SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C. 20549
                                FORM 10-K
      [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934
              For the Fiscal Year Ended September 30, 1994
                                   OR
          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934
                      Commission File Number 1-2918

                            ASHLAND OIL, INC.
         (Exact name of registrant as specified in its charter)

                     Kentucky                       61-0122250
         (State or other jurisdiction of         (I.R.S. Employer
         incorporation or organization)         Identification No.)

      1000 Ashland Drive, Russell, Kentucky            41169
    (Address of principal executive offices)          (Zip Code)

         P.O. Box 391, Ashland, Kentucky               41114
                (Mailing Address)                     (Zip Code)

     Registrant's telephone number, including area code (606) 329-3333
        Securities registered pursuant to Section 12(b) of the Act:

                                                Name of each
                                                exchange on 
   Title of each class                       which registered
   -------------------                      --------------------
   Common Stock, par value $1.00            New York Stock Exchange
     per share                                and Chicago Stock Exchange
   Rights to Purchase Cumulative            New York Stock Exchange
     Preferred Stock,                         and Chicago Stock Exchange
     Series of 1987                      
   $3.125 Cumulative Convertible            New York Stock Exchange
     Preferred Stock                        
   6 3/4% Convertible Subordinated          New York Stock Exchange
    Debentures, due 2014            

    Securities registered pursuant to Section 12(g) of the Act: None

        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     X             No
                                    ----
        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. [ X ]

        At October 31, 1994, the aggregate market value of the voting
   stock held by non-affiliates of the Registrant was approximately
   $1,865,040,000 (which amount does not include $483,909,000 held by
   nominees of Society National Bank as Trustee for certain of
   Registrant's employee benefit plans) based on the New York Stock

   Exchange closing price on October 31, 1994.

        At October 31, 1994, there were 60,656,088 shares of
   Registrant's Common Stock outstanding. One-half of one Right to
   purchase one-tenth of a share of Cumulative Preferred Stock, Series
   of 1987, accompanies each outstanding share of Registrant's Common
   Stock.


                        Documents Incorporated by Reference

        Portions of Registrant's Annual Report to Shareholders for the
   fiscal year ended September 30, 1994 are incorporated by reference
   into Parts I and II.

        Portions of Registrant's definitive Proxy Statement for its
   January 26, 1995 Annual Meeting of Shareholders are incorporated by
   reference into Part III.

TABLE OF CONTENTS Page PART I Item 1. Business . . . . . . . . . . . . . . . . . . . 1 Corporate Developments . . . . . . . . . . . . 1 Petroleum . . . . . . . . . . . . . . . . . . . 2 SuperAmerica . . . . . . . . . . . . . . . . . 6 Valvoline . . . . . . . . . . . . . . . . . . . 6 Chemical . . . . . . . . . . . . . . . . . . . 8 Construction . . . . . . . . . . . . . . . . . 9 Exploration . . . . . . . . . . . . . . . . . . 10 Coal . . . . . . . . . . . . . . . . . . . . . 13 Other Business . . . . . . . . . . . . . . . . 16 Miscellaneous . . . . . . . . . . . . . . . . . 16 Item 2. Properties . . . . . . . . . . . . . . . . . . 19 Item 3. Legal Proceedings . . . . . . . . . . . . . . . 19 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . 20 Item X. Executive Officers of Ashland . . . . . . . . . 20 PART II Item 5. Market for Registrant's Common Stock and Related Security Holder Matters . . . . . . . . . . . 21 Item 6. Selected Financial Data . . . . . . . . . . . . 22 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . 22 Item 8. Financial Statements and Supplementary Data . . 22 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . 22 PART III Item 10. Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . 22 Item 11. Executive Compensation . . . . . . . . . . . . 22 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . 22 Item 13. Certain Relationships and Related Transactions 22 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . . 22

PART I ITEM 1. BUSINESS Ashland Oil, Inc. is a Kentucky corporation, organized on October 22, 1936, with its principal executive offices located at 1000 Ashland Drive, Russell, Kentucky 41169 (Mailing Address: P.O. Box 391, Ashland, Kentucky 41114) (Telephone: (606) 329-3333). The terms "Ashland" and the "Company" as used herein include Ashland Oil, Inc. and its consolidated subsidiaries, except where the context indicates otherwise. Ashland's businesses are grouped into six industry segments: Petroleum, SuperAmerica, Valvoline, Chemical, Construction, and Exploration. Financial information about these segments for the five fiscal years ended September 30, 1994, is set forth on Pages 58 and 59 of Ashland's Annual Report to Shareholders for the fiscal year ended September 30, 1994 ("Annual Report"). In addition, Ashland is also involved in the coal industry through its 50% ownership of Arch Mineral Corporation ("Arch") and its 39% ownership of Ashland Coal, Inc. ("Ashland Coal"). Summarized financial information for these entities is contained in Note D of Notes to Consolidated Financial Statements in Ashland's Annual Report. Ashland Petroleum is one of the nation's largest independent petroleum refiners and a leading supplier of petroleum products to the transportation and commercial fleet industries, other industrial customers and independent marketers, and to SuperAmerica for retail distribution. In addition, Ashland Petroleum gathers and transports crude oil and petroleum products and distributes petroleum products under the Ashland-R- brand name. SuperAmerica operates combination gasoline and merchandise stores under the SuperAmerica-R- and Rich-R- brand names. Valvoline is a marketer of branded, packaged motor oil and automotive chemicals, filters, rust preventives and coolants. In addition, Valvoline is engaged in the "fast oil change" business through outlets operating under the Valvoline Instant Oil Change-R- and Valvoline Rapid Oil Change-R- names. Ashland Chemical distributes industrial chemicals, solvents, thermoplastics and resins, and fiberglass materials, and manufactures a wide variety of specialty chemicals and certain petrochemicals. Construction performs contract construction work, including highway paving and repair, excavation and grading, and bridge and sewer construction and produces asphaltic and ready-mix concrete, crushed stone and other aggregate, concrete block and certain specialized construction materials in the southern United States. Exploration explores for, develops, produces and sells crude oil and natural gas principally in the eastern and Gulf Coast areas of the United States, explores for and produces crude oil in Nigeria for export and explores for oil and gas in other international areas. Arch, one of the largest producers of low sulfur coal in the eastern United States, produces steam and metallurgical coal for sale in the domestic and international markets. Arch's production comes from surface and deep mines in Illinois, Kentucky, West Virginia and Wyoming. Ashland Coal produces low-sulfur, bituminous coal in central Appalachia for sale to domestic and foreign electric utility and industrial customers. Both Arch and Ashland Coal market coal mined by independent producers. At September 30, 1994, Ashland and its consolidated subsidiaries had approximately 31,600 employees (excluding contract employees). CORPORATE DEVELOPMENTS Ashland recently announced that it has signed an agreement with Saarbergwerke AG ("Saarberg") granting Ashland the option to purchase all of the 150 shares of Ashland Coal Class B Preferred Stock held by Saarberg, and granting Saarberg the option to require Ashland to purchase such stock. These options are exercisable during certain periods in February, 1995, and are subject to the satisfaction of certain conditions, including appropriate government approvals. The Preferred Stock represents approximately 15% of the voting power of Ashland Coal and if either option is exercised, Ashland will own approximately 54% of the voting stock of Ashland Coal. Ashland currently has no plans to purchase additional stock of Ashland Coal, other than the Class B Preferred Stock. 1

On November 3, 1994, the Board of Directors of Ashland voted, subject to shareholder approval at the 1995 Annual Meeting of Shareholders, to amend the Company's Second Restated Articles of Incorporation to change the name of the Company to Ashland Inc. This change of name is believed by the Board of Directors to be desirable and in the best interests of Ashland in order to identify Ashland in a manner that more clearly reflects its unified network of refining, energy and chemical businesses and yet retains the historical name of Ashland. On November 3, 1994, Ashland's Board of Directors approved the filing with the Securities and Exchange Commission (the "SEC") of a universal shelf registration statement to allow for offerings from time to time of up to an aggregate of $600 million in debt and/or equity securities. It is anticipated this filing will be made in late December 1994. Any offering of these securities will be made only by means of a written prospectus. In November 1994, Ashland Chemical signed a letter of intent with Aristech Chemical Corporation to acquire Aristech's unsaturated polyester resins, polyester distribution and maleic anhydride businesses. The transaction is subject to a number of conditions, including the execution and delivery of a definitive purchase agreement and appropriate governmental approvals. In February 1994, Ashland completed the sale of APAC-Arizona, Inc., its Arizona highway construction and construction materials business. The transaction completed Ashland's previously announced asset divestiture program. In November 1993, Ashland filed with the SEC a shelf registration statement to allow for offerings from time to time of up to an aggregate of $250 million in medium-term notes. Ashland had previously filed shelf registration statements for $750 million in medium-term notes. As of November 15, 1994, Ashland had sold $826 million in medium-term notes. The remaining $174 million in notes may be sold from time to time as separate series of senior debt in amounts and at prices and terms to be determined at the time of sale. The net proceeds of the offerings will be used to refinance outstanding debt and for other general corporate purposes. PETROLEUM Ashland Petroleum, a division of Ashland, has responsibility for the operation of Ashland's refineries, the supply and transportation of Ashland's crude oil requirements, the transportation and storage of refined petroleum products and the marketing of a portion of the refined petroleum products. PETROLEUM REFINING Ashland Petroleum owns and operates three refineries located in Catlettsburg, Kentucky; St. Paul Park, Minnesota; and Canton, Ohio. The approximate capacities of these refineries at September 30, 1994, were as follows: Crude Oil Capacity Location of Refinery (In thousands of barrels per calendar day)* -------------------- ---------------------------- Catlettsburg, Kentucky . . . . . 213.4 St. Paul Park, Minnesota . . . . 67.1 Canton, Ohio . . . . . . . . . . 66.0 ----- Total . . . . . . . . 346.5 ===== ------------ *The term "barrels" when used herein means barrels of 42 gallons each. 2

Ashland Petroleum's refineries are equipped with efficient facilities, including crude oil atmospheric and vacuum distillation, fluid catalytic cracking, catalytic reforming, desulfurization and sulfur recovery units. Each of these refineries has the capability to process a wide variety of crude oils, including low quality/low price crude oils (i.e., high in residuum and sulfur contents), and to produce normal refinery products, including asphalt. With the assistance of a 3,000 barrel-per-day MTBE unit and a partial ownership in an ethanol plant, Ashland Petroleum is also able to cost effectively produce reformulated gasoline. In addition, the Catlettsburg refinery is equipped to manufacture lubricating oils and a wide range of petrochemicals. The table below shows the average daily number of barrels of crude oil and other feedstocks processed and the refined products produced by Ashland Petroleum for the three fiscal years ended September 30, 1994: Years Ended September 30 ------------------------ 1994 1993 1992 ---- ---- ---- Total Input (In thousands of barrels per day) --------------------------------------------- Crude Oil 329.2 326.0 327.1 Other Feedstocks 12.6 13.7 14.2 Refinery Products Produced (In thousands of barrels per day) ----------------------------------------- Gasoline 168.0 166.8 169.9 Distillates and Kerosene 90.6 88.6 84.2 Asphalt 29.3 27.4 25.5 Jet and Turbine Fuel 10.9 12.2 14.0 Heavy Fuel Oils 7.7 9.0 10.6 Lubricants 7.6 7.6 7.1 Other 16.8 17.0 20.1 CRUDE OIL SUPPLY The crude oil processed in Ashland Petroleum's refineries is obtained from negotiated lease, contract and spot purchases or exchanges. During fiscal 1994, Ashland Petroleum's negotiated lease, contract and spot purchases of United States crude oil for refinery input (including 111,100 barrels per day acquired through Ashland's Scurlock Permian subsidiary) averaged 115,200 barrels per day. Purchases from Canada averaged 57,500 barrels per day during fiscal 1994. The balance of Ashland Petroleum's crude oil requirements during fiscal 1994 were met largely through purchases from various foreign national oil companies and traders. Purchases of foreign crude oil (including Canada) represented 65% of Ashland Petroleum's crude oil requirements during fiscal 1994 compared to 58% during fiscal 1993. Ashland's share of Nigerian production will either be sold, traded or used to help satisfy part of Ashland Petroleum's fiscal 1995 crude oil requirements, depending upon world crude oil prices and other economic factors. For further information concerning Nigerian production, see "Exploration-International Operations." The balance of Ashland Petroleum's crude oil requirements in fiscal 1995 is expected to be met through contract and spot purchases from United States independent producers and from various foreign national oil companies and traders as worldwide availability and prices dictate. For further information concerning crude oil prices and imports, see "Miscellaneous-Governmental Regulation and Action- General." 3

MARKETING OF PETROLEUM AND OTHER PRODUCTS Ashland Petroleum's principal marketing area for gasoline and fuel oils includes the Ohio River Valley, the upper Midwest, the upper Great Plains, the East Coast, and a portion of the southeastern United States. In addition to gasoline and fuel oils, Ashland also manufactures and markets liquified petroleum gas, asphalt and asphaltic products, pitch, base lube stocks, kerosene, petrochemicals, jet fuels, and residual fuels. Ashland Petroleum's production of gasoline, kerosene, and light fuel oils is sold at wholesale through wholesale channels of distribution, company owned and exchange terminals, Ashland branded bulk plants and at retail through SuperAmerica. The majority of these products are sold at wholesale through approximately 90 terminal areas in 23 states. Gasoline is sold at wholesale primarily to independent marketers, jobbers, and chain retailers who resell through several thousand retail outlets primarily under their own names, but also to a limited extent under the Ashland-R- brand name. Gasoline, kerosene, distillates, and aviation products are also sold to utilities, railroads, river towing companies, commercial fleet operators, aviation and airline companies, governmental agencies and other end users. Ashland Petroleum also markets petroleum products under the Ashland-R- brand name through a network of 112 (99 owned and 13 leased) bulk plants located in six states. These plants maintain inventories of gasoline, distillate, kerosene, motor oils, greases and other related products. Approximately 122 commission agents deliver products to Ashland customers from these plants, as well as from terminals or refineries operated by Ashland. Typical customers include reseller retail outlets, lessee-dealer retail outlets and numerous consumer, commercial and farm accounts. Ashland supplies 100 (88 owned and 12 leased) Ashland-R- brand lessee-dealers and 639 reseller outlets. Resellers generally own their locations and Ashland supplies pumps and signs for their use. Lessee-dealer outlets are owned or leased by Ashland and leased or subleased to the dealer. For further information on Ashland's retail marketing of petroleum products, see "SuperAmerica" and "Valvoline." In addition to providing crude oil for its own refineries, Ashland Petroleum, through its Scurlock Permian subsidiary, is actively engaged in purchasing, selling and trading crude oil in 15 states, principally at Midland, Texas; Cushing, Oklahoma; and St. James, Louisiana, three of the major distribution points for United States crude oil. Ashland Petroleum also produces and markets asphalt cements, polymerized asphalt, asphalt emulsions, and industrial asphalts in the United States. Ashland Petroleum markets these products from 24 locations to 22 southern and midwestern states. Additionally, Ashland Petroleum manufactures petroleum pitch, primarily used in the graphite electrode, clay target and refractory industries. Ashland Petroleum produces residual fuels at its three refineries and markets and sells these products in nine states, primarily to industrial customers as boiler fuel. The table below shows the average daily consolidated sales of petroleum products and crude oil by Ashland Petroleum, SuperAmerica, Valvoline and Exploration for the three fiscal years ended September 30: Years Ended September 30 ---------------------------- (In thousands of barrels per day) 1994 1993 1992 ----- ----- ---- Gasoline 181.9 182.1 186.5 Crude Oil 142.1 150.3 152.3 Distillates and Kerosene 97.0 93.0 87.0 Asphalt 34.3 31.4 30.5 Jet and Turbine Fuel 10.9 11.2 13.6 Heavy Fuel Oils 8.4 9.7 11.1 Lubricants 14.7 15.6 15.8 Other 23.3 21.3 23.5 Sales of gasoline (excluding excise taxes) represented approximately 18%, 20% and 21% of Ashland's consolidated sales and operating revenues (excluding excise taxes) in fiscal years 1994, 1993 and 1992, respectively. Sales of crude oil represented approximately 8%, 10% and 11% of Ashland's consolidated sales and operating revenues (excluding excise taxes) in fiscal years 1994, 1993 and 1992, respectively. 4

TRANSPORTATION Ashland owns, leases, or has an ownership interest in 5,759 miles of active pipeline in 13 states. This network transports crude oil and refined products to and from terminals, refineries and other pipelines. This includes 2,256 miles of crude oil gathering lines, 2,987 miles of crude oil trunk lines, 475 miles of refined product lines and 41 miles of natural gas liquid lines. Ashland has an 18.6% stock ownership interest in LOOP INC. ("LOOP"), the only U.S. deep water port facility capable of receiving crude oil from very large crude carriers and which has a capacity to off-load 1,000,000 to 1,200,000 barrels per day. Ashland also has a 21.4% stock ownership interest in LOCAP INC. ("LOCAP") which has a capacity of 1,200,000 barrels per day and a 21.6% undivided ownership interest in the Capline Pipeline System which has a nominal capacity of 1,175,000 barrels per day. LOCAP owns a pipeline connecting LOOP and the Capline System that originates at St. James, Louisiana. These port and pipeline systems provide Ashland Petroleum with access to common carrier transportation from the Louisiana Gulf Coast to Patoka, Illinois. At Patoka, the Capline System connects with other common carrier pipelines owned or leased by Ashland which provide transportation to Ashland Petroleum's refineries in Kentucky and Ohio. For summarized financial statements and information with respect to advances and transportation payments made by Ashland to LOOP and LOCAP, see Notes D and G of Notes to Consolidated Financial Statements in Ashland's Annual Report. In addition, Ashland owns a 5% undivided ownership interest in the Rancho Pipe Line System located in Texas and a 33% stock interest in the Minnesota Pipe Line Company, which owns a crude oil pipeline in Minnesota. Minnesota Pipe Line Company provides Ashland Petroleum with access to 270,000 barrels per day of crude oil common carrier transportation from Clearbrook, Minnesota to Cottage Grove, Minnesota, which is in the vicinity of Ashland Petroleum's St. Paul Park, Minnesota refinery. Ashland Petroleum owns or has an interest in 38 terminal facilities from which it sells a wide range of petroleum products. These facilities are supplied by a combination of river barge, pipeline, truck and rail. Ashland Petroleum also owns or operates a number of other terminals that are used in connection with the transportation of petroleum products or crude oil. Ashland Petroleum's river transportation operations include 8 towboats (6 owned, 2 leased) and 171 barges that transport crude oil and refined products on the Ohio, Mississippi and Illinois rivers, their tributaries, and the Intracoastal Waterway. Ashland Petroleum leases on a long-term basis two 80,000 ton deadweight tankers which are normally used for third party delivery of foreign crude oil to the United States. Additional requirements are met by chartering tankers for individual voyages. Ashland Petroleum leases rail cars in various sizes and capacities for movement of petroleum products and chemicals. Ashland Petroleum also owns a large number of tractor-trailers, additional trailers, and a large fleet of tank trucks and general service trucks. OTHER MATTERS For information on federal, state and local statutes and regulations relating to releases into the environment or protection of the environment, see "Miscellaneous-Governmental Regulation and Action-Environmental Protection." For information relating to certain environmental litigation, see "Legal Proceedings-Environmental Proceedings." There are traditional seasonal variations in Ashland Petroleum's sales and operating results. The seasonality that Ashland Petroleum experiences is due primarily to increased demand for gasoline during the summer driving season and increased demand for asphalt from the road paving industry during the last six months of Ashland's fiscal year. The refining industry experiences a similar seasonality. For Ashland's fiscal years 1992 to 1994, refining margins for Ashland Petroleum have averaged $3.86 per barrel for the six-month periods ended March 31 and $4.12 per barrel for the six-month periods ended September 30. 5

SUPERAMERICA SuperAmerica Group, a division of Ashland, conducts retail petroleum marketing operations. SuperAmerica has retail outlets in 11 states in the Ohio Valley and Upper Midwest under the SuperAmerica-R- and Rich-R- names. See also "Petroleum-Marketing of Petroleum and Other Products." SuperAmerica-R- Stores - SuperAmerica operates 598 (538 owned and 60 leased) combination gasoline and merchandise stores in 11 states under the SuperAmerica-R- name. These stores are designed for high volume sales. SuperAmerica stores offer consumers gasoline, diesel fuel at select locations and a broad mix of other goods and services such as fresh-baked goods, automated teller machines, video rentals, automotive accessories and a line of private-label items. SuperAmerica is also adding to its one-stop shopping concept by partnering with fast food chains including Taco Bell and Subway. During fiscal 1994, 40% of the revenues of the SuperAmerica stores were derived from the sale of merchandise and 60% of such revenues were derived from the sale of gasoline and diesel fuel. The SuperAmerica-R- trademark has been registered since 1963. Other registered trademarks and servicemarks owned by Ashland and used by SuperAmerica include SuperMom's-R-, The Fresh Choice-TM- and SuperSoda-R-, used in connection with food products; Injector Guard-R-, used in connection with gasoline additives; The Express Pump-R-, used in conjunction with gasoline dispensing equipment; SuperCare-R-, used in connection with pharmacy services, personal care and beauty products; and Yours-R- and Sincerely Yours-R-, used in connection with cigarettes. SuperAmerica operates warehouse distribution centers in Bloomington, Minnesota, and Ashland, Kentucky, that distribute certain merchandise to the stores. SuperAmerica also operates a commissary in Russell, Kentucky, that produces fresh sandwiches, salads and other food products for distribution to stores in the Ohio Valley. A wholly-owned subsidiary of SuperAmerica also operates a large bakery and commissary in St. Paul Park, Minnesota, under the name SuperMom's-R-. In addition to the 598 owned and leased SuperAmerica stores, SuperAmerica has 28 jobber/franchisees who operate 37 stores in 3 states in the upper Midwest. Rich-R- Oil - Rich Oil, a division of Ashland, operates 95 (76 owned and 19 leased) Rich-R- retail gasoline outlets in Kentucky, Ohio and West Virginia under the Rich-R- name. The Rich Oil outlets generate lower gasoline volumes than the average SuperAmerica store, primarily because the Rich Oil outlets are generally smaller and located in less-densely-populated areas. OTHER MATTERS Retail marketing "divorcement" legislation and wholesale and retail pricing regulations have been adopted in some states. They are proposed from time to time in other states and at the federal level. If such legislation were adopted at the federal level or in the states where SuperAmerica sells petroleum products, it could have a substantial adverse impact. For information relating to the regulation of underground storage tanks containing petroleum products, see "Miscellaneous- Governmental Regulation and Action-Environmental Protection." VALVOLINE The Valvoline Company, a division of Ashland, is a marketer of automotive and industrial oils, automotive chemicals, and automotive and environmental services, with sales in more than 140 countries. See also "Petroleum-Marketing of Petroleum and Other Products." Acquired by Ashland in 1950, Valvoline has diversified its operations in recent years and is comprised of the following business units: Valvoline Branded - Branded is Valvoline's largest business unit, representing 47% of Valvoline's annual sales dollars. Branded markets motor oils, greases, gear oils, automatic transmission fluids, antifreeze and oil and air filters primarily to the U.S. private passenger car and light truck market through a network of distributors, retailers and direct market operations. Valvoline is also one of the leading producers of packaged private label 6

motor oils in the United States. The Branded Commercial Fleet Sales division markets heavy-duty lubricants to the railroad, trucking, mining and marine industries. Although competition is severe, Branded plans to improve market share through a customer-focused strategy, involvement in motorsports and a marketing campaign stressing high performance, quality and value. Branded plants are supplied with base stocks primarily from Ashland's 8,500 barrels-per-day lube oil refinery in Catlettsburg, Kentucky. Ecogard, Inc. - As of September 30, 1994, Ecogard, Inc. through its First Recovery division, was collecting used motor oil at an annual rate of 35 million gallons from a network of automotive aftermarket retailers and service businesses in 41 states. Utilizing a "total fluid management" approach, First Recovery provides an environmental service to Branded customers, collecting used antifreeze and oil filters as well. In fiscal 1995, First Recovery will transport most of its collected used oil volume to a new industrial fuel processing plant owned and operated by Texaco Inc. near New Orleans, Louisiana. Valvoline Instant Oil Change ("VIOC") - VIOC, a division of Ashland, is one of the largest companies in the expanding U.S. "fast oil change" service business, providing Valvoline with a significant share of the installed segment of the passenger car and light truck motor oil market. Incorporation of the Valvoline name and trademark in VIOC's name, store signage and advertising provides an ongoing Valvoline presence in the communities in which VIOC stores are located. As of September 30, 1994, 347 company- owned service centers were open in 13 states: Georgia, Illinois, Indiana, Kentucky, Michigan, Minnesota, Mississippi, Missouri, New York, Ohio, Pennsylvania, Tennessee and Wisconsin. Stores in Minnesota operate as Valvoline Rapid Oil Change-R-. Valvoline Instant Oil Change Franchising, Inc. - Valvoline Instant Oil Change Franchising, Inc., a subsidiary of Ashland, began selling franchises in 1988 to accelerate Valvoline's growth in the fast oil-change business. As of September 30, 1994, 137 franchised units (75 of which are in operation) had been sold in 15 states: California, Connecticut, Delaware, Florida, Georgia, Kentucky, Maryland, Massachusetts, Minnesota, Nebraska, New Mexico, North Carolina, Pennsylvania, Rhode Island and Texas. A franchise has also been sold in Puerto Rico. All company-owned and franchised centers collect used motor oil from do-it-yourselfers as an environmental service. Car Care Products Group - In late 1994, Valvoline established a new Car Care Products Group to manage its growing portfolio of consumer automotive chemical brands. Valvoline acquired the Zerex- R- antifreeze brand and a long-term antifreeze feedstock supply agreement from the BASF Corp. in October 1994. Zerex joined Pyroil, NAPA and Valvoline's other various private label brands of automotive chemicals to form the Car Care Products Group. Pyroil is a major U.S. packager and marketer of refrigerants to the automotive aftermarket and is increasing its sales of consumer and professional automotive chemicals. Although refrigerants containing chlorofluorocarbons will be phased out of production by the end of 1995, Pyroil is actively supporting an industry transition to ozone-safe refrigerants. An exclusive agreement provides Pyroil with an assured supply of new-generation DuPont SUVA-R- refrigerants. Valvoline International, Inc. - Valvoline International, Inc., a subsidiary of Ashland, markets Valvoline branded products and TECTYL-R- Rust Preventives worldwide and operates company-owned affiliates in Australia, Canada, Denmark, Great Britain, the Netherlands, Sweden, Germany, Switzerland, Austria, France, Italy and Belgium. Licensees and distributors market products in other parts of Europe, Central and South America, the Far East, the Middle East and in certain African countries. Packaging and blending plants and distribution centers in Australia, Canada, Denmark, Sweden, Great Britain, the Netherlands and the United States supply international customers. Through a joint-venture with The Western India Group, Valvoline will construct a blending and packaging plant in India in 1995 to supply that market. Lube Refinery Sales - Valvoline's Lube Refinery Sales division sells excess base stock production from the Catlettsburg, Kentucky lube refinery to other U.S. motor oil and industrial oil marketers as well as to fuel and lube additive companies in the United States. It also markets Slack Wax, a lube byproduct, through a network of re-sellers and to other refiners for further processing. The division is also engaged in private label blending and packaging for other North American refiners. See "Petroleum- Petroleum Refining." The Valvoline-R- trademark was federally registered in 1873 and is the oldest trademark for a lubricating oil in the United States. Other important trademarks include Valvoline Instant Oil Change-R-, TECTYL-R-, Pyroil-R- and Zerex-R-. 7

CHEMICAL Ashland Chemical Company, a division of Ashland, is engaged in the manufacture, distribution and sale of a wide variety of chemical and plastic products. Ashland Chemical owns or leases 42 manufacturing facilities in 10 states and 17 foreign countries and owns or leases 102 distribution facilities in 34 states and 12 foreign countries. Ashland Chemical is comprised of the following operations: DISTRIBUTION Industrial Chemicals & Solvents ("IC&S") Division - IC&S markets chemical products and solvents to industrial chemical users in major markets through distribution centers in the United States, Canada and Puerto Rico. The division distributes approximately 3,500 chemical products made by many of the nation's leading chemical manufacturers, a growing number of off-shore producers, plus petrochemicals from Ashland's refineries. The division specializes in supplying mixed truckloads and less-than-truckload quantities to the paint and coatings, industrial and institutional compounding, automotive, appliance, paper and many other industries. In addition, the division distributes cosmetic and pharmaceutical specialty chemicals and food-grade additives and ingredients. The division also offers customers environmental services, working in cooperation with major chemical waste disposal companies. FRP Supply Division - This division markets to customers in the reinforced plastics and cultured marble industries mixed truckload and less-than-truckload quantities of polyester resins, fiberglass and other specialty reinforcements, catalyst and allied products from more than 50 distribution locations across the United States and Mexico. General Polymers Division - This division markets a broad range of thermoplastic injection molding and extrusion materials to processors in the plastics industry through distribution locations in the United States, Canada, Mexico and Puerto Rico. The division also provides plastic material transfer and packaging services. The division represents 22 major plastics producers, with emphasis on serving customers with mixed truckload and less-than-truckload quantities of packaged thermoplastics. The basic resins business unit markets packaged and bulk thermoplastic resins to a variety of processors in North America. Ashland Plastics International - This business unit markets a broad range of thermoplastics to processors outside North America. Ashland Plastics has distribution centers located in Australia, Belgium, France, Holland, Ireland, Italy, New Zealand, and the United Kingdom and exports to Latin America from the United States. SPECIALTY CHEMICALS Composite Polymers Division - This division manufactures and sells a broad range of chemical-resistant, fire-retardant and general-purpose grades of unsaturated polyester and vinyl ester resins for the reinforced plastics industry. Key markets include the automotive, construction and marine industries. The division has manufacturing plants in Los Angeles, California; Bartow, Florida; Ashtabula, Ohio; and Philadelphia, Pennsylvania. Specialty Polymers & Adhesives Division - This division manufactures and sells specialty liquid AROFENE-R- phenolic resins and AROTAP-R- phenolic resins for paper impregnation and friction material bonding; AROSET-R- acrylic polymers for pressure sensitive adhesives; ISOSET-R- emulsion polymer isocyanate adhesives for structural wood bonding; PLIOGRIP-R- polyurethane and epoxy structural adhesives for bonding fiberglass reinforced plastics, composites, thermoplastics and metals in automotive, recreational, and industrial applications; EMAWELD-R- induction bonding systems for thermoplastic materials; PLIOBOND-R- and PLIOSEAL-R- elastomeric polymer adhesives for commercial roofing applications; PLIOSEAL-TM- butyl rubber roofing tapes; and VPC-R- vapor curing, high-performance urethane coatings systems. The division has manufacturing plants in Calumet City, Illinois; Norwood, New Jersey; and Ashland, Ohio. Drew Ameroid Marine Division - This division supplies specialty chemicals for water and fuel treatment and general maintenance as well as refrigeration services, sealing products and welding and refrigerant products to the world's merchant marine fleet. Drew Ameroid Marine currently provides shipboard technical service for more than 15,000 vessels from 140 locations serving 800 ports throughout the world. 8

Electronic Chemicals Division - This division manufactures and sells a variety of ultra high-purity chemicals for the worldwide semiconductor manufacturing industry through various manufacturing locations. The division also custom blends and packages high- purity liquid chemicals to customer specifications. The division has manufacturing plants in Newark, California; Milan, Italy; Easton, Pennsylvania; and Dallas, Texas. The division also enters into long-term agreements to provide complete chemical management services, including purchasing, warehousing and delivering chemicals for in-plant use, for major facilities of large consumers of high-purity chemicals. Foundry Products Division - This division manufactures and sells foundry chemicals worldwide, including a complete line of foundry binders, core and mold coatings, sand additives, mold releases, core pastes, and other specialties. The division has two domestic manufacturing plants located in Cleveland, Ohio. Eighteen foreign subsidiaries and affiliates manufacture and/or market foundry and other chemicals. The division has a metals applications laboratory as part of the company's technical center, which is used for test castings and mold and core material testing. Drew Industrial Division - This division supplies specialized chemicals and consulting services for the treatment of boiler water, cooling water, steam, fuel and waste streams. The division also supplies process chemicals and technical services to the pulp and paper and mining industries. It also supplies additives used in the manufacture of latex and paints. This division conducts operations throughout North America, Europe and the Far East through subsidiaries, joint venture companies and distributors. The division has manufacturing plants in Kansas City, Kansas; Kearny, New Jersey; Houston, Texas; Ajax, Ontario, Canada; and Singapore. PETROCHEMICALS Petrochemical Division - This division markets aromatic hydrocarbons, principally cumene, toluene, xylene, and aromatic and aliphatic solvents and propylene manufactured at facilities located at the Catlettsburg, Kentucky refinery. The division manufactures maleic anhydride at Neal, West Virginia, and methanol near Plaquemine, Louisiana. OTHER MATTERS Melamine Chemicals, Inc. ("MCI") - Ashland owns 23% of the outstanding common stock of MCI, a publicly owned company (NASDAQ:MTWO). MCI produces melamine at its Donaldsonville, Louisiana plant and sells it to customers throughout the world. Melamine is a specialty chemical having numerous industrial and commercial applications. For information relating to the reauthorization of the Superfund Reauthorization Act of 1986 and the Resource Conservation and Recovery Act, see "Miscellaneous-Governmental Regulation and Action-Environmental Protection." CONSTRUCTION Ashland's construction operations are conducted primarily by the APAC group of companies which are located in 13 southern states. APAC is a major provider of publicly funded highway construction services, privately financed construction projects, and construction materials. As prime contractor, subcontractor or joint venture partner, APAC performs such construction work as paving, repair and resurfacing of highways, urban streets, roadways, bus lanes, airports, residential developments, shopping centers, other commercial parking areas, sidewalks, and driveways; excavation; grading and base work; and certain other activities in the construction of bridges and structures, sanitary sewers, drainage facilities and underground utilities. APAC also produces and sells construction materials such as asphaltic and ready-mix concrete, crushed stone and other aggregate, and in certain markets, concrete block and specialized construction materials, such as architectural block. To deliver its services and products, APAC utilizes extensive aggregate-producing properties and construction equipment. It currently has 15 permanent operating quarry locations, 31 other aggregate production facilities, 38 ready-mix concrete plants, 144 hot-mix asphalt plants, and a fleet of over 8,000 mobile equipment units, including heavy construction equipment and transportation- related equipment. 9

Raw aggregate generally consists of sand, gravel, granite, limestone and sandstone. About 36% of the raw aggregate produced by APAC is used in the performance of APAC's own contract construction work and the production of various processed construction materials. The remainder is sold to third parties. APAC also purchases substantial quantities of raw aggregate from other producers whose proximity to the job site render it economically feasible. Most other raw materials, such as liquid asphalt, portland cement and reinforcing steel, are purchased from others. APAC is not dependent upon any one supplier or customer. Approximately 60% of APAC's revenues are derived from highway and other public sector sources. The other 40% is derived from industrial and commercial customers and other private developers and contractors. Climate and weather significantly affect revenues in the construction business. Due to its location, APAC tends to enjoy a relatively long construction season. Most of APAC's operating income is generated during the construction period of May to October. Total backlog at September 30, 1994 was $554 million, compared to $495 million (restated to exclude APAC's Arizona operations which were sold in February 1994) at September 30, 1993. The backlog orders at September 30, 1994 are considered firm, and a major portion is expected to be filled during fiscal 1995. EXPLORATION Ashland's oil and gas exploration and production activities are conducted through wholly owned subsidiaries of Ashland (collectively referred to as "Ashland Exploration"). Ashland Exploration is currently engaged in the exploration for and production of oil and gas in the United States, in the exploration for and production of oil in Nigeria, and in oil and gas exploration in other international areas. For information regarding Ashland Exploration's estimated oil and gas reserves and other financial data, see Supplemental Oil and Gas Information on Pages 60 and 61 in Ashland's Annual Report. Since October 1, 1993, no estimates of Ashland Exploration's total proved net oil or gas reserves have been filed or included in reports to any federal authority or agency other than the SEC. DOMESTIC OPERATIONS Ashland Exploration has concentrated its domestic drilling and production efforts in two core areas: the Appalachian Basin and the Gulf Coast. In addition, minor royalty interests are located primarily in the Southwest and Midcontinent regions of the United States. In the Appalachian Basin, Ashland Exploration's activities consist primarily of shallow gas development drilling on leaseholds totaling approximately 807,100 acres in eastern Kentucky and West Virginia. In fiscal 1994, it drilled 58 net gas wells, excluding 29 net wells which were being drilled at year-end. Ashland Exploration's exploratory efforts are concentrated along the Gulf Coast. In fiscal 1994, Ashland Exploration participated in drilling 13 gross exploratory prospects, resulting in 4 gas discoveries. At fiscal year-end, an additional 2 gross exploratory wells were in the process of being drilled. Ashland Exploration's exploratory leasehold position in the Gulf of Mexico has risen to 160,000 acres, excluding one block from an August 1994 federal lease sale on which a lease is expected to be issued in early fiscal 1995. During fiscal 1994, Ashland Exploration's domestic production averaged 800 net barrels of oil per day and 94.3 million net cubic feet of natural gas per day. The average price received during fiscal 1994 was $14.29 per barrel of oil and $2.42 per thousand cubic feet (MCF) of gas. Ashland Exploration owned a working interest in 2,942 gross (2,655 net) domestic producing wells at September 30, 1994. 10

INTERNATIONAL OPERATIONS Ashland Exploration currently has rights to international concessions in Nigeria, Australia, and Morocco. Additional exploration opportunities are being evaluated in these and other countries. In Nigeria, Ashland Exploration's oil production during fiscal 1994 was 18,700 barrels per day from 74,000 acres onshore and 103,000 acres offshore held under a production-sharing contract with the Nigerian National Petroleum Corporation ("NNPC"), the Nigerian state-owned petroleum company. The term of this production sharing contract has been extended until June 12, 1998. Ashland Exploration plans to initiate exploratory drilling in fiscal 1995 to fulfil the commitment required for the extension of this production sharing contract. If this exploratory drilling is successful, the term on this production sharing contract would be extended until 2013. Other exploratory efforts in Nigeria will be carried out on two additional offshore blocks comprising a contract area of approximately 600,000 acres under another production-sharing contract with NNPC. The first exploratory well was successful in fiscal 1994. Additional exploratory drilling is planned for fiscal 1995. Ashland Exploration holds a 50% interest in these blocks. In other international exploratory activities, Ashland Exploration has extended its seismic option agreement with ONAREP, the Moroccan state-owned petroleum company. The agreement covers 1,500,000 acres offshore Morocco, which Ashland Exploration operates with a 50% interest. In Australia, Ashland Exploration owns a 50% interest in one exploration permit consisting of 335,000 gross acres and a 25% interest in another exploration permit consisting of 590,000 gross acres, both of which are located offshore western Australia. Three unsuccessful exploratory wells were drilled in Australia in fiscal 1994. Ashland Exploration's international operations are necessarily subject to factors beyond its control. Foreign operations may also be affected by laws and policies of the United States relating to foreign trade, investment, and taxation. NET OIL AND GAS PRODUCTION The following table summarizes net oil and gas production for the three fiscal years ended September 30, 1994. Net production for Nigeria is before royalty. Years Ended September 30 ------------------------- 1994 1993 1992 ---- ---- ----- Crude Oil (thousand barrels per day) United States . . . . . . . . . . . .8 1.0 1.0 Nigeria . . . . . . . . . . . . . . 18.7 21.7 25.9 ---- ---- ---- Total . . . . . . . . . . 19.5 22.7 26.9 ===== ==== ==== Natural Gas (MMCF per day) United States . . . . . . . . . . . 94.3 99.3 78.3 11

AVERAGE SALES PRICE AND PRODUCTION COST Ashland Exploration's average sales price per unit and production cost per unit for crude oil and natural gas for the three fiscal years ended September 30, 1994, are set forth in the table below: <TABLE> <CAPTION> United States Nigeria Total ------------------- ------------------- ------------------- 1994 1993 1992 1994 1993 1992 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- ---- ---- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Average sales price Crude oil (per barrel)...... $14.29 $17.54 $18.35 $15.01 $17.77 $19.21 $14.98 $17.76 $19.18 Natural gas (per MCF)..... 2.42 2.45 2.28 - - - 2.42 2.45 2.28 Average production product cost (per equivalent barrel) (1)..... 3.87 3.84 4.83 7.69 7.27 6.39 5.90 5.74 5.84 ----------------- <FN> (1) Equivalent barrels computed on a six MCF to one barrel ratio. </TABLE> GROSS AND NET PRODUCTIVE WELLS The following table sets forth Ashland Exploration's gross and net productive wells at September 30, 1994: Gross Net ------- ------ United States Oil . . . . . . . . . . . . . . . . . 175 47 Gas . . . . . . . . . . . . . . . . . 2,767 2,608 Nigeria Oil . . . . . . . . . . . . . . . . . 36 36 ----- ----- Total 2,978 2,691 ====== ====== These wells include 321 gross wells (308 domestic and 13 international) and 295 net wells (282 domestic and 13 international) which have multiple completions. TOTAL GROSS AND NET OIL AND GAS PRODUCING AND UNDEVELOPED ACREAGE The following table sets forth Ashland Exploration's total gross and net oil and gas producing and undeveloped acreage at September 30, 1994: Gross Net Gross Net Producing Producing Undeveloped Undeveloped Acreage Acreage Acreage Acreage --------- --------- --------- ---------- (thousands of acres) United States. . . . . 1,201 873 726 405 Nigeria. . . . . . . . 177 177 580 290 Morocco. . . . . . . . 1,500 750 Australia. . . . . . . 925 315 ----- ----- ----- ----- Total 1,378 1,050 3,731 1,760 ===== ===== ===== ===== 12

NET PRODUCTIVE AND DRY WELLS DRILLED Ashland Exploration's net productive and dry wells drilled during the three fiscal years ended September 30, 1994, are set forth in the table below: 1994 1993 1992 ---- ---- ---- Net Productive Exploratory Wells Drilled United States . . . . . . . . . . . 2 1 5 International . . . . . . . . . . . 1 0 0 ---- ---- ---- Total . . . . . . . . . . 3 1 5 ==== ==== ==== Net Dry Exploratory Wells Drilled United States . . . . . . . . . . . 4 2 3 International . . . . . . . . . . . 1 0 0 ---- ---- ---- Total . . . . . . . . . . 5 2 3 ==== ==== ==== Net Productive Development Wells Drilled United States . . . . . . . . . . . 59 84 182 International . . . . . . . . . . . 0 0 0 ---- ---- ---- Total . . . . . . . . . . 59 84 182 ==== ==== ==== Net Dry Development Wells Drilled United States . . . . . . . . . . . 1 1 0 International . . . . . . . . . . . 0 0 0 ---- ---- ---- Total . . . . . . . . . . 1 1 0 ==== ==== ==== COAL Arch Mineral Corporation ("Arch") - Ashland currently owns 50% of Arch and has the right to acquire an additional 1.25% of Arch pursuant to a Put and Call Agreement with an Arch shareholder. Through its wholly owned subsidiaries, Arch mines, processes, markets, and transports bituminous coal in the domestic and export steam and metallurgical markets. An additional wholly owned subsidiary of Arch owns, controls and manages mineral-bearing properties throughout the United States. Arch has mines located in the Appalachian, Midwestern, and Western coal fields with access to rail, inland waterway and truck transportation networks, including several of its own transloading facilities. Arch also controls undeveloped reserves in the San Juan Basin of New Mexico, the Green River area in southwest Wyoming, southern Illinois, Indiana, southeast Kentucky, western Virginia and southern West Virginia. For its fiscal year ended December 31, 1993, Arch sold 17.6 million tons of coal compared to sales of 20.9 million tons and 21.5 million tons in 1992 and 1991, respectively. In 1993, 79% of Arch's sales were from the production of its wholly owned independent operating subsidiaries, compared to 82% and 80% in 1992 and 1991, respectively. The remainder of the coal sold in each of these periods came from brokerage activities or from independent contractors operating on property controlled by Arch. Surface mines accounted for 69% of the production in 1993, as compared to 62% and 65% in 1992 and 1991, respectively. In each of these periods, the remainder of Arch's production came from its underground and auger mines. Sales under contracts with a duration of more than one year accounted for 78% of Arch's sales in 1993, compared with 86% and 80% in 1992 and 1991, respectively. Arch's 1993 operations were significantly and adversely impacted by the United Mine Workers of America strike discussed on the following page. As of September 30, 1994, Arch has 33 coal supply contracts of one year or longer duration. In the nine-months ended September 30, 1994, Arch sold 20.5 million tons of coal, 69% of which was sold under contracts with a duration of more than one year. During this period, 74% of Arch's total sales came from the production of its subsidiaries, while the remaining coal sold came from brokerage activities or independent contractors operating on properties controlled by Arch. During this nine-month period, 53% of Arch's production was from its surface mines and the remainder was from its underground and auger mines. 13

As of December 31, 1993, Arch owned or controlled estimated recoverable coal reserves in the proven and probable categories of approximately 1.6 billion tons, based on an estimate prepared by Arch. Arch believes a majority of these reserves have a sulfur content of less than 1.6 pounds of sulfur dioxide and a substantial portion have a sulfur content of less than 1.2 pounds of sulfur dioxide per million Btu. Ashland has not made an independent verification of this information. Apogee Coal Company ("Apogee"), an independent operating subsidiary of Arch, is a member of the Bituminous Coal Operators Association ("BCOA") and a signatory to a collective bargaining agreement with the United Mine Workers of America ("UMWA") that expires on August 1, 1998. This contract was ratified on December 14, 1993, after a 219-day strike against certain BCOA members, including Apogee. In the nine months ended September 30, 1994, Apogee's sales from captive and contractors mines represented approximately 54% of Arch's total sales. Two other independent subsidiaries of Arch are signatories to collective bargaining agreements with independent employees associations. Employees of the remainder of Arch's operating subsidiaries are not represented by labor unions. On January 31, 1994, Catenary Coal Holdings, Inc., a wholly owned subsidiary of Arch, acquired from Enirisorse S.p.A., the stock of Agipcoal Holdings USA, Inc. and Agipcoal America, Inc. On the same date, certain of the subsidiaries and assets of these companies were sold to subsidiaries of the Norfolk Southern Corporation, and Neweagle Industries, Inc. The remaining assets include mining complexes in Kentucky and West Virginia. Ashland Coal, Inc. ("Ashland Coal") - Ashland owns approximately 39% of Ashland Coal, a public company (NYSE:ACI) which is engaged in the production, transportation, processing and marketing of bituminous coal produced in eastern Kentucky and southern West Virginia. The primary emphasis and direction of Ashland Coal is on the acquisition and development of low-sulfur steam coal reserves. Saarbergwerke A.G., a coal producer, coal trader, and utility company owned jointly by the Government of Germany (74%) and the State of Saarland (26%), owns approximately a 15% interest in Ashland Coal, and Carboex International Ltd., a subsidiary of Sociedad Espanola De Carbon Exterior, S.A., a coal supply firm controlled by entities of the Government of Spain, owns approximately a 10% interest in Ashland Coal. The remaining 36% of Ashland Coal is owned by the public. For its fiscal year ended December 31, 1993, Ashland Coal and its independent operating subsidiaries sold 16 million tons of coal, as compared to 19.1 and 14.3 million tons sold in 1992 and 1991, respectively. Of the total number of tons sold during fiscal 1993, approximately 57% was under long-term contracts, as compared to 66% for 1992 and 67% for 1991, with the balance being sold on the spot market. In fiscal 1993, Ashland Coal and its independent operating subsidiaries sold 2.1 million tons of coal in the export market, compared to 3.9 million tons in 1992 and 3.8 million tons in 1991. Approximately 61%, 71%, and 71% of total revenues for 1993, 1992, and 1991, respectively, were derived from long-term contracts. For the year ended December 31, 1993, Ashland Coal's independent operating subsidiaries produced approximately 14.2 million tons of coal, as compared to 16.7 and 12.2 million tons for 1992 and 1991, respectively. In addition, Ashland Coal purchased for resale approximately 1.6 million tons of coal during 1993 and approximately 2.0 million tons of coal during each of 1992 and 1991. For the nine months ended September 30, 1994, Ashland Coal and its independent operating subsidiaries sold 14.8 million tons of coal. Of the total number of tons sold during the nine months ended September 30, 1994, 63% was under long-term contracts. These sales accounted for approximately 65% of Ashland Coal's total revenues for the nine-month period. Of the 14.8 million tons sold during the nine-month period, 1.4 million tons were sold in the export market. For the nine months, Ashland Coal's independent operating subsidiaries produced approximately 13.9 million tons of coal and purchased approximately 1.0 million tons for resale. 14

Ashland Coal's consolidated results for 1993 were significantly affected by a selective strike by the United Mine Workers of America from May to December 1993 against the operations of two subsidiaries of Ashland Coal's Dal-Tex Coal Corporation subsidiary ("Dal-Tex") and the operations of Ashland Coal's Hobet Mining, Inc. subsidiary ("Hobet"). These Dal-Tex subsidiaries and Hobet were signatories to the National Bituminous Coal Wage Agreement of 1988. On December 14, 1993, UMWA members ratified the National Bituminous Coal Wage Agreement of 1993, and thereafter the UMWA miners returned to work at the Dal-Tex and Hobet operations. Ashland Coal's Mingo Logan Coal Company subsidiary ("Mingo Logan"), Mingo Logan's Mountaineer Mining Company and Bearco divisions and certain contract miners are parties to a proceeding to determine whether Mingo Logan's employees should be deemed jointly employed with the contract miners' employees or whether the Mingo Logan and contract miners' employees are employed by different employers. The outcome of the proceeding would determine for purposes of voting on union representation (if such vote is required by applicable labor law) whether the Mingo Logan employees may vote separately, or will be required to vote with employees of Mingo Logan's contract miners. Substantially all of Ashland Coal's coal properties are in eastern Kentucky and southern West Virginia and are controlled by lease. Most of these leases run until the exhaustion of minable and merchantable coal. The remaining leases have primary terms ranging from one to 40 years, with many containing options to renew. Royalties paid to lessors are either on a fixed price per ton basis or on a percentage of the gross sales price basis. As of December 31, 1993, Ashland Coal estimates that its subsidiaries controlled approximately 723 million tons of recoverable reserves in the proven and probable categories. Based upon limited information obtained from preliminary prospecting, drilling and coal seam analysis, Ashland Coal estimates that a substantial percentage of this coal has a sulfur content of 1% or less. Ashland has not made an independent verification of this information. The extent to which reserves will eventually be mined depends upon a variety of variables, including future economic conditions and governmental actions affecting both the mining and marketability of low-sulfur steam coal. Other Matters - Arch and Ashland Coal are subject to environmental regulations, including the Surface Mining Control and Reclamation Act of 1977, the Clean Water Act, the Resource Conservation and Recovery Act and the Clean Air Act, as well as related federal environmental regulations and similar state enactments. In addition, the Federal Mine Safety and Health Act of 1977 ("MSHA") imposes health and safety standards on all mining operations. Regulations under MSHA are comprehensive and affect numerous aspects of mining operations, including the training of mine personnel, mining procedures, blasting and the equipment used in mining operations. Arch and Ashland Coal believe that they are in substantial compliance with all applicable environmental and MSHA requirements. These requirements are not expected to have a material adverse impact on Arch's or Ashland Coal's competitive position. Arch and Ashland Coal are subject to the provisions of the Coal Industry Retiree Health Benefit Act of 1992. This legislation provides for the funding of medical and death benefits for certain retired members of the UMWA through premiums to be paid by assigned operators, transfers from an overfunded pension trust established for the benefit of retired UMWA members, and transfers from the Abandoned Mine Lands Fund, which is funded by a federal tax on coal production. The effect of this legislation on the earnings and financial conditions of Arch and Ashland Coal is not expected to be significant. For information relating to acid rain legislation, see "Miscellaneous-Governmental Regulation and Action-Environmental Protection." 15

OTHER BUSINESS Ashland, through a subsidiary, Ashland Ethanol, Inc. ("AEI"), has a 50% interest in a partnership that owns an ethanol plant located in South Point, Ohio. The partnership is comprised of AEI and subsidiaries of Ohio Farm Bureau Federation, Inc., Publicker Industries Inc. and UGI Corporation. The plant began operation in September 1982 and is currently producing at an annual rate of approximately 65 million gallons of ethanol. In addition, the plant produced about 180 million tons of distillers dried grain in fiscal 1994. In 1981 the United States Department of Energy entered into a cooperative agreement with the partnership under which it advanced approximately $24.5 million in connection with the construction of this plant which will, except under certain circumstances, have to be repaid starting in 1996. The partnership also has a Farmers Home Administration ("FmHA") guaranteed loan and a working capital loan. Because of past concerns about the venture's long-term viability, Ashland wrote off its investment in AEI in fiscal 1986 and provided a reserve for the estimated impact of expected losses. AECOM Technology Corporation ("AECOM"), a 25% owned affiliate of Ashland, provides a wide array of design, engineering, architectural, planning, operations and maintenance, construction and construction management, development, environmental and other technical and professional services to industrial, commercial and government clients. AECOM is headquartered in Los Angeles, California, and performs services through offices located throughout the world. MISCELLANEOUS GOVERNMENTAL REGULATION AND ACTION Ashland's operations are affected by political developments and laws and regulations, such as restrictions on production, restrictions on imports and exports, the maintenance of specified reserves, price controls, tax increases and retroactive tax claims, expropriation of property, cancellation of contract rights, environmental protection controls and laws pertaining to workers' health and safety. As discussed in part below, a number of bills have been enacted or proposed by the United States Congress and various state governments which have or could have a significant impact on Ashland. General - As a refiner, Ashland is substantially affected by changes in world crude oil prices. Many world and regional events can have substantial effects on world crude oil prices and can increase volatility in world markets. Ashland expects to be able to acquire adequate supplies of crude oil at competitive prices. However, Ashland cannot predict whether foreign and United States petroleum product price levels will permit its refineries to operate on a profitable basis. Neither can it predict the effect on its operations and financial condition from possible further changes in the Organization of Petroleum Exporting Countries ("OPEC") policies or in actions by the President of the United States and the Congress, from changes in taxes and federal regulation of the oil and gas business in the United States, or from other developments that cannot be foreseen. The stability of Ashland's crude oil supply from foreign sources is subject to factors beyond its control, such as military conflict between oil-producing countries, the possibility of nationalization of assets, embargoes of the type imposed by OPEC in 1973, internal instability in one or more oil-producing countries, and rapid increases in crude oil prices. Although Ashland will continue, for economic reasons, to rely upon foreign crude oil sources for a substantial portion of its crude oil supply, the extent of operation in the domestic crude oil market afforded by Scurlock Permian Corporation will assist in offsetting the adverse effects frequently associated with market volatility. See "Petroleum-Crude Oil Supply" for Ashland's crude oil processing requirements. Imported crude oil is subject at present to payment of duty, which is 10.5 cents per barrel for crudes over 25 API gravity (2.1 cents per barrel for Canadian imports) and 5.25 cents per barrel for crudes below 25 API gravity (1.05 cents per barrel for Canadian imports). Imported crude oil is also subject to a customs users fee of .17% of the value of the crude oil. For information with respect to tax assessments on crude oil, see also "Environmental Protection." 16

Environmental Protection - Federal, state and local statutes and regulations relating to the protection of the environment have a significant impact on the conduct of Ashland's businesses. Ashland's capital and operating expenditures for air, water and solid waste control facilities are summarized below. Years Ended September 30 ------------------------ (In millions) 1994 1993 1992 ---------------- ---- ----- ----- Capital expenditures $ 63 $137 $162 Operating expenditures 140 148 138 At September 30, 1994, Ashland's reserves for environmental assessment and remediation efforts amounted to $167 million, reflecting Ashland's most likely estimates of the costs which will be incurred over an extended period to remediate identified environmental conditions for which costs are reasonably estimable. During fiscal 1995 and 1996, based on current environmental regulations, Ashland estimates capital expenditures for air, water and solid waste control facilities to be $70 million and $85 million, respectively. Expenditures for investigatory and remedial efforts in future years are subject to the uncertainties associated with environmental exposures, including identification of new environmental sites and changes in laws and regulations and their application. Such expenditures, however, are not expected to have a material adverse effect on Ashland's consolidated financial position, cash flow or liquidity, but could have a material adverse effect on results of operations in a particular quarter or fiscal year. With respect to the effect of such expenditures on Ashland's competitive position in its industries, it is not expected that Ashland's expenditures will be affected by the legislation and regulations relating to the environment in a manner that is significantly different from the anticipated effect on its competitors in the petroleum or chemical industries. The United States Environmental Protection Agency ("USEPA") and the states have adopted regulations and laws concerning underground storage tanks covering, among other things, registration of tanks, release detection, corrosion protection, response to releases, closure of, and financial responsibility for, underground storage tank systems. The Superfund Reauthorization Act of 1986 ("Superfund") provided for the establishment of a fund to be used for a waste clean-up program administered by the USEPA. The law provides for five separate taxes: (i) a petroleum tax on domestic crude oil and on imported crude oil equalized at 9.7 cents per barrel plus a 5 cents per barrel oil spill tax, as more fully described below, (ii) a chemical feedstock tax, (iii) a tax on imported chemical derivatives, and (iv) an "environmental tax" based on corporate alternative minimum taxable income. Ashland paid approximately $19 million in Superfund taxes during fiscal 1994. Superfund, which provides for cleanup of certain hazardous waste sites, is expected to be reauthorized during the 104th Congress. The reauthorized act is expected to provide for fair-share allocation of liability, improve cleanup remedy selection, and reduce insurance recovery litigation all of which should make the program more effective. However, it is uncertain at this time exactly what the revisions will be, or if they will result in significant savings. Effective October 1, 1993, the USEPA reduced by 90 percent, from 0.5 to 0.05 percent by weight, the allowable sulfur level in diesel fuel used on highways. The USEPA's action was designed to provide cleaner fuel that will permit reduced particulate emissions from truck engines. Ashland has invested more than $250 million in additional sulfur removal facilities, and is currently producing and providing such ultra-low-sulfur diesel fuel for on-highway use. The Oil Pollution Act of 1990 ("OPA 90") established a $1 billion trust fund to cover cleanup-related costs of oil spills after the responsible party's liability limits have been reached, or where the responsible party is otherwise unidentifiable or unable to pay. The trust fund is financed, when depleted below specified levels, through an excise tax of 5 cents per barrel on domestic crude oil and imported petroleum oil products (pursuant to the Superfund Reauthorization Act of 1986). On July 1, 1993, the oil spill tax was suspended because the Treasury Department estimated that the spill liability trust fund would reach its suspension point at the close of the second 17

quarter of 1993. Effective July 1, 1994, the oil spill tax was reinstated. OPA 90 subjects spillers to strict liability for removal costs and damages (including natural resource damages) resulting from oil spills, and requires the preparation and implementation of spill-response plans at designated vessels and facilities. Additionally, OPA 90 requires that new tank vessels entering or operating in domestic waters be equipped with double hulls, and that existing tank vessels without double hulls be retrofitted or removed from domestic service according to a phase-out schedule. While Ashland does not believe that compliance with implementing regulations will have a material adverse effect on the company's results of operations, a complete assessment of the financial implications of OPA 90 will be performed when all implementing regulations are final. On July 1, 1994, the United States Coast Guard issued interim final regulations dealing with financial responsibility for water pollution (vessels) under OPA 90 and the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"). The regulations require self-propelled tank vessel owners and operators to maintain evidence of financial responsibility, effective December 28, 1994, sufficient to meet their potential liability defined under OPA 90 and CERCLA for spills of oil or hazardous substances. The Director, Coast Guard National Funds Center has granted permission to Ashland to self-insure the financial responsibility amount for liability purposes for Ashland's ocean tankers as provided in OPA 90. Ashland is currently assessing the impact the regulations will have upon Ashland and its crude oil purchasing and transportation costs and strategies. The Federal Clean Air Act requires the refining industry to market cleaner-burning, reformulated gasoline ("RFG") beginning January 1, 1995 in nine specified metropolitan areas across the country. Ashland does not directly supply gasoline in any of the nine metropolitan areas. However, several urban locations within Ashland's marketing area have opted into the RFG program. Ashland currently believes it will be able to meet expected demand for RFG in its marketing area. The Clean Air Act also requires the refining industry to supply 39 carbon monoxide (CO) non-attainment areas with gasoline containing 2.7 weight percent oxygen for four winter months each year. Upon being re-designated CO attainment, several of these areas are seeking to opt-out of the oxygenated gasoline requirements. Ashland believes it will have a continuing need to directly supply this fuel only at St. Paul Park, Minnesota, whose primary market is a CO non-attainment area. Ashland believes it has or has access to ample oxygenate to meet this requirement. The Clean Air Act also contains acid rain provisions which require substantial reductions in sulfur dioxide emissions by power plants in the United States which should favor low-sulfur coal producers. Both Ashland Coal and Arch have significant low-sulfur reserves and should benefit from expected higher demand for low- sulfur coal. The Resource Conservation and Recovery Act ("RCRA"), which requires "cradle to grave" management of hazardous waste, is slated to be reauthorized by Congress, although timing of such reauthorization is uncertain. Reauthorization issues may include an expansion of hazardous waste program coverage, recycling, used oil, and solid waste management. These same issues may be addressed in additional USEPA rulemakings unrelated to reauthorization efforts. It is anticipated that both the reauthorization and other future rulemakings will result in increased environmental compliance costs, but the amount of such increase is uncertain at this time. RESEARCH Ashland conducts a program of research and development directed toward the invention and improvement of products and processes and also toward the improvement of environmental controls for its existing facilities. It maintains its primary research facilities in Catlettsburg, Kentucky, and Dublin, Ohio. For information about research and development costs, see Note A of Notes to Consolidated Financial Statements in Ashland's Annual Report. COMPETITION In all of its operations, Ashland is subject to intense competition both from companies in the respective industries in which it operates and from products of companies in other industries. In all of these segments, competition is based primarily on price, with factors such as reliability of supply, service and quality being considered. Ashland Petroleum competes primarily with other domestic refiners and, to a lesser extent, with 18

imported products. However, Ashland Petroleum enjoys a geographic advantage for products in its primary marketing areas. While some integrated competitors have sources of controlled crude production, few competitors in Ashland Petroleum's market areas are significantly crude self-sufficient. SuperAmerica competes with major oil companies, independent oil companies and independent marketers. Virtually all of SuperAmerica's refined products are supplied by Ashland Petroleum. SuperAmerica maintains one of the lowest net operating cost structures in the industry and enjoys gasoline and merchandise sales per store exceeding the convenience store industry average based on the 1994 National Association of Convenience Store State of the Industry Survey. Valvoline competes primarily with domestic oil companies and, to a lesser extent, with international oil companies on a worldwide basis. Valvoline's brand recognition and increasing market share in the fast oil-change market are important competitive factors. Ashland Chemical competes in a number of chemical distribution, specialty chemical and petrochemical markets. Its chemicals and solvents distribution businesses compete with national, regional and local companies throughout North America. Its plastics distribution businesses compete worldwide. Ashland Chemical's specialty chemicals businesses compete globally in selected niche markets and compete largely on the basis of technology and service while holding proprietary technology in virtually all their specialty chemicals businesses. Petrochemicals are largely commodities, with pricing and quality being the most important factors. The majority of the business for which APAC competes is obtained by competitive bidding. An important competitive factor in Ashland Exploration's domestic production activity is the ability of its exploration staff to identify potential natural gas prospects, obtain exploration rights and formulate and complete plans for the development of properties. Similarly, competitive factors that are important for Ashland Exploration's international production include its experience in identifying prospects and developing and operating properties. The coal industry is highly competitive, and Arch and Ashland Coal compete (principally in price, location and quality of coal) with each other and with a large number of other coal producers, some of which are substantially larger and have greater financial resources and larger reserve bases than them. ITEM 2. PROPERTIES Ashland's corporate headquarters and the principal offices of Ashland Petroleum are located in Russell, Kentucky. Principal offices of other segments are located in Lexington, Kentucky (SuperAmerica and Valvoline); Dublin, Ohio (Chemical); Atlanta, Georgia (Construction); and Houston, Texas (Exploration). All of these offices are leased for various terms ranging from 13 to 72 years, including renewal options. Ashland's principal manufacturing, marketing and other materially important physical properties are described under the appropriate segment under Item 1. See also the statistical data included under "Exploration" and "Coal" in Item 1 and Supplemental Oil and Gas Information on Pages 60 and 61 in Ashland's Annual Report. Additional information concerning certain leases may be found in Note G of Notes to Consolidated Financial Statements in Ashland's Annual Report. Such information is incorporated in this Item by reference. ITEM 3. LEGAL PROCEEDINGS Environmental Proceedings - (1) As of September 30, 1994, Ashland was subject to 72 notices received from the USEPA identifying Ashland as a "potentially responsible party" ("PRP") under CERCLA and the Superfund Amendment and Reauthorization Act ("SARA") for potential joint and several liability for cleanup costs in connection with alleged releases of hazardous substances from various waste treatment or disposal sites. These sites are currently subject to ongoing investigation and remedial activities, overseen by the USEPA in accordance with procedures established under CERCLA and SARA regulations, in which Ashland may be participating as a member of various PRP groups. Generally, the type of relief sought by the USEPA includes remediation of contaminated soil and/or groundwater, reimbursement for the costs of site cleanup or oversight expended by the USEPA, and/or long- term monitoring of environmental conditions at the sites. Ashland also receives notices from state environmental agencies pursuant to similar state legislation. Ashland carefully monitors the investigatory and remedial activity at many of these sites. Based on its experience with site remediation, its familiarity with current environmental laws and regulations, its analysis of the specific hazardous substances at issue, the existence of other financially viable PRPs and its current estimates of investigatory, clean-up and monitoring costs at each site, Ashland believes that its liability at these sites, either individually or 19

in the aggregate, after taking into account established reserves, will not have a material adverse effect on Ashland's consolidated financial position, cash flow or liquidity but could have a material adverse effect on results of operations in a particular quarter or fiscal year. Estimated costs for these matters are recognized in accordance with generally accepted accounting principles governing probability and the ability to reasonably estimate future costs. For additional information regarding these matters, see "Governmental Regulation and Action-Environmental Protection." (2) Ashland received a Notice of Potential Liability from the Commonwealth of Pennsylvania regarding a crude oil spill incident in the Delaware River in July 1994 involving the M/V Kentucky, which Ashland charters under a long-term bareboat charter. El Paso Dispute - On March 11, 1993, a complaint was filed by El Paso Refinery, L.P., against Scurlock Permian Corporation ("SPC"), a wholly owned subsidiary of Ashland, in the District Court of El Paso County, Texas. El Paso Refinery, L.P., is currently in Chapter 7 bankruptcy. Plaintiff alleges that SPC wrongfully breached certain duties under a contract to supply crude oil. Plaintiff further alleges violations of Texas usury law, common law fraud and duress and seeks substantial damages. In an apparent companion case filed the same day by individual plaintiffs (two officers of El Paso Refining, Inc., the general partner of El Paso Refinery, L.P.), damages are sought against SPC and others based upon the execution by plaintiffs of promissory notes in connection with the financing of the refinery. Ashland and SPC believe these complaints to be without merit and intend to defend them vigorously. SPC is a creditor in the El Paso bankruptcy proceeding and had filed a proof of claim for approximately $39 million against the bankrupt estate. As of November 8, 1994, SPC had received approximately $20 million from the liquidation of collateral. Ashland believes its current reserves are adequate to cover any shortfall that could be sustained in the bankruptcy proceeding. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders through the solicitation of proxies or otherwise, during the quarter ended September 30, 1994. ITEM X. EXECUTIVE OFFICERS OF ASHLAND The following is a list of Ashland's executive officers, their ages and their positions and offices during the last five years (listed alphabetically as to Senior Vice Presidents who are members of Ashland's core management group, other Senior Vice Presidents, Administrative Vice Presidents and other executive officers.) John R. Hall (age 62) is Chairman of the Board of Directors, Chief Executive Officer and Director of Ashland and has served in such capacities since 1981, 1981 and 1968, respectively. Paul W. Chellgren (age 51) is President and Chief Operating Officer and Director of Ashland and has served in such capacities since 1992. During the past five years, he has also served as Senior Vice President and Chief Financial Officer of Ashland. James R. Boyd (age 48) is Senior Vice President of Ashland and Group Operating Officer - Ashland Exploration, Inc., Arch Mineral Corporation, Ashland Services Company and APAC, Inc. Mr. Boyd has served as Senior Vice President since 1989 and as Group Operating Officer for the above companies since 1990, with the exception of APAC for which he assumed responsibility as of October 1, 1993. During the past five years, he has also served as Vice President of Ashland and President of Ashland Exploration, Inc. John A. Brothers (age 54) is Senior Vice President of Ashland and Group Operating Officer - Ashland Chemical Company, SuperAmerica Group and The Valvoline Company and has served in such capacities since 1984 and 1988, respectively. Thomas L. Feazell (age 57) is Senior Vice President, General Counsel and Secretary of Ashland and has served in such capacities since 1992, 1981 and October 1992, respectively. During the past five years he has also served as Administrative Vice President of Ashland. J. Marvin Quin (age 47) is Senior Vice President and Chief Financial Officer of Ashland and has served in such capacities since 1992. During the past five years, he has also served as Administrative Vice President and Treasurer of Ashland. 20

Robert E. Yancey, Jr. (age 49) is Senior Vice President of Ashland and Group Operating Officer - Ashland Petroleum Company and South Point Ethanol and President of Ashland Petroleum Company and has served in such capacities since 1986, 1988, and 1986, respectively. During the past five years, he also served as Group Operating Officer of APAC, Inc. Harry M. Zachem (age 50) is Senior Vice President - Public Affairs and has served in such capacity since 1988. John D. Barr (age 47) is Senior Vice President of Ashland and President of The Valvoline Company and has served in such capacities since 1989 and 1987, respectively. During the past five years he has also served as Vice President of Ashland. David J. D'Antoni (age 49) is Senior Vice President of Ashland and President of Ashland Chemical Company and has served in such capacities since 1988. John F. Pettus (age 51) is Senior Vice President of Ashland and President of SuperAmerica Group and has served in such capacities since 1989 and 1988, respectively. During the past five years he has also served as Vice President of Ashland. Charles F. Potts (age 50) is Senior Vice President of Ashland and President of APAC, Inc. and has served in such capacities since 1992. During the past five years he has also served as Senior Vice President and Chief Operating Officer and Regional Vice President of APAC. G. Thomas Wilkinson (age 56) is Senior Vice President of Ashland and President of Ashland Exploration, Inc. and has served in such capacities since 1992 and 1990, respectively. During the past five years he has also served as Vice President of Ashland, Executive Vice President of Ashland Exploration, Inc. and Senior Vice President of Ashland Exploration, Inc. Kenneth L. Aulen (age 45) is Administrative Vice President and Controller of Ashland and has served in such capacity since 1992. During the past five years he has also served as Auditor and Assistant Controller of Ashland. Philip W. Block (age 47) is Administrative Vice President - Human Resources of Ashland and has served in such capacity since 1992. During the past five years he has also served as Vice President - Corporate Human Resources. John W. Dansby (age 49) is Administrative Vice President and Treasurer of Ashland and has served in such capacities since 1992. During the past five years he has also served as Ashland's Vice President of Planning. William R. Sawran (age 49) is Vice President of Ashland, Chief Information Officer and President of Ashland Services Company and has served in such capacities since 1994 and 1984 respectively. Fred E. Lutzeier (age 42) is Auditor of Ashland and has served in such capacity since December 1992. During the past five years he has also served as Vice President and Controller of Arch Mineral Corporation. Each executive officer (other than Vice Presidents who are appointed by Ashland's management) is elected by the Board of Directors to a term of one year, or until his successor is duly elected, at the annual meeting of the Board of Directors, except in those instances where the officer is elected at other than an annual meeting of the Board of Directors, in which case his tenure will expire at the next annual meeting of the Board of Directors unless he is re-elected. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS There is hereby incorporated by reference the information appearing under the caption "Management's Discussion and Analysis- Quarterly Financial Information" on Page 40 in Ashland's Annual Report. 21

At September 30, 1994, there were approximately 25,500 holders of record of Ashland's Common Stock. Ashland Common Stock is listed on the New York and Chicago stock exchanges (ticker symbol ASH) and has trading privileges on the Boston, Cincinnati, Pacific, Philadelphia and Amsterdam stock exchanges. ITEM 6. SELECTED FINANCIAL DATA There is hereby incorporated by reference the information appearing under the caption "Five Year Selected Financial Information" on Page 57 in Ashland's Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS There is hereby incorporated by reference the information appearing under the caption "Management's Discussion and Analysis" on Pages 34 to 40 in Ashland's Annual Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA There is hereby incorporated by reference the consolidated financial statements appearing on Pages 41 through 55, the supplemental information appearing on Pages 58 through 61, and the information appearing under the caption "Management's Discussion and Analysis-Quarterly Financial Information" on Page 40 in Ashland's Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There has been no change in Ashland's independent auditors during the two fiscal years ended September 30, 1994. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT There is hereby incorporated by reference the information under the caption "Election of Directors" in Ashland's definitive Proxy Statement for its January 26, 1995 Annual Meeting of Shareholders, which was filed with the SEC within 120 days after September 30, 1994 ("Proxy Statement"). See also the list of Ashland's executive officers and related information under "Executive Officers of Ashland" in Item X herein. ITEM 11. EXECUTIVE COMPENSATION There is hereby incorporated by reference the information to appear under the captions "Executive Compensation" and "Compensation of Directors" in Ashland's Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There is hereby incorporated by reference the information to appear under the caption "Election of Directors" and the information regarding the ownership of securities of Ashland in Ashland's Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There is hereby incorporated by reference the information to appear under the caption "Compensation Committee Interlocks and Insider Participation" in Ashland's Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) DOCUMENTS FILED AS PART OF THIS REPORT (1) and (2) Financial Statements and Financial Schedules The consolidated financial statements and financial schedules of Ashland presented or incorporated by reference in this report are listed in the index on Page 27. (3) Exhibits 3.1 - Second Restated Articles of Incorporation of Ashland, as amended to May 18, 1993. 22

3.2 - Bylaws of Ashland, as amended to March 17, 1994. 4.1 - Ashland agrees to provide the SEC, upon request, copies of instruments defining the rights of holders of long- term debt of Ashland, and all of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed with the SEC. 4.2 - Indenture, dated as of August 15, 1989, as amended and restated as of August 15, 1990, between Ashland and Citibank, N.A., as Trustee (filed as Exhibit 4(a) to Ashland's 10-K for the fiscal year ended September 30, 1991, and incorporated herein by reference). The following Exhibits 10.1 through 10.17 are compensatory plans or arrangements or management contracts required to be filed as exhibits pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. 10.1 - Amended Stock Incentive Plan for Key Employees of Ashland Oil, Inc. and its Subsidiaries. 10.2 - Ashland Oil, Inc. Deferred Compensation and Stock Incentive Plan for Non-Employee Directors (filed as Exhibit 10(c).18 to Ashland's Form 10-Q for the quarter ended December 31, 1993, and incorporated herein by reference). 10.3 - Ashland Oil, Inc. Director Retirement Plan (filed as Exhibit 10(c).3 to Ashland's Form 10-K for the fiscal year ended September 30, 1988, and incorporated herein by reference). 10.4 - Eighth Amended and Restated Ashland Oil, Inc. Supplemental Early Retirement Plan for Certain Key Executive Employees (filed as Exhibit 10(c).4 to Ashland's Form 10-K for the fiscal year ended September 30, 1992, and incorporated herein by reference). 10.5 - Ashland Oil, Inc. Amended Performance Unit Plan. 10.6 - Ashland Oil, Inc. Incentive Compensation Plan (filed as Exhibit 10(c).6 to Ashland's 10-K for the fiscal year ended September 30, 1993, and incorporated herein by reference). 10.7 - Ashland Oil, Inc. Deferred Compensation Plan for Key Employees (filed as Exhibit 10(c).7 to Ashland's Form 10-K for the fiscal year ended September 30, 1988, and incorporated herein by reference). 10.8 - Ashland Oil, Inc. ERISA Forfeiture Plan (filed as Exhibit 10(c).8 to Ashland's 10-K for the fiscal year ended September 30, 1989, and incorporated herein by reference). 10.9 - Ashland Oil, Inc. Deferred Compensation Plan for ERISA Forfeitures (filed as Exhibit 10(c).9 to Ashland's 10-K for the fiscal year ended September 30, 1991, and incorporated herein by reference). 10.10 - Ashland Oil, Inc. Director Death Benefit Program (filed as Exhibit 10(c).10 to Ashland's 10-K for the fiscal year ended September 30, 1990, and incorporated herein by reference). 10.11 - Ashland Oil, Inc. Salary Continuation Plan (filed as Exhibit 10(c).11 to Ashland's Form 10-K for the fiscal year ended September 30, 1988, and incorporated herein by reference). 10.12 - Forms of Ashland Oil, Inc. Executive Employment Contract between Ashland Oil, Inc. and certain executive officers of Ashland (filed as Exhibit 10(c).12 to Ashland's 10-K for the fiscal year ended September 30, 1989, and incorporated herein by reference). 10.13 - Form of Indemnification Agreement between Ashland Oil, Inc. and each member of its Board of Directors (filed as Exhibit 10(c).13 to Ashland's 10-K for the fiscal year ended September 30, 1990, and incorporated herein by reference). 10.14 - Ashland Oil, Inc. Nonqualified Excess Benefit Pension Plan (filed as Exhibit 10(c).14 to Ashland's Form 10-K for the fiscal year ended September 30, 1988, and incorporated herein by reference). 10.15 - Ashland Oil, Inc. Long-Term Incentive Plan. 23

10.16 - Ashland Oil, Inc. Directors' Charitable Award Program (filed as Exhibit 10(c).16 to Ashland's Form 10-K for the fiscal year ended September 30, 1991, and incorporated herein by reference). 10.17 - Ashland Oil, Inc. 1993 Stock Incentive Plan. 11 - Computation of Earnings Per Share (appearing on Page 33 of Ashland's Form 10-K for the fiscal year ended September 30, 1994). 13 - Portions of Ashland's Annual Report to Shareholders, incorporated by reference herein, for the fiscal year ended September 30, 1994. 21 - List of Subsidiaries. 23 - Consent of Ernst & Young, independent auditors. 24 - Power of Attorney, including resolutions of the Board of Directors. 27 - Financial Data Schedule Upon written or oral request, a copy of the above exhibits will be furnished at cost. (b) REPORTS ON FORM 8-K None 24

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ASHLAND OIL, INC. (Registrant) By: /s/ Kenneth L. Aulen ------------------------------- (Kenneth L. Aulen, Administrative Vice President and Controller) Date: December 8, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant, in the capacities indicated, on December 8, 1994. Signatures Capacity ---------- --------- /s/ John R. Hall Chairman of the Board of Directors, --------------------------------- Chief Executive Officer John R. Hall and Director /s/ J. Marvin Quin Senior Vice President and --------------------------------- Chief Financial Officer J. Marvin Quin /s/ Kenneth L. Aulen Administrative Vice President, --------------------------------- Controller and Principal Kenneth L. Aulen Accounting Officer * Director --------------------------------- Thomas E. Bolger * Director --------------------------------- Samuel C. Butler * Director --------------------------------- Frank C. Carlucci * Director --------------------------------- Paul W. Chellgren * Director --------------------------------- James B. Farley * Director --------------------------------- Edmund B. Fitzgerald * Director --------------------------------- Mannie L. Jackson 25

* Director --------------------------------- Patrick F. Noonan * Director --------------------------------- Jane C. Pfieffer * Director --------------------------------- Michael D. Rose * Director --------------------------------- William L. Rouse, Jr. * Director --------------------------------- Robert B. Stobaugh * Director --------------------------------- James W. Vandeveer By: /s/ Thomas L. Feazell ---------------------------- Thomas L. Feazell Attorney-in-Fact Date: December 8, 1994 26

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES Page Consolidated financial statements and supplemental information: Statements of consolidated income . . . . . . . . . . . . * Consolidated balance sheets . . . . . . . . . . . . . . . * Statements of consolidated common stockholders' equity . . * Statements of consolidated cash flows . . . . . . . . . . * Notes to consolidated financial statements . . . . . . . . * Five year information by industry segment . . . . . . . . * Supplemental oil and gas information . . . . . . . . . . . * Management's discussion and analysis-Quarterly financial information . . . . . . . . . . . . . . . . . . . . . . . * Consolidated financial schedules: V- Property, plant and equipment . . . . . . . . . 29 VI- Accumulated depreciation, depletion and amortization of property, plant and equipment . . 30 VIII- Valuation and qualifying accounts . . . . . . . 31 IX- Short-term borrowings . . . . . . . . . . . . . 32 ------------------ *The consolidated financial statements appearing on Pages 41 through 55, the supplemental information appearing on Pages 58 through 61 and the information appearing under the caption "Management's Discussion and Analysis-Quarterly Financial Information" on Page 40 in Ashland's Annual Report are incorporated by reference in this Annual Report on Form 10-K. Schedules other than those listed above have been omitted because of the absence of the conditions under which they are required or because the information required is shown in the consolidated financial statements or the notes thereto. Separate financial statements of unconsolidated affiliates are omitted because each company does not constitute a significant subsidiary using the 20% tests when considered individually. Summarized financial information for such affiliates is disclosed in Note D of Notes to Consolidated Financial Statements in Ashland's Annual Report. 27

REPORT OF INDEPENDENT AUDITORS We have audited the consolidated financial statements and schedules of Ashland Oil, Inc. and subsidiaries listed in the accompanying index to financial statements and financial schedules (Item 14(a)). These financial statements and schedules are the responsibility of Ashland's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements listed in the accompanying index to financial statements (Item 14(a)) present fairly, in all material respects, the consolidated financial position of Ashland Oil, Inc. and subsidiaries at September 30, 1994, and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note A to the consolidated financial statements, in fiscal 1992 Ashland changed its methods of accounting for postretirement benefits other than pensions and for income taxes. Louisville, Kentucky Ernst & Young LLP November 2, 1994 28

<TABLE> <CAPTION> Ashland Oil, Inc. and Subsidiaries Schedule V - Property, Plant and Equipment ---------------------------------------------------------------------------------------------------------------- Other additions (deductions) (In millions) Balance at Retirements ------------------------------------- Balance beginning and Operations at end of year Additions transfers acquired Divestitures Other-net of year ---------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> Year ended September 30, 1994 Petroleum $2,790 $155 $ (20) $ 1 $ (15) $ - $2,911 SuperAmerica 440 39 (20) - - - 459 Valvoline 250 25 (3) 1 - - 273 Chemical 573 61 (7) 6 - - 633 Construction 582 45 (4) 12 (107) - 528 Exploration 924 41 (22) - - - 943 Corporate 146 10 (5) - - - 151 ---------------------------------------------------------------------------------------------------------------- $5,705 $376 $ (81) $ 20 $(122) $ - $5,898 ================================================================================================================ Year ended September 30, 1993 Petroleum $2,662 $230 $ (14) $ - $ (88) $ - $2,790 SuperAmerica 517 25 (22) - (80) - 440 Valvoline 238 21 (7) - - (2) 250 Chemical 547 51 (19) - (6) - 573 Construction 562 43 (20) - (3) - 582 Exploration 894 42 (12) - - - 924 Corporate 145 20 (19) - - - 146 ---------------------------------------------------------------------------------------------------------------- $5,565 $432 $ (113) $ - $(177) $(2) $5,705 ================================================================================================================ Year ended September 30, 1992 Petroleum $2,432 $273 $ (22) $(1) $ (20) $ - $2,662 SuperAmerica 486 37 (7) 5 - (4) 517 Valvoline 222 19 (3) - - - 238 Chemical 488 47 (13) 25 - - 547 Construction 545 42 (21) 3 (7) - 562 Exploration 835 67 (17) 9 - - 894 Corporate 158 19 (32) - - - 145 ---------------------------------------------------------------------------------------------------------------- $5,166 $504 $(115) $41 $ (27) $(4) $5,565 ================================================================================================================ </TABLE> 29

<TABLE> <CAPTION> Ashland Oil, Inc. and Subsidiaries Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment ------------------------------------------------------------------------------------------------------------------ (In millions) Balance at Depreciation, Retirements Balance beginning depletion and and at end Classification of year amortization(1) transfers Divestitures of year ------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Year ended September 30, 1994 Petroleum $1,296 $131 $(16) $ (8) $1,403 SuperAmerica 185 27 (15) - 197 Valvoline 79 15 2 - 96 Chemical 280 37 (8) - 309 Construction 412 39 (5) (81) 365 Exploration 610 35 (14) - 631 Corporate 73 11 (3) - 81 ------------------------------------------------------------------------------------------------------------------ $2,935 $295 $(59) $(89) $3,082 ================================================================================================================== Year ended September 30, 1993 Petroleum $1,242 $123 $ (9) $(60) $1,296 SuperAmerica 199 28 (15) (27) 185 Valvoline 71 13 (5) - 79 Chemical 260 35 (12) (3) 280 Construction 390 44 (20) (2) 412 Exploration 583 36 (9) - 610 Corporate 73 11 (11) - 73 ------------------------------------------------------------------------------------------------------------------ $2,818 $290 $(81) $(92) $2,935 ================================================================================================================== Year ended September 30, 1992 Petroleum $1,138 $121 $(17) $ - $1,242 SuperAmerica 172 31 (4) - 199 Valvoline 60 13 (2) - 71 Chemical 236 35 (11) - 260 Construction 369 44 (19) (4) 390 Exploration 558 42 (17) - 583 Corporate 69 11 (7) - 73 ------------------------------------------------------------------------------------------------------------------ $2,602 $297 $(77) $ (4) $2,818 ================================================================================================================== </TABLE> [FN] (1) Includes amounts charged to general corporate expenses. 30

<TABLE> <CAPTION> Ashland Oil, Inc. and Subsidiaries Schedule VIII - Valuation and Qualifying Accounts --------------------------------------------------------------------------------------------------------------------- (In millions) Balance at Provisions Balance beginning charged to Reserves Other at end Description of year earnings utilized changes of year --------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Year ended September 30, 1994 Reserves deducted from asset accounts Accounts receivable $20 $11 $ (8)(1) $ - $23 Inventories 5 3 (2) - 6 --------------------------------------------------------------------------------------------------------------------- Year ended September 30, 1993 Reserves deducted from asset accounts Accounts receivable $18 $13 $ (9)(1) $(2) $20 Inventories 9 2 (6) - 5 --------------------------------------------------------------------------------------------------------------------- Year ended September 30, 1992 Reserves deducted from asset accounts Accounts receivable $18 $30 $(30)(1) $ - $18 Inventories 6 6 (3) - 9 --------------------------------------------------------------------------------------------------------------------- <FN> (1) Uncollected amounts written off, net of recoveries of $2 million in 1994, $3 million in 1993 and $2 million in 1992. </TABLE> 31

<TABLE> <CAPTION> Ashland Oil, Inc. and Subsidiaries Schedule IX - Short-Term Borrowings ------------------------------------------------------------------------------------------------------------------------ Amount Outstanding (In millions) Weighted -------------------------- Weighted average Maximum average Balance interest at any Average interest at end rate at end month end during rate during Category of short-term borrowings of year of year during year year(1) year(2) ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Year ended September 30, 1994 Notes payable to banks $ 57 5.1% $ 69 $ 26 4.1% Commercial paper 15 5.0% 40 6 4.4% ------------------------------------------------------------------------------------------------------------------------ Year ended September 30, 1993 Notes payable to banks $ 42 3.3% $165 $ 87 3.3% Commercial paper 35 3.4% 111 40 3.3% ------------------------------------------------------------------------------------------------------------------------ Year ended September 30, 1992 Notes payable to banks $146 3.6% $165 $108 4.3% Commercial paper 89 3.5% 89 45 4.4% ------------------------------------------------------------------------------------------------------------------------ <FN> (1) Average is based on daily outstanding balances of short-term borrowings. (2) Weighted average is based on interest expense on short-term borrowings divided by average short-term borrowings outstanding. </TABLE> 32

<TABLE> <CAPTION> Ashland Oil, Inc. and Subsidiaries Exhibit 11 - Computation of Earnings (Loss) Per Share Years Ended September 30 ----------------------------------------------------------------------------------------------------------------------- (In millions except per share data) 1994 1993 1992 ----------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Primary earnings (loss) per share Income (loss) available to common shares Net income (loss) $ 197 $ 142 $ (336) Ashland Coal, Inc. (ACI) equity income and Ashland's share of ACI's cumulative effect of accounting changes (net of income taxes) - (25) (4) Ashland's share of ACI primary earnings per share (net of income taxes) - 23 4 Dividends on convertible preferred stock (19) (6) - ----------------------------------------------------------------------------------------------------------------------- $ 178 $ 134 $ (336) ----------------------------------------------------------------------------------------------------------------------- Average common shares and equivalents outstanding Average common shares outstanding 60 60 60 Common shares issuable upon exercise of stock options 1 - - Share adjustment for prepaid contribution to leveraged employee stock ownership plan (LESOP) - (1) (2) ----------------------------------------------------------------------------------------------------------------------- 61 59 58 ----------------------------------------------------------------------------------------------------------------------- Earnings (loss) per share $2.94 $2.26 $(5.75) ======================================================================================================================= Earnings (loss) per share assuming full dilution Income (loss) available to common shares Net income (loss) $ 197 $ 142 $ (336) ACI equity income and Ashland's share of ACI's cumulative effect of accounting changes (net of income taxes) - (25) (4) Ashland's share of ACI earnings per share assuming full dilution (net of income taxes) - 21 4 Interest on convertible debentures (net of income taxes) 5 6 - ----------------------------------------------------------------------------------------------------------------------- $ 202 $ 144 $ (336) ----------------------------------------------------------------------------------------------------------------------- Average common shares and equivalents outstanding Average common shares outstanding 60 60 60 Common shares issuable upon Exercise of stock options 1 1 - Conversion of debentures 2 3 - Conversion of preferred stock 9 3 - Share adjustment for prepaid contribution to LESOP - (1) (2) ----------------------------------------------------------------------------------------------------------------------- 72 66 58 ------------------------------------------------------------------------------------------------------------------------ Earnings (loss) per share $2.79 $2.20 $(5.75) ======================================================================================================================== </TABLE> 33



                                                           [ASHLAND LOGO]






                                     ASHLAND OIL, INC.


                                 SECOND RESTATED ARTICLES
                                     OF INCORPORATION
                            (INCLUDING ALL AMENDMENTS THERETO)







                                                      As Effective May 18, 1993

TABLE OF CONTENTS RECORDING DATA SECOND RESTATED ARTICLES OF INCORPORATION ASHLAND OIL, INC. <TABLE> <CAPTION> Date Filed In Date Office of Recorded in Number of Secretary Office of Shares of State County Clerk Authorized - Document of Kentucky Clerk Explanation _________________ _______________ ______________________ __________________ <S> <C> <C> <C> 1. Second Restated January 29, 1987 Boyd Co., KY - January 30,000,000 shares Articles of 30, 1987, Arts. of Inc., Cumulative Preferred Incorporation Book 25, Page 461; Stock, no par value; Greenup Co., KY - January 150,000,000 shares 30, 1987, Arts. of Inc., Common Stock, $1 par Book 9, Page 543 value 2. Certificate and January 29, 1987 Boyd Co., KY - January 10,000,000 shares Statement, etc. 30, 1987, Arts. of Inc., initially issuable Establishing and Book 25, Page 470; Designating Greenup Co., KY - January Cumulative 30, 1987, Arts. of Inc., Preferred Stock, Book 9, Page 552 Series of 1987, etc. of AOI 3. Amendment No. 1 January 28, 1988 Boyd Co., KY - January New Article X 29, 1988, Arts. of Inc., Book 25, Page 954; Greenup Co., KY - January 29, 1988, Arts. of Inc., Book 10, Page 169 4. Amendment No. 2 January 27, 1989 Boyd Co., KY - January New Article XI 30, 1989, Arts. of Inc., Book 26, Page 522; Greenup Co., KY - January 30, 1989, Arts. of Inc., Book 10, Page 423 5. Amendment No. 3 May 18, 1993 Boyd Co., KY - May 6,000,000 shares of 18, 1993, Arts. of Inc., $3.125 Cumulative Book 30, Page 59; Convertible Greenup Co., KY - May Preferred Stock, 18, 1993, Arts. of Inc., no par value Book 12, Page 322 </TABLE>

[STAMP] ORIGINAL COPY FILED SECRETARY OF STATE OF KENTUCKY FRANKFORT, KENTUCKY JANUARY 29, 1987 12:45 PM SECOND RESTATED ARTICLES OF INCORPORATION OF ASHLAND OIL, INC. Pursuant to Section 271A.320 of the Kentucky Business Corporation Act, Ashland Oil, Inc., pursuant to a resolution duly adopted by its Board of Directors, hereby adopts the following Second Restated Articles of Incorporation (hereinafter called the "Articles of Incorporation"): ARTICLE I The name of the corporation is Ashland Oil, Inc. (hereinafter called the "Company" or the "Corporation"). ARTICLE II The purpose for which the Company is organized is the transaction of any or all lawful businesses for which corporations may be organized under the Kentucky Business Corporation Act, or any act amendatory thereof, supplemental thereto or substituted therefor (hereinafter called the "Act"), and to do all things necessary, convenient, proper or desirable in connection with or incident to any of the Company's businesses. ARTICLE III A. The Company shall have all the powers conferred upon a corporation organized under the Act and shall have all powers necessary, convenient or desirable in order to fulfill and further the purpose of the Company. B. The Company shall have the power to purchase shares of the stock of the Company to the extent of unreserved and unrestricted capital and earned surplus of the Company and to any greater extent permitted by the Act. C. The Board of Directors of the Company may distribute to the shareholders of the Company a portion of the Company's assets, in cash or property, out of capital surplus of the Company and from any other source permitted by the Act. ARTICLE IV A. The aggregate number of shares which the Company is authorized to issue is 30,000,000 shares of Cumulative Preferred Stock, without par value (hereinafter called the "Preferred Stock"), and 150,000,000 shares of Common Stock, par value $1.00 per share (hereinafter called the "Common Stock"). B. Preferred Stock (1) To the extent permitted by the Act, the Board of Directors is authorized, by resolution, to cause the Preferred Stock to be divided into and issued from time to time in one or more series and to fix and determine the designation and number of shares, and the relative rights and preferences of the shares, of each such series, and to change shares of one series that have been redeemed or reacquired into shares of another series. (2) All shares of Preferred Stock shall rank equally and be identical in all respects except as to the relative rights and preferences of any series fixed and determined by the Board of Directors, which may vary to the extent permitted by the Act.

(3) The Preferred Stock shall be preferred over the Common Stock as to payment of dividends. Before any dividends or distributions (other than dividends or distributions payable in Common Stock) on the Common Stock shall be declared and set apart for payment or paid, the holders of shares of each series of Preferred Stock shall be entitled to receive dividends (either in cash, shares of Common Stock or Preferred Stock, or otherwise) when, as and if declared by the Board of Directors, at the rate and on the date or dates fixed in the resolution adopted by the Board of Directors establishing such series, and no more. With respect to each series of Preferred Stock, the dividends on each share of such series shall be cumulative from the date of issue of such share unless some other date is fixed in the resolution adopted by the Board of Directors establishing such series. Accruals of dividends shall not bear interest. (4) The Preferred Stock shall be preferred over the Common Stock as to assets so that the holders of each series of Preferred Stock shall be entitled to be paid, upon the voluntary or involuntary liquidation, dissolution or winding up of the Company and before any distribution is made to the holders of Common Stock, the amount fixed in the resolution adopted by the Board of Directors establishing such series, but in such case the holders of such series of Preferred Stock shall not be entitled to any other or further payment. If upon any such liquidation, dissolution or winding up of the Company its net assets shall be insufficient to permit the payment in full of the respective amounts to which the holders of all outstanding Preferred Stock are entitled, the entire remaining net assets of the Company shall be distributed among the holders of each series of Preferred Stock in amounts proportionate to the full amounts to which the holders of each such series are respectively so entitled. For purposes of this paragraph (4), the voluntary sale, lease, exchange or transfer of all or substantially all of the Company's property or assets to, or its consolidation or merger with, one or more corporations shall not be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company. (5) All shares of any series of Preferred Stock shall be redeemable to the extent permitted by the Act and fixed in the resolution adopted by the Board of Directors establishing such series. All shares of any series of Preferred Stock shall be convertible into shares of Common Stock or into shares of any other series of Preferred Stock to the extent permitted by the Act and fixed in the resolution adopted by the Board of Directors establishing such series. (6) Unless otherwise provided herein or by the Act, or unless otherwise provided in the resolution adopted by the Board of Directors establishing any series of Preferred Stock, the holders of shares of Preferred Stock shall be entitled to one vote for each share of Preferred Stock held by them on all matters properly presented to shareholders, the holders of Common Stock and the holders of all series of Preferred Stock voting together as one class. (7) So long as any shares of Preferred Stock are outstanding, the Company shall not: (a) Redeem, purchase or otherwise acquire any shares of Common Stock if at the time of making such redemption, purchase or acquisition, the Company shall be in default with respect to any dividends accrued on, or any obligation to retire, shares of Preferred Stock. (b) Without the affirmative vote or consent of the holders of at least 66 2/3 percent of the number of shares of Preferred Stock at the time outstanding, voting or consenting (as the case may be) separately as a class without regard to series, given in person or by proxy, either in writing or by resolution adopted at a meeting called for the purpose, (i) create any class of stock ranking prior to the Preferred Stock as to dividends or upon liquidation or increase the authorized number of shares of any such class of stock or (ii) alter or change any of the provisions of these Articles of Incorporation so as adversely to affect the relative rights and preferences of the Preferred Stock or (iii) increase the authorized number of shares of Preferred Stock. (c) Without the affirmative vote or consent of the holders of at least 66 2/3 percent of the number of shares of any series of Preferred Stock at the time outstanding, voting or consenting (as the case may be) separately as a series, given in person or by proxy, either in writing or by resolution adopted at a meeting called for the purpose, alter or change any of the provisions of these Articles of Incorporation so as adversely to affect the relative rights and preferences of such series. 2

C. Common Stock (1) The holders of Common Stock of the Company shall be entitled to one vote for each share of Common Stock held by them on all matters properly presented to shareholders, except as otherwise provided herein or by the Act. (2) Subject to the preferential rights of Preferred Stock set forth herein or in the resolution adopted by the Board of Directors establishing any series of Preferred Stock, such dividends (either in cash, shares of Common Stock or Preferred Stock, or otherwise) as may be determined by the Board of Directors may be declared and paid on the Common Stock from time to time in accordance with the Act. D. No holder of shares of any class of stock of the Company shall have any preemptive right to subscribe to stock, obligations, warrants, subscription rights or other securities of the Company of any class, whether now or hereafter authorized. ARTICLE V The Company shall have perpetual existence. ARTICLE VI Subject to the restriction that the number of directors shall not be less than the number required by the laws of the Commonwealth of Kentucky, the number of directors may be fixed, from time to time, pursuant to the By-laws of the Company. The members of the Board of Directors (other than those who may be elected by the holders of any class or series of capital stock of the Company having a preference over the Common Stock as to dividends or upon liquidation pursuant to the terms of these Articles of Incorporation or of such class or series of stock) shall be classified (so long as the Board of Directors shall consist of at least nine members pursuant to the By-laws), with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as shall be provided in the By-laws of the Company, one class to be originally elected for a term expiring at the annual meeting of the shareholders to be held in 1987, another class to be originally elected for a term expiring at the annual meeting of the shareholders to be held in 1988, and another class to be originally elected for a term expiring at the annual meeting of the shareholders to be held in 1989, with each class to hold office until the successors of such class are elected and qualified. At each annual meeting of the shareholders, the date of which shall be fixed by or pursuant to the By-laws of the Company, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election. Subject to any requirements of law and the rights of any class or series of capital stock of the Company having a preference over the Common Stock as to dividends or upon liquidation pursuant to the terms of these Articles of Incorporation or of such class or series of stock (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the terms of such class or series), the affirmative vote of the holders of 80 percent or more of the voting power of the then outstanding voting stock of the Company, voting together as a single class, shall be required to remove any director without cause. For purposes of this Article VI, "cause" shall mean the willful and continuous failure of a director to substantially perform such director's duties to the Company, other than any such failure resulting from incapacity due to physical or mental illness, or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Company. As used in these Articles of Incorporation, "voting stock" shall mean shares of capital stock of the Company entitled to vote generally in an election of directors. Subject to any requirements of law and the rights of any class or series of capital stock of the Company having a preference over the Common Stock as to dividends or upon liquidation pursuant to the terms of these Articles of Incorporation or of such class or series of stock, newly created directorships resulting from any 3

increase in the number of directors may be filled by the Board of Directors, or as otherwise provided in the By-laws, and any vacancies on the Board of Directors resulting from death, resignation, removal or other cause shall only be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director, or as otherwise provided in the By-laws. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. ARTICLE VII In furtherance and not in limitation of the powers conferred upon it by law, the Board of Directors is expressly authorized to: A. adopt any By-laws that the Board of Directors may deem necessary or desirable for the efficient conduct of the affairs of the Company, including, but not limited to, provisions governing the conduct of, and the matters which may properly be brought before, annual or special meetings of the shareholders and provisions specifying the manner and extent to which prior notice shall be given of the submission of proposals to be considered at any such meeting or of nominations for election of directors to be held at any such meeting; and B. repeal, alter or amend the By-laws. In addition to any requirements of law and any other provisions of these Articles of Incorporation or the terms of any class or series of capital stock having a preference over the Common Stock as to dividends or upon liquidation (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the terms of such class or series), the affirmative vote of the holders of 80 percent or more of the voting power of the then outstanding voting stock of the Company, voting together as a single class, shall be required to amend, alter or repeal any provision of the By-laws. ARTICLE VIII A. A higher than majority vote of shareholders for certain Business Combinations shall be required as follows: (1) In addition to any affirmative vote otherwise required by law or these Articles of Incorporation or the terms of any class or series of capital stock of the Company having a preference over the Common Stock as to dividends or upon liquidation (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the terms of such class or series) and except as otherwise expressly provided in Section B of this Article VIII: (a) any merger or consolidation of the Company or any Subsidiary with an Interested Shareholder or with any other corporation, whether or not itself an Interested Shareholder, which is, or after such merger or consolidation would be, an Affiliate of an Interested Shareholder who was an Interested Shareholder prior to the transaction; (b) any sale, lease, transfer, or other disposition, other than in the ordinary course of business, in one transaction or a series of transactions in any twelve-month period, to any Interested Shareholder or any Affiliate of an Interested Shareholder, other than the Company or any Subsidiary, of any assets of the Company or any Subsidiary having, measured at the time the transaction or transactions are approved by the Board of Directors, an aggregate book value as of the end of the Company's most recently ended fiscal quarter of 5 percent or more of the total market value of the outstanding stock of the Company or of its net worth as of the end of its most recently ended fiscal quarter; (c) the issuance or transfer by the Company or any Subsidiary, in one transaction or a series of transactions in any twelve-month period, of any equity securities of the Company or any Subsidiary which have an aggregate market value of 5% or more of the total market value of the outstanding stock 4

of the Company, determined as of the end of the Company's most recently ended fiscal quarter prior to the first such issuance or transfer, to any Interested Shareholder or any Affiliate of any Interested Shareholder, other than the Company or any Subsidiary, except pursuant to the exercise of warrants or rights to purchase securities offered pro rata to all holders of the Company's voting stock or any other method affording substantially proportionate treatment to the holders of voting stock; (d) the adoption of any plan or proposal for the liquidation or dissolution of the Company in which anything other than cash will be received by an Interested Shareholder or any Affiliate of an Interested Shareholder; or (e) any reclassification of securities, including any reverse stock split; any recapitalization of the Company; any merger or consolidation of the Company with any Subsidiary; or any other transaction which has the effect, directly or indirectly, in one transaction or a series of transactions, of increasing by 5 percent or more the proportionate amount of the outstanding shares of any class of equity securities of the Company or any Subsidiary which is directly or indirectly beneficially owned by any Interested Shareholder or any Affiliate of any Interested Shareholder; shall require the recommendation of the Board of Directors and the affirmative vote of the holders of at least (i) 80 percent of the voting power of the then outstanding voting stock of the Company, voting together as a single class, and (ii) two-thirds of the voting power of the then outstanding voting stock other than voting stock beneficially owned by the Interested Shareholder who is, or whose Affiliate is, a party to the Business Combination or by an Affiliate or Associate of such Interested Shareholder, voting together as a single class. (2) The term "Business Combination" as used in this Article VIII shall mean any transaction which is referred to in any one or more of clauses (a) through (e) of paragraph (1) of Section A of this Article VIII. B. The provisions of Section A of this Article VIII shall not be applicable to any Business Combination, and such Business Combination shall require only such affirmative vote (if any) as is required by law, any other provision of these Articles of Incorporation or the terms of any class or series of capital stock of the Company having a preference over the Common Stock as to dividends or upon liquidation, if all conditions specified in either of the following paragraphs (1) or (2) are met: (1) The Business Combination shall have been approved by resolution by a majority of the Continuing Directors at a meeting of the Board of Directors at which a quorum consisting of at least a majority of the then Continuing Directors was present; or (2) All the following five conditions have been met: (a) The aggregate amount of the cash and the market value as of the Valuation Date of consideration other than cash to be received per share by holders of Common Stock in such Business Combination is at least equal to the highest of the following: (i) the highest per share price, including any brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the Interested Shareholder for any shares of Common Stock (a) within the two-year period immediately prior to the Announcement Date or (b) in the transaction in which it became an Interested Shareholder, whichever is higher; (ii) the market value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher; and (iii) the price per share equal to the market value per share of Common Stock determined pursuant to clause (ii) immediately preceding, multiplied by the fraction resulting from (a) the highest per share price, including any brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the Interested Shareholder for any shares of Common Stock acquired by it within the two-year period immediately prior to the Announcement Date, over (b) the market value per share of Common Stock on the first day in such two-year period on which the Interested Shareholder acquired any shares of Common Stock. 5

(b) The aggregate amount of the cash and the market value as of the Valuation Date of consideration other than cash to be received per share by holders of shares of any class or series of outstanding stock other than Common Stock is at least equal to the highest of the following, whether or not the Interested Shareholder has previously acquired any shares of a particular class or series of stock: (i) the highest per share price, including any brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the Interested Shareholder for any shares of such class of stock acquired by it (a) within the two-year period immediately prior to the Announcement Date or (b) in the transaction in which it became an Interested Shareholder, whichever is higher; (ii) the highest preferential amount per share to which the holders of shares of such class of stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company; (iii) the market value per share of such class of stock on the Announcement Date or on the Determination Date, whichever is higher; and (iv) the price per share equal to the market value per share of such class of stock determined pursuant to clause (iii) immediately preceding, multiplied by the fraction resulting from (a) the highest per share price, including any brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the Interested Shareholder for any shares of any class of voting stock acquired by it within the two-year period immediately prior to the Announcement Date over (b) the market value per share of the same class of voting stock on the first day in such two-year period on which the Interested Shareholder acquired any shares or the same class of voting stock. (c) In making any price calculation under paragraph (2) of this Section B, appropriate adjustments shall be made to reflect any reclassification or stock split (including any reverse stock split), stock dividend, recapitalization, reorganization or any similar transaction which has the effect of increasing or reducing the number of outstanding shares of the stock. The consideration to be received by holders of any class or series of outstanding stock is to be in cash or in the same form as the Interested Shareholder has previously paid for shares of the same class or series of stock. If the Interested Shareholder has paid for shares of any class of stock with varying forms of consideration, the form of consideration for such class of stock shall be either in cash or the form used to acquire the largest number of shares of such class or series of stock previously acquired by it. (d) After the Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (i) there shall have been no failure to declare and pay at the regular date thereof any full periodic dividends, whether or not cumulative, on any outstanding Preferred Stock of the Company or other capital stock entitled to a preference over the Common Stock as to dividends or upon liquidation; (ii) there shall have been no reduction in the annual rate of dividends paid on the Common Stock, except as necessary to reflect any subdivision of the Common Stock, and no failure to increase the annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or other similar transaction which has the effect of reducing the number of outstanding shares of Common Stock; and (iii) the Interested Shareholder did not become the beneficial owner of any additional shares of stock of the Company except as part of the transaction which resulted in such Interested Shareholder or by virtue of proportionate stock splits or stock dividends. The provisions of clauses (i) and (ii) immediately preceding shall not apply if neither an Interested Shareholder nor any Affiliate or Associate of an Interested Shareholder voted as a director of the Company in a manner inconsistent with such clauses and the Interested Shareholder, within ten days after any act or failure to act inconsistent with such clauses, notifies the Board of Directors of the Company in writing that the Interested Shareholder disapproves thereof and requests in good faith that the Board of Directors rectify such act or failure to act. 6

(e) After the Interested Shareholder has become an Interested Shareholder, the Interested Shareholder shall not have received the benefit, directly or indirectly, except proportionately as a shareholder, of any loans, advances, guarantees, pledges or other financial assistance provided by the Company or any Subsidiary, whether in anticipation of or in connection with such Business Combination or otherwise. C. For purposes of this Article VIII: (1) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 1, 1985 (the term "registrant" in such Rule 12b-2 meaning in this case the Company). (2) "Announcement Date" means the first general public announcement of the proposal or intention to make a proposal of the Business Combination or its first communication generally to shareholders of the Company, whichever is earlier. (3) "Beneficial owner" when used with respect to any voting stock, means a person who, individually or with any Affiliate or Associate has: (i) the right to acquire voting stock, whether such right is exercisable immediately or only after the passage of time and whether or not such right is exercisable only after specified conditions are met pursuant to any agreement, arrangement, or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; (ii) the right to vote voting stock pursuant to any agreement, arrangement, or understanding; or (iii) any agreement, arrangements, or understanding for the purpose of acquiring, holding, voting or disposing of voting stock with any other person who beneficially owns, or whose Affiliates or Associates beneficially own, directly or indirectly, such shares of voting stock. (4) "Continuing Director" means any member of the Board of Directors who is not an Affiliate or Associate of an Interested Shareholder or any of its Affiliates, other than the Company or any Subsidiary, and who was a director of the Company prior to the time the Interested Shareholder became an Interested Shareholder, and any other member of the Board of Directors who is not an Affiliate or Associate of an Interested Director or any of its Affiliates, other than the Company or any Subsidiary, and was recommended or elected by a majority of the Continuing Directors at a meeting at which a quorum consisting of a majority of the Continuing Directors is present. (5) "Determination Date" means the date on which an Interested Shareholder first became an Interested Shareholder. (6) "Equity security" means: (a) any stock or similar security, certificate of interest, or participation in any profit-sharing agreement, voting trust certificate, or certificate of deposit for the foregoing; (b) any security convertible, with or without consideration, into an equity security, or any warrant or other security carrying any right to subscribe to or purchase an equity security; or (c) any put, call, straddle, or other option, right or privilege of acquiring an equity security from or selling an equity security to another without being bound to do so. (7) "Interested Shareholder" means any person, other than the Company or any Subsidiary, who: (a) is the beneficial owner, directly or indirectly, of 10 percent or more of the voting power of the outstanding voting stock of the Company; or (b) is an Affiliate of the Company and at any time within the two- year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10 percent or more of the voting power of the then outstanding voting stock of the Company. 7

For the purpose of determining whether a person is an Interested Shareholder, the number of shares of voting stock deemed to be outstanding shall include shares deemed owned by the person through application of paragraph (3) of this Section C but shall not include any other shares of voting stock which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. Furthermore, any such beneficial ownership or voting power arising solely out of a trustee or custodial relationship of any person in connection with a Company "employee benefit or stock plan" shall be excluded for purposes of determining whether or not any such person is an Interested Stockholder. For purposes hereof, the term "employee benefit or stock plan" of the Company shall mean any option, bonus, appreciation, profit sharing, retirement, incentive, thrift, employee stock ownership, dividend reinvestment, savings or similar plan of the Company. (8) "Market value" means: (a) in the case of stock, the highest closing sale price during the 30 calendar day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange listed stocks, or, if such stock is not quoted on such Composite Tape, on the New York Stock Exchange, or if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30 calendar day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotation is available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors at a meeting of the Board of Directors at which a quorum consisting of at least a majority of the then Continuing Directors is present; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Continuing Directors at a meeting of the Board of Directors at which a quorum consisting of at least a majority of the then Continuing Directors is present. (9) "Subsidiary" means any corporation of which voting stock having a majority of the votes entitled to be cast is owned, directly or indirectly, by the Company. (10) "Valuation Date" means: (a) for a Business Combination voted upon by shareholders, the later of the day prior to the date of the shareholders' vote or the date 20 business days prior to the consummation of the Business Combination; and (b) for a Business Combination not voted upon by shareholders, the date of the consummation of the Business Combination. (11) "Voting Stock" means shares of capital stock of the Company entitled to vote generally in an election of directors. D. In addition to any requirements of law and any other provisions of these Articles of Incorporation or the terms of any class or series of capital stock of the Company entitled to a preference over the Common Stock as to dividends or upon liquidation (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the terms of such class or series), the affirmative vote of (1) the holders of at least 80 percent of the voting power of the then outstanding voting stock of the Company, voting together as a single class, and (2) the holders of at least two-thirds of the voting power of the then outstanding voting stock of the Company other than the Interested Shareholder, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision inconsistent with, this Article VIII. 8

ARTICLE IX In addition to any requirements of law and any other provisions of these Articles of Incorporation or the terms of any class or series of capital stock of the Company having a preference over the Common Stock as to dividends or upon liquidation (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the terms of such class or series), the affirmative vote of the holders of 80 percent or more of the voting power of the then outstanding voting stock of the Company, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision inconsistent with, this Article IX or Article VI or VII of these Articles of Incorporation. Subject to the foregoing provisions of this Article IX and Section D of Article VIII, the Company reserves the right from time to time to amend, alter, change, add to or repeal any provision contained in these Articles of Incorporation in any manner now or hereafter prescribed by law and in these Articles of Incorporation, and all rights and powers at any time conferred upon shareholders, directors and officers of the Company by these Articles of Incorporation or any amendment thereof are subject to the provisions of this Article IX and Section D of Article VIII. The foregoing Second Restated Articles of Incorporation correctly set forth without change the corresponding provisions sequentially renumbered of the Restated Articles of Incorporation as heretofore amended, and supersede the Restated Articles of Incorporation and all amendments thereto. Dated: January 29, 1987. ASHLAND OIL, INC. /Thomas L. Feazell/ _______________________________ By: Thomas L. Feazell Vice President /John P. Ward/ _______________________________ By: John P. Ward Secretary COMMONWEALTH OF KENTUCKY ) ) SS: COUNTY OF GREENUP ) I, Teresa F. Gabbard, a notary public, do hereby certify that on this 29th day of January, 1987, personally appeared before me JOHN P. WARD, who, being duly sworn, declared that he is the Secretary of Ashland Oil, Inc., that he signed the foregoing document as such, and that the statements contained therein are true. My commission expires: October 9, 1989 /Teresa F. Gabbard/ _________________________ Teresa F. Gabbard Notary Public Prepared by John P. Ward 1000 Ashland Drive Russell, Kentucky /John P. Ward/ _____________________________ John P. Ward 9

[STAMP] [STAMP] LODGED FOR RECORD ON LODGED FOR RECORD ON THE 30 DAY OF JUNE THE 30 DAY OF JANUARY 1987 AT 9:57 AM. RECORDED 1987 AT 10:47 AM. RECORDED IN ART OF INC. BOOK IN ART OF INC. BOOK NO. 9 PAGE 552 NO. 25 PAGE 470 TAX ________ FEES $5.50 TAX $________ FEE $5.50 DONALD DAVIDSON, CLERK WILLIAM A. SELBEE, CLERK GREENUP COUNTY BOYD COUNTY BY JOAN BURNETT, D.C. BY: DONNA MARCUM, D.C.

[STAMP] ORIGINAL COPY FILED SECRETARY OF STATE OF KENTUCKY FRANKFORT, KENTUCKY JANUARY 29, 1987 12:50 PM DREXELL R. DAVIS ASHLAND OIL, INC. CERTIFICATE AND STATEMENT OF RESOLUTION ESTABLISHING AND DESIGNATING CUMULATIVE PREFERRED STOCK, SERIES OF 1987, AND FIXING AND DETERMINING CERTAIN RIGHTS THEREOF AND THE NUMBER OF SHARES INITIALLY ISSUABLE KNOW ALL MEN BY THESE PRESENTS, that THOMAS L. FEAZELL, as a Vice President, and JOHN P. WARD, as the Secretary, of ASHLAND OIL INC., a Kentucky corporation (the "Company"), do hereby certify that at a meeting of the Board of Directors of the Company duly called and held in accordance with the laws of Kentucky and the By-laws of the Company on January 29, 1987, the following resolution establishing and designating the Series of 1987 of the Cumulative Preferred Stock of the Company and fixing and determining certain rights thereof and the number of shares initially issuable was duly adopted. "RESOLVED, that, pursuant to the authority expressly granted to and vested in the Board of Directors of the Company (the "Board of Directors") by the Second Restated Articles of Incorporation of the Company (the "Articles"), this Board of Directors hereby establishes and designates a series of Cumulative Preferred Stock, without par value, of the Company and fixes and determines the number of shares to be initially issuable in such series and the relative rights and preferences thereof (in addition to the relative rights and preferences thereof set forth in the Articles which are applicable to Cumulative Preferred Stock of all series) as follows: SECTION 1. Designation, Number of Shares and Stated Value. The shares of such series shall be designated as "Cumulative Preferred Stock, Series of 1987" (the "Series 1987 Preferred Stock"). The stated value per share of the Series 1987 Preferred Stock shall be $25. The number of shares initially issuable and constituting the Series 1987 Preferred Stock shall be 10,000,000. SECTION 2. Dividends or Distributions. (a) The dividend rate for shares of the Series 1987 Preferred Stock shall be per share per annum the amount of cash, securities or other property equal to the sum of the Formula Amounts with respect to each quarterly dividend payable pursuant to Section 2(b) hereof on the Series 1987 Preferred Stock. The Formula Amount with respect to each such quarterly dividend payable shall be the greater of (1) $1.25 or (2) the Formula Number then in effect times the aggregate per whole share amount of (x) dividends payable in cash and (y) dividends or distributions payable in assets, securities or other forms of non-cash consideration (other than dividends or distributions solely in shares of common stock, par value $1.00 of the Company or any stock into which such common stock may be reclassified or changed as contemplated by the second proviso of this Section 2(a) (the "Common Stock")), declared on the Common Stock since the immediately preceding date on which a quarterly dividend was payable under Section 2(b) hereof on the Series 1987 Preferred Stock (a "Quarterly Dividend Payment Date") or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series 1987 Preferred Stock. For purposes of the preceding sentence, the aggregate per whole share amount of all non-cash dividends or distributions with respect to each quarterly payment of dividends on the Series 1987 Preferred Stock shall be the cash amount equivalent to the fair market value of all non-cash dividends or distributions as determined by the Board of Directors, which determination shall be final and binding. On or before the record date fixed or determined pursuant to Section 2(b) hereof for each Quarterly Dividend Payment Date after the date of issuance of any shares of the Series 1987 Preferred Stock, the Company shall submit for filing with the Secretary of State of the Commonwealth of Kentucky a certificate which sets forth the dividend payable for each share of the Series 1987 Preferred Stock on such Quarterly Dividend Payment Date determined in accordance with the provisions of this Section 2(a). As used herein, the "Formula Number" shall be 10; provided, however, that if at any time after January 29, 1987, the Company shall (i) pay a dividend (regardless of when declared) or make a distribution, on its outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide (by a stock split or otherwise) or split the outstanding shares of Common Stock into a larger number of shares of Common Stock, or (iii) combine (by a reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then in each such event the Formula Number shall be adjusted to a number determined by multiplying the Formula Number in effect immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares that are outstanding

immediately prior to such event (and rounding the result to the nearest whole number); and provided further that if at any time after January 29, 1987, the Company shall reclassify or change the outstanding shares of Common Stock into some other stock (including any such reclassification or change in connection with a merger in which the Company is the surviving corporation), then in such event the Formula Number shall be appropriately adjusted to reflect such reclassification or change. (b) Except as otherwise provided in the provisions of Article IV of the Articles, and unless prohibited by Kentucky law, the Company shall declare a dividend or distribution on the Series 1987 Preferred Stock as provided in Section 2(a), out of funds legally available therefor, immediately prior to the time it declares a dividend or distribution on the Common Stock (other than a dividend or distribution in shares of Common Stock), and such dividend or distribution on the Series 1987 Preferred Stock shall (except as otherwise provided in Article IV of the Articles) be payable on the same date on which the corresponding dividend or distribution on the Common Stock is payable, to holders of shares of Series 1987 Preferred Stock of record at the close of business on the record date fixed by the Board of Directors, which shall (except as otherwise provided in Article IV of the Articles) be the same as the record date for the corresponding dividend or distribution on the Common Stock; provided, however, that, in the event no dividend or distribution (other than a dividend or distribution in shares of Common Stock) shall have been declared on the Common Stock during the three month period after any Quarterly Dividend Payment Date (or with respect to the first Quarterly Dividend Payment Date during the three month period after the first issuance of any share or fraction of a share of Series 1987 Preferred Stock), a dividend of $1.25 per share on the Series 1987 Preferred Stock shall, unless prohibited by Kentucky law, nevertheless be payable, out of funds legally available therefor, 30 days after the last day of such three month period to holders of shares of Series 1987 Preferred Stock of record at the close of business on the record date, which shall (except as otherwise provided in Article IV of the Articles) be 5 days after the last day of such three month period. SECTION 3. Voting Rights. Except as otherwise provided in the provisions of Article IV of the Articles and by the provisions of applicable law, the holders of shares of Series 1987 Preferred Stock shall have the following voting rights: (a) Each holder of record of one whole share of the Series 1987 Preferred Stock shall be entitled to a number of votes equal to the Formula Number then in effect on all matters on which holders of the Common Stock or stockholders generally are entitled to vote. Each holder of record of a fraction of a share of the Series 1987 Preferred Stock shall be entitled, for each one-tenth (1/10th) of a share, to a number of votes equal to one-tenth (1/10th) of the Formula Number then in effect on all matters on which holders of the Common Stock or stockholders generally are entitled to vote; and (b) The holders of shares of Series 1987 Preferred Stock and the holders of shares of Common Stock shall vote together as one class for the election of directors of the Company and on all other matters submitted to a vote of stockholders of the Company. SECTION 4. Liquidation Rights. Upon the voluntary or involuntary liquidation, dissolution or winding up of the Company, and before any distribution is made to the holders of Common Stock, the holder of each full share or fraction of a share of Series 1987 Preferred Stock shall be entitled to be paid an amount equal to the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount per whole share equal to the greater of (1) $25 per share or (2) the Formula Number then in effect times the aggregate amount to be distributed per share to holders of Common Stock. SECTION 5. Consolidation, Merger, etc. Except as otherwise provided in Article IV of the Articles, in case the Company shall enter into any consolidation, merger, combination or other transaction in which the outstanding shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then in any such case the then outstanding shares of Series 1987 Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to the Formula Number then in effect times the aggregate amount of stock, securities, cash or other property (payable in kind), as the case may be, into which or for which each share of Common Stock is exchanged or changed. SECTION 6. No Redemption. Except as otherwise provided in Section 5, the shares of Series 1987 Preferred Stock shall not be subject to redemption by the Company or at the option of any holder of Series 1987 Preferred 2

Stock; provided, however, that the Company may purchase or otherwise acquire outstanding shares of Series 1987 Preferred Stock in the open market or by offer to any holder or holders of shares of Series 1987 Preferred Stock. SECTION 7. Fractional Shares. The Series 1987 Preferred Stock shall be issuable upon exercise of the Rights issued pursuant to the Rights Agreement dated as of May 15, 1986, between the Company and The Chase Manhattan Bank, N.A., as Rights Agent, as amended, (a copy of which is filed with the Securities and Exchange Commission), in whole shares or, at the option of the Company, in any fraction of a share that is one-tenth (1/10th) of a share or any integral multiple of such fraction. At the election of the Company prior to the first issuance of a share or a fraction of a share of Series 1987 Preferred Stock, either (1) certificates may be issued to evidence any such authorized fraction of a share of Series 1987 Preferred Stock, or (2) any such authorized fraction of a share of Series 1987 Preferred Stock may be evidenced by scrip or warrants in registered form which shall entitle the holder thereof to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. The holders of such scrip or warrants shall have all the rights, privileges and preferences to which the holders of fractional shares are entitled. In lieu of such fractional shares or scrip or warrants, the Company may pay registered holders cash equal to the same fraction of the current market value of a share of Series 1987 Preferred Stock (if any are outstanding) or the equivalent number of shares of Common Stock. SECTION 8. Amendments. The Board of Directors reserves the right by subsequent amendment of this resolution from time to time to increase and, in its discretion, to decrease the number of shares issuable in this series and in other respects to amend this resolution within the limitations provided by Kentucky law and the Articles. SECTION 9. Definitions. For purposes of this resolution, all terms defined in the Articles shall have the same meaning herein, except as otherwise specifically provided herein." IN TESTIMONY WHEREOF, witness our signatures this 29th day of January, 1987. /Thomas L. Feazell/ ____________________________ Thomas L. Feazell Vice President /John P. Ward/ ____________________________ John P. Ward Secretary COMMONWEALTH OF KENTUCKY ) ) SS: COUNTY OF GREENUP ) I, Teresa F, Gabbard, a Notary Public, do hereby certify that on this 29th day of January, 1987, personally appeared before me JOHN P. WARD, who being by me first duly sworn, declared that he is the Secretary of ASHLAND OIL,INC., and that he signed the foregoing document as Secretary of the Company and that the statements therein contained are true. /TERESA F. GABBARD/ ______________________________ Notary Public [STAMP] Prepared by: TERESA F. GABBARD John P. Ward My Commission expires October 9, 1989 1000 Ashland Drive Russell, Kentucky 41169 /John P. Ward/ _______________________________ John P. Ward 3

[STAMP] [STAMP] LODGED FOR RECORD ON LODGED FOR RECORD ON THE 30 DAY OF JANUARY THE 30 DAY OF JANUARY 1987 AT 10:46 AM. RECORDED 1987 AT 9:56 AM. RECORDED IN ART OF INC. BOOK IN ART OF INC. BOOK NO. 25 PAGE 461 NO. 9 PAGE 543 TAX ________ FEES $14.50 TAX $________ FEE $14.50 WILLIAM A. SELBEE, CLERK DONALD L. DAVIDSON, CLERK BOYD COUNTY GREENUP COUNTY BY: DONNA MARCUM, D.C. BY JOAN BURNETT, D.C.

[STAMP] ORIGINAL COPY FILED SECRETARY OF STATE OF KENTUCKY, FRANKFORT, KENTUCKY JAN 28, 1988 11:05 AM BREMER EHRLER SECRETARY OF STATE AMENDMENT TO SECOND RESTATED ARTICLES OF INCORPORATION OF ASHLAND OIL, INC. AMENDMENT NO. 1 KNOW ALL MEN BY THESE PRESENTS, that Thomas L. Feazell, as Vice President, and John P. Ward, as Secretary of Ashland Oil, Inc., a Kentucky corporation (the "Company") do hereby certify that, at a meeting on January 28, 1988 of the holders of its issued and outstanding stock, which meeting was duly called upon notice of the specific purpose, the holders of a majority of the outstanding stock entitled to vote adopted a new Article X of the Second Restated Articles of Incorporation (the "Articles") of the Company which reads in its entirety as follows: Notwithstanding any right to indemnification provided by the Act to any director, officer, employee or agent of the Company, the Company may, but shall not be required to, to the maximum extent permitted by law, indemnify any such person against costs and expenses (including but not limited to attorneys' fees) and any liabilities (including but not limited to judgments, fines, penalties and settlements) paid by or imposed against any such person in connection with any actual or threatened claim, action, suit or proceeding, whether civil, criminal, administrative, legislative, investigative or other (including any appeal relating thereto) and whether made or brought by or in the right of the Company or otherwise, in which any such person is involved, whether as a party, witness, or otherwise, because he or she is or was a director, officer, employee or agent of the Company or a director, officer, partner, trustee, employee or agent of any other corporation, partnership, employee benefit plan or other entity. The indemnification authorized by this Article X shall not supersede or be exclusive of any other right of indemnification which any such person may have or hereafter acquire under any provision of these Articles or the By-laws of the Company, agreement, vote of shareholders or disinterested directors or otherwise. The Company may take such steps as may be deemed appropriate by the Board of Directors to provide indemnification to any such person, including, without limitation, entering into contracts for indemnification between the Company and individual directors, officers, employees or agents which may provide rights to indemnification which are broader or otherwise different than the rights authorized by this Article. The Company may take such steps as may be deemed appropriate by the Board of Directors to secure, subject to the occurrence of such conditions or events as may be determined by the Board of Directors, the payment of such amounts as are required to effect any indemnification permitted or authorized by this Article, including, without limitation, purchasing and maintaining insurance, creating a trust fund, granting security interests or using other means (including, without limitation, irrevocable letters of credit). Any amendment or repeal of this Article X shall operate prospectively only and shall not affect any action taken, or failure to act, by the Company or any such person prior to such amendment or repeal. IN TESTIMONY WHEREOF, witness our signatures this 28th day of January, 1988. /Thomas L. Feazell/ /John P. Ward/ __________________________________ __________________________________ Thomas L. Feazell, Vice President John P. Ward, Secretary

COMMONWEALTH OF KENTUCKY ) ) SS: COUNTY OF GREENUP ) I, Valerie J. Parks, Notary Public, do hereby certify that on this 28th day of January, 1988, personally appeared before me JOHN P. WARD, who being by me first duly sworn, declared that he is the Secretary of ASHLAND OIL, INC., and that he signed the foregoing document as such and that the statements therein contained are true. /VALERIE J. PARKS/ __________________________________ VALERIE J. PARKS [STAMP] VALERIE J. PARKS Prepared by John P. Ward My Commission expires November 11, 1000 Ashland Drive, 1990 Russell, Kentucky /John P. Ward/ ________________________________ John P. Ward [STAMP] [STAMP] LODGED FOR RECORD ON LODGED FOR RECORD ON THE 29th DAY OF JANUARY THE 29 DAY OF JANUARY 1988 AT 10:55 AM. RECORDED 1988 AT 10:15 AM. RECORDED IN ART OF INC. BOOK IN ART OF INC. BOOK NO. 25 PAGE _________ NO. 10 PAGE 169 TAX ________FEES $5.50 TAX $________ FEE $5.50 WILLIAM A. SELBEE, CLERK DONALD L. DAVIDSON, CLERK BOYD COUNTY GREENUP COUNTY BY: D.R. MARCUM, D.C. BY: MARY STULTZ, D.C.

[STAMP] DATE: JANUARY 27, 1989 TIME: 2:02 PM AMOUNT: $40.00 BREMER EHRLER SECRETARY OF STATE COMMONWEALTH OF KENTUCKY ARTICLES OF AMENDMENT TO SECOND RESTATED ARTICLES OF INCORPORATION OF ASHLAND OIL, INC. AMENDMENT NO. 2 Pursuant to the provisions of Section 271B.10-060 of the Kentucky Business Corporation Act, the undersigned corporation adopts the following articles of amendment to its Second Restated Articles of Incorporation: FIRST: The name of the corporation is Ashland Oil, Inc. SECOND: At a meeting of the Board of Directors held on November 3, 1988, the Board of Directors proposed that the Second Restated Articles of Incorporation be amended by adding a new Article XI, and directed that the proposed amendment be submitted to the shareholders with the affirmative recommendation of the Board of Directors at a meeting of the company's shareholders to be held on January 26, 1989 (the "Meeting"), which Meeting was duly called upon notice of the specific purpose. The text of the new Article XI is as follows: ARTICLE XI No director shall be personally liable to the Company or its shareholders for monetary damages for breach of his duties as a director except to the extent that the applicable law from time to time in effect shall provide that such liability may not be eliminated or limited. Neither the amendment nor repeal of this Article XI shall affect the liability of any director of the Company with respect to any act or failure to act which occurred prior to such amendment or repeal. This Article XI is not intended to eliminate or limit any protection otherwise available to the directors of the Company. THIRD: There were 58,707,121 shares of Ashland Oil, Inc. Common Stock, each of which was entitled to cast one vote, outstanding at December 8, 1988, the record date for the Meeting, which represent all of the shares entitled to vote on such amendment. FOURTH: There were 50,687,052 shares of Ashland Oil, Inc. Common Stock indisputably represented at the Meeting. FIFTH: The total number of votes cast for such amendment was 47,745,995 and the total number of votes cast against such amendment was 2,231,353. Dated January 27, 1989. ASHLAND OIL, INC. /Thomas L. Feazell/ By: _____________________________ Thomas L. Feazell Administrative Vice President and General Counsel and /John P. Ward/ _____________________________ John P. Ward Secretary

COMMONWEALTH OF KENTUCKY ) COUNTY OF GREENUP ) The foregoing instrument was acknowledged before me this 27th day of January, 1989, by Thomas L. Feazell, Administrative Vice President and General Counsel, and John P. Ward, Secretary, of ASHLAND OIL, INC., a Kentucky corporation, on behalf of the corporation. /Valerie J. Parks/ _______________________________ Valerie J. Parks Notary Public [STAMP] VALERIE J. PARKS Prepared by John P. Ward My Commission Expires November 11, 1000 Ashland Drive 1990 Russell, Kentucky 41114 /John P. Ward/ _________________________ [STAMP] LODGED FOR RECORD ON THE 30 DAY OF JANUARY 1989 AT 9:40 AM. RECORDED IN ART OF INC. BOOK NO. 10 PAGE 423 TAX $________ FEE $5.50 DONALD L. DAVIDSON, CLERK GREENUP COUNTY BY JOAN BURNETT, D.C. [STAMP] NO. LODGED FOR RECORD THE 30 DAY OF JAN 1989 AT 10:25 AM RECORDED IN ART OF INC BOOK NO. 26 PAGE 522

[STAMP] RECEIVED & FILED CH $40.00 MAY 18 10:52 AM 93 BOB BABBAGE SECRETARY OF STATE COMMONWEALTH KENTUCKY ARTICLES OF AMENDMENT TO SECOND RESTATED ARTICLES OF INCORPORATION OF ASHLAND OIL, INC. AMENDMENT NO. 3 Pursuant to the provisions of Section 271B.10-060 of the Kentucky Business Corporation Act, the undersigned corporation adopts the following articles of amendment to set forth the preferences, limitations and relative rights of a series of shares of its Cumulative Preferred Stock, no par value, under Article IV of its Second Restated Articles of Incorporation: FIRST: The name of the Corporation is Ashland Oil, Inc. SECOND: The text of the amendment determining the terms of the series of shares of the Cumulative Preferred Stock is as follows: I. Designation of Series and Number of Shares to be Issuable Therein. This series of the Cumulative Preferred Stock shall be designated $3.125 Cumulative Convertible Preferred Stock (hereinafter called the "Convertible Preferred Stock"), of which 6,000,000 shares shall be issuable. II. Rank. All shares of Convertible Preferred Stock shall rank prior, both as to payment of dividends and as to distributions of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, to all of the Corporation's now or hereafter issued Common Stock (the "Common Stock"), to all of the Corporation s Cumulative Preferred Stock, Series of 1987, when and if issued, and to all of the Corporation s hereafter issued capital stock ranking junior to the Convertible Preferred Stock both as to the payment of dividends and as to distributions of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, when and if issued (the Common Stock, the Cumulative Preferred Stock, Series of 1987, and any such other capital stock being herein referred to as "Junior Stock"). III. Dividends. The holders of Convertible Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds at the time legally available therefor, dividends at the rate of $3.125 per annum per share, and no more, which shall be fully cumulative, shall accrue without interest from the date of the initial issuance of such shares of Convertible Preferred Stock (on a daily basis whether or not such amounts would be available at that time for distribution to holders of shares of Convertible Preferred Stock) and shall be payable in cash quarterly in arrears on March 15, June 15, September 15 and December 15 of each year commencing June 15, 1993 (with respect to the period from such date of initial issuance to June 15, 1993) (except that if any such date is a Saturday, Sunday or legal holiday, then such dividend shall be payable on the next day that is not a Saturday, Sunday or legal holiday) to holders of record as they appear upon the stock transfer books of the Corporation on such record dates, not more than sixty days nor less than ten days preceding the payment dates for such dividends, as are fixed by the Board of Directors (or, to the extent permitted by applicable law, a duly authorized committee thereof). In no event shall any such dividend record date be fixed less than (a) six business days prior to any date fixed for the redemption of the Convertible Preferred Stock or (b) with respect to the dividend payment date occurring on March 15, 1997, less than ten business days prior to any date fixed for such redemption. For purposes hereof, the term "legal holiday" shall mean any day on which banking institutions are authorized to close in New York, New York and the term "business day" shall mean any day other than a Saturday, Sunday or legal holiday. Subject to the next paragraph of this Section III, dividends on account of arrears for any past dividend period may be declared and paid at any time, without reference to any regular dividend payment date. The amount of dividends payable per share of Convertible Preferred Stock for each quarterly dividend period shall be computed by dividing the annual dividend amount by four. The amount of dividends payable for the initial dividend period and any period shorter than a full quarterly period shall be computed on the basis of a 360-day year of twelve 30-day months. No interest shall be payable in respect of any dividend payment on the Convertible Preferred Stock which may be in arrears. No dividends or other distributions, other than dividends payable solely in shares of Junior Stock, shall be 1

declared, paid or set apart for payment on shares of Junior Stock or any other capital stock of the Corporation ranking junior as to dividends to the Convertible Preferred Stock (the Junior Stock and any such other class or series of the Corporation's capital stock being herein referred to as "Junior Dividend Stock"), unless and until all accrued and unpaid dividends on the Convertible Preferred Stock for all dividend payment periods ending on or before the payment date of such dividends or other distributions on Junior Dividend Stock shall have been paid or declared and set apart for payment. No payment on account of the purchase, redemption, retirement or other acquisition of shares of Junior Dividend Stock or any other class or series of the Corporation's capital stock ranking junior to the Convertible Preferred Stock as to distributions of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (the Junior Stock and any other class or series of the Corporation's capital stock ranking junior to the Convertible Preferred Stock as to such distributions being herein referred to as "Junior Liquidation Stock") shall be made unless and until all accrued and unpaid dividends on the Convertible Preferred Stock for all dividend payment periods ending on or before such payment for such Junior Dividend Stock or Junior Liquidation Stock shall have been paid or declared and set apart for payment; provided, however, that the restrictions set forth in this sentence shall not apply to the purchase or other acquisition of Junior Dividend Stock or Junior Liquidation Stock either (A) pursuant to any employee or director incentive or benefit plan or arrangement (including any employment, severance or consulting agreement) of the Corporation or any subsidiary of the Corporation heretofore or hereafter adopted or (B) in exchange solely for Junior Stock. No full dividends shall be declared, paid or set apart for payment on shares of any class or series of the corporation's capital stock hereafter issued ranking, as to dividends, on a parity with the Convertible Preferred Stock (any such class or series of the Corporation's capital stock being herein referred to as "Parity Dividend Stock") for any period unless full cumulative dividends have been, or contemporaneously are, paid or declared and set apart for such payment on the Convertible Preferred Stock for all dividend payment periods ending on or before the payment date of such dividends on Parity Dividend Stock. No dividends shall be paid on Parity Dividend Stock except on dates on which dividends are paid on the Convertible Preferred Stock. All dividends paid or declared and set apart for payment on the Convertible Preferred Stock and the Parity Dividend Stock shall be paid or declared and set apart for payment pro rata so that the amount of dividends paid or declared and set apart for payment per share on the Convertible Preferred Stock and the Parity Dividend Stock on any date shall in all cases bear to each other the same ratio that accrued and unpaid dividends to the date of payment on the Convertible Preferred Stock and the Parity Dividend Stock bear to each other. No payment on account of the purchase, redemption, retirement or other acquisition of shares of Junior Stock, Parity Dividend Stock or any class or series of the Corporation's capital stock ranking on a parity with the Convertible Preferred Stock as to distributions of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (any such class or series of the Corporation's capital stock being herein referred to as "Parity Liquidation Stock") shall be made, and, other than dividends to the extent permitted by the preceding paragraph, no distributions shall be declared, paid or set apart for payment on shares of Parity Dividend Stock or Parity Liquidation Stock, unless and until all accrued and unpaid dividends on the Convertible Preferred Stock for all dividend payment periods ending on or before such payment for, or the payment date of such distributions on, such Parity Dividend Stock or Parity Liquidation Stock shall have been paid or declared and set apart for payment; provided, however, that the restrictions set forth in this sentence shall not apply to the purchase or other acquisition of Parity Dividend Stock or Parity Liquidation Stock either (A) pursuant to any employee or director incentive or benefit plan or arrangement (including any employment, severance or consulting agreement) of the Corporation or any subsidiary of the Corporation hereafter adopted or (B) in exchange solely for Junior Stock. Any reference to "distribution" contained in this Section III shall not be deemed, except as expressly stated, to include any distribution made in connection with any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. IV. Liquidation Preference. In the event of a liquidation, dissolution or winding up of the Corporation, 2

whether voluntary or involuntary, the holders of shares of Convertible Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to shareholders an amount equal to the dividends accrued and unpaid on such shares on the date of final distribution to such holders, whether or not declared, without interest, plus a sum equal to $50 per share, and no more, before any payment shall be made or any assets distributed to the holders of shares of Junior Liquidation Stock; provided, however, that such rights shall accrue to the holders of shares of Convertible Preferred Stock only with respect to assets (if any) remaining after the Corporation's payments with respect to the liquidation preferences of the shares of any class or series of the Corporation capital stock hereafter issued ranking prior to the Convertible Preferred Stock as to distributions of assets upon such liquidation, dissolution or winding up ("Senior Liquidation Stock") are fully met. The entire assets of the Corporation available for distribution to shareholders after the liquidation preferences of the shares of Senior Liquidation Stock are fully met shall be distributed ratably among the holders of the Convertible Preferred Stock and Parity Liquidation Stock in proportion to the respective preferential amounts to which each is entitled (but only to the extent of such preferential amounts). After payment in full of the liquidation preferences of the shares of the Convertible Preferred Stock, the holders of such shares shall not be entitled to any further participation in any distribution of assets by the Corporation. The voluntary sale, lease, exchange or transfer of all or substantially all of the Company's property or assets to, or its consolidation or merger with, one or more corporations shall not be deemed to be considered a voluntary or involuntary liquidation, dissolution or winding up of the Corporation. V. Redemption at Option of the Corporation. The Convertible Preferred Stock may not be redeemed by the Corporation prior to March 25, 1997. On and after such date, the Convertible Preferred Stock may be redeemed by the Corporation, at its option on any date set by the Board of Directors, in whole or in part at any time, subject to the limitations, if any, imposed by the Kentucky Business Corporation Act, for an amount in cash equal to the applicable price per share set forth for the date fixed for redemption in the following table: Date Fixed for Redemption Price On or after March 25, 1997 and on or before March 14,1998. $51.88 After March 14, 1998 and on or before March 14, 1999...... $51.56 After March 14, 1999 and on or before March 14, 2000...... $51.25 After March 14, 2000 and on or before March 14, 2001...... $50.94 After March 14, 2001 and on or before March 14, 2002...... $50.63 After March 14, 2002 and on or before March 14, 2003...... $50.31 Any date after March 14, 2003............................. $50.00 plus, in each case, an amount in cash equal to all per share dividends on the Convertible Preferred Stock accrued and unpaid thereon, whether or not declared, to but excluding the date fixed for redemption, such sum being hereinafter referred to as the "Redemption Price". In case of the redemption of less than all of the then outstanding Convertible Preferred Stock, the Corporation shall designate by lot, or in such other manner as the Board of Directors may determine to be fair, the shares to be redeemed, or shall effect such redemption pro rata. Notwithstanding the foregoing, the Corporation shall not redeem less than all of the Convertible Preferred Stock at any time outstanding until all dividends accrued and in arrears upon all Convertible Preferred Stock then outstanding shall have been paid in full for all past dividend periods. Not more than ninety nor less than thirty days prior to the date fixed for redemption by the Board of Directors, notice thereof by first class mail, postage prepaid, shall be given to the holders of record of the shares of Convertible Preferred Stock to be redeemed, addressed to such holders at their last addresses as shown upon the stock transfer books of the Corporation. Each such notice of redemption shall specify the date fixed for redemption, the Redemption Price, the place or places of payment, that payment will be made upon presentation and surrender of the shares of Convertible Preferred Stock, that on and after the date fixed for redemption dividends will cease to accrue on such shares, the then-effective conversion price pursuant to Section VI and that the right of holders to convert shares of Convertible Preferred Stock shall terminate at the close of business on 3

the fifth business day prior to the date fixed for redemption (unless the Corporation defaults in the payment of the Redemption Price). Any notice that is mailed as herein provided shall be conclusively presumed to have been duly given, whether or not the holder of shares of Convertible Preferred Stock receives such notice; and failure to give such notice by mail, or any defect in such notice, to the holders of any shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Convertible Preferred Stock. On or after the date fixed for redemption as stated in such notice, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the Redemption Price. If less than all the shares evidenced by any such surrendered certificate are redeemed, a new certificate shall be issued evidencing the unredeemed shares. No fractional shares of Convertible Preferred Stock shall be issued upon redemption of less than all Convertible Preferred Stock. If more than one certificate evidencing shares of Convertible Preferred Stock shall be held at one time by the same holder, the number of full shares issuable upon redemption of less than all of such shares of Convertible Preferred Stock shall be computed on the basis of the aggregate number of shares of Convertible Preferred Stock so held. Instead of any fractional share of Convertible Preferred Stock that would otherwise be issuable to a holder upon redemption of less than all shares of Convertible Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fractional share in an amount equal to the same fraction of the fair value per share of Convertible Preferred Stock (as determined in good faith by the Board of Directors or in any manner prescribed by the Board of Directors) at the close of business on the date fixed for redemption. Notice having been given as aforesaid, if, on the date fixed for redemption, funds necessary for the redemption shall be available therefor and shall have been deposited with a bank or trust company with irrevocable instructions and authority to pay the Redemption Price to the holders of the Convertible Preferred Stock, then, notwithstanding that the certificates evidencing any shares so called for redemption shall not have been surrendered, dividends with respect to the shares so called shall cease to accrue on and after the date fixed for redemption, such shares shall no longer be deemed outstanding, the holders thereof shall cease to be shareholders of the Corporation and all rights whatsoever with respect to the shares so called for redemption (except the right of the holders to receive the Redemption Price without interest upon surrender of their certificates therefor) shall terminate. If funds legally available for such purpose are not sufficient for redemption of the shares of Convertible Preferred Stock which were to be redeemed, then the certificates evidencing such shares shall be deemed not to be surrendered, such shares shall remain outstanding and the right of holders of shares of Convertible Preferred Stock thereafter shall continue to be only those of a holder of shares of the Convertible Preferred Stock. The shares of Convertible Preferred Stock shall not be subject to the operation of any mandatory purchase, retirement or sinking fund. VI. Conversion Privilege. (a) Right of Conversion. Each share of Convertible Preferred Stock shall be convertible at the option of the holder thereof, at any time prior to the close of business on the fifth business day prior to the date fixed for redemption of such share as herein provided, into fully paid and nonassessable shares of Common Stock, at the rate of that number of shares of Common Stock for each full share of Convertible Preferred Stock that is equal to $50 divided by the conversion price applicable per share of Common Stock, or into such additional or other securities, cash or property and at such other rates as required in accordance with the provisions of this Section VI. For purposes of this resolution, the "conversion price" applicable per share of Common Stock shall initially be equal to $32.343 and shall be adjusted from time to time in accordance with the provisions of this Section VI. (b) Conversion Procedures. Any holder of shares of Convertible Preferred Stock desiring to convert such shares into Common Stock shall surrender the certificate or certificates evidencing such shares of Convertible 4

Preferred Stock at the office of the transfer agent for the Convertible Preferred Stock, which certificate or certificates, if the Corporation shall so require, shall be duly endorsed to the Corporation or in blank, or accompanied by proper instruments of transfer to the Corporation or in blank, accompanied by irrevocable written notice to the Corporation that the holder elects so to convert such shares of Convertible Preferred Stock and specifying the name or names (with address or addresses) in which a certificate or certificates evidencing shares of Common Stock are to be issued. Subject to Section VI(l) hereof, no payments or adjustments in respect of dividends on shares of Convertible Preferred Stock surrendered for conversion or on account of any dividend on the Common Stock issued upon conversion shall be made upon the conversion of any shares of Convertible Preferred Stock and the holder will lose any right to payment of dividends on the shares of Convertible Preferred Stock surrendered for conversion. The Corporation shall, as soon as practicable after such deposit of certificates evidencing shares of Convertible Preferred Stock accompanied by the written notice and compliance with any other conditions herein contained, deliver at such office of such transfer agent to the person for whose account such shares of Convertible Preferred Stock were so surrendered, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Common Stock to which such person shall be entitled as aforesaid, together with a cash adjustment in respect of any fraction of a share of Common Stock as hereinafter provided. Such conversion shall be deemed to have been made as of the date of such surrender of the shares of Convertible Preferred Stock to be converted, and the person or persons entitled to receive the Common Stock deliverable upon conversion of such Convertible Preferred Stock shall be treated for all purposes as the record holder or holders of such Common Stock on such date. (c) Adjustment of Conversion Price. The conversion price at which a share of Convertible Preferred Stock is convertible into Common Stock shall be subject to adjustment from time to time as follows: (i) In case the Corporation shall pay or make a dividend or other distribution on its Common Stock exclusively in Common Stock or shall pay or make a dividend or other distribution on any other class or series of capital stock of the Corporation which dividend or distribution includes Common Stock, the conversion price in effect at the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be reduced by multiplying such conversion price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. (ii) In case the Corporation shall pay or make a dividend or other distribution on its Common Stock consisting exclusively of, or shall otherwise issue to all holders of its Common Stock, rights or warrants entitling the holders thereof to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in subparagraph (vi) of this Section VI(c)) of the Common Stock on the date fixed for the determination of shareholders entitled to receive such rights or warrants, the conversion price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such conversion price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. In case any rights or warrants referred to in this subparagraph (ii) in respect of which an adjustment shall have been made shall 5

expire unexercised within 45 days after the same shall have been distributed or issued by the Corporation, the conversion price shall be readjusted at the time of such expiration to the conversion price that would have been in effect if no adjustment had been made on account of the distribution or issuance of such expired rights or warrants. For the purposes of this Section VI(c)(ii), if both (A) a Distribution Date (as such term is defined in the Rights Agreement) and (B) an event set forth in Section 11(d)(i) or 13(a) of the Rights Agreement shall have occurred, then the later to occur of such events shall be deemed to constitute an issuance of rights to purchase shares of the related common stock. (iii) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the conversion price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the conversion price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (iv) Subject to the last sentence of this subparagraph (iv), in case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness, shares of any class or series of capital stock, cash or assets (including securities, but excluding any rights or warrants referred to in subparagraph (ii) of this Section VI(c), any dividend or distribution paid exclusively in cash and any dividend or distribution referred to in subparagraph (i) of this Section VI(c)), the conversion price shall be reduced so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the effectiveness of the conversion price reduction contemplated by this subparagraph (iv) by a fraction of which the numerator shall be the current market price per share (determined as provided in subparagraph (vi) of this Section VI(c)) of the Common Stock on the date fixed for the payment of such distribution (the "Reference Date") less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors), on the Reference Date, of the portion of the evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the Reference Date. If the Board of Directors determines the fair market value of any distribution for purposes of this subparagraph (iv) by reference to the actual or when issued trading market for any securities comprising such distribution, it must in doing so consider the prices in such market over the same period used in computing the current market price per share of Common Stock pursuant to subparagraph (vi) of this Section VI(c). For purposes of this subparagraph (iv), any dividend or distribution that includes shares of Common Stock or rights or warrants to subscribe for or purchase shares of Common Stock shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, cash, assets or shares of capital stock other than such shares of Common Stock or rights or warrants (making any further conversion price reduction required by this subparagraph (iv) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants (making any further conversion price reduction required by subparagraph (i) or (ii) of this Section VI(c), except (A) the Reference Date of such dividend or distribution as defined in this subparagraph (iv) shall be substituted as "the date fixed for the determination of shareholders entitled to receive such dividend or other distribution or to exchange such Rights", "the date fixed for the determination of shareholders entitled to receive such rights or warrants" and "the date fixed for such determination" within the meaning of subparagraphs (i) and (ii) of this Section VI(c) and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed "outstanding at the close of business on the date fixed for such determination" within the meaning of subparagraph (i) of this Section VI(c)). (v) In case the Corporation shall pay or make a dividend or other distribution on its Common Stock exclusively in cash (excluding (A) cash that is part of a distribution referred to in (iv) above and, (B) in the 6

case of any quarterly cash dividend on the Common Stock, the portion thereof that does not exceed the per share amount of the next preceding quarterly cash dividend on the Common Stock (as adjusted to appropriately reflect any of the events referred to in subparagraphs (i), (ii), (iii), (iv) and (v) of this Section VI(c)), or all of such quarterly cash dividend if the amount thereof per share of Common Stock multiplied by four does not exceed 15 percent of the current market price per share (determined as provided in subparagraph (vi) of this Section VI(c) of the Common Stock on the Trading Day (as defined in Section VI(i) next preceding the date of declaration of such dividend), the conversion price shall be reduced so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the effectiveness of the conversion price reduction contemplated by this subparagraph (v) by a fraction of which the numerator shall be the current market price per share (determined as provided in subparagraph (vi) of this Section VI(c)) of the Common Stock on the date fixed for the payment of such distribution less the amount of cash so distributed and not excluded as provided above applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the date fixed for the payment of such distribution. (vi) For the purpose of any computation under subparagraphs (ii), (iv) and (v) of this Section VI(c), the current market price per share of Common Stock on any date in question shall be deemed to be the average of the daily Closing Prices (as defined in Section VI(i)) for the five consecutive Trading Days prior to and including the date in question; provided, however, that (1) if the "ex" date (as hereinafter defined) for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the conversion price pursuant to subparagraph (i), (ii), (iii), (iv), or (v) above ("Other Event") occurs after the fifth Trading Day prior to the day in question and prior to the "ex" date for the issuance or distribution requiring such computation (the "Current Event"), the Closing Price for each Trading Day prior to the "ex" date for such Other Event shall be adjusted by multiplying such Closing Price by the same fraction by which the conversion price is so required to be adjusted as a result of such Other Event, (2) if the "ex" date, for any Other Event occurs after the "ex" date for the Current Event and on or prior to the date in question, the Closing Price for each Trading Day on and after the "ex" date for such Other Event shall be adjusted by multiplying such Closing Price by the reciprocal of the fraction by which the conversion price is so required to be adjusted as a result of such Other Event, (3) if the "ex" date for any Other Event occurs on the "ex" date for the Current Event, one of those events shall be deemed for purposes of clauses (1) and (2) of this proviso to have an "ex" date occurring prior to the "ex" date for the other event, and (4) if the "ex" date for the Current Event is on or prior to the date in question, after taking into account any adjustment required pursuant to clause (2) of this proviso, the Closing Price for each Trading Day on or after such "ex" date shall be adjusted by adding thereto the amount of any cash and the fair market value on the date in question (as determined in good faith by the Board of Directors in a manner consistent with any determination of such value for purposes of paragraph (iv) or (v) of this Section VI(c), whose determination shall be conclusive and described in a resolution of the Board of Directors) of the portion of the rights, warrants, evidences of indebtedness, shares of capital stock or assets being distributed applicable to one share of Common Stock. For purposes of this paragraph, the term "ex" date, (1) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the Closing Price was obtained without the right to receive such issuance or distribution and (2) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective. (vii) No adjustment in the conversion price shall be required unless such adjustment would require an increase or decrease of at least 1 percent in the conversion price; provided, however, that any adjustments which by reason of this subparagraph (vii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. 7

(viii) Whenever the conversion price is adjusted as herein provided: (1) the Corporation shall compute the adjusted conversion price and shall prepare a certificate signed by the Treasurer of the Corporation setting forth the adjusted conversion price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the transfer agent for the Convertible Preferred Stock; and (2) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall forthwith be required, and as soon as practicable after it is required, such notice shall be mailed by the Corporation to all record holders of shares of Convertible Preferred Stock at their last addresses as they shall appear upon the stock transfer books of the Corporation. (ix) The Corporation from time to time may reduce the conversion price by any amount for any period of time if the period is at least twenty days, the reduction is irrevocable during the period and the Board of Directors of the Corporation shall have made a determination that such reduction would be in the best interest of the Corporation, which determination shall be conclusive. Whenever the conversion price is reduced pursuant to the preceding sentence, the Corporation shall mail to holders of record of the Convertible Preferred Stock a notice of the reduction at least fifteen days prior to the date the reduced conversion price takes effect, and such notice shall state the reduced conversion price and the period it will be in effect. (d) No Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of Convertible Preferred Stock. If more than one certificate evidencing shares of Convertible Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Convertible Preferred Stock so surrendered. Instead of any fractional share of Common Stock that would otherwise be issuable to a holder upon conversion of any shares of Convertible Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fractional share in an amount equal to the same fraction of the market price per share of Common Stock (as determined by the Board of Directors or in any manner prescribed by the Board of Directors, which, so long as the Common Stock is listed on the New York Stock Exchange, shall be the reported last sale price regular way on the New York Stock Exchange) at the close of business on the day of conversion. (e) Reclassification, Consolidation, Merger or Sale of Assets. In the event that the Corporation shall be a party to any transaction (including without limitation any recapitalization or reclassification of the Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Common Stock), any consolidation of the Corporation with, or merger of the Corporation into, any other person, any merger of another person into the Corporation (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Corporation), any sale or transfer of all or substantially all of the assets of the Corporation or any share exchange) pursuant to which the Common Stock is converted into the right to receive other securities, cash or other property, then lawful provisions shall be made as part of the terms of such transaction whereby the holder of each share of Convertible Preferred Stock then outstanding shall have the right thereafter to convert such share only into (i) in the case of any such transaction other than a Common Stock Fundamental Change and subject to funds being legally available for such purpose under applicable law at the time of such conversion, the kind and amount of securities, cash and other property receivable upon such transaction by a holder of the number of shares of Common Stock of the Corporation into which such share of Convertible Preferred Stock might have been converted immediately prior to such transaction, after giving effect, in the case of any Non-Stock Fundamental Change, to any adjustment in the conversion price required by the provisions of Section VI(h), and (ii) in the case of a Common Stock Fundamental Change, common stock of the kind received by holders of Common Stock as a result of such Common Stock Fundamental Change in an amount determined pursuant to the provisions of Section VI(h). The Corporation or the person formed by such consolidation or resulting from such merger or which acquires such assets or which acquires the Corporation's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to 8

establish such right. Such certificate or articles of incorporation or other constituent document shall provide for adjustments which, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section VI. The above provisions shall similarly apply to successive transactions of the foregoing type. (f) Reservation of Shares; Etc. The Corporation shall at all times reserve and keep available, free from preemptive rights out of its authorized and unissued stock, solely for the purpose of effecting the conversion of the Convertible Preferred Stock, such number of shares of its Common Stock as shall from time to time be sufficient to effect the conversion of all shares of Convertible Preferred Stock from time to time outstanding. The Corporation shall from time to time, in accordance with the laws of the Commonwealth of Kentucky, in good faith and as expeditiously as possible endeavor to cause the authorized number of shares of Common Stock to be increased if at any time the number of shares of authorized and unissued Common Stock shall not be sufficient to permit the conversion of all the then-outstanding shares of Convertible Preferred Stock. If any shares of Common Stock required to be reserved for purposes of conversion of the Convertible Preferred Stock hereunder require registration with or approval of any governmental authority under any Federal or State law before such shares may be issued upon conversion, the Corporation will in good faith and as expeditiously as possible endeavor to cause such shares to be duly registered or approved as the case may be. If the Common Stock is listed on the New York Stock Exchange or any other national securities exchange, the Corporation will, if permitted by the rules of such exchange, list and keep listed on such exchange, upon official notice of issuance, all shares of Common Stock issuable upon conversion of the Convertible Preferred Stock. (g) Prior Notice of Certain Events. In case: (i) the Corporation shall (1) declare any dividend (or any other distribution) on its Common Stock, other than (A) a dividend payable in shares of Common Stock or (B) a dividend payable in cash out of its retained earnings other than any special or nonrecurring or other extraordinary dividend or (2) declare or authorize a redemption or repurchase of in excess of 10 percent of the then-outstanding shares of Common Stock; or (ii) the Corporation shall authorize the granting to all holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or series or of any other rights or warrants; or (iii) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Corporation is a party and for which approval of any shareholders of the Corporation shall be required, or of the sale or transfer of all or substantially all of the assets of the Corporation or of any share exchange whereby the Common Stock is converted into other securities, cash or other property; or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed with the transfer agent for the Convertible Preferred Stock, and shall cause to be mailed to the holders of record of the Convertible Preferred Stock, at their last addresses as they shall appear upon the stock transfer books of the Corporation, at least fifteen days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record (if any) is to be taken for the purpose of such dividend, distribution, redemption, repurchase, rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). 9

(h) Adjustments in Case of Fundamental Changes. Notwithstanding any other provision in this Section VI to the contrary, if any Fundamental Change (as defined in Section VI(i) occurs, then the conversion price in effect will be adjusted immediately after such Fundamental Change as described below. In addition, in the event of a Common Stock Fundamental Change (as defined in Section VI(i), each share of Convertible Preferred Stock shall be convertible solely into common stock of the kind received by holders of Common Stock as the result of such Common Stock Fundamental Change. For purposes of calculating any adjustment to be made pursuant to this Section VI(h) in the event of a Fundamental Change, immediately after such Fundamental Change: (i) in the case of a Non-Stock Fundamental Change (as defined in Section VI(i)), the conversion price of the Convertible Preferred Stock shall thereupon become the lower of (A) the conversion price in effect immediately prior to such Non-Stock Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to this Section VI, and (B) the result obtained by multiplying the greater of the Applicable Price (as defined in Section VI(i)) or the then applicable Reference Market Price (as defined in Section VI(i)) by a fraction of which the numerator shall be $50 and the denominator shall be (x) the then-current Redemption Price per share of Convertible Preferred Stock or (y) for any Non-Stock Fundamental Change that occurs before the Convertible Preferred Stock becomes redeemable by the Corporation pursuant to Section V, the applicable price per share set forth for the date of such Non-Stock Fundamental Change in the following table: Date of Non-Stock Fundamental Change Price After date of original issuance of Convertible Preferred Stock and on or before March 14,1994................. $53.13 After March 14, 1994 and on or before March 14,1995.......... . $52.81 After March 14, 1995 and on or before March 14,1996. .......... $52.50 After March 14, 1996 and on or before March 24,1997............ $52.19 plus, in any case referred to in this clause (y), an amount equal to all per share dividends on the Convertible Preferred Stock accrued and unpaid thereon, whether or not declared, to but excluding the date of such Non- Stock Fundamental Change; and (ii) in the case of a Common Stock Fundamental Change, the conversion price of the Convertible Preferred Stock in effect immediately prior to such Common Stock Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to this Section VI, shall thereupon be adjusted by multiplying such conversion price by a fraction of which the numerator shall be the Purchaser Stock Price (as defined in Section VI(i)) and the denominator shall be the Applicable Price; provided, however, that in the event of a Common Stock Fundamental Change in which (A) 100 percent by value of the consideration received by a holder of Common Stock is common stock of the successor, acquiror or other third party (and cash, if any, is paid with respect to any fractional interests in such common stock resulting from such Common Stock Fundamental Change) and (B) all of the Common Stock shall have been exchanged for, converted into or acquired for common stock (and cash with respect to fractional interests) of the successor, acquiror or other third party, the conversion price of the Convertible Preferred Stock in effect immediately prior to such Common Stock Fundamental Change shall thereupon be adjusted by multiplying such conversion price by a fraction of which the numerator shall be one (1) and the denominator shall be the number of shares of common stock of the successor, acquiror, or other third party received by a holder of one share of Common Stock as a result of such Common Stock Fundamental Change. (i) Definitions. The following definitions shall apply to terms used in this Section VI: (1) "Applicable Price" shall mean (i) in the event of a Non-Stock Fundamental Change in which the holders of the Common Stock receive only cash, the amount of cash received by the holder of one share of Common Stock and (ii) in the event of any other Non-Stock Fundamental Change or any Common Stock Fundamental Change, the average of the daily Closing Prices of the Common Stock for the ten consecutive 10

Trading Days prior to and including the record date for the determination of the holders of Common Stock entitled to receive cash, securities, property or other assets in connection with such Non-Stock Fundamental Change or Common Stock Fundamental Change, or, if there is no such record date, the date upon which the holders of the Common Stock shall have the right to receive such cash, securities, property or other assets, in each case, as adjusted in good faith by the Board of Directors of the Corporation to appropriately reflect any of the events referred to in subparagraphs (i), (ii), (iii), (iv) and (v) of Section VI(c). (2) "Closing Price" of any common stock on any day shall mean the last reported sale price regular way on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way of the common stock in each case on the New York Stock Exchange, or, if the common stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange or quotation system on which the common stock is listed or admitted to trading or quoted, or, if not listed or admitted to trading or quoted on any national securities exchange or quotation system, the average of the closing bid and asked prices of the common stock in the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similarly generally accepted reporting service, or, if not so available in such manner, as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors of the Corporation for that purpose. (3) "Common Stock Fundamental Change" shall mean any Fundamental Change in which more than 50 percent by value (as determined in good faith by the Board of Directors of the Corporation) of the consideration received by holders of Common Stock consists of common stock that for each of the ten consecutive Trading Days referred to with respect to such Fundamental Change in Section VI(i)(1) above has been admitted for listing or admitted for listing subject to notice of issuance on a national securities exchange or quoted on the National Association of Securities Dealers Automated Quotation ("NASDAQ") National Market System; provided, however, that a Fundamental Change shall not be a Common Stock Fundamental Change unless either (i) the Corporation continues to exist after the occurrence of such Fundamental Change and the outstanding shares of Convertible Preferred Stock continue to exist as outstanding shares of Convertible Preferred Stock, or (ii) not later than the occurrence of such Fundamental Change, the outstanding shares of Convertible Preferred Stock are converted into or exchanged for shares of convertible preferred stock of a corporation succeeding to the business of the Corporation, which convertible preferred stock has powers, preferences and relative, participating, optional or other rights, and qualifications, limitations and restrictions, substantially similar to those of the Convertible Preferred Stock. (4) "Fundamental Change" shall mean the occurrence of any transaction or event in connection with a plan pursuant to which all or substantially all of the Common Stock shall be exchanged for, converted into, acquired for or constitute solely the right to receive cash, securities, property or other assets (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise); provided, however, in the case of a plan involving more than one such transaction or event, for purposes of adjustment of the conversion price, such Fundamental Change shall be deemed to have occurred when substantially all of the Common Stock of the Corporation shall be exchanged for, converted into, or acquired for or constitute solely the right to receive cash, securities, property or other assets, but the adjustment shall be based upon the highest weighted average of consideration per share which a holder of Common Stock could have received in such transactions or events as a result of which more than 50 percent of the Common Stock of the Corporation shall have been exchanged for, converted into, or acquired for or constitute solely the right to receive cash, securities, property or other assets. (5) "Non-Stock Fundamental Change" shall mean any Fundamental Change other than a Common Stock Fundamental Change. (6) "Purchaser Stock Price" shall mean, with respect to any Common Stock Fundamental Change, the average of the daily Closing Prices of the Common Stock received in such Common Stock Fundamental Change for the ten consecutive Trading Days prior to and including the record date for the determination of the holders of the Common Stock entitled to receive such common stock, or, if there is no such record date, 11

the date upon which the holders of the Common Stock shall have the right to receive such common stock, in each case, as adjusted in good faith by the Board of Directors of the Corporation to appropriately reflect any of the events referred to in subparagraphs (i), (ii), (iii), (iv) and (v) of Section VI(c); provided, however, if no such Closing Prices of the common stock for such Trading Days exist, then the Purchaser Stock Price shall be set at a price determined in good faith by the Board of Directors of the Corporation. (7) "Reference Market Price" shall initially mean $17.25 (which is an amount equal to 66 2/3 percent of the reported last sale price for the Common Stock on the New York Stock Exchange on May 13, 1993), and in the event of any adjustment to the conversion price other than as a result of a Fundamental Change, the Reference Market Price shall also be adjusted so that the ratio of the Reference Market Price to the conversion price after giving effect to any such adjustment shall always be the same as the ratio of $17.25 to the initial conversion price per share set forth in the last sentence of Section VI(a). (8) "Trading Day" shall mean a day on which securities traded on the national securities exchange or quotation system or in the over-the- counter market used to determine the Closing Price. (j) Dividend or Interest Reinvestment Plans. Notwithstanding the foregoing provisions, the issuance of any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts in shares of Common Stock under any such plan, and the issuance of any shares of Common Stock or options or rights to purchase such shares pursuant to any employee benefit plan or program of the Corporation or pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the date the Convertible Preferred Stock was first designated (except as expressly provided in Section VI(c)(1) or VI(c)(ii) with respect to certain events under the Rights Agreement), and any issuance of Rights (as hereinafter defined), shall not be deemed to constitute an issuance of Common Stock or exercisable, exchangeable or convertible securities by the Corporation to which any of the adjustment provisions described above applies. There shall also be no adjustment of the conversion price in case of the issuance of any stock (or securities convertible into or exchangeable for stock) of the Corporation except as specifically described in this Section VI. If any action would require adjustment of the conversion price pursuant to more than one of the provisions described above, only one adjustment shall be made and such adjustment shall be the amount of adjustment which has the highest absolute value to holders of Convertible Preferred Stock. (k) Preferred Share Purchase Rights. So long as Preferred Share Purchase Rights of the kind declared and distributed by the Corporation's Board of Directors in May 1986, as the same have been and may hereafter be amended ("Rights"), are attached to the outstanding shares of Common Stock of the Corporation, each share of Common Stock issued upon conversion of the shares of Convertible Preferred Stock prior to the earliest of any Distribution Date (as defined in the Rights Agreement), the date of redemption of the Rights or the date of expiration of the Rights shall be issued with Rights in an amount equal to the amount of Rights then attached to each such outstanding share of Common Stock. (l) Certain Additional Rights. In case the Corporation shall, by dividend or otherwise, declare or make a distribution on its Common Stock referred to in Section VI(c)(iv) or VI(c)(v) (including, without limitation, dividends or distributions referred to in the last sentence of Section VI(c)(iv)), the holder of each share of Convertible Preferred Stock, upon the conversion thereof subsequent to the close of business on the date fixed for the determination of shareholders entitled to receive such distribution and prior to the effectiveness of the conversion price adjustment in respect of such distribution, shall also be entitled to receive for each share of Common Stock into which such share of Convertible Preferred Stock is converted, the portion of the shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock; provided, however, that, at the election of the Corporation (whose election shall be evidenced by a resolution of the Board of Directors) with respect to all holders so converting, the Corporation may, in lieu of distributing to such holder any portion of such distribution not consisting of cash securities of the Corporation, pay such holder an amount in cash equal to the fair market value thereof (as determined in good faith by the Board of Directors, whose determination shall be conclusive and 12

described in a resolution of the Board of Directors). If any conversion of a share of Convertible Preferred Stock described in the immediately preceding sentence occurs prior to the payment date for a distribution to holders of Common Stock which the holder of the share of Convertible Preferred Stock so converted is entitled to receive in accordance with the immediately preceding sentence, the Corporation may elect (such election to be evidenced by a resolution of the Board of Directors) to distribute to such holder a due bill for the shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash or assets to which such holder is so entitled, provided that such due bill (i) meets any applicable requirements of the principal national securities exchange or other market on which the Common Stock is then traded and (ii) requires payment or delivery of such shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash or assets no later than the date of payment or delivery thereof to holders of shares of Common Stock receiving such distribution. VII. Voting Rights. (a) General. The holders of shares of Convertible Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law. In connection with any right to vote, each holder of a share of Convertible Preferred Stock shall have one vote for each share held. Any shares of Convertible Preferred Stock owned, directly or indirectly, by any entity of which the Corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors, shall not have voting rights hereunder and shall not be counted in determining the presence of a quorum. (b) Default Voting Rights. Whenever dividends on the Convertible Preferred Stock or any other class or series of Parity Dividend Stock shall be in arrears in an aggregate amount equal to at least six quarterly dividends (whether or not consecutive), (i) the number of members of the Board of Directors of the Corporation shall be increased by two, effective as of the time of election of such directors as hereinafter provided and (ii) the holders of shares of Convertible Preferred Stock (voting separately as a class with all other affected classes or series of Parity Dividend Stock upon which like voting rights have been conferred and are exercisable) shall have the exclusive right to vote for and elect such two additional directors of the Corporation who shall continue to serve during the period such dividends remain in arrears. The right of the holders of shares of Convertible Preferred Stock to vote for such two additional directors shall terminate when all accrued and unpaid dividends on the Convertible Preferred Stock and all other affected classes or series of Parity Dividend Stock have been declared and paid or set apart for payment. The term of office of all directors so elected shall terminate immediately upon the termination of the right of the holders of shares of Convertible Preferred Stock and such Parity Dividend Stock to vote for such two additional directors, and the number of directors of the Board of Directors of the Corporation shall immediately thereafter be reduced by two. The foregoing right of the holders of shares of Convertible Preferred Stock with respect to the election of two directors may be exercised at any annual meeting of shareholders or at any special meeting of shareholders held for such purpose. If the right to elect directors shall have accrued to the holders of shares of Convertible Preferred Stock more than ninety days preceding the date established for the next annual meeting of stockholders, the President of the Corporation shall, within twenty days after the delivery to the Corporation at its principal office of a written request for a special meeting signed by the holders of at least 10 percent of all outstanding shares of Convertible Preferred Stock, call a special meeting of the holders of Convertible Preferred Stock to be held within sixty days after the delivery of such request for the purpose of electing such additional directors. The holders of shares of Convertible Preferred Stock and any Parity Dividend Stock referred to above voting as a class shall have the right to remove without cause at any time and replace any directors such holders shall have elected pursuant to this Section VII. VIII. Outstanding Shares. For purposes of this amendment, all shares of Convertible Preferred Stock issued by the Corporation shall be deemed outstanding, all shares of Convertible Preferred Stock issued by the Corporation shall be deemed outstanding except (i) from the date fixed for redemption pursuant to Section V, all shares of Convertible Preferred Stock that have been so called for redemption under Section V, to the extent 13

provided thereunder; (ii) from the date of surrender of certificates evidencing shares of Convertible Preferred Stock, all shares of Convertible Preferred Stock converted into Common Stock; and (iii) from the date of registration of transfer, all shares of Convertible Preferred Stock owned, directly or indirectly, by any entity of which the Corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors. IX. Partial Payments. Upon an optional redemption by the Corporation, if at any time the Corporation does not pay amounts sufficient to redeem all Convertible Preferred Stock, then such funds which are paid shall be applied to redeem such shares of Convertible Preferred Stock as the Corporation may designate by lot or in such other manner as the Board of Directors may determine to be fair, or such redemption shall be effected pro rata. X. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. XI. Miscellaneous. (a) The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Convertible Preferred Stock or shares of Common Stock or other securities issued on account of Convertible Preferred Stock pursuant hereto or certificates or instruments evidencing such shares or securities. The Corporation shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issuance or delivery of shares of Convertible Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Convertible Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person with respect to any such shares or securities other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable. (b) In the event that a holder of shares of Convertible Preferred Stock shall not by written notice designate the name in which shares of Common Stock to be issued upon conversion of such shares should be registered or to whom payment upon redemption of shares of Convertible Preferred Stock should be made or the address to which the certificates or instruments evidencing such shares or such payment, should be sent, the Corporation shall be entitled to register such shares and make such payment, in the name of the holder of such Convertible Preferred Stock as shown on the records of the Corporation and to send the certificates or instruments evidencing such shares or such payment, to the address of such holder shown on the records of the Corporation. THIRD: The Amendment was adopted on May 18, 1993. FOURTH: The Amendment was duly adopted by the Board of Directors. ASHLAND OIL, INC. /Paul W. Chellgren/ _________________________ Paul W. Chellgren President COMMONWEALTH OF KENTUCKY ) COUNTY OF GREENUP ) 14

The foregoing instrument was acknowledged before me this 17th day of May, 1993, by Paul W. Chellgren, President of ASHLAND OIL, INC., a Kentucky corporation, on behalf the corporation. /Mary E. Mell/ _________________________________ Mary E. Mell Notary Public [STAMP] MARY E. MELL My commission expires: July 3, 1994 Prepared by Thomas L. Feazell 1000 Ashland Drive Russell, Kentucky 41114 /Thomas L. Feazell/ _________________________________ Thomas L. Feazell 15

[STAMP] LODGED FOR RECORD ON THE 18 DAY OF MAY 19993 AT 3:45 PM RECORDED IN ART. OF INC. BOOK NO. 12 PAGE 322 TAX $______ FEES $23.50 DONALD L. DAVIDSON, CLERK GREENUP COUNTY BY J. THOMPSON D.C. NO. ___________ LODGED FOR RECORD ON THE 18 DAY OF MAY 1993 AT 2:55 PM RECORDED IN ART. OF INC. BOOK NO. 30 PAGE 59

                                   BY-LAWS
                                      OF
                               ASHLAND OIL, INC.

                                   ARTICLE I

                                    OFFICES

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


                                  ARTICLE II

                           MEETINGS OF SHAREHOLDERS

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


                                  ARTICLE III

                              BOARD OF DIRECTORS

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

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

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


                                  ARTICLE IV

                                  COMMITTEES

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


                                   ARTICLE V

                                   OFFICERS

      SECTION  1.  Officers and  Executive  Officers of  the  Corporation. The
officers of the Corporation shall
be:
      (a) a Chairman of the Board;
      (b) one or more Vice Chairmen of the Board;
      (c) a President;
      (d) one or  more Vice Presidents, one or more of  whom may be designated
as Executive  Vice President, one or more of  whom may be designated as Senior
Vice President,  and one or more  of whom may be  designated as Administrative
Vice President;
      (e) a Secretary and, as and  when designated, a Deputy Secretary and one
or more Assistant Secretaries;
      (f) a Treasurer and, as and when designated, a Deputy  Treasurer and one
or more Assistant Treasurers;
      (g) a  Controller and, as and  when designated, a Deputy  Controller and
one or more Assistant Controllers;
      (h)  an Auditor  and,  as and  when  designated, one  or more  Assistant
Auditors.
The following officers  are hereby  designated the Executive  Officers of  the
Corporation:
      Chairman of the Board;
      Vice Chairmen of the Board;
      President;
      Executive Vice Presidents;
      Senior Vice Presidents;
      Administrative Vice Presidents;
      Secretary;
      Treasurer;
      Controller;
      Auditor.
      SECTION 2. Election and  Appointment and Term of Office.  Each Executive
Officer shall  be elected by the Board  at its annual meeting  and hold office
until the next  annual meeting of the Board and until his successor is elected
or until his earlier  death, resignation or removal in  the manner hereinafter
provided.
      The  Board  may  elect such  other  officers  and  designate such  other
Executive Officers as  it deems necessary and  such other officers shall  have
such authority and shall perform such duties as the Board may prescribe.
      The Chairman of the Board  acting jointly with any Vice Chairman  of the
Board or the President, by  written designation filed with the  Secretary, may
appoint  all officers,  other  than Executive  Officers,  of the  Corporation.
Subject to the authority of the Board, the persons having authority to appoint
an officer shall also have authority to fix the salary of such officer.
      If additional officers are elected by the Board during the year, each of
them shall hold  office until the  next annual meeting  of the Board at  which
officers are regularly elected and until his successor is elected or appointed
or until his  earlier death, resignation or removal in  the manner hereinafter
provided.
      SECTION 3. Resignation, Removal and Vacancies. Any officer may resign at
any time  by giving written  notice to  the Chairman  of the  Board, any  Vice
Chairman of  the Board, the President  or the Secretary,  and such resignation
shall be effective when the notice is delivered, unless the notice specifies a
later effective date.
      All officers and agents elected or appointed shall be subject to removal
at any time by the Board with or without  cause. All appointed officers may be
removed at any time by the Chairman of the Board acting jointly with  any Vice
Chairman of  the Board or the President, by written designation filed with the
Secretary.
      A vacancy in any office may  be filled for the unexpired portion of  the
term  in  the same  manner as  provided for  election  or appointment  to such
office.
      SECTION 4. Duties and Functions.
      (A) Chairman  of the Board. The Chairman of the Board, if present, shall
preside at all meetings of  the shareholders and the Board. He shall  be Chief
Executive Officer of the  Corporation, shall be vested with  executive control
and management of the business  and affairs of the Corporation and  shall have
the  direction of all other  officers, agents and  employees. He shall perform
all such other  duties as  are incident to  the office or  as may be  properly
required  of him by  the Board, subject in  all matters to  the control of the
Board.
      (B) Vice  Chairmen of  the Board.  The Vice Chairman  of the  Board with
seniority  of  office, in  the absence  of the  Chairman  of the  Board, shall
preside at all meetings of the shareholders and the Board.  Each Vice Chairman
of the Board shall have such powers, authority and duties as may be  delegated
to him from time to time by the Board or the Chairman of the Board.
      (C) The President. The President, in the absence of the  Chairman of the
Board and all the Vice Chairmen of the Board, shall preside at all meetings of
the shareholders  and the  Board. He  shall  have such  powers, authority  and
duties as may  be delegated  to him  from time  to time  by the  Board or  the
Chairman of the Board.
      (D) Executive Vice Presidents. The Executive Vice  Presidents shall have
uch powers, authority and duties as may be delegated or assigned to them from
time to time by the Board, the Chairman of the Board, any Vice Chairman of the
Board or the President.
      (E) Senior Vice Presidents.  The Senior Vice Presidents shall  have such
powers, authority and duties as may be delegated or assigned to them from time
to time by  the Board,  the Chairman of  the Board, any  Vice Chairman of  the
Board or the President.
      (F) Administrative  Vice Presidents. The Administrative  Vice Presidents
shall have such powers, authority  and duties as may be delegated  or assigned
to them from time  to time by the Board,  the Chairman of the Board,  any Vice
Chairman of the Board or the President.
      (G)  Vice  Presidents.  The  Vice Presidents  shall  have  such  powers,
authority and duties as may be delegated or assigned to them from time to time
by the Board, the Chairman of the Board, any Vice Chairman of the Board or the
President.
      (H) Secretary. The Secretary shall  attend to the giving and serving  of
all notices required  by law or these  By-laws; shall be the  custodian of the
corporate seal and shall affix and attest the same to all papers requiring it;
shall have responsibility for preparing minutes  of the meetings of the  Board
and shareholders; and shall in general  perform all the duties incident to the
office of the Secretary, subject in all matters to the control of the Board.
      (I) Treasurer. The Treasurer shall have custody and control of the funds
and securities of  the Corporation and shall perform all  such other duties as
are incident  to his office  or that  may be properly  required of him  by the
Board,  the Chairman  of the  Board, any  Vice Chairman  of the  Board or  the
President.
      (J)  Controller. The Controller  shall maintain adequate  records of all
assets,  liabilities and  transactions  of  the  Corporation; shall  see  that
adequate audits thereof are  currently and regularly made; shall  have general
supervision of  the preparation  of the  Corporation's balance  sheets, income
accounts and other  financial statements  or records; and  shall perform  such
other duties as shall, from time to time, be assigned to him by the Board, the
Chairman of the Board, any Vice Chairman of  the Board or the President. These
duties and  powers shall extend to  all subsidiary corporations and  so far as
the Board, the Chairman of  the Board, any Vice  Chairman of the Board or  the
President may deem practicable, to all affiliated corporations.
      (K) Auditor.  The Auditor  shall  review the  accounting, financial  and
related operations of the  Corporation and shall be responsible  for measuring
the effectiveness  of various  controls established  for the  Corporation. His
duties  shall  include,  without  limitation,  the  appraisal  of  procedures,
verifying the extent of compliance with formal controls and the prevention and
detection  of fraud or dishonesty and such other duties as shall, from time to
time,  be assigned to him  by the Board,  the Chairman of the  Board, any Vice
Chairman of the  Board or the President. These duties  and powers shall extend
to all subsidiary  corporations and so far  as the Board, any Chairman  of the
Board,  any Vice Chairman of the Board  or the President may deem practicable,
to all affiliated corporations.


                                  ARTICLE VI

                CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

      SECTION  1. Borrowing  Authority. The  Chairman of  the Board,  any Vice
Chairman  of the Board, the  President, the Senior  Vice President supervising 
the  law function  and  any  other officer,  employee,  or  agent of  the
Corporation  designated by  the  Board  (collectively, "Designated  Officers")
shall, subject to Section 3 hereof, have the power, acting jointly with any  
officer designated by the Board as the Chief Financial Officer, Administrative 
Vice President responsible for the treasury function, or the  Treasurer 
(collectively, the "Financial Officers"), to authorize the establishment of 
borrowing facility, the borrowing of money or the guaranteeing of debt 
obligations of others on  behalf of  the Corporation. If  the approving 
Financial  Officer is also  one of  the  Designated Officers,  the  approval 
of  another  Designated Officer must be obtained.
      SECTION  2. Deklegation of Authority.  Any Financial Officer of the 
Corporation acting jointly with any Designated Officer may delegate the
authority to establish borrowing facilities or to borrow money or to issue debt
obligations or to guarantee the debt obligations of others or any combination
of the foregoing to any person(s) on behalf of the Corporation, provided each
obligation to be incurred under each such authority does not exceed the 
equivalent of Ten Million United States Dollars (U.S. $10,000,000).  Each 
delegated authority may not be redelegated.  If the approving Financial 
Officer is also one of the Designated Officers, the approval of another 
Designated Officer must be obtained.
     SECTION 3.  Limitation of Authority.  The Finance Committee of the Board
of Directors shall, subject to the last sentence of this Section 3, retain 
authority for and, in its sole discretion, shall authorize (a) any estab-
lishment of borrowing facilities, borrowing of money or issuance of debt 
obligations by the Corporation which exceeds the equivalent of Ten Million
United States Dollars (U.S. $10,000,000) and which has a maturity of one year
or more from the effective date of the issuance or borrowing and (b) any 
guarantee of any debt obligation of non-affiliated entities by the Corpora-
tion which guaranty is for an amount exceeding the equivalent of Ten Million
United States Dollars (U.S. $10,000,000) and which underlying obligation has
a maturity of one year or more from the effective date of the issuance or 
borrowing.  The foregoing limitations shall not apply, however, to those 
borrowings, debt issuances, or guaranties of debt obligations made or 
delivered, under or in connection with a borrowing facility or program 
previously approved by the Board of Directors or the Finance Committee or to
such types of transactions with or on behalf of affiliated entities.
     SECTION 4.  Execution of Documents. The  Designated Officers and any other 
officer, employee or agent of the Corporation designated by the Board shall 
have power,  acting alone, to execute  and deliver,  in  the name  and  on 
behalf of the Corporation, (a) mortgages, bonds, debentures, notes, checks,
drafts and other orders evidencing the borrowing or guaranteeing (when so 
authorized as provided in Section 1, 2, or 3)  or payment  of money  and (b)
deeds,  leases, contracts and other agreements and documents.  Each such  
named officer empowered to execute  and deliver the aforesaid  documents and
any such other officer, employee or agent so designated by the  Board 
pursuant to the  first sentence of this  Section 4 may  delegate  such  
power  (including authority  to  redelegate) by  written instrument to other
officers, employees or agents of the Corporation.
      SECTION 5. Deposits. All funds of the Corporation not otherwise employed
shall  be deposited  from time  to time  to the credit  of the  Corporation or
otherwise with such banks or other financial institutions as may be designated
by the Board, any Designated Officer, or  any  other officer, employee or 
agent of the Corporation so designated by the Board. Each such named officer 
and any such other officer, employee or  agent  so  authorized  by  the  Board  
may  delegate  such  power (including authority to  redelegate) by written 
instrument  to other officers, employees or agents of the Corporation.
      SECTION 6. Proxies  in Respect of  Shares or  Other Securities of  Other
Corporations. The Chairman of the Board, any Vice Chairman of the Board or the
President, and any  other officer of the Corporation  designated by the Board,
shall have the authority (a) to  appoint from time to time an agent  or agents
of  the Corporation to exercise in  the name and on  behalf of the Corporation
the powers and rights which  the Corporation may have as the holder  of shares
or  other securities  in any  other  corporation, (b)  to vote  or consent  in
respect  of such  shares or  securities  and (c)  to execute  or  cause to  be
executed in the name  and on behalf of the Corporation and under its corporate
seal,  or otherwise,  such  written  proxies,  powers  of  attorney  or  other
instruments as he may deem  necessary or proper in order that  the Corporation
may  exercise such  powers and  rights. Sny Designated Officer, or  any such  
designated officer  may instruct any  person or persons  appointed as  
aforesaid as to  the manner  of exercising such powers and rights.

                                  ARTICLE VII

                               BOOKS AND RECORDS

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


                                 ARTICLE VIII

                 SHARES AND THEIR TRANSFER; FIXING RECORD DATE

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


                                  ARTICLE IX

                                     SEAL

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


                                   ARTICLE X

                                  FISCAL YEAR

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

                                  ARTICLE XI

                                INDEMNIFICATION

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

                                  ARTICLE XII

                                  AMENDMENTS

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



                   AMENDED STOCK INCENTIVE PLAN FOR KEY EMPLOYEES
                     OF ASHLAND OIL, INC. AND ITS SUBSIDIARIES
    SECTION 1. PURPOSE

       The purpose of this amended Stock Incentive Plan For Key Employees of
Ashland Oil, Inc. And Its Subsidiaries (herein called the "Plan") is to revise
the Incentive Stock Option Plan For Key Employees of Ashland Oil, Inc. And Its
Subsidiaries (1981) (such plan as it existed prior to the effective date of
the Plan hereinafter referred to as the "1981 Plan") and to promote the
interests of Ashland Oil, Inc. (herein called "Ashland") and its shareholders
by providing their officers and key employees with an incentive to continue
service with Ashland and its subsidiaries. Through the grant of stock options,
stock appreciation rights and Restricted Stock awards (collectively referred
to as "Grants"), Ashland seeks to attract and retain in its employ individuals
of training, experience and ability and to furnish additional incentive to
officers and other key employees upon whose judgment, initiative and efforts
the successful conduct of its business largely depends.

    SECTION 2. ADMINISTRATION

        (a) The Plan shall be administered by the Personnel and Compensation
Committee of the Board of Directors of Ashland (herein called the
("Committee"), consisting of not less than three directors of Ashland who shall
be appointed, from time to time, by the Board of Directors of Ashland. No
person who is (or, within one year prior to his or her appointment as a member
of the Committee, was) eligible to participate in the Plan shall be a member
of the Committee. Subject to the express provisions of the Plan, the Committee
shall have plenary authority to interpret the Plan, to prescribe, amend, and
rescind from time to time rules and regulations relating to the Plan, to
determine the eligible employees to whom Grants shall be made, to determine
whether any option hereunder shall be deemed to be an "incentive stock option"
as provided by Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") (herein referred to as "incentive stock options") or an option
not qualifying as an "incentive stock option" under the Code (herein referred
to as "non-qualified options"), to determine the terms and provisions of the
respective Grants (which terms and provisions need not be the same in each
case), and to make all other determinations deemed necessary or advisable for
the administration of the Plan. In making such determinations, the Committee
may take into account the nature of the services rendered by the respective
employees, their present and potential contributions to Ashland's success and
such other factors as the Committee in its discretion shall deem relevant. The
determinations of the Committee on the matters referred to in this Section 2
shall be conclusive.

       (b) All determinations of the Committee shall be made by not less than a
majority of its members. Any decision or determination reduced to writing and
signed by all the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held. No member of the
Committee shall be liable, in the absence of bad faith, for any act or
omission with respect to his or her services on the Committee. Services on the
Committee shall constitute services as a Director of Ashland so that members
of the Committee shall be entitled to indemnification and reimbursement for
their services as members of the Committee to the same extent as for services
as Directors of Ashland.

SECTION 3. STOCK SUBJECT TO THE PLAN

       There will be reserved for issuance upon the exercise of options and
stock appreciation rights and upon awards of Restricted Stock (as defined in
Section 13), to be granted from time to time under the Plan, an aggregate of
2,000,000 shares of Ashland Common Stock, par value $1.00 per share ("Common
Stock") (which shares include shares heretofore provided for under the 1981
Plan). Such shares may be in whole or in part, as the Board of Directors of
Ashland (the "Board") shall from time to time determine, authorized and
unissued shares of Common Stock or issued shares of Common Stock which shall
have been reacquired by Ashland. If any option or stock appreciation right
granted under the Plan shall expire or 
                                     1

terminate for any reason without having been exercised (or considered to have been exercised as provided in Section 7) in full, the shares subject thereto shall again be available for the purposes of the Plan. SECTION 4. ELIGIBILITY Options and Restricted Stock may be granted only to salaried employees (which term shall be deemed to include officers) of Ashland and of its present and future subsidiary corporations as defined in Section 424 of the Code ("subsidiaries"). A director of Ashland or of a subsidiary who is not also such an employee of Ashland or of one of its subsidiaries will not be eligible to receive any options or Restricted Stock under the Plan. Options may be granted to employees who hold or have held options under previous plans. An employee who has been granted an option may be granted an additional option or options. Notwithstanding anything to the contrary contained herein, in the case of incentive stock options, the maximum aggregate fair market value (determined at the time each incentive stock option is granted under the Plan) of the shares of Common Stock for which any individual employee may be granted incentive stock options under the Plan in any calendar year (and under all other plans of Ashland or any subsidiary which provide for the granting of incentive stock options). For purposes of this paragraph, fair market value of Common Stock shall be the closing price of the Common Stock as reported on the Composite Tape on the date of the grant of an incentive stock option under the Plan or, if there is no trading at the Common Stock on the date in question, then the closing price of the Common Stock, as so reported, on the next preceding date on which there was trading in the Common Stock. SECTION 5. PERIOD OF PLAN AND DURATION OF OPTIONS (a) No options or Restricted Stock awards shall be granted under the Plan after November 7, 1994. (b) Every incentive stock option shall provide for a fixed expiration date of not later than ten years from the date such incentive option is granted. SECTION 6. OPTION DESIGNATION AND PRICE (a) Any option granted under the Plan may be granted as an incentive stock option or as a non-qualified stock option as shall be designated at the time of the grant of such option. (b) The option price per share of the Common Stock underlying each option shall be fixed by the Committee, but shall not be less than 100% of the fair market value of the stock at the time of the granting of the options. Such fair market value shall be determined by the Committee which may use any reasonable method of valuation, including the closing price of the Common Stock as reported on the Composite Tape on the date on which the option is granted. SECTION 7. EXERCISE OF OPTIONS. (a) The Committee may in its discretion prescribe in the option grant the installments, if any, in which an option granted under the Plan shall become exercisable provided that no option shall be exercisable prior to the first anniversary of the date of its grant except as provided in Section 12 or as the Committee otherwise determines. In no case may an option be exercised at any time for less than 50 shares (or the remaining shares covered by the option if less than 50 shares) during the term of the option. The specified number of shares will be issued upon receipt by Ashland of (i) notice from the optionee of exercise of an option and (ii) either payment to Ashland of the option price of the number of shares with respect to which the option is exercised or (with approval of the Committee) a promissory note as provided in Section 8 hereof. Each such notice and payment shall be delivered or mailed by postpaid mail, addressed to the Treasurer of Ashland at Ashland's Executive Offices at 1000 Ashland Drive, Russell, Kentucky, or such other place as Ashland may designate from time to time. (b) An incentive stock option shall not be exercisable while there is outstanding any incentive stock option which was granted before the granting of such option to such employee to purchase stock of 2

Ashland or a subsidiary (determined at the time of granting of such option) or a predecessor of any of such corporations. An option shall be treated as outstanding for this purpose until it is exercised in full or expires by reason of lapse of time. SECTION 8. PAYMENT FOR SHARES Except as otherwise provided in this Section 8, the option price shall be paid in full when the option is exercised. The price may be paid in whole or in part in (a) cash or (b) whole shares of Common Stock evidenced by negotiable certificates, valued at their fair market value on the date of exercise (which shares of Common Stock must have been owned by the employee six months or longer in the case of the exercise of options which were granted after May 21, 1992), (c) by a combination of such methods of payment, or (d) such other consideration as shall be approved by the Committee (including without limitation, assurance satisfactory to the Committee from a broker registered under the Securities Exchange Act of 1934, of the delivery of the proceeds of an imminent sale of the stock to be issued pursuant to the exercise of such option, such sale to be made at the discretion of the employee). For these purposes, "fair market value" shall be computed in the same manner as was the grant. If certificates representing shares of Common Stock are used to pay all or part of the purchase price of an option, separate certificates shall be delivered by Ashland representing the same number of shares as each certificate so used and an additional certificate shall be delivered representing the additional shares to which the employee is entitled as a result of exercise of the option. Moreover, an employee may request Ashland to "pyramid" his shares; that is, to automatically apply the shares which he is entitled to receive on the exercise of a portion of a stock option to satisfy the exercise for additional portions of the option, thus resulting in multiple simultaneous exercises of options by use of whole shares as payment. The Committee may in its discretion authorize payment of all or any part of the option price over a period of not more than five years from the date the option is exercised. Any unpaid balance of the option price shall be evidenced by the employee's promissory note payable to the order of Ashland which shall bear interest at such rate or rates as determined from time to time by the Committee, but not less than the lower of the prevailing base rate of interest or the most favorable rate of interest charged to commercial borrowers as announced by any major U.S. bank on the date the option is exercised, and shall be payable in full within not later than five years after the date the option is exercised. SECTION 9. GOVERNANCE OF PLANS Notwithstanding any terms or provisions to the contrary all incentive stock options outstanding prior to November 8, 1984, shall continue to be governed by the terms and provisions of the 1981 Plan. SECTION 10. GENERAL STOCK APPRECIATION RIGHTS The Committee may grant general stock appreciation rights ("SARs") pursuant to the provisions of this Section 10 to the holder of any option granted under the Plan (a "related option") with respect to all or a portion of the shares subject to the related option. An SAR may only be granted concurrently with the grant of the related option. Subject to the terms and provisions of this Section 10, each SAR shall be exercisable only at the same time and to the same extent the related option is exercisable and in no event after the termination of the related option. SARs shall be exercisable only when the fair market value (determined as of the date of exercise of the SARs) of each share of Common Stock with respect to which the SARs are to be exercised shall exceed the option price per share of Common Stock subject to the related option. SARs granted under the Plan shall be exercisable in whole or in part by notice to Ashland. Such notice shall state that the holder of the SARs elects to exercise the SARs and the number of shares in respect of which the SARs are being exercised. Subject to the terms and provisions of this Section 10, upon the exercise of SARs, the holder thereof shall be entitled to receive from Ashland consideration (in the form hereinafter provided) equal in value to the excess of the fair market value (determined as of the date of exercise of the SARs) of each share of 3

Common Stock with respect to which such SARs have been exercised over the option price per share of Common Stock subject to the related option. Upon the exercise of an SAR, the holder may specify the form of consideration to be received by such holder, which shall be in shares of Common Stock (valued at fair market value on the date of exercise of the SAR), or in cash, or partly in cash and partly in shares of Common Stock, as the holder shall request; provided, however, that the Committee, in its sole discretion, may disapprove the form of consideration requested and instead authorize the payment of such consideration in shares of Common Stock (valued as aforesaid), or in cash, or partly in cash and partly in shares of Common Stock, as the Committee shall determine. For purposes of this Section 10, (a) fair market value of a share of Common Stock shall be the mean between the high and low sales prices thereof on the Composite Tape on the date of exercise of an SAR or, if there is no trading of the Common Stock on the date in question, then the closing price of the Common Stock, as so reported, on the next preceding date on which there was trading in the Common Stock, and (b) the date of exercise of an SAR shall mean the date on which the Company shall have received notice from the holder of the SAR of the exercise of such SAR. Upon the exercise of SARs, the related option shall be considered to have been exercised (a) to the extent of the number of shares of Common Stock with respect to which such SARs are exercised and (b) to that extent for purposes of determining the number of shares of Common Stock available for the grant of options and Restricted Stock under the Plan. Upon the exercise or termination of the related option, the SARs with respect to such related option shall be considered to have been exercised or terminated to the extent of the number of shares of Common Stock with respect to which the related option was so exercised or terminated. SECTION 11. NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS No option or SAR granted under the Plan shall be transferable otherwise than by will or the laws of descent and distribution, and an option or SAR may be exercised, during the lifetime of the holder thereof, only by him or her. SECTION 12. CONTINUED EMPLOYMENT AND AGREEMENT TO SERVE (a) Subject to the provisions of Paragraphs (b), (c) and (e) of this Section 12, every option shall provide that it may not be exercised in whole or in part for a period of one year after the date of granting such option and if the employment of the employee shall be terminated, for any reason other than death or disability as determined by the Committee, prior to the end of such one year period, the option granted to such employee shall immediately terminate. (b) Every option shall provide that in the event of the death of the employee while employed by Ashland or one of its subsidiaries or death during the one-year period of disability described in Paragraph (c) of this section 12 or within three months after cessation of employment for any cause, it shall be exercisable, at any time or from time to time, prior to the fixed termination date set forth in the option, by the estate of the decedent, or by any person who shall acquire the right to exercise such option by bequest or by the laws of descent and distribution for the full number of optioned shares or any part thereof, less such number as may have been theretofore acquired under the option. (c) Every option shall provide that in the event the employment of any employee shall cease by reason of total and permanent disability within the meaning of Section 105(d)(4) of the Code as determined by the Committee at any time during the term of the option, it shall be exercisable, at any time or from time to time by such employee prior to the fixed termination date set forth in the option, during a period of one year of continuing disability following termination of employment by reason of such disability for the full number of optioned shares or any part thereof, less such number as may have been theretofore acquired under the option. (d) Except as provided in Paragraphs (a), (b), (c) and (e) of this Section 12, every option shall provide that it shall terminate on the earlier to occur of the fixed termination date set forth in the option or three 4

months after cessation of the employee's employment for any cause, and, except as provided in Paragraph (e) of this Section 12, if exercised after cessation of such employment, may be exercised only in respect of the number of shares which the employee could have acquired under the option immediately prior to such cessation of employment. No option may be exercised after the fixed termination date set forth in the option. (e) Notwithstanding any provision of this Section 12 to the contrary, any option granted pursuant to the Plan and any related SAR may, in the discretion of the Committee or as provided in the relevant option agreement, become fully exercisable as to all optioned shares (i) from and after the time the employee ceases to be an employee of Ashland or any of its subsidiaries as a result of the sale or other disposition by Ashland of assets or property (including shares of any subsidiary) in respect of which the employee had theretofore been employed or as a result of which optionee's continued employment with Ashland or any subsidiary is no longer required and (ii) in the case of a change in control (as hereinafter defined) of Ashland from and after the date of such change in control. For purposes of this Paragraph (e), the term "change in control" shall be deemed to occur (1) upon the approval by the Board of Directors of Ashland (or if approval of the Board of Directors of Ashland is not required as a matter of law, the shareholders of Ashland) of (A) any consolidation or merger of Ashland in which Ashland is not the continuing or surviving corporation or pursuant to which shares of Common Stock would be converted into cash, securities or other property other than a merger in which the holders of Common Stock immediately prior to the merger will have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger, (B) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Ashland, or (C) adoption of any plan or proposal for the liquidation or dissolution of Ashland, or (2) when any "person" (as defined in Section 13(d) of the Securities Exchange Act of 1934), other than Ashland or any subsidiary or employee benefit plan or trust maintained by Ashland or any of its subsidiaries, shall become the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of more than 20% of the Common Stock outstanding at the time, without the prior approval of the Board of Directors of Ashland. (f) Each employee granted an option under this Plan shall agree by his or her acceptance of such option to remain in the service of Ashland or a subsidiary corporation of Ashland for a period of at least one year from the date of the option agreement between Ashland and the employee. Such service shall, subject to the terms of any contract between Ashland or any such subsidiary and such employee, be at the pleasure of Ashland or such subsidiary and at such compensation as Ashland or such subsidiary shall reasonably determine from time to time. Nothing in the Plan or in any option granted pursuant to the Plan shall confer on any individual any right to continue in the employment of Ashland or any of its subsidiaries or interfere in any way with the right of Ashland or any of its subsidiaries to terminate his or her employment at any time. (g) Subject to the limitations set forth in Section 422 of the Code, the Committee may adopt, amend or rescind from time to time such provisions as it deems appropriate with respect to the effect of leaves of absence approved by any duly authorized officer of Ashland with respect to any optionee. (h) The determination by the Committee of any question involving disability shall be conclusive and binding. SECTION 13. RESTRICTED STOCK AWARDS The Committee may grant to employees shares of Common Stock subject to certain restrictions (herein referred to as "Restricted Stock"). The amount of Restricted Stock to be granted to any eligible employee and the respective terms and conditions of such grant (which terms and provisions need not be the same in each case) shall be determined by the Committee in its sole discretion. As a condition to any award and the corresponding delivery of Restricted Stock hereunder, the Committee may require an employee to pay an amount equal to, or in excess of, the par value of the shares of Restricted Stock 5

awarded to him or her. Each certificate issued in respect of shares of Restricted Stock granted to a participant under the Plans shall be registered in the name of the participant 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 Section 13 of the Stock Incentive Plan for Key Employees of Ashland Oil, Inc. and Its Subsidiaries and an Agreement entered into between the registered owner and Ashland Oil, Inc." Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered during a "Restricted Period", which shall be determined by the Committee and which shall not be less than one year nor more than five years from the date of grant. The Committee may reduce the Restricted Period with respect to any outstanding shares of Restricted Stock at any time, but in no event shall the Restricted Period be less than one year. Except for such restrictions, the employee as the owner of the Common Stock issued as Restricted Stock shall have all rights of a shareholder including, but not limited to, the right to vote such Common Stock and to receive dividends thereon as and when paid. In the event that an employee's employment is terminated by reason of death or physical or mental disability, or for such other reasons as the Committee may provide, the employee (or his or her estate) will receive his or her Restricted Stock subject to the terms of his or her employment agreement which agreement shall be in accordance with the terms and provisions set forth in Section 12(f) herein. In the case of voluntary resignation or any other termination of employment, an employee's Restricted Stock will be forfeited; provided, however, that the Committee may limit such forfeiture to that portion thereof which is proportional to the unelapsed portion of the Restricted Period. Any forfeited Restricted Stock shall not again be available for the grant of options and Restricted Stock under the Plan. At the end of the Restricted Period all shares of Restricted Stock shall be transferred free and clear of all restrictions to the employee. All such shares may also be transferred free and clear of all restrictions to the employee to the same extent provided in Section 12(e) either in the discretion of the Committee or as provided in the relevant employment agreement. SECTION 14. WITHHOLDING TAXES Federal, state or local law may require the withholding of taxes applicable to gains resulting from the exercise of non-qualified stock options granted hereunder. Unless otherwise prohibited by the Committee, each participant may satisfy any such tax withholding obligation by any of the following means, or by a combination of such means: (i) a cash payment; or (ii) authorizing Ashland to withhold from the shares of Ashland Common Stock otherwise issuable to the participant as a result of the exercise of the non- qualified stock option a number of shares having a fair market value, as of the date the withholding tax obligation arises (the "Tax Date"), which will satisfy the amount of the withholding tax obligation. A participant's election to pay the withholding tax obligation by (ii) above must be made on or before the Tax Date, is irrevocable, is subject to such rules as the Committee may adopt, and may be disapproved by the Committee. SECTION 15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event the market price of Common Stock shall decrease as a result of any recapitalization, reorganization, merger, consolidation, spinoff, separation, partial liquidation, or other transaction described in Section 424(a) of the Code, then, in the discretion of the Committee (and subject to any Internal Revenue Service requirements that may be applicable) the price per share of Common Stock under each option or Restricted Stock award granted pursuant to the Plan may be appropriately adjusted (and the number of shares subject to option or Restricted Stock awards may be appropriately adjusted). For purposes of the preceding sentence, the decrease in market price of Common Stock may be determined in any manner the Committee deems reasonable, including the comparison of such market price immediately before and immediately after the event giving rise to any such decrease, subject to internal Revenue Service requirements. 6

Adjustments under this Section 14 shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive, and the Committee in its discretion in making such adjustments may disregard fractional shares. SECTION 16. AMENDMENTS AND TERMINATIONS Unless the Plan shall theretofore have been terminated as hereinafter provided, the Plan shall terminate on, and no award shall be granted after, November 7, 1994. The Plan may be terminated, modified or amended by the shareholders of Ashland. The Board may at any time terminate, modify or amend the Plan in such respects as it shall deem advisable; provided, however, that the Board may not, without approval by the holders of a majority of the outstanding shares of stock present and voting at any annual or special meeting of shareholders of Ashland, (i) increase (except as provided in Section 14) the maximum number of shares as to which options or Restricted Stock may be granted under the Plan, (ii) change the class of employees eligible to receive options and Restricted Stock awards, (iii) change the manner of determining the minimum option prices other than to change the manner of determining the fair market value of the Common Stock as set forth in Section 6, or (iv) extend the period during which options or Restricted Stock awards may be granted or exercised. No termination, modification or amendment of the Plan may, without the consent of the employee to whom any option or Restricted Stock award shall theretofore have been granted, adversely affect the rights of such employee under such option or Restricted Stock award. SECTION 17. EFFECTIVENESS OF THE PLAN The Plan shall be effective on November 8, 1984, subject to its ratification by the holders of a majority of the shares of Ashland stock present and voting at the Annual Meeting of Shareholders of Ashland on January 31, 1985 or such other date fixed for the next meeting of shareholders or any adjournment or postponement thereof. The Committee may in its discretion authorize the granting of options and Restricted Stock awards, the exercise of which shall be expressly subject to the conditions that (a) the Plan shall have been approved or ratified as aforesaid by the shareholders of Ashland, (b) the shares of Common Stock to be issued upon the exercise of options granted under the Plan shall have been duly listed, upon official notice of issuance, upon the New York Stock Exchange and (c) a Registration Statement under the Securities Act of 1933, as amended, with respect to such shares shall have become effective. SECTION 18. TIME OF GRANTING OPTIONS AND RESTRICTED STOCK AWARDS Nothing contained in the Plan or any resolutions adopted or to be adopted by the Board of Directors of Ashland or the shareholders of Ashland shall constitute the granting of any option or Restricted Stock award hereunder. Options and Restricted Stock awards shall be granted hereunder only by action of or pursuant to the authority of the Committee and the date of grant shall be the date fixed in the determination thereof by the Committee; provided, however, that no participant shall have any rights in respect of such grant unless and until he or she shall have executed and delivered an option or employment agreement, as the case may be, in form and substance satisfactory to the Committee. SECTION 19. USE OF CERTAIN TERMS Options, SARs and Restricted Stock awards granted under the Plan shall be binding upon Ashland, its successors and assigns. Unless the context otherwise requires, the terms used in the Plan which correspond to like terms defined in Sections 421 through 424, inclusive, of the Code and regulations and revenue rulings applicable thereto shall have the meanings attributed to them in said sections of such Code. As Amended and Restated by the Board on March 17, 1994. 7


                        ASHLAND OIL, INC.
                  AMENDED PERFORMANCE UNIT PLAN

     1. Purpose. The purpose of this Amended Ashland Oil, Inc.
Performance Unit Plan (herein called the "Plan") is to amend
Ashland's current Performance Unit Plan and to further the long-
term, profitable growth of Ashland Oil, Inc., its subsidiaries
and affiliates (hereinafter collectively called "Ashland") by
offering a long-term incentive in addition to current
compensation to key employees of Ashland who will be largely
responsible for such growth to the benefit of the Ashland
shareholders. It is expected that this plan will encourage such
employees to remain with Ashland and will also encourage
qualified persons to seek and accept employment with Ashland.

     2. Stock Subject to this Plan. Any shares of Common Stock,
par value $1 per share ("Common Stock"), of Ashland Oil, Inc.,
used for purposes of this Plan may be in whole or in part, as the
Board of Directors of Ashland Oil, Inc. ("Board of Directors")
may from time to time determine, authorized and unissued shares
of Common Stock or issued shares of Common Stock reacquired by
Ashland.

     3. Committee. This Plan shall be administered by the
Personnel and Compensation Committee (the "Committee") which
shall consist of not less than three members of the Board of
Directors who are not eligible to participate in this Plan. The
Committee shall be appointed by the Board of Directors, which may
from time to time appoint members of the Committee in
substitution for members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee shall
select one of its members as its chairman and shall hold its
meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of
the Committee shall be made by not less than the majority of its
members. Any decision or determination reduced to writing and
signed by all the members shall be fully as effective as if it
had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary who shall keep
minutes of its meetings and shall make such rules and regulations
for the conduct of its business as it shall deem advisable.

     Subject to the express provisions of this Plan, the
Committee shall have plenary authority to interpret this Plan, to
award performance units, to prescribe, amend and rescind rules
and regulations relating to it, to determine the terms and
provisions of the respective performance unit awards (which need
not be identical) and to make all other determinations necessary
or advisable for its administration.

     4. Eligibility. Performance units may be awarded only to
regular salaried employees (which term shall be deemed to include
officers) of Ashland (hereinafter collectively called
"Employees"). Any Employee may receive one or more awards of
performance units as the Committee shall from time to time
determine, and such determinations may be different as to
different Employees and may vary as to different awards. A
director of Ashland who is not also an Employee shall not be
eligible to receive an award. Nothing contained in this Plan
shall be construed to limit the right of Ashland to grant
performance units or other forms of incentive compensation
otherwise than under this Plan. The Plan shall not confer on any
individual any right to continue in employ of Ashland or any of
its subsidiaries or interfere in any way with the right of the
Company or any of its subsidiaries to terminate his or her
employment at any time, with or without cause, notwithstanding
the possibility that the number of performance units exercisable
by an employee under his or her award may thereby be reduced or
eliminated.

     5. Award of Performance Units. (a) Performance units shall
be awarded to an Employee contingent upon future performance of
Ashland and/or of his or her division or company. The Committee
shall establish the performance measures applicable to such
performance and the time period over which such performance shall
be measured. Such measures may include, but shall not be limited
to, return on net assets employed; cumulative earnings per share;
or return on shareholder's equity. 

     The performance measures determined by the Committee shall
be established in writing prior to the beginning of each
performance period. The Committee shall have the discretion to
later revise the performance measures only so as to reduce or
eliminate the amount of compensation otherwise payable upon
attainment of the performance measures. In no event shall the
Committee be able to later revise the performance measures to
increase the amount of compensation otherwise payable.

(b) In determining the number of performance units to be awarded, the Committee shall take into account an Employee's responsibility level, performance, potential, cash compensation level, incentive compensation awards and such other considerations as it deems appropriate. Each award shall be established in dollars and the number of performance units therein shall be based on the Employee's base salary on the date of the award. The original amount of any award shall not exceed 400% of the Employee's then base salary; the amount paid out upon meeting the performance measures shall not exceed the amount of such award; and the total amount of payment under the Plan for each award period shall not exceed 2% of stockholders' equity as shown in the Annual Report to Shareholders at the end of the fiscal year next preceding the commencement of such award period. (c) An award of performance units to an Employee shall terminate for all purposes if he does not remain continuously in the employ of Ashland at all times during his award period, except in the case of death, disability or retirement under an Ashland pension plan (including early retirement at the request of Ashland), except as may otherwise be determined by the Committee under particular circumstances. An Employee (or his estate) whose employment was terminated because of death, disability or retirement as aforesaid shall be entitled to receive a pro rata portion of the payment of his award based upon the portion of the performance period during which he was so employed, all as the Committee shall determine in each case. (d) Payment with respect to performance units will be made to Employees on a date or dates fixed by the Committee but not earlier than two years nor more than four years after the start of the performance period established when such units were awarded. Payment may be made in one or more installments and may be made wholly in cash, wholly in shares of Common Stock or partly in cash and partly in such shares, all at the discretion of the Committee. If payment of an award of performance units is to be made in cash or partly in cash, the amount of cash to be paid to an Employee on any payment date shall be the original dollar amount (or the part thereof determined by the Committee to be paid in cash) of such award, adjusted with respect to the meeting of the performance measures for such award. If payment of an award of performance units 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 an Employee on any payment date shall be determined by dividing (x) the original dollar amount (or the part thereof determined by the Committee to be delivered in shares) of such award, adjusted with respect to the meeting of the performance measures for such award, by (y) the Fair Market Value of one share of Common Stock on the payment date. Any payment may be subject to such restrictions and conditions as the Committee may determine. For purposes of this Paragraph 5, the term "Fair Market Value" of a share of Common Stock on any date shall mean the average of the daily closing prices of such a share for the 30 consecutive trading days commencing 45 trading days before the date in question, and the term "closing price" for any day shall mean the last sales price, or, in case no sale takes place on such day, the average of the closing bid and asked prices, in either case as officially quoted by the New York Stock Exchange, Inc., or, if the Common Stock is not then listed or admitted to trading on such Exchange, the average of the closing bid and asked prices as furnished by any member firm of the New York Stock Exchange, Inc. selected from time to time by the Committee for that purpose. 6. Nontransferability and No Shareholder Rights. No award of performance units under this Plan shall be transferable otherwise than by will or the laws of descent and distribution. The holder of an award of performance units shall have none of the rights of a shareholder with respect to such units until shares of Common Stock shall have been registered in the name of the person or persons receiving payment of such award on the transfer books upon such payment. 7. Amendment and Termination. Unless this Plan shall theretofore have been terminated as hereinafter provided, this Plan shall terminate on, and no awards shall be granted after, September 30, 1994. This Plan may be terminated, modified or amended by the shareholders of Ashland Oil, Inc. The Board of Directors may also terminate this Plan, or modify or amend this Plan in such respects as it shall deem advisable in order to conform to any change in any law or regulation applicable thereto, or in other respects which shall not change (i) the maximum amount which may be paid out with respect to performance units awarded under this Plan, (ii) the class of employees eligible to receive awards, (iii) the period during which awards may be made or (iv) the 2

provisions relating to the administration of this Plan by a committee consisting of directors not eligible to participate in this Plan as provided in Paragraph 3. No termination, modification or amendment of this Plan may, without the consent of the Employee to whom any performance units shall theretofore have been awarded, adversely affect the rights of such Employee under such award. 8. Committee Determinations. The determination of the Committee with respect to any question arising as to the award of performance units, the individuals selected for awards, the amount, terms, form and time of payment of performance units and the interpretation of this Plan shall be final, conclusive and binding. As Amended and Restated by the Board on May 19, 1994. 3


                        ASHLAND OIL, INC.
                     LONG-TERM INCENTIVE PLAN

SECTION 1. PURPOSE

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

SECTION 2. DEFINITIONS

          (A) "Agreement" shall mean a written agreement setting
     forth the terms of an Award.

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

          (C) "Award" shall mean an Option (which may be
     designated as a Nonqualified or Incentive Stock Option), a
     Stock Appreciation Right, a Restricted Stock Award, or a
     Performance Share Award, in each case granted under this
     Plan.

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

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

          (F) "Change in Control" shall be deemed to occur (1)
     upon the approval by the Board (or if approval of the Board
     is not required as a matter of law, the shareholders of
     Ashland) of (A) any consolidation or merger of Ashland in
     which Ashland is not the continuing or surviving corporation
     or pursuant to which shares of Common Stock would be
     converted into cash, securities or other property other than
     a merger in which the holders of Common Stock immediately
     prior to the merger will have the same proportionate
     ownership of Common Stock of the surviving corporation
     immediately after the merger, (B) any sale, lease, exchange,
     or other transfer (in one transaction or a series of related
     transactions) of all or substantially all the assets of
     Ashland, or (C) adoption of any plan or proposal for the
     liquidation or dissolution of Ashland, (2) when any "person"
     (as defined in Section 13(d) of the Exchange Act), other
     than Ashland or any subsidiary or employee benefit plan or
     trust maintained by Ashland, shall become the "beneficial
     owner" (as defined in Rule 13d-3 under the Exchange Act),
     directly or indirectly, or more than 20% of Ashland's Common
     Stock outstanding at the time, without the prior approval of
     the Board, or (3) at any time during a period of two
     consecutive years, individuals who at the beginning of such
     period constituted the Board shall cease for any reason to
     constitute at least a majority thereof, unless the election
     or the nomination for election by Ashland's shareholders of
     each new director during such two-year period was approved
     by a vote of at least two-thirds of the directors then still
     in office who were directors at the beginning of such two-
     year period.

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

          (H) "Committee" shall mean the Personnel and
     Compensation Committee of the Board, as from time to time
     constituted, or any successor committee of the Board with
     similar functions, which shall consist of 


                                1

three or more members, each of whom shall be Disinterested. (I) "Common Stock" shall mean the Common Stock of the Company ($1.00 par value), subject to adjustment pursuant to Section 12. (J) "Company" shall mean, collectively, Ashland Oil, Inc. and its Subsidiaries. (K) "Disinterested" shall mean disinterested within the meaning of applicable regulatory requirements, including those promulgated under Section 16 of the Exchange Act. (L) "Employee" shall mean an officer or employee of the Company. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (N) "Exercise Price" shall mean, with respect to each share of Common Stock subject to an Option, the price fixed by the Committee at which such share may be purchased from the Company pursuant to the exercise of such Option, which price at no time may be less than 100% of the Fair Market Value of the Common Stock on the date the Option is granted. (O) "Fair Market Value" shall mean the closing price of the Common Stock as reported on the Composite Tape, or, if there is no trading of the Common Stock on the date in question, then the closing price of the Common Stock, as so reported, on the next preceding date on which there was trading in the Common Stock. (P) "Incentive Stock Option" or "ISO" shall mean an Option that is intended by the Committee to meet the requirements of Section 422 of the Code or any successor provision. (Q) "Nonqualified Stock Option" or "NQSO" shall mean an Option granted pursuant to this Plan which does not qualify as an Incentive Stock Option. (R) "Option" shall mean the right to purchase Common Stock at a price to be specified and upon terms to be designated by the Committee pursuant to this Plan. An Option shall be designated by the Committee as a Nonqualified Stock Option or an Incentive Stock Option. (S) "Outside Director" shall mean a director of the Company who is not also an Employee of the Company. (T) "Performance Period" shall mean the period designated by the Committee during which the performance objectives shall be measured. (U) "Performance Share Award" shall mean an award of shares of Common Stock, the issuance of which is contingent upon attainment of performance objectives specified by the Committee. (V) "Performance Shares" shall mean those shares of Common Stock issuable pursuant to a Performance Share Award. (W) "Personal Representative" shall mean the person or persons who, upon the disability or incompetence of an Employee or Outside Director, shall have acquired on behalf of the Employee or Outside Director by legal proceeding or otherwise the right to receive the benefits specified in this Plan. (X) "Plan" shall mean this Ashland Oil, Inc. Long-Term Incentive Plan. (Y) "Restricted Period" shall mean the period designated by the Committee during which Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered, which period in the case of Employees shall not be less than one year nor more than five years from the date of grant, and in the case of Outside Directors is the period set forth in subsection (B) of Section 8. (Z) "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. (AA) "Restricted Stock Award" shall mean an award of Restricted Stock. 2

(BB) "Retained Distributions" shall mean any securities or other property (other than regular cash dividends) distributed by the Company in respect of Restricted Stock during any Restricted Period. (CC) "Retirement" shall mean retirement of an Employee from the employ of the Company at any time as described in the Ashland Oil, Inc. and Affiliates Pension Plan or in any successor pension plan, as from time to time in effect. (DD) "Section 16(b) Optionee" shall mean an Employee or former Employee who is subject to Section 16(b) of the Exchange Act. (EE) "Stock Appreciation Right" or "SAR" shall mean the right of the holder to elect to surrender an Option or any portion thereof which is then exercisable and receive in exchange therefor shares of Common Stock, cash, or a combination thereof, as the case may be, with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock over the Exercise Price specified in such Option multiplied by the number of shares of Common Stock covered by such Option or portion thereof which is so surrendered. An SAR may be granted as part of an Option or as a separate right to any holder of any Option theretofore or then being granted under this Plan. An SAR shall be exercisable upon any additional terms and conditions (including, without limitation, the issuance of Restricted Stock and the imposition of restrictions upon the timing of exercise) which may be determined as provided in the Plan. (FF) "Subsidiary" shall mean any present or future subsidiary corporations, as defined in Section 424 of the Code, of Ashland. (GG) "Tax Date" shall mean the date the withholding tax obligation arises with respect to the exercise of an Award. SECTION 3. STOCK SUBJECT TO THE PLAN There will be reserved for issuance under the Plan (upon the exercise of Options and Stock Appreciation Rights, upon awards of Restricted Stock and Performance Shares and for stock bonuses on deferred awards of Restricted Stock and Performance Shares), an aggregate of 3,000,000 shares of Ashland Common Stock, par value $1.00 per share. Such shares shall be authorized but unissued shares of Common Stock. Except as provided in Sections 7 and 8, if any Award under the Plan shall expire or terminate for any reason without having been exercised in full, or if any Award shall be forfeited, the shares subject to the unexercised or forfeited portion of such Award shall again be available for the purposes of the Plan. SECTION 4. ADMINISTRATION The Plan shall be administered by the Committee. No person who is (or, within one year prior to his or her appointment as a member of the Committee, was) eligible to participate in the Plan, except as specifically authorized under subsection (B) of Section 8 herein, or in any other stock option or stock bonus plan of the Company, shall be a member of the Committee. The Committee shall have no authority regarding the granting of Restricted Stock to Outside Directors, as such grants are fixed pursuant to subsection (B) of Section 8 of the Plan. In addition to any implied powers and duties that may be needed to carry out the provisions of the Plan, the Committee shall have all the powers vested in it by the terms of the Plan, including exclusive authority (except as to Awards of Restricted Stock granted to Outside Directors) to select the Employees to be granted Awards under the Plan, to determine the type, size and terms of the Awards to be made to each Employee selected, to determine the time when Awards will be granted, and to prescribe the form of the Agreements embodying Awards made under the Plan. Subject to the provisions of the Plan specifically governing Awards of Restricted Stock granted or to be granted to Outside Directors pursuant to subsection (B) of Section 8 herein, the Committee shall be authorized to interpret the Plan and the Awards granted under the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to make any other determinations which it believes necessary or advisable for the administration of the Plan, and to correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent the Committee deems desirable to carry it into effect. Any decision of the Committee in the administration of the Plan, as described herein, shall be final and conclusive. 3

The Committee may act only by a majority of its members. Any determination of the Committee may be made, without notice, by the written consent of the majority of the members of the Committee. In addition, the Committee may authorize any one or more of their number or any officer of the Company to execute and deliver documents on behalf of the Committee. No member of the Committee shall be liable for any action taken or omitted to be taken by him or her or by any other member of the Committee in connection with the Plan, except for his or her own willful misconduct or as expressly provided by statute. The provisions of this Section 4 with respect to decisions made by, and authority of, the Committee shall be subject to the provisions of subsection (B) of Section 8 herein. SECTION 5. ELIGIBILITY Awards may only be granted (i) to individuals who are Employees of Ashland, and (ii) as expressly provided in subsection (B) of Section 8 of the Plan, to individuals who are duly elected Outside Directors of Ashland. SECTION 6. STOCK OPTIONS A. Designation and Price. (a) Any Option granted under the Plan may be granted as an Incentive Stock Option or as a Nonqualified Stock Option as shall be designated by the Committee at the time of the grant of such Option. Each Option shall be evidenced by an Agreement between the recipient and the Company, which Agreement shall specify the designation of the Option as an ISO or a NQSO, as the case may be, and shall contain such terms and conditions as the Committee, in its sole discretion, may determine in accordance with the Plan. (b) Every Incentive Stock Option shall provide for a fixed expiration date of not later than ten years from the date such Incentive Stock Option is granted. (c) The Exercise Price of Common Stock issued pursuant to each Option shall be fixed by the Committee at the time of the granting of the Option; provided, however, that such Exercise Price shall in no event be less than 100% of the Fair Market Value of the Common Stock on the date such Option is granted. B. Exercise. The Committee may, in its discretion, provide for Options granted under the Plan to be exercisable in whole or in part; provided, however, that no Option shall be exercisable prior to the first anniversary of the date of its grant, except as provided in Section 10 or as the Committee otherwise determines in accordance with the Plan, and in no case may an Option be exercised at any time for fewer than 50 shares (or the total remaining shares covered by the Option if fewer than 50 shares) during the term of the Option. The specified number of shares will be issued upon receipt by Ashland of (i) notice from the optionee of exercise of an Option, and (ii) either payment to Ashland (as provided in this Section 6, subsection (C) below), of the Exercise Price for the number of shares with respect to which the Option is exercised, or with approval of the Committee, a promissory note as hereinafter provided. Each such notice and payment shall be delivered or mailed by postpaid mail, addressed to the Treasurer of Ashland at Ashland Oil, Inc., 1000 Ashland Drive, Russell, Kentucky, 41169, or such other place as Ashland may designate from time to time. Separate stock certificates shall be issued by the Company for those shares acquired pursuant to the exercise of an ISO and for those shares acquired pursuant to a NQSO. C. Payment for Shares. Except as otherwise provided in this Section 6, the Exercise Price for the Common Stock shall be paid in full when the Option is exercised. Subject to such rules as the Committee may impose, the Exercise Price may be paid in whole or in part in (i) cash, (ii) whole shares of Common Stock owned by the Employee six months or longer and evidenced by negotiable certificates, valued at their Fair Market Value 4

on the date of exercise, (iii) by a combination of such methods of payment, or (iv) such other consideration as shall be approved by the Committee (including without limitation, assurance satisfactory to the Committee from a broker registered under the Exchange Act, of the delivery of the proceeds of an imminent sale of the stock to be issued pursuant to the exercise of such Option, such sale to be made at the direction of the Employee). If certificates representing shares of Common Stock are used to pay all or part of the Exercise Price of an Option, separate certificates shall be delivered by Ashland representing the same number of shares as each certificate so used and an additional certificate shall be delivered representing any additional shares to which the Employee is entitled as a result of exercise of the Option. Moreover, if so provided in the Agreement, and subject to such restrictions, terms and conditions as the Committee may impose, an Employee may request Ashland to "pyramid" his or her shares; that is, to automatically apply the shares which he or she is entitled to receive on the exercise of a portion of an Option to satisfy the exercise for additional portions of the Option, thus resulting in multiple simultaneous exercises of an Option by use of whole shares as payment. The Committee may, in its discretion, authorize payment of all or any part of the Exercise Price over a period of not more than five years from the date the Option is exercised. In such instance any unpaid balance of the Exercise Price shall be evidenced by the Employee's promissory note payable to the order of Ashland which shall bear interest at such rate or rates as determined from time to time by the Committee. SECTION 7. STOCK APPRECIATION RIGHTS The Committee may grant Stock Appreciation Rights pursuant to the provisions of this Section 7 to any holder of any Option granted under the Plan with respect to all or a portion of the shares subject to the related Option. An SAR may be granted as part of an Option or as a separate right to any holder of any Option theretofore or then being granted under this Plan. Subject to the terms and provisions of this Section 7, each SAR shall be exercisable only at the same time and to the same extent the related Option is exercisable and in no event after the termination of the related Option. An SAR shall be exercisable only when the Fair Market Value (determined as of the date of exercise of the SAR) of each share of Common Stock with respect to which the SAR is to be exercised shall exceed the Exercise Price per share of Common Stock subject to the related Option. An SAR granted under the Plan shall be exercisable in whole or in part by notice to Ashland. Such notice shall state that the holder of the SAR elects to exercise the SAR and the number of shares in respect of which the SAR is being exercised. For purposes of this Section 7, the date of exercise of an SAR shall mean the date on which the Company receives such notice. Subject to the terms and provisions of this Section 7, upon the exercise of an SAR, the holder thereof shall be entitled to receive from Ashland consideration (in the form hereinafter provided) equal in value to the excess of the Fair Market Value (determined as of the date of exercise of the SAR) of each share of Common Stock with respect to which such SAR has been exercised over the Exercise Price per share of Common Stock subject to the related Option. The Committee may stipulate in the Agreement the form of consideration which shall be received upon the exercise of an SAR. If no consideration is specified therein, upon the exercise of an SAR, the holder may specify the form of consideration to be received by such holder, which shall be in shares of Common Stock (valued at Fair Market Value on the date of exercise of the SAR), or in cash, or partly in cash and partly in shares of Common Stock, as the holder shall request; provided, however, that the Committee, in its sole discretion, may disapprove the form of consideration requested and instead authorize the payment of such consideration in shares of Common Stock (valued as aforesaid), or in cash, or partly in cash and partly in shares of Common Stock. Upon the exercise of an SAR, the related Option shall be deemed exercised to the extent of the number of shares of Common Stock with respect to which such SAR is exercised and to that extent for purposes of determining the number of shares of Common Stock available for the grant of Awards under the Plan. Upon the exercise or termination of the related Option, the SAR with respect thereto shall be considered to have been exercised or terminated to the extent of the number of shares of Common Stock with respect to which the related Option was so exercised or terminated. 5

SECTION 8. RESTRICTED STOCK AWARDS A. Awards to Employees The Committee may make an award of Restricted Stock to selected Employees, evidenced by an Agreement which shall contain such terms and conditions as the Committee, in its sole discretion, may determine. The amount of each Restricted Stock Award and the respective terms and conditions of each Award (which terms and conditions need not be the same in each case) shall be determined by the Committee in its sole discretion. As a condition to any Award hereunder, the Committee may require an Employee to pay to the Company an amount equal to, or in excess of, the par value of the shares of Restricted Stock awarded to him or her. Any such Restricted Stock Award shall automatically expire if not purchased in accordance with the Committee's requirements within thirty (30) days after the date of grant. Subject to the terms and conditions of each Restricted Stock Award, the Employee, as the owner of the Common Stock issued as Restricted Stock, shall have all rights of a shareholder including, but not limited to, voting rights as to such Common Stock and the right to receive dividends thereon when, as and if paid. In the event that a Restricted Stock Award has been made to an Employee whose employment or service is subsequently terminated by reason of death or physical or mental disability, or for such other reason as the Committee may provide, such Employee (or his or her estate) will receive his or her Restricted Stock subject to the terms of his or her Agreement with the Company, which Agreement shall be in accordance with the terms and conditions set forth in this Section 8. In the event that a Restricted Stock Award has been made to an Employee who subsequently voluntarily resigns or whose employment is terminated for any reason other than as referred to above, such Restricted Stock will be forfeited by such Employee; provided, however, that the Committee may limit such forfeiture to that portion thereof which is proportional to the unelapsed portion of the Restricted Period under such Award. Employees may be offered the opportunity to defer the receipt of payment of vested shares of Restricted Stock, and Common Stock may be granted as a bonus for deferral, under terms as may be established by the Committee from time to time; however, in no event shall the Common Stock granted as a bonus for deferral exceed 20% of the Restricted Stock so deferred per year over a five-year period. B. Awards to Outside Directors Subject to the limitation of the number of shares of Common Stock available pursuant to Section 3, effective immediately following the 1989 Annual Meeting of Shareholders of the Company, each person who at such time shall be a duly elected Outside Director is hereby granted, effective on such date, 1,000 shares of Restricted Stock subject to the terms and conditions set forth in this subsection (B) and subsection (C) below. Subsequent to the 1989 Annual Meeting of Shareholders of the Company, each person who has received no previous Award under the Plan and who is duly appointed or elected as an Outside Director of the Company is hereby granted, effective on the date of his or her appointment or election to the Board, 1,000 shares of Restricted Stock, subject to the terms and conditions set forth in this subsection (B) and subsection (C) below. as a condition to any Award hereunder, the Outside Director will be required to pay to the Company a non- refundable amount equal to the par value of the shares of Restricted Stock awarded to him or her. Upon the granting of the Restricted Stock Award, such Outside Director shall be entitled to all rights incident to ownership of Common Stock of the Company with respect to his or her Restricted Stock, including, but not limited to, the right to vote such shares of Restricted Stock and to receive dividends thereon when, as and if paid; provided, however, that in no case may any shares of Restricted Stock granted to an Outside Director be sold, assigned, transferred, pledged, or otherwise encumbered during the Restricted Period which shall not lapse until the earlier to occur of the following: (i) normal retirement from the Board at age 70, (ii) the death or disability of such Outside Director, or (iii) a 50% change in the beneficial ownership of the Company as defined in Rule 13d-3 under the Exchange Act. In the case of voluntary resignation or other termination of service of an Outside Director prior to the occurrence of any of the events described in (i), (ii) or (iii) of the preceding sentence, any grant of Restricted Stock made to him or her pursuant to this subsection (B) will be forfeited by such Outside Director. 6

C. Transferability Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered during a Restricted Period, which, in the case of Employees, shall be determined by the Committee and which shall not be less than one year nor more than five years from the date such Restricted Stock was awarded, and, in the case of Outside Directors, shall be determined in accordance with subsection (B) of this Section 8. The Committee may at any time, reduce the Restricted Period with respect to any outstanding shares of Restricted Stock awarded under the Plan to Employees, but in no event shall such Restricted Period be less than one year. During the Restricted Period, certificates representing the Restricted Stock and any Retained Distributions shall be registered in the recipient's name and bear a restrictive legend to the effect that ownership of such Restricted Stock (and any such Retained Distributions), and the enjoyment of all rights appurtenant thereto are subject to the restrictions, terms, and conditions provided in the Plan and the applicable Agreement. Such certificates shall be deposited by the recipient with the Company, together with stock powers or other instruments of assignment, each endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Stock and any securities constituting Retained Distributions which shall be forfeited in accordance with the Plan and the applicable Agreement. Restricted Stock shall constitute issued and outstanding shares of Common Stock for all corporate purposes. The recipient will have the right to vote such Restricted Stock, to receive and retain all regular cash dividends, and to exercise all other rights, powers, and privileges of a holder of Common Stock with respect to such Restricted Stock, with the exception that (i) the recipient will not be entitled to delivery of the stock certificate or certificates representing such Restricted Stock until the restrictions applicable thereto shall have expired; (ii) the Company will retain custody of all Retained Distributions made or declared with respect to the Restricted Stock (and such Retained Distributions will be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Retained Distributions shall have been made, paid, or declared shall have become vested, and such Retained Distributions shall not bear interest or be segregated in separate accounts; (iii) the recipient may not sell, assign, transfer, pledge, exchange, encumber, or dispose of the Restricted Stock or any Retained Distributions during the Restricted Period; and (iv) a breach of any restrictions, terms, or conditions provided in the Plan or established by the Committee with respect to any Restricted Stock or Retained Distributions will cause a forfeiture of such Restricted Stock and any Retained Distributions with respect thereto. Any forfeited Restricted Stock shall not again be available for the grant of Awards under the Plan. SECTION 9. PERFORMANCE SHARES The Committee may make awards of Common Stock, evidenced by an Agreement, to selected Employees on the basis of the Company's financial performance in any given period. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees who shall receive such Performance Shares, to determine the number of such shares to be granted for each Performance Period, and to determine the duration of each such Performance Period. There may be more than one Performance Period in existence at any one time, and the duration of Performance Periods may differ from each other. The Committee shall establish performance measures for each Performance Period on the basis of such criteria and to accomplish such objectives as the Committee may from time to time, in its sole discretion, determine. Such measures may include, but shall not be limited to, return on investments, cumulative earnings per share, or return on shareholders' equity. The performance measures determined by the Committee shall be established prior to the beginning of each Performance Period but may be subject to such later revisions as the Committee shall deem appropriate. Performance Shares may not be sold, assigned, transferred, pledged, or otherwise encumbered, except as herein provided and as provided in Section 10(e), during the Performance Period. 7

The Committee shall determine, in its sole discretion, the manner of payment, which may include (i) cash, (ii) shares of Common Stock, or (iii) shares of Restricted Stock in such proportions as the Committee shall determine. Employees may be offered the opportunity to defer the receipt of payment of earned Performance Shares, and Common Stock may be granted as a bonus for deferral under terms as may be established by the Committee from time to time; however, in no event shall the Common Stock granted as a bonus for deferral exceed 20% of the Performance Shares so deferred per year over a five-year period. An Employee must be employed by the Company at the end of a Performance Period in order to be entitled to payment of Performance Shares in respect of such period; provided, however, that in the event of an Employee's cessation of employment before the end of such period, or upon the occurrence of his or her death, retirement, or disability, or other reason approved by the Committee, the Committee may, in its discretion, limit such forfeiture to that portion of the Performance Shares deemed not earned. SECTION 10. CONTINUED EMPLOYMENT AND AGREEMENT TO SERVE (a) Subject to the provisions of paragraphs (b), (c) and (e) of this Section 10, every Option and SAR shall provide that it may not be exercised in whole or in part for a period of one year after the date of granting such Option and, if the employment of the Employee shall be terminated, for any reason other than death or disability as determined by the Committee, prior to the end of such one year period, the Option granted to such Employee shall immediately terminate. (b) Every Option shall provide that in the event the Employee dies while employed by Ashland during the one-year period of disability described in paragraph (c) of this Section 10 or within three months after cessation of employment for any cause, such Option shall be exercisable, at any time or from time to time, prior to the fixed termination date set forth in the Option, by the Beneficiaries of the decedent for the full number of optioned shares or any part thereof, less such number as may have been theretofore acquired under the Option. (c) Every Option shall provide that in the event the employment of any Employee shall cease by reason of total and permanent disability within the meaning of Section 22(e)(3) of the Code, as determined by the Committee at any time during the term of the Option, such Option shall be exercisable, at any time or from time to time by such Employee, during a period of one year of continuing disability following termination of employment by reason of such disability for the full number of optioned shares or any part thereof, less such number as may have been theretofore acquired under the Option. The determination by the Committee of any question involving disability shall be conclusive and binding. (d) Except as provided in paragraphs (a), (b), (c) and (e) of this Section 10, every Option shall provide that it shall terminate on the earlier to occur of the fixed termination date set forth in the Option or three months after cessation of the Employee's employment for any cause except Retirement, in which event the Option shall be exercisable for a period of three years after such Retirement date, and, except as provided in paragraph (e) of this Section 10, if exercised after cessation of such employment or Retirement, may be exercised only in respect of the number of shares which the Employee could have acquired under the Option immediately prior to such cessation of employment or Retirement; provided, however, that no Option may be exercised after the fixed termination date set forth in the Option. (e) Notwithstanding any provision of this Section 10 to the contrary, any Award granted pursuant to the Plan, except a Restricted Stock Award to Outside Directors, which is governed by Section 8, subsection (B), may, in the discretion of the Committee or as provided in the relevant Agreement, become exercisable, at any time or from time to time, prior to the fixed termination date set forth in the Award for the full number of awarded shares or any part thereof, less such numbers as may have been theretofore acquired under the Award (i) from and after the time the Employee ceases to be an Employee of Ashland as a result of the sale or other disposition by Ashland of assets or property (including shares of any subsidiary) in respect of which such Employee had theretofore been employed or as a result of which such Employee's continued employment with Ashland is no longer required, and (ii) in the case of a Change in Control of Ashland, from and after the date of such Change in Control. 8

(f) Each Employee granted an Award under this Plan shall agree by his or her acceptance of such Award to remain in the service of Ashland for a period of at least one year from the date of the Agreement respecting the Award between Ashland and the Employee. Such service shall, subject to the terms of any contract between Ashland and such Employee, be at the pleasure of Ashland and at such compensation as Ashland shall reasonably determine from time to time. Nothing in the Plan, or in any Award granted pursuant to the Plan, shall confer on any individual any right to continue in the employment of or service to Ashland or interfere in any way with the right of Ashland to terminate the Employee's employment at any time. (g) Subject to the limitations set forth in Section 422 of the Code, the Committee may adopt, amend, or rescind from time to time such provisions as it deems appropriate with respect to the effect of leaves of absence approved by any duly authorized officer of Ashland with respect to any Employee. SECTION 11. WITHHOLDING TAXES Federal, state or local law may require the withholding of taxes applicable to gains resulting from the exercise of an Award. Unless otherwise prohibited by the Committee, each Employee may satisfy any such tax withholding obligation by any of the following means, or by a combination of such means: (i) a cash payment, (ii) authorizing Ashland to withhold from the shares of Common Stock otherwise issuable to the Employee pursuant to the exercise or vesting of an Award a number of shares having a Fair Market Value, as of the Tax Date, which will satisfy the amount of the withholding tax obligation, or (iii) by delivery to Ashland of a number of shares of Common Stock having a Fair Market Value as of the Tax Date which will satisfy the amount of the withholding tax obligation arising from an exercise or vesting of an Award. An Employee's election to pay the withholding tax obligation by (ii) or (iii) above must be made on or before the Tax Date, is irrevocable, is subject to such rules as the Committee may adopt, and may be disapproved by the Committee. If the amount requested is not paid, the Committee may refuse to issue Common Stock under the Plan. SECTION 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event of any change in the outstanding Common Stock of the Company by reason of any stock split, stock dividend, recapitalization, merger, consolidation, reorganization, combination, or exchange of shares, split- up, split-off, spin-off, liquidation or other similar change in capitalization, or any distribution to common stockholders other than cash dividends, the number or kind of shares that may be issued under the Plan pursuant to Section 3 and the number or kind of shares subject to, or the price per share under any outstanding Award shall be automatically adjusted so that the proportionate interest of the Employee or Outside Director shall be maintained as before the occurrence of such event. Such adjustment shall be conclusive and binding for all purposes of the Plan. SECTION 13. AMENDMENTS AND TERMINATIONS Unless the Plan shall have been terminated as hereinafter provided, the Plan shall terminate on, and no Award shall be granted after, November 3, 1993. The plan may be terminated, modified or amended by the shareholders of the Company. The Board may at any time terminate, modify or amend the Plan in such respects as it shall deem advisable; provided, however, that the Board may not, without approval by the holders of a majority of the outstanding shares of stock present and voting at any annual or special meeting of shareholders of Ashland: (i) increase (except as provided in Section 12) the maximum number of shares which may be issued pursuant to the Awards granted under the Plan, (ii) change the class of persons eligible to receive Awards, (iii) change the manner of determining the minimum Exercise Price of Options other than to change the manner of determining the Fair Market Value of the Common Stock as set forth in Section 2, (iv) extend the period during which Awards may be granted or exercised, or (v) amend any provision of the Plan insofar as it applies specifically to Restricted Stock Awards granted or to be granted to Outside Directors. 9

SECTION 14. MISCELLANEOUS PROVISIONS (a) Except as to Awards to Outside Directors, no Employee or other person shall have any claim or right to be granted an Award under the Plan. (b) An Employee's or Outside Director's rights and interest under the Plan may not be assigned or transferred in whole or in part, either directly or by operation of law or otherwise (except in the event of an Employee's or Outside Director's death, by will or the laws of descent and distribution), including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and no such right or interest of any Employee or Outside Director in the Plan shall be subject to any obligation of liability of such individual. An Award shall be exercisable, during an Employee's lifetime, only by him or her or his or her Personal Representative. Except as specified in Section 8, the holder of an Award shall have none of the rights of a shareholder until the shares subject thereto shall have been registered in the name of the person or persons exercising the Award on the transfer books of the Company. (c) No Common Stock shall be issued hereunder unless counsel for the Company shall be satisfied that such issuance will be in compliance with applicable Federal, state, and other securities laws. (d) The expenses of the Plan shall be borne by the Company. (e) By accepting any Award under the Plan, each Employee and Outside Director and each Personal Representative or Beneficiary claiming under or through him or her shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, any action taken under the Plan by the Company or the Board. (f) Awards granted under the Plan shall be binding upon Ashland, its successors, and assigns. (g) The appropriate officers of the Company shall cause to be filed any reports, returns, or other information regarding Awards hereunder or any Common Stock issued pursuant hereto as may be required by Section 13 or 15(d) of the Exchange Act, or any other applicable statute, rule, or regulation. (h) Nothing contained in this Plan shall prevent the Board of Directors from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required. SECTION 15. EFFECTIVENESS OF THE PLAN The Plan shall be submitted to the shareholders of the Company for their approval and adoption on January 26, 1989 or such other date fixed for the next meeting of shareholders or any adjournment or postponement thereof. The Plan shall not be effective and no Award shall be made hereunder unless and until the Plan has been so approved and adopted at a meeting of the Company's shareholders. SECTION 16. GOVERNING LAW The provisions of this Plan shall be interpreted and construed in accordance with the laws of the Commonwealth of Kentucky. As Amended and Restated by the Board on March 17, 1994. 10


                       ASHLAND OIL, INC.
                  1993 STOCK INCENTIVE PLAN

SECTION 1. PURPOSE

	The purpose of the Ashland Oil, Inc. 1993 Stock
Incentive Plan is to promote the interests of Ashland
Oil, Inc. and its shareholders by providing its
directors, officers and employees with an incentive to
continue service with Ashland. Accordingly, the Company
may grant to selected officers and employees Stock
Options, Stock Appreciation Rights, Restricted Stock,
Merit Awards and Performance Share Awards in an effort to
attract and retain in its employ qualified individuals
and to provide such individuals with incentives to devote
their best efforts to the Company through ownership of
the Company's stock, thus enhancing the value of the
Company for the benefit of shareholders. The Plan also
provides an incentive for qualified persons, who are not
officers or employees of the Company, to serve on the
Board of Directors of the Company and to continue to work
for the best interests of the Company by rewarding such
persons with automatic grants of Restricted Stock of the
Company. Stock Options, Stock Appreciation Rights, Merit
Awards and Performance Shares may not be granted to such
Outside Directors under the Plan.

SECTION 2. DEFINITIONS

	(A) "Agreement" shall mean a written agreement
setting forth the terms of an Award.

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

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

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

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

	(F) "Change in Control" shall be deemed to occur
(1) upon the approval by the Board (or if approval of the
Board is not required as a matter of law, the
shareholders of Ashland) of (A) any consolidation or
merger of Ashland in which Ashland is not the continuing
or surviving corporation or pursuant to which shares of
Common Stock would be converted into cash, securities or
other property other than a merger in which the holders
of Common Stock immediately prior to the merger will have
the same proportionate ownership of Common Stock of the
surviving corporation immediately after the merger, (B)
any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all
or substantially all the assets of Ashland, or (C)
adoption of any plan or proposal for the liquidation or
dissolution of Ashland, (2) when any "person" (as defined
in Section 13(d) of the Exchange Act), other than Ashland
or any subsidiary or employee benefit plan or trust
maintained by Ashland, shall become the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, or more than 20% of Ashland's
Common Stock outstanding at the time, without the prior
approval of the Board, or (3) at any time during a period
of two consecutive years, individuals who at the
beginning of such period constituted the Board shall
cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for
election by Ashland's shareholders of each new director
during such two-year period was approved by a vote of at
least two-thirds of the directors then still in office
who were directors at the beginning of such two-year
period.

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


(H) "Committee" shall mean the Personnel and Compensation Committee of the Board, as from time to time constituted, or any successor committee of the Board with similar functions, which shall consist of three or more members, each of whom shall be Disinterested. (I) "Common Stock" shall mean the Common Stock of the Company ($1.00 par value), subject to adjustment pursuant to Section 13. (J) "Company" shall mean, collectively, Ashland Oil, Inc. and its Subsidiaries. (K) "Disinterested" shall mean disinterested within the meaning of applicable regulatory requirements, including those promulgated under Section 16 of the Exchange Act. (L) "Employee" shall mean an officer or employee of the Company. (M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (N) "Exercise Price" shall mean, with respect to each share of Common Stock subject to (i) an Option (other than a Reload Option), the price fixed by the Committee at which such share may be purchased from the Company pursuant to the exercise of such Option, which price at no time may be less than 100% of the Fair Market Value of the Common Stock on the date the Option is granted or (ii) a Reload Option, the price of which is as fixed pursuant to Section 6 of the Plan. (O) "Fair Market Value" shall mean the closing price of the Common Stock as reported on the Composite Tape, or, if there is no trading of the Common Stock on the date in question, then the closing price of the Common Stock, as so reported, on the next preceding date on which there was trading in the Common Stock. (P) "Incentive Stock Option" or "ISO" shall mean an Option that is intended by the Committee to meet the requirements of Section 422 of the Code or any successor provision. (Q) "Long-Term Incentive Plan" shall mean the Ashland Oil, Inc. Long-Term Incentive Plan approved and adopted on January 26, 1989 by the shareholders of the Company. (R) "Merit Award" shall mean an award of Common Stock issued pursuant to Section 9 of the Plan. (S) "Nonqualified Stock Option" or "NQSO" shall mean an Option granted pursuant to this Plan which does not qualify as an Incentive Stock Option. (T) "Option" shall mean the right to purchase Common Stock at a price to be specified and upon terms to be designated by the Committee or otherwise determined pursuant to this Plan. An Option shall be designated by the Committee as a Nonqualified Stock Option or an Incentive Stock Option. (U) "Original Option" shall mean an option as defined in Subsection (D) of Section 6 of the Plan. (V) "Outside Director" shall mean a director of the Company who is not also an Employee of the Company. (W) "Performance Period" shall mean the period designated by the Committee during which the performance objectives shall be measured. (X) "Performance Share Award" shall mean an award of shares of Common Stock, the issuance of which is contingent upon attainment of performance objectives specified by the Committee. (Y) "Performance Shares" shall mean those shares of Common Stock issuable pursuant to a Performance Share Award. (Z) "Personal Representative" shall mean the person or persons who, upon the disability or incompetence of an Employee or Outside Director, shall have acquired on behalf of the Employee or Outside Director by legal proceeding or otherwise the right to receive the benefits specified in this Plan. (AA) "Plan" shall mean this Ashland Oil, Inc. 1993 Stock Incentive Plan. 2

(BB) "Reload Option" shall mean an option granted pursuant to Subsection (D) of Section 6 of the Plan. (CC) "Restricted Period" shall mean the period designated by the Committee during which Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered, which period in the case of Employees shall not be less than one year from the date of grant, and in the case of Outside Directors is the period set forth in subsection (B) of Section 8. (DD) "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. (EE) "Restricted Stock Award" shall mean an award of Restricted Stock. (FF) "Retained Distributions" shall mean any securities or other property (other than regular cash dividends) distributed by the Company in respect of Restricted Stock during any Restricted Period. (GG) "Retirement" shall mean retirement of an Employee from the employ of the Company at any time as described in the Ashland Oil, Inc. and Affiliates Pension Plan or in any successor pension plan, as from time to time in effect. (HH) "Section 16(b) Optionee" shall mean an Employee or former Employee who is subject to Section 16(b) of the Exchange Act. (II) "Stock Appreciation Right" or "SAR" shall mean the right of the holder to elect to surrender an Option or any portion thereof which is then exercisable and receive in exchange therefor shares of Common Stock, cash, or a combination thereof, as the case may be, with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock over the Exercise Price specified in such Option multiplied by the number of shares of Common Stock covered by such Option or portion thereof which is so surrendered. An SAR may only be granted concurrently with the grant of the related Option. An SAR shall be exercisable upon any additional terms and conditions (including, without limitation, the issuance of Restricted Stock and the imposition of restrictions upon the timing of exercise) which may be determined as provided in the Plan. (JJ) "Subsidiary" shall mean any present or future subsidiary corporations, as defined in Section 424 of the Code, of Ashland. (KK) "Tax Date" shall mean the date the withholding tax obligation arises with respect to the exercise of an Award. SECTION 3. STOCK SUBJECT TO THE PLAN There will be reserved for issuance under the Plan (upon the exercise of Options and Stock Appreciation Rights, upon awards of Restricted Stock, Performance Shares and Merit Awards and for stock bonuses on deferred awards of Restricted Stock and Performance Shares), an aggregate of 2,900,000 shares of Ashland Common Stock, par value $1.00 per share provided; however, that of such shares, only 1,500,000 shares in the aggregate shall be available for issuance for Restricted Stock Awards and Merit Awards. Such shares shall be authorized but unissued shares of Common Stock. Except as provided in Sections 7 and 8, if any Award under the Plan shall expire or terminate for any reason without having been exercised in full, or if any Award shall be forfeited, the shares subject to the unexercised or forfeited portion of such Award shall again be available for the purposes of the Plan. SECTION 4. ADMINISTRATION The Plan shall be administered by the Committee. No person who is (or, within one year prior to his or her appointment as a member of the Committee, was) eligible to participate in the Plan, except as specifically authorized under subsection (B) of Section 8 herein, or in any other stock option or stock bonus plan of the Company, shall be a member of the Committee. The Committee shall have no authority 3

regarding the granting of Restricted Stock to Outside Directors, as such grants are fixed pursuant to subsection (B) of Section 8 of the Plan. In addition to any implied powers and duties that may be needed to carry out the provisions of the Plan, the Committee shall have all the powers vested in it by the terms of the Plan, including exclusive authority (except as to Awards of Restricted Stock granted to Outside Directors) to select the Employees to be granted Awards under the Plan, to determine the type, size and terms of the Awards to be made to each Employee selected, to determine the time when Awards will be granted, and to prescribe the form of the Agreements embodying Awards made under the Plan. Subject to the provisions of the Plan specifically governing Awards of Restricted Stock granted or to be granted to Outside Directors pursuant to subsection (B) of Section 8 herein, the Committee shall be authorized to interpret the Plan and the Awards granted under the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to make any other determinations which it believes necessary or advisable for the administration of the Plan, and to correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent the Committee deems desirable to carry it into effect. Any decision of the Committee in the administration of the Plan, as described herein, shall be final and conclusive. The Committee may act only by a majority of its members. Any determination of the Committee may be made, without notice, by the written consent of the majority of the members of the Committee. In addition, the Committee may authorize any one or more of their number or any officer of the Company to execute and deliver documents on behalf of the Committee. No member of the Committee shall be liable for any action taken or omitted to be taken by him or her or by any other member of the Committee in connection with the Plan, except for his or her own willful misconduct or as expressly provided by statute. The provisions of this Section 4 with respect to decisions made by, and authority of, the Committee shall be subject to the provisions of subsection (B) of Section 8 herein. SECTION 5. ELIGIBILITY Awards may only be granted (i) to individuals who are Employees of Ashland, and (ii) as expressly provided in subsection (B) of Section 8 of the Plan, to individuals who are duly elected Outside Directors of Ashland. SECTION 6. STOCK OPTIONS A. Designation and Price. (a) Any Option granted under the Plan may be granted as an Incentive Stock Option or as a Nonqualified Stock Option as shall be designated by the Committee at the time of the grant of such Option. Each Option shall be evidenced by an Agreement between the recipient and the Company, which Agreement shall specify the designation of the Option as an ISO or a NQSO, as the case may be, and shall contain such terms and conditions as the Committee, in its sole discretion, may determine in accordance with the Plan. (b) Every Incentive Stock Option shall provide for a fixed expiration date of not later than ten years from the date such Incentive Stock Option is granted. Every Nonqualified Stock Option shall provide for a fixed expiration date of ten years and one month from the date such Nonqualified Stock Option is granted, such period to be applicable to each Nonqualified Stock Option granted under this Plan. (c) The Exercise Price of Common Stock issued pursuant to each Option (other than a Reload Option) shall be fixed by the Committee at the time of the granting of the Option; provided, however, that such Exercise Price shall in no event be less than 100% of the Fair Market Value of the Common Stock on the date such Option is granted. B. Exercise. The Committee may, in its discretion, provide for Options granted under the Plan to be exercisable in 4

whole or in part; provided, however, that no Option (other than a Reload Option) shall be exercisable prior to the first anniversary of the date of its grant, except as provided in Section 11(e) or as the Committee otherwise determines, and in no case may an Option be exercised at any time for fewer than 50 shares (or the total remaining shares covered by the Option if fewer than 50 shares) during the term of the Option. The specified number of shares will be issued upon receipt by Ashland of (i) notice from the optionee of exercise of an Option, and (ii) either payment to Ashland (as provided in this Section 6, subsection (C) below), of the Exercise Price for the number of shares with respect to which the Option is exercised, or with approval of the Committee, a secured promissory note as hereinafter provided. Each such notice and payment shall be delivered or mailed by postpaid mail, addressed to the Treasurer of Ashland at Ashland Oil, Inc., 1000 Ashland Drive, Russell, Kentucky, 41169, or such other place as Ashland may designate from time to time. Separate stock certificates shall be issued by the Company for those shares acquired pursuant to the exercise of an ISO and for those shares acquired pursuant to a NQSO. C. Payment for Shares. Except as otherwise provided in this Section 6, the Exercise Price for the Common Stock shall be paid in full when the Option is exercised. Subject to such rules as the Committee may impose, the Exercise Price may be paid in whole or in part in (i) cash, (ii) whole shares of Common Stock owned by the Employee six months or longer and evidenced by negotiable certificates, valued at their Fair Market Value on the date of exercise, (iii) by a combination of such methods of payment, or (iv) such other consideration as shall constitute lawful consideration for the issuance of Common Stock and be approved by the Committee (including without limitation, assurance satisfactory to the Committee from a broker registered under the Exchange Act, of the delivery of the proceeds of an imminent sale of the stock to be issued pursuant to the exercise of such Option, such sale to be made at the direction of the Employee). If certificates representing shares of Common Stock are used to pay all or part of the Exercise Price of an Option, separate certificates shall be delivered by Ashland representing the same number of shares as each certificate so used and an additional certificate shall be delivered representing any additional shares to which the Employee is entitled as a result of exercise of the Option. Moreover, if so provided in the Agreement, and subject to such restrictions, terms and conditions as the Committee may impose, an Employee may request Ashland to "pyramid" his or her shares; that is, to automatically apply the shares which he or she is entitled to receive on the exercise of a portion of an Option to satisfy the exercise for additional portions of the Option, thus resulting in multiple simultaneous exercises of an Option by use of whole shares as payment. The Committee may, in its discretion, authorize payment of all or any part of the Exercise Price over a period of not more than five years from the date the Option is exercised, In such instance any unpaid balance of the Exercise Price shall be evidenced by the Employee's promissory note payable to the order of Ashland which shall be secured by such collateral and shall bear interest at such rate or rates as determined from time to time by the Committee. D. Reload Options. The Committee shall have the authority to specify at the time of grant that an Employee shall be granted another Stock Option (a "Reload Option") in the event such Employee exercises all or a part of a Stock Option (an "Original Option") by surrendering in accordance with Section 6, subsection (C) already owned shares of Common Stock in full or partial payment of the Exercise Price under such Original Option, subject to the availability of shares of Common Stock under the Plan at the time of exercise. Each Reload Option shall cover a number of shares of Common Stock equal to the number of shares of Common Stock surrendered in payment of the Exercise Price, shall have an Exercise Price per share of Common Stock equal to the Fair Market Value of the Common Stock on the date of grant of such Reload Option and shall expire on the stated expiration date of the Original Option. A Reload Option shall be exercisable at any time and from time to time from and after the date of grant of such Reload Option (or, as the Committee in its sole discretion shall determine at the time of grant, at such time or times as shall be specified in the Reload Option); provided, however, that a Reload Option granted to a Section 16(b) Optionee shall not be exercisable during the first six months from the date of grant of such Reload Option. The first such Reload Option may provide for the grant, when exercised, of one subsequent Reload Option 5

to the extent and upon such terms and conditions, consistent with this Section 6, subsection (D), as the Committee in its sole discretion shall specify at or after the time of grant of such Reload Option. A Reload Option shall contain such other terms and conditions which may include a restriction on the transferability of the number of shares of Common Stock received upon exercise of the Original Option reduced by a number of shares equal in value to the tax liability incurred upon exercise as the Committee in its sole discretion may deem desirable which may be set forth in the Agreement evidencing the Reload Option. SECTION 7. STOCK APPRECIATION RIGHTS The Committee may grant Stock Appreciation Rights pursuant to the provisions of this Section 7 to any holder of any Option (including any Reload Option) granted under the Plan with respect to all or a portion of the shares subject to the related Option. An SAR may only be granted concurrently with the grant of the related Option. Subject to the terms and provisions of this Section 7, each SAR shall be exercisable only at the same time and to the same extent the related Option is exercisable and in no event after the termination of the related Option. An SAR shall be exercisable only when the Fair Market Value (determined as of the date of exercise of the SAR) of each share of Common Stock with respect to which the SAR is to be exercised shall exceed the Exercise Price per share of Common Stock subject to the related Option. An SAR granted under the Plan shall be exercisable in whole or in part by notice to Ashland. Such notice shall state that the holder of the SAR elects to exercise the SAR and the number of shares in respect of which the SAR is being exercised. For purposes of this Section 7, the date of exercise of an SAR shall mean the date on which the Company receives such notice. Subject to the terms and provisions of this Section 7, upon the exercise of an SAR, the holder thereof shall be entitled to receive from Ashland consideration (in the form hereinafter provided) equal in value to the excess of the Fair Market Value (determined as of the date of exercise of the SAR) of each share of Common Stock with respect to which such SAR has been exercised over the Exercise Price per share of Common Stock subject to the related Option. The Committee may stipulate in the Agreement the form of consideration which shall be received upon the exercise of an SAR. If no consideration is specified therein, upon the exercise of an SAR, the holder may specify the form of consideration to be received by such holder, which shall be in shares of Common Stock (valued at Fair Market Value on the date of exercise of the SAR), or in cash, or partly in cash and partly in shares of Common Stock, as the holder shall request; provided, however, that the Committee, in its sole discretion, may disapprove the form of consideration requested and instead authorize the payment of such consideration in shares of Common Stock (valued as aforesaid), or in cash, or partly in cash and partly in shares of Common Stock. Upon the exercise of an SAR, the related Option shall be deemed exercised to the extent of the number of shares of Common Stock with respect to which such SAR is exercised and to that extent a corresponding number of shares of Common Stock shall not again be available for the grant of Awards under the Plan. Upon the exercise or termination of the related Option, the SAR with respect thereto shall be considered to have been exercised or terminated to the extent of the number of shares of Common Stock with respect to which the related Option was so exercised or terminated. SECTION 8. RESTRICTED STOCK AWARDS A. Awards to Employees The Committee may make an award of Restricted Stock to selected Employees, evidenced by an Agreement which shall contain such terms and conditions as the Committee, in its sole discretion, may determine. The amount of each Restricted Stock Award and the respective terms and conditions of each Award (which terms and conditions need not be the same in each case) shall be determined by the Committee in its sole discretion. As a condition to any Award hereunder, the Committee may require an Employee to pay to the Company an amount equal to, or in excess of, the par value of the shares of Restricted Stock awarded to him or her. Any such Restricted Stock Award shall automatically expire if not purchased in accordance with the Committee's requirements within thirty (30) days after the date of grant. Subject to the terms and conditions of each Restricted Stock Award, the Employee, as the owner of the 6

Common Stock issued as Restricted Stock, shall have all rights of a shareholder including, but not limited to, voting rights as to such Common Stock and the right to receive dividends thereon when, as and if paid. In the event that a Restricted Stock Award has been made to an Employee whose employment or service is subsequently terminated for any reason prior to the lapse of all restrictions thereon, such Restricted Stock will be forfeited in its entirety by such Employee; provided, however, that the Committee may, in its sole discretion, limit such forfeiture. Any Restricted Stock so forfeited by an Employee shall not again be available for the grant of Awards under the Plan. Employees may be offered the opportunity to defer the receipt of payment of vested shares of Restricted Stock, and Common Stock may be granted as a bonus for deferral, under terms as may be established by the Committee from time to time; however, in no event shall the Common Stock granted as a bonus for deferral exceed 20% of the Restricted Stock so deferred. B. Awards to Outside Directors During the term of the Plan, (i) each Outside Director who was granted an award of restricted stock under the Long-Term Incentive Plan on January 26, 1989 and who continues to serve as an Outside Director on January 31, 1994 shall be granted an Award of 1,000 shares of Restricted Stock on January 31, 1994; (ii) each Outside Director who was granted an award of restricted stock under such Long-Term Incentive Plan other than those Outside Directors in (i) above shall be granted an Award of 1,000 shares of Restricted Stock upon the fifth anniversary of his or her prior award under the Long-Term Incentive Plan; and (iii) each person who is hereafter duly appointed or elected as an Outside Director and who does not receive an award under the Long-Term Incentive Plan shall be granted, effective on the date of his or her appointment or election to the Board, an Award of 1,000 shares of Restricted Stock. All Awards under this subsection (B) are subject to the limitation on the number of shares of Common Stock available pursuant to Section 3 and to the terms and conditions set forth in this subsection (B) and subsection (C) below. As a condition to any Award hereunder, the Outside Director will be required to pay to the Company a nonrefundable amount equal to the par value of the shares of Restricted Stock awarded to him or her. Upon the granting of the Restricted Stock Award, such Outside Director shall be entitled to all rights incident to ownership of Common Stock of the Company with respect to his or her Restricted Stock, including, but not limited to, the right to vote such shares of Restricted Stock and to receive dividends thereon when, as and if paid; provided, however, that in no case may any shares of Restricted Stock granted to an Outside Director be sold, assigned, transferred, pledged, or otherwise encumbered during the Restricted Period which shall not lapse until the earlier to occur of the following: (i) normal retirement from the Board at age 70, (ii) the death or disability of such Outside Director, (iii) a 50% change in the beneficial ownership of the Company as defined in Rule 13d-3 under the Exchange Act, or (iv) voluntary early retirement to take a position in governmental service. In the case of voluntary resignation or other termination of service of an Outside Director prior to the occurrence of any of the events described in (i), (ii), (iii) or (iv) of the preceding sentence, any grant of Restricted Stock made to him or her pursuant to this subsection (B) will be forfeited by such Outside Director. Any Restricted Stock so forfeited by an Outside Director shall not again be available for the grant of Awards under the Plan. C. Transferability Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered during a Restricted Period, which, in the case of Employees, shall be determined by the Committee and which shall not be less than one year from the date such Restricted Stock was awarded, and, in the case of Outside Directors, shall be determined in accordance with subsection (B) of this Section 8. The Committee may at any time, reduce the Restricted Period with respect to any outstanding shares of Restricted Stock awarded under the Plan to Employees, but in no event shall such Restricted Period be less than one year. During the Restricted Period, certificates representing the Restricted Stock and any Retained Distributions shall be registered in the recipient's name and bear a restrictive legend to the effect that ownership of such Restricted Stock (and any such Retained Distributions), and the enjoyment of all rights 7

appurtenant thereto are subject to the restrictions, terms, and conditions provided in the Plan and the applicable Agreement. Such certificates shall be deposited by the recipient with the Company, together with stock powers or other instruments of assignment, each endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Stock and any securities constituting Retained Distributions which shall be forfeited in accordance with the Plan and the applicable Agreement. Restricted Stock shall constitute issued and outstanding shares of Common Stock for all corporate purposes. The recipient will have the right to vote such Restricted Stock, to receive and retain all regular cash dividends, and to exercise all other rights, powers, and privileges of a holder of Common Stock with respect to such Restricted Stock, with the exception that (i) the recipient will not be entitled to delivery of the stock certificate or certificates representing such Restricted Stock until the restrictions applicable thereto shall have expired; (ii) the Company will retain custody of all Retained Distributions made or declared with respect to the Restricted Stock (and such Retained Distributions will be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Retained Distributions shall have been made, paid, or declared shall have become vested, and such Retained Distributions shall not bear interest or be segregated in separate accounts; (iii) the recipient may not sell, assign, transfer, pledge, exchange, encumber, or dispose of the Restricted Stock or any Retained Distributions during the Restricted Period; and (iv) a breach of any restrictions, terms, or conditions provided in the Plan or established by the Committee with respect to any Restricted Stock or Retained Distributions will cause a forfeiture of such Restricted Stock and any Retained Distributions with respect thereto. SECTION 9. MERIT AWARDS The Committee may from time to time make an award of Common Stock under the Plan to selected Employees for such reasons and in such amounts as the Committee, in its sole discretion, may determine. As a condition to any such Merit Award, the Committee may require an Employee to pay to the Company an amount equal to, or in excess of, the par value of the shares of Common Stock awarded to him or her. SECTION 10. PERFORMANCE SHARES The Committee may make awards of Common Stock, evidenced by an Agreement, to selected Employees on the basis of the Company's financial performance in any given period. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees who shall receive such Performance Shares, to determine the number of such shares to be granted for each Performance Period, and to determine the duration of each such Performance Period. There may be more than one Performance Period in existence at any one time, and the duration of Performance Periods may differ from each other. The Committee shall establish performance measures for each Performance Period on the basis of such criteria and to accomplish such objectives as the Committee may from time to time, in its sole discretion, determine. Such measures may include, but shall not be limited to, return on investment, earnings per share, return on shareholders' equity, or return to shareholders. The performance measures determined by the Committee shall be established in writing prior to the beginning of each performance period. The Committee shall have the discretion to later revise the performance measures only so as to reduce or eliminate the amount of compensation otherwise payable upon attainment of the performance measures. In no event shall the Committee be able to later revise the performance measures to increase the amount of compensation otherwise payable. Performance Shares may not be sold, assigned, transferred, pledged, or otherwise encumbered, except as herein provided and as provided in Section 11(e), during the Performance Period. The Committee shall determine, in its sole discretion, the manner of payment, which may include (i) cash, (ii) shares of Common Stock, or (iii) shares of Restricted Stock in such proportions as the Committee shall determine. Employees may be offered the opportunity to defer the receipt of payment of earned Performance Shares, and Common Stock may be granted as a bonus for deferral under terms as may be 8

established by the Committee from time to time; however, in no event shall the Common Stock granted as a bonus for deferral exceed 20% of the Performance Shares so deferred. An Employee must be employed by the Company at the end of a Performance Period in order to be entitled to payment of Performance Shares in respect of such period; provided, however, that in the event of an Employee's cessation of employment before the end of such period, or upon the occurrence of his or her death, retirement, or disability, or other reason approved by the Committee, the Committee may, in its sole discretion, limit such forfeiture. SECTION 11. CONTINUED EMPLOYMENT AND AGREEMENT TO SERVE (a) Subject to the provisions of paragraph (e) of this Section 11, if the employment of the Employee shall terminate prior to the time any portion of an Option or Reload Option first becomes exercisable, the Option granted to such Employee shall immediately terminate. (b) Every Option shall provide that in the event the Employee dies while employed by Ashland, during the one-year period of disability described in paragraph (c) of this Section 11 or within three months after cessation of employment for any cause, such Option shall be exercisable, at any time or from time to time, prior to the fixed termination date set forth in the Option, by the Beneficiaries of the decedent for the number of shares which the Employee could have acquired under the Option immediately prior to the Employee's death. (c) Every Option shall provide that in the event the employment of any Employee shall cease by reason of total and permanent disability within the meaning of Section 22(e)(3) of the Code, as determined by the Committee at any time during the term of the Option, such Option shall be exercisable, at any time or from time to time by such Employee, during a period of one year of continuing disability following termination of employment by reason of such disability for the number of shares which the Employee could have acquired under the Option immediately prior to the Employee's total and permanent disability. The one-year period following such termination of employment during which Options may be exercisable may be extended at the discretion of the Committee; provided, however, that no Option may be exercisable after the fixed termination date set forth in the Option. The determination by the Committee of any question involving disability shall be conclusive and binding. (d) Except as provided in paragraphs (a), (b), (c) and (e) of this Section 11, every Option shall provide that it shall terminate on the earlier to occur of the fixed termination date set forth in the Option or three months after cessation of the Employee's employment for any cause except Retirement, in which event the Option shall be exercisable for a period of three years after such Retirement date, which three-year period may be extended at the discretion of the Committee. If an Option is exercised after cessation of employment or Retirement, it may be exercised only in respect of the number of shares which the Employee could have acquired under the Option immediately prior to such cessation of employment or Retirement; provided, however, that no Option may be exercised after the fixed termination date set forth in the Option. (e) Notwithstanding any provision of this Section 11 to the contrary, any Award granted pursuant to the Plan, except a Restricted Stock Award to Outside Directors, which is governed by Section 8, subsection (B), may, in the discretion of the Committee or as provided in the relevant Agreement, become exercisable, at any time or from time to time, prior to the fixed termination date set forth in the Award for the full number of awarded shares or any part thereof, less such numbers as may have been theretofore acquired under the Award (i) from and after the time the Employee ceases to be an Employee of Ashland as a result of the sale or other disposition by Ashland of assets or property (including shares of any subsidiary) in respect of which such Employee had theretofore been employed or as a result of which such Employee's continued employment with Ashland is no longer required, and (ii) in the case of a Change in Control of Ashland, from and after the date of such Change in Control. (f) Each Employee granted an Award under this Plan shall agree by his or her acceptance of such 9

Award to remain in the service of Ashland for a period of at least one year from the date of the Agreement respecting the Award between Ashland and the Employee. Such service shall, subject to the terms of any contract between Ashland and such Employee, be at the pleasure of Ashland and at such compensation as Ashland shall reasonably determine from time to time. Nothing in the Plan, or in any Award granted pursuant to the Plan, shall confer on any individual any right to continue in the employment of or service to Ashland or interfere in any way with the right of Ashland to terminate the Employee's employment at any time. (g) Subject to the limitations set forth in Section 422 of the Code, the Committee may adopt, amend, or rescind from time to time such provisions as it deems appropriate with respect to the effect of leaves of absence approved by any duly authorized officer of Ashland with respect to any Employee. SECTION 12. WITHHOLDING TAXES Federal, state or local law may require the withholding of taxes applicable to gains resulting from the exercise of an Award. Unless otherwise prohibited by the Committee, each Employee may satisfy any such tax withholding obligation by any of the following means, or by a combination of such means: (i) a cash payment, (ii) authorizing Ashland to withhold from the shares of Common Stock otherwise issuable to the Employee pursuant to the exercise or vesting of an Award a number of shares having a Fair Market Value, as of the Tax Date, which will satisfy the amount of the withholding tax obligation, or (iii) by delivery to Ashland of a number of shares of Common Stock having a Fair Market Value as of the Tax Date which will satisfy the amount of the withholding tax obligation arising from an exercise or vesting of an Award. An Employee's election to pay the withholding tax obligation by (ii) or (iii) above must be made on or before the Tax Date, is irrevocable, is subject to such rules as the Committee may adopt, and may be disapproved by the Committee. If the amount requested is not paid, the Committee may refuse to issue Common Stock under the Plan. SECTION 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event of any change in the outstanding Common Stock of the Company by reason of any stock split, stock dividend, recapitalization, merger, consolidation, reorganization, combination, or exchange of shares, split-up, split-off, spin-off, liquidation or other similar change in capitalization, or any distribution to common stockholders other than cash dividends, the number or kind of shares that may be issued under the Plan pursuant to Section 3 and the number or kind of shares subject to, or the price per share under any outstanding Award shall be automatically adjusted so that the proportionate interest of the Employee or Outside Director shall be maintained as before the occurrence of such event. Such adjustment shall be conclusive and binding for all purposes of the Plan. Section 14. Amendments And Terminations Unless the Plan shall have been terminated as hereinafter provided, the Plan shall terminate on, and no Award (other than Reload Options automatically granted pursuant to Section 6) shall be granted after January 26, 1998. The plan may be terminated, modified or amended by the shareholders of the Company. The Board may at any time terminate, modify or amend the Plan in such respects as it shall deem advisable; provided, however, that the Board may not, without approval by the holders of a majority of the outstanding shares of stock present and voting at any annual or special meeting of shareholders of Ashland: (i) increase (except as provided in Section 13) the maximum number of shares which may be issued pursuant to the Awards granted under the Plan, (ii) change the class of persons eligible to receive Awards, (iii) change the manner of determining the minimum Exercise Price of Options other than to change the manner of determining the Fair Market Value of the Common Stock as set forth in Section 2, (iv) extend the period during which Awards may be granted or exercised, or (v) amend any provision of the Plan insofar as it applies specifically to Restricted Stock Awards granted or to be granted to Outside Directors. SECTION 15. MISCELLANEOUS PROVISIONS 10

(a) Except as to Awards to Outside Directors, no Employee or other person shall have any claim or right to be granted an Award under the Plan. (b) An Employee's or Outside Director's rights and interest under the Plan may not be assigned or transferred in whole or in part, either directly or by operation of law or otherwise (except in the event of an Employee's or Outside Director's death, by will or the laws of descent and distribution), including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and no such right or interest of any Employee or Outside Director in the Plan shall be subject to any obligation of liability of such individual. An Award shall be exercisable, during an Employee's lifetime, only by him or her or his or her Personal Representative. Except as specified in Section 8, the holder of an Award shall have none of the rights of a shareholder until the shares subject thereto shall have been registered in the name of the person receiving or person or persons exercising the Award on the transfer books of the Company. (c) No Common Stock shall be issued hereunder unless counsel for the Company shall be satisfied that such issuance will be in compliance with applicable Federal, state, and other securities laws. (d) The expenses of the Plan shall be borne by the Company. (e) By accepting any Award under the Plan, each Employee and Outside Director and each Personal Representative or Beneficiary claiming under or through him or her shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee. (f) Awards granted under the Plan shall be binding upon Ashland, its successors, and assigns. (g) The appropriate officers of the Company shall cause to be filed any reports, returns, or other information regarding Awards hereunder or any Common Stock issued pursuant hereto as may be required by Section 13 or 15(d) of the Exchange Act, or any other applicable statute, rule, or regulation. (h) Nothing contained in this Plan shall prevent the Board of Directors from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required. (i) Each Employee shall be deemed to have been granted any Award on the date the Committee took action to grant such Award under the Plan or such later date as the Committee in its sole discretion shall determine at the time such grant is authorized; provided, however, that a Reload Option shall be deemed to have been granted on the date on which the Original Option is exercised or such later date as the Committee in its sole discretion shall determine prior to the date on which such exercise occurs and a subsequent Reload Option shall be deemed to have been granted on the date on which the underlying Reload Option is exercised or such later date as the Committee in its sole discretion shall determine prior to the date on which such exercise occurs. SECTION 16. EFFECTIVENESS OF THE PLAN The Plan shall be submitted to the shareholders of the Company for their approval and adoption on January 28, 1993 or such other date fixed for the next meeting of shareholders or any adjournment or postponement thereof. The Plan shall not be effective and no Award shall be made hereunder unless and until the Plan has been so approved and adopted at a meeting of the Company's shareholders. SECTION 17. GOVERNING LAW The provisions of this Plan shall be interpreted and construed in accordance with the laws of the Commonwealth of Kentucky. As amended and restated by the Board on November 3, 1994. 11




   

MANAGEMENT'S DISCUSSION AND ANALYSIS ASHLAND OIL, INC. AND SUBSIDIARIES <TABLE> <CAPTION> YEARS ENDED SEPTEMBER 30 ---------------------------------- 1994 1993 1992 ------- ----------- ----------- (IN MILLIONS) <S> <C> <C> <C> SALES AND OPERATING REVENUES Petroleum.................................................................. $ 4,666 $ 4,752 $ 4,848 SuperAmerica............................................................... 1,706 1,785 1,888 Valvoline.................................................................. 1,000 938 900 Chemical................................................................... 2,885 2,586 2,488 Construction............................................................... 1,101 1,116 1,043 Exploration................................................................ 199 247 262 Intersegment sales......................................................... (1,223) (1,225) (1,218) ------- ----------- ----------- $10,334 $10,199 $10,211 ------- ----------- ----------- ------- ----------- ----------- OPERATING INCOME (LOSS) Petroleum.................................................................. $ 113 $ 56 $ (125) SuperAmerica............................................................... 59 65 1 Valvoline.................................................................. 52 56 50 ------- ----------- ----------- Total Refining and Marketing Group....................................... 224 177 (74) Chemical................................................................... 125 108 81 Construction............................................................... 70 53 45 Exploration................................................................ 28 36 17 General corporate expenses................................................. (80) (77) (132) ------- ----------- ----------- $ 367 $ 297 $ (63) ------- ----------- ----------- ------- ----------- ----------- EQUITY INCOME Arch Mineral Corporation................................................... $ 7 $ (10) $ 10 Ashland Coal, Inc.......................................................... 6 27 13 Other...................................................................... 9 9 10 ------- ----------- ----------- $ 22 $ 26 $ 33 ------- ----------- ----------- ------- ----------- ----------- OPERATING INFORMATION Petroleum Product sales (thousand barrels per day) (1)............................. 357.7 350.3 347.4 Refining inputs (thousand barrels per day) (2)........................... 338.4 335.9 337.4 Value of products manufactured per barrel................................ $ 21.49 $ 23.00 $ 23.81 Input cost per barrel.................................................... 16.76 19.06 20.48 ------- ----------- ----------- Refining margin per barrel............................................... $ 4.73 $ 3.94 $ 3.33 SuperAmerica Product sales (thousand barrels per day)................................. 70.2 73.8 77.1 Merchandise sales (millions)............................................. $ 519 $ 549 $ 587 Valvoline product sales (thousand barrels per day) (1)..................... 17.9 16.3 16.6 Construction backlog at September 30 (millions)............................ $ 554 $ 495(3) $ 500(3) Exploration Net daily production Natural gas (million cubic feet) (1)................................... 94.3 99.3 78.3 Nigerian crude oil (thousand barrels).................................. 18.7 21.7 25.9 Sales price Natural gas (per thousand cubic feet).................................. $ 2.42 $ 2.45 $ 2.28 Nigerian crude oil (per barrel)........................................ $ 15.01 $ 17.77 $ 19.21 Arch Mineral Corporation (4) Tons sold (millions)..................................................... 24.3 19.2 21.0 Sales price per ton...................................................... $ 26.35 $ 25.26 $ 25.73 Ashland Coal, Inc. (4) Tons sold (millions)..................................................... 18.2 18.0 17.2 Sales price per ton...................................................... $ 29.85 $ 29.77 $ 29.80 <FN> ------------------------------ (1) Includes intersegment sales. (2) Includes crude oil and other purchased feedstocks. (3) Amounts have been restated to exclude APAC's Arizona operations which were sold in 1994. (4) Amounts are reported on a 100% basis for these affiliated companies accounted for on the equity method. </TABLE> 34

RESULTS OF OPERATIONS Ashland's net income amounted to $197 million in 1994, compared to $142 million in 1993 and a net loss of $336 million in 1992. However, comparisons of these results are affected by various unusual items. The following table shows the effect of unusual items on operating and net income for the three years ended September 30, 1994. <TABLE> <CAPTION> OPERATING INCOME (LOSS) NET INCOME (LOSS) ---------------- ----------------- 1994 1993 1992 1994 1993 1992 ---- ---- ---- ---- ---- ----- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> Income before unusual items............... $356 $282 $145 $190 $115 $ 64 Special charges Voluntary enhanced retirement program... -- -- (31) -- -- (20) Asset write-downs....................... -- -- (64) -- -- (41) Riley-related reserves.................. -- -- (38) -- -- (23) Environmental provisions................ -- -- (41) -- -- (25) Accounting changes........................ -- -- (34) -- -- (291) Other Litigation matters...................... 11 -- -- 7 -- -- Ashland Coal unusual items.............. -- -- -- -- 18 -- Gain on sale of Petroleum operation..... -- 15 -- -- 9 -- ---- ---- ---- ---- ---- ----- Income (loss) as reported................. $367 $297 $(63) $197 $142 $(336) ---- ---- ---- ---- ---- ----- ---- ---- ---- ---- ---- ----- </TABLE> Excluding unusual items, net income amounted to $190 million in 1994, compared to $115 million in 1993. Operating income from Petroleum was up significantly, while record results were achieved by Chemical and Construction. In addition, equity income from Ashland's coal investments showed substantial improvement since the prolonged strike by the United Mine Workers (UMW) was settled in December 1993. The increase in net income from $64 million in 1992 to $115 million in 1993 reflected improvements in most of Ashland's businesses, other than its coal investments which were adversely affected by the UMW strike. While Ashland Petroleum was responsible for the majority of the increase in earnings, SuperAmerica, Valvoline and Chemical each contributed record results. As a result of difficult conditions in the U.S. economy and the petroleum refining industry, Ashland implemented a voluntary enhanced retirement program in July 1992 to reduce employment levels and lower costs, thereby enhancing its competitive position. In addition, because of lower earnings and the large capital spending requirements for its refineries, Ashland announced a $200 million asset divestiture program during that same year. Various businesses and properties were identified for possible sale, resulting in loss provisions of nearly $24 million, which are included in asset write-downs in the above table. The remaining asset write-downs were related to discontinued operations and a re-evaluation of an enhanced oil recovery project. Reserves were also increased in 1992 for future costs associated with certain custom boilers built by Riley Stoker and other Riley-related matters. Because of higher contract costs and certain settlements during that year, the reserves recognized in prior years were no longer adequate to cover the indemnities provided to the purchaser when Riley was sold in 1990. The environmental provisions reflect adjustments to estimated future environmental costs, primarily in the areas of remediation and replacement of underground storage tanks at older retail marketing locations. The accounting changes reflected the effect of Ashland's adoption of Financial Accounting Standards Board (FASB) Statements No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and No. 109, "Accounting for Income Taxes," both effective as of October 1, 1991 (see Note A to the Consolidated Financial Statements). During 1993, Ashland amended its retiree benefit programs and its costs returned to amounts more closely approximating pre-1992 pay-as-you-go levels. The following table compares operating income before unusual items by segment for the three-year period. <TABLE> <CAPTION> 1994 1993 1992 --------- --------- --------- (IN MILLIONS) <S> <C> <C> <C> Operating income (loss) Petroleum........................................................... $ 113 $ 41 $ (36) SuperAmerica........................................................ 59 65 29 Valvoline........................................................... 52 56 52 Chemical............................................................ 125 108 96 Construction........................................................ 70 53 54 Exploration......................................................... 28 36 33 General corporate expenses.......................................... (91) (77) (83) --------- --------- --------- $ 356 $ 282 $ 145 --------- --------- --------- --------- --------- --------- </TABLE> 35

PETROLEUM Operating income of Ashland Petroleum amounted to $113 million in 1994, compared to $41 million in 1993 before unusual items. Ashland Petroleum's strong performance was due to higher margins in its Midwest markets, as well as its actions to improve crude oil selection and other profit enhancement efforts. Margins were strong in the first half of 1994, reflecting very favorable distillate prices concurrent with the implementation of low-sulfur diesel requirements in the December quarter and reduced crude oil costs in the March quarter. Most of the last half of 1994 was adversely affected by increasing crude oil costs, with wholesale product prices not keeping pace. The refineries performed well with crude oil throughput up slightly despite major scheduled turnarounds at two of its refineries. Although refining margins were very volatile for most of the year, such margins did increase from $3.94 a barrel in 1993 to $4.73 a barrel in 1994. This improvement was partially offset, however, by higher turnaround and depreciation costs. Earnings from Scurlock Permian improved considerably, as crude oil gathering and handling margins were up compared to their depressed levels in 1993. Ashland Petroleum's operating income of $41 million in 1993 excluded a gain of $15 million on the sale of its TPT inland waterways barge operation. Such results rebounded from an operating loss of $36 million in 1992 before unusual items. The improvement reflected an increase in the refining margin from $3.33 a barrel in 1992 to $3.94 a barrel in 1993, resulting from higher asphalt prices, stronger regional product markets, and more selective purchases of crude oils to yield a more profitable product mix. In other operations, results from branded marketing were up considerably, reflecting higher product margins and reduced environmental expenses, while earnings from Scurlock Permian declined due to unusually competitive market conditions that adversely affected gathering and handling volumes and margins. SUPERAMERICA Operating income of $59 million for SuperAmerica in 1994 was second only to its record earnings of $65 million achieved in 1993. Gasoline and merchandise margins were at all-time highs and largely offset the volume reductions associated with last year's sale of 80 SuperAmerica stores. Such stores were located in Florida and other non-strategic areas outside markets directly supplied by Ashland Petroleum. At September 30, 1994, 598 SuperAmerica stores were operating, compared to 588 stores in 1993 and 642 stores in 1992. While the number of stores is up at year end in 1994, the average number of stores in operation for the year was actually down 4%, and operations of the newly-opened stores had not yet fully matured. SuperAmerica achieved record operating income of $65 million in 1993, compared to $29 million in 1992 before unusual items. Improvements in margins for both gasoline and merchandise more than offset the reductions in volumes resulting from the sale of 80 stores during 1993. VALVOLINE Valvoline also had its second best year ever, with operating income of $52 million in 1994, compared to last year's record of $56 million. The major factor in the decline was reduced margins on automotive refrigerants resulting from built-up customer inventories. Earnings from Valvoline's branded motor oil business were relatively unchanged as the effects of volume increases were largely offset by reduced margins associated with a continuing shift from packaged products to lower margin bulk sales, and by significant increases in raw material costs during the last half of 1994. International operations were up considerably, spurred in part by the acquisition of Valvoline distributorships in six European countries during 1994. Valvoline Instant Oil Change (VIOC) achieved higher earnings for the second straight year with continued improvements in average car counts and ticket prices. At September 30, 1994, VIOC operated 347 company outlets, compared to 341 in 1993 and 315 in 1992. In addition, the VIOC franchising program continued to expand with 75 outlets open at year-end in 1994, compared to 66 in 1993 and 45 in 1992. Valvoline's operating income of $56 million in 1993 exceeded its previous record earnings of $52 million in 1992 before unusual items. Improved results from its automotive chemicals businesses and VIOC more than offset lower earnings from branded motor oil sales and international operations. While Valvoline was able to increase its market share slightly in the highly competitive motor oil market, earnings from its branded motor oil business were down 20% due to soft demand and higher marketing expenses. In addition, the results of international operations were adversely affected by currency losses brought on by a strong U.S. dollar. However, the automotive chemical businesses achieved record earnings due to better margins on refrigerant sales and other Pyroil products, while VIOC results improved on the strength of higher average car counts and ticket prices, as well as additional outlets. CHEMICAL For the third consecutive year, Ashland Chemical was the leading earnings contributor to Ashland's results with operating income of $125 million in 1994. Such income surpassed Ashland Chemical's previous record earnings of $108 million in 1993, despite incurring higher charges for environmental remediation costs in 1994. Earnings from the distribution businesses were up 22%, principally due to higher sales volumes for thermoplastics. Operating income from the specialty chemicals group increased 25%, with foundry products and water treatment chemicals leading an across the board improvement. Results from petrochemicals were up 15%, with improvements in 36

methanol margins more than offsetting the effects of production and weather- related problems on cumene results early in 1994. Operating income of $108 million in 1993 was a record for Ashland Chemical, exceeding its 1992 earnings of $96 million before unusual items. Earnings from the distribution businesses returned to more normal levels, reflecting integration of the 1992 acquisition of Unocal's chemical distribution business, higher sales volumes and margins for thermoplastics, and increased efficiencies from its redesigned distribution services organization. Although results from most of the specialty chemical businesses improved, the favorable effects were largely offset by lower earnings from water treatment chemicals. Operating income from petrochemicals declined 20%, as higher natural gas feedstocks reduced methanol margins and cumene operations suffered from tighter margins, a temporary shutdown by a major customer and lower sales volumes. CONSTRUCTION The APAC construction operations achieved record earnings of $70 million in 1994, compared to $53 million in 1993. Each of its continuing operating regions achieved improvements on the strength of a higher quality backlog, better margins on construction materials and more favorable weather conditions. In addition, APAC's construction operations in Arizona contributed operating income (including a gain on the sale of those operations) of $9 million, which was up from $6 million in 1993. APAC's backlog of $554 million at September 30, 1994, is expected to contain slightly higher margins than last year's backlog of $495 million for its continuing operations. Operating income from APAC totaled $53 million in 1993, compared to $54 million in 1992 before unusual items. Revenues were up 7%, but the favorable impact was more than offset by poor weather conditions in most of APAC's operating regions in the December 1992 quarter and severe flooding in its Arizona region in the March 1993 quarter. EXPLORATION Ashland Exploration's operating income declined from $36 million in 1993 to $28 million in 1994. However, its contribution to Ashland's net income after recognition of tax credits was down only slightly. Operating income from domestic operations was down $19 million, resulting from lower production and prices for both natural gas and crude oil, increased exploration expenses, and the favorable effect of a contract settlement that was included in results for 1993. Operating income from foreign operations improved by $11 million, reflecting lower exploration expenses and improved results from crude oil trading activities. Such factors more than offset the effects of normal declines in Nigerian crude oil production as developed reserves continue to be depleted. Ashland Exploration generated operating income of $36 million in 1993, compared to $33 million in 1992 before unusual items. Earnings from domestic operations were up $18 million resulting from a 27% increase in natural gas production, higher natural gas sales prices and the favorable effect of a contract settlement. However, results from foreign operations were down $15 million reflecting a decline in crude oil production in Nigeria and additional expenses associated with seismic activity on two offshore Nigerian blocks. GENERAL CORPORATE EXPENSES General corporate expenses amounted to $91 million in 1994 before the net effects of favorable settlements and reserves for other litigation matters, compared to $77 million in 1993 and $83 million in 1992. Expenses for 1994 included consulting fees and other expenses related to a corporate-wide cost control program and higher accruals for performance-based compensation. Expenses declined from 1992 to 1993 due to the effects of personnel reductions under the voluntary enhanced retirement program implemented in 1992. OTHER INCOME (EXPENSE) Interest expense (net of interest income) amounted to $117 million in 1994, $123 million in 1993 and $128 million in 1992. Adjusting for capitalized interest on refinery projects of $9 million in 1993 and $3 million in 1992, net interest costs incurred amounted to $117 million in 1994, $132 million in 1993 and $131 million in 1992. Average debt levels declined significantly in 1994 compared to 1993. Average debt levels were up in 1993 compared to 1992, but the effect was largely offset by lower interest rates on floating-rate debt. Results of Arch Mineral produced equity income of $7 million in 1994, an equity loss of $10 million in 1993 and equity income of $10 million in 1992. The major factor in the fluctuations was the prolonged strike by the UMW which extended from April into December 1993 and had a significant effect on the comparability of results for both fiscal 1993 and 1994. In addition, equity income from Arch for 1992 included an insurance gain of $8 million resulting from a fire at an Illinois mine. Sales tonnage was up significantly in 1994, largely due to the acquisition of the assets of Agipcoal USA. Equity income from Ashland Coal for 1993 included a net gain of $20 million resulting from a favorable adjustment to income tax expense due to tax law changes, partially offset by a charge to increase the valuation allowance for certain prepaid royalties. Excluding this unusual gain, equity income from Ashland Coal amounted to $6 million in 1994, $7 million in 1993 and $13 million in 1992. The UMW strike (including the related aftereffects) was the major cause of the reduced earnings for both 1994 and 1993. 37

FINANCIAL POSITION LIQUIDITY Ashland's financial position has enabled it to obtain capital for its financing needs and maintain investment grade ratings on its senior debt of Baa1 from Moody's and BBB from Standard & Poor's. Ashland has revolving credit agreements providing for up to $350 million in borrowings, none of which were in use at September 30, 1994. At that date, Ashland could issue an additional $227 million in medium-term notes under a shelf registration should future opportunities or needs arise. Ashland also has access to various uncommitted lines of credit and commercial paper markets, and had short-term notes and commercial paper of $72 million outstanding at September 30, 1994. While certain debt agreements contain covenants restricting the amount by which Ashland can increase its indebtedness, such indebtedness could have been increased by up to $724 million at September 30, 1994. Cash and cash equivalents at September 30, 1994, were $40 million, compared to $41 million for 1993. Cash flows from operations, a major source of Ashland's liquidity, amounted to $454 million in 1994, $250 million in 1993 and $398 million in 1992. The reduction in 1993 resulted principally from increased working capital. This increase included higher receivables and inventories associated with the greater level of business activity in several divisions, as well as higher than normal payables in 1992 related to capital expenditures and the voluntary enhanced retirement program. Cash flows from operations provided over 75% of Ashland's capital requirements for net property additions and dividends during the last three years. The remainder of its capital requirements during this period, plus funds for acquisitions, have come from borrowings, the issuance of convertible preferred stock, and the sale of operations. Property additions amounted to $1,312 million during the last three years and are summarized in the Information by Industry Segment on page 59. Expenditures by Ashland Petroleum amounted to 54% of the combined total for 1992 and 1993, as the refineries were upgraded to produce cleaner-burning fuels and to meet tougher environmental regulations. Accordingly, capital expenditures by Ashland's related energy and chemical businesses were curtailed to some extent during those years to meet the capital needs of the refineries. With the completion of various refinery units in 1993, investments in these energy and chemical businesses were accelerated, accounting for nearly 60% of Ashland's capital expenditures during 1994. Long-term borrowings provided funds of $664 million during the last three years, including the issuance of $332 million of medium-term notes and $250 million of 8.80% senior debentures. The proceeds from these debt issues, as well as $293 million from the issuance of convertible preferred stock in 1993, were used to retire $600 million of long-term debt (based on their scheduled maturities or opportunities for lower interest rates) and to partially fund the capital expenditure program. Cash flows were also supplemented as necessary by the issuance of short-term notes and commercial paper. Cash requirements for acquisitions amounted to $172 million since 1991, related primarily to the acquisition of Unocal's chemical distribution business in 1992, Valvoline's European distributorships in 1994 and several small chemical and construction companies. Proceeds from the sale of operations generated $196 million during the last three years, including divestitures of APAC's construction operations in Arizona, 80 SuperAmerica stores, various assets acquired in the acquisition of The Permian Corporation in 1991, and Ashland Petroleum's TPT inland waterways barge operation. Investment purchases, sales and maturities relate primarily to the turnover in the debt securities held by Ashland's captive insurance companies. The net cash outflow related to these transactions in the last three years reflected the increase in the investment portfolios of these companies. Working capital at September 30, 1994, was $483 million and liquid assets (cash, cash equivalents and accounts receivable) amounted to 81% of current liabilities at that date. Ashland's working capital is significantly affected by its use of the LIFO method of inventory valuation, which valued such inventories at $395 million below their replacement costs at September 30, 1994. CAPITAL RESOURCES During fiscal 1995, Ashland anticipates capital expenditures of approximately $425 million. Ashland Petroleum's capital expenditures are expected to decline to under 40% of the total, as additional capital is directed to growth opportunities in Ashland's related energy and chemical businesses. In addition, dividends are estimated at about $85 million in 1995 based on shares currently outstanding and the recently announced increase in Ashland's annual common dividend rate from $1.00 a share to $1.10 a share, effective December 15, 1994. Ashland anticipates meeting over 80% of its 1995 capital requirements for property additions and dividends from internally generated funds. External financing will likely be necessary to provide funds for the remainder of such requirements and for scheduled maturities of $61 million of long-term debt. However, debt as a percent of Ashland's capitalization is not expected to change significantly as a result of these capital requirements for 1995. 38

Ashland's capitalization at September 30, 1994, consisted of debt due within one year (4%), long-term debt (44%), deferred income taxes (1%), convertible preferred stock (9%) and common stockholders' equity (42%). At that date, long-term debt included $87 million of floating-rate debt and the interest rates on an additional $430 million of fixed-rate debt were converted to floating rates through interest rate swap agreements. As a result, interest costs for 1995 will fluctuate with short-term interest rates on about 35% of Ashland's long-term debt, as well as on any short-term notes and commercial paper. ENVIRONMENTAL MATTERS Federal, state and local laws and regulations relating to the protection of the environment have resulted in higher operating costs and capital investments by the industries in which Ashland operates. Because of the continuing trend toward greater environmental awareness and increasingly stringent regulations, Ashland believes that expenditures for environmental compliance will continue to have a significant effect on the conduct of its businesses. Although it cannot accurately predict how these developments will affect future operations and earnings, Ashland does not believe the nature and significance of its costs will vary significantly from those of its competitors in the petroleum and chemical industries. Ashland has invested heavily in its refineries since 1989, primarily to equip them to make new federally-mandated fuels and to meet tougher environmental regulations related to air emissions. During 1993, Ashland completed five major units central to this effort. These units enabled Ashland to begin producing oxygenated fuels and low-sulfur diesel required for on-highway use as of October 1, 1993. Furthermore, the new units allow Ashland to meet the new reformulated gasoline requirements effective as of January 1, 1995, as well as the air emission regulations being phased in over the next few years. Capital expenditures for air, water and solid waste facilities amounted to $63 million in 1994, $137 million in 1993 and $162 million in 1992. Based on current environmental regulations, Ashland anticipates such capital expenditures will amount to about $70 million in 1995. Ashland's operating expenditures for environmental remediation and compliance amounted to $140 million in 1994, $148 million in 1993 and $138 million in 1992, and are expected to be around $160 million in 1995. Compliance expenditures do not include the increased costs of additives, such as MTBE and ethanol, required to meet the oxygenated fuel requirements. Environmental reserves are subject to considerable uncertainties which affect Ashland's ability to estimate its share of the ultimate costs of required remediation efforts. Such uncertainties involve the nature and extent of contamination at each site, the extent of required cleanup efforts under existing environmental regulations, widely varying costs of alternate cleanup methods, changes in environmental regulations, the potential effect of continuing improvements in remediation technology, and the number and financial strength of other potentially responsible parties at multiparty sites. As a result, charges to income for environmental liabilities could have a material effect on results of operations in a particular quarter or fiscal year as assessments and remediation efforts proceed or as new remediation sites are identified. However, such charges are not expected to have a material adverse effect on Ashland's consolidated financial position, cash flow or liquidity. OUTLOOK Refinery margins remain very volatile and natural gas prices are currently depressed. With these factors and the divestiture of APAC's construction operations in Arizona, it will be difficult to repeat the strong results Ashland achieved in last year's December quarter. However, the related energy and chemical businesses are expected to continue showing good results. Not every refiner has been willing or able to add the expensive infrastructure needed to produce cleaner-burning fuels. As a result, the rationalization of the U.S. refining industry will likely continue. In addition, the implementation of reformulated gasoline and other alternatives for meeting local air quality goals may move gasoline more toward a specialty, rather than a commodity product. Furthermore, as gasoline grades proliferate, limitations imposed by pipelines may create less transparent, more regionalized marketplaces. With Ashland's efficient transportation system, the ability of its refineries to upgrade crude oil into higher value products, the regional advantage usually enjoyed by Midwest markets and the trend toward "designer" gasolines, the long-term outlook for Ashland's refining margins has improved. Since regulatory compliance expenditures have peaked for now, Ashland's discretionary cash flow position has improved. Ashland plans to continue capitalizing on its cash flow position by substantially increasing its investment in growth opportunities in Ashland's related energy and chemical businesses, as well as strengthening its competitive position in Ashland Petroleum by upgrading refinery streams and improving its marketing and transportation facilities. During the next five years, SuperAmerica plans to add up to 200 new stores in areas supplied by Ashland Petroleum's refineries, increasing its share in strategic markets where it is already a leader and distributing a growing percentage of Ashland Petroleum's gasoline production. Valvoline recently expanded its presence in the $1.7 billion U.S. automotive chemicals market by acquiring Zerex, the nation's No. 2 brand of antifreeze, and will continue expanding VIOC and its international operations. Ashland Chemical will emphasize integrated marketing efforts targeting its North American customers and a growing international sales base. 39

Increased infrastructure spending and an expanding economy should benefit APAC's efforts to build its position in existing markets. Although Ashland Exploration's earnings may continue to decline until its Nigerian reserves are replaced, the results were promising for the first well drilled in the two offshore Nigerian blocks acquired in 1992. Ashland Exploration plans to drill two additional wells in fiscal 1995 to further appraise the commercial potential of these blocks. Efficient operations, access to major markets and a strong reserve base in central Appalachia position Arch Mineral and Ashland Coal to capitalize on an improving demand picture for low-sulfur coal. The outlook for continued growth at both companies is strong and, with the coal strike behind them, represents one of Ashland's best opportunities for improved earnings in 1995. Ashland continues to explore opportunities for enhancing the benefits derived from its coal investments. EFFECTS OF INFLATION AND CHANGING PRICES Ashland's consolidated financial statements are prepared on the historical cost method of accounting and, as a result, do not reflect changes in the dollar's purchasing power. Although annual inflation rates have been low in recent years, Ashland's results are still affected by the cumulative inflationary trend from prior years. In the capital-intensive industries in which Ashland operates, replacement costs for its properties would generally exceed their historical costs. Accordingly, depreciation, depletion and amortization expense would be greater if it were based on current replacement costs. However, since replacement facilities would reflect technological improvements and changes in business strategies, such facilities would be expected to be more productive than existing facilities, mitigating somewhat the increased depreciation expense. Ashland uses the last-in, first-out (LIFO) method to value a substantial portion of its inventories to provide a better matching of revenues with current costs. However, LIFO values such inventories below their replacement costs. Monetary assets (such as cash, cash equivalents and accounts receivable) lose purchasing power as a result of inflation, while monetary liabilities (such as accounts payable and indebtedness) result in a gain because they can be settled with dollars of diminished purchasing power. Ashland's monetary liabilities exceed its monetary assets, which results in net purchasing power gains and provides a hedge against the effects of future inflation. QUARTERLY FINANCIAL INFORMATION The following table presents quarterly financial information and per share data relative to Ashland's common stock. <TABLE> <CAPTION> QUARTERS ENDED ---------------------------------------------------------------------------------------------- DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30 ---------------------- ---------------------- ---------------------- ---------------------- 1993 1992 1994 1993 1994 1993 1994 1993 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (IN MILLIONS EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> <C> <C> Sales and operating revenues........ $2,572 $2,555 $2,207 $2,386 $2,703 $2,605 $2,853 $2,653 Operating income.................... 120 57 68 30 (1) 72 105 107 (2) 104 Net income.......................... 58 25 33 1 (1) 44 50 61 (2) 67 (3) Earnings per share.................. .90 .41 .47 .01 .65 .81 .93 1.00 Common dividends per share.......... .25 .25 .25 .25 .25 .25 .25 .25 Market price per common share High.............................. 35 5/8 27 3/8 44 1/2 29 1/4 42 3/4 27 3/4 37 7/8 34 3/8 Low............................... 31 23 5/8 34 25 5/8 33 1/2 24 1/4 33 1/4 25 3/8 <FN> - ------------------------------ (1) A gain on the sale of TPT, an inland waterways barge operation, increased operating income by $15 million and net income by $9 million in the quarter ended March 31, 1993. (2) A net gain related to litigation matters increased operating income by $11 million and net income by $7 million in the quarter ended September 30, 1994. (3) A net gain for Ashland Coal resulting from a favorable adjustment to income tax expense due to tax law changes, partially offset by a charge to increase the valuation allowance for certain prepaid royalties, increased net income by $18 million in the quarter ended September 30, 1993. </TABLE> 40

STATEMENTS OF CONSOLIDATED INCOME ASHLAND OIL, INC. AND SUBSIDIARIES <TABLE> <CAPTION> YEARS ENDED SEPTEMBER 30 ------------------------------- 1994 1993 1992 --------- --------- --------- (IN MILLIONS EXCEPT PER SHARE DATA) <S> <C> <C> <C> REVENUES Sales and operating revenues (including excise taxes)............................ $ 10,334 $ 10,199 $ 10,211 Other............................................................................ 48 57 40 --------- --------- --------- 10,382 10,256 10,251 COSTS AND EXPENSES Cost of sales and operating expenses............................................. 7,742 7,951 8,210 Excise taxes on products and merchandise......................................... 877 645 659 Selling, general and administrative expenses..................................... 1,021 993 1,023 Depreciation, depletion and amortization......................................... 295 293 290 General corporate expenses....................................................... 80 77 132 --------- --------- --------- 10,015 9,959 10,314 --------- --------- --------- OPERATING INCOME (LOSS).......................................................... 367 297 (63) OTHER INCOME (EXPENSE) Interest expense (net of interest income) -- Notes A and F....................... (117) (123) (128) Equity income -- Note D.......................................................... 22 26 33 --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES AND THE CUMULATIVE EFFECT OF ACCOUNTING CHANGES......................................................................... 272 200 (158) Income taxes (credit) -- Note H.................................................. 75 58 (90) --------- --------- --------- INCOME (LOSS) BEFORE THE CUMULATIVE EFFECT OF ACCOUNTING CHANGES................. 197 142 (68) Cumulative effect of accounting changes -- Note A................................ -- -- (268) --------- --------- --------- NET INCOME (LOSS)................................................................ $ 197 $ 142 $ (336) --------- --------- --------- --------- --------- --------- EARNINGS (LOSS) PER SHARE -- Note A Primary Income (loss) before the cumulative effect of accounting changes............... $ 2.94 $ 2.26 $ (1.18) Cumulative effect of accounting changes........................................ -- -- (4.57) --------- --------- --------- Net income (loss)............................................................ $ 2.94 $ 2.26 $ (5.75) Assuming full dilution Income (loss) before the cumulative effect of accounting changes............... $ 2.79 $ 2.20 $ (1.18) Cumulative effect of accounting changes........................................ -- -- (4.57) --------- --------- --------- Net income (loss).............................................................. $ 2.79 $ 2.20 $ (5.75) AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING Primary.......................................................................... 61 59 58 Assuming full dilution........................................................... 72 66 58 </TABLE> See Notes to Consolidated Financial Statements. 41

CONSOLIDATED BALANCE SHEETS ASHLAND OIL, INC. AND SUBSIDIARIES ASSETS <TABLE> <CAPTION> SEPTEMBER 30 -------------------- 1994 1993 --------- --------- (IN MILLIONS) <S> <C> <C> CURRENT ASSETS Cash and cash equivalents -- Note A........................................................ $ 40 $ 41 Accounts receivable (less allowances for doubtful accounts of $23 million in 1994 and $20 million in 1993).......................................................................... 1,323 1,178 Construction completed and in progress -- at contract prices............................... 55 51 Inventories -- Note A...................................................................... 601 553 Deferred income taxes -- Note H............................................................ 71 78 Other current assets....................................................................... 81 72 --------- --------- 2,171 1,973 INVESTMENTS AND OTHER ASSETS Investments in and advances to unconsolidated affiliates -- Note D......................... 291 280 Investments of captive insurance companies -- Note A....................................... 181 185 Cost in excess of net assets of companies acquired (less accumulated amortization of $32 million in 1994 and $31 million in 1993).................................................. 80 65 Other noncurrent assets.................................................................... 276 279 --------- --------- 828 809 PROPERTY, PLANT AND EQUIPMENT Cost Petroleum................................................................................ 2,911 2,790 SuperAmerica............................................................................. 459 440 Valvoline................................................................................ 273 250 Chemical................................................................................. 633 573 Construction............................................................................. 528 582 Exploration (successful efforts method).................................................. 943 924 Corporate................................................................................ 151 146 --------- --------- 5,898 5,705 Accumulated depreciation, depletion and amortization....................................... (3,082) (2,935) --------- --------- 2,816 2,770 --------- --------- $ 5,815 $ 5,552 --------- --------- --------- --------- </TABLE> See Notes to Consolidated Financial Statements. 42

CONSOLIDATED BALANCE SHEETS ASHLAND OIL, INC. AND SUBSIDIARIES LIABILITIES AND STOCKHOLDERS' EQUITY <TABLE> <CAPTION> SEPTEMBER 30 -------------------- 1994 1993 --------- --------- (IN MILLIONS) <S> <C> <C> CURRENT LIABILITIES Debt due within one year Notes payable to banks................................................................... $ 57 $ 42 Commercial paper......................................................................... 15 35 Current portion of long-term debt........................................................ 61 82 Trade and other payables................................................................... 1,520 1,418 Income taxes............................................................................... 35 42 --------- --------- 1,688 1,619 NONCURRENT LIABILITIES Long-term debt (less current portion) -- Notes E and F..................................... 1,391 1,399 Accrued pension and other postretirement benefits -- Note K................................ 515 511 Reserves of captive insurance companies.................................................... 173 173 Deferred income taxes -- Note H............................................................ 30 44 Other long-term liabilities and deferred credits........................................... 423 351 Commitments and contingencies -- Notes F, G and L.......................................... --------- --------- 2,532 2,478 STOCKHOLDERS' EQUITY -- Notes E, I and J Preferred stock, no par value, 30 million shares authorized Convertible preferred stock, 6 million shares issued, $300 million liquidation value..... 293 293 Common stockholders' equity Common stock, par value $1.00 per share Authorized -- 150 million shares Issued -- 61 million shares in 1994 and 60 million shares in 1993...................... 61 60 Paid-in capital.......................................................................... 159 143 Retained earnings........................................................................ 1,126 1,008 Loan to leveraged employee stock ownership plan (LESOP).................................. (33) (33) Prepaid contribution to LESOP............................................................ -- (6) Other.................................................................................... (11) (10) --------- --------- Total common stockholders' equity.......................................................... 1,302 1,162 --------- --------- 1,595 1,455 --------- --------- $ 5,815 $ 5,552 --------- --------- --------- --------- </TABLE> See Notes to Consolidated Financial Statements. 43

STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS' EQUITY ASHLAND OIL, INC. AND SUBSIDIARIES <TABLE> <CAPTION> PREPAID COMMON PAID-IN RETAINED LOAN TO CONTRIBUTION STOCK CAPITAL EARNINGS LESOP TO LESOP OTHER TOTAL ------ ------- -------- ------- ------------ ------ ----- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> <C> BALANCE AT OCTOBER 1, 1991............................. $60 $130 $1,325 $(34) $(40) $ 3 $1,444 Net loss............................................... (336) (336) Dividends on common stock, $1.00 a share............... (58) (2) (60) Increase in equity due to Ashland Coal stock issuance.............................................. 14 14 Issued common stock under stock incentive plans........ 2 2 Allocation of LESOP shares to participants............. 18 18 Other changes.......................................... 4 4 ------ ------- -------- ------- --- ------ ----- BALANCE AT SEPTEMBER 30, 1992.......................... 60 146 931 (34) (24) 7 1,086 Net income............................................. 142 142 Dividends Preferred stock...................................... (6) (6) Common stock, $1.00 a share.......................... (59) (1) (60) Decrease in equity due to change in Ashland Coal capital structure..................................... (6) (6) Issued common stock under stock incentive plans........ 2 2 Allocation of LESOP shares to participants............. 19 19 Other changes.......................................... 1 1 (17) (15) ------ ------- -------- ------- --- ------ ----- BALANCE AT SEPTEMBER 30, 1993.......................... 60 143 1,008 (33) (6) (10) 1,162 Net income............................................. 197 197 Dividends Preferred stock...................................... (19) (19) Common stock, $1.00 a share.......................... (60) (60) Issued common stock under stock incentive plans........ 1 16 17 Allocation of LESOP shares to participants............. 6 6 Other changes.......................................... (1) (1) ------ ------- -------- ------- --- ------ ----- BALANCE AT SEPTEMBER 30, 1994.......................... $61 $159 $1,126 $(33) $ -- $ (11) $1,302 ------ ------- -------- ------- --- ------ ------ ------ ------- -------- ------- --- ------ ------ </TABLE> See Notes to Consolidated Financial Statements. 44

STATEMENTS OF CONSOLIDATED CASH FLOWS ASHLAND OIL, INC. AND SUBSIDIARIES <TABLE> <CAPTION> YEARS ENDED SEPTEMBER 30 ------------------------ 1994 1993 1992 ----- ----- ------ (IN MILLIONS) <S> <C> <C> <C> CASH FLOWS FROM OPERATIONS Income (loss) before the cumulative effect of accounting changes.................................... $ 197 $ 142 $ (68) Expense (income) not affecting cash Depreciation, depletion and amortization (1)...................................................... 308 305 302 Deferred income taxes............................................................................. 2 14 (147) Undistributed earnings of unconsolidated affiliates............................................... (14) (12) (22) Gain on sale of operations -- net of current income taxes......................................... (3) (12) -- Other noncash items............................................................................... 39 (3) 208(2) Change in operating assets and liabilities (3)...................................................... (75) (184) 125 ----- ----- ------ 454 250 398 CASH FLOWS FROM FINANCING Proceeds from issuance of long-term debt............................................................ 77 341 246 Proceeds from issuance of capital stock............................................................. 17 295 2 Repayment of long-term debt......................................................................... (109) (367) (124) Increase (decrease) in short-term debt.............................................................. (5) (159) 97 Dividends paid...................................................................................... (79) (66) (60) ----- ----- ------ (99) 44 161 CASH FLOWS FROM INVESTMENT Additions to property, plant and equipment.......................................................... (376) (432) (504) Purchase of operations -- net of cash acquired...................................................... (62) (2) (108) Proceeds from sale of operations.................................................................... 59 107 30 Disposals of property, plant and equipment.......................................................... 23 32 38 Investment purchases (4)............................................................................ (335) (451) (466) Investment sales and maturities (4)................................................................. 335 440 433 ----- ----- ------ (356) (306) (577) ----- ----- ------ DECREASE IN CASH AND CASH EQUIVALENTS............................................................... (1) (12) (18) Cash and cash equivalents -- beginning of year...................................................... 41 53 71 ----- ----- ------ CASH AND CASH EQUIVALENTS -- END OF YEAR............................................................ $ 40 $ 41 $ 53 ----- ----- ------ ----- ----- ------ DECREASE (INCREASE) IN OPERATING ASSETS (3) Accounts receivable................................................................................. $(153) $ 26 $ 39 Construction completed and in progress.............................................................. (3) (13) (3) Inventories......................................................................................... (45) 67 65 Deferred income taxes............................................................................... -- 15 (2) Other current assets................................................................................ (7) (8) 7 Investments and other assets........................................................................ 15 2 28 INCREASE (DECREASE) IN OPERATING LIABILITIES (3) Trade and other payables........................................................................... 95 (245) 30 Income taxes....................................................................................... (10) (20) (2) Noncurrent liabilities............................................................................. 33 (8) (37) ----- ----- ------ CHANGE IN OPERATING ASSETS AND LIABILITIES......................................................... $ (75) $(184) $ 125 ----- ----- ------ ----- ----- ------ <FN> - ------------------------------ (1) Includes amounts charged to general corporate expenses. (2) Includes noncash charges for unusual items totaling $208 million consisting of provisions for a voluntary enhanced retirement program ($31 million); various asset write-downs including properties held for sale and assets of discontinued operations ($64 million); future environmental cleanup costs ($41 million); reserves for future costs associated with certain custom boilers built by a former engineering subsidiary and other matters ($38 million); and the current year effect of the adoption of a new accounting standard for postretirement benefits ($34 million). (3) Excludes changes resulting from operations acquired or sold. (4) Represents primarily investment transactions of captive insurance companies. </TABLE> See Notes to Consolidated Financial Statements. 45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ASHLAND OIL, INC. AND SUBSIDIARIES NOTE A -- SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Ashland and its majority-owned subsidiaries. Investments in joint ventures and 20% to 50% owned affiliates are accounted for on the equity method. INVENTORIES <TABLE> <CAPTION> 1994 1993 --------- --------- (IN MILLIONS) <S> <C> <C> Crude oil................................................................... $ 243 $ 273 Petroleum products.......................................................... 286 258 Chemicals and other products................................................ 421 337 Materials and supplies...................................................... 46 45 Excess of replacement costs over LIFO carrying values....................... (395) (360) --------- --------- $ 601 $ 553 --------- --------- --------- --------- </TABLE> Crude oil, petroleum products and chemicals with a replacement cost of approximately $705 million at September 30, 1994, and $652 million at September 30, 1993, are valued using the last-in, first-out (LIFO) method. The remaining inventories are stated generally at the lower of cost (using the first-in, first-out (FIFO) or average cost method) or market. PROPERTY, PLANT AND EQUIPMENT The cost of plant and equipment (other than capitalized exploration and development costs) is depreciated by the straight-line method over the estimated useful lives of the assets. Oil and gas exploration and development costs are accounted for using the successful efforts method. Capitalized exploration and development costs are depleted by the units-of-production method over the estimated recoverable reserves. Estimated costs of major refinery turnarounds are accrued, while other maintenance and repair costs are expensed as incurred. Maintenance and repair expense amounted to $279 million in 1994, $248 million in 1993 and $246 million in 1992. ENVIRONMENTAL COSTS Accruals for environmental costs are recognized when it is probable that a liability has been incurred and the amount of that liability can be reasonably estimated. Such costs are charged to expense if they relate to the remediation of conditions caused by past operations or are not expected to mitigate or prevent contamination from future operations. Accruals are recorded at undiscounted amounts based on experience, assessments and current technology without regard to any third-party recoveries, and are regularly adjusted as environmental assessments and remediation efforts proceed. EARNINGS PER SHARE Primary earnings per share is based on net income less preferred dividends divided by the average number of common shares and equivalents outstanding during the respective years. Average common shares outstanding exclude average unallocated shares (423,000 shares in 1994, 973,000 shares in 1993 and 1,522,000 shares in 1992) related to the prepaid contribution to the leveraged employee stock ownership plan. Shares of common stock issuable under stock options are treated as common stock equivalents when dilutive. Earnings per share assuming full dilution begins with the primary earnings per share computation. Shares issuable upon conversion of the preferred stock and 6.75% subordinated debentures are added to average common shares and equivalents when dilutive. In such cases, net income is further adjusted by adding back preferred dividends and interest expense (net of tax) on these debentures. DERIVATIVE INSTRUMENTS Ashland uses commodity futures and option contracts to reduce its exposure to fluctuations in prices for crude oil, petroleum products and natural gas. Gains and losses on these contracts are deferred and accounted for as part of the transactions or activities being hedged. Ashland uses interest rate swap agreements to obtain greater access to the lower borrowing costs normally available on floating-rate debt, while minimizing refunding risk through the issuance of long-term, fixed-rate debt. Settlements under the swap agreements are recognized as adjustments of interest expense. 46

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ACCOUNTING CHANGES In 1992, Ashland adopted Financial Accounting Standards (FAS) Board Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and FAS 109, "Accounting for Income Taxes," both effective as of October 1, 1991. FAS 106 requires that the projected future cost of providing postretirement benefits such as health care and life insurance be recognized as an expense as employees render service instead of when benefits are paid. The adoption of FAS 106 resulted in a net charge to income of $279 million ($415 million before tax), or $4.76 per share, for the cumulative effect of the accounting change for prior periods. FAS 109 superseded FAS 96, which Ashland adopted effective October 1, 1987, and is less restrictive than FAS 96 in allowing recognition of deferred tax assets. However, FAS 109 also requires that such assets be reduced by a valuation allowance unless it is more likely than not that those benefits will be realized. Ashland's adoption of FAS 109 resulted in a net credit to income of $11 million, or $.19 per share, for the cumulative effect of the accounting change for prior periods. Effective September 30, 1994, Ashland adopted FAS 115, "Accounting for Certain Investments in Debt and Equity Securities." As a result, investments of captive insurance companies are now carried at quoted market prices plus accrued interest. Previously, such investments were carried at cost plus accrued interest. The adoption did not have a significant effect on Ashland's consolidated financial statements. OTHER Cash equivalents include highly liquid investments maturing within three months after purchase. Investments of captive insurance companies are primarily foreign corporate and government debt obligations. Income related to construction contracts is generally recognized by the units-of-production method, which is a variation of the percentage-of-completion method. Any anticipated losses on such contracts are charged against operations as soon as such losses are estimable. Costs in excess of net assets of companies acquired are amortized by the straight-line method over periods generally ranging from 10 to 40 years, with an average remaining life of 14 years. Research and development costs are expensed as incurred ($12 million in 1994, $14 million in 1993 and $14 million in 1992). Interest is capitalized on projects where construction of an asset takes considerable time and entails substantial expenditures. Capitalized interest amounted to $9 million in 1993 and was not significant in 1994 and 1992. The Financial Accounting Standards Board has issued a statement which Ashland has not yet adopted, regarding accounting for postemployment benefits. When adopted effective October 1, 1994, this statement will not have a significant effect on Ashland's consolidated financial statements. NOTE B -- ACQUISITIONS AND DIVESTITURES ACQUISITIONS In February 1992, Ashland completed the acquisition of Unocal's chemical distribution business for $84 million. The business involves the distribution of a wide range of chemicals, hydrocarbon solvents and specialty ingredients through a nationwide network of distribution centers. This acquisition and several smaller acquisitions completed in various segments during the last three years did not have a significant effect on Ashland's consolidated financial statements. All these acquisitions have been accounted for as purchases. DIVESTITURES In 1992, Ashland completed the sale of its Corpus Christi, Texas, marine terminal, pipelines and gathering systems. These assets were acquired in the 1991 acquisition of The Permian Corporation. In 1993, Ashland sold various operations, including its TPT inland waterways barge operation, the Thunderbird crude oil common carrier pipeline system in Montana and Wyoming, and 80 SuperAmerica stores in Florida and other non-strategic areas outside markets served by Ashland Petroleum's refineries. In addition, several other smaller operations engaged in petroleum, chemical and construction activities were sold. Proceeds from the sale of these operations totaled $107 million and, except for a pretax gain of $15 million on the sale of TPT, resulted in no significant gain or loss. In 1994, Ashland completed the sale of APAC's Arizona operations. Except as indicated, the divestitures discussed above and several smaller divestitures completed in various segments during the last three years did not have a significant effect on Ashland's consolidated financial statements. 47

NOTE C -- INFORMATION BY INDUSTRY SEGMENT Ashland's operations are conducted primarily in the United States and are managed along industry segments, which include Petroleum, SuperAmerica, Valvoline, Chemical, Construction and Exploration. In addition, Ashland is involved in the coal industry through equity interests in Arch Mineral Corporation and Ashland Coal, Inc. (see Note D). Information by industry segment is shown on pages 58 and 59. Petroleum operations are conducted by Ashland Petroleum, one of the nation's largest independent petroleum refiners. In addition to supplying petroleum products to SuperAmerica, Valvoline, Ashland Chemical and APAC, Ashland Petroleum is a leading supplier of petroleum products to the transportation and commercial fleet industries, other industrial customers and independent marketers (including dealers operating under the Ashland-R- brand name). Principal products include gasoline, distillates and kerosene, asphalt, jet and turbine fuel, lubricants, and heavy fuel oils. Ashland Petroleum also gathers and transports crude oil and petroleum products in connection with its refining and wholesale marketing operations and markets crude oil through Scurlock Permian. SuperAmerica includes Ashland's retail gasoline and merchandise marketing operations, including the SuperAmerica-R- chain of high-volume retail stores. Gasoline and merchandise are also sold from outlets operated by SuperAmerica under the Rich-R- brand name. Operations are conducted primarily in the Ohio Valley and Upper Midwest. Valvoline is a marketer of automotive and industrial oils, automotive chemicals, filters, rust preventives and coolants with sales in more than 140 countries. In addition, Valvoline is engaged in the "fast oil change" business through outlets operating under the Valvoline Instant Oil Change-R- and Valvoline Rapid Oil Change-R- names, and provides environmental services for the collection of used oil, antifreeze and filters. Chemical businesses are managed by Ashland Chemical, which distributes industrial chemicals, solvents, thermoplastics and resins, and fiberglass materials. Ashland Chemical also manufactures a wide variety of specialty chemicals and certain petrochemicals. Major specialty chemicals include foundry products, water treatment and marine service chemicals, specialty polymers and adhesives, unsaturated polyester resins, and high-purity electronic and laboratory chemicals. Principal petrochemicals include cumene, toluene, xylene, aromatic and aliphatic solvents, propylene, maleic anhydride and methanol. Construction operations are conducted by the APAC group of companies, which perform contract construction work including highway paving and repair, excavation and grading, and bridge and sewer construction. APAC also produces asphaltic and ready-mix concrete, crushed stone and other aggregate, concrete block and certain specialized construction materials in thirteen southern states. Exploration operations are conducted by Ashland Exploration, which is engaged in crude oil and natural gas production in the eastern and Gulf Coast areas of the United States and crude oil production in Nigeria. Arch Mineral produces metallurgical and steam coal from surface and deep mines in Illinois, Kentucky, West Virginia and Wyoming for sale to utility and steel companies. Ashland Coal produces low-sulfur bituminous coal in central Appalachia for sale to domestic and foreign electric utility and industrial markets. Both Arch Mineral and Ashland Coal market coal mined by independent producers. Certain information with respect to foreign operations follows. <TABLE> <CAPTION> TOTAL INCOME BEFORE ASSETS INCOME TAXES ---------- ------------------ 1994 1993 1994 1993 1992 ---- ---- ---- ---- ---- (IN MILLIONS) <S> <C> <C> <C> <C> <C> Foreign operations Petroleum................................................. $ -- $ -- $ 1 $ 2 $ 2 Valvoline................................................. 150 74 10 6 9 Chemical.................................................. 220 174 28 27 34 Exploration............................................... 46 45 22 14 28 ---- ---- ---- ---- ---- $416 $293 $61 $49 $73 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- </TABLE> 48

NOTE D -- UNCONSOLIDATED AFFILIATES Affiliated companies accounted for under the equity method include: Arch Mineral Corporation (a 50% owned coal company); Ashland Coal, Inc. (a 39% owned publicly traded coal company); LOOP INC. and LOCAP INC. (18.6% and 21.4% owned corporate joint ventures operating a deepwater offshore port and related pipeline facilities in the Gulf of Mexico); and various other companies. Summarized financial information reported by these affiliates and a summary of the amounts recorded in Ashland's consolidated financial statements follow. <TABLE> <CAPTION> ARCH MINERAL ASHLAND LOOP INC. AND CORPORATION COAL, INC. LOCAP INC. OTHER TOTAL ------------ ---------- ------------- ----- ----- (IN MILLIONS) <S> <C> <C> <C> <C> <C> SEPTEMBER 30, 1994 Financial position Current assets.................................. $ 173 $ 119 $ 36 $ 204 Current liabilities............................. (132) (110) (86) (123) ----- ----- ----- ----- Working capital................................. 41 9 (50) 81 Noncurrent assets............................... 797 721 638 203 Noncurrent liabilities.......................... (713) (373) (525) (96) ----- ----- ----- ----- Stockholders' equity............................ $ 125 $ 357 $ 63 $ 188 ----- ----- ----- ----- ----- ----- ----- ----- Results of operations Sales and operating revenues.................... $ 641 $ 561 $ 149 $ 701 Gross profit.................................... 60 71 54 172 Net income...................................... 14 17 15 14 Amounts recorded by Ashland Investments and advances........................ 70 138(1) 12 71 $ 291 Equity income................................... 7 6 3 6 22 Dividends received.............................. -- 3 -- 5 8 SEPTEMBER 30, 1993 Financial position Current assets.................................. $ 114 $ 133 $ 35 $ 195 Current liabilities............................. (104) (70) (79) (123) ----- ----- ----- ----- Working capital................................. 10 63 (44) 72 Noncurrent assets............................... 738 748 666 199 Noncurrent liabilities.......................... (637) (465) (571) (90) ----- ----- ----- ----- Stockholders' equity............................ $ 111 $ 346 $ 51 $ 181 ----- ----- ----- ----- ----- ----- ----- ----- Results of operations Sales and operating revenues.................... $ 485 $ 550 $ 143 $ 654 Gross profit (loss)............................. (13) 58 49 154 Net income (loss)............................... (20) 41(2) 9 17 Amounts recorded by Ashland Investments and advances........................ 63 132 10 75 $ 280 Equity income (loss)............................ (10) 27 2 7 26 Dividends received.............................. 4 3 1 6 14 SEPTEMBER 30, 1992 Results of operations Sales and operating revenues.................... $ 540 $ 528 $ 156 $ 599 Gross profit.................................... 31 86 58 148 Net income (loss)............................... (104)(3) 35 21 13 Amounts recorded by Ashland Equity income................................... 10 13 4 6 $ 33 Dividends received.............................. 4 3 -- 4 11 <FN> - ------------------------ (1) The market value of Ashland's investment is $214 million based on the market price of Ashland Coal's common stock. (2) Includes a net gain of $44 million resulting from a favorable adjustment to income tax expense due to tax law changes, partially offset by a charge to increase the valuation allowance for certain prepaid royalties. Also includes a net charge of $19 million for the cumulative effect of the adoption of FAS 106 and FAS 109, which was recorded by Ashland in 1992. (3) Includes a net after-tax charge of $123 million for the adoption of FAS 106 and FAS 109 along with an after-tax gain of $15 million from insurance proceeds resulting from a fire at an Illinois mine. </TABLE> Ashland's retained earnings include $159 million of undistributed earnings from unconsolidated affiliates accounted for under the equity method. 49

NOTE E -- LONG-TERM DEBT <TABLE> <CAPTION> 1994 1993 --------- --------- (IN MILLIONS) <S> <C> <C> Senior debt Medium-term notes, due 1995-2023, interest at an average rate of 8.8% at September 30, 1994 (5.8% to 10.4%).......................................................... $ 661 $ 668 8.80% debentures, due 2012......................................................... 250 250 11.125% sinking fund debentures, due 2017.......................................... 200 200 Pollution control and industrial revenue bonds, due 1996 to 2020, interest at an average rate of 6.3% at September 30, 1994 (3.4% to 8.1%)......................... 162 162 Note payable to bank for financing of leveraged employee stock ownership plan, due 1995-1996, interest at a combination of an adjusted certificate of deposit rate and 76% of the prime rate (5.2% at September 30, 1994)............................ 33 33 Other.............................................................................. 21 19 --------- --------- 1,327 1,332 Other 6.75% convertible subordinated debentures, due 2014, convertible into common stock at $51.34 per share............................................................... 124 142 Subsidiary debt not guaranteed by Ashland and other................................ 1 7 --------- --------- 125 149 --------- --------- 1,452 1,481 Current portion of long-term debt.................................................... (61) (82) --------- --------- $ 1,391 $ 1,399 --------- --------- --------- --------- </TABLE> Aggregate maturities of long-term debt are $61 million in 1995, $65 million in 1996, $60 million in 1997, $49 million in 1998 and $49 million in 1999. Excluded from such maturities are $38 million of floating rate pollution control and industrial revenue bonds, due between 2003 and 2009. These bonds are subject to early redemptions at the bondholders' option, but generally not before 1996. Ashland has various revolving credit agreements totaling $350 million under which no borrowings were outstanding at September 30, 1994. The agreement providing for $300 million in borrowings expires on March 9, 1998, while the agreements providing for $50 million in borrowings expire on February 24, 1995. Certain debt agreements contain covenants restricting dividends, share repurchases and other distributions with respect to Ashland's capital stock, as well as covenants limiting new borrowings. At September 30, 1994, distributions with respect to Ashland's capital stock were restricted to $873 million. Interest payments on all indebtedness amounted to $119 million in 1994, $131 million in 1993 and $130 million in 1992. NOTE F -- FINANCIAL INSTRUMENTS Ashland uses interest rate swap agreements to obtain greater access to the lower borrowing costs normally available on floating-rate debt, while minimizing refunding risk through the issuance of long-term, fixed-rate debt. At September 30, 1994, Ashland had unleveraged agreements with a notional principal amount of $430 million which were used to convert fixed rates on its 8.80% debentures and certain medium-term notes to variable rates based on three-month or six-month London Interbank Offered Rates (LIBOR). At that date, Ashland was receiving a weighted-average fixed interest rate of 5.8% and paying a weighted-average variable interest rate of 5%, calculated on the notional amount. Notional amounts do not quantify risk or represent assets or liabilities of Ashland, but are used in the determination of cash settlements under the agreements. The terms remaining on Ashland's swaps range from 14 to 52 months, with a weighted-average remaining life of 38 months. Interest expense was reduced by $9 million in 1994, $8 million in 1993 and $2 million in 1992 resulting from settlements under these agreements. Ashland is exposed to credit losses from counterparty nonperformance, but does not anticipate any losses from its agreements, all of which are with major financial institutions. Due to increasing interest rates, the estimated fair value of Ashland's swaps amounted to a net liability of $15 million at September 30, 1994, compared to a net asset of $22 million at September 30, 1993. This decline in value was more than offset by the decline in the fair value of the related fixed-rate indebtedness. Under its current swap agreements, Ashland's annual interest expense in 1995 will change by about $4 million for each 1% change in LIBOR. 50

NOTE F -- FINANCIAL INSTRUMENTS (CONTINUED) The carrying amounts and fair values of Ashland's significant financial instruments at September 30, 1994 and 1993 are shown below. The fair values of cash and cash equivalents, notes payable to banks and commercial paper approximate their carrying amounts. The fair values of investments of captive insurance companies are based on quoted market prices plus accrued interest. The fair values of long-term debt are based on quoted market prices or, if market prices are not available, the present values of the underlying cash flows discounted at Ashland's incremental borrowing rates. The fair values of interest rate swaps are based on quoted market prices, which reflect the present values of the difference between estimated future variable-rate payments and future fixed-rate receipts. <TABLE> <CAPTION> 1994 1993 ---------------------- ---------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ----------- --------- ----------- --------- (IN MILLIONS) <S> <C> <C> <C> <C> Assets Cash and cash equivalents.................................... $ 40 $ 40 $ 41 $ 41 Investments of captive insurance companies................... 181 181 185 198 Liabilities Notes payable to banks and commercial paper.................. 72 72 77 77 Long-term debt (including current portion)................... 1,452 1,517 1,481 1,713 Interest rate swaps.......................................... -- 15 -- (22) </TABLE> NOTE G -- LEASES AND OTHER COMMITMENTS LEASES Ashland and its subsidiaries are lessees in noncancelable leasing agreements for office buildings, warehouses, pipelines, transportation and marine equipment, storage facilities, retail outlets, manufacturing facilities and other equipment and properties which expire at various dates. Capitalized lease obligations are not significant and are included in long-term debt. Future minimum rental payments at September 30, 1994, and rental expense under operating leases follow. <TABLE> <CAPTION> FUTURE MINIMUM RENTAL PAYMENTS RENTAL EXPENSE 1994 1993 1992 - ---------------------------------- ---------------------------------- --------- --------- --------- (IN MILLIONS) (IN MILLIONS) <S> <C> <C> <C> <C> <C> 1995.............................. $ 63 1996.............................. 50 Minimum rentals 1997.............................. 41 (including rentals under 1998.............................. 40 short-term leases)................ $ 113 $ 111 $ 104 1999.............................. 35 Contingent rentals................ 12 11 12 Later years....................... 222 Sublease rental income............ (12) (17) (13) --------- --------- --------- --------- $ 451 $ 113 $ 105 $ 103 --------- --------- --------- --------- --------- --------- --------- --------- </TABLE> OTHER COMMITMENTS Under agreements with LOOP and LOCAP (see Note D), Ashland is committed to advance funds against future transportation charges if these corporate joint ventures are unable to meet their cash requirements. Such advances are limited to Ashland's share, based on its equity interests, of the total debt service and defined operating and administrative costs of these companies. Such advances, however, are reduced by (1) transportation charges Ashland paid, (2) a pro rata portion of transportation charges paid by other equity participants in excess of their required amounts, and (3) a pro rata portion of transportation charges paid by third parties who are not equity participants. At September 30, 1994, all advances made to LOOP and LOCAP by Ashland had been applied against transportation charges. Transportation charges incurred amounted to $24 million in 1994, $22 million in 1993 and $25 million in 1992. At September 30, 1994, Ashland's contingent liability for its share of the indebtedness of LOOP and LOCAP secured by throughput and deficiency agreements amounted to approximately $100 million. Ashland is contingently liable under guarantees of certain debt and lease obligations of Ashland Coal, Inc., an unconsolidated affiliate. At September 30, 1994, such obligations have a present value of approximately $16 million. Ashland is also contingently liable for up to $16 million of borrowings under a revolving credit agreement of AECOM Technology Corporation, an unconsolidated affiliate. Ashland's guaranteed portion of outstanding borrowings under this agreement amounted to $9 million at September 30, 1994. 51

NOTE H -- INCOME TAXES A summary of the provision for income taxes follows. The 1993 provision was not significantly affected by tax legislation that, among other things, increased the federal income tax rate 1%, effective January 1, 1993. <TABLE> <CAPTION> 1994 1993 1992 ---- ---- ----- (IN MILLIONS) <S> <C> <C> <C> Current (1) Federal................................................... $56 $24 $ 41 State..................................................... 8 13 8 Foreign................................................... 9 7 8 ---- ---- ----- 73 44 57 ---- ---- ----- Deferred Federal and state......................................... 2 14 (145) Foreign................................................... -- -- (2) ---- ---- ----- 2 14 (147) ---- ---- ----- $75 $58 $ (90) ---- ---- ----- ---- ---- ----- <FN> - ------------------------ (1) Income tax payments amounted to $70 million in 1994, $41 million in 1993 and $40 million in 1992. </TABLE> Deferred income taxes are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences which give rise to significant deferred tax assets (liabilities) follow. <TABLE> <CAPTION> 1994 1993 --------- --------- (IN MILLIONS) <S> <C> <C> Accrued pension and other postretirement benefits...................................... $ 205 $ 202 Environmental, insurance and litigation reserves....................................... 116 103 Alternative minimum tax credit carryforwards........................................... 23 19 Property related items other than depreciation......................................... 23 25 Uncollectible accounts receivable...................................................... 17 18 Other items............................................................................ 75 79 --------- --------- Total deferred tax assets.............................................................. 459 446 --------- --------- Accelerated depreciation............................................................... (357) (351) Intangible drilling costs.............................................................. (38) (33) Undistributed equity income............................................................ (16) (17) Other items............................................................................ (7) (11) --------- --------- Total deferred tax liabilities......................................................... (418) (412) --------- --------- Net deferred tax asset................................................................. $ 41 $ 34 --------- --------- --------- --------- </TABLE> The U.S. and foreign components of income before income taxes and a reconciliation of the normal statutory federal income tax with the provision for income taxes follow. <TABLE> <CAPTION> 1994 1993 1992 --------- --------- --------- (IN MILLIONS) <S> <C> <C> <C> Income (loss) before income taxes United States................................................................. $ 211 $ 151 $ (231) Foreign....................................................................... 61 49 73 --------- --------- --------- $ 272 $ 200 $ (158) --------- --------- --------- --------- --------- --------- Income taxes computed at U.S. statutory rates................................... $ 95 $ 70 $ (54) Increase (decrease) in amount computed resulting from Equity income................................................................. (7) (6) (9) State income taxes............................................................ 6 9 (10) Net impact of foreign results................................................. (7) (7) (7) Non-conventional fuel credit.................................................. (10) (9) (9) Other items................................................................... (2) 1 (1) --------- --------- --------- $ 75 $ 58 $ (90) --------- --------- --------- --------- --------- --------- </TABLE> The Internal Revenue Service (IRS) has examined Ashland's consolidated U.S. income tax returns through 1989. As a result of its examinations, the IRS has proposed adjustments, certain of which are being contested by Ashland. Ashland believes it has adequately provided for any income taxes and related interest which may ultimately be paid on contested issues. 52

NOTE I -- CAPITAL STOCK In May 1993, Ashland completed the sale of six million shares of cumulative convertible preferred stock priced at $50 per share. Net proceeds, after fees and expenses, totaled $293 million and were used to reduce debt. The shares have no voting rights and are entitled to cumulative annual dividends of $3.125 per share. They have liquidation preferences equal to $50 per share plus accrued and unpaid dividends, and are convertible at any time at the option of the holders into 1.546 shares of Ashland common stock. The preferred shares are redeemable at the option of Ashland at $51.88 per share beginning March 25, 1997, and declining gradually to $50 per share by March 15, 2003, plus accrued and unpaid dividends to the redemption date. Under Ashland's Shareholder Rights Plan, each common share is accompanied by one-half of a Right to purchase one-tenth share of preferred stock for $120 (the "Exercise Price"). Each one-tenth share of preferred stock will be entitled to dividends and to vote on an equivalent basis with two common shares. The Rights are not exercisable or detachable from the common shares until 10 days after any party acquires 15% or more (or announces a tender offer for 20% or more) of Ashland's common stock. If any party acquires 20% or more of Ashland's common stock or acquires Ashland in a business combination, each Right (other than those held by the acquiring party) will entitle the holder to purchase stock of Ashland or the acquiring company having a market value of two times the Exercise Price. The Rights expire on May 15, 1996, and can be redeemed at any time prior to becoming exercisable. At September 30, 1994, 10 million shares of cumulative preferred stock are reserved for potential issuance under the Shareholder Rights Plan. At September 30, 1994, 16 million common shares are reserved for conversion of debentures and preferred stock and for issuance under outstanding stock options. NOTE J -- STOCK OWNERSHIP PLANS LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN During 1986, Ashland established a leveraged employee stock ownership plan (LESOP) to cover the majority of its salaried employees. LESOP purchases of Ashland common stock that year were generally funded through a loan from Ashland, of which the remaining principal at September 30, 1986, amounted to $246 million. In 1987, Ashland contributed excess assets recovered from certain company pension plans to the LESOP and prepaid $212 million of the remaining principal. Because one-half of employees' LESOP accounts serve to fund future benefits paid by certain pension plans, one-half of the funds used to prepay debt was accounted for by Ashland as a prepaid LESOP contribution. Ashland common shares held by the LESOP related to the contribution of excess pension assets were allocated to employees' accounts over an eight-year period ending September 30, 1994. The remaining shares are allocated as the loan to the LESOP is repaid. The projected costs of the LESOP (including the prepaid contribution, projected dividends on the related unallocated shares and projected future contributions) are being expensed on a pro rata basis as the original shares are allocated to employees. This expense totaled $18 million annually in 1994, 1993 and 1992. Additional contributions from Ashland were not required through September 30, 1994, since dividends on unallocated shares exceeded interest and administrative costs, with the excess used to prepay portions of the remaining principal on the loan. Contributions from Ashland will resume in fiscal 1995 as principal payments on the loan become due. STOCK INCENTIVE PLANS Ashland has stock incentive plans under which key employees or directors can purchase shares of common stock under stock options or restricted stock awards. Stock options are granted to employees at a price equal to the fair market value of the stock on the date of grant and become exercisable over periods of one to three years. Unexercised options lapse 10 years after the date of grant. Restricted stock awards entitle employees or directors to purchase shares at a nominal cost, to vote such shares and to receive any dividends thereon. However, such shares are subject to forfeiture upon termination of service before the restriction period ends. <TABLE> <CAPTION> 1994 1993 1992 ------------------------- ------------------------- ------------------------- COMMON PRICE RANGE PER COMMON PRICE RANGE PER COMMON PRICE RANGE PER SHARES SHARE SHARES SHARE SHARES SHARE ------- ---------------- ------- ---------------- ------- ---------------- (IN THOUSANDS EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> Options outstanding -- beginning of year (1)......................................... 4,504 $13 3/8 - 41 3,918 $13 3/8 - 41 3,349 $13 3/8 - 41 Options granted.............................. 860 35 7/8 - 37 1/2 934 24 5/8 - 33 1/8 753 23 7/8 - 30 3/4 Options exercised............................ (639) 13 3/8 - 41 (81) 13 3/8 - 33 3/8 (71) 13 3/8 - 30 3/4 Options canceled............................. (28) 23 7/8 - 41 (267) 23 7/8 - 41 (113) 30 - 41 ------- ---------------- ------- ---------------- ------- ---------------- Options outstanding -- end of year (1)....... 4,697 $14 1/4 - 41 4,504 $13 3/8 - 41 3,918 $13 3/8 - 41 ------- ---------------- ------- ---------------- ------- ---------------- ------- ---------------- ------- ---------------- ------- ---------------- Options exercisable -- end of year........... 3,242 $14 1/4 - 41 3,080 $13 3/8 - 41 2,597 $13 3/8 - 41 ------- ---------------- ------- ---------------- ------- ---------------- ------- ---------------- ------- ---------------- ------- ---------------- <FN> - ------------------------------ (1) Shares of common stock available for issuance under options or awards amounted to 2,295,000 at September 30, 1994, and 2,660,000 at October 1, 1993. </TABLE> 53

NOTE K -- EMPLOYEE BENEFIT PLANS PENSION PLANS Ashland sponsors pension plans which cover substantially all employees, other than union employees covered by multiemployer pension plans under collective bargaining agreements. Benefits under Ashland's plans generally are based on the employee's years of service and compensation during the years immediately preceding retirement. For certain plans, such benefits are expected to come in part from one-half of employees' leveraged employee stock ownership plan (LESOP) accounts. Ashland determines the level of contributions to its pension plans annually and contributes amounts within allowable limitations imposed by Internal Revenue Service regulations. Ashland contributed the maximum tax-deductible contributions to its pension plans in 1994 and 1993, while full funding limitations prohibited Ashland from making significant contributions in 1992. The following tables detail the funded status of the plans and the components of pension expense. A discount rate of 8% and an assumed rate of salary increases of 5% were used in determining the actuarial present value of projected benefit obligations at September 30, 1994 (7% and 5% at September 30, 1993). <TABLE> <CAPTION> 1994 1993 -------------------------------- -------------------------------- PLANS WITH PLANS WITH PLANS WITH PLANS WITH ASSETS IN EXCESS ABO IN EXCESS ASSETS IN EXCESS ABO IN EXCESS OF ABO OF ASSETS OF ABO OF ASSETS ---------------- ------------- ---------------- ------------- (IN MILLIONS) <S> <C> <C> <C> <C> Plan assets at fair value (primarily listed stocks and bonds)........................... $ 36 $185 $ 36 $177 --- ----- --- ----- Accumulated benefit obligations (ABO) Vested..................................... 30 188 31 190 Nonvested.................................. 5 44 5 34 --- ----- --- ----- 35 232 36 224 --- ----- --- ----- Plan assets less than (in excess of) ABO..... (1) 47(1) -- 47 Provision for future salary increases........ 12 131 12 146 Deferred pension costs....................... (8) (40) (12) (67) --- ----- --- ----- Net accrued pension costs (2)................ $ 3 $138 $ -- $126 --- ----- --- ----- --- ----- --- ----- Components of deferred pension costs Unrecognized transition gain............... $ 3 $ 10 $ 3 $ 15 Unrecognized net loss...................... (10) (63) (14) (88) Unrecognized prior service costs........... (1) (9) (1) (10) Recognition of minimum liability........... -- 22 -- 16 --- ----- --- ----- $ (8) $(40) $(12) $(67) --- ----- --- ----- --- ----- --- ----- </TABLE> <TABLE> <CAPTION> 1994 1993 1992 --------- --------- --------- (IN MILLIONS) <S> <C> <C> <C> Components of pension expense Service cost....................................................................... $ 24 $ 26 $ 20 Interest cost...................................................................... 29 28 24 Actual investment loss (gain) on plan assets....................................... 7 (24) (15) Deferred investment (loss) gain (3)................................................ (27) 10 1 Other amortization and deferral.................................................... 4 5 -- Voluntary enhanced retirement program pension cost................................. -- -- 9 --- --- --- $ 37 $ 45 $ 39 --- --- --- --- --- --- <FN> - ------------------------ (1) Includes unfunded ABO of $44 million for non-qualified supplemental pension plans. (2) Amounts are recorded in various asset and liability accounts on Ashland's consolidated balance sheets. (3) The expected long-term rate of return on plan assets was 9% for 1994 and 1993, and 10% for 1992. </TABLE> OTHER POSTRETIREMENT BENEFIT PLANS Ashland sponsors several unfunded benefit plans which provide health care and life insurance benefits for eligible employees who retire from active service. The health care plans are contributory, with retiree contributions adjusted periodically, and contain other cost-sharing features such as deductibles and coinsurance. The life insurance plans are generally noncontributory. Ashland's policy is to fund the costs of postretirement plans on a pay-as-you-go basis. During 1992, Ashland adopted Financial Accounting Standards Board Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (see Note A). During 1993, Ashland amended nearly all of its retiree health care plans to place a cap on the company's contributions and to adopt a cost-sharing method based upon a retiree's years of service. The cap limits the company's contribution to average retiree per capita health care costs for 1992 (net of direct retiree contributions), increasing thereafter by up to 4.5% per year. If per capita health care costs increase by more than 4.5% per year, the additional costs will be paid by retirees through higher contributions. As a result, the accumulated postretirement benefit obligation (APBO) for retiree health care plans was reduced by $197 million and postretirement health care expense decreased after 1992 to amounts more closely approximating pre-1992 pay-as-you-go levels. 54

NOTE K -- EMPLOYEE BENEFIT PLANS (CONTINUED) The following tables detail the status of the plans and the components of postretirement benefit expense. The APBO was determined using a discount rate of 8% at September 30, 1994, and 7% at September 30, 1993. Under the amended plan, the assumed annual rate of increase in the per capita cost was 4.5% beginning in 1993. <TABLE> <CAPTION> 1994 1993 1992 -------------------------- -------------------------- -------------------------- LIFE LIFE LIFE HEALTH CARE INSURANCE HEALTH CARE INSURANCE HEALTH CARE INSURANCE ------ ----------- ------ ----------- ------ ----------- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> Accumulated postretirement benefit obligations (APBO) Retirees.............................. $ 93 $ 19 $ 102 $ 20 Fully eligible active plan participants......................... 38 5 41 5 Other active plan participants........ 86 5 95 5 ----- --- ----- --- 217 29 238 30 Unrecognized net loss................... (17) -- (51) (2) Unrecognized plan amendment credit...... 158 8 180 8 ----- --- ----- --- Accrued other postretirement benefit costs.................................. $ 358 $ 37 $ 367 $ 36 ----- --- ----- --- ----- --- ----- --- Components of other postretirement benefit expense Service cost.......................... $ 7 $ 1 $ 6 $ 1 $ 15 $ 1 Interest cost......................... 16 2 16 2 28 3 Amortization and deferral (principally plan amendment credit)............... (15) (1) (17) (1) -- -- ----- --- ----- --- --- --- $ 8 $ 2 $ 5 $ 2 $ 43 $ 4 ----- --- ----- --- --- -- ----- --- ----- --- --- -- </TABLE> OTHER PLANS Certain union employees are covered under multiemployer defined benefit pension plans administered by unions. Amounts charged to pension expense and contributed to the plans were $1 million annually in 1994, 1993 and 1992. Ashland sponsors a Thrift Plan to assist eligible employees in providing for retirement or other future financial needs. Ashland matches employee contributions up to 6% of their qualified earnings at a rate of 70% (20% for LESOP participants). Ashland's contributions to the Plan amounted to $7 million annually in 1994, 1993 and 1992. NOTE L -- LITIGATION, CLAIMS AND CONTINGENCIES Ashland is subject to various federal, state and local environmental laws and regulations which require remediation efforts at multiple locations, including operating facilities, previously owned or operated facilities, and Superfund or other waste sites. Consistent with its accounting policy for environmental costs, Ashland's reserves for environmental assessments and remediation efforts amounted to $167 million at September 30, 1994, and $139 million at September 30, 1993. Such amounts reflect Ashland's most likely estimates of the costs which will be incurred over an extended period to remediate identified environmental conditions for which costs are reasonably estimable. Environmental reserves are subject to considerable uncertainties which affect Ashland's ability to estimate its share of the ultimate costs of required remediation efforts. Such uncertainties involve the nature and extent of contamination at each site, the extent of required cleanup efforts under existing environmental regulations, widely varying costs of alternate cleanup methods, changes in environmental regulations, the potential effect of continuing improvements in remediation technology, and the number and financial strength of other potentially responsible parties at multiparty sites. As a result, charges to income for environmental liabilities could have a material effect on results of operations in a particular quarter or fiscal year as assessments and remediation efforts proceed or as new remediation sites are identified. However, such charges are not expected to have a material adverse effect on Ashland's consolidated financial position. Ashland has numerous insurance policies that provide coverage at various levels for environmental costs. Ashland is currently involved in negotiations concerning the amount of insurance coverage for environmental costs under some of these policies. In addition, various costs of remediation efforts related to underground storage tanks are eligible for reimbursement from state administered funds. Probable recoveries related to certain costs incurred or expected to be incurred in future years are included in other noncurrent assets. In addition, Ashland and its subsidiaries are parties to numerous claims and lawsuits (some of which are for substantial amounts) with respect to product liability and commercial and other matters. While these claims and actions are being contested, the outcome of individual matters is not predictable with assurance. Although any actual liability is not determinable as of September 30, 1994, Ashland believes that any liability resulting from these matters involving Ashland and its subsidiaries, after taking into consideration Ashland's insurance coverages and amounts provided for, should not have a material adverse effect on Ashland's consolidated financial position. 55

FIVE YEAR SELECTED FINANCIAL INFORMATION ASHLAND OIL, INC. AND SUBSIDIARIES YEARS ENDED SEPTEMBER 30 <TABLE> <CAPTION> 1994 1993 1992 1991 1990 ------- ------- ---------- ------- ------- (IN MILLIONS EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> SUMMARY OF OPERATIONS Revenues Sales and operating revenues (including excise taxes)............... $10,334 $10,199 $10,211 $ 9,867 $ 9,473 Other............................................................... 48 57 40 56 54 Costs and expenses Cost of sales and operating expenses................................ (7,742) (7,951) (8,210) (7,725) (7,401) Excise taxes on products and merchandise............................ (877) (645) (659) (620) (497) Selling, general and administrative expenses........................ (1,021) (993) (1,023) (926) (949) Depreciation, depletion and amortization............................ (295) (293) (290) (265) (256) General corporate expenses.......................................... (80) (77) (132) (93) (93) ------- ------- ---------- ------- ------- Operating income (loss)............................................... 367 297 (63) 294 331 Other income (expense) Interest expense (net of interest income)........................... (117) (123) (128) (115) (118) Equity income....................................................... 22 26 33 14 50 ------- ------- ---------- ------- ------- Income (loss) before income taxes and the cumulative effect of accounting changes................................................... 272 200 (158) 193 263 Income taxes (credit)................................................. 75 58 (90) 48 81 ------- ------- ---------- ------- ------- Income (loss) before the cumulative effect of accounting changes...... 197 142 (68) 145 182 Cumulative effect of accounting changes............................... -- -- (268) -- -- ------- ------- ---------- ------- ------- Net income (loss)..................................................... $ 197 $ 142 $ (336) $ 145 $ 182 ------- ------- ---------- ------- ------- ------- ------- ---------- ------- ------- BALANCE SHEET INFORMATION Working capital Current assets...................................................... $ 2,171 $ 1,973 $ 2,110 $ 2,119 $ 2,143 Current liabilities................................................. 1,688 1,619 2,046 1,823 1,805 ------- ------- ---------- ------- ------- $ 483 $ 354 $ 64 $ 296 $ 338 ------- ------- ---------- ------- ------- Total assets.......................................................... $ 5,815 $ 5,552 $ 5,668 $ 5,449 $ 5,118 ------- ------- ---------- ------- ------- Capitalization Debt due within one year............................................ $ 133 $ 159 $ 306 $ 195 $ 170 Long-term debt (less current portion)............................... 1,391 1,399 1,444 1,337 1,235 Deferred income taxes............................................... 30 44 59 312 324 Convertible preferred stock......................................... 293 293 -- -- -- Common stockholders' equity......................................... 1,302 1,162 1,086 1,444 1,280 ------- ------- ---------- ------- ------- $ 3,149 $ 3,057 $ 2,895 $ 3,288 $ 3,009 ------- ------- ---------- ------- ------- ------- ------- ---------- ------- ------- CASH FLOW INFORMATION Cash flows from operations............................................ $ 454 $ 250 $ 398 $ 473 $ 371 Additions to property, plant and equipment............................ 376 432 504 445 446 Dividends............................................................. 79 66 60 58 58 COMMON STOCK INFORMATION Primary earnings (loss) per share..................................... $ 2.94 $ 2.26 $ (1.18)(1) $ 2.56 $ 3.27 Dividends per share................................................... 1.00 1.00 1.00 1.00 1.00 <FN> - ------------------------ (1) Excludes the cumulative effect of accounting changes of $(4.57) per share. </TABLE> 57

FIVE YEAR INFORMATION BY INDUSTRY SEGMENT ASHLAND OIL, INC. AND SUBSIDIARIES YEARS ENDED SEPTEMBER 30 <TABLE> <CAPTION> 1994 1993 1992 1991 1990 ----------- ----------- ----------- ------- -------- (IN MILLIONS) <S> <C> <C> <C> <C> <C> SALES AND OPERATING REVENUES Petroleum........................................................ $ 4,666 $ 4,752 $ 4,848 $ 4,877 $ 4,169 SuperAmerica..................................................... 1,706 1,785 1,888 1,948 1,747 Valvoline........................................................ 1,000 938 900 793 701 Chemical......................................................... 2,885 2,586 2,488 2,285 2,245 Construction..................................................... 1,101 1,116 1,043 1,019 1,083 Engineering...................................................... -- -- -- -- 348 Exploration...................................................... 199 247 262 323 399 Intersegment sales (1) Petroleum...................................................... (1,193) (1,195) (1,182) (1,335) (1,177) Other.......................................................... (30) (30) (36) (43) (42) ----------- ----------- ----------- ------- -------- $10,334 $10,199 $10,211 $ 9,867 $ 9,473 ----------- ----------- ----------- ------- -------- ----------- ----------- ----------- ------- -------- OPERATING INCOME (LOSS) Petroleum........................................................ $ 113 $ 56(2) $ (125) $ 138 $ 211 SuperAmerica..................................................... 59 65 1 30 41 Valvoline........................................................ 52 56 50 39 37 ----------- ----------- ----------- ------- -------- Total Refining and Marketing Group............................. 224 177 (74) 207 289 Chemical......................................................... 125 108 81 98 70 Construction..................................................... 70 53 45 41 53 Engineering...................................................... -- -- -- -- (28)(3) Exploration...................................................... 28 36 17 41 40 General corporate expenses....................................... (80)(4) (77) (132) (93) (93) ----------- ----------- ----------- ------- -------- $ 367 $ 297 $ (63)(5) $ 294 $ 331 ----------- ----------- ----------- ------- -------- ----------- ----------- ----------- ------- -------- IDENTIFIABLE ASSETS Petroleum........................................................ $ 2,259 $ 2,240 $ 2,296 $ 2,274 $ 1,862 SuperAmerica..................................................... 398 364 446 437 443 Valvoline........................................................ 532 430 402 377 375 Chemical......................................................... 1,122 958 999 834 856 Construction..................................................... 404 440 437 434 514 Exploration...................................................... 374 375 361 337 324 Coal investments................................................. 208 196 190 231 274 Corporate (6).................................................... 518 549 537 525 470 ----------- ----------- ----------- ------- -------- $ 5,815 $ 5,552 $ 5,668 $ 5,449 $ 5,118 ----------- ----------- ----------- ------- -------- ----------- ----------- ----------- ------- -------- </TABLE> 58

<TABLE> <CAPTION> 1994 1993 1992 1991 1990 ----------- ----------- ----------- ------- -------- (IN MILLIONS) ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT <S> <C> <C> <C> <C> <C> Petroleum........................................................ $ 155 $ 230 $ 273 $ 249 $ 191 SuperAmerica..................................................... 39 25 37 37 67 Valvoline........................................................ 25 21 19 14 27 Chemical......................................................... 61 51 47 41 48 Construction..................................................... 45 43 42 36 46 Engineering...................................................... -- -- -- -- 3 Exploration...................................................... 41 42 67 60 39 Corporate........................................................ 10 20 19 8 25 ----------- ----------- ----------- ------- -------- $ 376 $ 432 $ 504 $ 445 $ 446 ----------- ----------- ----------- ------- -------- ----------- ----------- ----------- ------- -------- DEPRECIATION, DEPLETION AND AMORTIZATION Petroleum........................................................ $ 134 $ 127 $ 125 $ 103 $ 93 SuperAmerica..................................................... 27 28 31 31 30 Valvoline........................................................ 19 18 17 16 17 Chemical......................................................... 43 42 43 41 39 Construction..................................................... 40 44 45 48 47 Engineering...................................................... -- -- -- -- 5 Exploration...................................................... 33 34 28 26 25 Corporate........................................................ 12 12 13 14 13 ----------- ----------- ----------- ------- -------- $ 308 $ 305 $ 302 $ 279 $ 269 ----------- ----------- ----------- ------- -------- ----------- ----------- ----------- ------- -------- <FN> - ------------------------ (1) Intersegment sales are accounted for at prices which approximate market value. (2) Includes a gain of $15 million on the sale of TPT, an inland waterways barge operation. (3) Includes a provision of $15 million for estimated expenditures to correct problems with certain boiler contracts. (4) Includes a net gain of $11 million related to litigation matters. (5) Operating income for 1992 includes charges for unusual items totaling $208 million consisting of provisions for a voluntary enhanced retirement program ($31 million); various asset write-downs including properties held for sale and assets of discontinued operations ($64 million); future environmental cleanup costs ($41 million); reserves for future costs associated with certain custom boilers built by a former engineering subsidiary and other matters ($38 million); and the current year effect of the adoption of a new accounting standard for postretirement benefits ($34 million). The combined effect of all of these items reduced operating income for each of the segments as follows: Petroleum ($89 million), SuperAmerica ($28 million), Valvoline ($2 million), Chemical ($15 million), Construction ($9 million), Exploration ($16 million) and general corporate expenses ($49 million). (6) Includes principally cash, cash equivalents, investments in and advances to unconsolidated affiliates (other than Arch Mineral Corporation and Ashland Coal, Inc.) and investments of captive insurance companies. </TABLE> 59

SUPPLEMENTAL OIL AND GAS INFORMATION ASHLAND OIL, INC. AND SUBSIDIARIES YEARS ENDED SEPTEMBER 30 OIL AND GAS RESERVES, REVENUES AND COSTS The following tables summarize Ashland's (1) crude oil and natural gas reserves, (2) results of operations from oil and gas producing and marketing activities, (3) costs incurred, both capitalized and expensed, in oil and gas producing activities, and (4) capitalized costs for oil and gas producing activities, along with the related accumulated depreciation, depletion and amortization. U.S. crude oil and natural gas reserves are reported net of royalties and interests owned by others. Foreign crude oil reserves relate to reserves available to Ashland, as producer, under a long-term contract with the Nigerian National Petroleum Corporation. Reserves reported in the table are estimated and are subject to future revisions. <TABLE> <CAPTION> 1994 1993 1992 ----------------------- ----------------------- ----------------------- U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL ------ ------- ----- ------ ------- ----- ------ ------- ----- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> CRUDE OIL RESERVES (millions of barrels) Proved developed and undeveloped reserves Beginning of year.................................... 1.4 7.7 9.1 1.6 13.3 14.9 1.7 15.0 16.7 Revisions of previous estimates...................... (.1) 6.7 6.6 .2 2.3 2.5 .2 7.8 8.0 Extensions and discoveries........................... -- -- -- -- -- -- .2 -- .2 Sale of reserves in place............................ (.1) -- (.1) -- -- -- (.1) -- (.1) Production........................................... (.3) (6.8) (7.1) (.4) (7.9) (8.3) (.4) (9.5) (9.9) ------ ------- ----- ------ ------- ----- ------ ------- ----- End of year.......................................... .9 7.6 8.5 1.4 7.7 9.1 1.6 13.3 14.9 ------ ------- ----- ------ ------- ----- ------ ------- ----- Proved developed reserves Beginning of year.................................... 1.3 7.7 9.0 1.5 13.3 14.8 1.7 15.0 16.7 End of year.......................................... .9 7.6 8.5 1.3 7.7 9.0 1.5 13.3 14.8 NATURAL GAS RESERVES (billions of cubic feet) Proved developed and undeveloped reserves Beginning of year.................................... 455.5 463.9 399.1 Revisions of previous estimates...................... (98.2) 4.9 19.9 Extensions and discoveries........................... 25.9 19.4 67.2 Purchase of reserves in place........................ .4 3.5 6.4 Production........................................... (34.4) (36.2) (28.7) ------ ------ ------ End of year.......................................... 349.2 455.5 463.9 ------ ------ ------ Proved developed reserves Beginning of year.................................... 352.0 346.5 302.9 End of year.......................................... 320.5 352.0 346.5 RESULTS OF OPERATIONS (in millions) Revenues Sales to third parties............................... $ 96 $ 99 $ 195 $ 106 $ 135 $ 241 $ 74 $ 182 $ 256 Intersegment sales (1)............................... 4 -- 4 6 -- 6 6 -- 6 ------ ------- ----- ------ ------- ----- ------ ------- ----- 100 99 199 112 135 247 80 182 262 Costs and expenses Production (lifting) costs (2)....................... (23) (90) (113) (25) (60) (85) (25) (80) (105) Exploration expenses................................. (13) (1) (14) (8) (10) (18) (7) (3) (10) Depreciation, depletion, amortization and valuation provisions.......................................... (35) (1) (36) (33) (3) (36) (38) (4) (42) Other costs (3)...................................... (25) (2) (27) (23) (5) (28) (21) (4) (25) Income and foreign exploration taxes................. 7 19 26 -- (44) (44) 15 (63) (48) ------ ------- ----- ------ ------- ----- ------ ------- ----- $ 11 $ 24 $ 35 $ 23 $ 13 $ 36 $ 4 $ 28 $ 32 ------ ------- ----- ------ ------- ----- ------ ------- ----- ------ ------- ----- ------ ------- ----- ------ ------- ----- COSTS INCURRED (in millions) Property acquisition costs Proved properties.................................... $ 1 $ -- $ 1 $ 3 $ -- $ 3 $ 9 $ -- $ 9 Unproved properties.................................. 2 -- 2 2 -- 2 3 3 6 Exploration costs...................................... 19 1 20 10 10 20 11 6 17 Development costs...................................... 32 2 34 35 2 37 60 -- 60 CAPITALIZED COSTS (in millions) Proved properties...................................... $ 494 $ 392 $ 886 $ 467 $ 391 $ 858 Unproved properties.................................... 45 1 46 47 3 50 ------ ------- ----- ------ ------- ----- 539 393 932 514 394 908 Accumulated depreciation, depletion and amortization... (231) (392) (623) (211) (391) (602) ------ ------- ----- ------ ------- ----- $ 308 $ 1 $ 309 $ 303 $ 3 $ 306 ------ ------- ----- ------ ------- ----- ------ ------- ----- ------ ------- ----- </TABLE> 60

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO OIL AND GAS RESERVES The following tables summarize discounted future net cash flows and changes in such flows in accordance with Financial Accounting Standards Board Statement No. 69, "Disclosures about Oil and Gas Producing Activities." Under the guidelines of the Statement, estimated future cash flows are determined based on current prices for crude oil and natural gas, estimated production of Ashland's proved crude oil and natural gas reserves, estimated future production and development costs of those reserves based on current costs and economic conditions, and estimated future income and foreign exploration taxes based on taxing arrangements in effect at year-end. Such cash flows are then discounted using the prescribed 10% rate. Many other assumptions could have been made which may have resulted in significantly different estimates. Ashland does not rely upon these estimates in making investment and operating decisions. Ashland does not represent this discounted future net cash flow to be indicative of future cash flow or the current value of its reserves, nor is it an appropriate value to compare with reported values of other companies with different fiscal year-ends. Gas prices utilized in deriving this discounted future net cash flow are based on conditions that existed at September 30 and are usually different than prices that exist at calendar year-end due to seasonal fluctuations in the natural gas market. Prices can also vary significantly at the same point in time from year to year due to a variety of factors. The average gas price used in the 1994 discounted future net cash flow calculation was based on $1.48 per million BTU at Henry Hub. Ashland estimates that using the average NYMEX "12 month strip" futures price of $1.93 per million BTU as a basis would add 36BCF and $50 million to the discounted future net cash flow of $197 million at September 30, 1994. The average gas price used in the 1993 discounted future net cash flow calculation was based on $2.37 per million BTU at Henry Hub. Using that price as a basis in this year's calculation would add 101BCF and $102 million to the discounted future net cash flow at September 30, 1994. Therefore, disregarding price, Ashland essentially replaced the value of its production in fiscal 1994. <TABLE> <CAPTION> DISCOUNTED FUTURE NET CASH FLOWS U.S. FOREIGN TOTAL - ---------------------------------------------------------------------------------------- --------- ----------- --------- (IN MILLIONS) <S> <C> <C> <C> SEPTEMBER 30, 1994 Future cash inflows..................................................................... $ 691 $ 124 $ 815 Future production (lifting) costs....................................................... (315) (80) (395) Future development costs................................................................ (22) (9) (31) Future income and foreign exploration taxes............................................. (17) (24) (41) --------- ----- --------- 337 11 348 Annual 10% discount..................................................................... (140) (1) (141) --------- ----- --------- $ 197 $ 10 $ 207 --------- ----- --------- --------- ----- --------- SEPTEMBER 30, 1993 Future cash inflows..................................................................... $ 1,320 $ 121 $ 1,441 Future production (lifting) costs....................................................... (436) (101) (537) Future development costs................................................................ (92) -- (92) Future income and foreign exploration taxes............................................. (166) (10) (176) --------- ----- --------- 626 10 636 Annual 10% discount..................................................................... (318) (1) (319) --------- ----- --------- $ 308 $ 9 $ 317 --------- ----- --------- --------- ----- --------- </TABLE> <TABLE> <CAPTION> 1994 1993 1992 ---------------------- --------------------- --------------------- CHANGES IN DISCOUNTED FUTURE NET CASH FLOWS U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL - ------------------------------------------------------------ ----- ------- ----- ---- ------- ----- ---- ------- ----- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Net change due to extensions and discoveries................ $ 21 $ -- $ 21 $ 20 $ -- $ 20 $ 39 $ -- $ 39 Sales of oil and gas produced -- net of production (lifting) costs...................................................... (76) (9) (85) (87) (74) (161) (55) (102) (157) Changes in prices........................................... (186) (3) (189) (35) (25) (60) 121 3 124 Previously estimated development costs incurred............. 24 2 26 38 1 39 45 2 47 Net change due to revisions of previous estimates of reserves................................................... (17) 34 17 3 7 10 8 68 76 Purchase (sale) of reserves in place........................ -- -- -- 3 -- 3 3 -- 3 Accretion of 10% discount................................... 31 1 32 33 2 35 22 3 25 Other -- net (4)............................................ 33 (11) 22 (16) 1 (15) (17) (2) (19) Net change in income and foreign exploration taxes.......... 59 (13) 46 14 71 85 (48) 6 (42) ----- ------- ----- ---- ------- ----- ---- ------- ----- (111) 1 (110) (27) (17) (44) 118 (22) 96 Discounted future net cash flows Beginning of year......................................... 308 9 317 335 26 361 217 48 265 ----- ------- ----- ---- ------- ----- ---- ------- ----- End of year............................................... $ 197 $ 10 $ 207 $308 $ 9 $ 317 $335 $ 26 $ 361 ----- ------- ----- ---- ------- ----- ---- ------- ----- ----- ------- ----- ---- ------- ----- ---- ------- ----- <FN> - ------------------------------ (1) Intersegment sales are accounted for at prices which approximate market value. (2) Includes only costs incurred to operate and maintain wells, related equipment and facilities. (3) Includes results of crude oil trading. (4) Includes changes in future production and development costs and changes in the timing of future production. </TABLE> 61











       
                                     EXHIBIT 21
LIST OF SUBSIDIARIES

Subsidiaries of Ashland ("AOI") at October 1, 1994 included the companies 
listed below. Ashland has numerous unconsolidated affiliates, which are 
primarily accounted for on the equity method, and majority-owned 
consolidated subsidiaries in addition to the companies listed below. Such 
affiliates and subsidiaries are not listed below since they would not 
constitute a significant subsidiary considered in the aggregate as a 
single entity.

                                               Jurisdiction of    Immediate
                  Company                      Incorporation      Parent*   
                  -------                      ----------------   ----------
AECOM Technology Corporation                      Delaware        ATEC 25%
APAC-Alabama, Inc.                                Delaware           AHI
APAC-Arkansas, Inc.                               Delaware           AHI
APAC-Carolina, Inc.                               Delaware           AHI
APAC-Florida, Inc.                                Delaware           AHI
APAC-Georgia, Inc.                                 Georgia           AHI
APAC Holdings, Inc. ("AHI")                       Delaware           AOI
APAC, Inc.                                        Delaware           AHI
APAC-Kansas, Inc.                                 Delaware           AHI
APAC-Mississippi, Inc.                            Delaware           AHI
APAC-Oklahoma, Inc.                               Delaware           AHI
APAC-Tennessee, Inc.                              Delaware           AHI
APAC-Texas, Inc.                                  Delaware           AHI
APAC-Virginia, Inc.                               Delaware           AHI
Arch Mineral Corporation                          Delaware         AOI 50%
Ashland Chemical Canada Ltd.                   Alberta, Canada       AOI
Ashland Coal, Inc.                                Delaware         AOI 39%
Ashland Crude Marketing, Inc.                     Delaware          AOII
Ashland Crude Trading, Inc.                       Delaware           AOI
Ashland Exploration, Inc.                         Delaware           AOI
Ashland Foundry International, Inc.               Delaware           AOI
Ashland Nigerian Development Company ("ANDC")     Delaware          AOII
Ashland of Nigeria, Ltd. ("ANL")                  Delaware          AOII
Ashland Oil (Nigeria) Company Ultd.                Nigeria    ANL 50%-ANDC 50%
Ashland Overseas Investments, Inc. ("AOII")       Delaware           AOI
Ashland Pipe Line Company ("APL")                   Ohio             AOI
Ashland Plastics International, Inc.              Delaware           AOI
Ash Property, Inc.                                  Ohio             AOI
Ashmont Insurance Company, Inc. ("AIC")            Vermont           AOI
ATEC, Inc. ("ATEC")                               Delaware           AOI
Bluegrass Insurance Company Limited                Bermuda           AIC
Bluegrass International Insurance Limited          Bermuda           AIC
Drew Ameroid International Corporation             Liberia           DCC
Drew Chemical Corporation ("DCC")                 Delaware           AOI
Iberia Ashland Chemical S. A.                       Spain          AOI 70%
Mid-Valley Supply Co.                             Kentucky           AOI
Ohio River Pipe Line Company                      Delaware           APL
Scurlock Permian Corporation                      Kentucky           AOI
Valvoline (Australia) Pty. Ltd.                   Australia          VII
Valvoline Canada Ltd.                          Ontario, Canada       VII
Valvoline International, Inc. ("VII")             Delaware           AOI
- --------------------

   *100% of the voting securities are owned by the immediate parent except as 
    otherwise indicated.











                                                           Exhibit 23
          ERNST & YOUNG LLP


                           CONSENT OF INDEPENDENT AUDITORS



          We consent to the incorporation by reference  in the Registration
          Statement (Form S-8 No. 33-52125) pertaining to the Ashland  Oil,
          Inc.  Deferred Compensation  and  Stock Incentive  Plan for  Non-
          Employee Directors,  in the Registration Statement  (Form S-8 No.
          2-95022)  pertaining  to  the  Ashland Oil,  Inc.  Amended  Stock
          Incentive Plan  for Key Employees, in  the Registration Statement
          (Form  S-8  No. 33-7501)  pertaining  to  the  Ashland Oil,  Inc.
          Employee Thrift Plan, in the Registration Statement (Form S-8 No.
          33-26101) pertaining to the Ashland Oil, Inc. Long-Term Incentive
          Plan,  in  the Registration  Statement  (Form  S-8 No.  33-55922)
          pertaining to the Ashland Oil, Inc. 1993 Stock Incentive Plan, in
          the Registration Statement (Form  S-8 No. 33-49907) pertaining to
          the Ashland  Oil, Inc.  Leveraged Employee Stock  Ownership Plan,
          and the Registration Statement (Form S-3 No. 33-51095) pertaining
          to  the U.S.  $301,627,000 Ashland  Oil, Inc.  Medium-Term Notes,
          Series F,  and  the  related  Prospectus,  of  our  report  dated
          November  2, 1994,  with  respect to  the consolidated  financial
          statements and  schedules of  Ashland Oil, Inc.  and subsidiaries
          included in  the  Annual Report  (Form 10-K) for  the year  ended
          September 30, 1994.


          Louisville, Kentucky                /s/ Ernst & Young LLP
          December 7, 1994






                               POWER OF ATTORNEY


      KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors
and Officers of ASHLAND OIL, INC., a Kentucky corporation, which is about to
file an Annual Report on Form 10-K with the Securities and Exchange Commission
under the provisions of the Securities Exchange Act of 1934, as amended,
hereby constitutes and appoints JOHN R. HALL, PAUL W. CHELLGREN, THOMAS L.
FEAZELL, JAMES G. STEPHENSON and DAVID L. HAUSRATH, and each of them, his true
and lawful attorneys-in-fact and agents, with full power to act without the
others to sign and file such Annual Report and the exhibits thereto and any
and all other documents in connection therewith with the Securities and
Exchange Commission, and to do and perform any and all acts and things
requisite and necessary to be done in connection with the foregoing as fully
as he or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.  

Dated:  November 3, 1994

/s/ John R. Hall                              /s/ Mannie L. Jackson            
- ------------------------------------          --------------------------------
John R. Hall, Chairman of the Board of        Mannie L. Jackson, Director
Directors, Chief Executive Officer and 
Director 


/s/ Paul W. Chellgren                         /s/ Patrick F. Noonan            
- ------------------------------------          --------------------------------
Paul W. Chellgren, President,                 Patrick F. Noonan, Director 
Chief Operating Officer and Director


/s/ J. Marvin Quin                            /s/ Jane C. Pfeiffer             
- ------------------------------------          --------------------------------
J. Marvin Quin, Chief Financial               Jane C. Pfeiffer, Director
Officer and Senior Vice President


/s/ Thomas E. Bolger                          /s/ Michael D. Rose              
- ------------------------------------          --------------------------------
Thomas E. Bolger, Director                    Michael D. Rose, Director


/s/ Samuel C. Butler                          /s/ William L. Rouse, Jr.        
- ------------------------------------          --------------------------------
Samuel C. Butler, Director                    William L. Rouse, Jr., Director


/s/ Frank C. Carlucci                         /s/ Robert B. Stobaugh           
- ------------------------------------          --------------------------------
Frank C. Carlucci, Director                   Robert B. Stobaugh, Director


/s/ James B. Farley                           /s/ James W. Vandeveer           
- ------------------------------------          --------------------------------
James B. Farley, Director                     James W. Vandeveer, Director


/s/ Edmund B. Fitzgerald                                              
- ------------------------------------
Edmund B. Fitzgerald, Director


EXCERPT FROM MINUTES OF DIRECTOR'S MEETING ASHLAND OIL, INC. November 3, 1994 RESOLVED, that the Corporation's Annual Report to the Securities and Exchange Commission ("SEC") on Form 10-K (the "Form 10-K") in the form previously circulated to the Board in preparation for the meeting be, and it hereby is, approved with such changes as the Chairman of the Board, the President, any Vice President, the Secretary and David L. Hausrath ("Authorized Persons") shall approve, the execution and filing of the Form 10-K with the SEC to be conclusive evidence of such approval; provided, however, that without derogating from the binding effect of the above, it is understood that an Authorized Person shall cause the distribution prior to the filing with the SEC, of a copy of such Form 10-K to the directors in substantially that form which is to be filed with the SEC and that each director's oral concurrence with respect to such form shall be obtained prior to the filing with the SEC; FURTHER RESOLVED, that the Authorized Persons be, and each of them hereby is, authorized to file with the SEC the Form 10-K and any amendments thereto on Form 10-K/A and/or any other applicable form; and FURTHER RESOLVED, that the Authorized Persons, be and each of them hereby is, authorized and directed to take such other action as may be necessary and proper to implement the foregoing resolutions.

<TABLE> <S> <C>

          <ARTICLE>  5
          <LEGEND>    THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
                      EXTRACTED FROM ASHLAND OIL, INC.'S ANNUAL REPORT TO
                      SHAREHOLDERS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
                      1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
                      SUCH ANNUAL REPORT.
          <MULTIPLIER>  1,000,000
                 
          <S>                                    <C>
          <PERIOD-TYPE>                          YEAR
          <FISCAL-YEAR-END>                      SEP-30-1994
          <PERIOD-END>                           SEP-30-1994
          <CASH>                                          40
          <SECURITIES>                                     0
          <RECEIVABLES>                                1,346
          <ALLOWANCES>                                    23
          <INVENTORY>                                    601
          <CURRENT-ASSETS>                             2,171
          <PP&E>                                       5,898
          <DEPRECIATION>                               3,082
          <TOTAL-ASSETS>                               5,815
          <CURRENT-LIABILITIES>                        1,688
          <BONDS>                                      1,391
          <COMMON>                                        61
          <PREFERRED-MANDATORY>                            0
          <PREFERRED>                                    293
          <OTHER-SE>                                   1,241
          <TOTAL-LIABILITY-AND-EQUITY>                 5,815
          <SALES>                                     10,334
          <TOTAL-REVENUES>                            10,382
          <CGS>                                        8,914
          <TOTAL-COSTS>                                8,914
          <OTHER-EXPENSES>                             1,101
          <LOSS-PROVISION>                                11
          <INTEREST-EXPENSE>                             117
          <INCOME-PRETAX>                                250
          <INCOME-TAX>                                    75
          <INCOME-CONTINUING>                            197
          <DISCONTINUED>                                   0
          <EXTRAORDINARY>                                  0
          <CHANGES>                                        0
          <NET-INCOME>                                   197
          <EPS-PRIMARY>                                 2.94
          <EPS-DILUTED>                                 2.79
                  
          
</TABLE>