ASHLAND INC. DEFERRED COMPENSATION PLAN FOR EMPLOYEES

Whereas , the Ashland Inc. Deferred Compensation Plan for Employees (2005) (hereinafter the “Plan”) was approved by the Board of Directors of Ashland Inc. (“Ashland”) on November 4, 2004 to be effective January 1, 2005;

Whereas , the Plan as approved and effective reserved the right to amend it;

Whereas , the right to amend the Plan was exercised on April 21, 2005 by amending and restating the Plan effective January 1, 2005 and further amending the Plan on October 28, 2005 effective January 1, 2005;

Whereas , it is again desired to exercise the right to amend the Plan and thereby institute the second amendment and restatement of the Plan;

Now, Therefore , effective January 1, 2005, except as otherwise provided herein, the Plan is amended and restated as follows:

1.            PURPOSE

The Ashland Inc. Deferred Compensation Plan for Employees (2005) (the “Plan”) is maintained primarily for the purpose of providing an opportunity to defer compensation for retirement or other future purposes to a select group of management or highly compensated employees (including former employees that met these criteria when employed).  The obligations of the Company hereunder constitute a mere promise to make the payments provided for in this Plan.  No employee, his or her spouse or the estate of either of them shall have, by reason of this Plan, any right, title or interest of any kind in or to any property of the Company.  To the extent any Participant has a right to receive payments from the Company under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company.

This Plan is a replacement of the prior Ashland Inc. Deferred Compensation Plan amended and restated as of April 1, 2003 (the “Former Plan”).  Compensation deferred under the Former Plan that was vested as of December 31, 2004 shall remain subject to all of the rules, terms and conditions in effect under the Former Plan as of December 31, 2004.  For this purpose, the Compensation deferred under the Former Plan shall include all income, gains and losses connected to such Compensation.

The rules, terms and conditions of this Plan shall apply to Compensation deferred after December 31, 2004, including any Election to defer such Compensation made in 2004.  For this purpose, the Compensation deferred after December 31, 2004 shall include all income, gains and losses connected to such Compensation.  Additionally, the rules, terms and conditions of this Plan shall apply to any Compensation that was deferred before January 1, 2005 and that was not vested at December 31, 2004.

2.            DEFINITIONS

The following definitions shall be applicable throughout the Plan:

(a)           “Accounting Date” means the Business Day on which a calculation concerning a Participant’s Compensation Account is performed, or as otherwise defined by the Committee.

(b)           “Beneficiary” means the person(s) designated by the Participant in accordance with Section 10, or if no person(s) is/are so designated, the estate of a deceased Participant.

(c)           “Board” means the Board of Directors of Ashland Inc. or its designee.

(d)           “Business Day” means a day on which the New York Stock Exchange is open for trading activity.

(e)           “Change in Control” shall be deemed to occur (1) upon approval of the shareholders of Ashland (or if such approval is not required, upon the approval of the Board) of (A) any consolidation or merger of the Company (a “Business Combination”), other than a consolidation or merger of the Company into or with a direct or indirect wholly-owned subsidiary, in which the shareholders of the Company own, directly or indirectly, less than 50% of the then outstanding shares of common stock of the Business Combination that are entitled to vote generally for the election of directors of the Business Combination or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the merger, (B) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Ashland, provided, however, that no sale, lease, exchange or other transfer of all or substantially all the assets of Ashland shall be deemed to occur unless assets constituting 80% of the total assets of Ashland are transferred pursuant to such sale, lease exchange or other transfer, or (C) adoption of any plan or proposal for the liquidation or dissolution of Ashland, (2) when any person (as defined in Section 3(a)(9) or 13(d) of the Exchange Act), other than Ashland or any subsidiary or employee benefit plan or trust maintained by Ashland, shall become the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 25% of Ashland’s Common Stock outstanding at the time, without the approval of the Board, or (3) at any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election by Ashland’s shareholders of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period.

(f)           “Code” means the Internal Revenue Code of 1986, as amended.

(g)           “Committee” means the Personnel and Compensation Committee of the Board or its designee.

(h)           “Common Stock” means the common stock, $.01 par value, of Ashland Inc.

(i)           “Common Stock Fund” means that investment option, approved by the Committee, in which a Participant’s Compensation Account may be deemed to be invested and may earn income based on a hypothetical investment in Common Stock.

(j)           “Company” means, on and after June 30, 2005, Ashland Inc., its divisions, subsidiaries and affiliates.

(k)           “Compensation” means any employee compensation determined by the Committee to be properly deferrable under the Plan.

(l)           “Compensation Account(s)” means the Retirement Account, the In-Service Account(s), the Excess Plan Account and/or the SERP Account.  In-Service Accounts created on and after January 1, 2006, shall be referred to as Flexible Distribution Accounts.

(m)           “Corporate Human Resources” means the Corporate Human Resources Department of the Company.

(n)           “Credit Date” means the date Compensation otherwise would have been paid to the Participant.

(o)           “Deferred Compensation” means the Compensation the Participant elects to defer pursuant to the Plan.

(p)           “Disability” means that a Participant is either:

Corporate Human Resources or its delegate shall determine whether a Participant has incurred a Disability.

(q)           “Election” means a Participant’s delivery of a notice of election to defer payment of all or a portion of his or her Compensation, Excess Payments or SERP Payments under the terms of the Plan.  Such notice shall also include instructions specifying the time the deferred Compensation, Excess Payments or SERP Payments will be paid and the form in which it will be paid.  Such elections shall be irrevocable except as otherwise provided in the Plan or pursuant to Treasury guidance.  Elections shall be made and delivered as prescribed by the Committee or the Company.

(r)           “Employee” means a full-time, regular salaried employee (which term shall be deemed to include officers) of the Company, its present and future subsidiary corporations as defined in Section 424 of the Internal Revenue Code of 1986, as amended or its affiliates.

(s)           “Excess Payments” means payments made to a Participant pursuant to the Plan and the Excess Plan.  These are amounts that a Participant deferred from the Excess Plan to this Plan which were transferred to this Plan at a time when the amounts were payable under the Excess Plan and held in an Excess Plan Account for the Participant.

(t)           “Excess Plan” means the Ashland Inc. Nonqualified Excess Benefit Pension Plan, as it now exists or as it may hereafter be amended.

(u)           “Fair Market Value” means the price of a share of Common Stock, as reported on the Composite Tape for New York Stock Exchange issues on the date and at the time designated by the Company.

(v)           “In-Service Account” means the account(s) to which the Participant’s Deferred Compensation is credited and from which distributions are made.  In-Service Accounts created on and after January 1, 2006, are referred to as Flexible Distribution Accounts.  References to Flexible Distribution Accounts shall include In-Service Accounts created before January 1, 2006.  A Participant may not have more than five Flexible Distribution Accounts outstanding.

(w)           “Participant” means an Employee selected by the Committee to participate in the Plan and who has elected to defer payment of all or a portion of his or her Compensation under the Plan or who otherwise has a Compensation Account in the Plan.

(x)           “Performance-Based Compensation” means Compensation that meets requirements specified by the Secretary of the Treasury.  Performance-Based Compensation will include the attributes

that it is variable, contingent on the satisfaction of pre-established metrics and is not readily ascertainable at the time of the Election to defer such compensation under Section 8(b).

(y)           “Plan” means this Ashland Inc. Deferred Compensation Plan for Employees (2005) as it now exists or as it may hereafter be amended.

(z)           “Plan Year” means the calendar year.  The first Plan Year of the Plan is 2005.

(aa)           “Retirement Account” means the account(s) to which the Participant’s Deferred Compensation is credited and from which distributions are made.

(bb)           “Secretary of the Treasury” or “Treasury” means the United States Department of Treasury.

(cc)           “Separation from Service” or “Termination” means a termination from employment resulting in a cessation of performing active service for the Company (other than by reason of death or Disability).  An Employee is considered to incur a Separation from Service on the date the Employee terminates employment with the Company or when it is reasonably anticipated that  the Employee's services to the Company will permanently decrease to 20% or less of the average amount of services performed for the Company during the immediately preceding 36 month period (or period of total employment if less than 36 months).  Notwithstanding anything in the foregoing to the contrary, a Separation from Service does not occur as a result of military leave, sick leave or other bona fide leave of absence not exceeding six months or the period during which the Employee retains a right to reemployment.

(dd)           “SERP” means the Ashland Inc. Supplemental Early Retirement Plan for Certain Employees, as it now exists or as it may hereafter be amended.

(ee)           “SERP Payments” means payments made to a Participant pursuant to the Plan and the SERP.  These are amounts that a Participant deferred from the SERP to this Plan which were transferred to this Plan at a time when the amounts were payable under the SERP and held in a SERP Account for the Participant.

(ff)           “Specified Employee” means, for a particular Plan Year, any Employee who was at anytime during the 12 months ending on the December 31 preceding the start of the particular Plan Year (the Specified Employee identification date) classified on the records of the Company as being in salary grade band 23 or higher.  Such an Employee shall be classified as a Specified Employee as of January 1 of the particular Plan Year (the Specified Employee effective date) and shall remain classified as such for the entirety of such Plan Year.  Notwithstanding anything to the contrary, no more than 200 Employees may be classified as Specified Employees for any Plan Year.  Unless otherwise provided in the particular document, this definition of Specified Employee shall apply to all plans, programs, contracts, agreements and other arrangements maintained by the Company that are subject to Code section 409A.

(gg)           “Stock Unit(s)” means the share equivalents credited to the Common Stock Fund of a Participant’s Compensation Account pursuant to Section 6.

(hh)           “Unforeseeable Emergency” means a severe financial hardship of a Participant because of

The meaning of Unforeseeable Emergency shall be interpreted and applied in accordance with applicable guidance that may be issued by the Treasury.

(a)            Shares Authorized for Issuance.   There shall be reserved for issuance under the Plan 500,000 shares of Common Stock, subject to adjustment pursuant to subsection (c) below.

(b)            Units Authorized for Credit.   The maximum number of Stock Units that may be credited to Participants’ Compensation Accounts under the Plan is 1,500,000, subject to adjustment pursuant to subsection (c) below.

(c)            Adjustments in Certain Events.   In the event of any change in the outstanding Common Stock of the Company by reason of any stock split, share dividend, recapitalization, merger, consolidation, reorganization, combination, or exchange or reclassification of shares, split-up, split-off, spin-off, liquidation or other similar change in capitalization, or any distribution to common shareholders other than ordinary cash dividends, the number or kind of shares or Stock Units that may be issued or credited under the Plan shall be automatically adjusted so that the proportionate interest of the Participants shall be maintained as before the occurrence of such event.  Such adjustment shall be conclusive and binding for all purposes of the Plan.

4.            ELIGIBILITY

The Committee shall have the authority to select from management and/or highly compensated Employees those Employees who shall be eligible to participate in the Plan; provided, however, that employees and/or retirees who have elected to defer an amount into this Plan from another plan sponsored or maintained by the Company, the terms of which allowed such employee or retiree to make such a deferral election into this Plan, shall be considered to be eligible to participate in this Plan.

5.            ADMINISTRATION

Full power and authority to construe, interpret and administer the Plan shall be vested in the Company and the Committee or one or more of their delegates. This power and authority includes, but is not limited to, selecting Compensation eligible for deferral, establishing deferral terms and conditions and adopting modifications, amendments and procedures as may be deemed necessary, appropriate or convenient by the Committee. This power and authority also includes, without limitation, the ability to construe and interpret provisions of the Plan, make determinations regarding law and fact, reconcile any inconsistencies between provisions in the Plan or between provisions of the Plan and any other statement concerning the Plan, whether oral or written, supply any omissions to the Plan or any document associated with the Plan, and to correct any defect in the Plan or in any document associated with the Plan. Decisions of the Company and the Committee (or their delegates) shall be final, conclusive and binding upon all parties.  Day-to-day administration of the Plan shall be the responsibility of Corporate Human Resources.&nb