2015.

Operating income totaled $117 million in 2016 as compared to $95 million in 2015. EBITDA increased $23 million to $134 million in 2016. EBITDA margin increased 1.2 percentage points in to 29.3% in 2016.

2015 compared to 2014

Quick Lubes sales increased $25 million, or 7%, to $394 million during 2015. Volume increased sales by $18 million as lubricant sales gallons increased to 17.4 million gallons during 2015. Favorable pricing and changes in product mix increased sales by $5 million and $2 million, respectively.

Gross profit increased $15 million during 2015 compared to 2014. Lower raw material costs and favorable product pricing increased gross profit by $8 million. Increases in volumes and changes in product mix combined to increase gross profit by $7 million. Gross profit margin during 2015 increased 1.4 percentage points to 39.8%.

Selling, general and administrative expense decreased by less than $1 million during 2015 as compared to 2014. The slight decrease was primarily a result of $5 million of cost savings from resource costs allocated from Valvoline’s parent company. These costs were partially offset by a $2 million increase in salary and benefit costs and a $1 million increase in legal and consulting costs, as well as increased advertising costs and bad debt expense of $1 million combined. Equity and other income was slightly positive compared to the prior year due to a gain on the disposition of certain assets.

Operating income totaled $95 million in 2015 as compared to $79 million in 2014. EBITDA increased $17 million to $111 million in 2015. EBITDA margin increased 2.4 percentage points to 28.1% in 2015.

Additional Sales and Growth Information

Quick Lubes sales are influenced by the number of company-owned stores and the business performance of those stores. Through Quick Lubes, Valvoline sells products to and receive royalty fees from VIOC franchisees. As a result, Quick Lubes sales are influenced by the number of units owned by franchisees and the business performance of franchisees. The following table provides supplemental information regarding company-owned stores and franchisees that Valvoline believes is relevant to an understanding of the Quick Lubes business.



	For the years ended September 30
	2016		2015		2014
Total store units open at end of period - Company-owned	342		279		272
Total store units open at end of period - Franchisee*	726		663		650
Total store units open at end of period - Combined*	1,068		942		922

Same-Store Sales Growth** - Company-owned	6.2	%	7.5	%	4.5	%
Same-Store Sales Growth** - Franchisee*	8.0	%	7.8	%	5.5	%
Same-Store Sales Growth** - Combined*	7.5	%	7.7	%	5.2	%

* Valvoline’s franchisees are distinct legal entities and Valvoline does not consolidate the results of operations of its franchisees.


**	Valvoline has historically determined same-store sales growth on a fiscal year basis, with new stores excluded from the metric until the completion of their first full fiscal year in operation.

EBITDA and Adjusted EBITDA reconciliation

The following EBITDA presentation is provided as a means to enhance the understanding of financial measurements that Valvoline has internally determined to be relevant measures of comparison for the results of Quick Lubes. There were no unusual or key items that affected comparability for Adjusted EBITDA for all periods presented herein.



	For the years ended September 30
(In millions)	2016		2015		2014
Operating income	$	117	$	95	$	79
Depreciation and amortization	17		16		15
EBITDA	$	134	$	111	$	94

International

2016 compared to 2015

International sales decreased $19 million, or 4%, to $493 million in 2016. Unfavorable foreign currency exchange, primarily with the Yuan and Australian dollar, decreased sales by $28 million, or 6%. Higher volume levels increased sales by $27 million, or 5%. Lower product pricing decreased sales by $18 million.

Gross profit was essentially unchanged in 2016 compared to 2015. Unfavorable foreign currency exchange decreased gross profit by $7 million, while increases in volumes and changes in product mix combined to increase gross profit by $7 million. Lower product pricing was partially offset by lower product costs resulting in minimal gross profit impact. Gross profit margin during 2016

increased 1.2 percentage points to 31.4%.

Selling, general and administrative expense increased $2 million during the current period, primarily as a result of $1 million of salaries expense, $1 million of advertising and sales promotion costs, and $1 million of cost savings from resource costs allocated from Valvoline’s parent company. Equity and other income (loss) increased $11 million compared to 2015 primarily as a result of the $14 million impairment of the Venezuelan equity method investment in 2015. For additional information see Note 3 of Notes to Consolidated Financial Statements.

Operating income totaled $74 million in 2016 as compared to $65 million in the prior year. EBITDA increased $9 million in 2016 to $79 million. Adjusted EBITDA decreased $5 million and Adjusted EBITDA margin decreased 0.5 percentage points to 16.0% in the current year.

2015 compared to 2014

International sales decreased $45 million, or 8%, to $512 million during 2015. Unfavorable currency exchange decreased sales by $65 million as a result of the U.S. dollar strengthening as compared to various foreign currencies, primarily the Euro and the Australian dollar. Volume increased sales $24 million, as lubricant gallons sold increased to 50.1 million gallons during 2015, and changes in product mix increased sales by $2 million. Unfavorable product pricing decreased sales by $6 million.

Gross profit increased $1 million during 2015 compared to 2014. Unfavorable foreign currency exchange decreased gross profit by $17 million while lower raw material costs, partially offset by lower product pricing, increased gross profit by $11 million. Increases in volumes and changes in product mix combined to increase gross profit by $7 million. Gross profit margin during 2015 increased 2.5 percentage points to 30.2%.

Selling, general and administrative expense decreased $7 million, or 7%, during 2015 as compared to 2014, primarily as a result of declines from favorable foreign currency exchange of $9 million, which was partially offset by increased sales promotion costs of $1 million.

Equity and other income decreased by $21 million during 2015 compared to 2014, primarily due to the $14 million impairment of an equity method investment in Venezuela during 2015 and $8 million from a favorable arbitration ruling on a commercial contract during 2014. For additional information see Notes 3 and 13 of Notes to Consolidated Financial Statements.

Operating income totaled $65 million in 2015 as compared to $78 million in 2014. EBITDA decreased $14 million to $70 million in 2015. Adjusted EBITDA was $84 million in 2015 and 2014. Adjusted EBITDA margin increased 1.4 percentage points to 16.5% in 2015.

EBITDA and Adjusted EBITDA reconciliation

The following EBITDA and Adjusted EBITDA presentation is provided as a means to enhance the understanding of financial measurements that Valvoline has internally determined to be relevant measures of comparison for the results of International. Adjusted EBITDA results have been prepared to illustrate the ongoing effects of Valvoline’s operations, which exclude certain key items. The $14 million adjustment during the year ended September 30, 2015 is related to the impairment of an equity method investment within Venezuela.



	For the years ended September 30
(In millions)	2016		2015		2014
Operating income	$	74	$	65	$	78
Depreciation and amortization	5		5		6
EBITDA	79		70		84
Impairment of equity investment	—		14		—
Adjusted EBITDA	$	79	$	84	$	84

Unallocated and Other

The following table summarizes the key components of the Unallocated and other segment’s operating income (expense) for the fiscal years ended September 30, 2016 , 2015 , and 2014 .



	For the years ended September 30
(In millions)	2016			2015			2014
Gain (losses) on pension and other postretirement plan remeasurement	$	18		$	(46	)	$	(61	)
Non-service pension and other postretirement net periodic income (a)	17			9			9
Separation costs	(6		)	—			—
Restructuring activities	—			—			(6		)
Other legacy costs	(1		)	—			—
Operating income (expense)	$	28		$	(37	)	$	(58	)


(a)	Amounts exclude service costs of $10 million during 2016, $9 million during 2015 and $10 million during 2014, which are allocated to Valvoline’s reportable segments.

Fiscal years ended September 30, 2016 , 2015 , and 2014

Unallocated and other recorded income of $28 million for 2016 compared to expense of $37 million for 2015 and $58 million for 2014. Unallocated and other includes pension and other postretirement net periodic costs and income within operations that have not been allocated to reportable segments. These costs and income are reflective of stand-alone Valvoline pension plans as well as the shared pension and other postretirement plans accounted for under a multi-employer approach.

In connection with Valvoline’s separation from Ashland, the Company assumed pension and postretirement benefit obligations and plan assets, of which a substantial portion relates to the U.S. pension and other postretirement plans. Before the transfer, these plans were accounted for by Valvoline as multi-employer plans. See Note 12 of Notes to Consolidated Financial Statements as changes made to these plans will significantly impact amounts recorded by Valvoline in the future. In the historical periods presented, Valvoline received an allocation of the cost for these benefits based on Valvoline employees’ relative participation in the plan. However, as the responsibility for several of Ashland’s pension and postretirement plans transferred to Valvoline, the full amount of any costs or gains related to the transferred plans has been reflected within the Valvoline consolidated financial statements for the month of September and will continue going forward. These pension and other postretirement plan costs include interest cost, expected return on assets and amortization of prior service credit, which resulted in income of $17 million during 2016, $9 million during 2015, and $9 million during 2014. Unallocated and other also includes gains and losses on pension and other postretirement plan remeasurements, which resulted in a gain of $18 million in 2016, a loss of $46 million in 2015 and a loss of $61 million in 2014. Fluctuations in these amounts from year to year result primarily from changes in the discount rate but are also partially affected by differences between the expected and actual return on plan assets during each year as well as other changes in other actuarial assumptions such as changes in demographic data or mortality assumptions. The current year remeasurement gain includes the allocation of the curtailment gains and actuarial losses resulting from the March 2016 announced plan amendments of certain shared pension and other postretirement plans. These plan amendments froze the pension benefits for the majority of Ashland’s U.S. pension plans as of September 30, 2016 and reduced the retiree life and medical benefits effective October 1, 2016 and January 1, 2017, respectively. The amounts recorded for pension and other postretirement plans are expected to be substantially different in 2017 and beyond.

Unallocated and other also includes $6 million of separation costs in 2016 and $1 million of other legacy costs allocated from Ashland to Valvoline in 2016. In 2014, Unallocated and other also included $6 million of severance expense related to restructuring programs.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Overview

Historically, the primary source of liquidity for Valvoline’s business was the cash flow provided by operations, which was transferred to Ashland to support its overall centralized cash management strategy. Transfers of cash to and from Ashland’s cash management system have been reflected in Parent’s net investment in the historical Consolidated Balance Sheets, Consolidated Statements of Cash Flows and Consolidated Statements of Stockholders’ Equity. In connection with Valvoline’s separation from Ashland, the Company received $60 million in cash from Ashland, and Valvoline currently maintains separate cash management and financing functions for operations.

At September 30, 2016, Valvoline has outstanding $375 million of 5.500% senior unsecured notes due 2024 (“2024 Notes”), with an aggregate principal amount of $375 million, which were issued in July 2016. The net proceeds of the offering of $370 million (after deducting initial purchasers’ discounts) were transferred to Ashland.

On September 26, 2016, Valvoline incurred $875 million in new indebtedness under the 2016 Credit Agreement. The 2016 Senior Credit Agreement provided for an aggregate principal amount of $1,325 million in senior secured credit facilities, comprised of (i) a five-year $875 million term loan and (ii) a five-year $450 million revolving credit facility (including a $100 million letter of credit sublimit). Valvoline fully drew on the Term Loans, receiving approximately $865 million (after deducting fees and expenses) and borrowed $137 million under the Revolver. These net proceeds were transferred to Ashland. A portion of these borrowings were repaid in connection with the Valvoline IPO as further discussed below.

In connection with these financing transactions, Valvoline deferred $17 million in debt issuance costs, of which $4 million of amortization was accelerated and recognized in net interest and other financing expense in the Consolidated Statements of Comprehensive Income as a result of the repayment on the senior secured term loan facility. The remaining balance of debt issuance costs is amortized over the term of the respective arrangements using the effective interest method. Refer to Note 9 of Notes to Consolidated Financial Statements for additional details regarding the Company’s financing activities.

In connection with Valvoline’s separation from Ashland, the Company assumed pension and postretirement benefit obligations and plan assets, of which a substantial portion relates to the U.S. pension and other postretirement plans. The unfunded portion of the pension and postretirement obligations at September 30, 2016 was approximately $900 million. As announced by Ashland in March 2016, these pension plans are frozen to new participants and, effective September 2016, the accrual of pension benefits for participants were frozen. Certain other postretirement benefits were also eliminated or curtailed.

No U.S. qualified pension plan contributions were required in 2016; however, approximately $6 million in contributions to the U.S. non-qualified pension plans and non-U.S. pension plans were made during the year. Ashland paid approximately $4 million prior to the IPO, which were accounted for through Parent’s net investment in Valvoline, and Valvoline paid the remaining $2 million in September 2016. During 2017, Valvoline expects to contribute approximately $15 million to its pension plans.

As of September 30, 2016, the Company was in compliance with all covenants. Valvoline believes that cash flows expected to be generated from operations and other available financial resources such as cash on hand and debt capacity will be adequate to meet investing and financing requirements. The Company’s ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures, and other business and risk factors described elsewhere in this Annual Report. Valvoline’s future capital requirements will depend on many factors, including its rate of sales growth, the expansion of its sales and marketing activities, its expansion into other markets and its results of operations. To the extent that existing cash, cash from operations and credit facilities are insufficient to fund its future activities, Valvoline may need to seek additional financing alternatives.

Financial position

Valvoline had $172 million in cash and cash equivalents as of September 30, 2016, of which $78 million was held by foreign subsidiaries. Valvoline currently has no plans to repatriate any amounts for which additional U.S. taxes would need to be accrued.

Operating activities

The cash generated during each period is primarily driven by net income results, adjusted for certain non-cash items such as depreciation and amortization and remeasurement adjustments to the pension and other postretirement plans, as well as changes in working capital, which are fluctuations within accounts receivable, inventory, trade and other payables, and accrued expenses and other liabilities. Valvoline continues to emphasize working capital management as a high priority and focus.

The following table sets forth the cash flows associated with Valvoline’s operating activities:



	For the years ended September 30
(In millions)	2016			2015			2014
Cash flows from operating activities
Net income	$	273		$	196		$	173
Adjustments to reconcile net income to cash flows from operating activities
Depreciation and amortization	38			38			37
Debt issuance cost amortization	4			—			—
Deferred income taxes	13			(9		)	(16		)
Equity income from affiliates	(12		)	(12		)	(10		)
Distributions from equity affiliates	16			18			7
Net loss on acquisition and divestiture	1			26			—
Impairment of equity method investment	—			14			—
Pension contribution	(2		)	—			—
(Gain) loss on Valvoline pension and other postretirement plan remeasurements	(42		)	2			1
Change in assets and liabilities (a)
Accounts receivable	(17		)	53			(31		)
Inventories	(4		)	(6		)	8
Trade and other payables	(49		)	(7		)	(8		)
Accrued expenses and other liabilities	54			9			(11		)
Other assets and liabilities	38			8			20
Total cash flows provided by operating activities	$	311		$	330		$	170


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

Cash provided by operating activities decreased by $19 million in 2016. The decrease in cash flows provided by operating activities was primarily related to a number of factors related to the Separation and IPO, net of increased net income. These factors related to the Separation and IPO resulted in increased receivables, net of increased accrued expenses and other liabilities, and increased deferred income tax expense. The changes in working capital were primarily related to separation and financing activities in the fourth fiscal quarter of 2016 which increased payables and accrued expenses offset by increased receivables as customer payments on Valvoline receivables were collected by Ashland prior to year-end but were not remitted to Valvoline before September 30, 2016.

Cash provided by operating activities increased $160 million from 2014 to 2015. This was primarily attributed to increased net income and working capital performance with inflows of $41 million related to receivables from the sale of certain customer receivables to a financial institution in 2015, as well as noncash adjustments for the net losses associated with the disposition of car care products and equity investment activity.

Investing activities

The following table sets forth the cash flows associated with Valvoline’s investing activities:



	For the years ended September 30
(In millions)	2016			2015			2014
Cash flows from investing activities
Additions to property, plant and equipment	$	(66	)	$	(45	)	$	(37	)
Proceeds from disposal of property, plant and equipment	1			1			1
Purchase of operations - net of cash acquired	(83		)	(5		)	(2		)
Proceeds from sale of operations	—			23			—
Total cash flows used by investing activities	$	(148	)	$	(26	)	$	(38	)

Cash used by investing activities was $148 million in 2016 compared to $26 million in 2015 and $38 million for 2014 . The purchase of operations of $83 million during the current period relates primarily to the acquisition of Oil Can Henry’s as well as other nominal

Quick Lubes locations, while the prior year periods included $5 million and $2 million in 2015 and 2014, respectively, for nominal Quick Lube acquisitions. Fiscal 2016 included cash outflows of $66 million for capital expenditures primarily related to the Company’s investments in preparation for full separation from Ashland to operate as a stand-alone company in fiscal 2017. This compares to capital expenditures of $45 million and $37 million in 2015 and 2014, respectively.

Financing activities

The following table sets forth the cash flows associated with Valvoline’s financing activities:



	For the years ended September 30
(In millions)	2016			2015			2014
Cash flows from financing activities
Net transfers to Parent	$	(1,504	)	$	(304	)	$	(132	)
Cash contributions from Parent	60			—			—
Proceeds from initial public offering, net offering costs of $40	719			—			—
Proceeds from borrowings, net of issuance costs of $15	1,372			—			—
Repayment on borrowings	(637		)	—			—
Total cash flows provided by (used in) financing activities	$	10		$	(304	)	$	(132	)

As Ashland managed Valvoline’s cash and financing arrangements prior to the IPO, all excess cash generated through earnings were remitted to Ashland and all sources of cash were funded by Ashland. See Note 1 of Notes to Consolidated Financial Statements for additional information.

Cash flows from financing activities was an inflow of $10 million for 2016 , and an outflow of $304 million and $132 million in 2015 and 2014 , respectively. Cash flows provided by financing activities in 2016 were related to the various financing activities previously described that Valvoline executed in the fiscal fourth quarter in order to establish borrowings and initial capitalization, net of remittances to Ashland for net cash transfers primarily from borrowing proceeds and net income through the date of IPO. Cash provided by operations, which increased for the reasons discussed previously, and proceeds from the disposition of car care products drove the $172 million increase in cash transferred to Ashland during 2015 compared to 2014.

Free cash flow and other liquidity information

The following table sets forth free cash flow for the disclosed periods and reconciles free cash flow to cash flows provided by operating activities. Free cash flow has certain limitations, including that it does not reflect adjustments for certain non-discretionary cash flows, such as allocated costs, and includes the pension and other postretirement plan remeasurement losses or gains related to Ashland sponsored benefit plans accounted for as a participation in a multi-employer plan prior to their September 1, 2016 transfer to Valvoline. See “Results of Operations—Consolidated Review—Non-GAAP Performance Metrics” for additional information.



	For the years ended September 30
(In millions)	2016			2015			2014
Cash flows provided by operating activities	$	311		$	330		$	170
Less:
Additions to property, plant and equipment	(66		)	(45		)	(37		)
Free cash flows	$	245		$	285		$	133

At September 30, 2016 , working capital (current assets minus current liabilities, excluding long-term debt due within one year) amounted to $349 million, compared to $178 million at the end of 2015 . Working capital is affected by Valvoline’s use of the last-in, first-out (“LIFO”) method of inventory valuation that valued inventories below their replacement costs by $29 million at September 30, 2016 and $31 million at September 30, 2015. Liquid assets, (cash, cash equivalents, and accounts receivable) amounted to 134% of current liabilities at September 30, 2016 and 112% at September 30, 2015.

Stockholder dividends

On November 15, 2016, the Company’s Board of Directors approved a quarterly cash dividend of $0.049 per share of common stock. The dividend is payable December 20, 2016 to shareholders on record on December 5, 2016.

Debt

As previously noted, Valvoline executed a number of transactions during the fourth fiscal quarter of 2016 in order to establish its stand-alone borrowings and capital structure. Refer to Note 9 of Notes to Consolidated Financial Statements for further details regarding these arrangements.

Capital expenditures

Capital expenditures were $66 million for the year ended September 30, 2016 . The annual average capital expenditure during the last three years was $49 million. Capital expenditures by reportable segment for the last three fiscal years are set forth in the table below:



	For the years ended September 30
(In millions)	2016		2015		2014
Core North America	$	41	$	20	$	15
Quick Lubes	20		19		16
International	5		6		6
	$	66	$	45	$	37

Contractual obligations and other commitments

The following table sets forth Valvoline’s obligations and commitments to make future payments under existing contracts at September 30, 2016. Excluded from the table are contractual obligations for which the ultimate settlement of quantities or prices are not fixed and determinable or capital lease obligations.



(In millions)	Total		Less than 1 Year		1-3 years		3-5 years		More than 5 years
Contractual obligations
Long-term debt	$	752	$	19	$	56	$	301	$	376
Interest payments (a)	212		33		63		58		58
Operating lease obligations	155		22		37		27		69
Employee benefit obligations (b)	164		26		39		31		68
Unrecognized tax benefits (c)	8		—		—		—		8
Total contractual obligations	$	1,291	$	100	$	195	$	417	$	579

(a) 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 the rates that existed as of September 30, 2016.


(b)	Includes estimated funding of Valvoline specific pension plans for 2017, as well as projected benefit payments through 2026 under Valvoline’s unfunded pension plans. Excludes the benefit payments from the pension plan trust funds. See Note 12 of Notes to Consolidated Financial Statements.


(c)	Due to uncertainties in the timing of the effective settlement of tax positions with respect to taxing authorities, Valvoline is unable to determine the timing of payments related to noncurrent unrecognized tax benefits, including interest and penalties. Therefore, these amounts were included in the “More than 5 years” column.

Tax-related commitments

Valvoline will generally be included in Ashland income tax returns until full separation and Stock Distribution (“Interim Period”). Under the Tax Matters Agreement, Ashland will generally make all necessary tax payments to the relevant tax authorities with respect to Ashland returns, and Valvoline will make tax sharing payments to Ashland. The amount of the tax sharing payments will generally be determined as if Valvoline and each of its relevant subsidiaries included in the Ashland returns filed their own separate tax returns for the Interim Period.

For taxable periods that begin on or after the day after the date of the Stock Distribution, Valvoline will no longer be included in any Ashland income tax returns and will file returns that include only Valvoline and/or its subsidiaries, as appropriate. Valvoline will not be required to make tax sharing payments to Ashland for those taxable periods. Nevertheless, Valvoline has (and will continue to have following the Stock Distribution) joint and several liability with Ashland to the IRS for the consolidated U.S. federal income taxes of the Ashland consolidated group for the taxable periods in which Valvoline was part of the Ashland consolidated group.

Pursuant to the terms of the Tax Matters Agreement, Valvoline will indemnify Ashland for certain U.S. federal, state or local taxes for any tax period prior to full separation and Stock Distribution that arise on audit or examination and are directly attributable to neither the Valvoline business nor the Chemicals businesses. Any payment obligations that may arise as a result of Valvoline assuming liability for such taxes could negatively affect Valvoline’s financial position and cash flows.

OFF-BALANCE SHEET ARRANGEMENTS

As part of Valvoline’s normal course of business, it 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 Valvoline would have to make actual cash expenditures in connection with these obligations is largely dependent on the performance of the party whose obligations Valvoline guarantees, or the occurrence of future events that Valvoline is unable to predict. Valvoline has reserved the approximate fair value of these guarantees in accordance with U.S. GAAP.

NEW ACCOUNTING PRONOUNCEMENTS

For a discussion and analysis of recently issued accounting pronouncements and its impact on Valvoline, see Note 2 of Notes to Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

The preparation of Valvoline’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), sales deductions, employee benefit obligations and income taxes. 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.

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 5 to 35 years and machinery and equipment principally over 5 to 15 years. Property, plant and equipment asset groups are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. 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.

These evaluations 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 are used in determining the impact of these assessments, which include the expected useful lives of long-lived assets and the 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.

Goodwill

Valvoline evaluates goodwill for impairment annually or when events and circumstances indicate an impairment may have occurred. This annual assessment is performed as of July 1 and consists of determining each reporting unit’s current fair value compared to its current carrying value. Valvoline’s reporting units are Core North America ($89 million in goodwill as of September 30, 2016 ), Quick Lubes ($135 million in goodwill as of September 30, 2016 ), and International ($40 million in goodwill as of September 30, 2016 ) reportable segments.

In reviewing goodwill for impairment, Valvoline has the option to first perform a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If Valvoline determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, Valvoline is not required to perform any additional tests in assessing goodwill for impairment. However, if Valvoline

concludes otherwise or elects not to perform the qualitative assessment, then Valvoline is required to perform the first step of a two-step impairment review process.

Valvoline performed the quantitative assessment for each reporting unit during the applicable fiscal year periods and upon completion of this assessment noted no impairment for any fiscal year periods within the financial statements. During the fiscal 2016 annual impairment analysis, all of Valvoline’s reporting units’ fair value exceeded the book value by greater than 300%.

Valvoline’s assessment of an impairment charge on goodwill could change in future periods if any or all of the following events were to occur with respect to a particular reporting unit: a significant change in projected business results, a divestiture decision, significant changes to certain discounted cash flow assumptions, economic deterioration that is more severe or of a longer duration than anticipated, or other significant economic events.

Sales Deductions

Valvoline recognizes revenue in accordance with Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, as amended by SAB No. 104, Revenue Recognition, 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. Provisions are made at the time of revenue recognition for sales rebates and discounts consisting primarily of promotion rebates and customer pricing discounts. These provisions are recorded as a reduction of revenue based on contract terms and the Company’s historical experience with similar programs and require management’s judgment with respect to estimating customer participation and performance levels. Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined. The cost of these programs is recognized as incurred and recorded as a reduction of sales and totaled $388 million, $345 million and $322 million in the Consolidated Statements of Comprehensive Income for September 30, 2016 , 2015 and 2014 , respectively.

Employee benefit obligations

Plan transfers and accounting

During September 2016, prior to the Valvoline IPO, Ashland transferred a substantial portion of qualified and non-qualified U.S. pension plans as well as certain other postretirement benefit and non-U.S. pension plans to Valvoline. As of September 30, 2016, Valvoline’s net unfunded pension and other postretirement plan liabilities totaled approximately $900 million.

Prior to the Valvoline IPO and the transfer of certain pension and other postretirement liabilities to Valvoline, the Company accounted for its participation in the Ashland sponsored defined benefit pension and other postretirement plans as a participation in a multi-employer plan within the consolidated financial statements. Under this method of accounting, Valvoline recognized its allocated portion of net periodic benefit costs but did not report a liability beyond the contributions due and unpaid to the plans. Amounts recognized in the Consolidated Statements of Comprehensive Income for multi-employer defined benefit and other postretirement benefit plans include an allocation to Valvoline on a ratable basis of the net actuarial gains and losses on an annual basis or whenever a plan was determined to qualify for remeasurement. As a result of the transfer of pension and other postretirement liabilities from Ashland to Valvoline, Valvoline assumed full responsibility as plan sponsor for these plans. From the point of transfer, Valvoline accounts for the plans as single-employer plans, recognizing net liabilities and the full amount of any costs or gains, including the net actuarial gains and losses recognized upon remeasurement.

Pension plans

Valvoline sponsors contributory and noncontributory qualified defined benefit pension plans that cover certain employees in the United States and in a number of other countries. In addition, Valvoline 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. Valvoline 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 in accordance with local practices and regulations of the respective countries. For further information, see Note 12 of Notes to Consolidated Financial Statements.

Other postretirement benefit plans

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Certain of Valvoline’s U.S. and Canada retired or disabled employees participated in health care and life insurance plans sponsored by Ashland. Historically, there were no Valvoline specific postretirement benefit plans. During March 2016, Ashland announced that it will reduce retiree life and medical benefits effective October 1, 2016 and January 1, 2017, respectively. The majority of qualifying employees participated in Ashland sponsored postretirement plans that were accounted for by Valvoline as multi-employer plans, which in accordance with U.S. GAAP, were not included within the Consolidated Balance Sheets for prior periods. As a result of the Separation, Ashland transferred the majority of the multi-employer other postretirement benefit plans to Valvoline on September 1, 2016. For purposes of these consolidated financial statements, the transferred plans were accounted for as multi-employer plans until the transfer date of September 1, 2016 and subsequently all costs and liabilities associated with these plans are included in the consolidated financial statements.

Since January 1, 2004, the transferred 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 Valvoline. The assumed postretirement health care plans include a limit on Valvoline’s share of costs for recent and future retirees. The assumed pre-65 health care cost trend rate as of September 30, 2016 was 7.9% and continues to be reduced to 4.5% in 2037 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.

Costs for Valvoline’s participation in the Ashland sponsored other postretirement plans were allocated based on Valvoline employees’ relative participation in the plan prior to September 1, 2016. The amount of cost allocated was expense of $1 million during 2014. Within the multi-employer adjustments are remeasurement gains and losses, including actuarial losses of $2 million during 2014.

Change in applying discount rate to measure benefit costs

During 2016, Ashland changed the method used to estimate the service and interest cost components of net periodic benefit costs for pension and other postretirement benefits. This change compared to the previous method resulted in a decrease in the service and interest cost components for pension and other postretirement benefit costs during 2016. Historically, Ashland estimated these service and interest cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. Ashland has elected to utilize a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. Ashland made this change to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. This change does not affect the measurement of Ashland’s total benefit obligations or annual net periodic benefit costs as the change in the service and interest costs will be offset in the actuarial gain or loss reported, which typically occurs during the fourth fiscal quarter. Ashland has accounted for this change as a change in accounting estimate that is inseparable from a change in accounting principle and accordingly has accounted for it prospectively. Valvoline will continue this accounting treatment for the transferred plans.

For defined benefit pension plans specific to Valvoline, the impact of this discount rate change compared to the previous method decreased pension service and interest cost minimally for the full year 2016. Based on plan demographics, the majority of the incremental decrease was reported in selling, general, and administrative expense during 2016, within the Consolidated Statements of Comprehensive Income in the Unallocated and other segment. Service and interest cost, as well as the other components of net periodic benefit costs, were subject to change for such reasons as an event requiring a remeasurement. Valvoline’s total projected benefit obligations related to these specific pension plans was not impacted by these reductions in service and interest costs as the decrease was substantially offset within the actuarial gain or loss caption when the plans were remeasured during the fiscal year.

Components of net periodic benefit costs (income)

For segment reporting purposes, service cost for operations is proportionately allocated to each reportable segment, excluding the Unallocated and other segment, while all other costs for operations are recorded within the Unallocated and other segment.

The following table summarizes the components of pension and other postretirement plans benefit costs for operations and the assumptions used to determine net periodic benefit costs (income) for the plans included within the Consolidated Balance Sheets, which as of September 30, 2016 includes pension and other postretirement plans transferred from Ashland.

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(In millions)	Pension benefits									Other postretirement benefits
(In millions)	2016			2015			2014			2016			2015		2014
Net periodic benefit costs (income)
Service cost	$	3		$	1		$	2		$	—		$	—	$	—
Interest cost	11			3			3			—			—		—
Expected return on plan assets	(17		)	(3		)	(3		)	—			—		—
Amortization of prior service credit (a)	—			—			—			(1		)	—		—
Actuarial loss (gain)	(42		)	2			1			—			—		—
Pre-separation allocation from Parent (b)	21			43			58			—			—		1
	$	(24	)	$	46		$	61		$	(1	)	$	—	$	1
Weighted-average plan assumptions (c)
Discount rate for service cost (d)	4.10		%	4.08		%	4.61		%	4.25		%	—		—
Discount rate for interest cost (d)	3.23		%	4.08		%	4.61		%	2.92		%	—		—
Rate of compensation increase	3.23		%	3.15		%	3.52		%	—			—		—
Expected long-term rate of
return on plan assets	6.77		%	5.34		%	5.97		%	—			—		—

(a) Other postretirement plan changes announced in March 2016 resulted in negative plan amendments that are being amortized within this caption during 2016.

(b) The pre-separation allocation from Ashland are costs (income) of multi-employer plans for 2014, 2015, and from October 1, 2015 until the transfer of plans to Valvoline at September 1, 2016. The allocation during 2016, 2015 and 2014 is comprised of service cost of $7 million, $8 million, and $8 million, respectively; non-service income of $10 million, $9 million, and $9 million, respectively; and actuarial losses of $24 million, $44 million, and $60 million, respectively.

(c ) The plan assumptions discussed are a blended weighted-average rate for Valvoline’s U.S. and non-U.S. plans. The assumptions for 2015 and 2014 only reflect Valvoline stand-alone plans. The 2016 assumptions reflect a combination of a full year of Valvoline stand-alone plans and one month for the plans transferred to Valvoline on September 1, 2016. The U.S. pension plan represented approximately 98% of the projected benefit obligation at September 30, 2016. Other postretirement benefit plans consist of U.S. and Canada, with the U.S. plan representing approximately 81% of the projected benefit obligation at September 30, 2016. Non-U.S. plans use assumptions generally consistent with those of U.S. plans.

(d) Weighted-average discount rates in 2016 reflect the adoption of the full yield curve approach.

The following table shows the amortization of prior service cost (credit) recognized in accumulated other comprehensive loss.



	Pension benefits					Postretirement
(In millions)	2016			2015		2016			2015
Transfer in of unrecognized prior service cost (credit)	$	1		$	—	$	(81	)	$	—
Amortization of prior service credit	—			—		1			—
Total	$	1		$	—	$	(80	)	$	—

Total recognized in net periodic benefit cost (income)
and accumulated other comprehensive loss	$	(23	)	$	3	$	(81	)	$	—

The following table shows the amount of prior service credit in accumulated other comprehensive loss at September 30, 2016 that is expected to be recognized as a component of net periodic benefit cost (income) during the next fiscal year.



(In millions)	Pension benefits		Postretirement
Prior service credit	$	—	$	(12	)

As of September 30, 2016 and 2015 , the amounts recognized within accumulated other comprehensive loss are shown in the following table.

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(In millions)	Pension benefits				Postretirement
(In millions)	2016		2015		2016			2015
Prior service cost (credit)	$	2	$	1	$	(80	)	$	—

Obligations and funded status

Actuarial valuations are performed for the pension benefit plans to determine Valvoline’s obligation for each plan specific to Valvoline. In accordance with U.S. GAAP, Valvoline recognizes the unfunded status of these 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 2016 and 2015 follow for the plans included within the Consolidated Balance Sheets.



(In millions)	Pension benefits						Postretirement
(In millions)	2016			2015			2016			2015
Change in benefit obligations
Benefit obligations at October 1	$	59		$	68		$	—		$	—
Transfer from Parent	3,523			—			75			—
Service cost	3			1			—			—
Interest cost	11			3			—			—
Participant contributions	—			—			1			—
Benefits paid	(20		)	(3		)	(3		)	—
Actuarial loss (gain)	(66		)	2			—			—
Foreign currency exchange rate changes	1			(12		)	—			—
Curtailment/Settlement	(373		)	—			—			—
Benefit obligations at September 30	$	3,138		$	59		$	73		$	—
Change in plan assets
Value of plan assets at October 1	$	46		$	53		$	—		$	—
Transfer from Parent	2,653			—			—			—
Actual return on plan assets	(7		)	3			—			—
Employer contributions	6			3			2			—
Participant contributions	—			—			1			—
Benefits paid	(20		)	(3		)	(3		)	—
Foreign currency exchange rate changes	2			(10		)	—			—
Curtailment/Settlement	(373		)	—			—			—
Value of plan assets at September 30	$	2,307		$	46		$	—		$	—

Unfunded status of the plans	$	(831	)	$	(13	)	$	(73	)	$	—

Amounts recognized in the balance sheet
Current benefit liabilities	$	(11	)	$	—		$	(11	)	$	—
Noncurrent benefit liabilities	(820		)	(13		)	(62		)	—
Net amount recognized	$	(831	)	$	(13	)	$	(73	)	$	—

Weighted-average plan assumptions
Discount rate	3.54		%	3.84		%	2.92		%	—
Rate of compensation increase	3.10		%	3.14		%	—			—

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The accumulated benefit obligation for all pension plans was $3,134 million at September 30, 2016 and $56 million at September 30, 2015 . Information for pension plans with an accumulated benefit obligation in excess of plan assets follows for the plans included within the Consolidated Balance Sheets:



(In millions)	2016						2015
(In millions)	Qualified plans		Non-qualified plans		Total		Qualified plans		Non-qualified plans		Total
Projected benefit obligation	$	2,976	$	152	$	3,128	$	44	$	7	$	51
Accumulated benefit obligation	2,973		152		3,125		42		6		48
Fair value of plan assets	2,298		—		2,298		39		—		39

Plan assets

The weighted average expected long-term rate of return on pension plan assets was 6.77% and 5.34% for 2016 and 2015 , respectively. 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.

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, 2016 . For additional information and a detailed description of each level within the fair value hierarchy, see Note 2.



(In millions)	Total fair value		Quoted prices in active markets for identical assets Level 1		Significant other observable inputs Level 2		Significant unobservable inputs Level 3
Cash and cash equivalents	$	81	$	81	$	—	$	—
U.S. government securities	85		—		85		—
Other government securities	73		—		73		—
Corporate debt instruments	1,077		877		200		—
Corporate stocks	242		134		108		—
Private equity and hedge funds	726		—		—		726
Other investments	23		—		—		23
Total assets at fair value	$	2,307	$	1,092	$	466	$	749



(In millions)	Total fair value		Quoted prices in active markets for identical assets Level 1		Significant other observable inputs Level 2		Significant unobservable inputs Level 3
Cash and cash equivalents	$	3	$	3	$	—	$	—
Other government securities	26		—		26		—
Corporate stocks	16		—		16		—
Private equity and hedge funds	1		—		—		1
Total assets at fair value	$	46	$	3	$	42	$	1

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Valvoline’s pension plans hold a variety of investments designed to diversify risk. Investments classified as a Level 1 fair value measure principally represent marketable securities priced in active markets. Cash and cash equivalents and public equity and debt securities are well diversified and invested in U.S. and international small-to-large companies across various asset managers and styles. Investments classified as a Level 2 fair value measure principally represent fixed-income securities in U.S. treasuries and agencies and other investment grade corporate bonds and debt obligations.

Valvoline’s pension plans also hold Level 3 investments primarily within hedge funds and private equity funds with hedge funds accounting for nearly all of the Level 3 investments. Valvoline’s investments in these funds are primarily valued using the net asset value per share of underlying investments as determined by the respective individual fund administrators on a daily, weekly or monthly basis, depending on the fund. Such valuations are reviewed by the portfolio managers who determine the estimated value of the collective funds based on these inputs. The following table provides a reconciliation of the beginning and ending balances for these Level 3 assets.



(In millions)	Total Level 3 assets			Private equity and hedge funds			Other investments
Balance at September 30, 2014	$	1		$	1		$	—
Purchases	—			—			—
Sales	—			—			—
Actual return on plan assets	—			—			—
Balance at September 30, 2015	$	1		$	1		$	—
Transfer in	794			771			23
Purchases	—			—			—
Sales	(51		)	(51		)	—
Actual return on plan assets
Related to assets held at September 30, 2016	5			5			—
Balance at September 30, 2016	$	749		$	726		$	23

Investments and Strategy

In developing an investment strategy for its defined benefit plans, Valvoline has considered the following factors: the nature of the plans’ liabilities, the allocation of liabilities between active, deferred and retired members, the funded status of the plans, the applicable investment horizon, the respective size of the plans and historical and expected investment returns. Valvoline’s U.S. pension plan assets are managed by outside investment managers, which are monitored against investment return benchmarks and Valvoline’s established investment strategy. 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 and diversification of investments and to optimize returns.

The current target asset allocation for the U.S. plan is 51% fixed securities and 49% equity securities. Fixed income securities primarily include long duration high grade corporate debt obligations. Risk assets include both traditional equity as well as a mix of non-traditional assets such as hedge funds and private equity. Investment managers may employ a limited use of derivatives to gain efficient exposure to markets.

Valvoline’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 Valvoline’s U.S. and non-U.S. plans at September 30, 2016 and 2015 by asset category follow.

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(In millions)	Target	Actual at September 30
(In millions)	Target	2016		2015
Plan assets allocation
Equity securities	15-60%	46	%	36	%
Debt securities	40-85%	52	%	62	%
Other	0-20%	2	%	2	%
		100	%	100	%

Cash flows

U.S. pension legislation and future funding requirements

Valvoline’s U.S. qualified pension plans funding requirements through fiscal 2017 are calculated in accordance with the regulations set forth in the Moving Ahead for Progress in the 21 ^st Century Act (MAP-21), which provides temporary relief for employers who sponsor defined benefit pension plans related to funding contributions under the Employee Retirement Income Security Act of 1974. Specifically, MAP-21 allows for the use of a 25-year average interest rate within an upper and lower range for purposes of determining minimum funding obligations instead of an average interest rate for the two most recent years, as was previously required.

During fiscal 2016, Valvoline contributed $2 million to its non-qualified U.S. pension plans and $4 million and $3 million during 2016 and 2015, respectively, to its non-U.S. pension plans. Valvoline expects to contribute approximately $12 million to its non-qualified U.S. pension plans and $3 million to its non-U.S. pension plans during 2017.

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.



(In millions)	Pension benefits		Postretirement
2017	$	195	$	11
2018	194		8
2019	193		7
2020	193		5
2021	192		4
2022 - 2026	942		19

Other plans

For 2016, 2015 and 2014, qualifying Valvoline employees are eligible to participate in Ashland’s qualified savings plan that assists employees in providing for retirement or other future needs, Valvoline’s allocated expense related to these defined contributions was $11 million in 2016 and 2015 and $7 million in 2014. After the IPO, Valvoline sponsors various other benefit plans, some of which are required by different countries. Total current and noncurrent liabilities associated with these plans were $2 million and $4 million, respectively, as of September 30, 2016.

NOTE 13 – LITIGATION, CLAIMS AND CONTINGENCIES

There are various claims, lawsuits and administrative proceedings pending or threatened against Valvoline and its various subsidiary companies and, in certain jurisdictions, separate legal entities which are deemed insignificant. Such actions are with respect to commercial and tax disputes, product liability, toxic tort liability, environmental, and other matters which seek remedies or damages, in some cases in substantial amounts. While Valvoline cannot predict with certainty the outcome of such actions, it believes that adequate reserves have been recorded where appropriate and losses already recognized with respect to such actions were immaterial as of September 30, 2016 and 2015 . There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions; however, Valvoline believes that such potential losses will not be material.

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Commercial contract

During 2014, Valvoline received a favorable arbitration ruling on a commercial contract related to the International reportable segment. Collections from the settlement for $2 million and $10 million during 2015 and 2014, respectively, were recognized within the equity and other income caption of the Consolidated Statements of Comprehensive Income.

NOTE 14 – RELATED PARTY TRANSACTIONS AND PARENT COMPANY INVESTMENT

Related party transactions

All significant intercompany transactions between Valvoline and Ashland have been included in the consolidated financial statements and are considered to have been effectively settled for cash at the time the transaction was recorded. The total net effect of the settlement of these transactions between Valvoline and Ashland is reflected in the Consolidated Statements of Cash Flows as a financing activity and in the Consolidated Balance Sheets as Parent company investment. In the Consolidated Statements of Stockholders’ Equity, the invested equity returned to Ashland is the net of a variety of intercompany transactions including, but not limited to, collection of trade receivables, payment of trade payables and accrued liabilities, settlement of charges for allocated corporate costs and payment of taxes by Ashland on Valvoline’s behalf.

Cash management and financing

Until the IPO, Valvoline participated in Ashland’s centralized cash management system. Accordingly, the cash and cash equivalents were held by Ashland at the corporate level and were not attributed to Valvoline for the 2015 period. Transfers of cash, both to and from Ashland’s centralized cash management system, are reflected as a component of Parent company investment on the Consolidated Balance Sheets and as a financing activity within the accompanying Consolidated Statements of Cash Flows. Debt obligations of Ashland have not been included in the consolidated financial statements of Valvoline, because Valvoline is not a party to the obligation between Ashland and the debt holders.

Derivative instruments

Ashland regularly uses derivative instruments to manage its exposure to fluctuations in foreign currencies. 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 equity section of Ashland’s Consolidated Balance Sheets as a component of accumulated other comprehensive loss and subsequently recognized in Ashland’s Consolidated Statements of Comprehensive 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.

Until the IPO, Valvoline participated in Ashland’s centralized programs. As a result, no gains or losses on hedges reported as a component of the cumulative translation adjustment within accumulated other comprehensive loss are reported in the Consolidated Balance Sheets for any year presented.

Changes in the fair value of all derivatives are recognized immediately in income unless the derivative qualifies as a hedge of future cash flows or a hedge of a net investment in foreign operations. Expenses recognized in income have been allocated to Valvoline as part of the Corporate expense allocations.

Valvoline began its own hedging program in late September 2016. Foreign currency derivative instruments are used to manage exposure on certain transactions denominated in foreign currencies to curtail potential earnings volatility effects of certain assets and liabilities, including short-term inter-company loans, denominated in currencies other than the U.S. dollar. These derivative 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 valued at fair value with net changes in fair value recorded within the selling, general and administrative expense caption of the Consolidated Statements of Comprehensive Income. As of the end of fiscal year 2016, none of the outstanding hedges had settled. The outstanding balance of these hedges was not material at September 30, 2016.

Stock incentive plans

Valvoline has historically participated in Ashland’s stock incentive plans for key employees and directors, primarily in the form of stock appreciation rights, restricted stock, performance shares and other non-vested stock awards. Equity-based compensation expense has been either directly reported by or allocated to Valvoline based on the awards and terms previously granted to Ashland’s employees. Stock based compensation expense recorded by Valvoline during the fiscal years ended September 30, 2016 , 2015 and 2014 were $11 million , $9 million , and $8 million , respectively. These costs were primarily included within the Corporate expense allocation caption of the Consolidated Statements of Comprehensive Income. Compensation expense for stock incentive plans is

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generally based on the grant-date fair value over the appropriate vesting period. Ashland utilizes several industry accepted valuation models to determine the fair value. Until the Separation occurs, Valvoline will continue to participate in Ashland’s equity-based compensation plans and record equity-based compensation expense based on the historical allocation of cost.

Related party receivables and payables

At September 30, 2016, Valvoline had receivables from Parent of $30 million recorded in other current assets on the Consolidated Balance Sheets. Also, at September 30, 2016, Valvoline had recorded obligations to Parent of $73 million, of which $2 million is in accrued expenses and other liabilities on the Consolidated Balance Sheets and $71 million is recorded in other noncurrent liabilities on the Consolidated Balance Sheets. The long-term liability relates primarily to the obligations under the Tax Matters Agreement.

Transition Services Agreement

Valvoline also entered into a Transition Services Agreement (“TSA”) and Reverse Transition Services Agreement (“RTSA”) with Ashland to cover certain continued corporate services provided by Valvoline and Ashland to each other following the completion of Valvoline’s IPO. In connection with the IPO, Valvoline began to set up its own corporate functions, and pursuant to the TSA, Ashland provides various corporate support services, including certain accounting, human resources, information technology, office and building, risk, security, tax and treasury services. Pursuant to the RTSA, Valvoline provides various corporate support services, including certain human resources, information technology, office and building, security and tax services, as well as certain regulatory compliance services required during the period in which Valvoline remains a majority-owned subsidiary of Ashland. Additional services may be identified from time to time and also be provided under the TSA and RTSA. In general, these agreements began following the completion of the IPO and cover a period not expected to exceed 24 months. The costs of these services were not material during the year ended September 30, 2016, and are consistent with expenses that Ashland has historically allocated or incurred with respect to such services, plus a mark-up of five percent.

Corporate allocations and Parent company investment

Corporate allocations

Prior to the completion of the IPO, Valvoline has historically utilized centralized functions of Ashland to support its operations, and in return, Ashland allocated certain of its expenses to Valvoline. Such expenses represent costs related, but not limited to, treasury, legal, accounting, insurance, information technology, payroll administration, human resources, stock incentive plans and other services. These costs, together with an allocation of Ashland overhead costs, are included within the Corporate expense allocation caption of the Consolidated Statements of Comprehensive Income. Where it is possible to specifically attribute such expenses to activities of Valvoline, these amounts have been charged or credited directly to Valvoline without allocation or apportionment. Allocation of all other such expenses is based on a reasonable reflection of the utilization of service provided or benefits received by Valvoline during the periods presented on a consistent basis, such as headcount, square footage, tangible assets or sales. Valvoline’s management supports the methods used in allocating expenses and believes these methods to be reasonable estimates. During 2016, Valvoline began to establish its own corporate functions.

The following table summarizes the centralized and administrative support costs of Ashland that have been allocated to Valvoline for the years ended September 30:



(In millions)	2016		2015		2014
Information technology	$	20	$	17	$	17
Financial and accounting	12		13		12
Building services	11		10		10
Legal and environmental	6		7		7
Human resources	5		4		5
Shared services	2		2		—
Other general and administrative	23		26		44
Total	$	79	$	79	$	95

Nevertheless, the consolidated financial statements may not include all of the actual expenses that would have been incurred and may not reflect Valvoline’s results of operations, financial position and cash flows had it been a stand-alone company during the periods presented. It is not practicable to estimate actual costs that would have been incurred had Valvoline been a stand-alone company

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during the periods presented. Actual costs that would have been incurred if Valvoline had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. General corporate expenses allocated to Valvoline during the fiscal years ended September 30, 2016, 2015 and 2014 were $79 million, $79 million, and $95 million, respectively.

NOTE 15 – REPORTABLE SEGMENT INFORMATION

Valvoline’s business is managed within three reportable segments based on how operations are managed internally for the products and services sold to customers, including how the results are reviewed by the chief operating decision maker, which includes determining resource allocation methodologies used for reportable segments. Valvoline’s operating segments are identical to its reportable segments. Operating income is the primary measure reviewed by the chief operating decision maker in assessing each reportable segment’s financial performance. Valvoline’s businesses are managed within three reportable segments: Core North America, Quick Lubes, and International.

Reportable segment business descriptions

The Core North America business segment sells Valvoline™ and other branded products in the United States and Canada to both consumers who perform their own automotive maintenance, referred to as “Do-It-Yourself” or “DIY” consumers, as well as to installer customers who use Valvoline products to service vehicles owned by “Do-It-For Me” or “DIFM” consumers. Valvoline sells to its DIY consumers through national retail auto parts stores, leading mass merchandisers and independent auto part stores. Valvoline sells to its DIFM consumers through installers in the United States and Canada. Installer customers include car dealers, general repair shops, and third-party quick lube chains. Valvoline directly serves these customers as well as through a network of distributors. Valvoline’s installer channel also sells branded products and solutions to heavy duty customers such as on-highway fleets and construction companies.

Through its Quick Lubes business segment, Valvoline operates Valvoline Instant Oil Change (VIOC), a quick-lube service chain involving both Company-owned and franchised stores. Valvoline also sells its products and provides Valvoline branded signage to independent quick lube operators through its Express Care program.

The International business segment sells Valvoline™ and Valvoline’s other branded products in approximately 140 countries outside of the United States and Canada. Valvoline’s key international markets include China, India, EMEA, Latin America and Australia Pacific. The International business segment sells products for both consumer and commercial vehicles and equipment, and is served by company-owned plants in the United States, Australia and the Netherlands, a joint venture-owned plant in India and third-party warehouses and toll manufacturers in other regions. In most of the countries where Valvoline’s products are sold, Valvoline goes to market via independent distributors.

The Unallocated and other segment generally includes items such as components of pension and other postretirement benefit plan expenses (excluding service costs, which are allocated to the reportable segments), certain significant company-wide restructuring activities and legacy costs or adjustments that relate to divested businesses, including the $26 million loss from the sale of car care products during 2015.

Valvoline did not have a single customer that represented 10% of consolidated net sales in 2014, 2015, or 2016.

International data

Information about Valvoline’s domestic and international operations follows. Valvoline’s foreign operations are primarily captured within the International reportable segment and Valvoline has no material operations in any individual international country.



	Sales from external customers						Net (liabilities) assets					Property, plant and equipment - net
(In millions)	2016		2015		2014		2016			2015		2016		2015
United States	$	1,397	$	1,413	$	1,440	$	(515	)	$	492	$	286	$	219
International	532		554		601		190			125		38		35
	$	1,929	$	1,967	$	2,041	$	(325	)	$	617	$	324	$	254

F-35

Reportable segment results

The following tables present various financial information for each reportable segment for the years ended September 30, 2016 , 2015 and 2014 and as of September 30, 2016 , 2015 and 2014 . Results of Valvoline’s reportable segments are presented based on how operations are managed internally for the products and services sold to customers, including how the results are reviewed by the chief operating decision maker, which includes determining resource allocation methodologies used for reportable segments. The structure and practices are specific to Valvoline; therefore, the financial results of Valvoline’s reportable segments are not necessarily comparable with similar information for other comparable companies. Valvoline allocates all costs to its reportable segments except for certain significant company-wide restructuring activities and/or other costs or adjustments that relate to former businesses that Valvoline no longer operates. The service cost component of pension and other postretirement benefits costs is allocated to each reportable segment on a ratable basis; while the remaining components of pension and other postretirement benefits costs are recorded to Unallocated and other. Valvoline 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 the industry or market changes. Revisions to Valvoline’s methodologies that are deemed insignificant are applied on a prospective basis.

Valvoline determined that disclosing sales by specific product was impracticable. As such, the following table provides a summary of 2016 sales by product category for each reportable segment:



Sales by Product Category for 2016
Core North America			Quick Lubes			International
Lubricants	87	%	Lubricants	94	%	Lubricants	89	%
Chemicals	4	%	Chemicals	1	%	Chemicals	7	%
Antifreeze	7	%	Filters	5	%	Antifreeze	3	%
Filters	2	%		100	%	Filters	1	%
	100	%					100	%

The following table presents various financial information for each reportable segment. The operating results of divested assets during 2015 that did not qualify for discontinued operations accounting treatment are included in the financial information until the date of sale.

F-36




Reportable Segment Information
	Years ended September 30
(In millions)	2016		2015			2014
Sales
Core North America	$	979	$	1,061		$	1,114
Quick Lubes	457		394			370
International	493		512			557
	$	1,929	$	1,967		$	2,041
Equity income (loss)
Core North America	$	—	$	—		$	—
Quick Lubes	—		—			—
International	12		(2		)	10
	12		(2		)	10
Other income
Core North America	1		1			2
Quick Lubes	2		2			2
International	4		7			16
	7		10			20
	$	19	$	8		$	30
Operating income (loss)
Core North America	$	212	$	200		$	165
Quick Lubes	117		95			79
International	74		65			78
Unallocated and other (a)	28		(37		)	(58		)
	$	431	$	323		$	264
Assets
Core North America	$	517	$	476		$	553
Quick Lubes	370		237			224
International	271		263			296
Unallocated and other	659		2			10
	$	1,817	$	978		$	1,083


(a)	During 2016 , 2015 , and 2014 , Unallocated and other also includes a gain of $18 million , a loss of $46 million , and a loss of $61 million , respectively, related to the actuarial remeasurements of pension and other postretirement benefit plans.

F-37



	Years ended September 30
(In millions)	2016		2015		2014
Equity method investments
Core North America	$	—	$	—	$	—
Quick Lubes	—		—		—
International	26		29		44
Unallocated and other	—		—		—
	$	26	$	29	$	44
Depreciation and amortization
Core North America	$	16	$	17	$	16
Quick Lubes	17		16		15
International	5		5		6
	$	38	$	38	$	37
Property, plant and equipment – net
Core North America	$	123	$	87	$	103
Quick Lubes	149		127		124
International	46		40		45
Unallocated and other	6		—		—
	$	324	$	254	$	272

Additions to property, plant and equipment
Core North America	$	41	$	20	$	15
Quick Lubes	20		19		16
International	5		6		6
	$	66	$	45	$	37

NOTE 16 – SUBSEQUENT EVENTS

Effective November 29, 2016, Valvoline entered into a $125 million trade receivable securitization facility to provide an additional source of liquidity. The Company borrowed $75 million under this facility on December 1, 2016 and the related proceeds were used to reduce borrowings under the Term Loans.

F-38

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

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



	First Quarter						Second Quarter						Third Quarter						Fourth Quarter
(In millions except per share amounts)	2016			2015			2016			2015			2016			2015			2016			2015
Sales	$	456		$	492		$	479		$	481		$	500		$	510		$	494		$	484
Cost of sales	280			328			288			307			300			321			300			326
Gross profit as a percentage of sales	38.6		%	33.3		%	39.9		%	36.2		%	40.0		%	37.1		%	39.3		%	32.6		%
Operating income	96			86			104			83			113			109			118			45
Net income	65			57			68			34			75			72			65			33

Basic and diluted earnings per share (b)
Net income	$	0.32		$	0.28		$	0.33		$	0.17		$	0.36		$	0.35		$	0.32		$	0.16

Market price per common share (a)
High	$	—		$	—		$	—		$	—		$	—		$	—		$	23.98		$	—
Low	—			—			—			—			—			—			23.10			—

(a) Valvoline common stock began trading on The New York Stock Exchange under the symbol “VVV” on September 23, 2016. Prior to this date, there was no public market for Valvoline common stock.

(b) Per share amounts for periods prior to September 30, 2016 have been presented for comparability only. There were no outstanding shares of Valvoline prior to the IPO in September 2016. The share count utilized for all prior period calculations was the share count as of September 30, 2016.

F-39

EXHIBIT 3.2

BY-LAWS

VALVOLINE INC.

Amended and restated as of September 19, 2016

ARTICLE I

Offices

SECTION 1.01. Registered Office . The registered office of Valvoline Inc. (hereinafter called the “ Corporation ”) in the Commonwealth of Kentucky shall be at 306 West Main Street – Suite 512, City of Frankfort, County of Franklin, Kentucky 40601, and the registered agent shall be CT Corporation System, or such other office or agent as the Board of Directors of the Corporation (the “ Board ”) shall from time to time select.

SECTION 1.02. Other Offices . The Corporation may also have an office or offices, and keep the books and records of the Corporation, except as may otherwise be required by law, at such other place or places, either within or outside of the Commonwealth of Kentucky, as the Board may from time to time determine or the business of the Corporation may require.

ARTICLE II

Meetings of Shareholders

SECTION 2.01. Place of Meeting . All meetings of the shareholders of the Corporation (the “ shareholders ”) shall be held at a place, either within or outside of the Commonwealth of Kentucky, to be determined by the Board. If no designation is made by the Board, the place of meeting shall be the principal office of the Corporation. The Board may, in its sole discretion, determine that the meetings shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 271B.7-080 of the Kentucky Business Corporation Act (the “ KBCA ”) (or any successor provision thereto).

SECTION 2.02. Annual Meetings . The annual meeting of the shareholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on such date and at such time as shall from time to time be fixed by the Board. Any previously scheduled annual meeting of the shareholders may be postponed by action of the Board taken prior to the time previously scheduled for such annual meeting of the shareholders.

SECTION 2.03. Special Meetings .

(a) Except as otherwise required by law or the Articles of Incorporation of the Corporation (the “ Articles ”), and subject to the rights of the holders of any outstanding series of preferred stock (the “ Preferred Stock ”), special meetings of the shareholders for any purpose or purposes may be called by a majority of the Board.

(b) Subject to the provisions of this Section 2.03, a special meeting of the shareholders shall be called by the Secretary of the Corporation (the “ Secretary ”) following receipt by the Secretary of a written demand for a special meeting (a “ Special Meeting Demand ”) from the holders of at least 33 1/3% of all shares entitled to vote on any issue proposed to be considered at the proposed special meeting (the “ Requisite Holders ”) if such Special Meeting Demand complies with the requirements of Section 2.03(c). The Secretary shall determine whether all such requirements have been satisfied and such determination shall be binding on the Corporation and its shareholders.

(c) A Special Meeting Demand must be delivered to or mailed and received by the Secretary at the principal office of the Corporation. To be in proper form, a Special Meeting Demand shall set be in writing and set forth as to each matter proposed to be brought before the special meeting the information required by Section 2.07(d) with respect to shareholder proposals of business for annual and special meetings. Such shareholders shall also update and supplement such information as required by Sections 2.07(e) and (f) with respect to shareholder proposals of business for annual and special meetings. In addition, a Special Meeting Demand shall not be valid if (i) the Special Meeting Demand relates to an item of

business that is not a proper subject for shareholder action under applicable law; (ii) the Special Meeting Demand is received by the Corporation during the period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the date of the next annual meeting; or (iii) such Special Meeting Demand was made in a manner that involved a violation of Regulation 14A under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) or other applicable law.

(d) A Special Meeting Demand may be revoked by written revocation delivered to the Corporation at any time prior to the special meeting by one or more of the shareholders who originally executed such Special Meeting Demand so long as those shareholders who originally executed the Special Meeting Demand but who do not execute such written revocation (if any) do not collectively constitute Requisite Holders; provided , however , the Board shall have the discretion to determine whether or not to proceed with the special meeting.

(e) If none of the shareholders who submitted the Special Meeting Demand for a special meeting of the shareholders appears or sends a qualified representative to present the proposal(s) or business submitted by the shareholders for consideration at the special meeting, the Corporation need not present such proposal(s) or business for a vote at such meeting.

(f) Only such business as is specified in the Corporation’s notice of any special meeting of the shareholders shall come before a special meeting. Such business only may be specified by a majority of the Board or in a valid Special Meeting Demand. A special meeting shall be held at such place, if any, and on such date and at such time as shall be fixed by the Board.

(g) The chairman of a special meeting may refuse to permit any business to be brought before a special meeting that fails to comply with this Section 2.03 or, in the case of a shareholder proposal, if the shareholder solicits proxies in support of such shareholder’s proposal without having made the representation required by Section 2.07(d)(7).

SECTION 2.04. Notice of Meetings .

(a) Except as otherwise provided by law, notice of each meeting of the shareholders, whether annual or special, shall be given by the Corporation to each shareholder of record entitled to notice of the meeting not less than 10 days nor more than 60 days before the date of the meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the shareholder at such shareholder’s address as it appears on the records of the Corporation. Each such notice shall state the place, if any, date and time of the meeting, the means of remote communications, if any, by which shareholders and proxy holders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

(b) Notice of adjournment of a meeting of the shareholders need not be given if the place, if any, date and time to which it is adjourned, and the means of remote communications, if any, by which shareholders and proxy holders may be deemed to be present in person and vote at such meeting, are announced at such meeting, unless, after adjournment, a new record date is or must be fixed for the adjourned meeting. If after adjournment a new record date is or must be fixed for the adjourned meeting, the notice of the adjourned meeting shall be given to each shareholder of record as of the new record date. Such further notice shall be given as may be required by law.

SECTION 2.05. Quorum . Except as otherwise required by law, the Articles or these By-laws of the Corporation (these “ By-laws ”), the holders of a majority of the voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereat, present in person or by proxy, shall constitute a quorum at any meeting of the shareholders; provided , however , that in the case of any vote to be taken by classes or series, the holders of a majority of the votes entitled to be cast by the shareholders of a particular class or series, present in person or by proxy, shall constitute a quorum of such class or series. To the fullest extent permitted by law, the shareholders present at a duly organized meeting may continue to transact any business for which a quorum existed at the commencement of such meeting until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

SECTION 2.06. Adjournments . The chairman of the meeting or the shareholders, by the affirmative vote of the holders of a majority of the voting power of the shares of capital stock entitled to vote thereat, who are present in person or by proxy, may adjourn the meeting from time to time whether or not a quorum is present (or, in the case of specified business to be voted on by a class or series, the chairman of the meeting or the shareholders, by the affirmative vote of the holders of a majority of the voting power of the outstanding shares of such class or series so represented, may adjourn the meeting with respect to such specified business). At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called.

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SECTION 2.07. Order of Business; Shareholder Proposals .

(a) At each meeting of the shareholders, the Chairman of the Board or, in the absence of the Chairman of the Board, the President of the Corporation (the “ President ”) or, in the absence of the Chairman of the Board and the President, such person as shall be selected by the Board or the executive committee of the Board, shall act as chairman of the meeting. The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof and the opening and closing of the voting polls.

(b) At any annual meeting of the shareholders, only such business shall be conducted as shall have been brought before the annual meeting (i) by or at the direction of the chairman of the meeting or (ii) by any shareholder who is a holder of record at the time of the giving of the notice provided for in this Section 2.07, who is entitled to vote at the meeting and who complies with the procedures set forth in this Section 2.07.

(c) For business properly to be brought before an annual meeting of the shareholders by a shareholder, the shareholder must have given timely notice thereof in proper written form to the Secretary. To be timely, a shareholder’s notice must be delivered to or mailed and received by the Secretary at the principal office of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting; provided , however , that in the event that the date of the annual meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice by the shareholder to be timely must be so delivered or received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting and the 10th day following the day on which public announcement of the date of such meeting is first made. In no event shall an adjournment or postponement of an annual meeting commence a new time period for the giving of a shareholder’s notice as described in this Section 2.07. As used in these By-laws, “ public announcement ” shall mean disclosure (i) in a press release reported by the Dow Jones Newswire, Business Wire, Reuters Information Service or any similar or successor news wire service or (ii) in a communication distributed generally to shareholders and in a document publicly filed by the Corporation with the Securities and Exchange Commission (the “ SEC ”) pursuant to Sections 13, 14 or 15(d) of the Exchange Act or any successor provisions thereto.

(d) To be in proper written form, a shareholder’s notice to the Secretary or a Special Meeting Demand shall set forth in writing as to each matter the shareholder proposes to bring before the annual meeting or, in the case of a Special Meeting Demand, a special meeting:

(1) the name and address of each shareholder proposing such business, as they appear on the Corporation’s books;

(2) as to each shareholder proposing such business, the name and address of (i) any other beneficial owner of stock of the Corporation that are owned by such shareholder and (ii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the shareholder or such beneficial owner (each, a “ Shareholder Associated Person ”);

(3) as to each shareholder proposing such business and any Shareholder Associated Person, (i) the class or series and number of shares of stock directly or indirectly held of record and beneficially by the shareholder proposing such business or Shareholder Associated Person, (ii) the date such shares of stock were acquired, (iii) a description of any agreement, arrangement or understanding, direct or indirect, with respect to such business between or among the shareholder proposing such business, any Shareholder Associated Person or any others (including their names) acting in concert with any of the foregoing, (iv) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions and borrowed or loaned shares) that has been entered into, directly or indirectly, as of the date of such shareholder’s notice or Special Meeting Demand by, or on behalf of, the shareholder proposing such business or any Shareholder Associated Person, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of the shareholder proposing such business or any Shareholder Associated Person with respect to shares of stock of the Corporation (a “ Derivative ”), (v) a description in reasonable

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detail of any proxy (including revocable proxies), contract, arrangement, understanding or other relationship pursuant to which the shareholder proposing such business or Shareholder Associated Person has a right to vote any shares of stock of the Corporation, (vi) any rights to dividends on the stock of the Corporation owned beneficially by the shareholder proposing such business or Shareholder Associated Person that are separated or separable from the underlying stock of the Corporation, (vii) any proportionate interest in stock of the Corporation or Derivatives held, directly or indirectly, by a general or limited partnership in which the shareholder proposing such business or Shareholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (viii) any performance-related fees (other than an asset-based fee) that the shareholder proposing such business or Shareholder Associated Person is entitled to based on any increase or decrease in the value of stock of the Corporation or Derivatives thereof, if any, as of the date of such notice or Special Meeting Demand (the information specified in Section 2.07(d)(1) to (3) is referred to herein as “ Shareholder Information ”);

(4) a representation that each such shareholder is a holder of record of stock of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose such business;

(5) a brief description of the business desired to be brought before the annual meeting or, in the case of a Special Meeting Demand, a special meeting, the text of the proposal (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend these By-laws, the text of the proposed amendment) and the reasons for conducting such business at the meeting;

(6) any material interest of the shareholder and any Shareholder Associated Person in such business;

(7) a representation as to whether such shareholder intends (i) to deliver a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt such business or (ii) otherwise to solicit proxies from the shareholders in support of such business;

(8) all other information that would be required to be filed with the SEC if the shareholder or any Shareholder Associated Person were participants in a solicitation subject to Section 14 of the Exchange Act; and

(9) a representation that the shareholder shall provide any other information reasonably requested by the Corporation.

(e) Such shareholders providing the notice or Special Meeting Demand shall also provide any other information reasonably requested by the Corporation within five business days after such request.

(f) In addition, such shareholders shall further update and supplement the information provided to the Corporation in the notice, Special Meeting Demand, or upon the Corporation’s request pursuant to Section 2.07(e) as needed, so that such information shall be true and correct as of the record date for the meeting and as of the date that is the later of 10 business days before the meeting or any adjournment or postponement thereof. Such update and supplement must be delivered personally or mailed to, and received at the principal office of the Corporation, addressed to the Secretary, by no later than five business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than seven business days before the date for the meeting (in the case of the update and supplement required to be made as of 10 business days before the meeting or any adjournment or postponement thereof).

(g) The foregoing notice requirements shall be deemed satisfied by a shareholder for an annual meeting if the shareholder has notified the Corporation of his or her intention to present a proposal at an annual meeting and such shareholder’s proposal has been included in a proxy statement that has been prepared by management of the Corporation to solicit proxies for such annual meeting; provided , however , that if such shareholder does not appear or send a qualified representative to present such proposal at such annual meeting, the Corporation need not present such proposal for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation; and provided , further , that the foregoing shall not imply any obligation beyond that required by applicable law to include a shareholder’s proposal in a proxy statement prepared by management of the Corporation. Notwithstanding anything in these By-laws to the

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contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 2.07.

(h) The chairman of an annual meeting may refuse to permit any business to be brought before an annual meeting that fails to comply with this Section 2.07 or, in the case of a shareholder proposal, if the shareholder solicits proxies in support of such shareholder’s proposal without having made the representation required by Section 2.07(d)(7).

(i) The provisions of this Section 2.07 shall govern all business related to shareholder proposals at the annual meeting of the shareholders; provided that business related to the election or nomination of directors shall be governed by the provisions of Section 3.03 and not by this Section 2.07.

SECTION 2.08. List of Shareholders . It shall be the duty of the Secretary or other officer who has charge of the stock ledger to prepare and make, at least five days before each meeting of the shareholders, a complete list of the shareholders entitled to notice thereof, arranged, subject to applicable law, in alphabetical order by voting group (and within each voting group by class or series of shares), and showing the address of each shareholder and the number of shares registered in such shareholder’s name. Such list shall be produced and kept available at the times and places required by law.

SECTION 2.09. Voting .

(a) Except as otherwise provided by law or by the Articles, each shareholder of record of any series of Preferred Stock shall be entitled at each meeting of the shareholders to such number of votes, if any, for each share of such stock as may be fixed in the Articles or in the resolution or resolutions adopted by the Board providing for the issuance of such stock, and each shareholder of record of Common Stock shall be entitled at each meeting of the shareholders to one vote for each share of such stock, in each case, registered in such shareholder’s name on the books of the Corporation:

(1) on the date fixed pursuant to Section 7.06 as the record date for the determination of shareholders entitled to vote at such meeting; or

(2) if no such record date shall have been so fixed, then at the close of business on the day immediately before the day on which notice of such meeting is given, or, if notice is waived, at the close of business on the day immediately before the day on which the meeting is held.

(b) Each shareholder entitled to vote at any meeting of the shareholders may authorize a person to act for such shareholder by proxy. Any such proxy shall be delivered to the secretary of such meeting at or prior to the time designated for holding such meeting, but in any event not later than the time designated in the order of business for so delivering such proxies. No such proxy shall be voted or acted upon after 11 months from its date, unless the proxy provides for a longer period.

(c) Except as otherwise required by law and except as otherwise provided in the Articles or these By-laws, at each meeting of the shareholders, all corporate actions to be taken by vote of the shareholders shall be authorized by a majority of the votes cast by the shareholders entitled to vote thereon who are present in person or by proxy, and where a separate vote by class or series is required, a majority of the votes cast by the shareholders of such class or series who are present in person or by proxy shall be the act of such class or series.

(d) Unless required by law or determined by the chairman of the meeting to be advisable, the vote on any matter, including the election of directors, need not be by written ballot. Any written ballot shall be signed by the shareholder voting, or by such shareholder’s proxy, and shall state the number of shares voted.

SECTION 2.10. Inspectors . The chairman of the meeting shall appoint one or more inspectors to act at any meeting of the shareholders. Such inspectors shall perform such duties as shall be required by law or specified by the chairman of the meeting. Inspectors need not be shareholders. No director or nominee for the office of director shall be appointed such inspector.

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ARTICLE III

Board of Directors

SECTION 3.01. General Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Articles directed or required to be exercised or done by the shareholders.

SECTION 3.02. Number, Term of Office, Qualification and Election .

(a) Number of Directors . Subject to the rights of holders of any outstanding series of Preferred Stock with respect to the election of directors, the number of directors of the Corporation shall be fixed from time to time by resolution adopted by the Board; provided , however , that a vote of the shareholders is required to increase or decrease the number of directors by more than 30% from the number last fixed by the shareholders. However, no decrease in the number of directors constituting the Board shall shorten the term of any incumbent director. Directors of the Corporation need not be shareholders.

(b) Term of Office . Directors, other than any who may be elected by the holders of any series of Preferred Stock pursuant to the provisions set forth in the Articles, shall hold office until the next annual meeting of the shareholders and until each of their successors shall have been duly elected and qualified.

(c) Director Qualification . Unless the Board determines otherwise, to be eligible to be a nominee for election or reelection as a director, a person must deliver (in accordance with the time periods prescribed for delivery of notice by the Board) to the Secretary at the principal office of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (A) is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person will act or vote as a director on any issue or question (a “ Voting Commitment ”) that has not been disclosed to the Corporation or (ii) any Voting Commitment that could limit or interfere with such person’s ability to comply with such person’s fiduciary duties as a director under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein and (C) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading and other policies and guidelines of the Corporation that are applicable to directors.

(d) Election . Directors shall be elected in the manner provided in the Articles.

SECTION 3.03. Notification of Nominations .

(a) Subject to the rights of the holders of any outstanding series of Preferred Stock, nominations for the election of directors may be made by (1) the Board or (2) by any shareholder who is a shareholder of record at the time of giving of the notice of nomination provided for in this Section 3.03 and who is entitled to vote for the election of directors.

(b) Subject to the rights of the holders of any outstanding series of Preferred Stock, any shareholder of record entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if timely written notice of such shareholder’s intent to make such nomination is given in proper written form to the Secretary. To be timely, a shareholder’s notice must be delivered to or mailed and received by the Secretary at the principal office of the Corporation (i) with respect to an election to be held at an annual meeting of the shareholders, not less than 90 days nor more than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting; provided , however , that in the event that the date of the annual meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice by the shareholder to be timely must be so delivered or received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting and the 10th day following the day on which public announcement of the date of such meeting is first made; and (ii) with respect to an election to be held at a special meeting of the shareholders for the election of directors, not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting and the

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10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees to be elected at such meeting. In no event shall an adjournment or postponement, or public announcement of an adjournment or postponement, of an annual or special meeting commence a new time period (or extend any time period) for the giving of a shareholder’s notice as described in this Section 3.03.

(1) the Shareholder Information with respect to such shareholder and any Shareholder Associated Persons and the name and address of the person or persons to be nominated;

(2) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote in the election of directors and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;

(3) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder;

(4) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among the shareholder and any Shareholder Associated Person or any of their respective affiliates or associates or other parties with whom they are acting in concert, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the shareholder, Shareholder Associated Person or any person acting in concert therewith, were the “registrant” for purposes of such rule and each nominee were a director or executive of such registrant;

(5) such other information regarding each nominee proposed by such shareholder and Shareholder Associated Persons as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board and a completed signed questionnaire, representation and agreement required by Section 3.02(c);

(6) a representation as to whether such shareholder intends (a) to deliver a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve the nomination or (b) otherwise to solicit proxies from shareholders in support of such nomination;

(7) a representation that the shareholders shall provide any other information reasonably requested by the Corporation; and

(8) the executed written consent of each nominee to serve as a director of the Corporation if so elected;

(d) Such shareholders shall also provide any other information reasonably requested by the Corporation within five business days after such request.

(e) In addition, such shareholders shall further update and supplement the information provided to the Corporation in the notice of nomination or upon the Corporation’s request pursuant to Section 3.03(d) as needed, so that such information shall be true and correct as of the record date for the meeting and as of the date that is 10 business days before the meeting or any adjournment or postponement thereof. Such update and supplement must be delivered personally or mailed to, and received at the principal office of the Corporation, addressed to the Secretary, by no later than five business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and not later than seven business days before the date for the meeting (in the case of the update and supplement required to be made as of 10 business days before the meeting or any adjournment or postponement thereof).

(f) The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure or if the shareholder solicits proxies in favor of such shareholder’s nominee(s) without having made the representations required by Section 3.03(c)(6).

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(g) If such shareholder does not appear or send a qualified representative to present such proposal at such meeting, the Corporation need not present such proposal for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

(h) Subject to the rights of the holders of any outstanding series of Preferred Stock, only such persons who are nominated in accordance with the procedures set forth in this Section 3.03 shall be eligible to serve as directors of the Corporation.

(i) Notwithstanding anything in this Section 3.03 to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting of the shareholders is increased and there is no public announcement naming all of the nominees for directors or specifying the size of the increased Board made by the Corporation at least 90 days prior to the first anniversary of the date of the immediately preceding annual meeting, a shareholder’s notice required by this Section 3.03 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to or mailed to and received by the Secretary at the principal office of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

SECTION 3.04. Quorum and Manner of Acting . Except as otherwise provided by law, the Articles or these By-laws, (i) a majority of the Whole Board (as defined below) shall constitute a quorum for the transaction of business at any meeting of the Board, and (ii) the affirmative vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. The chairman of the meeting or a majority of the directors present may adjourn the meeting to another time and place whether or not a quorum is present. When a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. The term “ Whole Board ” shall mean the total number of authorized directors pursuant to Section 3.02(a), whether or not there exist any vacancies on the Board.

SECTION 3.05. Place of Meetings . Subject to Sections 3.06 and 3.07, the Board may hold its meetings at such place or places within or outside of the Commonwealth of Kentucky as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof.

SECTION 3.06. Regular Meetings . As soon as practicable after each annual election of directors, the Board shall meet for the purpose of organization and the transaction of other business. Regular meetings of the Board shall be held at such times as the Board shall from time to time determine, at such locations as the Board may determine.

SECTION 3.07. Special Meetings . Special meetings of the Board shall be held whenever called by the Chairman of the Board, the President or by a majority of directors then in office, and shall be held at such place, on such date and at such time as he, she or they, as applicable, shall fix.

SECTION 3.08. Notice of Meetings . Notice of regular meetings of the Board or of any adjourned meeting thereof need not be given. Notice of each special meeting of the Board shall be given by overnight delivery service or mailed to each director, in either case addressed to such director at such director’s residence or usual place of business, at least two days before the day on which the meeting is to be held or shall be sent to such director at such place by telecopy or by electronic transmission or shall be given personally or by telephone, not later than two days before the meeting is to be held, but notice need not be given to any director who shall, either before or after the meeting, submit a signed written waiver of such notice or who shall attend such meeting without protesting at the beginning of the meeting (or promptly upon such director’s arrival) the lack of notice to such director.

SECTION 3.09. Rules and Regulations . The Board may adopt such rules and regulations not inconsistent with the provisions of law, the Articles or these By-laws for the conduct of its meetings and management of the affairs of the Corporation as the Board may deem proper.

SECTION 3.10. Participation in Meeting by Means of Communications Equipment . Any one or more members of the Board or any committee thereof may participate in any meeting of the Board or of any such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other or as otherwise permitted by law, and such participation in a meeting shall constitute presence in person at such meeting.

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SECTION 3.11. Action Without Meeting . Any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all of the members of the Board or of any such committee consent thereto in a signed writing describing the action to be taken and, if required by law, the writing or writings are filed with the minutes or proceedings of the Board or of such committee.

SECTION 3.12. Resignations . Any director of the Corporation may at any time resign by delivering written notice to the Board, the Chairman of the Board or the Corporation. Such resignation shall take effect at the time specified therein or, if the time be not specified therein, upon receipt thereof, and the acceptance of such resignation shall not be necessary to make it effective.

SECTION 3.13. Removal . Directors may only be removed in accordance with and in the manner provided in the Articles.

SECTION 3.14. Compensation . Each director, in consideration of such person serving as a director, shall be entitled to receive from the Corporation such amount per annum and such fees for attendance at meetings of the Board or of committees of the Board, or both, as the Board or a committee thereof shall from time to time determine. In addition, each director shall be entitled to receive from the Corporation reimbursement for the reasonable expenses incurred by such person in connection with the performance of such person’s duties as a director. Nothing contained in this Section 3.14 shall preclude any director from serving the Corporation or any of its subsidiaries in any other capacity and receiving compensation therefor.

ARTICLE IV

Committees of the Board of Directors

SECTION 4.01. Establishment of Committees of the Board . The Board shall designate such committees as may be required by the rules of the New York Stock Exchange (or any other principal United States exchange upon which the shares of the Corporation may be listed) and may from time to time, by resolution adopted by a majority of the Board, designate other committees of the Board (including an executive committee), with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee.

SECTION 4.02. Conduct of Business . Any committee, to the extent allowed by law and provided in the resolution establishing such committee or the charter of such committee, shall have and may exercise all the duly delegated powers and authority of the Board in the management of the business and affairs of the Corporation. The Board shall have the power to prescribe the manner in which proceedings of any such committee shall be conducted. In the absence of any such prescription, any such committee shall have the power to prescribe the manner in which its proceedings shall be conducted. Unless the Board or such committee shall otherwise provide, regular and special meetings and other actions of any such committee shall be governed by the provisions of Article III applicable to meetings and actions of the Board. Each committee shall keep regular minutes and report on its actions to the Board.

ARTICLE V

Officers

SECTION 5.01. Number; Term of Office .

(a) The officers of the Corporation shall be determined by the Board and, to the extent provided in Section 5.01(c), the Chairman of the Board, and may include a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (including, without limitation, Senior Vice Presidents) and a Treasurer, Secretary and Controller and such other officers and agents as the Board may appoint from time to time, each to have such authority, functions or duties as these By-laws provide or as may be delegated or assigned to such officer, from time to time, by the Board, the Chairman of the Board or the President. One person may hold the offices and perform the duties of any two or more of said officers; provided , however , that no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law, the Articles or these By-laws to be executed, acknowledged or verified by two or more officers.

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The Board may require any officer or agent to give security for the faithful performance of such person’s duties. The Board shall designate which of the officers shall be executive officers of the Corporation.

(b) Each officer shall be appointed by the Board at its annual meeting and hold office until the next annual meeting of the Board and until the officer’s successor is appointed or until the officer’s earlier death, resignation or removal in the manner hereinafter provided. If additional officers are appointed by the Board during the year, each of them shall hold office until the next annual meeting of the Board at which officers are regularly appointed and until the officer’s successor is appointed or until the officer’s earlier death, resignation or removal in the manner hereinafter provided.

(c) In addition to the foregoing, the Chairman of the Board, by written designation filed with the Secretary, may appoint one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers, Assistant Controllers and Assistant Auditors of the Corporation. If appointed during the year, each of them shall hold office until the next annual meeting of the Board at which officers are regularly appointed and until the officer’s successor is appointed or until the officer’s earlier death, resignation or removal in the manner hereinafter provided. Subject to the authority of the Board, the Chairman of the Board shall also have authority to fix the salary of such officer.

SECTION 5.02. Resignation; Removal; Vacancies . Any officer may resign at any time by delivering written notice to the Corporation, and such resignation shall be effective when the notice is delivered, unless the notice specifies a later effective date. All officers and agents appointed shall be subject to removal at any time by the Board with or without cause. All appointed officers may be removed at any time by the Chairman of the Board acting jointly with the President or any Executive or Senior Vice President, by written designation filed with the Secretary. A vacancy in any office may be filled for the unexpired portion of the term in the same manner as provided for appointment to such office.

SECTION 5.03. Chairman of the Board . The Chairman of the Board, if present, shall preside at all meetings of the shareholders and the Board. If designated by Board resolution, the Chairman of the Board shall be Chief Executive Officer of the Corporation, and if so designated, shall be vested with executive control and management of the business and affairs of the Corporation and have the direction of all other officers, agents and employees. The Chairman of the Board shall perform all such other duties as are incident to the office or as may be properly required of the Chairman of the Board by the Board, subject in all matters to the control of the Board.

SECTION 5.04. President . The President, in the absence of the Chairman of the Board, shall preside at all meetings of the shareholders and the Board. If designated by Board resolution, the President shall be Chief Executive Officer of the Corporation, and if so designated, shall be vested with executive control and management of the business and affairs of the Corporation and have the direction of all other officers, agents and employees. The President shall have such powers, authority and duties as may be delegated or assigned to the President from time to time by the Board or the Chairman of the Board.

SECTION 5.05. Vice Presidents . The Executive Vice Presidents, Senior Vice Presidents, Administrative Vice Presidents and Vice Presidents shall have such powers, authority and duties as may be delegated or assigned to them from time to time by the Board, the Chairman of the Board or the President. An Administrative Vice President or Vice President need not be an officer of the Corporation and shall not be deemed an officer of the Corporation unless designated as such by the Board, the Chairman of the Board or the President.

SECTION 5.06. Treasurer . The Treasurer shall have custody and control of the funds and securities of the Corporation and shall perform all such other duties as are incident to the office of the Treasurer or that may be properly required of the Treasurer by the Board, the Chairman of the Board or the President.

SECTION 5.07. Controller . The Controller shall maintain adequate records of all assets, liabilities and transactions of the Corporation; shall see that adequate audits thereof are currently and regularly made; shall have general supervision of the preparation of the Corporation’s balance sheets, income accounts and other financial statements or records; and shall perform such other duties as shall, from time to time, be assigned to him, by the Board, the Chairman of the Board or the President. Unless otherwise provided by the Board, the Chairman of the Board or the President, these duties and powers shall extend to all subsidiary corporations and, so far as the Board, the Chairman of the Board or the President may deem practicable, to all affiliated corporations.

SECTION 5.08. Secretary . The Secretary shall attend to the giving and serving of all notices required by law or these By-laws, shall be the custodian of the corporate seal and shall affix and attest the same to all papers requiring it; shall have responsibility for preparing minutes of the meetings of the Board and shareholders; shall have responsibility for

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authenticating records of the Corporation; and shall in general perform all the duties incident to the office of the Secretary, subject in all matters to the control of the Board.

SECTION 5.09. Auditor . The Auditor shall review the accounting, financial and related operations of the Corporation and shall be responsible for measuring the effectiveness of various controls established for the Corporation. The Auditor’s duties shall include, without limitation, the appraisal of procedures, verifying the extent of compliance with formal controls and the prevention and detection of fraud or dishonesty and such other duties as shall, from time to time, be assigned to the Auditor by the Board, the Chairman of the Board or the President. Unless otherwise provided by the Board, the Chairman of the Board or the President, these duties and powers shall extend to all subsidiary corporations and, so far as the Board, the Chairman of the Board or the President may deem practicable, to all affiliated corporations.

SECTION 5.10. Assistant Treasurers, Assistant Controllers and Assistant Secretaries . Any Assistant Treasurers, Assistant Controllers and Assistant Secretaries shall perform such duties as shall be assigned to them by the Board or by the Treasurer, Controller or Secretary, respectively, or by the Chief Executive Officer.

SECTION 5.11. General Provision . The powers, authorities and duties established pursuant to this Article V may be delegated or assigned, directly or indirectly, by the Board, the Chairman of the Board or the President, as the case may be.

ARTICLE VI

Indemnification

SECTION 6.01. Right to Indemnification . The Corporation, to the fullest extent permitted or required by the KBCA or other applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment and unless applicable law otherwise requires, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), shall indemnify and hold harmless any person who is or was a director or officer of the Corporation and who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be made so involved in any threatened, pending or completed investigation, claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, any action, suit or proceedings by or in the right of the Corporation to procure a judgment in its favor) (a “ Proceeding ”) by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) (a “Covered Entity” ) against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding; provided , however , that, except as required by law, the foregoing shall not apply to a director or officer of the Corporation with respect to a Proceeding that was commenced by such director or officer unless the proceeding was commenced after a Change in Control (as defined below). Any director or officer of the Corporation entitled to indemnification as provided in this Section 6.01 is hereinafter called an “ Indemnitee ”. Any right of an Indemnitee to indemnification shall be a contract right and shall, unless determined by the Corporation to not be in its best interest, include the right to receive payment in advance of any expenses incurred by the Indemnitee in connection with such Proceeding, consistent with the provisions of the KBCA or other applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment and unless applicable law otherwise requires, only to the extent that such amendment permits the Corporation to provide broader rights to payment of expenses than such law permitted the Corporation to provide prior to such amendment), and the other provisions of this Article VI; provided that, if required by law or by the Corporation in its discretion, the Corporation receive an undertaking to repay such amount if it is ultimately determined that the Indemnitee is not entitled to be indemnified.

For purposes of this Section 6.01, “Change in Control” means the occurrence of any of the following: (i) any merger or consolidation of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation’s Common Stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of the Corporation’s Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Corporation, or the liquidation or dissolution of the Corporation or (iii) individuals who would constitute a majority of the members of the Board elected at any meeting of shareholders or by written consent (without regard to any members of the Board elected pursuant to the terms of any series of Preferred Stock) shall be elected to the Board and the

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election or the nomination for election by the shareholders of such directors was not approved by a vote of at least two-thirds of the directors in office immediately prior to such election.

SECTION 6.02. Insurance, Contracts and Funding . The Corporation may purchase and maintain insurance to protect itself and any director, officer, employee or agent of the Corporation or of any Covered Entity against any expenses, judgments, fines and amounts paid in settlement as specified in Section 6.01 of this Article VI or incurred by any such director, officer, employee or agent in connection with any Proceeding referred to in Section 6.01 of this Article VI, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the KBCA. The Corporation may enter into contracts with any director, officer, employee or agent of the Corporation or of any Covered Entity in furtherance of the provisions of this Article VI and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided or authorized in this Article VI.

SECTION 6.03. Indemnification Not Exclusive Right . The right of indemnification provided in this Article VI shall not be exclusive of any other rights to which an Indemnitee may otherwise be entitled, and the provisions of this Article VI shall inure to the benefit of the heirs and legal representatives of any Indemnitee under this Article VI and shall be applicable to Proceedings commenced or continuing after the adoption of this Article VI, whether arising from acts or omissions occurring before or after such adoption.

SECTION 6.04. Severability . If any provision or provisions of this Article VI shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article VI (including, without limitation, all portions of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article VI (including, without limitation, all portions of any paragraph of this Article VI containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or enforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

SECTION 6.05. Indemnification of Employees Serving as Directors . The Corporation, to the fullest extent of the provisions of this Article VI with respect to the indemnification of directors and officers of the Corporation, may indemnify any person who is or was an employee of the Corporation or of any entity in which the Corporation, directly or indirectly, has an interest and who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be made so involved in any threatened, pending or completed Proceeding by reason of the fact that such employee is or was serving (a) as a director of a corporation in which the Corporation had at the time of such service, directly or indirectly, a 50% or greater equity interest (a “ Subsidiary Director ”) or (b) at the written request of an Authorized Officer, as a director of another corporation in which the Corporation had at the time of such service, directly or indirectly, a less than 50% equity interest (or no equity interest at all) or in a capacity equivalent to that of a director for any partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) in which the Corporation has an interest (a “ Requested Employee ”), against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such Subsidiary Director or Requested Employee in connection with such Proceeding. The Corporation, to the fullest extent of the provisions of this Article VI with respect to the advancement of expenses of directors and officers of the Corporation, may also advance expenses incurred by any such Subsidiary Director or Requested Employee in connection with any such Proceeding, consistent with the provisions of this Article VI with respect to the advancement of expenses of directors and officers of the Corporation.

For purposes of this Section 6.05, “Authorized Officer” means any one of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, any Vice President that is an officer of the Corporation or the Secretary.

SECTION 6.06. Indemnification of Employees and Agents . Notwithstanding any other provision or provisions of this Article VI, the Corporation, to the fullest extent of the provisions of this Article VI with respect to the indemnification of directors and officers of the Corporation, may indemnify any person other than a director or officer of the Corporation, a Subsidiary Director or a Requested Employee, who is or was an employee or agent of the Corporation or of any entity in which the Corporation, directly or indirectly, has an interest and who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be made so involved in any threatened, pending or completed Proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, a Covered Entity, or of any entity in which the Corporation, directly or indirectly, has an interest, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding. The Corporation may also advance expenses incurred by such employee or

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agent in connection with any such Proceeding, consistent with the provisions of this Article VI with respect to the advancement of expenses of directors and officers of the Corporation.

ARTICLE VII

Capital Stock

SECTION 7.01. Certificates for Shares and Uncertificated Shares .

(a) The shares of stock of the Corporation shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock, or shall be represented by certificates, or a combination of both. To the extent that shares are represented by certificates, such certificates whenever authorized by the Board shall be in such form as shall be approved by the Board. The certificates representing shares of stock of each class shall be signed by, or in the name of, the Corporation by the Chairman of the Board, the President, or by any Vice President, and by the Secretary or any Assistant Secretary, and sealed with the seal of the Corporation, which may be a facsimile thereof. Any or all such signatures may be facsimiles if countersigned by a transfer agent or registrar. Although any officer, transfer agent or registrar whose manual or facsimile signature is affixed to such a certificate ceases to be such officer, transfer agent or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its issue. In the event that the Corporation issues or transfers shares without certificates, within a reasonable time after such issuance or transfer, the Corporation shall send the shareholder a written statement of the information required by the KBCA to be stated on a share certificate.

(b) The stock ledger and blank share certificates, if any, shall be kept by the Secretary or by a transfer agent or by a registrar or by any other officer or agent designated by the Board.

SECTION 7.02. Transfer of Shares . Transfers of shares of stock of each class of the Corporation shall be made only on the books of the Corporation upon authorization by the registered holder thereof, or by such holder’s attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary or a transfer agent for such stock, if any, and if such shares are represented by a certificate, upon surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power (or by proper evidence of succession, assignment or authority to transfer) and the payment of any taxes thereon; provided , however , that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. To the fullest extent permitted by law, the person in whose name shares are registered on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation.

SECTION 7.03. Registered Shareholders and Addresses of Shareholders . The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered on its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Kentucky.

SECTION 7.04. Lost, Destroyed and Mutilated Certificates . The holder of any certificate representing any shares of stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of such certificate. The Corporation may issue to such holder a new certificate or certificates for shares, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction. The Board, or a committee designated thereby, or the transfer agents and registrars for the stock, may, in their discretion, require the owner of the lost, stolen or destroyed certificate, or such person’s legal representative, to give the Corporation a bond in such sum and with such surety or sureties as they may direct to indemnify the Corporation and said transfer agents and registrars against any claim that may be made on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

SECTION 7.05. Regulations . The Board may make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificated or uncertificated shares of stock of each class of the Corporation and may make such rules and take such action as it may deem expedient concerning the issue of certificates in lieu of certificates claimed to have been lost, destroyed, stolen or mutilated.

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SECTION 7.06. Fixing Date for Determination of Shareholders of Record .

(a) In order that the Corporation may determine the shareholders entitled to notice of any meeting of the shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 70 nor less than 10 days before the date of such meeting nor more than 70 days prior to any such other action (as the case may be).

(b) A determination of shareholders entitled to notice of or to vote at a meeting of the shareholders shall apply to any adjournment of the meeting; provided , however , that the Board shall fix a new record date for the adjourned meeting if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

SECTION 7.07. Transfer Agents and Registrars . The Board may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.

ARTICLE VIII

Miscellaneous

SECTION 8.01. Seal . The Board shall provide a suitable corporate seal, which shall bear, but not be limited to, the full name of the Corporation and shall be in the charge of the Secretary. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

SECTION 8.02. Fiscal Year . The fiscal year of the Corporation shall begin on the first day of October in each year.

SECTION 8.03. Waiver of Notice . Whenever any notice whatsoever is required to be given by these By-laws, by the Articles or by law, the person entitled thereto may, either before or after the meeting or other matter in respect of which such notice is to be given, waive such notice in a signed writing or as otherwise permitted by law, which shall be filed with or entered upon the minutes of the meeting or the corporate records kept with respect to such other matter, as the case may be, and in such event such notice need not be given to such person and such waiver shall be deemed equivalent to such notice. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance at any meeting shall constitute waiver of notice other than in the case of attendance for the express purpose of objecting at the beginning of the meeting (or promptly upon such person’s arrival) to the transaction of business because the meeting is not lawfully called or convened.

SECTION 8.04. Execution of Documents . The Board shall designate the officers, employees and agents of the Corporation who shall have power to execute and deliver deeds, contracts, mortgages, bonds, debentures, notes, checks, drafts and other orders for the payment of money and other documents for and in the name of the Corporation and may authorize (including authority to redelegate) to other officers, employees or agents of the Corporation. Such delegation may be by resolution or otherwise and the authority granted shall be general or confined to specific matters, all as the Board or any such committee may determine. In the absence of such designation, the officers of the Corporation shall have such power so referred to, to the extent incident to the normal performance of their duties.

SECTION 8.05. Deposits . All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board or any committee thereof or any officer of the Corporation to whom power in respect of financial operations shall have been delegated by the Board or any such committee or in these By-laws shall select.

SECTION 8.06. Checks . All checks, drafts and other orders for the payment of money out of the funds of the Corporation, and all notes or other evidences of indebtedness of the Corporation, shall be signed on behalf of the Corporation in such manner as shall from time to time be determined by resolution of the Board or of any committee thereof or by any officer of the Corporation to whom power in respect of financial operations shall have been delegated by the Board or any such committee thereof or as set forth in these By-laws.

SECTION 8.07. Proxies in Respect of Stock or Other Securities of Other Corporations . The Board shall designate the officers of the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have

[[NYCORP:3600137v9:4334W: 10/24/2016--01:03 PM]]

as the holder of stock or other securities in any other corporation or other entity, and to vote or consent in respect of such stock or securities; such designated officers may instruct the person or persons so appointed as to the manner of exercising such powers and rights; and such designated officers may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, such written proxies, powers of attorney or other instruments as they may deem necessary or proper in order that the Corporation may exercise its said powers and rights.

SECTION 8.08. Subject to Law and the Articles of Incorporation . All powers, duties and responsibilities provided for in these By-laws, whether or not explicitly so qualified, are qualified by the provisions of the Articles and applicable law.

ARTICLE IX

Amendments

SECTION 9.01. Subject to the KBCA and the Articles, these By-laws may be altered, amended or repealed, in whole or in part, or new By-laws may be adopted by the Board at any meeting thereof; provided , however , that notice of such alteration, amendment, repeal or adoption of new By-laws is contained in the notice of such meeting of the Board and such notice is given not less than twenty-four hours prior to the meeting. Unless a higher percentage is required by the Articles, any such alteration, amendment, repeal or adoption of any By-law shall require approval by a majority of the Board. The shareholders of the Corporation shall have the power to alter, amend, repeal or adopt any By-law only to the extent and in the manner provided in the Articles and only to the extent permitted by law.

[[NYCORP:3600137v9:4334W: 10/24/2016--01:03 PM]]

EXHIBIT 4.3

[Execution Version]

______________________________

FIRST SUPPLEMENTAL INDENTURE

Dated as of September 26, 2016

______________________________

VALVOLINE INC.,

THE GUARANTORS PARTY HERETO,

and

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

FIRST SUPPLEMENTAL INDENTURE (this “ First Supplemental Indenture ”), dated as of September 26, 2016, among VALVOLINE INC., a Kentucky corporation (the “ Company ”), the entities listed on Schedule I hereto (each a “ Subsidiary Guarantor ”), and U.S. BANK NATIONAL ASSOCIATION, as trustee (the “ Trustee ”).

W I T N E S S E T H

WHEREAS, VALVOLINE FINCO TWO LLC., a Delaware limited liability company (“ Finco Two ”), and ASHLAND INC., a Kentucky corporation (“ Ashland ”), have heretofore executed and delivered to the Trustee an indenture (the “ Indenture ”), dated as of July 20, 2016, providing for the issuance of an unlimited aggregate principal amount of 5.500% Senior Notes due 2024 (the “ Notes ”);

WHEREAS, on the date hereof, pursuant to Section 271B.11-080 of the Kentucky Business Corporation Act, Finco Two merged with and into the Company (the “ Merger ”), with the Company as the surviving corporation;

WHEREAS, as a result of the Merger, the Company is assuming, by and under operation of law and this First Supplemental Indenture, the obligations of Finco Two for the due and punctual payment of the principal of, premium, if any, and interest (including Additional Interest, if any) on all the Notes and the performance and observance of the Indenture on the part of Finco Two;

WHEREAS, as a result of the Merger and in accordance with the Indenture, the Subsidiary Guarantors are, by and under this First Supplemental Indenture, unconditionally guaranteeing all of the Company’s obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “ Guarantees ”); and

WHEREAS, pursuant to Sections 9.01 and 9.05 of the Indenture, the Trustee is authorized to execute and deliver this First Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. Capitalized Terms . Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. Assumption by the Company . The Company hereby assumes the obligations of Finco Two for the due and punctual payment of the principal of, premium, if any, and interest on all Outstanding Notes issued pursuant to the Indenture and the performance and observance of each other obligation and covenant set forth in the Indenture to be performed or observed on the part of Finco Two. The Company is hereby substituted for, and may exercise every right and power of, Finco Two under the Indenture with the same effect as if the Company had been named as Finco Two in the Indenture, and the Company is a successor company under the Indenture.

3. Agreement to Guarantee . Each Subsidiary Guarantor hereby agrees as follows:

a. Such Subsidiary Guarantor hereby becomes a party to the Indenture as a Guarantor and as such will have all of the rights and be subject to all of the obligations and agreements of a Subsidiary Guarantor under the Indenture, subject to the terms and conditions set forth in the Indenture.

b. Such Subsidiary Guarantor agrees, on a joint and several basis with all the existing Subsidiary Guarantors, to fully, unconditionally and irrevocably Guarantee to each Holder of the Notes and the Trustee the Obligations in accordance with the terms set forth in Article X of the Indenture.

4. Release of Ashland Guarantee . Pursuant to Section 10.03 of the Indenture, effective as of the date hereof, Ashland is hereby fully and unconditionally released from the Ashland Guarantee, and shall have no further obligations in respect of the Ashland Guarantee, the Notes, or the Indenture.

5. No Personal Liability of Directors, Officers, Employees and Stockholders . No present, past or future director, officer, employee, member, partner, incorporator or equity holder of the Company, any Subsidiary Guarantor or any Subsidiary of the Company or any of their respective direct or indirect parent companies (except for the Company or any Subsidiary Guarantor in its capacity as obligor or guarantor in respect of the Notes and not in its capacity as equity holder of any Subsidiary Guarantor) shall have any liability for any obligations of the Company or the Subsidiary Guarantors under the Notes, the Guarantees, this First Supplemental Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation.

6. Ratification of the Indenture; First Supplemental Indenture part of the Indenture . Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This First Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. Each Subsidiary Guarantor agrees that its Guarantee shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.

7. Governing Law . THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

8. Counterparts . The parties may sign any number of copies of this First Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of copies of this First Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this First Supplemental Indenture as to the parties hereto and may be used in lieu of the original First Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

9. Effect of Headings . The Section headings of this First Supplemental Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

10. The Trustee . The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this First Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Company and the Subsidiary Guarantors.

11. Benefits Acknowledged . The Company and each Subsidiary Guarantor’s Guarantee are subject to the terms and conditions set forth in the Indenture. Each of the Company and the Subsidiary Guarantors acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this First Supplemental Indenture and that the Guarantee and waivers made by it pursuant to its Guarantee and this First Supplemental Indenture and are knowingly made in contemplation of such benefits.

12. Successors . All agreements of the Company and the Subsidiary Guarantors in this First Supplemental Indenture shall bind its successors, except as otherwise provided in the Indenture (including without limitation Section 10.03 of the Indenture). All agreements of the Trustee in this First Supplemental Indenture shall bind its successors.

13. Severability . If any provision in this First Supplemental Indenture is deemed unenforceable, it shall not affect the validity or enforceability of any other provision set forth herein, or of this First Supplemental Indenture as a whole.

[ Remainder of page intentionally left blank ]

IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, all as of the date first above written.



VALVOLINE INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Assistant Treasurer

[Signature Page to the Supplemental Indenture]



VALVOLINE US LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



VALVOLINE LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



VALVOLINE LICENSING AND
INTELLECTUAL PROPERTY LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



VALVOLINE BRANDED FINANCE, INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



VALVOLINE INTERNATIONAL HOLDINGS
INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer

[Signature Page to the Supplemental Indenture]



VALVOLINE INSTANT OIL CHANGE
FRANCHISING, INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



RELOCATION PROPERTIES MANAGEMENT
LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



VIOC FUNDING, INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



VALVOLINE INTERNATIONAL, INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



FUNDING CORP. I

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer

[Signature Page to the Supplemental Indenture]



OCH INTERNATIONAL, INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



OCHI ADVERTISING FUND LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



OCHI HOLDINGS LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



OCHI HOLDINGS II LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer

[Signature Page to the Supplemental Indenture]



U.S. BANK NATIONAL ASSOCIATION, as
Trustee

By:	/s/ William E. Sicking
	William E. Sicking
	Vice President & Trust Officer

[Signature Page to the Supplemental Indenture]

SCHEDULE I

Subsidiary Guarantors

Valvoline US LLC

Valvoline LLC

Valvoline Licensing and Intellectual Property LLC

Valvoline Branded Finance, Inc.

Valvoline International Holdings Inc.

Valvoline Instant Oil Change Franchising, Inc.

Relocation Properties Management LLC

VIOC Funding, Inc.

Valvoline International, Inc.

Funding Corp. I

OCH International, Inc.

OCHI Advertising Fund LLC

OCHI Holdings LLC

OCHI Holdings II LLC

EXHIBIT 4.4

[Execution]

Valvoline Inc.

$375,000,000

5.500% Senior Notes due 2024

REGISTRATION RIGHTS AGREEMENT

Dated September 26, 2016

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REGISTRATION RIGHTS AGREEMENT

September 26, 2016

Citigroup Global Markets Inc.

as Representative of the several Initial Purchasers

388 Greenwich Street

New York, New York 10013

Ladies and Gentlemen:

This Registration Rights Agreement (this “ Agreement ”) is made and entered into as of September 26, 2016, among Valvoline Inc., a Kentucky corporation (“ Valvoline ”), the subsidiaries (each, a “ Guarantor ” and collectively, the “ Guarantors ” and together with Valvoline, the “ Company ”) listed on Schedule I to the First Supplemental Indenture (defined below) and Citigroup Global Markets Inc. (the “ Representative ”), as representative of the several Initial Purchasers (the “ Initial Purchasers ”) listed on Schedule A to the Purchase Agreement (as defined below), each of whom has purchased the $375,000,000 aggregate principal amount of 5.500% Senior Notes due 2024 (the “ Notes ”) of Valvoline Finco Two LLC, a Delaware limited liability company (“ Finco ”). Ashland Inc., a Kentucky corporation (“ Ashland ”), is the initial guarantor of the Notes pursuant to the indenture, dated as of July 20, 2016 (the “ Initial Indenture ”) among Finco, Ashland and U.S. Bank National Association, as trustee (the “ Trustee ”).

This Agreement is made pursuant to the Purchase Agreement, dated July 13, 2016 (the “ Purchase Agreement ”), among Finco, Ashland and the Representative and in connection with the Assumption of the obligations of Finco under the Notes by the Company under the First Supplemental Indenture, dated September 26, 2016, among Valvoline, the Guarantors and the Trustee (the “ First Supplemental Indenture ”, and together with the Initial Indenture, the “ Indenture ”). Capitalized terms used but not defined herein have the meanings assigned to them in the Purchase Agreement.

The parties hereby agree as follows:

SECTION 1. Definitions . As used in this Agreement, the following capitalized terms shall have the following meanings:

Additional Interest: As defined in Section 5 hereof.

Additional Interest Payment Date: With respect to the Transfer Restricted Securities, each Interest Payment Date.

Advice: As defined in Section 6(c) hereof.

Agreement: As defined in the preamble hereto.

Ashland: As defined in the preamble hereto.

Broker-Dealer: Any broker or dealer registered under the Exchange Act.

Business Day: Any day other than a Saturday, Sunday or a day on which commercial banking institutions are required to be closed in the State of New York.

Commission: The Securities and Exchange Commission.

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Company: As defined in the preamble hereto.

Consummate: A registered Exchange Offer shall be deemed “Consummated” for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Securities to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of Exchange Securities in the same aggregate principal amount as the aggregate principal amount of Transfer Restricted Securities that were tendered by Holders thereof pursuant to the Exchange Offer.

Exchange Act: The Securities Exchange Act of 1934, as amended.

Exchange Date: As defined in Section 3(a) hereof.

Exchange Offer: The offer by the Company to the Holders of all outstanding Transfer Restricted Securities of the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Securities in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders, such exchange offer being the subject of a Registration Statement of the Company registering the Exchange Securities under the Securities Act.

Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus.

Exchange Offer Suspension Period: As defined in Section 3(c) hereof.

Exchange Securities: The 5.500% Senior Notes due 2024, of the same series under the Indenture as the Transfer Restricted Securities, to be issued to Holders in exchange for Transfer Restricted Securities pursuant to this Agreement.

Finco: As defined in the preamble hereto.

FINRA: Financial Industry Regulatory Authority, Inc.

First Supplemental Indenture: As defined in the preamble hereto.

Guarantors: As defined in the preamble hereto.

Guarantees: As defined in the preamble hereto.

Holders: As defined in Section 2(b) hereof.

Indemnified Holder: As defined in Section 8(a) hereof.

Indenture: The Initial Indenture, as supplemented and amended by the First Supplemental Indenture.

Initial Indenture: As defined in the preamble hereto.

Initial Placement: The issuance and sale by Finco of the Securities to the Initial Purchasers pursuant to the Purchase Agreement.

Initial Purchaser: As defined in the preamble hereto.

- 3 -

Interest Payment Date: As defined in the Indenture and the Securities.

Notes: As defined in the preamble hereto.

Person: An individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by all amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.

Purchase Agreement: As defined in the preamble hereto.

Registrar: As defined in the Indenture.

Registration Default: As defined in Section 5 hereof.

Registration Statement: Any registration statement of the Company relating to (a) an offering of Exchange Securities pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein.

Representative: As defined in the preamble hereto.

Securities: The Notes issued and sold to the Initial Purchasers, and any securities issued in exchange therefor or in lieu thereof pursuant to the Indenture. The Notes are entitled to the benefit of the Guarantees provided for in the Indenture and unless the context otherwise requires, any reference herein to the “Securities,” the “Exchange Securities” or the “Transfer Restricted Securities” shall include a reference to the related Guarantees.

Securities Act: The Securities Act of 1933, as amended.

Shelf Filing Deadline: As defined in Section 4(a) hereof.

Shelf Registration Statement: As defined in Section 4(a) hereof.

Shelf Suspension Period: As defined in Section 4(a) hereof.

Transfer Restricted Securities: The Notes; provided that the Notes shall cease to be Transfer Restricted Securities on the earliest to occur of (i) the date on which a Registration Statement with respect to such Notes has become effective under the Securities Act and such Notes have been exchanged in the Exchange Offer or disposed of pursuant to such Registration Statement or (ii) the date on which such Notes cease to be outstanding.

Trust Indenture Act: The Trust Indenture Act of 1939, as amended.

Trustee: As defined in the preamble hereto.

Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public.

Valvoline: As defined in the preamble hereto.

- 4 -

SECTION 2. Securities Subject to this Agreement .

(a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities.

(b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a “ Holder ”) whenever such Person owns Transfer Restricted Securities.

SECTION 3. Registered Exchange Offer .

(a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) hereof have been complied with), or there are no Transfer Restricted Securities outstanding, the Company shall (i) use its commercially reasonable efforts to cause to be filed with the Commission a Registration Statement under the Securities Act relating to the Exchange Securities and the Exchange Offer, (ii) use its commercially reasonable efforts to cause such Registration Statement to become effective, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, file a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings in connection with the registration and qualification of the Exchange Securities to be made under the state securities or blue sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) promptly following the effectiveness of such Registration Statement, commence the Exchange Offer. The Company shall use its commercially reasonable efforts to Consummate the Exchange Offer on or prior to December 31, 2017 (the “ Exchange Date ”). If the Exchange Offer is required pursuant to this Section 3(a), the Exchange Offer Registration Statement shall be on the appropriate form permitting registration of the Exchange Securities to be offered in exchange for the Transfer Restricted Securities and to permit resales of Transfer Restricted Securities held by Broker-Dealers as contemplated by Section 3(c) hereof.

(b) If an Exchange Offer Registration Statement is required to be filed and is declared effective pursuant to Section 3(a) above, the Company shall use its commercially reasonable efforts to cause the Exchange Offer Registration Statement to be effective continuously until the Exchange Offer is Consummated and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however , that in no event shall such period be less than 20 days after the date notice of the Exchange Offer is mailed to the Holders. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Exchange Securities shall be included in the Exchange Offer Registration Statement. The Company shall use its commercially reasonable efforts to cause the Exchange Offer to be Consummated by the Exchange Date.

(c) The Company shall indicate in a “Plan of Distribution” section contained in the Prospectus forming a part of the Exchange Offer Registration Statement that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company) may exchange such Transfer Restricted Securities pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an “underwriter” within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Securities received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such “Plan of Distribution” section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such “Plan of Distribution” shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer except to the extent required by the Commission.

- 5 -

The Company shall use its commercially reasonable efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) hereof to the extent necessary to ensure that it is available for resales of Exchange Securities acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms in all material respects with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective and (ii) the date on which a Broker-Dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities; provided that the Company, for a period of up to 60 days in any three-month period, not to exceed 90 days in any calendar year, shall be entitled to suspend its obligations under Section 6(c) and suspend the use of the Prospectus that is part of the Exchange Offer Registration Statement (any such period, an “ Exchange Offer Suspension Period ”), if there is a possible acquisition, disposition or business combination or other transaction, business development or event involving Valvoline or any of its subsidiaries that would require disclosure to be included or incorporated by reference in the Exchange Offer Registration Statement or Prospectus (and disclosure would not be required to be made at such time but for the use of such Exchange Offer Registration Statement or Prospectus) and the Company determines in the exercise of its reasonable judgment (and not for the purpose of avoidance of its obligations hereunder) that such disclosure is not in the best interest of Valvoline and its stockholders or would reasonably be expected to adversely affect in any material respect Valvoline or its business or Valvoline’s ability to effect a planned or proposed acquisition, disposition, business combination or other similar transaction.

The Company shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 180-day (or shorter as provided in the foregoing sentence) period in order to facilitate such resales.

It is agreed that if the Exchange Offer required to be Consummated pursuant to this Agreement is not so Consummated by the Exchange Date, the only remedy to the Holders, except as provided in Section 4 hereof, after the Exchange Date will be Additional Interest as set forth in Section 5 hereof.

Notwithstanding anything in this Section 3 to the contrary, the requirements to file and keep effective the Exchange Offer Registration Statement and to make all other filings contemplated by this Section 3 and the requirements to Consummate the Exchange Offer shall terminate at the earliest to occur of such time as a Shelf Registration Statement required by Section 4(a)(ii) has been filed in accordance with Section 4 hereof with respect to all Transfer Restricted Securities for which information has been provided in accordance with Section 4(b) hereof, and such Shelf Registration Statement has been declared effective by the Commission.

SECTION 4. Shelf Registration .

(a) Shelf Registration. If (i) the Company is not required to file an Exchange Offer Registration Statement or to Consummate the Exchange Offer solely because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) hereof have been complied with), (ii) for any reason the Exchange Offer is not Consummated by the Exchange Date, or (iii) (A) prior to the Exchange Date, the Initial Purchasers request from the Company with respect to Transfer Restricted Securities not eligible to be exchanged for Exchange Securities in the Exchange Offer, (B) with respect to any Holder of Transfer Restricted Securities such Holder notifies the Company that (1) such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, (2) such Holder notifies the Company within 30 days of the consummation of the Exchange Offer that such Holder may not resell the Exchange Securities acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (3) such Holder is a Broker-Dealer and holds Transfer Restricted Securities acquired directly from the Company or one of its affiliates, and requests from the Company with respect to such Securities or (C) prior to the Exchange Date, in the case of any Initial Purchaser, such Initial Purchaser notifies the Company it will not receive Exchange Securities in exchange

- 6 -

for Transfer Restricted Securities constituting any portion of such Initial Purchaser’s unsold allotment, the Company shall:

(x) cause to be filed a shelf registration statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the “ Shelf Registration Statement ”) on or prior to the 30th day after the date such obligation arises (or if such 30th day is not a Business Day, the next succeeding Business Day) but no earlier than the Exchange Date (such date being the “ Shelf Filing Deadline ”), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and

(y) use its commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 60th day after the Shelf Filing Deadline (or if such 60th day is not a Business Day, the next succeeding Business Day).

The Company shall use its commercially reasonable efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Transfer Restricted Securities by the Holders of such Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms in all material respects with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, from the date on which the Shelf Registration Statement is declared effective by the Commission until the first anniversary of such effective date (or such shorter period that will terminate when all the Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant to such Shelf Registration Statement); provided that the Company, for a period of up to 60 days in any three-month period, not to exceed 90 days in any calendar year, shall be entitled to suspend its obligations under Section 6(b) and (c) and suspend the use of the Prospectus that is part of the Shelf Registration Statement (any such period, a “ Shelf Suspension Period ”), if there is a possible acquisition, disposition or business combination or other transaction, business development or event involving Valvoline or any of its subsidiaries that would require disclosure to be included or incorporated by reference in the Shelf Registration Statement or Prospectus (and disclosure would not be required to be made at such time but for the use of such Shelf Registration Statement or Prospectus) and the Company determines in the exercise of its reasonable judgment (and not for the purpose of avoidance of its obligations hereunder) that such disclosure is not in the best interest of Valvoline and its stockholders or would reasonably be expected to adversely affect in any material respect Valvoline or its business or Valvoline’s ability to effect a planned or proposed acquisition, disposition, business combination or other similar transaction. It is agreed that if a Shelf Registration Statement is required to be filed and effective pursuant to this Agreement and is not so filed and effective after the Shelf Filing Deadline, the only remedy to the Holders after the Shelf Filing Deadline will be Additional Interest as set forth in Section 5 hereof. Notwithstanding anything in this Agreement to the contrary, the requirements to file a Shelf Registration Statement and to use its commercially reasonable efforts to cause such Shelf Registration Statement to become effective and remain effective shall terminate where such requirements were the result of the circumstances described under Section 4(a)(ii) hereof, at such time as the Exchange Offer is Consummated.

(b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 Business Days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading.

SECTION 5. Additional Interest. If either (i) the Exchange Offer, if required hereby, has not been Consummated on or prior to the Exchange Date, (ii) any Shelf Registration Statement, if required hereby, has not

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been declared effective by the Commission by the time provided in this Agreement, or (iii) any Registration Statement required by this Agreement has been declared effective but ceases to be effective at any time at which it is required to be effective under this Agreement other than during an Exchange Offer Suspension Period or a Shelf Suspension Period (each such event referred to in clauses (i) through (iii), a “ Registration Default ”), the Company hereby agrees that the interest rate borne by the affected Transfer Restricted Securities shall be increased by 0.25% per annum during the 90-day period immediately following the occurrence of any Registration Default and shall increase by 0.25% per annum at the end of each subsequent 90-day period during which such Registration Default continues (such increase, “ Additional Interest ”), but in no event shall the amount of Additional Interest on any Transfer Restricted Securities exceed 0.50% per annum. At the cure of all Registration Defaults relating to the particular Transfer Restricted Securities the interest rate borne by the relevant Transfer Restricted Securities will be reduced to the original interest rate borne by such Transfer Restricted Securities; provided, however, that, if after any such reduction in interest rate, a different Registration Default occurs, the interest rate borne by the relevant Transfer Restricted Securities shall again be increased pursuant to the foregoing provisions; and provided further that notwithstanding anything in this Agreement to the contrary, a Registration Default shall be deemed cured (among other circumstances under which it may be cured) at such time as the requirement to Consummate the Exchange Offer or the requirement that a Shelf Registration Statement be declared effective or remain effective, as applicable, terminates in a manner provided in this Agreement.

All obligations of the Company set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such security shall have been satisfied in full.

SECTION 6. Registration Procedures .

(a) Exchange Offer Registration Statement. In connection with the Exchange Offer, if required pursuant to Section 3(a) hereof, the Company shall comply with all of the provisions of Section 6(c) hereof, shall use its commercially reasonable efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions:

(i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Company hereby agrees to use its commercially reasonable efforts to seek a no-action letter or other favorable decision from the Commission allowing the Company to Consummate an Exchange Offer for such Transfer Restricted Securities. The Company hereby agrees to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. Subject to the immediately preceding two sentences, the Company hereby agrees, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a favorable resolution by the Commission staff of such submission.

(ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate (within the meaning of Rule 405 under the Securities Act) of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange Securities to be issued in the Exchange Offer and (C) it is acquiring the Exchange Securities in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company’s preparations for the Exchange Offer. Each Holder shall acknowledge and agree that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer

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(1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission’s letter to Shearman & Sterling LLP, dated July 2, 1993, and similar no-action letters (which may include any no-action letter obtained pursuant to clause (i) above) and the Commission’s Compliance and Disclosure Interpretations, and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K under the Securities Act if the resales are of Exchange Securities obtained by such Holder in exchange for Transfer Restricted Securities acquired by such Holder directly from the Company.

(b) Shelf Registration Statement. If required pursuant to Section 4 hereof, in connection with the Shelf Registration Statement, the Company shall comply with all the provisions of Section 6(c) hereof and shall use its commercially reasonable efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will as expeditiously as is commercially reasonably practicable prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof, in accordance with the provisions of Section 4 hereof.

(c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Transfer Restricted Securities by Broker-Dealers), the Company shall:

(i) use its commercially reasonable efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (it being understood that such financial statements shall be deemed provided to the extent filed with the Commission); upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company shall file promptly an appropriate amendment to such Registration Statement (or file with the Commission a document to be incorporated by reference into the Registration Statement), in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its commercially reasonable efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter;

(ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus;

(iii) in the case of a Shelf Registration Statement, advise the underwriter(s), if any, and selling Holders named in any Registration Statement promptly and, if requested by such Persons, confirm such advice in writing, (A) when the Prospectus or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the

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Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus any amendment or supplement thereto, untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or blue sky laws, the Company shall use its commercially reasonable efforts to obtain the withdrawal or lifting of such order at the earliest possible time;

(iv) in the case of a Shelf Registration Statement, furnish without charge to each of the Initial Purchasers, each selling Holder named in any Registration Statement, and each of the underwriter(s), if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement, if not available on the Commission’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system), which documents will be subject to the review and comment of such Holders and underwriter(s) in connection with such sale, if any, for a period of at least two Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (but shall not be required to amend any document previously filed with the Commission and incorporated by reference therein) to which an Initial Purchaser of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s), if any, shall reasonably object in writing within two Business Days after the receipt thereof (such objection to be deemed timely made upon confirmation of telecopy transmission within such period). The objection of an Initial Purchaser or underwriter, if any, shall be deemed to be reasonable if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission;

(v) in connection with an Underwritten Offering, make available at reasonable times for inspection by the Initial Purchasers and the managing underwriter(s), if any, participating in any disposition pursuant to such Registration Statement and any attorney or accountant retained by such Initial Purchasers or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company reasonably requested to be made available and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such Holder, Initial Purchaser, underwriter, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness and to participate in meetings with investors to the extent reasonably requested by the managing underwriter(s), if any;

(vi) in connection with an Underwritten Offering, if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the “Plan of Distribution” of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such post-effective amendment;

(vii) in connection with an Underwritten Offering, cause the Transfer Restricted Securities covered by the Registration Statement to be rated, if not then rated, with the appropriate rating agencies, if so

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requested by the Holders of a majority in aggregate principal amount of Securities covered thereby or the underwriter(s), if any;

(viii) in the case of a Shelf Registration Statement, furnish to each Initial Purchaser, each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including financial statements and schedules, (but without documents incorporated by reference therein and all exhibits thereto, unless requested);

(ix) in the case of a Shelf Registration Statement, deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company hereby consents to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto;

(x) in the case of a Shelf Registration Statement, take all customary and appropriate actions (as determined in good faith by the Company) in order to expedite or facilitate the disposition of such Transfer Restricted Securities and if so requested by the Holders of such Transfer Restricted Securities in connection with any underwritten offering, enter into a customary underwriting agreement and:

(A) make such representations and warranties to the Holders of such Transfer Restricted Securities and the underwriters as the Company is able to make, in such form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them;

(B) obtain opinions of counsel to the Company covering the matters customarily covered in opinions and negative assurance letters, requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such underwriters;

(C) obtain “cold comfort” letters and updates thereof from the Company’s independent certified public accountants (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements are, or are required to be, included in the Registration Statement) addressed to the underwriters, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters to underwriters in connection with similar underwritten offerings;

(D) if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 8 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section or, at the request of any underwriters, in the form customarily provided to such underwriters in similar types of transactions; and

(E) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the managing underwriters, if any.

The above shall be done at the closing of an offering under any underwriting agreement as and to the extent required thereunder;

(xi) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the state securities or blue sky laws of such jurisdictions as the selling Holders or underwriter(s), if any, may reasonably request and do any and all

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other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however , that the Company shall not be required to register or qualify as a foreign corporation where it is not then so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not then so subject;

(xii) issue, upon the request of any Holder of Transfer Restricted Securities covered by the Shelf Registration Statement, Exchange Securities having an aggregate principal amount equal to the aggregate principal amount of Transfer Restricted Securities, surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Exchange Securities to be registered in the name of such Holder or in the name of the purchaser(s) of such Securities, as the case may be; in return, the Transfer Restricted Securities held by such Holder shall be surrendered to the Company for cancellation;

(xiii) cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request no later than three Business Days after written request made by such Holders or underwriter(s);

(xiv) use its commercially reasonable efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in Section 6(c)(xi) hereof;

(xv) if any fact or event contemplated by Section 6(c)(iii)(D) hereof shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus (or file with the Commission a document to be incorporated by reference into the Registration Statement) so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein not misleading;

(xvi) provide a CUSIP number for all Securities not later than the effective date of the Registration Statement covering such Securities and provide the Trustee under the Indenture with certificates for such Securities which are in a form eligible for deposit with the Depository Trust Company and take all other action reasonably necessary to ensure that all such Securities are eligible for deposit with the Depository Trust Company;

(xvii) cooperate and assist in any filings required to be made with the FINRA and in the performance of any due diligence investigation by any underwriter (including any “qualified independent underwriter”) that is required to be retained in accordance with the rules and regulations of the FINRA;

(xviii) otherwise use its commercially reasonable efforts to comply in all material respects with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement covering at least 12 months (which need not be audited) and meeting the requirements of Rule 158 under the Securities Act;

(xix) cause the Indenture to be qualified under the Trust Indenture Act not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Securities to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and to execute, and use its commercially reasonable efforts to cause the Trustee to execute, all documents that may be

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required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and

(xx) in the case of a Shelf Registration Statement, cause all Securities covered by the Registration Statement to be listed on each securities exchange or automated quotation system on which the Securities are then listed if requested by the Holders of a majority in aggregate principal amount of Securities or the managing underwriter(s), if any.

Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof, or until it is advised in writing (the “ Advice ”) by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have received the Advice; provided, however, that no such extension shall be taken into account in determining whether Additional Interest is due pursuant to Section 5 hereof or the amount of such Additional Interest, it being agreed that the Company’s determination to suspend use of a Registration Statement pursuant to this paragraph, if in excess of the Shelf Suspension Period or the Exchange Offer Suspension Period, as applicable, shall be treated as a Registration Default for purposes of Section 5 hereof.

SECTION 7. Registration Expenses .

(a) All expenses incident to the Company’s performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including, without limitation: (i) all registration and filing fees and expenses (including any required filings made by any Initial Purchaser or Holder with the FINRA); (ii) all fees and expenses of compliance with federal securities and state securities or blue sky laws; (iii) all expenses of printing (including printing certificates for the Exchange Securities to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company; (v) all application and filing fees in connection with listing the Exchange Securities on a securities exchange or automated quotation system pursuant to the requirements thereof; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance); but excluding underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of a Holder’s Transfer Restricted Securities pursuant to the Shelf Registration Statement, which shall be the responsibility of each such Holder.

The Company will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company.

(b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the “Plan of Distribution” contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Shearman & Sterling LLP or such other counsel as may be chosen by

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the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared.

SECTION 8. Indemnification .

(a) The Company agrees to indemnify and hold harmless (i) each Holder and (ii) each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the Persons referred to in this clause (ii) being hereinafter referred to as a “ controlling person ”) and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (any Person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an “ Indemnified Holder ”), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including, without limitation, and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing, settling, compromising, paying or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Holder), that is directly or indirectly based upon, or arises out of or in connection with, any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Company by any of the Holders expressly for use therein. This indemnity agreement shall be in addition to any liability which the Company may otherwise have.

In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to which indemnity may be sought against the Company, such Indemnified Holder (or the Indemnified Holder controlled by such controlling person) shall promptly notify the Company in writing; provided, however, that the failure to give such notice shall not relieve the Company of its obligations pursuant to this Agreement to the extent they are not prejudiced as a proximate result of such failure. In case any such action is brought against any Indemnified Holder and such Indemnified Holder seeks or intends to seek indemnity from the Company, the Company will be entitled to participate in and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the Indemnified Holder promptly after receiving the aforesaid notice from such Indemnified Holder, to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Holder; provided, however , if the defendants in any such action include both an Indemnified Holder and the Company and such Indemnified Holder shall have reasonably concluded, based upon advice from counsel, that a conflict may arise between the positions of the Company and such Indemnified Holder in conducting the defense of any such action or that there may be legal defenses available to it and/or other Indemnified Holders which are different from or additional to those available to the Company such Indemnified Holder or Indemnified Holders shall have the right to select separate counsel, reasonably satisfactory to the Company to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such Indemnified Holder or Indemnified Holders. Upon receipt of notice from the Company to such Indemnified Holder of the Company’s election so to assume the defense of such action and approval by such Indemnified Holder of counsel, the Company will not be liable to such Indemnified Holder under this Section 8 for any legal or other expenses subsequently incurred by such Indemnified Holder in connection with the defense thereof unless (i) such Indemnified Holder shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the Company shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the Company, representing the Indemnified Holders who are parties to such action) or (ii) the Company shall not have employed counsel satisfactory to the Indemnified Holder to represent the Indemnified Holder within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the Company. The Company shall be liable for any settlement of any such action or proceeding effected with the Company’s prior written consent, which consent shall not be withheld unreasonably, and the Company agrees to indemnify and hold harmless any Indemnified Holder from and against any loss, claim, damage, liability or expense by reason of any settlement of any action effected with the written

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consent of the Company. The Company shall not, without the prior written consent of each Indemnified Holder, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Holder is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Holder from all liability arising out of such action, claim, litigation or proceeding.

(b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and respective directors and officers and any Person controlling (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company, and the respective officers, directors, partners, employees, representatives and agents of each such Person, to the same extent as the foregoing indemnity from the Company to each of the Indemnified Holders, but only with respect to claims and actions based on information relating to such Holder furnished in writing by such Holder expressly for use in any Registration Statement. In case any action or proceeding shall be brought against the Company or its respective directors or officers or any such controlling person in respect of which indemnity may be sought against a Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given the Company, and the Company, its respective directors and officers and such controlling person shall have the rights and duties given to each Holder, under the preceding paragraph.

(c) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(a) or (b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities, judgments, actions or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and the Holders, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and of any Indemnified Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or such Indemnified Holder, on the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a) hereof, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim.

The Company and each Holder of Transfer Restricted Securities agree that it would not be just and equitable if contribution pursuant to this Section 8(c) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The Holders’ obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Transfer Restricted Securities held by each of the Holders hereunder and not joint.

SECTION 9. Rule 144A.

The Company hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, if the Company is no longer required to file reports under the Exchange Act, it will make available

- 15 -

upon request to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A under the Securities Act.

SECTION 10. Participation in Underwritten Registrations.

No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder’s Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements.

SECTION 11. Selection of Underwriters: Underwritten Offerings.

The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker(s) and managing underwriter(s) that will administer such offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, however , that such investment banker(s) and managing underwriter(s) must be reasonably satisfactory to the Company.

SECTION 12. Miscellaneous.

(a) Remedies. The Company hereby agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

(b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company’s securities under any agreement in effect on the date hereof.

(d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has (i) in the case of Section 5 hereof and this Section 12(d)(i), obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding any Transfer Restricted Securities held by the Company or its affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered; provided, however, that, with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser with respect to which such amendment, qualification, supplement, waiver, consent or departure is to be effective.

(e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested) or air courier guaranteeing overnight delivery:

- 16 -

(i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and

(ii) if to the Company:

Valvoline Inc.

3499 Blazer Parkway

Lexington, Kentucky 40509

Attention: General Counsel

With a copy to:

Cravath, Swaine & Moore LLP

825 8 ^th Avenue

New York, New York 10019

Facsimile: (212) 474-3700

Attention: Andrew J. Pitts, Esq.

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.

Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture.

(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without limitation, and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however , that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder.

(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

(j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

- 17 -

(k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

[ Signature pages follow ]

- 18 -

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.



Very truly yours,

VALVOLINE INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Assistant Treasurer

[Signature Page to the Registration Rights Agreement]

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VALVOLINE US LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



VALVOLINE LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



VALVOLINE LICENSING AND
INTELLECTUAL PROPERTY LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



VALVOLINE BRANDED FINANCE, INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer



VALVOLINE INTERNATIONAL HOLDINGS
INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasurer

[Signature Page to the Registration Rights Agreement]

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VALVOLINE INSTANT OIL CHANGE
FRANCHISING, INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasure



RELOCATION PROPERTIES MANAGEMENT
LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasure



VIOC FUNDING, INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasure



VALVOLINE INTERNATIONAL, INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasure



FUNDING CORP. I

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasure

[Signature Page to the Registration Rights Agreement]

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OCH INTERNATIONAL, INC.

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasure



OCHI ADVERTISING FUND LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasure



OCHI HOLDINGS LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasure



OCHI HOLDINGS II LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Vice President and Assistant Treasure

[Signature Page to the Registration Rights Agreement]

- 22 -

The foregoing Registration Rights Agreement is hereby confirmed and accepted by the Initial Purchasers as of the date first above written:

CITIGROUP GLOBAL MARKETS INC.

Acting on behalf of itself

and as the Representative of

the several Initial Purchasers

By: CITIGROUP GLOBAL MARKETS INC.



By:	/s/ Scott Schloss
	Name: Scott Schloss
	Title: Managing Director &Vice President

[Signature Page to the Registration Rights Agreement]

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EXHIBIT 10.1

VALVOLINE INC.

2016 DEFERRED COMPENSATION PLAN FOR EMPLOYEES

(Effective October 1, 2016)

VALVOLINE INC.

2016 DEFERRED COMPENSATION PLAN FOR EMPLOYEES


1.	PURPOSE

Valvoline Inc. hereby establishes the Valvoline Inc. 2016 Deferred Compensation Plan for Employees for the purpose of providing an opportunity to defer compensation for retirement or other future purposes to a select group of management or highly compensated employees (including former employees that met these criteria when employed). The obligations of Valvoline Inc. hereunder constitute a mere promise 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 Valvoline Inc. or its Related Entities. To the extent any Participant has a right to receive payments from Valvoline Inc. under this Plan, such right shall be no greater than the right of any unsecured general creditor of Valvoline Inc.


2.	DEFINITIONS

The following definitions shall be applicable throughout the Plan:


(a)	“ Accounting Date ” means the Business Day on which a calculation concerning a Participant’s Compensation Account is performed, or as otherwise defined by the Committee or the Company.


(b)	“ Ashland Plan ” means the Ashland Inc. Deferred Compensation Plan for Employees, as amended.


(c)	“ Beneficiary ” means the estate of a deceased Participant.


(d)	“ Board ” means the Board of Directors of the Company.


(e)	“ Business Day ” means a day on which the New York Stock Exchange is open for trading activity.


(f)	“ Change in Control ” shall be deemed to have occurred if:

there shall be consummated (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, as a result of which the shareholders of the Company own (directly or indirectly), immediately after the Business Combination, less than fifty percent (50%) of the then outstanding shares of common stock that are entitled to vote generally for the election of directors of the corporation resulting from such 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 Business Combination in which the holders of the Company’s Common Stock immediately prior to the Business Combination have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the Business Combination, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, provided, however, that no sale, lease, exchange or other transfer of all or substantially all the assets of the Company shall be deemed to occur unless assets constituting at least eighty percent (80%) of the total assets of the Company are transferred pursuant to such sale, lease, exchange or other transfer;


2.	the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company;

any Person shall become the Beneficial Owner of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, without the approval of the Board; or

at any time during a period of two (2) 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 the Company’s shareholders of each new director during such two- (2-) year period was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were directors at the beginning of such two- (2-) year period.

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of (1) the consummation of any transaction or series of integrated transactions immediately following which the record holders of the Common Stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions, (2) the repurchase by the Company of outstanding shares of Common Stock or other securities pursuant to a tender or exchange offer or (3) the Valvoline Spin-Off.

(g) “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

(h) “ Committee ” means the Compensation Committee of the Board or its designee.

(i) “ Common Stock ” means (i) prior to the Separation Date, the common stock, $.01 per value, of Ashland Global Holdings Inc.; and (ii) on and after the Separation Date, the common stock, $.01 par value, of the Company.

(j) “ Common Stock Fund ” means that hypothetical investment option, approved by the Committee or the Company, in which a Participant’s Compensation Account may be deemed to be invested and may earn income based on a hypothetical investment in Common Stock.

(k) “ Company ” means Valvoline Inc., a Kentucky corporation, and any successor thereto.

(l) “ Compensation ” means any compensation of an Employee determined by the Committee or the Company to be properly deferrable under the Plan.

(m) “ Compensation Account(s) ” means the Deferred Account (also known as Retirement Account), the In‑Service Account(s) (also known as Flexible Distribution Account(s)), the Transferred Excess Plan Account and/or the Transferred SERP Account.

(n) “ Corporate Human Resources ” means the Corporate Human Resources Department of the Company.

(o) (“ Credit Date ” means the date Compensation otherwise would have been paid to the Participant if such Compensation was not Deferred Compensation.

(p) “Deferral Account” also known as “ Retirement Account ” means the account(s), established annually as determined by the Committee or the Company, described in Section 9(a) to which the Participant’s Deferred Compensation is credited and from which distributions are made, and shall include any corresponding account(s) transferred from the Ashland Plan to this Plan.

(q) “ Deferred Compensation ” means the Compensation the Participant elects to defer pursuant to the Plan, and which is credited to the Participant’s Compensation Account(s).

(r) “ Disability ” means that a Participant is unable to engage in any substantial gainful activity because of a medically determinable physical or mental impairment that is expected to result in death or last for a continuous period of twelve (12) or more months. Corporate Human Resources or its delegate shall determine whether a Participant has incurred a Disability.

(s) “ Election ” means a Participant’s delivery of a notice of election to defer payment of all or a portion of his or her Compensation under the terms of the Plan or, with respect to accounts transferred from the Ashland Plan to this Plan, under the Ashland Plan. Such notice shall also include instructions specifying the time(s) the Deferred Compensation will be paid and the form (i.e., lump sum or installments) in which it will be paid. Such Elections may be annual or evergreen (as determined by the Committee or the Company), and shall comply with Code section 409A to the extent applicable and, be irrevocable except as otherwise provided in the Plan or pursuant to Treasury guidance. Elections shall be in the form, and made and delivered, as prescribed by the Committee or the Company.

(t) “ Employee ” means a full-time, regular salaried employee (which term shall be deemed to include officers) of the Company and its present and future Related Entities.

(u) “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

(v) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

(w) “ Fair Market Value ” means the price of a share of Common Stock, as reported on the Composite Tape for New York Stock Exchange issues on the date and at the time designated by the Company.

(x) “In‑Service Account(s)” also known as “ Flexible Distribution Account(s) ” means the account(s), established annually as determined by the Committee or the Company, described in Section 9(b) to which the Participant’s Deferred Compensation is credited and from which distributions are made, and shall include any corresponding account(s) transferred from the Ashland Plan to this Plan.

(y) “ Participant ” means an Employee who is a highly-compensated or management Employee selected to participate in the Plan and who has elected to defer payment of all or a portion of his or her Compensation under the Plan or who otherwise has a Compensation Account in the Plan.

(z) “ Performance-Based Compensation ” means Compensation that meets requirements specified by the Secretary of the Treasury, including Treasury Regulation section 1.409A-1(e). Performance-Based Compensation will include the attributes that it is variable, contingent on the satisfaction of pre-established metrics and is not readily ascertainable at the time of the Election to defer such compensation under Section 8(b).

(aa) “ Plan ” means this Valvoline Inc. 2016 Deferred Compensation Plan for Employees as it now exists or as it may hereafter be amended.

(bb) “ Plan Year ” means the calendar year.

(cc) “ Related Entities ” means (a) any corporation that is a member of a “controlled group of corporations” as defined in Code section 414(b) that includes the Company, and (b) any trade or business that is under “common control” as defined in Code section 414(c) that includes the Company.

(dd) “ Secretary of the Treasury ” or “ Treasury ” means the United States Department of Treasury.

(ee) “ Separation Date ” means the date upon which the Valvoline Spin‑Off is completed.

(ff) “ Separation from Service ” or “ Termination ” means a termination from employment resulting in a cessation of performing active service for the Company and the Related Entities. An Employee is considered to incur a Separation from Service on the date the Employee terminates employment with the Company and the Related Entities or when it is reasonably anticipated that the Employee’s services to the Company and the Related Entities will permanently decrease to twenty percent (20%) or less of the average amount of services performed for the Company and the Related Entities during the immediately preceding thirty-six (36) month period (or period of total employment if less than thirty-six (36) months). Notwithstanding anything in the foregoing to the contrary, a Separation from Service does not occur as a result of military leave, sick leave or other bona fide leave of absence not exceeding six (6) months or the period during which the Employee retains a right to reemployment.

(gg) “ Specified Employee ” means, for a particular Plan Year, any Employee who was at anytime during the twelve (12) months ending on the December 31 preceding the start of the particular Plan Year (the Specified Employee identification date) classified on the records of the Company as a “specified employee” within the meaning of Code section 409A(a)(2)(B)(i) and Treasury Regulation section 1.409A-1(i). Such an Employee shall be classified as a Specified Employee as of January 1 of the particular Plan Year (the Specified Employee effective date) and shall remain classified as such for the entirety of such Plan Year. Notwithstanding anything to the contrary, no more than two hundred (200) Employees may be classified as Specified Employees for any Plan 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 and the Related Entities that are subject to Code section 409A.

(hh) “ Transferred Excess Plan Account ” means a Participant’s Excess Account under the Transferred Excess Plan that has been deferred by the Participant.

(ii) “ Transferred Excess Plan ” means the Ashland Inc. Nonqualified Excess Benefit Pension Plan transferred by Ashland Inc. to, and assumed by, Valvoline effective as of September 1, 2016.

(jj) “ Transferred SERP Account ” means a Participant’s SERP Account under the Transferred SERP that has been deferred by the Participant.

(kk) “ Transferred SERP ” means the Amended and Restated Ashland Inc. Supplemental Early Retirement Plan for Certain Employees transferred by Ashland Inc. to, and assumed by, Valvoline effective as of September 1, 2016.

(ll) “Unforeseeable Emergency ” means a severe financial hardship of a Participant (that cannot be alleviated by compensation or reimbursement received insurance companies or otherwise as provided in Treasury Regulation Section 1.409A-3(i)(3)) because of (i) an illness or accident of the Participant, the Participant's spouse or dependent (as defined in Code section 152(a)); (ii) a loss of the Participant's property due to casualty; or (iii) such other similar extraordinary unforeseeable circumstances because of events beyond the control of the Participant. Corporate Human Resources or its delegate shall determine whether a Participant has incurred an Unforeseeable Emergency.

(mm) “ Valvoline ” means Valvoline LLC, a wholly-owned subsidiary of the Company.

(nn) “ Valvoline Spin-Off ” means the transaction or series of transactions initially approved by the board of directors of Ashland Inc. on September 16, 2015, intended to separate the Valvoline business from Ashland Inc.'s specialty chemical business and create two independent, publicly-traded companies.


3.	SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION

(a) Shares Authorized for Issuance . There shall be reserved for issuance under the Plan one million (1,000,000) shares of Common Stock, subject to adjustment pursuant to subsection (c) below.

(b) Adjustments in Certain Events . In the event of any change in the outstanding Common Stock of the Company by reason of any stock split, share dividend, recapitalization, merger, consolidation, reorganization, combination, or exchange or reclassification of shares, split-up, split-off, spin-off, liquidation or other similar change in capitalization, or any distribution to common shareholders other than ordinary cash dividends, the number or kind of shares that may be issued or credited under the Plan shall be automatically adjusted so that the proportionate interest of the Participants shall be maintained as before the occurrence of such event. Such adjustment shall be conclusive and binding for all purposes of the Plan.


4.	ELIGIBILITY

The Committee shall have the authority to select from management and/or highly compensated Employees those Employees who shall be eligible to participate in the Plan; provided, however, that employees and/or retirees who have elected to defer an amount into this Plan from another plan sponsored or maintained or transferred and assumed by Valvoline, the terms of which allowed such employee or retiree to make such a deferral election into this Plan, shall be considered to be eligible to participate in this Plan.


5.	ADMINISTRATION

Full power and authority to construe, interpret and administer the Plan shall be vested in the Company and the Committee or one or more of their delegates. This power and authority includes, but is not limited to, selecting Compensation eligible for deferral, establishing deferral terms and conditions and adopting modifications, amendments and procedures as may be deemed necessary, appropriate or convenient by the Committee. This power and authority also includes, without limitation, the ability to construe and interpret provisions of the Plan, make determinations regarding law and fact, 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 Company and the Committee (or their delegates) shall be final, conclusive and binding upon all parties. Day-to-day administration of the Plan shall be the responsibility of Corporate Human Resources. The administration of and all interpretations under the Plan shall be made consistent with all applicable law.


6.	PARTICIPANT COMPENSATION ACCOUNT(S)

Upon election to participate in the Plan, there shall be established a Deferral Account and/or In‑Service Account(s), as designated by the Participant, to which there shall be credited any Deferred Compensation, as of each Credit Date. There shall also be established a Transferred Excess Plan Account and/or a Transferred SERP Account for a Participant who has made an applicable deferral election. Each such Compensation Account shall be credited (or debited) on each Accounting Date with hypothetical income (or hypothetical loss) based upon a hypothetical investment in any one or more of the investment options available under the Plan, as prescribed by the Committee, for the particular Compensation credited, which may include a Common Stock Fund, as elected by the Participant under the terms of Section 8. The crediting or debiting on each Accounting Date of hypothetical income (or hypothetical loss) shall be made for the respective amounts that were subject to each Election under Section 8. All investments of a Participant’s Compensation Account in which such Participant’s Compensation Account may be deemed invested in the Common Stock Fund, shall be on each relevant Accounting Date valued at Fair Market Value. Additionally, all distributions, investments and investment exchanges allowed and made under the Plan shall be as of the relevant Accounting Date at Fair Market Value.


7.	EARLY WITHDRAWAL

(a) Unforeseeable Emergency . A Participant or a Participant’s legal representative may submit an application for a distribution from either a Deferral Account or an In-Service Account because of an Unforeseeable Emergency. The amount of the distribution shall not exceed the amount necessary to satisfy the needs of the Unforeseeable Emergency. Such distribution shall include an amount to pay taxes reasonably anticipated as a result of the distribution. The amount allowed as a distribution under this Section 7(a) shall take into account the extent to which the Unforeseeable Emergency may be relieved by reimbursement, insurance or liquidation of the Participant’s

assets (but only to the extent such liquidation would itself not cause a severe financial hardship). The distribution shall be made in a single sum and paid as soon as practicable (but not later than sixty (60) days) after the application for the distribution on account of the Unforeseeable Emergency is approved. The provisions of this Section 7(a) shall be interpreted and administered in accordance with applicable guidance that may be issued by the Treasury.

(b) Disability . A Participant or a Participant’s legal representative may submit an application for a distribution from the Participant’s Deferral Account and In-Service Account because of the Participant’s Disability. The distribution shall be made in a single sum and paid as soon as practicable (but not later than sixty (60) days) after the application for the distribution on account of the Participant’s Disability is approved. The provisions of this Section 7(b) shall be interpreted and administered in accordance with applicable guidance that may be issued by the Treasury. If such guidance should allow an election of a period or form of distribution at the time of the application for a distribution on account of the Participant’s Disability then the Plan shall allow such elections.

(c) Prohibition on Acceleration . Except as otherwise provided in the Plan and except as may be allowed in guidance from the Secretary of the Treasury, distributions from a Participant’s Compensation Account(s) may not be made earlier than the time such amounts would otherwise be distributed pursuant to the terms of the Plan.


8.	DEFERRAL ELECTIONS

(a) General . The Company or the Committee shall determine the timing of the filing of the appropriate Election forms (which may be an online Election form). An effective Election may not be revoked or modified except as otherwise determined by the Company or the Committee or as stated herein.

(b) Permissible Deferral Election . A Participant’s Election to defer Compensation may only be made in the taxable year before the Compensation is earned, with two (2) exceptions. The first exception applies to a Participant during his or her first (1 ^st ) year of eligibility to participate in the Plan. In that event such a Participant may, if so offered by the Company or the Committee, elect to defer Compensation for services performed after the Election, provided that the Election is made within thirty (30) days of the date the Participant becomes eligible to participate in the Plan.

The second exception is with respect to an election to defer Performance-Based Compensation. If Performance-Based Compensation is based on services of a Participant performed over a period of at least twelve (12) months, then the Participant may, if so offered by (and on the terms and limitations specified by) the Company or the Committee, make an Election to defer all or part of such Performance-Based Compensation not later than six (6) months before the end of such service period.

A Participant’s Election under this Section 8(b) shall specify the amount or percentage of Compensation deferred and specify the time and form of distribution from among those described in Section 9 of the Plan. Each Election to defer Compensation is a separate election regarding the time and form of distribution.

(c) Hypothetical Investment Alternatives - Existing Balances . A Participant may elect to change an existing selection as to the investment alternatives in effect with respect to an existing Compensation Account (in increments prescribed by the Committee or the Company) as often, and with such restrictions, as determined by the Committee or by the Company. If a Participant fails to make an investment selection for his or her Compensation Account, the Committee or the Company may prescribe a default selection or selections in any manner that appears reasonable in their discretion.


9.	DISTRIBUTION

(a) Deferral Account . In accordance with a Participant’s Election under Section 8, but subject to Sections 7 and 11, amounts subject to such Election in the Deferral Account (determined in accordance with Section 6) shall be distributed -


1.	Upon a Participant’s Separation from Service as either a lump sum or in installments not exceeding fifteen (15) years; provided, however, that the distribution to a Participant who is

a Specified Employee must not be made before the earliest of the date that is six (6) months after the Participant’s Separation from Service or the date of the Participant’s death;


2.	For Elections made prior to October 1, 2016, upon a Participant’s death to the Participant’s Beneficiary as either a lump sum or in installments not exceeding fifteen (15) years from the date of the Participant’s death; or for Elections made on or after October 1, 2016, upon a Participant’s death to the Participant’s Beneficiary in a lump sum; or


3.	At a specified time or under a fixed schedule not exceeding fifteen (15) years from the Participant’s Separation from Service.

(b) In‑Service Account . In accordance with a Participant’s Election under Section 8, but subject to Sections 7 and 11, amounts subject to such Election in an In‑Service Account (determined in accordance with Section 6) shall be distributed -


1.	For Elections made prior to October 1, 2016, upon a Participant’s death to the Participant’s Beneficiary as either a lump sum or in installments not exceeding fifteen (15) years; or for Elections made on or after October 1, 2016, upon a Participant’s death to the Participant’s Beneficiary in a lump sum; or


2.	At a specified time or under a fixed schedule not less than two (2) years measured from the beginning of the Plan Year after the Plan Year in which the Election is made and not exceeding fifteen (15) years measured from the beginning of the Plan Year after the Plan Year in which the Election is made.

(c) Transferred Excess Plan Accounts and Transferred SERP Accounts . In accordance with a Participant's Election under Section 8, but subject to Sections 7 and 11, amounts subject to such Election in either the Transferred Excess Plan Account or Transferred SERP Account, or both (determined in accordance with Section 6) shall be distributed -

Upon a Participant's Separation from Service and entitlement to a distribution under the Transferred Excess Plan and/or Transferred SERP, as applicable, as either a lump sum or in installments not exceeding 15 years from the date the Participant was entitled to a distribution under the Transferred Excess Plan and/or Transferred SERP, as applicable; provided, however, that the distribution to a Participant who is a Specified Employee must not be made before the earliest of the date that is six (6) months after the Participant was entitled to a distribution under the Transferred Excess Plan and/or Transferred SERP, as applicable or the date of the Participant's death;


2.	For Elections made prior to October 1, 2016, upon a Participant's death to the Participant's Beneficiary as either a lump sum or in installments not exceeding fifteen (15) years from the date of the Participant's death; or for Elections made on or after October 1, 2016, upon a Participant’s death to the Participant’s Beneficiary in a lump sum; or


3.	At a specified time or under a fixed schedule not exceeding fifteen (15) years from the date the Participant incurred a Separation from Service and was entitled to a distribution under the Transferred Excess Plan and/or Transferred SERP, as applicable.

(d) Medium of Distribution and Default Method . A Participant’s Deferral Account, In‑Service Account(s), Transferred Excess Plan Account and Transferred SERP Account shall be distributed in cash or shares of Common Stock (or a combination of both) as determined by the Committee or the Company. If no Election is made by a Participant as to the distribution or form of payment from one or more of his or her Compensation Account(s), upon the earliest time that a distribution from such account is to be made pursuant to the terms of the Plan, such account shall be paid in cash or shares of Common Stock (or a combination of both) as determined by the Committee or the Company in a lump sum, within sixty (60) days following the Participant’s Separation from Service (provided that if

such sixty (60) day period begins in one calendar year and ends in the next calendar year, the Participant shall have no right, directly or indirectly, to designate the calendar year of payment).

(e) Election to Delay the Time or Change the Form of Distribution . A Participant may make an Election to delay the time of a distribution or change the form of a distribution, or may elect to do both, with respect to an amount that would be payable pursuant to an Election (except in the event of a distribution on account of the Participant’s death) if all of the following requirements are met -


1.	Such an Election may not take effect until at least twelve (12) months after it is made;


2.	Any delay to the distribution that would take effect because of the Election is at least to a date five (5) years after the date the distribution otherwise would have begun; and


3.	Such an Election may not be made less than twelve (12) months before the date of the first scheduled payment.

(f) Distribution Exceptions . Notwithstanding anything in the Plan to the contrary, the following shall apply to the distribution of Contribution Account(s):


1.	Distribution pursuant to a domestic relations order as described in Section 12;


2.	Distribution of a Participant’s or Beneficiary’s Compensation Account(s) shall be made in a single lump sum payment as soon as possible provided the distribution will be of the entirety of the Participant’s or Beneficiary’s Compensation Account(s) and the distribution does not exceed the adjusted Code section 402(g) limit; and


3.	Distribution or suspension of contributions may be made in the discretion of the Company for any other permitted purpose under Treasury Regulation section 1.409A-3(j)(4)(ii)-(xiv).

(g) Timing of Payments to Specified Employees. Notwithstanding anything in the Plan to the contrary, if a Participant is a Specified Employee as of the date of his or her Separation from Service, then no distribution/payment of such Participant’s Compensation Accounts shall be made upon the Participant’s Separation from Service until the first payroll date of the seventh month following the Participant’s Separation from Service (or, if earlier, upon the date of the Participant’s death or such other earlier time as would not result in a tax or penalty under Code section 409A) (the “ Specified Employee Payment Date ”). Any payments to which a Specified Employee otherwise would have been entitled under the Plan during the period between the Participant’s Separation from Service and the Specified Employee Payment Date shall be accumulated and paid in a lump sum payment on the Specified Employee Payment Date.


10.	BENEFICIARY

If the Participant dies before receiving distribution of all amounts due hereunder, the remaining unpaid amounts shall be paid in one lump sum to the estate of such Participant, which shall be the Participant’s “Beneficiary” under this Plan.


11.	CHANGE IN CONTROL

In the event of a Change in Control, the Company shall reimburse a Participant for the legal fees and expenses incurred if the Participant is required to seek to obtain or enforce any right to distribution. In the event that it is determined that such Participant is properly entitled to a cash or other distribution hereunder, such Participant 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 subject date from the date such distribution should have been made to and including the date it is made. Notwithstanding any provision of this Plan to the contrary, this Section 11 and

the definition of “Change in Control” may not be amended after a Change in Control occurs without the written consent of a majority in number of Participants.


12.	INALIENABILITY; UNFUNDED PLAN

The interests of the Participants and their Beneficiaries under the Plan may not in any way be voluntarily or involuntarily transferred, alienated or assigned, nor subject to attachment, execution, garnishment or other such equitable or legal process. A Participant or Beneficiary cannot waive the provisions of this Section 12. Notwithstanding anything contained herein to the contrary, valid court ordered divisions of a Participant’s Compensation Account(s) pursuant to a domestic relations order may be recognized and distributions may be made pursuant to such an order provided that such distributions are consistent with this Section 12. 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 or its delegate will review the order to determine if it is qualified. Upon notification by the Company or its delegate 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 or its delegate 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 (5 ^th ) calendar year following the calendar year during which the Company or its delegate notifies the former spouse that the order is qualified. The Company or its delegate may prescribe procedures that are consistent with this Section 12 and applicable law to implement benefit assignments pursuant to qualified orders.

The Plan at all times shall be unfunded; and no provision shall be made at any time with respect to segregating assets of any Participant for the payment of any amounts hereunder. The Plan constitutes a mere promise of the Company and the Related Entities to make payments to Participants (and, to the extent applicable, Participants’ Beneficiaries) in the future. Participants and their Beneficiaries and estates have rights only as unsecured general creditors of the Company and the Related Entities.


13.	CLAIMS

(a) Initial Claim - Notice of Denial . If any claim for benefits (within the meaning of section 503 of ERISA) is denied in whole or in part, the Company (which shall include the Company or its delegate throughout this Section 13) will provide written notification of the denied claim to the Participant or Beneficiary, as applicable, (hereinafter referred to as the claimant) in a reasonable period, but not later than ninety (90) days after the claim is received. The ninety- (90-) day period can be extended under special circumstances. If special circumstances apply, the claimant will be notified before the end of the ninety- (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 one hundred eighty (180) days after the claim is received.

The written decision will include:


1.	The reasons for the denial.


2.	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.


3.	A description of additional materials or information needed to process the claim. It will also explain why those materials or information are needed.


4.	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 the Company in such manner as determined from time to time. The Company is the named fiduciary under ERISA for purposes of the appeal of the denied claim. The Company may delegate its authority to rule on appeals of denied claims and any person or persons or entity to which such authority is delegated may re-delegate that authority. The appeal must be sent at least sixty (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. The Company 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 sixty (60) days after the appeal is received. The sixty- (60-) day period can be extended under special circumstances. If special circumstances apply, the claimant will be notified before the end of the sixty- (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 one hundred twenty (120) days after the appeal is received.

Special rules apply if the Company 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 thirty (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 five (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:


1.	The reasons for the denial.


2.	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.


3.	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.


4.	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.


14.	GOVERNING LAW

The provisions of this Plan shall be interpreted and construed in accordance with the laws of the Commonwealth of Kentucky, except to the extent preempted by Federal law.


15.	AMENDMENTS

The Company may amend, alter or terminate this Plan at any time without the prior approval of the Board or the Committee; provided, however, that the Company may not, without approval by the Board:

(a) increase the number of securities that may be issued under the Plan (except as provided in Section 3(b));

(b) materially modify the requirements as to eligibility for participation in the Plan; or


16.	COMPLIANCE WITH RULE 16b-3

It is the intention of the Company that the Plan comply in all respects with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act.


17.	COMPLIANCE WITH 409A

It is the intention of the Company and the Committee that the Plan be administered in compliance with Code section 409A and the applicable guidance issued thereunder by the Secretary of the Treasury. Any provision that is found to be inconsistent with Code section 409A or the applicable guidance issued thereunder by the Secretary of the Treasury shall be reformed and applied by the Company in a manner consistent with applicable law, as determined by the Company.


18.	EFFECTIVE DATE

The Plan was approved by the Personnel and Compensation Committee of the Board of Directors of Ashland Inc. and adopted by the Company to be effective as of October 1, 2016.

IN WITNESS WHEREOF , Valvoline Inc. has caused its duly authorized representative to execute the Plan, this 30th day of September, 2016, to be effective as the date noted above.



On Behalf of Valvoline Inc.

By:	/s/ Peter J. Ganz
	Senior Vice President, General Counsel and Secretary
	Ashland Global Holdings Inc.

EXHIBIT 10.2

2016 VALVOLINE INC. INCENTIVE PLAN

(Effective as of October 1, 2016)

SECTION 1. PURPOSE

The purpose of the 2016 Valvoline Incentive Plan is to promote the interests of the Company and its shareholders by providing incentives to its directors, officers and employees (including prospective directors, officers and employees). Accordingly, the Company may grant to selected officers and employees Option Awards, Stock Appreciation Rights Awards, Restricted Stock Awards, Restricted Stock Unit Awards, Incentive Awards, Performance Unit Awards and Recognition Awards in an effort to attract and retain in its employ qualified individuals and to provide such individuals with incentives to continue service with the Company, devote their best efforts to the Company and improve the Company’s economic performance, thus enhancing the value of the Company for the benefit of shareholders. This Plan also provides an incentive for qualified persons, who are not officers or employees of the Company, to serve on the Board of Directors of the Company and to continue to work for the best interests of the Company by rewarding such persons with Option Awards, Stock Appreciation Rights Awards, Restricted Stock Awards or Restricted Stock Unit Awards.

SECTION 2. DEFINITIONS

“Agreement” shall mean either: (i) an agreement, either in written or electronic format, entered into by the Company and a Recipient setting forth the terms and provisions applicable to an Award granted under the Plan; or (ii) a statement, either in written or electronic format, issued by the Company to a Recipient describing the terms and provisions of such Award, which need not be signed by the Recipient.

“Assumed Valvoline Award” shall mean a stock option, stock appreciation right, restricted stock, restricted stock unit, performance unit, merit or other incentive compensation award granted pursuant to the Amended and Restated 2015 Ashland Inc. Incentive Plan, the Amended and Restated 2011 Ashland Inc. Incentive Plan or any other long-term incentive compensation plan sponsored or maintained by Ashland Inc. (or its successor) and assumed under this Plan in connection with the Valvoline Stock distribution.

“Award” shall mean an Option Award, a Stock Appreciation Right Award, a Restricted Stock Award, a Restricted Stock Unit Award, an Incentive Award, a Performance Unit Award or a Recognition Award, in each case granted under this Plan.

“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.

“Beneficiary” shall mean the person or persons designated by a Recipient or, if no designation has been made, the person or persons entitled by will or the laws of descent and distribution to receive the benefits specified under this Plan in the event of a Recipient’s death.

“Board” shall mean the Board of Directors of the Company.

“Cause” shall have the meaning assigned thereto in the applicable Agreement or, in the event the applicable Agreement does not assign a meaning to such term, “Cause” shall mean (i) the willful and continued failure of the Participant to substantially perform his or her duties with the Company or its Subsidiaries (other than any such failure resulting from the Participant’s incapacity due to physical or mental illness), (ii) willful engaging by the Participant in gross misconduct materially injurious to the Company or its Subsidiaries or (iii) the Participant’s conviction of or the entering of a plea of nolo contendere (or similar plea under the law of a jurisdiction outside the United States) to the commission of a felony (or a similar crime or offense under the law of a jurisdiction outside the United States).

“Change in Control” shall be deemed to have occurred if:

there shall be consummated (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, as a result of which the shareholders of the Company own(directly or indirectly), immediately after the Business Combination, less than 50% of the then outstanding shares of common stock that are entitled to vote generally for the election of directors of the corporation resulting from such 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 Business Combination in which the holders of the Company’s Common Stock immediately prior to the Business Combination have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the Business Combination, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, provided, however, that no sale, lease, exchange or other transfer of all or substantially all the assets of the Company shall be deemed to occur unless assets constituting at least 80% of the total assets of the Company are transferred pursuant to such sale, lease, exchange or other transfer;

the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company;

any Person shall become the Beneficial Owner of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, without the approval of the Board; or

at any time during a period of two (2) 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 the Company’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.

“Code” shall mean the United States Internal Revenue Code of 1986, as amended.

“Common Stock” shall mean the Common Stock of the Company ($0.01 par value), subject to adjustment pursuant to Section 14 hereof. “Company” shall mean Valvoline Inc. or any successor thereto.

“Compensation Committee” shall mean the Compensation Committee of the Board, as from time to time constituted, or any successor committee of the Board with similar functions, which shall, unless otherwise determined by the board, consist of three or more members, each of whom shall be a “non-employee director” within the meaning of Rule 16b-3 issued under the Exchange Act, an “outside director” within the meaning of the regulations issued under Section 162(m) of the Code and an “independent director” within the meaning of the applicable rules of the New York Stock Exchange or any other securities exchange upon which the Company’s Common Stock is listed, or such committee’s delegate.

“Credited Service” shall mean periods of employment with the Company and its Subsidiaries for which credit is given, as determined by the Compensation Committee in its sole discretion.

“Disability” shall have the meaning assigned thereto in the applicable Agreement or, in the event the applicable Agreement does not assign a meaning to such term, “Disability” shall mean, (i) in the case of a Participant, when he or she becomes unable to perform the functions required by his or her regular job due to physical or mental illness and, in connection with the grant of an Incentive Stock Option, he or she falls within the meaning of that term as

provided in Section 22(e)(3) of the Code; and (ii) in the case of an Outside Director, when he or she is unable to attend to his or her duties and responsibilities as a member of the Board because of incapacity due to physical or mental illness.

“Dividend Equivalents” shall mean the equivalent value (in cash, shares of Common Stock, shares of Restricted Stock or RSUs) of dividends that would otherwise be paid on the shares subject to an Award but that have not been issued or delivered, as described in Section 16(N).

“Effective Date” shall mean October 1, 2016.

“Employee” shall mean a regular, full-time or part-time employee of the Company or any of its Subsidiaries, provided, however, that for purposes of determining whether any individual may be a Participant for purposes of any grant of an Incentive Stock Option, the term “Employee” shall have the meaning given to such term in Section 3401(c) of the Code.

“Exercise Price” shall mean, with respect to each share of Common Stock subject to an Option or Stock Appreciation Right, the price fixed by the Compensation Committee at which such share may be purchased from the Company pursuant to the exercise of such Option or Stock Appreciation Right.

“Exchange Act” shall mean the United States Securities Exchange Act of 1934, as amended.

“Fair Market Value” shall mean, as of any date, (i) the closing sale price per share of Common Stock as reported on the Composite Tape of the New York Stock Exchange, or if there are no sales on such day, on the next preceding trading day during which a sale occurred and (ii) in the absence of such markets for the shares of Common Stock, the Fair Market Value shall be determined by the Compensation Committee, in its discretion, (which determination shall be made in a manner that complies with Section 409A of the Code to the extent required to avoid the imposition of taxes or penalties under Section 409A of the Code, as determined by the Committee), and such determination shall be conclusive and binding for all purposes.

“Incentive Award” shall mean an Award made pursuant to Section 7 hereof, the payment of which is contingent upon the achievement of performance goals (including Performance Goals) for the particular Performance Period.

“Incentive Stock Option” or “ISO” shall mean an Option that is intended by the Compensation Committee to meet the requirements of Section 422 of the Code or any successor provision.

“ISO Award” shall mean an Award of an Incentive Stock Option pursuant to Section 10 hereof.

“Nonqualified Stock Option” or “NQSO” shall mean an Option granted pursuant to this Plan which does not qualify as an Incentive Stock Option.

“NQSO Award” shall mean an Award of a Nonqualified Stock Option pursuant to Section 10 hereof.

“Option” shall mean the right to purchase Common Stock at a price to be specified and upon terms to be designated by the Compensation Committee, in its discretion, or otherwise determined pursuant to this Plan. The Compensation Committee, in its discretion, shall designate an Option as a Nonqualified Stock Option or an Incentive Stock Option.

“Option Award” shall mean an Award of an Option pursuant to Section 10 hereof.

“Outside Director” shall mean a director of the Company, who is not also an Employee, who is selected by the Compensation Committee to receive an Award under this Plan.

“Participant” shall mean an Employee who is designated (whether individually or as a member of a specified group of Employees) by the Compensation Committee to receive an Award under this Plan.

“Performance-Based Exception” shall mean the performance-based exception from the tax deductibility limitations of Section 162(m) of the Code.

“Performance Goals” shall mean performance goals as may be established in writing by the Compensation Committee. Such goals may be absolute in their terms or measured against or in relation to other companies comparably or otherwise situated, and/or may be relative to stock market indices or such other published or special indices as the Compensation Committee deems appropriate. Performance Goals may relate to the performance of the Company or one or more of its Subsidiaries, divisions, departments, units, functions, partnerships, joint ventures or minority investments, product lines or products, and/or the performance of the individual Participant. The Performance Goals applicable to any Award that is intended to qualify for the Performance-Based Exception shall be based on one or more of the following criteria (which may be measured either in the aggregate or on per share basis, and which may include or exclude items to measure specific objectives, such as losses from discontinued operations, extraordinary gains or losses, the cumulative effect of accounting changes, acquisitions or divestitures, foreign exchange impacts and any unusual, nonrecurring gain or loss):


(i)	Earnings measures, including net earnings on either a LIFO, FIFO or other basis and including earnings, earnings before interest, earnings before interest and taxes, earnings before interest, taxes and depreciation or earnings before interest, taxes, depreciation and amortization;


(ii)	Operating measures, including operating income, operating earnings, or operating margin;


(iii)	Income or loss measures, including net income or net loss, and economic profit;


(iv)	Cash flow measures, including cash flow or free cash flow;


(v)	Revenue measures;


(vi)	Reductions in expense measures;


(vii)	Operating and maintenance, cost management, and employee productivity measures;


(viii)	Company return measures, including return on assets, investments, equity, or sales;


(ix)	Share price (including attainment of a specified per-share price during the performance period, growth measures, total return to shareholders or attainment of a specified price per share for a specified period of time);


(x)	Strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market share, market penetration, business expansion targets, project milestones, production volume levels, or cost targets;


(xi)	Accomplishment of, or goals related to, mergers, acquisitions, dispositions, public offerings, or similar extraordinary business transactions;


(xii)	Achievement of business or operational goals such as market share, business development and/or customer objectives, and debt ratings; or


(xiii)	Growth or rate of growth of any of the performance criteria set forth herein.

“Performance Period” shall mean the period designated by the Compensation Committee during which performance goals (including Performance Goals) shall be measured.

“Performance Unit Award” shall mean an Award made pursuant to Section 8 hereof, the payment of which is contingent upon the achievement of performance goals (including Performance Goals) for the particular Performance Period.

“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) an underwriter temporarily holding securities pursuant to an offering on behalf of the Company.

“Personal Representative” shall mean the person or persons who, upon the Disability or incompetence of a Recipient, shall have acquired on behalf of the Recipient by legal proceeding or otherwise the right to receive the benefits specified in this Plan.

“Plan” shall mean this 2016 Valvoline Incentive Plan.

“Plan Share Limit” shall have the meaning given in Section 3(A) hereof. “Qualifying Termination” shall mean:


(i)	in the case of a Participant, termination of the Participant’s employment with the Company and its Subsidiaries at any time such that (A) the Participant is age fifty-five (55) or older and has at least ten (10) years of continuous service; and


(ii)	in the case of an Outside Director, termination of the Outside Director’s service on the Board as a result of a mandatory retirement date established by the Compensation Committee.

“Recipient” shall mean a Participant or an Outside Director, as appropriate.

“Recognition Award” shall mean an Award of Common Stock issued pursuant to Section 9 hereof.

“Restricted Period” shall mean the period during which Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of performance goals (including Performance Goals), or upon the occurrence of other events as determined by the Compensation Committee, in its discretion).

“Restricted Stock” shall mean those shares of Common Stock issued pursuant to a Restricted Stock Award which are subject to the restrictions, terms, and conditions set forth in the related Agreement or designated by the Compensation Committee, in its discretion, in accordance with the Plan.

“Restricted Stock Award” shall mean an Award of Restricted Stock pursuant to Section 6 hereof.

“Restricted Stock Units” or “RSUs” shall mean units (or other Common Stock equivalents) issued pursuant to a Restricted Stock Unit Award which are valued in terms of shares of Common Stock and are subject to the restrictions, terms, and conditions set forth in the related Agreement or designated by the Compensation Committee, in its discretion, in accordance with the Plan.

“Restricted Stock Unit Award” or “RSU Award” shall mean an Award of Restricted Stock Units pursuant to Section 6 hereof.

“Stock Appreciation Right” or “SAR” shall mean a right pursuant to a Stock Appreciation Right Award to be paid an amount measured by the appreciation in the Fair Market Value of shares of Common Stock from the date of grant to the date of exercise of the SAR, with payment to be made wholly in cash, wholly in shares of Common Stock or a combination thereof as specified in the Agreement or determined by the Compensation Committee, in its discretion. A SAR may be granted only singly and may not be granted in tandem with an Option.

“Stock Appreciation Right Award” or “SAR Award” shall mean an Award of a Stock Appreciation Right pursuant to Section 10 hereof.

“Subsidiary” shall mean a corporation, company or other entity, whether U.S. or foreign, (i) more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are now or hereafter, owned or controlled, directly or indirectly, by the Company, or (ii) which does not have outstanding shares or securities (as may be the case, for example, in a partnership, limited liability company, joint venture or unincorporated association), but more than fifty percent (50%) of whose ownership interests representing the right generally to make decisions for such other entity is now or hereafter, owned or controlled, directly or indirectly, by the Company; provided, however, that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, the term “Subsidiary” shall have the meaning given to such term in Section 424(f) of the Code, as interpreted by the regulations thereunder and applicable law.

“Substitute Awards” shall have the meaning given in Section 14 hereof.

“Tax Date” shall mean the date the withholding tax obligation arises with respect to an Award.

“Valvoline Stock distribution” shall mean the transaction or series of transactions initially approved by the Board of Directors of Ashland, Inc. on September 16, 2015 intended to separate the Valvoline business from Ashland Inc.’s specialty chemical business and create two independent, publicly traded companies.

SECTION 3. STOCK SUBJECT TO THIS PLAN

(A) Subject to adjustment as provided under Section 14 hereof, there will be reserved for issuance under this Plan an aggregate of 7,000,000 shares of Common Stock (the “Plan Share Limit”), any or all of which may be delivered with respect to ISO Awards. Subject to adjustment as provided under Section 14 hereof, the following limits shall apply with respect to Awards that are intended to qualify for the Performance-Based Exception: (i) the maximum aggregate number of shares of Common Stock that may be subject to Options or SARs granted in any calendar year to any one Participant shall be 1,000,000 shares; (ii) the maximum aggregate number of Restricted Stock Awards and shares of Common Stock issuable or deliverable under Restricted Stock Unit Awards granted in any calendar year to any one Participant shall be 500,000 shares; and (iii) the maximum aggregate number of shares of Common Stock issuable or deliverable under Performance Unit Awards granted in any calendar year to any one Participant shall be 500,000 shares of Common Stock or, in the case of Performance Unit Awards established in cash, an amount of cash equal to the Fair Market Value (as of the date of grant) of 500,000 shares of Common Stock. Subject to adjustment as provided under Section 14 hereof, the maximum aggregate number of shares of Common Stock that may be issuable or deliverable under Awards granted in any calendar year to any one Outside Director shall be 25,000 shares or, in the case of Awards established in cash, an amount of cash equal to the Fair Market Value (as of the date of grant) of 25,000 shares of Common Stock.

(B) In the event that any Award is paid solely in cash, no shares shall be deducted from the Plan Share Limit by reason of such Award. Shares of Common Stock subject to Awards that are forfeited, terminated, canceled or settled without the delivery of Common Stock under the Plan (including cash settlement) will again be available for Awards under the Plan and credited toward the Plan Share Limit. Notwithstanding any other provision herein, the Plan Share Limit shall not be increased by: (i) shares of Common Stock tendered in full or partial payment of the Exercise Price of an Option, (ii) shares of Common Stock withheld by the Company or any Subsidiary to satisfy a tax withholding obligation in connection with the vesting or exercise of an Award, and (iii) shares of Common Stock that are repurchased by the Company with Option proceeds. Moreover, all shares of Common Stock covered by a SAR, to the extent that it is exercised and settled in shares, and whether or not shares are actually issued or delivered to the Recipient upon exercise of the right, shall be considered issued or delivered pursuant to the Plan for purposes of the Plan Share Limit.

(C) Any shares of Common Stock underlying Restricted Stock Awards, Restricted Stock Unit Awards, Recognition Awards, Incentive Awards, Performance Unit Awards and Dividend Equivalents (collectively, “Full-Value Awards”) that are issued or delivered under the Plan shall reduce the Plan Share Limit by 4.5 shares for every one share of Common Stock issued or delivered in connection with such Full-Value Award, and any shares covered by an Award other than a Full-Value Award shall reduce the Plan Share Limit by one share for every one share of Common Stock issued or delivered under such Award. Any shares of Common Stock that again become available for issuance or delivery pursuant to Section 3(B) of the Plan shall be credited toward the Plan Share Limit in the same manner as such shares were originally deducted from the Plan Share Limit pursuant to this Section 3(C).

SECTION 4. ADMINISTRATION

The Compensation Committee shall have the exclusive authority to administer this Plan.

In addition to any implied powers and duties that may be needed to carry out the provisions hereof the Compensation Committee shall have all the powers vested in it by the terms hereof, including exclusive authority to select the Recipients, to determine the type, size and terms of the Awards to be made to each Recipient, to determine the time when Awards will be granted, and to prescribe the form of the Agreement embodying Awards made under this Plan. The Compensation Committee shall be authorized to interpret this Plan and the Awards (including Substitute Awards) granted under this Plan, to establish, amend and rescind any rules and regulations relating to this Plan, to provide for accelerated vesting of any outstanding Awards, to make any other determinations which it believes necessary or advisable for the administration hereof, and to correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent the Compensation Committee, in its discretion, deems desirable to carry it into effect. To the extent permitted by applicable laws, the Compensation Committee may, in

its discretion, delegate to one or more directors or Employees any of the Compensation Committee’s authority under this Plan. The acts of any such delegates shall be treated hereunder as acts of the Compensation Committee with respect to any matters so delegated.

The Compensation Committee shall have no obligation to treat Recipients or eligible Employees or non-employee directors uniformly, and the Compensation Committee may, in its discretion, make determinations under this Plan selectively among Recipients who receive, or Employees or directors who are eligible to receive, Awards (whether or not such Recipients or eligible Employees or directors are similarly situated). All determinations and decisions made by the Compensation Committee, in its discretion, pursuant to the provisions of this Plan and all related orders and resolutions of the Compensation Committee shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries, shareholders, Participants, Outside Directors, Employees, directors and their estates, Beneficiaries and Personal Representatives.

Notwithstanding any other provision of this Plan, the Board may reserve to itself any or all of the authority or responsibility of the Compensation Committee under this Plan or may act as the administrator of the Plan for any and all purposes. To the extent that the Board has reserved any such authority or responsibility or during any time that the Board is acting as administrator of the Plan, it shall have all the powers of the Compensation Committee hereunder, and any reference herein to the Compensation Committee (other than in this paragraph) shall include the Board. To the extent that any action of the Board under the Plan conflicts with any action of the Compensation Committee, the action of the Board shall control.

SECTION 5. ELIGIBILITY

Awards may only be granted to Participants and Outside Directors, provided that Outside Directors may not be granted ISOs, Incentive Awards, Performance Unit Awards or Recognition Awards.

SECTION 6. RESTRICTED STOCK AND RESTRICTED STOCK UNIT (RSU) AWARDS

(A) Grant . Any Recipient may receive one or more Restricted Stock Awards or RSU Awards, as the Compensation Committee, in its discretion, shall from time to time determine.

(B) Restricted Periods .

(1) Participants . The Restricted Period for each Restricted Stock Award or RSU Award to a Participant shall be set forth in the applicable Agreement. Except as otherwise provided in an Agreement upon a termination of employment or pursuant to Section 12 in the event of a Change in Control, a Restricted Stock Award or RSU Award granted to a Participant shall have a minimum Restricted Period of (i) one (1) year in the case of restrictions that lapse based on the achievement of performance goals (including Performance Goals); and (ii) three (3) years in the case of restrictions that lapse based solely on the passage of time, which period may, at the discretion of the Compensation Committee, lapse on a pro- rated, graded, or cliff basis (as specified in the Agreement); provided that in the Compensation Committee’s sole discretion, no more than five percent (5%) of the shares of Common Stock available for issuance as Restricted Stock Awards or pursuant to RSU Awards under the Plan may be granted with a Restricted Period of less than three (3) years.

(2) Termination of Employment or Service . Except as otherwise provided in the Agreement or as determined by the Compensation Committee, in its discretion, in the event that a Restricted Stock Award or RSU Award has been made to a Recipient whose employment or service as a director is subsequently terminated for any reason prior to the lapse of all restrictions thereon, such Restricted Stock or RSU shall be forfeited in its entirety by such Recipient.

Certain Restricted Stock Award Provisions.

(1) Shareholder Rights; Restrictions on Transferability . Upon the granting of a Restricted Stock Award, a Recipient shall be entitled to all rights incident to ownership of Common Stock of the Company with

respect to his or her Restricted Stock, including, but not limited to, the right to vote such shares of Restricted Stock and to receive dividends thereon when, as and if paid in cash, shares of Restricted Stock or Dividend Equivalents, as set forth in the applicable Agreement or as determined by the Compensation Committee, in its discretion. Each such grant of Restricted Stock may be made without additional consideration or in consideration of a payment by such Recipient that may be less than the Fair Market Value per share of Common Stock at the date of grant. Subject to Section 16(B) hereof, Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered during a Restricted Period.

(2) Restrictions; Dividends on Restricted Stock . During the Restricted Period, (a) any certificates representing the Restricted Stock shall be registered in the Recipient’s name and bear a restrictive legend to the effect that ownership of such Restricted Stock, and the enjoyment of all rights appurtenant thereto are subject to the restrictions, terms, and conditions provided in this Plan and the applicable Agreement, and (b) all uncertificated shares of Restricted Stock shall be held by the Company (or its transfer agent) in book entry form with appropriate restrictions relating to the transfer of such shares of Restricted Stock and the other terms and conditions provided in the Plan. Any such certificates shall be deposited by the Recipient with the Company, together with stock powers or other instruments of assignment, each endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Stock which shall be forfeited in accordance with this Plan and the applicable Agreement. Restricted Stock shall constitute issued and outstanding shares of Common Stock for all corporate purposes. Notwithstanding the foregoing: (i) the Recipient will not be entitled to delivery of any stock certificates representing such Restricted Stock until the restrictions applicable thereto shall have expired; (ii) the Company will retain custody of all shares of Restricted Stock issued as a dividend or otherwise with respect to an Award of Restricted Stock (and such issued shares of Restricted Stock shall be subject to the same restrictions, terms and conditions as are applicable to the awarded Restricted Stock) until such time, if ever, as such shares of Restricted Stock shall have become vested, and Restricted Stock shall not bear interest or be segregated in separate accounts; (iii) subject to Section 16(B) hereof, the Recipient may not sell, assign, transfer, pledge, exchange, encumber, or dispose of any Restricted Stock during the Restricted Period; and (iv) unless otherwise determined and directed by the Compensation Committee, in its discretion, a breach of any restrictions, terms, or conditions provided in this Plan, the applicable Agreement or established by the Compensation Committee with respect to any Restricted Stock will cause a forfeiture of such awarded Restricted Stock (including any Restricted Stock issued as a dividend or otherwise) with respect thereto. Notwithstanding anything contained in this Section 6(C)(2) to the contrary, cash dividends or other distributions with respect to Restricted Stock Awards that vest based on the achievement of performance goals (including Performance Goals) shall be accumulated until such Award is earned, and the cash dividends or other distributions shall not be paid if the performance goals (including Performance Goals) are not satisfied.

(1) General. Each RSU Award shall constitute an agreement by the Company to issue or deliver shares of Common Stock or cash to the Recipient following the end of the applicable Restricted Period in consideration of the performance of services. Each such grant of Restricted Stock Units may be made without additional consideration or in consideration of a payment by such Recipient that may be less than the Fair Market Value per share of Common Stock at the date of grant.

(2) No Shareholder Rights; Dividend Equivalents . A Recipient who receives an RSU Award shall not have any rights as a shareholder with respect to the shares of Common Stock subject to such RSUs until such time, if any, that shares of Common Stock are delivered to the Recipient pursuant to the terms of the applicable Agreement. A Recipient who receives an RSU Award shall have such rights, if any, to Dividend Equivalents as shall be set forth in the applicable Agreement or as determined by the Compensation Committee, in its discretion.

(3) Payment . Unless otherwise determined by the Compensation Committee, in its discretion, each Agreement shall set forth the payment date for the RSU Award, which date shall not be earlier than the end of the applicable Restricted Period. Payment of earned Restricted Stock Units (and Dividend Equivalents,

if applicable) may be made in one or more installments and may be made wholly in cash, wholly in shares of Common Stock or a combination thereof, as determined by the Compensation Committee, in its discretion.

SECTION 7. INCENTIVE AWARDS

(A) Grant . Any Participant may receive one or more Incentive Awards, as the Compensation Committee shall from time to time determine.

(B) Terms and Conditions.

(1) Performance Goals . No later than one hundred and twenty (120) days (or, in the case of Awards that are intended to qualify for the Performance-Based Exception, ninety (90) days or such shorter period as is required under the Performance-Based Exception) after the commencement of each Performance Period, the Compensation Committee shall establish in writing one or more performance goals (including Performance Goals) that must be reached by a Participant in order to receive an Incentive Award for such Performance Period. Except with respect to Awards that are intended to qualify for the Performance-Based Exception, the Compensation Committee shall have the discretion to later revise the performance goals (including Performance Goals) and the amount to be paid out upon the attainment of such goals for any reason, including the reflection of promotions, transfers or other changes in a Participant’s employment so long as such changes are consistent with the performance goals (including Performance Goals) established for other Participants in the same or similar positions. Performance goals (including Performance Goals) established for Awards that are intended to qualify for the Performance-Based Exception may only be adjusted to reduce or eliminate the amount of compensation otherwise payable upon attainment of the performance goals (including Performance Goals).

(2) Award Limits . The target Incentive Award shall be a fixed percentage of the Participant’s base salary paid during the year. The maximum aggregate compensation that can be paid pursuant to an Incentive Award granted in any calendar year to any one Participant shall be ten million dollars ($10,000,000) or a number of shares of Common Stock having an aggregate Fair Market Value (as of the date of grant) not in excess of such amount.

(C) Payment . Payment of Incentive Awards may be made in one or more installments and may be made wholly in cash, wholly in shares of Common Stock or a combination thereof as determined by the Compensation Committee. Except as otherwise provided in the applicable Agreement, payments shall be made no later than the fifteenth day of the third month following the later of (i) the end of the tax year of the Participant in which the Performance Period ends and (ii) the end of the tax year of the Company in which the Performance Period ends.

If payment of an Incentive Award shall be made all or partially in shares of Common Stock, the number of shares of Common Stock to be delivered to a Participant on any payment date shall be determined by dividing (x) the dollar amount of such Incentive Award to be paid (or the part thereof determined by the Compensation Committee to be delivered in shares) by (y) the Fair Market Value on the date the Compensation Committee approves payment of the Incentive Award or as of such other date or dates as the Compensation Committee shall determine.

(D) Termination . Unless otherwise provided in an Agreement or determined and directed by the Compensation Committee, an Incentive Award shall terminate if the Participant does not remain continuously employed and in good standing with the Company or any of its Subsidiaries until the last business day of the month immediately preceding the month in which such Incentive Award is otherwise payable. Unless otherwise provided in an Agreement or determined and directed by the Compensation Committee, in the event a Participant’s employment is terminated because of death, Disability, Qualifying Termination or other employment termination event determined in the discretion of the Compensation Committee, the Participant (or his or her Beneficiaries or estate) shall receive the prorated portion of the payment of an Incentive Award for which the Participant would have otherwise been eligible, based upon the portion of the Performance Period during which he or she was so employed, at such time

such Incentive Award is otherwise payable, so long as the performance goals (including Performance Goals) are subsequently achieved.

SECTION 8. PERFORMANCE UNIT AWARDS

(A) Grant . Any Participant may receive one or more Performance Unit Awards, as the Compensation Committee shall from time to time determine. Each Performance Unit Award shall be established in dollars or shares of Common Stock, or a combination of both, as determined by the Compensation Committee.

(B) Performance Goals . The performance goals (including Performance Goals) and Performance Period applicable to a Performance Unit Award shall be set forth in writing by the Compensation Committee no later than one hundred and twenty (120) days (or, in the case of Awards that are intended to qualify for the Performance-Based Exception, ninety (90) days or such shorter period as is required under the Performance-Based Exception) after the commencement of the Performance Period. Except with respect to Awards that are intended to qualify for the Performance- Based Exception, the Compensation Committee shall have the discretion to later revise the performance goals (including any Performance Goals) and the amount to be paid out upon the attainment of such goals for any reason including the reflection of promotions, transfers or other changes in a Participant’s employment so long as such changes are consistent with the Performance Goals established for other Participants in the same or similar positions. Goals established for Awards that are intended to qualify for the Performance-Based Exception may only be adjusted to reduce or eliminate the amount of compensation otherwise payable upon attainment of the Performance Goals.

(1) General. The amount of payment with respect to Performance Unit Awards shall be determined by the Compensation Committee and shall be based on the original amount of such Performance Unit Award (including any Dividend Equivalents with respect thereto) adjusted to reflect the attainment of the Performance Goals during the Performance Period. Payment may be made in one or more installments and may be made wholly in cash, wholly in shares of Common Stock or a combination thereof as determined by the Compensation Committee. Except as otherwise provided in the applicable Agreement, payments shall be made no later than the fifteenth day of the third month following the later of (i) the end of the tax year of the Participant in which the Performance Period ends and (ii) the end of the tax year of the Company in which the Performance Period ends. Any payment may be subject to such restrictions and conditions as the Compensation Committee may determine.

(2) Payment in Common Stock . If payment of a Performance Unit Award established in dollars is to be made in shares of Common Stock or partly in such shares, the number of shares of Common Stock to be delivered to a Participant on any payment date shall be determined by dividing (i) the amount payable with respect to such Performance Unit Award by (ii) the Fair Market Value of the Common Stock on the date the Compensation Committee approves payment of the Performance Unit Award or as of such other date or dates as the Compensation Committee shall determine.

(3) Payment in Cash . If payment of a Performance Unit Award established in shares of Common Stock is to be made in cash or partly in cash, the amount of cash to be paid to a Participant on any payment date shall be determined by multiplying (i) the number of shares of Common Stock to be paid in cash with respect to such Performance Unit Award, by (ii) the Fair Market Value of the Common Stock on the date the Compensation Committee approves payment of the Performance Unit Award or as of such other date or dates as the Compensation Committee shall determine.

(D) Termination . Unless otherwise provided in an Agreement or determined and directed by the Compensation Committee, a Performance Unit Award (including any Dividend Equivalents with respect thereto) shall terminate for all purposes if the Participant does not remain continuously employed and in good standing with the Company or any of its Subsidiaries until the last business day of the month immediately preceding the month in which such Performance Unit Award is otherwise payable. Unless otherwise provided in an Agreement or determined

and directed by the Compensation Committee, a Participant (or his or her Beneficiaries or estate) whose employment was terminated because of death, Disability, Qualifying Termination or other employment termination event determined in the discretion of the Compensation Committee will receive a prorated portion of the payment of his or her Performance Unit Award (including any Dividend Equivalents with respect thereto), based upon the portion of the Performance Period during which he or she was so employed, at such time as such Performance Unit Award is otherwise payable, so long as the Performance Goals are subsequently achieved.

SECTION 9. RECOGNITION AWARDS

Any Participant may receive a Recognition Award under this Plan for such reasons and in such amounts as the Compensation Committee may from time to time determine.

SECTION 10. OPTIONS AND SAR AWARDS

(A) Grant . Any Recipient may receive one or more Option or SAR Awards, as the Compensation Committee, in its discretion, shall from time to time determine.

(B) Designation and Price .

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

(2) Every ISO shall provide for a fixed expiration date of not later than ten (10) years from the date such ISO is granted. Every NQSO and SAR shall provide for a fixed expiration date of not later than ten (10) years and one month from the date such NQSO or SAR is granted.

(3) The Exercise Price of Common Stock issued pursuant to each Option or SAR shall be fixed by the Compensation Committee at the time of the granting of the Option or SAR; provided, however, that such Exercise Price shall in no event ever be less than 100% of the Fair Market Value of the Common Stock on the date such Option or SAR is granted, subject to adjustment as provided in Section 14.

(C) Exercise . The Compensation Committee may, in its discretion, provide for Options or SARs granted under this Plan to be exercisable in whole or in part. The specified number of shares of Common Stock will be issued after receipt by the Company of (i) notice from the holder thereof of the exercise of an Option or SAR, and (ii) with respect to Options, payment to the Company (as provided in subsection (D) of this Section) of the Exercise Price for the number of shares with respect to which the Option is exercised. Each such notice and payment shall be delivered or mailed to the Company at such place and in such manner as the Company may designate from time to time.

(D) Payment .

(1) Options . Except as otherwise provided in this Section 10, the Exercise Price for the Common Stock issuable pursuant to an Option shall be paid in full when the Option is exercised. Subject to such rules as the Compensation Committee in its discretion may impose, the Exercise Price may be paid in whole or in part: (i) in cash; (ii) by tendering (either by actual delivery or attestation) unencumbered shares of Common Stock previously acquired by the Recipient exercising such Option having an aggregate Fair Market Value at the time of exercise equal to the total Exercise Price; (iii) by a combination of such methods of payment; or (iv) by such other consideration as shall constitute lawful consideration for the issuance of Common Stock and approved by the Compensation Committee in its discretion (including, without limitation, effecting a cashless exercise of the Option with a broker or by having the Company withhold shares of Common Stock from the

shares of Common Stock otherwise issuable pursuant to the exercise of the Option (for the avoidance of doubt, the shares of Common Stock so withheld shall be counted against the Plan Share Limit)).

(2) Stock Appreciation Rights . A SAR shall entitle the holder thereof, upon exercise, to surrender the SAR and receive in exchange therefore an amount equal to (i) the excess, if any, of (x) the Fair Market Value of a share of Common Stock at the time the SAR is exercised over (y) the Exercise Price specified in such SAR, (ii) multiplied by the number of shares of Common Stock covered by such SAR, or portion thereof, which is so surrendered. Such amount shall be paid to the holder in shares of Common Stock the number of which shall be determined by dividing such amount by the Fair Market Value of the Common Stock at the time the holder makes an effective exercise of the right to receive such amount; provided that, subject to Section 15 hereof, the exercise of any SAR may be settled wholly in cash or a combination of cash and shares of Common Stock as set forth in the Agreement or as determined by the Compensation Committee in its discretion.

(E) Expiration or Termination of Awards.

(1) Participants .

(a) Except as otherwise provided in the Agreement or as determined by the Compensation Committee, and subject to the provisions of Section 12(A) hereof, every Option and SAR granted to a Participant shall provide that it may not be exercised in whole or in part prior to the first anniversary of the date of its grant of granting such Option or SAR (unless otherwise determined by the Compensation Committee) and if the employment of the Participant shall terminate prior to the end of such first anniversary (or such other period determined by the Compensation Committee), the Option or SAR granted to such Participant shall immediately terminate.

(b) Except as otherwise provided in the Agreement or as determined by the Compensation Committee, in the event the Participant dies (i) while employed, (ii) during the periods in which Options or SARs may be exercised by a Participant determined to be Disabled, or (iii) after Qualifying Termination, such Option or SAR shall be exercisable, at any time or from time to time, prior to the fixed termination date set forth in the Option or SAR, by the Beneficiaries of the decedent for the number of shares which the Participant could have acquired under the Option or SAR immediately prior to the Participant’s death.

(c) Except as otherwise provided in the Agreement or as determined by the Compensation Committee, in the event the employment of any Participant shall cease by reason of Disability, as determined by the Compensation Committee at any time during the term of the Option or SAR, such Option or SAR shall be exercisable, at any time or from time to time, prior to the fixed termination date set forth in the Option or SAR, by such Participant or his or her Personal Representative for the number of shares which the Participant could have acquired under the Option or SAR immediately prior to the Participant’s Disability. The determination by the Compensation Committee of any question involving Disability of a Participant shall be conclusive and binding.

(d) Except as otherwise provided in the Agreement or as determined by the Compensation Committee, in the event the employment of any Participant shall cease by reason of Qualifying Termination, such Option or SAR shall be exercisable, at any time or from time to time, prior to the fixed termination date set forth in the Option or SAR, for the number of shares which the Participant could have acquired under the Option or SAR immediately prior to such Qualifying Termination.

(e) Notwithstanding any provision of this Plan to the contrary, any Option or SAR may, in the discretion of the Compensation Committee or as provided in the relevant Agreement, become exercisable, at any time or from time to time, prior to the fixed termination date set forth in the Option or SAR, for the full number of awarded shares or any part thereof, less such number as may have been theretofore acquired under the Option or SAR from and after the time the Participant ceases to be an Employee as a result of the sale or other disposition by the Company or any of its Subsidiaries of assets or property

(including shares of any Subsidiary) in respect of which such Participant had theretofore been employed or as a result of which such Participant’s continued employment is no longer required.

(f) Except as provided in subsections (b), (c), (d) and (e) of this Section 10(E)(1) and Sections 12(A) and 16(H) hereof, every Option and SAR shall terminate on the earlier to occur of the fixed termination date set forth in the Option or SAR or ninety (90) days after cessation of the Participant’s employment for any reason in respect of the number of shares of Common Stock which the Participant could have acquired under the Option or SAR immediately prior to such cessation of employment; provided, however, that no Option or SAR may be exercised after the fixed termination date set forth in the Option or SAR, which shall be no more than ten (10) years from the date of grant.

(2) Outside Directors .

(a) Except as otherwise provided in the Agreement or as determined by the Compensation Committee, and subject to the provisions of Section 12(A) hereof, every Option and SAR granted to an Outside Director shall provide that, unless otherwise determined by the Compensation Committee, (i) it may not be exercised in whole or in part until the earlier to occur of (1) the one-year anniversary of the date of granting such Option or SAR and (2) the next annual meeting of shareholders immediately following the date of granting such Option or SAR and (ii) if the service of the Outside Director shall terminate prior to the end of such one year period (or such other period determined by the Compensation Committee), the Option or SAR granted to such Outside Director shall immediately terminate.

(b) Except as otherwise provided in the Agreement or as determined by the Compensation Committee, in the event the service of any Outside Director as a director of the Company ceases by reason of Qualifying Termination, death, Disability or other event as determined in the discretion of the Compensation Committee, then any unexercised Options or SARs granted to such Outside Director shall be exercisable, at any time or from time to time, prior to the fixed termination date set forth in the Option or SAR, by such Outside Director, his or her Personal Representative or his or her Beneficiaries for the number of shares which the Outside Director could have acquired under the Option or SAR immediately prior to the Outside Director’s Qualifying Termination, death or Disability, as applicable. The determination by the Compensation Committee of any question involving Disability of an Outside Director shall be conclusive and binding.

SECTION 11. CONTINUED EMPLOYMENT

Nothing in this Plan, or in any Award granted pursuant to this Plan, shall confer on any individual any right to continue in the employment of, or service (as an Outside Director or otherwise) to, the Company or any of its Subsidiaries or interfere in any way with the right of the Company or any of its Subsidiaries to terminate the Participant’s employment with or service to the Company at any time.

SECTION 12. CHANGE IN CONTROL

(A) Treatment of Awards . The following provisions of this Section 12(A) shall govern the treatment of Awards in the event of a Change in Control, except to the extent otherwise provided in an applicable Agreement:

(1) Outstanding Awards may be assumed, continued, converted or replaced by the surviving or resulting entity in connection with a Change in Control, as determined by the Compensation Committee in its sole discretion prior to such Change in Control in accordance with Section 12(A)(3), without the consent of the affected Recipient. Any outstanding Award that is assumed, continued, converted or replaced by the surviving or resulting entity in connection with a Change in Control shall continue to vest (and become exercisable, as applicable) subject to the Recipient’s continued employment or service with such surviving or resulting entity or its Subsidiaries in accordance with the vesting schedule and other terms set forth in the applicable Agreement; provided that, in the event of the termination of a Participant’s employment with such surviving or resulting entity or its Subsidiaries without Cause during the one-year period immediately following the date of the

Change in Control, any such Award (or portion thereof) that is then unvested shall immediately vest (and become exercisable, as applicable) and become free of all other restrictions.

(2) Any outstanding Award that is not assumed, continued, converted or replaced by the surviving or resulting entity in connection with a Change in Control shall immediately vest and become free of all other restrictions upon the date of the Change in Control.

(3) An Award will not be considered to be assumed, continued, converted or replaced by the surviving or resulting entity in connection with a Change in Control unless, in each case as determined by the Compensation Committee in its sole discretion prior to such Change in Control, the number and kind of shares or other securities underlying the Award, and the exercise prices and performance goals (including Performance Goals) applicable thereto, if any, are adjusted (or, in the case of performance goals (including Performance Goals), measured or deemed achieved in full or in part as of immediately prior to such Change in Control) to prevent dilution of the Recipient’s rights hereunder and to preserve the intrinsic value and material terms and conditions of the Award as in effect as of immediately prior to the Change in Control.

(B) Cash-out of Awards . In connection with a Change in Control, the Compensation Committee may, in its sole discretion, and without the consent of the affected Recipient, either by the terms of the Agreement applicable to any Award or by resolution adopted prior to the occurrence of the Change in Control, provide that any outstanding Award (or a portion thereof) shall, upon the occurrence of such Change in Control, be cancelled in exchange for a payment in cash in an amount based on the Fair Market Value of the shares of Common Stock subject to the Award (less any Exercise Price), which amount may be zero (0), if applicable.

SECTION 13. WITHHOLDING TAXES

Federal, state, local, non-United States or other law may require the withholding of taxes applicable to gains resulting from the payment or vesting of an Award. Unless otherwise prohibited by the Compensation Committee, the Company may permit or require (subject to such conditions or procedures as may be established by the Compensation Committee in its discretion) any such tax withholding obligation of a Recipient to be satisfied by any of the following means, or by a combination of such means: (i) a cash payment from Recipient; (ii) withholding from the shares of Common Stock otherwise issuable to the Recipient pursuant to the vesting or exercise of an Award a number of shares of Common Stock having a Fair Market Value, as of the Tax Date, equal to the maximum amount that may be withheld under Financial Accounting Standards Board Accounting Standards Codification Topic 718 without creating an additional accounting charge; or (iii) having the Recipient deliver to the Company a number of shares of Common Stock having a Fair Market Value as of the Tax Date which will satisfy the withholding tax obligation (in whole or in part) arising from the vesting or exercise of an Award. If the payment specified in clauses (i) or (iii) of the preceding sentence is not paid by a Recipient, the Compensation Committee may refuse to issue Common Stock under this Plan.

SECTION 14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

In the event of any change in the outstanding Common Stock of the Company by reason of any stock split, stock dividend, recapitalization, merger, consolidation, reorganization, combination, or exchange of shares, split-up, split-off, stock distribution, liquidation or other similar change in capitalization, or any distribution to common shareholders other than normal cash dividends, the number or kind of shares (or other property) that may be issued under this Plan pursuant to Section 3 hereof, the number or kind of shares (or other property) subject to any outstanding Award and the price per share and performance goals applicable to any outstanding Award shall be automatically adjusted, as determined by the Compensation Committee in its sole discretion, so that the proportionate interest of the Recipient shall be maintained as before the occurrence of such event. Such adjustment shall be conclusive and binding for all purposes hereof.

Awards may, in the discretion of the Compensation Committee, be granted under this Plan in assumption of, or in substitution for, the Assumed Valvoline Awards and outstanding awards previously granted by a company acquired by the Company or any of its affiliates or with which the Company or any of its affiliates combines (“Substitute

Awards”). The number of Shares underlying any Substitute Awards (including the Assumed Valvoline Awards) shall not be counted against the Plan Share Limit; provided , however , that, Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding stock options intended to qualify for special tax treatment under Sections 421 and 422 of the Code that were previously granted by a company that is acquired by the Company or any of its affiliates or with which the Company or any of its affiliates combines shall be counted against number of shares of Common Stock which may be delivered with respect to ISO Awards. Except as otherwise determined by the Compensation Committee, any Substitute Awards granted under this Plan in assumption of, or in substitution of, the Assumed Valvoline Awards shall be subject to the same terms and conditions as were in effect with respect to the Assumed Valvoline Awards as of immediately prior to such assumption or substitution.

SECTION 15. AMENDMENT AND TERMINATION

The Board may amend, alter, suspend or terminate this Plan in whole or in part and at any time; provided, however, that no alteration or amendment that requires shareholder approval in order for the Plan to continue to comply with the New York Stock Exchange rules or any rule promulgated by the Securities and Exchange Commission or any other securities exchange on which shares of Common Stock are listed or any other applicable laws shall be effective unless such amendment shall be approved by the requisite vote of shareholders of the Company entitled to vote thereon within the time period required under such applicable listing standard or rule.

Except for adjustments made pursuant to Section 14 hereof, the Board or the Compensation Committee will not, without the further approval of the shareholders of the Company, authorize the amendment of any outstanding Option or SAR to reduce the Exercise Price. No Option or SAR will be cancelled and replaced with Awards having a lower Exercise Price or for another Award or for cash without further approval of the shareholders of the Company, except as provided in Section 12 or 14 hereof. Furthermore, no Option or SAR will provide for the payment, at the time of exercise, of a cash bonus or grant or sale of another Award without further approval of the shareholders of the Company. This Section 15 is intended to prohibit the cash-out or repricing of “underwater” Options or SARs without shareholder approval and will not be construed to prohibit the adjustments provided for in Section 12 or 14 hereof.

Termination of this Plan shall not affect any Awards made hereunder which are outstanding on the date of termination and such Awards shall continue to be subject to the terms of this Plan notwithstanding its termination. Except as otherwise provided pursuant to this Plan, no amendment, suspension, or modification of this Plan or an Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Recipient holding such Award; provided that the Compensation Committee in its discretion may modify an ISO held by a Participant to disqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code without the Participant’s consent.

SECTION 16. MISCELLANEOUS PROVISIONS

(A) Rights to Awards . No Recipient or other person shall have any claim or right to be granted an Award under this Plan.

(B) Assignment and Transfer . A Recipient’s rights and interests under this Plan (including any Awards granted hereunder) may not be assigned or transferred in whole or in part, either directly or by operation of law or otherwise (except in the event of a Recipient’s death, by will or the laws of descent and distribution), including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and no such rights or interests of any Recipient in this Plan shall be subject to any obligation or liability of such individual; provided, however, that a Recipient’s rights and interests under this Plan (including any Awards granted hereunder) may, subject to the discretion and direction of the Compensation Committee, be made transferable by such Recipient during his or her lifetime. Except as specified in Section 6 hereof, the holder of an Award shall have none of the rights of a shareholder until the shares subject thereto shall have been registered in the name of the person receiving or person or persons exercising the Award on the transfer books of the Company.

(C) Compliance with Legal and Exchange Requirements . The Plan, the granting and exercising of Awards hereunder, the issuance of Common Stock and other interests hereunder, and the other obligations of the Company under the Plan and any Agreement pursuant to the Plan, shall be subject to all applicable United States federal and

state laws, rules and regulations, the applicable laws, rules and regulations of any other country or jurisdiction, and to such approvals by any regulatory or governmental agency as may be required. The Company or the Compensation Committee, in their respective discretion, may postpone the granting, vesting and exercising of Awards, the issuance or delivery of Common Stock under any Award or any other action permitted under the Plan to permit the Company, with reasonable diligence, to complete such stock exchange listing or registration or qualification of such Common Stock or other required action under any federal or state law, rule, or regulation and may require any Recipient to make such representations and furnish such information as the Compensation Committee may consider appropriate in connection with the issuance or delivery of Common Stock in compliance with applicable laws, rules, and regulations. The Company shall not be obligated by virtue of any provision of the Plan to recognize the vesting or exercise of any Award or to otherwise sell or issue Common Stock in violation of any such laws, rules, or regulations; and any postponement of the vesting, exercise or settlement of any Award under this provision shall not extend the term of such Awards, and neither the Company nor any of its Subsidiaries, directors or officers shall have any obligations or liability to any Recipient with respect to any Award (or Common Stock issuable thereunder) that shall lapse because of such postponement.

(D) Ratification and Consent . By accepting any Award under this Plan, each Recipient and each Personal Representative or Beneficiary claiming under or through him or her shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, any action taken under this Plan by the Company or any of its Subsidiaries, the Board, or the Compensation Committee in its discretion.

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

(F) Grant Date . Each Recipient shall be deemed to have been granted any Award on the date the Compensation Committee took action to grant such Award under this Plan or such date as the Compensation Committee in its discretion shall determine at the time such Award is authorized. The grant date shall not be earlier than the date of the resolution and action therein by the Compensation Committee.

(G) Fractional Shares . No fractional shares shall be issued or delivered pursuant to this Plan or any Award. The Compensation Committee in its discretion shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

(H) Forfeiture Provision . Unless the Agreement specifies otherwise, the Compensation Committee in its discretion may require a Recipient to forfeit all unexercised, unearned, unvested or unpaid Awards if:

(1) the Recipient, without written consent of the Company, engages directly or indirectly in any manner or capacity as principal, agent, partner, officer, director, employee or otherwise in any business or activity competitive with the business conducted by the Company or any of its Subsidiaries, as determined by the Compensation Committee in its discretion;

(2) the Recipient performs any act or engages in any activity that is detrimental to the best interests of the Company or any of its Subsidiaries, as determined by the Compensation Committee in its discretion; or

(3) the Recipient breaches any agreement or covenant with, or obligation or duty to, the Company or any Subsidiary, including without limitation, any non-competition agreement, non-solicitation agreement, confidentiality or non-disclosure agreement, or assignment of inventions or ownership of works agreement, as determined by the Compensation Committee in its discretion.

(I) Compensation Recovery Policy . Each Award granted to a Participant under the Plan shall be subject to forfeiture or repayment pursuant to the terms of any applicable compensation recovery policy adopted by the Company as in effect from time to time, including any such policy that may be adopted or amended to comply with

the Dodd-Frank Wall Street Reform and Consumer Protection Act or any rules or regulations issued by the Securities and Exchange Commission or applicable securities exchange.

(J) Severability . The validity, legality, or enforceability of the Plan will not be affected even if one or more of the provisions of this Plan shall be held to be invalid, illegal, or unenforceable in any respect.

(K) Section 409A . The Company intends that Awards granted under the Plan will be designed and administered in such a manner that they are either exempt from the application of, or comply with, the requirements of Section 409A of the Code. To the extent that the Compensation Committee in its discretion determines that any award granted under the Plan is subject to Section 409A of the Code, the Agreement shall incorporate the terms and conditions necessary to avoid the imposition of an additional tax under Section 409A of the Code upon a Recipient. The Compensation Committee reserves the right to make amendments to any Award as it deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. Notwithstanding any other provision of the Plan or any Agreement (unless the Agreement provides otherwise with specific reference to this Section): (i) an Award shall not be granted, deferred, accelerated, extended, paid out, settled, substituted or modified under the Plan in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon a Recipient; and (ii) if an Award is subject to Section 409A of the Code, and if the Recipient holding the Award is a “specified employee” (as defined in Section 409A of the Code, with such classification to be determined in accordance with the methodology established by the Company), no distribution or payment of any amount under the Award as a result of such Recipient’s “separation from service” (as defined in Section 409A of the Code) shall be made before a date that is six (6) months following the date of such separation from service or, if earlier, the date of the Recipient’s death. Although the Company intends to administer the Plan so that Awards will be exempt from, or will comply with, the requirements of Section 409A of the Code, the Company does not warrant that any Award under the Plan will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local, non-United States or other law. The Company shall not be liable to any Recipient for any tax, interest, or penalties a Recipient might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the Plan.

(L) Awards to Participants Outside the United States . Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Subsidiaries operate or have Employees or otherwise to foster and promote achievement of the purposes of this Plan, the Compensation Committee, in its sole discretion, shall have the power and authority, without any amendment to the Plan, to: (i) determine which non-United States Subsidiaries shall be covered by this Plan; (ii) determine which foreign nationals and Employees outside the United States are eligible to participate in this Plan; (iii) modify the terms and conditions of any Award granted to Participants who are foreign nationals, who are employed outside the United States or who are otherwise subject to the laws of one or more non-United States jurisdictions; (iv) grant Awards to Participants who are foreign nationals, who are employed outside the United States or who are otherwise subject to the laws of one or more non-United States jurisdictions, on such terms and conditions different from those specified in the Plan; (v) modify exercise procedures and other terms and procedures with respect to such Participants, to the extent such actions may be necessary or advisable; and (vi) take any action, before or after an Award is made, that it deems necessary or advisable to obtain approval or comply with any local government regulatory exemptions, approvals or requirements.

Notwithstanding the above, the Compensation Committee may not take any actions hereunder, and no Awards shall be granted that would violate any applicable law.

(M) Headings . The headings in this Plan are inserted for convenience only and shall not affect the interpretation hereof.

(N) Dividend Equivalents . At the discretion of the Compensation Committee, Awards granted pursuant to the Plan may provide Recipients with the right to receive Dividend Equivalents, which may be paid currently or credited to an account for the Recipients, and may be settled in cash and/or shares of Common Stock, as determined by the Compensation Committee in its sole discretion, subject in each case to such terms and conditions as the Compensation Committee shall establish. No Dividend Equivalents shall relate to shares underlying an Option or SAR unless such Dividend Equivalent rights are explicitly set forth as a separate arrangement and do not cause any

such Option or SAR to be subject to Section 409A of the Code. Notwithstanding anything contained in this Plan to the contrary, Dividend Equivalents with respect to Restricted Stock Unit Awards, Incentive Awards, Performance Unit Awards and Recognition Awards that vest based on the achievement of Performance Goals shall be accumulated until such Award is earned, and the Dividend Equivalents shall not be paid if the Performance Goals are not satisfied.

(O) Deferrals . Except with respect to Options and SARs, the Compensation Committee in its discretion may permit Recipients to elect to defer the issuance or delivery of shares of Common Stock or the settlement of Awards in cash under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of the Plan. The Compensation Committee in its discretion also may provide that deferred issuances and settlements include the payment or crediting of Dividend Equivalents or interest on the deferral amounts. All elections and deferrals permitted under this provision shall comply with Section 409A of the Code, including setting forth the time and manner of the election (including a compliant time and form of payment), the date on which the election is irrevocable, and whether the election can be changed until the date it is irrevocable.

(P) Successors . All obligations of the Company under the Plan and with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or other event, or a sale or disposition of all or substantially all of the business and/or assets of the Company and references to the “Company” herein and in any Agreements shall be deemed to refer to such successors.

SECTION 17. EFFECTIVENESS OF THIS PLAN

This Plan shall be effective as of the Effective Date. No Award may be granted under the Plan after the tenth anniversary of the Effective Date, or such earlier date as the Board shall determine. The Plan will remain in effect with respect to outstanding Awards until no Awards remain outstanding.

SECTION 18. GOVERNING LAW

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

EXHIBIT 10.3

RESTRICTED STOCK AGREEMENT

Name of Outside Director: XXXXXXX

Name of Plan: 2016 Valvoline Inc. Incentive Plan

Number of Shares of Valvoline Inc.

Common Stock: XXXXXXX

Par Value Per Share: $0.01

Date of Award: __________________________20___

Valvoline Inc. (“Valvoline”) hereby awards to the above-named Outside Director (hereinafter called the “Outside Director”) XXXXXXX shares of Valvoline Common Stock, par value $0.01 per share, subject to certain restrictions (hereinafter called “Restricted Stock”), as an award (“Award”) pursuant to the 2016 Valvoline Inc. Incentive Plan (hereinafter called the “Plan”) and this Restricted Stock Agreement (“Agreement”), in order to provide the Outside Director with an additional incentive to serve on Valvoline’s Board of Directors (the “Board”) and to continue to work for the best interests of Valvoline.

Valvoline confirms this Award to the Outside Director, as a matter of separate agreement and not in lieu of fees or any other compensation for services, of the number of shares of Restricted Stock set forth above, subject to and upon all the terms, provisions and conditions contained herein and in the Plan. Capitalized terms used but not defined in this Agreement shall have the meanings given such terms in the Plan.

This Award will be evidenced by entry on the books of Valvoline’s transfer agent, Wells Fargo Bank, N.A. Each entry in respect of shares of Restricted Stock shall be designated in the name of the Outside Director and shall bear the following legend:

“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeitures) contained in the Plan and the Agreement entered into between the registered owner and Valvoline Inc.”

The Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered until the Vesting Date. The Vesting Date shall mean the earlier of (i) the Outside Director’s Retirement, (ii) the Outside Director’s death or Disability, (iii) the Outside Director’s voluntary early retirement to take a position in Governmental Service and (iv) any removal or involuntary separation of the Outside Director from the Board following a Change in Control. Except as otherwise provided below or unless otherwise determined and directed by the Compensation Committee, in the case of voluntary resignation or other termination of service of the Outside Director prior to the Vesting Date, the grant of Restricted Stock made to the Outside Director will be forfeited. Except for such restrictions described above, the Outside Director will have all rights of a shareholder with respect to the shares of Restricted Stock including but not limited to, the right to vote and to receive dividends as and when paid.

Personal and Confidential

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Notwithstanding the foregoing, the Compensation Committee may, in its sole discretion, provide for accelerated vesting of the Award at any time and for any reason.

Nothing contained in this Agreement or in the Plan shall confer upon the Outside Director any right to remain in the service of Valvoline.

Information about the Outside Director and the Outside Director’s participation in the Plan may be collected, recorded and held, used and disclosed by and among Valvoline, its subsidiaries and any third party Plan administrators as necessary for the purpose of managing and administering the Plan. The Outside Director understands that such processing of this information may need to be carried out by Valvoline, its subsidiaries and by third party administrators whether such persons are located within the Outside Director’s country or elsewhere, including the United States of America. By accepting this Award, the Outside Director consents to the processing of information relating to the Outside Director and the Outside Director’s participation in the Plan in any one or more of the ways referred to above.

The Outside Director consents and agrees to electronic delivery of any documents that Valvoline may elect to deliver (including, but not limited to, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports, and all other forms of communications) in connection with this and any other award made or offered under the Plan. The Outside Director understands that, unless earlier revoked by the Outside Director by giving written notice to Valvoline at [ • ] Attention: [ • ], this consent shall be effective for the duration of the Award. The Outside Director also understands that the Outside Director shall have the right at any time to request that Valvoline deliver written copies of any and all materials referred to above at no charge.

This Award is granted under, and is subject to, all the terms and conditions of the Plan, including, but not limited to, the forfeiture provision of Section 16(H) of the Plan.

Copies of the Plan and related Prospectus are available for the Outside Director’s review on Fidelity’s website.

This grant of Restricted Stock is subject to the Outside Director’s on-line acceptance of the terms and conditions of this Agreement through the Fidelity website. By accepting the terms and conditions of this Agreement, the Outside Director acknowledges receipt of a copy of the Plan, Prospectus, and Valvoline’s most recent Annual Report and Proxy Statement (the “Prospectus Information”). The Outside Director represents that he or she is familiar with the terms and provisions of the Prospectus Information and hereby accepts this Award on the terms and conditions set forth herein and in the Plan, and acknowledges that he or she had the opportunity to obtain independent legal advice at his or her expense prior to accepting this Award.

Personal and Confidential

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IN WITNESS WHEREOF, VALVOLINE has caused this instrument to be executed and delivered effective as of the day and year first above written.

VALVOLINE INC.

By: ____________________________________

Name: ____________________________________

Title: ____________________________________

Personal and Confidential

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EXHIBIT 10.4

VALVOLINE INC.

NONQUALIFIED DEFINED CONTRIBUTION PLAN

(Effective October 1, 2016)

VALVOLINE INC.

NONQUALIFIED DEFINED CONTRIBUTION PLAN

ARTICLE 1

PURPOSE AND EFFECTIVE DATE

1.1 Purpose . Valvoline Inc. hereby establishes the Plan to provide benefits for certain employees that supplements the limitation on compensation imposed by Section 401(a)(17) of the Code (including successor provisions thereto) on the Savings Plan. It is intended that the Plan be maintained primarily for a select group of management or highly compensated employees and be exempt from the Employee Retirement Income Security Act of 1974, as amended.

1.2 Effective Date . The Plan is effective October 1, 2016.

ARTICLE 2

DEFINITIONS

Pronouns used in the Plan are in the masculine gender but include the feminine gender unless the context clearly indicates otherwise. Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:

2.1 “ Account ” means an account established for the purpose of recording amounts credited on behalf of a Participant and any income, expenses, gains, losses or distributions included thereon. The Account shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant pursuant to the Plan. Separate Accounts shall be established for a Participant by Plan Year and by type of contribution to the Participant.

2.2 “ Base Compensation ” means, with respect to each Plan Year, compensation paid to a Participant that is included in the definition of Compensation for deferral purposes in the Savings Plan without giving effect to any reduction required by Code Section 401(a)(17) and which is not Incentive Compensation.

2.3 “ Base Compensation Deferrals ” means, with respect to each Plan Year, Base Compensation that is deferred into the Deferred Compensation Plan.

2.4 “ Base Contribution ” means, with respect to each Plan Year, the Base Contribution as provided in Section 4.1.

2.5 “ Beneficiary ” means the Participant’s estate.

2.6 “ Board ” means the Board of Directors of the Company.

2.7 “ Cause ”, for Participants with a Change in Control agreement with the Employer, as defined by the Participant’s Change in Control agreement; and for Participants without a Change in Control agreement, the willful and continuous failure of a Participant to substantially perform his or her duties to the Employer (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 the Employer or the Company, each to be determined by the Company in its sole discretion.

2.8 “ Change in Control ” shall be deemed to have occurred if:

(1)

there shall be consummated (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, as a result of which the shareholders of the Company own (directly or indirectly), immediately after the Business Combination, less than fifty percent (50%) of the then outstanding shares of common stock that are entitled to vote generally for the election of directors of the corporation resulting from such 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 Business Combination in which the holders of the Company's Common Stock immediately prior to the Business Combination have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the Business Combination, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, provided, however, that no sale, lease, exchange or other transfer of all or substantially all the assets of the Company shall be deemed to occur unless assets constituting at least eighty percent (80%) of the total assets of the Company are transferred pursuant to such sale, lease, exchange or other transfer;


(2)	the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company;

(3)

any Person shall become the Beneficial Owner of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately-negotiated purchases or otherwise, without the approval of the Board; or

(4)

at any time during a period of two (2) 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 the Company's shareholders of each new director during such two- (2-) year period was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were directors at the beginning of such two- (2-) year period.

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of (1) the consummation of any transaction or series of integrated transactions immediately following which the record holders of the Common Stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions, (2) the repurchase by the Company of outstanding shares of Common Stock or other securities pursuant to a tender or exchange offer or (3) the Valvoline Spin-Off.

2.9 “ Code ” means the Internal Revenue Code of 1986, as amended.

2.10 “ Committee ” means the Compensation Committee of the Board and its designees.

2.11 “Company” means Valvoline Inc., a Kentucky corporation, and any successor thereto.

2.12 “ Deferred Compensation Plan ” means the Valvoline Deferred Compensation Plan for Employees, as may be amended, and amended and restated, from time to time.

2.13 “ Disabled ” or “ Disability ” means a determination that the Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. A Participant also will be considered disabled if he is determined (a) to be totally disabled by the Social Security Administration, or (b) to be disabled in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the requirements of Treasury Regulation Section 1.409A-3(i)(4). The Committee or its delegate shall determine whether a Participant has incurred a Disability.

2.14 “ Discretionary Contribution ” means, with respect to each Plan Year, the portion of the Employer Contribution as provided in Section 4.2(b).

2.15 “ Effective Date ” means October 1, 2016.

2.16 “ Eligible Employee ” means an employee of the Employer who is determined to be a member of a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, and who are classified in base salary and grades 21 and above and are not eligible for the SERP.

2.17 “ Employer ” means the Company, Valvoline and the present and future Related Entities that employ a Participant.

2.18 “ Employer Contribution ” means the Employer contributions provided in ARTICLE 4.

2.19 “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

2.20 “ Excess Base Compensation ” means, with respect to each Plan Year, Base Compensation paid to a Participant that is included in the definition of Compensation in the Savings Plan but that is in excess of the limitation in Code Section 401(a)(17) and which is not Incentive Compensation.

2.21 “ Excess Base Compensation Deferrals ” means, with respect to each Plan Year, Excess Base Compensation that is deferred to the Deferred Compensation Plan other than Incentive Compensation Deferrals.

2.22 “ Identification Date ” means the date at which Key Employees are determined which shall be December 31st.

2.23 “ Incentive Compensation ” means, with respect to a Plan Year, bonuses paid to a Participant under any applicable incentive compensation plans that are excluded from the definition of “Compensation” in the Savings Plan and which is not Base Compensation.

2.24 “ Incentive Compensation Deferrals ” means Incentive Compensation that is deferred into the Deferred Compensation Plan.

2.25 “ Key Employee ” means a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i) who satisfies the conditions set forth in Section 8.3.

2.26 “ Matching Contribution ” means, with respect to each Plan Year, the portion of the Employer Contribution provided in Section 4.2(a).

2.27 “ Participant ” means an Eligible Employee who commences participation in the Plan in accordance with ARTICLE 3.

2.28 “ Period of Service ” means, except as otherwise provided in Section 4.2(b)(iv), a period of employment with the Employer commencing on the date an Employee works at least one hour for which the Employee is paid and ending on the date such Employee has a Separation from Service.

2.29 “ Plan ” means this Valvoline Inc. Nonqualified Defined Contribution Plan, effective October 1, 2016, and as amended from time to time.

2.30 “ Plan Year ” means each twelve (12) month period beginning January 1 ^st and ending on December 31 ^st , except for the first Plan Year that shall begin on the Effective Date and ends on December 31, 2016.

2.31 “ Related Entities ” means (a) any corporation that is a member of a controlled group of corporations as defined in Code Section 414(b) that includes the Company, and (b) any trade or business that is under “common control” as defined in Code Section 414(c) that includes the Company.

2.32 “ Savings Plan ” means the tax-qualified Valvoline LLC Employee Savings Plan, as amended from time to time.

2.33 “ Separation from Service ” and “ Separated from Service ” means a Participant’s termination of employment with the Employer for any reason, including death, that meets the requirements of the definition of “separation from service” set forth in Treasury Regulation Section 1.409A-1(h). For purposes of determining whether

a Separation from Service has occurred, the twenty percent (20%) default threshold set forth in Treasury Regulation Section 1.409A-1(h)(1)(ii) shall be utilized.

2.34 “ Valuation Date ” means the last day of each calendar month during a Plan Year, or such other date or dates as determined by the Committee.

2.35 “ Valvoline ” means Valvoline LLC, a wholly-owned subsidiary of the Company.

2.36 “ Valvoline Spin Off ” means the transaction or series of transactions initially approved by the board of directors of Ashland Inc. on September 16, 2015, intended to separate the Valvoline business from Ashland Inc.'s specialty chemical business and create two independent, publicly-traded companies.

ARTICLE 3

PARTICIPATION

3.1 Participation . Each Eligible Employee of the Employer shall be eligible for the Plan immediately.

3.2 Termination of Participation . The Employer may terminate a Participant’s participation in the Plan, provided, however, any such termination at the direction of the Employer shall not take effect until the first day of the next Plan Year.

ARTICLE 4

EMPLOYER CONTRIBUTIONS

4.1 Base Contribution. If a Participant has not Separated from Service in a Plan Year, a Participant’s Account will be credited with a Base Contribution in an amount equal to four percent (4%) of the Participant’s Incentive Compensation, Excess Base Compensation and Excess Base Compensation Deferrals for the Plan Year.

4.2 Other Employer Contributions .

(a) Matching Contribution . If a Participant has not Separated from Service in a Plan Year, a Participant’s Account will be credited with a Matching Contribution in an amount equal to four percent (4%) of the Participant’s Incentive Compensation, Excess Base Compensation and Excess Base Compensation Deferrals for the Plan Year.

(b) Discretionary Contribution . A Discretionary Contribution may be credited to one or more Participants’ Accounts in an amount determined solely by the Employer for any Plan Year.

4.3 Crediting Employer Contributions . Each Participant shall be credited with the applicable Employer Contributions in accordance with this ARTICLE 4, as soon as administratively feasible following each Plan Year.

ARTICLE 5

PAYMENT SCHEDULE AND FORM OF PAYMENT

5.1 Payment Schedule and Form of Payment . Amounts credited to a Participant’s Account shall be paid to the Participant in a lump sum on or within sixty (60) days following the Participant’s Separation from Service other than for Cause (provided that if such sixty (60) day period begins in one calendar year and ends in the next calendar year, the Participant shall not designate the year of payment). Notwithstanding anything in the Plan to the contrary, a Participant who is a Key Employee shall not have the lump sum payment of such amounts credited to his Account until the first business day of the seventh month following his Separation from Service other than for Cause.

5.2 Death Before Payment . If a Participant dies prior to a Separation from Service for any other reason, the amount credited to the deceased Participant’s Account as of his date of death shall be paid in a lump sum to the Participant’s Beneficiary within sixty (60) days following the Participant’s date of death (provided that if such sixty (60) day period begins in one calendar year and ends in the next calendar year, the Beneficiary shall not designate the calendar year of payment).

ARTICLE 6

ACCOUNTS AND CREDITS AND FUNDING

6.1 Contribution Credits to Account . A Participant’s Account will be credited with the Employer Contributions credited on his behalf under ARTICLE 4.

6.2 Credits and Debits to Account . The Participant’s Account shall be credited (or debited) on each Valuation Date with hypothetical income (or loss) based upon a hypothetical investment in any one or more of the hypothetical investment options available under the Plan, as prescribed by the Committee or its delegate. The crediting or debiting on each Valuation Date of hypothetical income (or loss) shall be made for each respective Account. All hypothetical investments of a Participant’s Account shall be valued at fair market value. Additionally, all payments, distributions, investments and investment exchanges allowed and made under the Plan shall be as of the relevant Valuation Date at fair market value.

6.3 Adjustment of Accounts . Each Account maintained for a Participant shall be adjusted for hypothetical credits and any expenses allocable under the terms of the Plan to the Account. The Account shall be adjusted as of each Valuation Date to reflect: (a) the hypothetical credits and expenses described in this ARTICLE 6; (b) amounts credited pursuant to ARTICLE 4; and (c) payments, distributions or withdrawals.

6.4 Establishment of Trust for Funding . The Employer may, but is not required to, establish a trust to hold amounts which the Employer may contribute from time to time to correspond to some or all amounts credited to Participants under this ARTICLE 6. If the Employer establishes a trust, the provisions of Sections 6.4(a) and (b) shall become operative.

(a) Grantor Trust . Any trust established by the Employer shall be between the Employer and a trustee pursuant to a separate written agreement under which assets are held, administered and managed, subject to the claims of the Employer’s creditors in the event of the Employer’s insolvency, until paid to the Participant and/or his Beneficiaries. The trust is intended to be treated as a grantor trust under the Code, and it is intended that the establishment of the trust shall not cause the Participant to realize current income on amounts contributed thereto. The Employer must notify the trustee in the event of a lawsuit regarding the Plan or regarding its bankruptcy or insolvency.

(b) Investment of Trust Funds . Any amounts contributed to the trust by the Employer shall be invested by the trustee in accordance with the provisions of the trust and the instructions of the Committee or its delegate.

ARTICLE 7

RIGHT TO BENEFITS

7.1 Vesting. Unless a Participant is terminated for Cause, a Participant shall be one hundred percent (100%) vested in his Accounts upon the earlier of a Change in Control or the Participant’s Separation from Service. Notwithstanding the preceding sentence, if a Participant is terminated for Cause, the Participant shall forfeit all rights to the Participant’s Account.

7.2 Amount of Benefits . The vested amounts credited to a Participant’s Account as determined under ARTICLE 4 shall determine and constitute the basis for the amount payable to the Participant (or, in the event of the Participant’s death, to the Participant’s Beneficiary) under the Plan.

ARTICLE 8

PAYMENTS OF AMOUNTS CREDITED TO ACCOUNTS

8.1 Method and Timing of Payments . Except as otherwise provided under the Plan, including this ARTICLE 8, payments under the Plan shall be made in accordance with ARTICLE 5 of the Plan.

8.2 Prohibition on Acceleration . Except as otherwise provided in the Plan and except as may be allowed in guidance from the Secretary of the Treasury, distributions/payments from a Participant’s Account(s) may not be made earlier than the time such amounts would otherwise be distributed pursuant to the terms of the Plan.

8.3 Key Employees . Unless an exception to Code Section 409A applies to a payment to a Participant, in no event shall a distribution made to a Key Employee from his Accounts due to his Separation from Service occur before the date which is six (6) months after his Separation from Service, or, if earlier, his date of death. For purposes of this Section 8.3, a Key Employee means an employee of an employer, including any corporation that is a member of a controlled group of corporations as defined in Code Section 414(b) that includes the employer and any trade or business that is under common control as defined in Code Section 414(c) with the employer, any of whose stock is publicly traded on an “established securities market,” within the meaning of Section 1.409A-1(k), or otherwise who satisfies the requirements of Code Sections 416(i)(1)(A)(i), (ii) or (iii), determined without regard to Code Section 416(i)(5), at any time during the twelve- (12-) month period ending on the Identification Date. An employee who is determined to be a Key Employee on an Identification Date shall be treated as a Key Employee for purposes of the six- (6-) month delay in distributions set forth in this Section 8.3 for the twelve- (12-) month period beginning on the first day of the fourth month following the Identification Date. Whether any stock of the Employer is traded on an established securities market or otherwise is determined on the date a Participant experiences a Separation from Service. This Section 8.3 shall not apply to an accelerated distribution made in accordance with Section 11.9.

8.4 Permissible Delays in Payment . Distributions may be delayed beyond the date payment would otherwise occur in accordance with the provisions of ARTICLE 5 in any of the following circumstances:

(a) Payments Subject to Code Section 162(m) . The Employer may delay payment if it reasonably anticipates that its deduction with respect to such payment would not be permitted due to the application of Code Section 162(m); provided, however, that (i) the deduction limitation of Code Section 162(m) shall be applied to all payments to similarly situated Participants on a reasonably consistent basis; (ii) the payment must be made either during the Participant’s first taxable year in which the Employer reasonably anticipates, or should reasonably anticipate, that if the payment is made during such year, the deduction of such payment will not be barred by application of Code Section 162(m) or during the period beginning with the date of the Participant’s Separation from Service (or, if the Participant is a Key Employee, beginning with the date that is six (6) months after Separation from Service) and ending on the later of the last day of the Employer’s taxable year in which the Participant incurs a Separation from Service for the 15th day of the third month following the Participant’s Separation from Service (or, if the Participant is a Key Employee, the 15th day of the third month following the date that is six (6) months after Separation from Service); (iii) where any payment to a particular Participant is delayed because of Code Section 162(m), the delay in payment will be treated as a subsequent deferral election under Code Section 409A, unless all scheduled payments to such Participant that could be delayed are also delayed; and (iv) no election may be provided to a Participant with respect to the timing of payment hereunder.

(b) Payments that would violate Federal Securities Laws or Other Applicable Law . The Employer may also delay payment if it reasonably anticipates that the marking of the payment will violate Federal securities laws or other applicable laws provided payment is made at the earliest date on which the Employer reasonably anticipates that the making of the payment will not cause such violation.

(c) Other Events and Conditions . The Employer also reserves the right to delay payment upon such other events and conditions as the Secretary of the Treasury may prescribe in generally applicable guidance published in the Internal Revenue Bulletin.

Except as may be otherwise required under Code Section 409A, a payment is treated as made upon the date contemplated under the provisions of the Plan if the payment is made at such date or a later date within the same calendar year or, if later, by the 15th day of the third calendar month following the date contemplated by the Plan. If calculation of the amount of the payment is not administratively practicable due to events beyond the control of the Participant (or Participant’s Beneficiary), the payment will be treated as made upon the date contemplated by the Plan if the payment is made during the first calendar year in which the payment is administratively practicable. Similarly, if the funds of the Employer are not sufficient to make the payment at the date specified under the Plan without jeopardizing the solvency of the Employer, the payment will be treated as made upon the date contemplated by the Plan if the payment is made during the first calendar year in which the funds of the Employer are sufficient to make the payment without jeopardizing the solvency of the Employer.

If a payment is not made, in whole or in part, as of the date contemplated by the Plan because the Employer refuses to make such payment, the payment will be treated as made upon the date contemplated by the Plan if the Participant accepts the portion (if any) of the payment that the Employer is willing to make (unless such acceptance will result in forfeiture of the claim to all or part of the remaining account), makes prompt and reasonable, good faith efforts to collect the remaining portion of the payment and any further payment (including payment of a lesser amount that satisfies the obligation to make the payment) is made no later than the end of the first calendar year in which the Employer and the Participant enter into a legally binding settlement of such dispute, the Employer concedes that the amount is payable, or the Employer is required to make such payment pursuant to a final and nonappealable judgment or other binding decision. For purposes of this paragraph, efforts to collect the payment will be presumed not to be prompt, reasonable, good faith efforts, unless the Participant provides notice to the Employer within ninety (90) days of the latest date upon which the payment could have been timely made in accordance with the terms of the Plan and the Treasury Regulations promulgated under Code Section 409A, and unless, if not paid, the Participant takes further enforcement measures within one hundred eighty (180) days after such latest date. For purposes of this paragraph, the Employer is not treated as having refused to make a payment where pursuant to the terms of the Plan the Participant is required to request payment, or otherwise provide information to take any other action, and the Participant has failed to take such action. In addition, for purposes of this paragraph, the Participant is deemed to have requested that a payment not be made, rather than the Employer having refused to make such payment, where the Employer’s decision to refuse to make the payment is made by the Participant or a member of the Participant’s family (as defined in Code Section 267(c)(4) applied as if the family of an individual includes the spouse of any member of the family), or any person or group of persons over whom the Participant’s family member has effective control, or any person any portion of whose compensation is controlled by the Participant or the Participant’s family member.

ARTICLE 9

AMENDMENT AND TERMINATION

9.1 Plan Amendment . The Company reserves the sole right to amend the Plan pursuant to a resolution of the Board approving such amendment. An amendment must be in writing and executed by a representative of the Company authorized to take such action. The Company hereby reserves the right to amend the Plan without the consent of the Participants in the future, as required to comply with any present or future law, regulation or rule applicable to the Plan, including, but not limited to Code Section 409A and all applicable guidance promulgated thereunder, and to prevent any Participant from becoming subject to any additional tax or penalty under Code Section 409A. No amendment can directly or indirectly deprive any current or former Participant or Beneficiary of all or any portion of his vested Account which had accrued prior to the amendment, except to the extent required by the Code or other applicable law.

9.2 Retroactive Amendments . An amendment to the Plan made by the Company in accordance with Section 9.1 may be made effective on a date prior to the first day of the Plan Year in which it is adopted. Any retroactive amendment by the Company shall be subject to the provisions of Section 9.1.

9.3 Plan Termination . The Plan will terminate automatically as of the date that no amounts remain to be paid/distributed under the Plan.

The Company reserves the right to terminate the Plan and accelerate the time of payment of all amounts to be distributed under the Plan in accordance with the following provisions of this Section 9.3. The Company may make an irrevocable election to terminate the Plan and distribute all amounts credited to all Participant Accounts within the thirty (30) days preceding or the twelve (12) months following a Change in Control. For this purpose, the Plan will be treated as terminated only if all other arrangements sponsored by the Employer immediately after the time of the Change in Control with respect to which deferrals of compensation are treated as having been deferred under a single plan under Treasury Regulation Section 1.409A-1(c)(2) are terminated and liquidated with respect to each Participant that experienced the Change in Control, so that under the terms of the termination and liquidation all such Participants are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Company irrevocably takes all necessary action to terminate and liquidate the Plan and such other arrangements. In addition, the Company reserves the right to terminate the Plan within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to Section 503(b)(1)(A) of Title 11 of the United States Code, provided that amounts deferred under the Plan are included in the gross incomes of Participants in the earlier of (a) the taxable year in which the amount is actually or constructively received, or (b) the latest of the following years: (1) the calendar year in which the termination occurs, (2) the first calendar year in which the amount is no longer subject to a substantial risk of forfeiture, or (3) the first calendar year in which payment is administratively practicable. The Company retains the discretion to terminate the Plan if (1) the termination does not occur proximate to a downturn in the financial health of the Company; (2) all arrangements sponsored by the Employer that would be aggregated with any terminated arrangement under Treasury Regulation Section 1.409A-1(c) if the same service provider participated in all of the arrangements are terminated, (3) no payments other than payments that would be payable under the terms of the arrangements if the termination had not occurred are made within twelve (12) months of the termination of the arrangements, (4) all payments are made within twenty-four (24) months of the termination of the arrangements, and (5) the Employer does not adopt new arrangements that would be aggregated with any terminated arrangement under Treasury Regulation Section 1.409A-1(c), if the same service provider participated in both arrangements, at any time with the three (3) year period following the date of termination of the arrangement. The Company also reserves the right to terminate the Plan and accelerate the time of payment of all amounts to be distributed under the Plan under such conditions and events as may be prescribed by the Internal Revenue Service in generally applicable guidance published in the Internal Revenue Bulletin.

9.4 Distribution Upon Termination of the Plan . Except as provided in Section 9.3, the Plan may not be terminated before the date on which all amounts credited to all Participant Accounts have been paid in accordance with the terms of the Plan.

ARTICLE 10

PLAN ADMINISTRATION

10.1 Powers and Responsibilities of the Company . The Company shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof. The Company’s powers and responsibilities include, but are not limited to, the following, which powers and responsibilities shall be exercised in its sole discretion:

(a) To make and enforce such rules and regulations as it deems, in its sole discretion, necessary or proper for the efficient administration of the Plan;

(b) To decide all questions concerning the Plan and the eligibility of any person to participate in the Plan, in its sole discretion, subject to review by the Committee or its delegate.

(d) To compute the amount of benefits which will be payable to any Participant, former Participant or Beneficiary in accordance with the provisions of the Plan in its discretion;

(e) To determine the person or persons to whom such benefits will be paid in its discretion;

(f) To authorize the payment of benefits;

(g) To comply with any applicable reporting and disclosure requirements of Part 1 of Subtitle B of Title 1 of ERISA;

(h) To appoint such agents, counsel, accountants, and consultants as may be required to assist in administering the Plan;

(i) To allocate and delegate its responsibilities in its discretion, including the formation of any administrative sub-committee to administer the Plan.

10.2 Powers and Responsibilities of the Committee . The Committee or its delegate shall be responsible (a) for determining the hypothetical investments relating to Participants’ Accounts pursuant to ARTICLE 6, and (b) for the review of denied claims pursuant to Section 10.3(b) in its sole discretion. In the course of reviewing a denied claim, the Committee or its delegate shall have the power to interpret the Plan, in its sole discretion, and its interpretation thereof shall be final, conclusive and binding on all persons claiming benefits under the Plan.

10.3 Claims and Review Procedures .

(a) Claims Procedure . If any person believes he is being denied any rights or benefits under the Plan, such person may file a claim in writing with the Company. If any such claim is wholly or partially denied, the Company or its delegate will notify such person of its decision in writing. Such notification will contain (i) specific reasons for the denial, (ii) specific reference to pertinent Plan provisions, (iii) a description of any additional material or information necessary for such person to perfect such claim and an explanation of why such material or information is necessary, and (iv) information as to the steps to be taken if the person wishes to submit a request for review. Such notification will be given within ninety (90) days after the claim is received by the Company (or within one hundred eighty (180) days, if special circumstances require an extension of time for processing the claim, and if written notice of such extension and circumstances is given to such person within the initial ninety (90) day period). If such notification is not given within such period, the claim will be considered denied as of the last day of such period and such person may request a review of his claim.

(b) Review Procedure . Within sixty (60) days after the date on which a person receives a written notification of denial of claim (or, if written notification is not provided, within sixty (60) days of the date denial is considered to have occurred), such person (or his duly authorized representative) may (i) file a written request with the Company for a review of his denied claim and of pertinent documents and (ii) submit written issues and comments to the Company. The Company or its delegate will notify such person of its decision in writing. Such notification will be written in a manner calculated to be understood by such person and will contain specific reasons for the decision as well as specific references to pertinent Plan provisions. The decision on review will be made within sixty (60) days after the request for review is received by the Company (or within one hundred twenty (120) days, if special circumstances require an extension of time for processing the request, such as an election by the Company or its delegate to hold a hearing, and if written notice of such extension and circumstances is given to such person within the initial sixty- (60-) day period). If the decision on review is not made within such period, the claim will be considered denied.

10.4 Plan Administrative Costs . All reasonable costs and expenses (including legal, accounting, and employee communication fees) incurred by the Company in administering the Plan shall be paid by the Company.

ARTICLE 11

MISCELLANEOUS

11.1 Unsecured General Creditor of the Employer . The Plan at all times shall be entirely unfunded. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Employer. For purposes of the payment of benefits under the plan, the assets of the Employer shall be, and shall remain, the general, unpledged, unrestricted assets of the Employer. The Employer’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.

11.2 Employer’s Liability . The Employer’s liability for the payment of benefits under the Plan shall be defined only by the Plan. The Employer shall have no obligation or liability to a Participant under the Plan except as provided by the Plan.

11.3 Limitation of Rights . Neither the establishment of the Plan, nor any amendment thereof, nor the creation of any fund or account, nor the payment of any benefits, will be construed as giving to the Participant or any other person any legal or equitable right against the Company, the Employer or the Committee except as provided herein; and in no event will the terms of employment or service of the Participant be modified or in any way affected hereby.

11.4 Anti-Assignment . Except as otherwise provided in connection with a division of property under a domestic relations proceeding under state law and subject to the terms of the Plan, no right or interest of the Participants shall be subject to involuntary alienation, assignment or transfer of any kind. An eligible employee may voluntarily assign his rights under the Plan. The Employer, 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. Employer 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 the Employer. A domestic relations order intended to assign a benefit hereunder to a former spouse of an eligible employee must be delivered to the Employer. The Employer will review the order to determine if it is qualified. Upon notification by the Employer 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 Employer 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 Employer notifies the former spouse that the order is qualified. The Employer may prescribe procedures that are consistent with this Section 11.4 and applicable law to implement benefit assignments pursuant to qualified orders.

11.5 Facility of Payment . If the Employer determines, on the basis of medical reports or other evidence satisfactory to the Employer, that the recipient of any benefit payments under the Plan is incapable of handling his affairs by reason of minority, illness, infirmity or other incapacity, such payments may be disbursed to a person or institution designated by a court which has jurisdiction over such recipient or a person or institution otherwise having the legal authority under State law for the care and control of such recipient. The receipt by such person or institution of any such payments, and any such payment to the extent thereof, shall discharge the liability of the Employer for the payment of benefits hereunder to such recipient.

11.6 Notices . Any notice or other communication required or permitted to be given in connection with the Plan shall be in writing and shall be deemed to have been duly given (i) upon request, if delivered personally or via courier, (ii) upon confirmation of receipt, if given by facsimile or electronic transmission, and (iii) on the third business day following mailing, if mailed first-class, postage prepaid, registered or certified mail as follows:

(a) If it is sent to the Employer, it will be at the address specified by the Employer; or

(b) If it is sent to a Participant or Beneficiary, it will be at the last address filed with the Employer by the Participant (or Beneficiary).

11.7 Tax Withholding . The Employer shall have the right to deduct from all payments or deferrals made under the Plan any tax required by law to be withheld. If the Employer concludes that tax is owing with respect to any deferral or payment hereunder, the Employer shall withhold such amounts from any payments due the Participant or his Beneficiary, as permitted by law, or otherwise make appropriate arrangements with the Participant or his Beneficiary for satisfaction of such obligation. Tax, for purposes of this Section 11.7, means any federal, state, local, foreign or any other governmental income tax, employment or payroll tax, excise tax, or any other tax or assessment owing with respect to amounts deferred, any earnings thereon, and any payments made to Participants or Beneficiaries under the Plan.

11.8 Indemnification . To the fullest extent allowed by law, the Company shall indemnify and hold harmless each member of the Committee and each employee, officer, or director of the Employer to whom is delegated duties, responsibilities, and authority with respect to the Plan against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him (including but not limited to reasonable attorneys’ fees) which arise as a result of his actions or failure to act in connection with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by the Employer. Notwithstanding the foregoing, the Company shall not indemnify any person for any such amount incurred through any settlement or compromise of any action unless the Company consents in writing to such settlement or compromise.

11.9 Permitted Acceleration of Payment . The Company or its delegate, in its sole discretion, may accelerate the time in which payment shall be made under the Plan to: (a) an individual other than the Participant as may be necessary to fulfill a domestic relations order within the meaning of Code Section 414(p)(1)(B), (b) the extent reasonably necessary to avoid the violation of an applicable federal, state, local, or foreign ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the Participant to participate in activities in the normal course of his position in which the Participant would otherwise not be able to participate under an applicable rule), determined in accordance with Treasury Regulation Section 1.409A-3(j)(4)(iii)(B), (c) pay the FICA tax imposed under Code Sections 3101, 3121(a) and 3121(v)(2) on compensation deferred under the Plan, (d) pay the income tax at source on wages imposes under Code Section 3401 or the corresponding withholding provisions of the applicable, state, local or foreign tax laws as a result of the payment of any FICA tax described in clause (c), and to pay the additional income tax at source on wages attributable to the pyramiding Code Section 3401 wages and taxes, (e) pay state, local, or foreign tax obligations arising from participation in the Plan that apply to an amount deferred under the Plan before the amount is paid or made available to the Participant, (f) pay the income tax at source on wages imposed under Code Section 3401 as a result of the payment described in clause (e) and to pay the additional income tax at source on wages imposed under Code Section 3401 attributable to such additional Code Section 3401 wages and taxes, (g) satisfy the debt of a Participant to the Employer where such debt is incurred in the ordinary course of the service relationship between the Participant and the Employer, as applicable, the entire amount of the reduction in any Plan year does not exceed $5,000, and the reduction is made at the same time and in the same amount as the debt otherwise would have been due and collected from the Participant, and (h) pay the amount required to be included in gross income as a result of the failure of the Plan to comply with the requirements of Code Section 409A. The total payment under clauses (c) and (d) shall, in no event, exceed the aggregate of the FICA tax and the income tax withholding related to such FICA tax. The total payment under clause (e) shall, in no event, exceed the amount of such taxes due as a result of participation in the Plan. The total payment under clauses (e) and (f) shall, in no event, exceed the aggregate of the state, local, and foreign tax amount, and the income tax withholding related to such state, local, and foreign tax amount. The total payment under clause (h) shall, in no event, exceed the amount required to be included in income as a result of the failure to comply with requirements of Code Section 409A.

11.10 No Guarantee or Employment or Participation . Nothing in the Plan shall interfere with or limit in any way the right of the Employer to terminate any Participant’s employment at any time and for any reason, nor confer upon any Participant any right to continue in the employ of the Employer. No employee of the Employer shall have a right to be selected as a Participant under the Plan or, if selected, to continue to participate for any Plan Year.

11.11 Unclaimed Benefit . Each Participant shall keep the Employer informed of his current address. The Employer shall not be obligated to search for the whereabouts of any person. If the location of a Participant is not made known to the Employer within three (3) years after the date on which payment of the Participant’s vested Account is scheduled to be made, payment may be made as though the Participant had died at the end of the three- (3-) year period. If within one additional year after such three- (3-) year period has elapsed, or, within three (3) years after the actual death of a Participant, the Employer is unable to locate the Beneficiary of the Participant, then the Employer shall have no further obligation to pay any benefit hereunder to such Participant or Beneficiary or any other person and such benefit shall be irrevocably forfeited.

11.12 Governing Law . The Plan will be construed, administered and enforced according to the laws of the Commonwealth of Kentucky without regard to principles of conflicts of law to the extent not otherwise preempted by ERISA.

11.13 Erroneous Payment . Any amount paid under this Plan in error to a Participant or to a Participant’s Beneficiary shall be returned to the Employer. A payment made in error does not create on the part of the recipient a legally binding right to such payment.

11.14 Effective Date . The Plan was approved by the Personnel and Compensation Committee of the Board of Directors of Ashland Inc. and established by the Company to be effective as of October 1, 2016.

[signature page immediately follows]

IN WITNESS WHEREOF , Valvoline Inc. has caused its duly authorized representative to execute the Plan, this 30th day of September, 2016, to be effective as of the date noted above.



On Behalf of Valvoline Inc.

By:	/s/ Peter J. Ganz
	Peter J. Ganz
	Senior Vice President, General Counsel and Secretary
	Ashland Global Holdings Inc.

EXHIBIT 10.5

Valvoline LLC

3499 Blazer Parkway

Lexington, KY 40509

Tel:859 357-3147

mmeixelsperger@valvoline.com



Mary Meixelsperger
Chief Financial Officer

September 6, 2016

David J. Scheve

13716 Lake Spring Drive

Louisville, KY 40299

Dear David:

This letter is to confirm the revised employment offer, from the original employment offer dated August 30, 2016, extended to you by Valvoline LLC. ("Valvoline") for the position of Controller for Valvoline, reporting to Mary Meixelsperger , Chief Financial Officer of Valvoline with a targeted start date on or before October 4, 2016. The details of the offer are outlined below. As you are aware, Ashland is in the process of separating its Valvoline commercial unit from its remaining businesses, such that Ashland and Valvoline will ultimately become two separate, independent and unrelated companies. The final separation of Ashland and Valvoline will not occur until Ashland effects a spin-off of all of its shares of Valvoline to Ashland's shareholders. It is currently expected that this will occur sometime in the late spring/early summer of 2017, however this date may be subject to change.

Your starting salary will be $250,000 annually. This position will entitle you to eligibility for incentive compensation (IC). Our IC plan year runs from October 1 through September 30. Your annual incentive opportunity at target performance under the applicable Ashland Inc. plan for FY2017 is 40% of annual base salary, which may be prorated for the 2017 plan year based on your employment start date. In addition, you will be eligible to participate in the long-term incentive program beginning in the fall of 2016, which will provide an additional incentive opportunity equal to 40% of the market reference point for your salary band. You will also be eligible to participate in other executive compensation programs to the same extent as other employees at your level who are part of the Valvoline organization. You will also be eligible to participate in other executive compensation programs to the same extent as other executive level employees at your level who are part of the Valvoline organization. These plans, as well as other executive compensation plans and programs in which you are eligible to participate, may be subject to termination or modification during the course of your employment, and nothing in this letter is intended to create a contract guaranteeing that you will be eligible for the same benefit opportunities in subsequent plan years. However, so long as you remain in your new role with Valvoline, your base salary will not be reduced, and you will be eligible to participate in those executive compensation plans and programs offered to executive employees within the Valvoline organization on the same terms and conditions as they are offered to all other employees supporting the Valvoline organization in your same group and level.

In addition to the above, you will also be eligible to receive a one-time grant of 1,500 Ashland Inc. Restricted Stock Units (RSU) with a vesting schedule of 25% after two years and 75% after three years from date of grant. Please be advised that upon the final separation of Ashland and Valvoline, it is anticipated that this grant will convert to RSU's of Valvoline.

Further, you will be afforded a one-time, signing bonus in the gross amount of $10,000, subject to applicable taxes and deductions. This will be paid to you shortly after commencement of your employment.

For the remainder of calendar year 2016 you will be eligible for 5 days of vacation plus 5 days of administrative leave. Starting in 2017, you will be eligible for 10 days of vacation plus 5 days' administrative leave (until such time you earn 3 weeks of vacation). In addition to the above, you may also be eligible to participate in the full range of salaried employee benefits including health insurance, group life insurance, dental insurance, disability insurance, various other voluntary insurance programs and, upon meeting the eligibility requirements, our savings plan. Your participation in particular employee benefits programs will be subject to the same limitations and conditions as those applicable to other employees eligible to participate.

A post-offer background check will be conducted in accordance with the disclosures made on the employment application, to which you must provide consent, and will include appropriate reference checks, verification of education (if applicable), DMV report (if applicable) and a criminal records check; along with the successful completion of a drug screen. Separately, we will advise you of the date, time and the location of the post-offer drug testing. This offer may be rescinded in the event the results of your drug screen or background check are unsatisfactory.

If you elect to accept this offer of employment, it should be understood that you will not have a contract of employment with either Ashland or Valvoline that guarantees your employment for any duration, and that nothing in this letter, the company's Human Resources policies or procedures, or any statements made to you about this job, will not in any way provide you with any such rights of continuing employment. Both you and Valvoline, will remain free to terminate your employment at any time, with or without notice, and with or without cause. By acceptance of this offer you are also confirming that you have disclosed to Valvoline any noncompetition agreement or other obligation you have with your prior employer or with another third party, and you have not and will not breach any such agreement.

David, I am very pleased to extend this offer of employment to you. I look forward to an excellent opportunity for both you and Valvoline as a result of your acceptance. If you choose to accept this offer, please confirm with your written acceptance below no later than September 6, 2016. If you have any questions, concerns or need additional information, please feel free to call me at (859) 357-3147.

Best regards,

Mary Meixelsperger



ACCEPTED:	/s/ David J. Scheve

DATE:	9/6/2016

EXHIBIT 10.6

VALVOLINE INC.

2016 DEFERRED COMPENSATION PLAN FOR

NON-EMPLOYEE DIRECTORS

(Effective October 1, 2016)

VALVOLINE INC.

2016 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

Valvoline Inc. hereby establishes a nonqualified deferred compensation plan for members of the Board of Directors who are not employees of the Company to be known as the Valvoline Inc. 2016 Deferred Compensation Plan for Non-Employee Directors.

The Plan is effective as of October 1, 2016, and is entitled to be, and shall be administered as, an unfunded plan maintained for the purpose of providing deferred compensation for the Directors and, as such, is not an “employee benefit plan” within the meaning of the Employee Retirement Income Security Act of 1974, as amended.

ARTICLE I. GENERAL PROVISIONS


1.	PURPOSE

The purpose of this Plan is to provide each Director with an opportunity to defer some or all of the Director’s Fees as a means of saving for retirement or other purposes. In addition, the Plan provides Directors with the ability to increase their proprietary interest in the Company’s long-term prospects by permitting Directors to receive all or a portion of their Fees in Valvoline Inc. Common Stock. The obligations of the Company hereunder constitute a mere promise to make the payments provided for in this Plan. No Director, 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 the Company. To the extent any Participant has a right to receive payments from the Company under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company.


2.	DEFINITIONS

The following definitions shall be applicable throughout the Plan:

(a) “ Accounting Date ” means the Business Day on which a calculation concerning a Participant’s Account is performed, or as otherwise defined by the Committee or the Company.

(b) “ Account ” means, collectively, a Deferred Fee Account, Stock Account, Restricted Stock Account, and Transferred Account, as applicable to a Participant. The Account is maintained solely as a bookkeeping entry by the Company to evidence an unfunded, unsecured payment obligation of the Company to a Participant.

(d) “ Ashland Director ” means a current or former member of the board of directors of Ashland Inc. or Ashland Global Holdings Inc.

(e) “ Ashland Elections ” means Ashland Fees’ deferral elections and time and form of payment elections made by Ashland Participants under the Ashland Plan.

(f) “ Ashland Fees ” means an Ashland Director’s annual retainer and, as applicable, other annual retainers earned by an Ashland Director for service as an Ashland Director (but excluding Ashland Restricted Stock Units).

(g) “ Ashland Participant ” means a Participant who participates or participated in the Ashland Plan as an Ashland Director.

(h) “ Ashland Plan ” means the Ashland Global Holdings Inc. 2016 Deferred Compensation Plan for Non-Employee Directors and any predecessor plan thereto that is subject to Code section 409A (including the Ashland Inc. Deferred Compensation Plan for Non-Employee Directors (2005), as amended).

(i) “ Ashland Restricted Stock Units ” means the Ashland Participant’s annual award of deferred restricted stock units for service as an Ashland Director credited to the Ashland Participant under the Ashland Plan and to the Ashland Participant’s Transferred Account.

(j) “ Ashland Stock Units ” means the hypothetical Ashland Common Stock share equivalents credited to an Ashland Participant’s Ashland Plan account and Transferred Account.

(k) “ Beneficiary ” means the Participant’s estate.

(l) “ Board ” or “ Board of Directors ” means the board of directors of Valvoline Inc.

(m) “ Business Day ” means a day on which the New York Stock Exchange is open for trading activity.

(n) “ Change in Control ” shall be deemed to have occurred if:


2.	the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company;

(o) “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

(p) “ Committee ” means the Compensation Committee of the Board or its designee.

(q) “ Common Stock ” means the common stock, $.01 par value, of the Company.

(r) “ Common Stock Fund ” means that hypothetical investment option, approved by the Committee, in which a Participant’s Account may be deemed to be invested and may earn income based on a hypothetical investment in Common Stock.

(s) “ Company ” means Valvoline Inc., a Kentucky corporation, and any successor thereto.

(t) “ Corporate Human Resources ” means the Corporate Human Resources Department of the Company.

(u) “ Credit Date ” means the date on which any Fees would otherwise have been paid to the Participant if such Fees were not Deferred Fees.

(v) “ Deferred Fee Account ” means the portion of a Participant’s Account that is separately accounted for and to which Deferred Fees are credited.

(w) “ Deferred Fees ” mean the Fees elected by the Participant to be deferred pursuant to a Fee Deferral Election, and which are credited to the Participant’s Deferred Fee Account and, if applicable to the Participant, the Participant’s Stock Account.

(x) “ Deferred Ashland Fees ” mean the Ashland Fees that were elected by an Ashland Participant to be deferred under the Ashland Plan.

(y) “ Director ” means any non-employee director of the Board.

(z) “ Disability ” means that a Participant is unable to engage in any substantial gainful activity because of a medically determinable physical or mental impairment that is expected to result in death or last for a continuous period of twelve (12) or more months. Corporate Human Resources or its delegate shall determine whether a Participant has incurred a Disability.

(aa) “ Election ” means a Participant’s delivery of a notice of election to defer payment of all or a portion of his or her Fees under the terms of the Plan. The Committee or the Company may prescribe other means of making and delivering an Election. An Election shall also include instructions specifying the time and form of payment of a Participant’s Deferred Fees and Restricted Stock Units and/or Account under the Plan. Such Elections shall comply with Code section 409A to the extent applicable, and be irrevocable except as otherwise provided in the Plan.

(bb) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

(cc) “ Fair Market Value ” means the price of a share of Common Stock, as reported on the Composite Tape for New York Stock Exchange on the date and at the time designated by the Company.

(dd) “ Fees ” mean a Director’s annual cash retainer and, as applicable, other additional annual cash retainers earned by a Director for service as a member of the Board during all or part of a calendar year (but excluding Restricted Stock Units).

(ee) “ Fee Deferral Election ” means an Election by a Participant to defer Fees pursuant to Article III, Section 3 of the Plan.

(ff) “ Participant ” means a Director, regardless of whether the Director elects to defer the payment of any Fees pursuant to a Fee Deferral Election.

(gg) “ Payment Commencement Date ” means the date payment(s) of amounts credited to a Participant’s Account begin pursuant to Article III, Section 5.

(hh) “ Personal Representative ” means the person or persons who, upon the disability or incompetence of a Participant, have acquired on behalf of the Participant, by legal proceeding or otherwise, the right to receive the payments specified in this Plan.

(ii) “ Plan ” means this Valvoline Inc. 2016 Deferred Compensation Plan for Non-Employee Directors as it now exists or may be hereafter amended.

(jj) “ Restricted Stock Account ” means the portion of a Participant’s Account that is separately accounted for and to which Restricted Stock Units are credited pursuant to Article III, Section 1.

(kk) “ Restricted Stock Units ” means either (i) the Participant’s annual award of deferred Company restricted stock units for service as a Director, or (ii) deferred Company restricted stock units credited after the Separation Date to an Ashland Participant’s Transferred Account in substitution of Ashland Restricted Stock Units credited to the Participant’s Transferred Restricted Stock Subaccount prior to the Separation Date.

(ll) “ Secretary of the Treasury ” or “ Treasury ” means the United States Department of Treasury.

(mm) “ Separation Date ” means the date upon which the Valvoline Spin‑Off is completed.

(nn) “ Stock Account ” means the portion of a Participant’s Account that is separately accounted for and to which Deferred Fees are credited with Stock Units attributable to the Participant’s hypothetical investment in the Common Stock Fund.

(oo) “ Stock Unit(s)” means the hypothetical Common Stock share equivalents credited either (i) to a Participant’s Stock Account pursuant to Article III, Section 1, or (ii) to an Ashland Participant’s Transferred Account in substitution of Ashland Stock Units credited to the Participant’s Transferred Stock Subaccount prior to the Separation Date.

(pp)“ Termination ” means retirement from the Board or termination of service as a Director for any other reason that constitutes a “separation from service” within the meaning of Code section 409A and the Treasury regulations and other guidance promulgated thereunder.

(qq) “ Transferred Account ” means the Ashland Plan bookkeeping account(s), and all Ashland Elections relating thereto, of an Ashland Participant transferred on the Transfer Date by Ashland Inc. or Ashland Global Holdings Inc. from the Ashland Plan to this Plan.

(rr) “ Transfer Date ” means the date an Ashland Participant’s Transferred Account is transferred from the Ashland Plan to this Plan, which date shall be the Separation Date or such other date specified by the Committee.

(ss) “ Transferred Deferred Fee Subaccount ” means the portion of an Ashland Participant’s Transferred Account that is separately accounted for and to which Deferred Ashland Fees were credited to the Ashland Participant under the Ashland Plan.

(tt) “ Transferred Stock Subaccount ” means the portion of an Ashland Participant’s Transferred Account that is separately accounted for and to which Ashland Stock Units were credited to the Ashland Participant under the Ashland Plan.

(uu) “ Transferred Restricted Stock Subaccount ” means the portion of an Ashland Participant’s Transferred Account that is separately accounted for and to which Ashland Restricted Stock Units were credited to the Ashland Participant under the Ashland Plan.

(vv) “ Unforeseeable Emergency ” means a severe financial hardship of a Participant (that cannot be alleviated by compensation or reimbursement received insurance companies or otherwise as provided in Treasury Regulation Section 1.409A-3(i)(3)) because of (i) an illness or accident of the Participant, the Participant’s spouse or dependent (as defined in Code section 152(a)); (ii) a loss of the Participant’s property due to casualty; or (iii) such other similar extraordinary unforeseeable circumstances because of events beyond the control of the Participant. Corporate Human Resources or its delegate shall determine whether a Participant has incurred an Unforeseeable Emergency.

(ww) “ Valvoline Spin-Off ” means the transaction or series of transactions initially approved by the board of directors of Ashland Inc. on September 16, 2015, intended to separate the Valvoline business from Ashland Inc.’s specialty chemical business and create two independent, publicly-traded companies.


3.	SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION

(a) Shares Authorized for Issuance . There shall be reserved for issuance under the Plan one million (1,000,000) shares of Common Stock, subject to adjustment pursuant to subsection (b) below. Such shares shall be authorized but unissued shares of Common Stock.

(b) Adjustments in Certain Events . In the event of any change in the outstanding Common Stock of the Company by reason of any stock split, stock dividend, recapitalization, merger, consolidation, reorganization, combination, or exchange of shares, split-up, split-off, spin-off, liquidation or other similar change in capitalization, or any distribution to common shareholders other than ordinary cash dividends, the number or kind of shares that may be issued under the Plan shall be automatically adjusted so that the proportionate interest of the Directors shall be maintained as before the occurrence of such event. Effective as of the Separation Date, all Ashland Stock Units and Ashland Restricted Stock Units credited to an Ashland Participant’s Transferred Account shall be converted into (and thereafter constitute the hypothetical investments of the Ashland Participant’s Transferred Account) Stock Units and Restricted Stock Units. Such adjustments shall be conclusive and binding for all purposes of the Plan.


4.	ELIGIBILITY

Each Director shall be eligible to, and shall participate in the Plan.


5.	ADMINISTRATION

Full power and authority to construe, interpret and administer the Plan shall be vested in the Company and the Committee or one or more of their delegates. This power and authority includes, but is not limited to, establishing deferral terms and conditions and adopting modifications and amendments to procedures as may be deemed necessary or appropriate. This power and authority also includes, without limitation, the ability to construe and interpret provisions of the Plan, make determinations regarding law and fact, 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 Company and the Committee (or their delegates) shall be final, conclusive and binding upon all parties. Day-to-day administration of the Plan shall be the responsibility of Corporate Human Resources. The administration of and all interpretations under the Plan shall be made consistent with all applicable law.

ARTICLE II. FEES IN COMMON STOCK PROVISION

Each Participant may make an Election to receive all or a portion of his or her Fees in shares of Common Stock (in lieu of cash) or make a Fee Deferral Election to defer Fees pursuant to Article III, Section 3. A Participant who elects to receive Fees in shares of Common Stock shall receive such shares at the end of each quarter beginning in the quarter the Election is effective. The number of shares of Common Stock so issued shall be equal to the amount of Fees which otherwise would have been payable in cash during the quarter divided by the Fair Market Value. Only whole number of shares of Common Stock will be issued, with any fractional shares to be paid in cash.

ARTICLE III. DEFERRED COMPENSATION


1.	PARTICIPANT’S ACCOUNT

(a) Deferred Fee Account. For each Participant who makes a Fee Deferral Election, there shall be established a Deferred Fee Account to which there shall be credited any Deferred Fees as of each Credit Date. The Deferred Fee Account shall be credited (or debited) on each Accounting Date with hypothetical income (or hypothetical loss) based upon the Deferred Fee Account’s hypothetical investment in any one or more of the hypothetical investment options available under the Plan, as prescribed by the Committee or the Company and as elected by the Participant under the terms of Article III, Section 3. The crediting or debiting on each Accounting Date of such hypothetical income (or hypothetical loss) shall be made for the respective amounts that were subject to each Fee Deferral Election under Article III, Section 3.

(b) Stock Account and Stock Units. To the extent a Participant selects a Common Stock Fund as a hypothetical investment of the Participant’s Deferred Fee Account, such shall be accounted for in the Stock Account (instead of the Deferred Fee Account) of the Participant, and shall be credited on each Accounting Date with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased with the amount of such Deferred Fees at the Fair Market Value on the Accounting Date. As of the date of any dividend distribution date for the Common Stock, the Participant’s Stock Account shall be credited with additional Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased, at the Fair Market Value on such date, with the amount which would have been paid as dividends on that number of shares (including fractions of a share) of Common Stock which is equal to the number of Stock Units then credited to the Participant’s Stock Account with respect to a particular Fee Deferral Election under Article III, Section 3.

(c) Restricted Stock Account and Restricted Stock Units. Each Participant shall have his or her Restricted Stock Account credited on an Accounting Date with the number of Restricted Stock Units approved for such allocation equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased with the dollar amount of the approved grant for this purpose at the Fair Market Value on the Accounting Date. The Restricted Stock Units so credited shall be separately maintained and accounted for in a Restricted Stock Account for the Participant. Amounts credited to the Restricted Stock Account shall be forfeitable until the one (1) year anniversary of the date on which such amounts were so credited; provided, however, if the Participant does not seek re-election as a Director, such forfeitable amounts shall become non-forfeitable on the date of the Board meeting that immediately precedes such one (1) year anniversary so long as the Participant is a Director on the day before such Board meeting. As of the date of any dividend distribution date for the Common Stock, the Participant’s Restricted Stock Account shall be credited with additional Restricted Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased, at the Fair Market Value on such date, with the amount which would have been paid as dividends on that number of shares (including fractions of a share) of Common Stock which is equal to the number of Restricted Stock Units then credited to the Participant’s Restricted Stock Account. The

additional Restricted Stock Units so allocated shall remain forfeitable until the date on which the Restricted Stock Units with respect to which the additional Restricted Stock Units were credited become non-forfeitable. On the date of a Participant’s Termination prior to a Change in Control (other than in the circumstance described in the proviso in the third sentence of this paragraph (c)), all Restricted Stock Units (including fractional Restricted Stock Units) that have not become non-forfeitable shall be forfeited; provided, however, that on the date of a Participant’s Termination on or after a Change in Control, all Restricted Stock Units (including fractional Restricted Stock Units) shall become non-forfeitable.

(d) Transferred Account. For each Ashland Participant, there shall be established a Transferred Account to which there shall be credited on the Transfer Date any amounts credited to such Participant under the Ashland Plan. Each Transferred Account shall have a Transferred Deferred Fee Subaccount, Transferred Stock Subaccount, and Transferred Restricted Stock Subaccount to which deferred Ashland Fees and hypothetical shares of Ashland Common Stock were credited under the Ashland Plan prior to the Transfer Date; and after the Separation Date, Common Stock shall replace any Ashland Common Stock as the hypothetical investments, with Stock Units replacing Ashland Stock Units and Restricted Stock Units replacing Ashland Restricted Stock replacing Ashland Restricted Stock Units. Each Transferred Stock Subaccount and Transferred Restricted Stock Subaccount shall be administered consistent with the dividend and vesting provisions of Article III, Sections 1(b) and 1(c) above.


2.	EARLY PAYMENT/DISTRIBUTION

(a) Unforeseeable Emergency . A Participant or a Participant’s Personal Representative may submit an application for a payment/distribution from the Participant’s Account (including the non-forfeitable portion of the Restricted Stock Account) because of an Unforeseeable Emergency. The amount of the payment/distribution shall not exceed the amount necessary to satisfy the needs of the Unforeseeable Emergency. Such payment/distribution shall include an amount to pay taxes reasonably anticipated as a result of the payment/distribution. The amount allowed as a payment/distribution under this Article III, Section 2(a) shall take into account the extent to which the Unforeseeable Emergency may be relieved through reimbursement or compensation from insurance or liquidation of the Participant’s assets (but only to the extent such liquidation would itself not cause a severe financial hardship). The payment/distribution shall be made in a single sum and paid as soon as practicable (but not later than sixty (60) days) after the application for the payment/distribution on account of the Unforeseeable Emergency is approved. The provisions of this Article III, Section 2(a) shall be interpreted and administered in accordance with applicable guidance that may be issued by the Treasury.

(b) Disability . A Participant or a Participant’s legal representative may submit an application for a total payment/distribution from the Participant’s Account (including the non-forfeitable portion of the Participant’s Restricted Stock Account and Transferred Restricted Stock Subaccount) because of the Participant’s Disability. The payment/distribution shall be made in a single lump sum and paid as soon as practicable (but not later than sixty (60) days) after the application is approved.

(c) Prohibition on Acceleration . Except as otherwise provided in the Plan and except as may be allowed in guidance from the Secretary of the Treasury, payments/distributions from a Participant’s Account may not be made earlier than the time such amounts would otherwise be paid/distributed pursuant to the terms of the Plan. Notwithstanding anything herein to the contrary, acceleration of payments/distributions may be made in the discretion of the Company for any permitted purpose under Treas. Reg. section 1.409A-3(j)(4)(ii)-(xiv).


3.	ELECTIONS

(a) General . Any Participant wishing to defer Fees under the Plan may elect to do so by completing and delivering a Fee Deferral Election on a form (which may be an online election form) prescribed by Corporate Human Resources (i) electing the time and form of payment/distribution (lump sum or installments not exceeding fifteen (15) years at a specified time or under a fixed schedule not exceeding fifteen (15) years) of such Deferred Fees, and (ii) designating the manner in which such Deferred Fees are to be deemed invested in accordance with Article III, Section 1. The timing of the filing of the appropriate Fee Deferred Election form shall be determined by the Company or the

Committee. An effective Fee Deferral Election to defer Fees may not be revoked or modified except as otherwise determined by the Company or the Committee in a manner consistent with applicable law (including, without limitation, Code section 409A) or as stated herein.

(b) Permissible Fee Deferral Election . A Participant’s initial Fee Deferral Election to defer Fees may only be made in the taxable year before the Fees are earned, with one exception. The exception applies to a Participant during his or her first year of eligibility to participate in the Plan. In that event such a Participant may, if so offered by the Company or the Committee, elect to defer Fees for services performed after the Fee Deferral Election, provided that the Fee Deferral Election is made within thirty (30) days of the date the Participant first becomes eligible to participate in the Plan. A Participant’s Fee Deferral Election under this Article III, Section 3(b) shall specify the amount or percentage of Fees deferred and the time and form of payment/distribution (lump sum installments not exceeding fifteen (15) years at a specified time or under a fixed schedule not exceeding fifteen (15) years) from among those described in Article III, Section 4 of the Plan. Each Fee Deferral Election to defer Fees may be treated as a separate election regarding the time and form of distribution, if so determined at the time of a particular election by the Company.

(c) Hypothetical Investment Alternatives. Subject to the following, a Participant may select, and elect to change an existing selection as to the hypothetical investment alternatives in effect with respect to amounts credited to the Participant’s Account (in increments prescribed by the Committee or the Company) as often, and with such restrictions, as determined by the Committee or by the Company. Notwithstanding the foregoing, the following rules shall apply to investments of Stock Units, Restricted Stock Units, Ashland Stock Units and Ashland Restricted Stock Units:


1.	Stock Units . Stock Units credited to a Participant’s Stock Account cannot be transferred to another hypothetical investment alternative under the Plan.

Restricted Stock Units . Restricted Stock Units credited on an annual basis to a Participant’s Restricted Stock Account cannot be transferred to another hypothetical investment alternative under the Plan; provided, however, that if the Participant makes an election prior to a grant of Restricted Stock Units, then upon the Participant satisfying the Board’s Common Stock ownership guidelines, up to fifty percent (50%) of such Participant’s Restricted Stock Units that become non-forfeitable, as credited to such Participant’s Restricted Stock Account, may be transferred to another hypothetical investment alternative under the Plan.


3.	Ashland Stock Units. Ashland Stock Units (and, after the Separation Date, Stock Units) credited to an Ashland Participant’s Transferred Stock Subaccount cannot be transferred to another hypothetical investment alternative under the Plan.

Ashland Restricted Stock Units. Ashland Restricted Stock Units (and, after the Separation Date, Restricted Stock Units) credited to an Ashland Participant’s Transferred Restricted Stock Subaccount cannot be transferred to another hypothetical investment under the Plan; provided, however, that upon the Participant satisfying the Board’s Common Stock ownership guidelines, up to fifty percent (50%) of the Participant’s non‑forfeitable Transferred Restricted Stock Subaccount may be transferred to another hypothetical investment alternative under the Plan.

(d) Ashland Elections. Ashland Elections relating to an Ashland Participant’s Transferred Account may not be changed except as provided in Article III, Section 4(d) below.


4.	PAYMENT/DISTRIBUTION

(a) Account . In accordance with a Participant’s Election and as prescribed by the Committee or the Company, (i) Deferred Fees credited to a Participant’s Deferred Fee Account and Stock Account, and (ii) the non-forfeitable portion of the Participant’s Restricted Stock Account, shall be paid/distributed (in cash or shares of Common Stock (or a combination of both) as determined by the Company or the Committee pursuant to the Participant’s Fee Deferral Election (applicable to Deferred Fees) and Election (applicable to the

Participant’s Restricted Stock Account); provided that if no such Fee Deferral Election or Election is made by a Participant such amounts shall be paid in a lump sum within sixty (60) days following Termination (provided that if such sixty (60) day period begins in one calendar year and ends in the next calendar year, the Participant shall have no right, directly or indirectly, to designate the calendar year of payment). In accordance with a Participant’s Fee Deferral Election under Article III, Section 3, but subject to Sections 2 and 6 of Article III, amounts subject to such Fee Deferral Election in the Deferred Fee Account and Stock Account and subject to such Election in the Restricted Stock Account shall be paid/distributed --


1.	Upon a Participant’s Termination, including death, as either a lump sum or in installments not exceeding fifteen (15) years; or


2.	At a specified time or under a fixed schedule not exceeding fifteen (15) years.

(b) Transferred Account. Except as otherwise provided in Section 4(d) of this Article III, each Ashland Participant’s Transferred Account shall be paid pursuant to his or her Ashland Elections; and, in the absence of Ashland Elections, the Ashland Participant’s Transferred Account shall be paid/distributed as provided in this Article III, Section 4.

(c) Medium of Distribution and Default Method . A Participant’s Account shall be paid/distributed in cash or shares of Common Stock (or a combination of both) as determined by the Committee or the Company. Notwithstanding anything in the foregoing to the contrary, all of a Participant’s Stock Units and Restricted Stock Units that are subject to the restrictions on hypothetical investment transfer described in Article III, Section 3(c) shall be paid/distributed to the Participant (or, in the event of the Participant’s death, the Participant’s Beneficiary(ies) or estate) in whole shares of Common Stock, with any remainder distributed in cash. The amounts so paid/distributed shall be paid paid/distributed first under the timing of distributions that applies to the portion of the Participant’s Account being paid/distributed.

(d) Election to Delay the Time or Change the Form of Payment/Distribution . A Participant may make an Election to delay the time of a payment or change the form of a payment, or may elect to do both, with respect to an amount that would be payable pursuant to a Fee Deferral Election, Ashland Election or other Election (except in the event of a payment/distribution on account of the Participant’s death) if all of the following Code section 409A requirements are met:


1.	Such a subsequent Election may not take effect until at least twelve (12) months after it is made;


2.	Any delay to the payment/distribution that would take effect because of the subsequent Election is at least to a date five (5) years after the date the payment/distribution otherwise would have begun; and


3.	In the case of a payment/distribution that would be made under paragraph (a)2. of this Section 4, such a subsequent Election may not be made less than twelve (12) months before the date of the first scheduled payment.


5.	PAYMENT COMMENCEMENT DATE

Payments of amounts deferred by Participants pursuant to valid Fee Deferral Elections, Elections and Ashland Elections shall commence in accord with such Fee Deferral Elections, Elections and Ashland Elections. If a Participant dies prior to the first deferred payment specified in a Fee Deferral Election, Election or Ashland Election, payments shall commence to the Participant’s Beneficiary on the first payment/distribution date so specified.


6.	CHANGE IN CONTROL

In the event of a Change in Control, the Company shall reimburse a Participant for the legal fees and expenses incurred if the Participant is required to seek to obtain or enforce any right to payment/distribution. In the event that it is determined that such Participant is properly entitled to a cash or other payment/distribution hereunder, such Participant 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 subject date from the date such payment/distribution should have been made to and including the date it is made. Notwithstanding any provision of this Plan to the contrary, this Article III, Section 6 and the definition of “Change in Control” in Article I may not be amended after a Change in Control occurs without the written consent of a majority in number of Participants.

ARTICLE IV. MISCELLANEOUS PROVISIONS


1.	BENEFICIARY

If the Participant dies before receiving payment of all amounts due hereunder, remaining unpaid amounts shall be paid in one lump sum to the estate of such Participant which shall be the Participant’s “Beneficiary” under this Plan.


2.	INALIENABILITY; UNFUNDED PLAN

The interests of a Participant and his or her Beneficiary under the Plan may not in any way be voluntarily or involuntarily transferred, alienated or assigned by a Participant or a Participant’s Beneficiary, nor be subject to attachment, execution, garnishment or other such equitable or legal process.

The Plan at all times shall be unfunded; and no provision shall be made at any time with respect to segregating assets of any Participant for the payment of any amounts hereunder. The Plan constitutes a mere promise of the Company to make payments to Participants (and, to the extent applicable, Participants’ Beneficiaries) in the future. Participants and their Beneficiaries have rights only as unsecured general creditors of the Company.


3.	GOVERNING LAW

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


4.	AMENDMENT AND TERMINATION

The Committee may amend, alter or terminate this Plan at any time; provided, however, that the Committee may not, without approval by the Board:

(a) materially increase the number of securities that may be issued under the Plan (except as provided in Article I, Section 3),

(b) materially modify the requirements as to eligibility for participation in the Plan, or


5.	COMPLIANCE WITH RULE 16b-3

It is the intention of the Company that the Plan comply in all respects with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and that Participants remain non-employee Directors for purposes of administering other employee benefit plans of the Company and having such other plans be exempt from Section 16(b) of the Exchange Act. Therefore, if any Plan provision is found not to be in compliance with Rule 16b-3 or if any Plan provision would disqualify Participants from remaining non-employee Directors, that provision shall be deemed amended so that the

Plan does so comply and the Participants remain non-employee Directors, to the extent permitted by law and deemed advisable by the Committee, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3.


6.	COMPLIANCE WITH 409A

No representation is made to any Participant with respect to the tax or securities aspects or implications of the Plan; and Participants should consult with their own tax, financial and legal advisors with respect to their participation in the Plan. Neither the Company, nor any member of the Board or the Committee shall have any liability to any person in the event Code section 409A applies to any Account or payment under the Plan in a manner that results in adverse tax consequences for the Participant or any of his or her Beneficiary.


7.	EFFECTIVE DATE

The Plan was approved by the Personnel and Compensation Committee of the Board of Directors of Ashland Inc. and established by the Company to be effective as of October 1, 2016.

IN WITNESS WHEREOF , Valvoline Inc. has caused its duly authorized representative to execute the Plan, this 30th day of September, 2016, to be effective as of the date noted above.



On Behalf of Valvoline Inc.

By:	/s/ Peter J. Ganz
	Peter J. Ganz
	Senior Vice President, General Counsel and Secretary
	Ashland Global Holdings Inc.

EXHIBIT 10.7

AMENDMENT TO THE ASHLAND INC.

NONQUALIFIED EXCESS BENEFIT PENSION PLAN

WHEREAS, Ashland Inc. (“Ashland”), maintains the Ashland Inc. Nonqualified Excess Benefit Pension Plan (the “Plan”) for the benefit of employees eligible to participate therein; and

WHEREAS , Ashland is the sponsor of the Plan; and

WHEREAS , pursuant to Article IV, Section 5, of the Charter of the Personnel and Compensation Committee of the Board of Directors of Ashland Inc., said Personnel and Compensation Committee (the “Committee”) has retained authority to amend or transfer any of the benefit plans of Ashland and its subsidiaries and affiliates that are more than 50% owned by Ashland; and

WHEREAS, the Committee has approved the transfer of the sponsorship of the Plan from Ashland to Valvoline LLC; and

WHEREAS , the Chief Financial Officer of Ashland Inc. has been delegated the authority by the Committee to prepare and execute any and all amendments necessary to give effect to this decision of the Committee.

NOW, THEREFORE, BE IT RESOLVED , the Plan is amended, effective September 1, 2016, as follows:

I. The following sentence is added after the first sentence of Section 1:

“In accordance with a corporate reorganization, effective as of September 1, 2016, sponsorship of the Plan was transferred from Ashland Inc. to Valvoline LLC.”

II. All references to “Ashland” and “Ashland Inc.” in the Plan after the recitals are hereinafter

changed to “Valvoline” and “Valvoline LLC” respectively.

III. In all other respects the Plan shall remain unchanged.

IN WITNESS WHEREOF , the Chief Financial Officer has caused this amendment to the Plan to be executed this _____day of ____________, 2016.



By:	/s/ J. Kevin Willis
	Chief Financial Officer, Ashland Inc.

EXHIBIT 10.8

AMENDMENT TO THE

AMENDED AND RESTATED SUPPLEMENTAL EARLY RETIREMENT PLAN FOR CERTAIN EMPLOYEES

WHEREAS, Valvoline LLC ("Valvoline") sponsors for the benefit of certain of its employees the Amended and Restated Supplemental Early Retirement Plan for Certain Employees (the "SERP"); and

WHEREAS, Valvoline desires to cease future benefit accrual under the terms of the SERP effective as of September 30, 2016 (the "Effective Date");

NOW, THEREFORE, the SERP shall be amended as follows:

I. Section 2.08 shall be amended to add the following sentence to the end thereto which shall read as follows:

Notwithstanding the foregoing, Continuous Service shall exclude any service of the Employee with Ashland Inc. (or any entity within the Ashland Inc. controlled group as detem1ined in accordance with Section 414 of the Code) upon the separation of Ashland Inc. from the controlled group (as determined in accordance with Section 414 of the Code) with Valvoline LLC; provided, however, for the purpose of determining whether an Employee separates from service for the purpose of determining a distribution, so long as an Employee remains a service provider (within the terms of Code section 409A) Ashland LLC (or any entity within the controlled group of such entity determined in accordance with Section 414 of the Code), the Employee shall not be deemed to have incurred a separation from service.

II. Section 2.11 shall be amended to add the following sentences to the end thereof which shall read as follows:

Notwithstanding the foregoing, the Final Average Bonus of a Participant shall not include any amounts paid after September 30, 2016, provided, however, that payments made under the Fiscal Year 2016 Annual Incentive Compensation program, payable in December of 2016, shall be included in determining the Final Average Bonus of a Participant. The determination of a Participant's Final Average Bonus shall be made as of September 30, 2016 and such amount

shall not be modified thereafter.


III.	Section 2.12 shall be amended to add the following sentence to the end thereof which shall read as follows:

Notwithstanding the foregoing, the Final Average Compensation of a Participant shall not include any amounts paid after September 30, 2016. The determination of a Participant's Final Average Compensation shall be made as of September 30, 2016 and such amount shall not be modified thereafter.

IV. Section 5.06A shall be amended to add the following sentence to the end thereof which shall read as follows:

The determination as to whether a Participant is a Level I or II Participant, or is a Level III, IV and V Participant shall be made as of September 30, 2016 and later modifications to a Participant's employment shall not impact the means of determining benefits under this Plan.

V. In all other respect the Plan shall remain unchanged.

(Signature Page Immediately Follows)

IN WITNESS WHEREOF, this amendment to the Plan has been is executed this 30th day of September, 2016, to be effective as of the date indicated above.

On Behalf of Valvoline LLC



By:	/s/ Peter J. Ganz
	Peter J. Ganz
	Senior Vice President, General Counsel and Secretary
	Ashland Global Holdings Inc.

EXHIBIT 10.9

AMENDMENT TO THE

ASHLAND INC. NONQUALIFIED EXCESS BENEFIT PLAN

WHEREAS , Valvoline LLC (“Valvoline”) sponsors for the benefit of certain of its employees the Ashland Inc. Nonqualified Excess Benefit Plan (the “Excess Plan”); and

WHEREAS , Valvoline desires to cease future benefit accrual under the terms of the Excess Plan effective as of September 30, 2016 (the “Effective Date”);

NOW, THEREFORE , the Excess Plan shall be amended as follows:

I. Section 3(v) shall be added to the Plan to read as follows:

(v) Plan Benefit Freeze . The benefit accrual of a Participant shall cease as of September 30, 2016 and no service or compensation of a Participant following that date shall result in any additional benefit due under this Plan. Notwithstanding the provisions of this Section 3(v), any early retirement benefits and subsidization reduction factors to all Participants providing services as of September 30, 2016 shall be provided if the Participant attains age 55 prior to retirement. In addition, any “Rule of 80” requirement to receive an early retirement or subsidized benefit shall be applied by including all service with both Ashland Inc. and Valvoline LLC for Participants for so long as Ashland Inc. (or any entity within the controlled group of Ashland Inc. determined in accordance with Section 414 of the Internal Revenue Code) remains in the same controlled group, as determined within Section 414 of the Internal Revenue Code, of Valvoline LLC. Upon the cessation of Ashland Inc. and Valvoline LLC to be within the same controlled group, determined in accordance with Section 414 of the Internal Revenue Code, only service with Valvoline LLC (or any entity within its controlled group determined in accordance with Section 414 of the Internal Revenue Code) shall be included in determining satisfaction of the “Rule of 80.” For the purpose of determining whether a Participant separates from service, so long as a Participant remains a service provider (within the terms of Code section 409A) for Valvoline LLC or Ashland LLC (or any entity within the controlled group of such entity determined in accordance with Section 414 of the Code), the Participant shall not be deemed to have incurred a separation from service.

II. In all other respect the Plan shall remain unchanged.

IN WITNESS WHEREOF , this amendment to the Plan has been is executed this 30 ^th day of September, 2016, to be effective as of the date indicated above.



By:	/s/ Peter J. Ganz
	Peter J. Ganz
	Senior Vice President, General Counsel and
	Secretary

EXHIBIT 10.11

EXECUTION VERSION

AMENDMENT NO. 1

TO CREDIT AGREEMENT

THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this “ Amendment ”), dated as of September 21, 2016, is entered into by and among Valvoline Finco One LLC, a Delaware limited liability company (the “ Initial Borrower ”), The Bank of Nova Scotia, as Administrative Agent (the “ Administrative Agent ”), and each Lender party hereto.

PRELIMINARY STATEMENTS

The Initial Borrower, The Bank of Nova Scotia, as Administrative Agent, Swing Line Lender and an L/C Issuer, Citibank, N.A., as Syndication Agent, and the Lenders from time to time party thereto entered into that certain Credit Agreement, dated as of July 11, 2016 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time prior to the date hereof, the “ Credit Agreement ”; the terms defined therein being used herein as therein defined);

The Initial Borrower has requested an amendment to the Credit Agreement, effective as of the Amendment No. 1 Effective Date (as defined below) to amend certain provisions of the Credit Agreement as set forth herein; and

The Initial Borrower, the Lenders and the Administrative Agent have agreed that the Credit Agreement shall be amended as provided in Section 1 hereof, upon the terms and subject to the conditions set forth herein and effective as of the Amendment No. 1 Effective Date.

NOW, THEREFORE, in consideration of the premises and further valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

Section 1. Amendments to the Credit Agreement on the Amendment No. 1 Effective Date . The Credit Agreement shall be, effective as of the Amendment No. 1 Effective Date and subject to the satisfaction of the conditions precedent set forth in Section 2 hereof, hereby amended as follows:

(a) Section 1.01 of the Credit Agreement is hereby amended by inserting the following defined terms in the correct alphabetical order:

(i) “ Amendment No. 1 ” means Amendment No. 1 to this Agreement, dated as of September 21, 2016, among the Initial Borrower, the Administrative Agent and each Lender party thereto.

(ii) “ Amendment No. 1 Effective Date ” means the date on which Amendment No. 1 to this Agreement became effective in accordance with Section 2 thereof.

(b) The definition of “Audited Financial Statements” in Section 1.01 of the Credit Agreement shall be amended by inserting the text “of the Valvoline Business, for the fiscal years ended September 30, 2014 and September 30, 2015,” immediately after the words “audited combined balance sheet”.

(c) Section 4.02(k) of the Credit Agreement shall be amended by inserting the following proviso immediately before the period (“.”) at the end thereof:

“; provided that, so long as the Funding Date occurs prior to November 12, 2016, the delivery of the unaudited consolidated (or combined, as the case may be) balance sheet

and the related consolidated (or combined, as the case may be) statements of operations and comprehensive income, invested equity and cash flows, including the notes thereto, of the Valvoline Business for (x) the six-month period ended March 31, 2016, and (y) the nine-month period ended June 30, 2016, shall be deemed to satisfy this condition.”

(d) Section 6.01(b) of the Credit Agreement shall be amended by replacing the text “June 30, 2016” therein with the text “December 31, 2016”.

Section 2. Conditions to Amendment No. 1 Effective Date . Section 1 of this Amendment shall become effective on and as of the date (the “ Amendment No. 1 Effective Date ”) that the Administrative Agent or its counsel shall have received the following, each of which shall be electronic transmissions (followed promptly by originals), each in form and substance reasonably satisfactory to the Administrative Agent and its legal counsel:

(a) a counterpart of this Amendment, duly executed by the Initial Borrower, each of the Lenders immediately prior to the Amendment No. 1 Effective Date, and the Administrative Agent;

(b) such documents and certifications as the Administrative Agent may reasonably require to evidence that the Initial Borrower is duly organized or formed, and validly existing and in good standing in its state of incorporation;

(c) a certificate executed by a Responsible Officer of the Initial Borrower certifying as to the matters in clause (d) below; and

(d) the following representations and warranties of the Initial Borrower shall be true and correct on and as of the Amendment No. 1 Effective Date:

(i) no Default has occurred and is continuing on and as of the Amendment No. 1 Effective Date, or would result from this Amendment or any transactions contemplated hereby; and

(ii) the representations and warranties of the Initial Borrower set forth in Article V of the Credit Agreement that were required to be made on the Effective Date in accordance with the lead-in paragraph to Article V of the Credit Agreement are true and correct in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” is true and correct in all respects) on and as of the Amendment No. 1 Effective Date, except to the extent such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) as of such earlier date.

Section 3. Reference to and Effect on Loan Documents.

(a) On and after the Amendment No. 1 Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement and each reference in each of the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Amendment.

(b) This Amendment is an amendment as referred to in the definition of Loan Documents and shall for all purposes constitute a Loan Document.

other Loan Documents, as specifically amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Loan Documents.

Section 4. Costs and Expenses . The Borrower agrees to pay or reimburse all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution, delivery and administration of this Amendment (including, without limitation, the reasonable and documented fees and expenses of a single counsel for the Administrative Agent) in accordance with the terms of Section 10.04(a) of the Credit Agreement, which payment and reimbursement shall occur on the Funding Date to the extent such costs and expenses are invoiced at least three Business Days prior to the Funding Date.

Section 5. Execution in Counterparts . This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier or other electronic transmission (including “.pdf”, “.tif” or similar format) shall be effective as delivery of a manually executed counterpart of this Amendment.

Section 6. Governing Law . THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

[The remainder of this page intentionally left blank.]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written.



VALVOLINE FINCO ONE LLC

By:	/s/ Lynn P. Freeman
	Name: Lynn P. Freeman
	Title: Assistant Treasurer