As filed with the Securities and Exchange Commission on May 20, 2003
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
Under
the Securities Act of 1933
ASHLAND INC.
(Exact name of Registrant as specified in its charter)
Kentucky 61-0122250
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
50 E. RiverCenter Boulevard
P.O. Box 391
Covington, KY 41012-0391
(859) 815-3333
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
David L. Hausrath, Esq.
Vice President and General Counsel
50 E. RiverCenter Boulevard
P.O. Box 391
Covington, KY 41012-0391
(859) 815-3333
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: _
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box: X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering: _
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering:
-
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. _
(continued on next page)
(continued from previous page)
CALCULATION OF REGISTRATION FEE
====================================================================================================================
Title of Each Class of Securities Amount to be Proposed Proposed Amount of
to be Registered Registered Maximum Maximum Registration
Offering Price Aggregate Fee
Per Unit(1) Offering
Price(1)
--------------------------------------------------------------------------------------------------------------------
Common Stock (par value $1.00 per share) 296,385(2) $28.13 $8,337,310 $676.00
and Rights attached thereto
====================================================================================================================
(1) Estimated solely for the purposes of calculating the registration
fee in accordance with Rule 457(h)(1) of the Securities Act of
1933. Accordingly, the price per share of the common stock offered
pursuant to the plan is based on the 296,385 shares of common
stock reserved for issuance under the plan and at an exercise
price per share of $28.13, which is the closing price of the New
York Stock Exchange Composite Tape on September 19, 2002 per share
of common stock.
(2) Number of shares issuable upon exercise of nonqualified stock
options granted to selected officers and employees of Marathon
Ashland Petroleum LLC under the Ashland Inc. Stock Option Plan for
Employees of Joint Ventures.
ASHLAND HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL ASHLAND SHALL FILE A
FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
(LEGEND INFORMATION)
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED May 20, 2003
PROSPECTUS
Ashland Inc.
50 E. RiverCenter Boulevard
Covington, Kentucky 41011
(859) 815-3333
296,385 Shares
Common Stock
This prospectus relates to the 296,385 shares of Ashland Inc. common
stock, $1.00 par value per share, that we will issue upon exercise of the
outstanding nonqualified stock options that we granted to selected
employees and officers of Marathon Ashland Petroleum LLC, or "MAP". MAP is
a joint venture between Ashland and Marathon Oil Company, a subsidiary of
Marathon Oil Corporation.
Our common stock is listed on the New York Stock Exchange and the
Chicago Stock Exchange under the symbol "ASH". On May 19, 2003, the last
reported sale price of our common stock as reported by the New York Stock
Exchange was $32.20 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
You should read this prospectus and any supplement carefully before
you invest.
Exercise Price Proceeds to Ashland
-------------- -------------------
Per share of common stock $28.13 $28.13
Total $8,337,310 $8,337,310
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus is dated May 20, 2003.
TABLE OF CONTENTS
Page
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Risk Factors 3
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Ashland Inc. 5
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Use of Proceeds 5
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Description of Common Stock 5
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Where You Can Find More Information About Ashland 7
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The Plan 8
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Federal Income Tax Consequences 11
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Plan of Distribution 12
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Legal Matters 12
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2
RISK FACTORS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS.
This prospectus contains forward-looking statements. These statements
relate to our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined in
these risk factors, any of which may cause our actual results to differ
materially from any forward-looking statements.
WE ARE SUBJECT TO LIABILITIES FROM CLAIMS ALLEGING PERSONAL INJURY CAUSED BY
EXPOSURE TO ASBESTOS.
Virtually all of our asbestos-related liabilities result from
indemnification obligations undertaken by us in 1990 in connection with the
sale of Riley Stoker Corporation (Riley), a former subsidiary. Although
Riley was neither a producer nor a manufacturer of asbestos, its industrial
boilers contained some asbestos-containing components provided by other
companies. During the December 2002 quarter, we increased our reserve for
asbestos claims by $390 million to cover the litigation defense and claim
settlement costs expected to be paid during the next ten years. The reserve
was further increased by $14 million during the quarter ended March 31,
2003, to maintain the reserve at a level adequate to cover estimated future
payments over a rolling 10-year period. Prior to December 31, 2002, the
asbestos reserve was based on the estimated costs that would be incurred to
settle open claims. Reflecting the additional provisions, our reserve for
asbestos claims on an undiscounted basis amounted to $580 million at March
31, 2003. Because insurance is expected to provide reimbursements for most
of these costs and coverage-in-place agreements exist with the insurance
companies that provide substantially all of the coverage currently being
accessed, the current year increases in the asbestos reserve are expected
to be offset in part by probable insurance recoveries valued at $242
million. At March 31, 2003, our receivable for recoveries of such costs
from our insurers amounted to $419 million, of which $28 million relates to
costs previously paid by us. Projecting future asbestos costs is subject to
numerous variables that are extremely difficult to predict. In addition to
the significant uncertainties surrounding the number of claims that might
be received, other variables include the type and severity of the disease
alleged by each claimant, the long latency period associated with asbestos
exposure, dismissal rates, costs of medical treatment, the impact of
bankruptcies of other companies that are co-defendants in claims,
uncertainties surrounding the litigation process from jurisdiction to
jurisdiction and from case to case, and the impact of potential changes in
legislative or judicial standards. Furthermore, any predictions with
respect to these variables are subject to even greater uncertainty as the
projection period lengthens. Reference should be made to Note F of the
Condensed Consolidated Financial Statements in Ashland's Form 10-Q for the
quarter ended March 31, 2003 for a discussion of our asbestos-related
litigation.
ENVIRONMENTAL AND HEALTH AND SAFETY LIABILITIES AND REQUIREMENTS COULD
MATERIALLY INCREASE THE OPERATING COSTS OF OUR BUSINESSES, PARTICULARLY
MARATHON ASHLAND PETROLEUM LLC ("MAP"), OUR JOINT VENTURE WITH MARATHON OIL
COMPANY, AND OUR CHEMICAL BUSINESSES.
We are subject to various U.S. and foreign laws and regulations relating to
environmental protection and worker health and safety. These laws and
regulations regulate discharges of pollutants into the air and water, the
management and disposal of hazardous substances, and the cleanup of
contaminated properties. The costs of complying with these laws and
regulations can be substantial and may increase as applicable requirements
become more stringent and new rules are implemented. If we violate the
requirements of these laws and regulations, we may be forced to pay
substantial fines, to complete additional costly projects, or to modify or
curtail our operations to limit contaminant emissions. In addition, we are
investigating and remediating a number of our current and former
properties. At March 31, 2003, such locations included 98 waste treatment
or disposal sites where we have been identified as a potentially
responsible party under Superfund or similar state laws, approximately 130
current and former operating facilities (including certain facilities
conveyed to MAP) and about 1,220 service station properties. Our reserves
for environmental remediation amounted to $174 million at March 31, 2003,
and reflect our estimates of the most likely costs that will be incurred
over an extended period to remediate identified conditions for which the
costs are reasonably estimable, without regard to any third-party
recoveries. Engineering studies, probability techniques, historical
experience and other factors are used to identify and evaluate remediation
alternatives and their related costs in determining the estimated reserves
for environmental remediation. Environmental remediation reserves are
subject to numerous inherent uncertainties that affect our ability to
estimate our share of the costs. Such uncertainties involve the nature and
extent of contamination at each site, the extent of required cleanup
efforts under existing environmental regulations, widely varying costs of
alternate cleanup methods, changes in environmental regulations, the
potential effect of continuing improvements in remediation technology, and
the number and financial
3
strength of other potentially responsible parties at multiparty sites. We
regularly adjust our reserves as remediation continues. None of the
remediation locations is individually material to us, as our largest
reserve for any site is less than $10 million. As a result, our exposure to
adverse developments with respect to any individual site is not expected to
be material, and these sites are in various stages of ongoing remediation.
Although environmental remediation could have a material effect on results
of our operations if a series of adverse developments occurs in a
particular quarter or fiscal year, we believe that the chance of such a
developments occurring in the same quarter or fiscal year is remote.
DOMESTIC AND INTERNATIONAL POLITICAL, LEGISLATIVE, REGULATORY AND LEGAL
CHANGES THAT RESULT IN RISING CRUDE OIL AND OTHER FEEDSTOCK PRICES COULD
ADVERSELY EFFECT THE PROFITABILITY OF MAP.
Domestic and international political, legislative, regulatory and legal
changes may adversely affect our results of operations. Political actions
may include changes in the policies of the Organization of Petroleum
Exporting Countries or other developments involving or affecting
oil-producing countries, including terrorists activities, military
conflict, embargoes, internal instability or actions or reactions of the
U.S. government in anticipation of, or in response to, such actions.
Profitability of MAP depends largely on the margin between the cost of
crude oil and other feedstocks refined and the selling prices of refined
products. MAP is a purchaser of crude oil in order to satisfy its refinery
throughput requirements. As a result, MAP's overall profitability could be
adversely affected by increases in crude oil and other feedstock prices
that are not recovered in the marketplace through higher prices for refined
products. Reference should be made to the Refining and Marketing section of
the Management Discussion and Analysis section in our Securities and
Exchange Commission ("SEC" or "Commission") filings for a discussion of the
impact of crude oil costs on MAP's operating performance.
SEVERAL OF OUR BUSINESSES ARE CYCLICAL IN NATURE, AND ECONOMIC DOWNTURNS OR
DECLINES IN DEMANDS FOR CERTAIN DURABLE GOODS MAY REDUCE OUR PROFIT MARGINS
AND LIMIT OUR ABILITY TO GENERATE REVENUES.
The profitability of our businesses are particularly susceptible to
downturns in the economy, particularly downturns in the segments of the
U.S. economy related to the purchase and sale of durable goods, including
housing, construction, automotive, marine and semiconductor. Both overall
demand for our products and our profit margins may decline as a direct
result of an economic recession, inflation, changes in the prices of
hydrocarbons and other raw materials (e.g., crude oil and petroleum and
chemical products), consumer confidence, interest rates or governmental
fiscal policies. In addition, we may experience significant changes in our
profitability as a result of variations in sales, changes in product mix or
pricing competition.
ADVERSE CHANGES IN PREVAILING CLIMATE OR WEATHER THAT RESULT IN DELAYS IN
JOB COMPLETION IN APAC AND LOWER SALES VOLUMES IN MAP MAY NEGATIVELY IMPACT
THE OPERATING RESULTS OF THOSE BUSINESSES.
Changes in climate and weather can significantly affect the performance of
several of our operations. Extreme variations from normal climatic
conditions could have a significant effect on the operating results of
APAC's construction operations. In particular, unfavorable weather
conditions could delay the completion of construction projects, and may
require the use of additional resources. In addition, certain of the
products sold by MAP and Valvoline are seasonal in nature, and thus demand
for those products may decline due to significant changes in prevailing
climate and weather conditions. For example, the sales volume of asphalt,
which increases in warm weather months, and the sales volumes of propane
and home heating oil, which increase in cold weather months, could be
negatively affected by extreme variations in climatic patterns. MAP's
production or distribution operations are also subject to disruption by
extreme weather conditions such as floods, frozen rivers or hurricanes. In
addition, adverse weather conditions which impair driving conditions, such
as winter storms, can result in reduced retail sales of gasoline.
PROVISIONS OF OUR CHARTER AND BYLAWS AND KENTUCKY LAW COULD DETER TAKEOVER
ATTEMPTS THAT SOME SHAREHOLDERS MAY CONSIDER DESIRABLE, WHICH COULD
ADVERSELY AFFECT OUR STOCK PRICE.
Provisions of our certificate of incorporation, our bylaws and Kentucky law
make acquiring control of us without the support of our board of directors
difficult for a third party, even if the change of control would be
beneficial to you. The existence of these provisions may deprive you of any
opportunity to sell your shares at a premium over the prevailing market
price for our common stock. The potential inability of our shareholders to
obtain a control premium could adversely affect the market price for our
common stock. Please see "Description of Common Stock" for a description of
these and other provisions.
4
ASHLAND INC.
Our businesses are grouped into five industry segments: APAC, Ashland
Distribution, Ashland Specialty Chemical, Valvoline, and Refining and
Marketing.
APAC performs asphalt and concrete contract construction work,
including highway paving and repair, excavation and grading, and bridge
construction, and produces asphaltic and ready-mix concrete, crushed stone
and other aggregate in the southern and midwestern United States.
Ashland Distribution distributes industrial chemicals and solvents,
plastics, composite materials and fine ingredients in North America and
plastics in Europe. Ashland Distribution also provides environmental and
energy management services. Ashland Specialty Chemical manufactures
composites, adhesives, and casting binder chemicals for use in the
transportation and construction industries. Ashland Specialty Chemical also
manufactures water treatment chemicals for use in the general industrial
and merchant marine markets. In addition, Ashland Specialty Chemical
manufactures high purity chemicals and provides services to the
microelectronics industry.
Valvoline is a producer and marketer of premium packaged motor oil and
automotive chemicals, including appearance products, antifreeze, 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) name.
MAP operates seven refineries with a total crude oil refining capacity
of 935,000 barrels per day. Refined products are distributed through a
network of terminals and independent and company-owned retail outlets in
the Midwest, the upper Great Plains and the southeastern United States.
Marathon Oil Company holds a 62% interest in MAP and we hold a 38% interest
in MAP. Ashland accounts for its investment in MAP using the equity method.
We are a Kentucky corporation, organized on October 22, 1936, with our
principal executive offices located at 50 E. RiverCenter Boulevard,
Covington, Kentucky 41011 (Mailing Address: 50 E. RiverCenter Boulevard,
P.O. Box 391, Covington, Kentucky 41012-0391) (Telephone: (859) 815-3333).
USE OF PROCEEDS
We will use the net proceeds we receive from the sale of our common
stock to which this prospectus relates in connection with the exercise of
the options described in this prospectus for general corporate purposes.
General corporate purposes may include additions to working capital,
capital expenditures, repayment of debt, stock redemption or the financing
of possible acquisitions.
DESCRIPTION OF COMMON STOCK
COMMON STOCK
As of the date of this prospectus, we are authorized to issue up to
300,000,000 shares of common stock. As of April 30, 2003, we had 68,242,617
shares of common stock issued and outstanding and had reserved 11,406,766
additional shares of common stock for issuance under our various stock and
compensation incentive plans.
The following summary of the material provisions of the applicable
sections of Ashland's restated articles of incorporation and bylaws is not
complete and is not intended to give full effect to provisions of statutory
or common law. You should refer to the applicable provisions of the
following documents:
o the restated articles, which are incorporated by reference to
Exhibit 3 to our Form 10-Q for the quarter ended June 30, 2002,
and
o the by-laws, as amended, which are incorporated by reference to
Exhibit 3.2 to our Form 10-K for the fiscal year ended September
30, 2002.
DIVIDENDS. The holders of common stock are entitled to receive
dividends when, as and if declared by our board of directors, out of funds
legally available for their payment subject to the rights of holders of
preferred stock.
5
VOTING RIGHTS. The holders of common stock are entitled to one vote
per share on all matters submitted to a vote of shareholders.
RIGHTS UPON LIQUIDATION. In the event of our voluntary or involuntary
liquidation, dissolution or winding up, the holders of common stock will be
entitled to share equally in any of our assets available for distribution
after the payment in full of all debts and distributions and after the
holders of all series of outstanding preferred stock have received their
liquidation preferences in full.
MISCELLANEOUS. The outstanding shares of common stock are fully paid
and nonassessable. The holders of common stock are not entitled to
preemptive or redemption rights. Shares of common stock are not convertible
into shares of any other class of capital stock. National City Bank,
Cleveland, Ohio, is the transfer agent and registrar for the common stock.
PREFERRED STOCK PURCHASE RIGHTS
The board of directors has authorized the distribution of one right
for each outstanding share of our common stock. Each right entitles its
holder to buy one-one thousandth (1/1000th) of a share of Series A
Participating Cumulative Preferred Stock at a price of $140.
The rights will become exercisable upon the earlier of (a) any time we
learn that a person or group has acquired, or obtained the right to
acquire, beneficial ownership of more than 15% of our outstanding common
stock (an "acquiring person"), unless provisions intended to prevent
accidental triggering apply, and (b) any date designated by our board of
directors following the commencement of, or first public disclosure of an
intention to commence, a tender or exchange offer for our outstanding
common stock. Each right other than those held by the acquiror will entitle
its holder to purchase, at the right's exercise price, shares of our common
stock having a market value of twice the right's exercise price.
Additionally, if we are acquired in a merger or other business combination,
each right other than those held by the surviving or acquiring company will
entitle its holder to purchase, at the right's exercise price, shares of
the acquiring company's common stock (or our stock if we are the surviving
corporation) having a market value of twice the right's exercise price.
Each one-one thousandth of a share of Series A Participating Cumulative
Preferred Stock will be entitled to dividends and to vote on an equivalent
basis with one share of our common stock.
Rights may be redeemed at the option of the board of directors for
$.01 per right at any time before the earlier of any time there is an
acquiring person or the tenth anniversary of the date of the plan. The
board of directors may amend the rights at any time without shareholder
approval. The rights will expire by their terms on May 15, 2006.
CERTAIN PROVISIONS OF ASHLAND'S RESTATED ARTICLES
In the event of a proposed merger or tender offer, proxy contest or
other attempt to gain control of us and not approved by our board of
directors, it would be possible for our board of directors to authorize the
issuance of one or more series of preferred stock with voting rights or
other rights and preferences which would impede the success of the proposed
merger, tender offer, proxy contest or other attempt to gain control of us.
Applicable law, the restated articles and the applicable rules of the stock
exchanges upon which the common stock is listed may limit this authority.
The consent of the holders of common stock would not be required for any
issuance of preferred stock like this.
The restated articles incorporate in substance certain provisions of
the Kentucky Business Corporation Act to require certain approvals as a
condition to mergers and certain other business combinations involving us
and a 10% shareholder unless (a) the transaction is approved by a majority
of our continuing directors or (b) certain minimum price and procedural
requirements are met. Those approvals include the approval of the holders
of at least 80% of our voting stock, plus two-thirds of the voting stock
other than voting stock owned by the 10% shareholder. In addition, the
Kentucky Business Corporation Act includes a standstill provision which
precludes a business combination from occurring with a 10% shareholder,
notwithstanding any vote of shareholders or price paid, for a period of
five years after the date that 10% shareholder becomes a 10% shareholder,
unless a majority of our independent directors approves the combination
before that date.
6
The restated articles also provide that
o our board of directors is classified into three classes,
o a director may be removed from office without cause only by the
affirmative vote of the holders of at least 80% of the voting
power of our then outstanding voting stock,
o our board of directors may adopt by-laws concerning the conduct
of, and matters considered at, meetings of shareholders, including
special meetings,
o the by-laws and certain provisions of the restated articles may be
amended only by the affirmative vote of the holders of at least
80% of the voting power of our then outstanding voting stock and
o the by-laws may be adopted or amended by our board of directors.
However, the by-laws adopted in this fashion may be amended or
repealed by affirmative vote of the holders of at least 80% of the
voting power of our then outstanding voting stock.
WHERE YOU CAN FIND MORE INFORMATION ABOUT ASHLAND
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document we file
at the SEC's public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the SEC at 800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's web site at www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus
the information we file with it, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus,
and later information filed with the SEC will update and supersede this
information. We incorporate by reference the documents listed below and any
filings made with the SEC under Section 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 after the date of the initial registration
statement relating to this prospectus and prior to effectiveness of that
registration statement, and any future such filings until our offering is
completed:
(a) Annual Report on Forms 10-K and 10-K/A for the year ended
September 30, 2002;
(b) Quarterly Reports on Form 10-Q's for the quarters ended December
31, 2002 and March 31, 2003;
(c) the description of our common stock, par value $1.00 per share,
set forth in the Registration Statement on Form 10, as amended in
its entirety by the Form 8 filed with the SEC on May 1, 1983; and
(d) the description of Ashland's Rights to Purchase Series A
Participating Cumulative Preferred Stock, set forth in the
Registration Statement on Form 8-A dated May 16, 1996.
You may request a copy of these filings, at no cost, by writing to or
telephoning us at the following address (or by visiting our website at
www.ashland.com):
Office of the Secretary
Ashland Inc.
50 E. RiverCenter Boulevard
P.O. Box 391
Covington, KY 41012-0391
859-815-3333
We have authorized no one to provide you with information different
from the information incorporated by reference or provided in this
prospectus or the prospectus supplement. We are not making an offer of
these securities in any state where the offer is not permitted.
7
THE PLAN
GENERAL PLAN INFORMATION
Marathon Ashland Petroleum LLC, or MAP, is a joint venture between
Marathon Oil Company, a subsidiary of Marathon Oil Corporation, and
Ashland. Our management determined that it would be in our best interest
that certain MAP officers and employees have an ownership interest in
Ashland. On September 19, 2002 our board of directors approved the grant of
296,385 options to purchase our common stock to 426 officers and employees
of MAP. Throughout this prospectus, we will refer to the stock options as
the "MAP stock options," the MAP employees that were granted MAP stock
options as the "recipients" and our Personnel and Compensation Committee as
the "Committee." We granted the MAP stock options under the terms and
conditions of the notices of grant and the Ashland Inc. Stock Option Plan
for Employees of Joint Ventures, a plan, approved by our board of directors
on September 17, 1998, specifically designated to grant options to
employees of joint ventures in which we have an interest. The MAP stock
options supplement stock options and/or restricted stock granted to the
recipients by Marathon Oil Company in amounts recommended by the MAP
Executive Committee.
This section contains a summary of all material terms and provisions
of the Ashland Inc. Stock Option Plan for Employees of Joint Ventures and
is not complete. You should refer to the documents relating to the plan
which are incorporated by reference as exhibits to the registration
statement of which this prospectus is a part. If necessary, we will in the
future provide supplemental material to update the available information
with respect to the plan, the MAP stock options and the underlying shares
of our common stock to holders of MAP stock options.
The plan is not a qualified deferred compensation plan under Section
401(a) of the Internal Revenue Code of 1986, as amended, and is exempt from
the provisions of the Employee Retirement Income Security Act of 1974, as
amended.
Participants under the plan may obtain additional information
regarding the plan and its administration from the Office of the Secretary,
Ashland Inc., 50 E. RiverCenter Boulevard, P.O. Box 391, Covington, KY
41012-0391. The Secretary's Office may also be reached by phone at
859-815-3333.
PURPOSE OF THE PLAN
The principal purpose of the plan is to promote our interests and
those of our shareholders by attracting and retaining management personnel
whose training, experience and abilities contribute to the success of MAP
or another joint venture in which we have an interest and which our board
of directors designates as being governed by the plan. To achieve this
purpose, we may in our discretion grant MAP stock options to selected MAP
officers and employees. A recipient of the MAP stock options will have the
right to purchase our common stock at a price and on terms to be specified
by the Committee or determined in some other manner under the plan.
ADMINISTRATION
The Committee will administer the plan. Mannie L. Jackson, Patrick F.
Noonan, W.L. Rouse, Jr., T. M. Solso and Michael J. Ward presently serve on
the Committee.
ELIGIBILITY AND GRANT OF MAP STOCK OPTIONS
The MAP Executive Committee recommends to the Committee certain
regular, full-time or part-time employees of MAP to participate in the
plan. The Committee selects the MAP employees to receive an award of MAP
stock options under the plan. The MAP stock options to which this
prospectus relates were granted to the recipients on September 19, 2002.
Under the notices of grant, none of the rights and obligations of the
recipients, including under the vesting provisions or other terms of the
notices of grant or the plan, will be affected by the transfer of any of
the recipients from MAP to Ashland or from MAP to another unit of Marathon
Oil Corporation. Under the notices of grant, by accepting the award of MAP
stock options, the recipients agree to remain at MAP for a period of at
least one year from the date of the award although this does not in any way
confer from Ashland to any recipient any right to continue employment with
MAP or affect any existing right of MAP to terminate any recipient.
8
ANNUAL REPORT TO OPTIONEES
Recipients receive, on an annual basis, a report from Ashland as to
the amount and status of their MAP stock options.
EXERCISE PRICE
Under the plan, the exercise price for the underlying Ashland common
stock that will be issued for each MAP stock option will be fixed by the
Committee at the time the option is granted. The Committee determined that
exercise price for the options to be the fair market value per share of our
common stock on the date of grant. The Committee further determined fair
market value to be the closing price per share of our common stock on the
New York Stock Exchange composite tape on the date of grant, which was
$28.13 on September 19, 2002.
ACCEPTANCE OF AWARDS
By accepting any award of MAP stock options under the plan, each
recipient will be conclusively deemed to have indicated his or her
acceptance and ratification of and consent to any action that we, our board
of directors or the Committee may have taken with respect to the plan,
including any amendment of the plan by the board of directors or the
Committee. The terms of this provision will also be deemed to apply to each
personal representative or beneficiary claiming under or through the
recipient, as those individuals are defined under the plan.
NOTICE OF GRANT
Each MAP stock option will, at our discretion and as directed by the
Committee, be evidenced by a notice of grant between the recipient and us.
The notice of grant will contain those terms and conditions that the
Committee determines and that are consistent with the plan.
VESTING
Unless the Committee determines otherwise, each MAP stock option will
provide that its recipient may not wholly or partially exercise the option
for a period of one year after the date of the option's grant. Each MAP
stock option will vest in accordance with the terms of the notice of grant
provided to each recipient. With the exception of 82,785 options which vest
based upon the performance of MAP, 50% of the MAP stock options granted to
a recipient will vest on the first anniversary of the grant date, an
additional 25% will vest on the second anniversary of the grant date and
the remaining 25% will vest on the third anniversary of the grant date.
EXERCISE OF MAP STOCK OPTIONS AND PAYMENT
A stock option may be exercised by written notice to us. The written
notice must be consistent with the terms of the notice of grant relating to
the MAP stock option and must be accompanied by payment of the full
exercise price for the underlying shares of our common stock which the
holder of the MAP stock option chooses to exercise. The exercise price for
any shares purchased may be paid in cash, in shares of our common stock
previously owned by the holder, partly in cash and partly in our common
stock or in such other consideration as shall constitute lawful
consideration for the issuance of common stock (including, but not limited
to, a "cashless exercise"), as the Committee, in its sole discretion, may
determine. There are no restrictions on the resale of the Ashland common
stock acquired as a result of the exercise of a MAP stock option.
In order to assure compliance with the securities laws, during any
time that the registration statement of which this prospectus is a part is
not effective, the Committee may require evidence of a type and degree it
considers necessary to establish that the underlying shares of common stock
are being purchased for investment only and not with a view to, or for sale
in connection with, a distribution. As used in this context, "distribution"
is defined under the Securities Act. If this prospectus is not then part of
an effective registration statement, the Committee may further require
legends on the certificates representing the underlying shares.
As a condition to the transfer of a certificate representing those
shares, the Committee may obtain those agreements or undertakings that it
considers necessary or advisable to assure compliance with any provision of
the plan or any law or regulation.
9
CANCELLATION OF MAP STOCK OPTION
The Committee has the right in its sole discretion and without the
option holder's consent to cancel a MAP stock option granted under the
plan, whether vested or not, at any time. If the Committee does so, it will
cause us to pay the recipient holding the canceled option an amount
determined by using the Black-Scholes or some other valuation method
generally accepted and used by nationally recognized executive compensation
consulting firms. The Committee will determine whether we make the buyout
payments under this provision in cash, in shares of our common stock or
partly in cash and partly in common stock. Buyout payments will be made net
of any applicable foreign, federal (including FICA), state or local
withholding taxes.
TRANSFERABILITY
Unless our board of directors or the Committee directs otherwise, the
rights and interest of a recipient may not wholly or partially be assigned
or transferred directly, by operation of law or in some other manner,
including but not limited to the following: execution, levy, garnishment,
attachment, pledge or bankruptcy. No recipient's rights or interest under
the plan will be assigned or transferred because of any obligation or
liability of that recipient. The sole exception to this provision is that
the recipient's rights and interest under the plan may pass by will or the
laws of descent and distribution in the event of the recipient's death.
RESERVE OF COMMON STOCK
Shares of our common stock to be issued upon the exercise of MAP stock
options will be from authorized but unissued shares. If any MAP stock
option or a part of a MAP stock option expires, terminates or is canceled
or surrendered for any reason without having been fully exercised, the
shares relating to the unexercised portion of the MAP stock option may
again be subject to the grant of MAP stock options under the plan.
TERM OF THE PLAN
The plan became effective on September 17, 1998, the date of the
plan's approval by our board of directors. Each MAP stock option will have
a fixed expiration date of not later than ten years and one month from the
option's date of grant, unless the option is canceled or the plan is
terminated before the fixed expiration date. Each of the MAP stock options
will expire on October 19, 2012, if not terminated earlier as provided
below.
TERMINATION OF EMPLOYMENT
The plan provides that the Committee will decide when and the terms
under which a recipient (or his beneficiaries or legal personal
representative, as the case may be, as those terms are defined in the plan)
who dies, becomes disabled or retires or leaves MAP employment may continue
to exercise vested MAP stock options. The Committee will also decide the
extent to which unvested MAP stock options will vest for those recipients.
Under the notices of grant, in the event of a recipient's retirement from
MAP or death or disability while employed by MAP, Ashland or another unit
of Marathon Oil Corporation, the MAP stock option may be exercised until
its expiration date. That option may be exercised for the number of shares
which the recipient could have acquired under the option immediately prior
to the retirement, death or disability.
The plan provides that if the employment of a recipient terminates
before the end of the one year vesting period for the options or any other
period determined by the Committee, then those options will immediately
terminate. Under the notices of grant, a recipient, after terminating
employment from MAP, Ashland or another unit of Marathon Oil Corporation
for a reason other than retirement, death or disability, may exercise any
MAP stock option until the earlier of 30 days after termination or the
expiration date of the option. That option may be exercised for the number
of shares which the recipient could have acquired under the option
immediately prior to termination.
ADJUSTMENTS
The kind of shares that we may issue under the plan and the kind of
shares underlying or the exercise price for any outstanding MAP stock
options will be automatically adjusted to maintain the proportionate
interest of any recipient who received MAP stock options before any of the
following types of events: a stock split, stock dividend, recapitalization,
merger, consolidation, reorganization, combination, exchange of shares,
split-up, split-off, spin-off,
10
liquidation or any distribution to holders of our common stock other than
cash dividends. Any adjustment under this provision will be conclusive and
binding for all purposes of the plan.
AMENDMENT
Our board of directors or the Committee may at any time terminate,
modify or amend the plan in those respects it deems advisable and as
permitted by law.
TYPE OF STOCK OPTION
The MAP stock options will be nonqualified stock options and will not
be entitled to tax treatment as incentive stock options as defined in
Section 422 of the Internal Revenue Code of 1986, as amended.
LISTING
The shares of our common stock underlying the MAP stock options have
been listed on the New York Stock Exchange and the Chicago Stock Exchange.
FEDERAL INCOME TAX CONSEQUENCES
The following brief description of the tax consequences of awards
under the plan is based on Federal tax laws currently in effect and does
not purport to be a complete description of such Federal tax consequences.
If shares are issued to the original holder of a nonqualified option
that is granted and exercised in accordance with the plan, then:
o no income will be recognized by the holder at the time of grant of
the option;
o upon exercise of the option the holder will recognize taxable
ordinary income in an amount equal to the excess of the fair
market value, at the time of exercise, of the shares acquired over
the option price;
o subject to the limitation described below, we will be entitled to
a deduction at the same time and in the same amount as the holder
has income under the preceding item; and
o upon a sale of the shares acquired, the holder will have
short-term or long-term capital gain or loss, as the case may be,
in an amount equal to the difference between the amount realized
on the sale and the tax basis of the shares sold.
Assuming that the payment of the option price is made entirely in
cash, the tax basis of the shares will be equal to their fair market value
on the date of exercise, but not less than the option price, and their
holding period will begin on the day after the tax basis of the shares is
determined in this manner.
If the optionee uses previously owned shares to exercise an option in
whole or in part, the transaction will not be considered to be a taxable
disposition of the previously owned shares. The holder's tax basis and
holding period of the previously owned shares will be carried over to the
equivalent number of shares received on exercise. The tax basis of the
additional shares received upon exercise will be the fair market value of
the shares on the date of exercise but not less than the amount of cash
used in payment, and the holding period for the additional shares will
begin on the day after the tax basis of the shares is determined in this
manner. In order to facilitate recordkeeping by optionees, when an option
is exercised with previously owned shares, we will deliver separate stock
certificates to the optionee representing the shares surrendered and the
additional shares to which the optionee is entitled as a result of the
exercise.
In addition to the Federal income tax consequences described above,
the acquisition, ownership or disposition of a MAP stock option or shares
acquired upon the exercise of a MAP stock option may have tax consequences
under various state or foreign laws that may be applicable to certain
option holders. Since these tax consequences, as well as the Federal income
tax consequences described above, may vary from holder to holder depending
upon the particular facts and circumstances involved, each holder should
consult his or her own tax advisor with respect to the Federal income tax
consequences of the grant or exercise of a MAP stock option, and also with
respect to any tax
11
consequences under applicable state or foreign law. Ashland will not
withhold more than the statutorily required amounts for federal, state and
local taxes.
PLAN OF DISTRIBUTION
We will offer the underlying shares of our common stock directly to
the recipients under the terms of the plan. We will pay all expenses
relating to the offer and sale to the recipients of the shares of our
common stock underlying the MAP stock options. Recipients will not incur
any commissions, fees or other charges or expenses in connection with the
offer of securities covered by this prospectus.
LEGAL MATTERS
The validity of the common stock offered hereby has been passed upon
by David L. Hausrath, Esq., Vice President and General Counsel of Ashland.
Mr. Hausrath beneficially owns 71,851 shares of our common stock (including
common stock units held in our deferred compensation plan and shares of
common stock with respect to which he has the right to acquire beneficial
ownership within 60 days through the exercise of stock options).
12
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting compensation, are:
Filing Fee for Registration Statement $ 676.00
Accounting Fees and Expenses $6,100.00
Stock Exchange Listing Fees $2,982.00
---------
Total $9,758.00
=========
All of the above amounts, other than the Commission filing fee and the
Stock Exchange listing fees, are estimates only.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 271B.8-500 through 580 of the Kentucky Business Corporation
Act contain detailed provisions for indemnification of directors and
officers of Kentucky corporations against judgments, penalties, fines,
settlements and reasonable expenses in connection with litigation. Under
Kentucky law, the provisions of a company's articles and by-laws may govern
the indemnification of officers and directors in lieu of the
indemnification provided for by statute. We have elected to indemnify our
officers and directors pursuant to our Restated Articles, our By-laws and
by contract rather than to have such indemnification governed by the
statutory provisions.
Article X of the Restated Articles permits, but does not require, us
to indemnify our directors, officers and employees to the fullest extent
permitted by law. Our By-laws require indemnification of our officers and
employees under certain circumstances. We have entered into indemnification
contracts with each of our directors that require indemnification to the
fullest extent permitted by law, subject to certain exceptions and
limitations.
We have purchased insurance which insures (subject to certain terms
and conditions, exclusions and deductibles) us against certain costs which
we might be required to pay by way of indemnification to our directors or
officers under our Restated Articles or By-laws, indemnification agreements
or otherwise and protects individual directors and officers from certain
losses for which they might not be indemnified by us. In addition, we have
purchased insurance which provides liability coverage (subject to certain
terms and conditions, exclusions and deductibles) for amounts which we, or
the fiduciaries under our employee benefit plans, which may include our
directors, officers and employees, might be required to pay as a result of
a breach of fiduciary duty.
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ITEM 16. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement:
3.1 Third Restated Articles of Incorporation, as amended effective
July 17, 2002 (incorporated by reference to Exhibit 3 to Ashland's
Form 10-Q for the quarter ended June 30, 2002).
3.2 By-laws, as amended effective November 15, 2002 (incorporated by
reference to Exhibit 3.2 to Ashland's Form 10-K for the fiscal
year ended September 30, 2002).
4 Form of Certificate of Common Stock, par value $1.00 per share
(incorporated by reference to Exhibit 4 to Registration Statement
No. 333-54762, filed with the Commission on May 24, 2001).
*5 Opinion of David L. Hausrath, Esq.
*10.1 Ashland Inc. Stock Option Plan for Employees of Joint Ventures.
*10.2 Form of Notice of Grant of Non-Qualified Stock Option.
*10.3 Form of Notice of Grant of a Restoration Non-Qualified Performance
Based Stock Option.
*10.4 Form of Notice of Grant of Non-Qualified Performance Based Stock
Option.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of PricewaterhouseCoopers LLP.
*23.3 Consent of David L. Hausrath, Esq. (included as part of Exhibit
5).
*24 Power of Attorney, including resolutions of the board of
directors.
*Filed herewith.
ITEM 17. UNDERTAKINGS.
(A) Ashland hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided, however, that paragraphs (A)(l)(i) and (A)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by Ashland pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of
the offering.
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(B) Ashland hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of Ashland's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(C) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of Ashland pursuant to the foregoing provisions, or
otherwise, Ashland has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Ashland of expenses incurred or paid by a
director, officer or controlling person of Ashland in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Ashland will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy, as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Ashland
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Covington, Commonwealth of Kentucky, on May 20,
2003.
ASHLAND INC.,
By: /s/ David L. Hausrath
----------------------
David L. Hausrath
Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities indicated on May 20, 2003.
Signature Title
--------- -----
* Chairman of the Board and Chief
-- Executive Officer
James J. O'Brien (Principal Executive Officer)
* Senior Vice President and Chief
-- Financial Officer
J. Marvin Quin (Principal Financial Officer)
* Administrative Vice President
-- and Controller
Kenneth L. Aulen (Principal Accounting Officer)
* Director
--
Ernest H. Drew
* Director
--
Roger W. Hale
* Director
--
Bernadine P. Healy
* Director
--
Mannie L. Jackson
* Director
--
Patrick F. Noonan
* Director
--
Jane C. Pfeiffer
* Director
--
William L. Rouse, Jr.
* Director
--
George A. Schaefer, Jr.
* Director
--
Theodore M. Solso
* Director
--
Michael J. Ward
*By :/s/ David L. Hausrath
---------------------
David L. Hausrath
Attorney-in-fact
* Original power of attorney authorizing, James J. O'Brien, David L.
Hausrath and Linda L. Foss and each of them to sign the Registration
Statement and amendments thereto on behalf of the above-mentioned directors
and officers of Ashland has been filed with the Commission as Exhibit 24 to
the Registration Statement.
II-4
EXHIBIT INDEX
5 Opinion of David L. Hausrath, Esq.
10.1 Ashland Inc. Stock Option Plan for Employees of Joint Ventures.
10.2 Form of Notice of Grant of Non-Qualified Stock Option.
10.3 Form of Notice of Grant of a Restoration Non-Qualified Performance
Based Stock Option.
10.4 Form of Notice of Grant of Non-Qualified Performance Based Stock
Option.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of David L. Hausrath, Esq. (included as part of Exhibit
5).
24 Power of Attorney, including resolutions of the board of
directors.
II-5