Securities and Exchange Commission, Washington, D.C. 20549
Annual Report on Form 10-K for the year ended December 31, 1996.
Filed pursuant to Section 13 of the Securities Exchange Act of 1934.
Commission file number 1-1463
Union Carbide Corporation
1996 10-K
Union Carbide Corporation Tel. (203) 794-2000
39 Old Ridgebury Road State of incorporation: New York
Danbury, Connecticut 06817-0001 IRS identification number: 13-1421730
Securities registered pursuant to Section 12(b) of the Act:
Class of security: Registered on:
Common Stock ($1 par value) New York Stock Exchange
Chicago Stock Exchange, Incorporated
The Pacific Stock Exchange Incorporated
Share Purchase Rights Plan New York Stock Exchange
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 ("the Act") during the preceding 12 months, 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.
At February 28, 1997, 126,741,112 shares of common stock were outstanding.
Non-affiliates held 125,958,321 of those shares, of which the aggregate market
value was $5.952 billion.
Documents incorporated by reference:
Annual report to stockholders for the year ended December 31, 1996 (Parts I
and II)
Proxy statement for the annual meeting of stockholders to be held on April 23,
1997 (Part III)
Table of Contents
Part I
Item 1: Business ........................................................ 1
Item 2: Properties ...................................................... 3
Item 3: Legal Proceedings ............................................... 4
Item 4: Submission of Matters to a Vote of Security Holders ............. 4
Part II
Item 5: Market for Registrant's Common Equity and Related Stockholder
Matters ......................................................... 5
Item 6: Selected Financial Data ......................................... 5
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................... 5
Item 8: Financial Statements and Supplementary Data ..................... 5
Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ............................................ 5
Part III
Item 10: Directors and Executive Officers of the Registrant .............. 6
Item 11: Executive Compensation .......................................... 8
Item 12: Security Ownership of Certain Beneficial Owners and Management .. 8
Item 13: Certain Relationships and Related Transactions .................. 8
Part IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K . 9
Signatures ............................................................... 12
Exhibit Index ............................................................ 13
Cautionary statement for the purposes of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995: All statements in this Form
10-K report that do not reflect historical information are forward looking
statements. These include statements incorporated herein by reference to the
1996 annual report to stockholders. Important factors that could cause actual
results to differ materially from those discussed in such forward looking
statements include the supply/demand balance for the corporation's products,
customer inventory levels, competitive pricing pressures, feedstock costs,
changes in industry production capacities and operating rates, competitive
technology positions and failure to achieve the corporation's cost reduction
targets or complete construction projects on schedule. Some of these factors
are discussed further in Part I, Item 1: Business.
Definition of Terms: See the inside back cover page of the 1996 annual report
to stockholders. Terms defined there are used herein.
Part I
Item 1. Business
General-Union Carbide operates in two business segments of the chemicals and
plastics industry, Specialties & Intermediates and Basic Chemicals & Polymers.
Specialties & Intermediates converts basic and intermediate chemicals into a
diverse portfolio of chemicals and polymers serving industrial customers in
many markets. This segment also provides technology services, including
licensing, to the oil and gas and petrochemicals industries. The Basic
Chemicals & Polymers segment converts hydrocarbon feedstocks, principally
liquefied petroleum gas and naphtha, into polyethylene, polypropylene,
ethylene oxide and ethylene glycol for sale to third-party customers, as well
as propylene, ethylene, ethylene oxide and ethylene glycol for consumption by
the Specialties & Intermediates segment. The profitability of the Basic
Chemicals & Polymers segment of the chemicals and plastics industry is highly
cyclical, whereas that of the Specialties & Intermediates segment is less
cyclical. Consequently, Union Carbide's results are subject to the swings of
the business cycle in the Basic Chemicals & Polymers segment. See page 1,
pages 6 through 8, and "Summary and Outlook" on pages 10 through 12 of the
1996 annual report to stockholders for further information about Union
Carbide's businesses, and Note 5 on pages 30 through 31 of the 1996 annual
report to stockholders for financial information about Union Carbide's
business segments.
Union Carbide does not produce against a backlog of firm orders; production is
geared primarily to the level of incoming orders and to projections of future
demand. Inventories of finished products, work in process and raw materials
are maintained to meet delivery requirements of customers and Union Carbide's
production schedules.
At year-end 1996, 11,745 people were employed in manufacturing facilities,
laboratories and offices around the world.
Raw Materials, Products and Markets-See information herein and in the 1996
annual report to stockholders on pages 6 through 8. Unless otherwise
indicated, the products of Union Carbide are sold principally by its own sales
force, directly to customers.
Union Carbide believes it has contracts or commitments for, or readily
available sources of, hydrocarbon feedstocks and fuel supplies to meet its
anticipated needs in all major product areas. The corporation's operations are
dependent upon the availability of hydrocarbon feedstocks and fuels which are
purchased from diverse domestic and international sources, including
independent oil and gas producers as well as integrated oil companies.
The availability and price of hydrocarbon feedstocks, energy and finished
products are subject to plant interruptions and outages and to market and
political conditions in the U.S. and elsewhere. Operations and products at
times may be adversely affected by legislation, government regulations,
shortages, or international or domestic events.
The business segments of Union Carbide are not dependent to a significant
extent upon a single customer or a few customers.
Patents; Trademarks; Research and Development-Union Carbide owns a large
number of United States and foreign patents that relate to a wide variety of
products and processes, has pending a substantial number of patent
applications throughout the world, and is licensed under a number of patents.
These patents expire at various times over the next 20 years. Such patents and
patent applications in the aggregate are material to Union Carbide's
competitive position. No one patent is considered to be material; however, the
patent portfolio relating to the UNIPOL process technology is, in the
aggregate, considered to be material. Union Carbide also has a large number of
trademarks. The UNION CARBIDE, UCAR and UNIPOL trademarks are material; no
other single trademark is material.
Part I (Cont.)
Essentially all of Union Carbide's research and development activities are
company-sponsored. The principal research and development facilities of Union
Carbide are indicated in the discussion of Properties (Item 2) of this Form
10-K report. In addition to the facilities specifically indicated there,
product development and process technology laboratories are maintained at some
plants. Union Carbide expensed $159 million in 1996, $144 million in 1995, and
$136 million in 1994 on company-sponsored research activities to develop new
products, processes, or services, or to improve existing ones.
Environment-See Costs Relating to Protection of the Environment on pages 14
through 15 of the 1996 annual report to stockholders and Note 15 on pages 39
through 40 thereof.
Insurance-Union Carbide's policy is to obtain public liability insurance
coverage at terms and conditions and a price that management considers fair
and reasonable. Union Carbide's management believes Union Carbide has public
liability insurance in an amount sufficient to meet its current needs in light
of pending, threatened, and future litigation and claims. There is no
assurance, however, that Union Carbide will not incur losses beyond the
limits, or outside the coverage, of its insurance. Such insurance is subject
to substantial deductibles.
Competition-Each of the major product and service areas in which Union Carbide
participates is highly competitive. In some instances competition comes from
manufacturers of the same products as those produced by Union Carbide and in
other cases from manufacturers of different products which may serve the same
markets as those served by Union Carbide's products. Some of Union Carbide's
competitors, such as companies principally engaged in petroleum operations,
have more direct access to hydrocarbon feedstocks, and some have greater
financial resources than Union Carbide.
The Specialties & Intermediates segment is characterized by differentiated
products and is less subject to external changes in supply/demand
relationships than the Basic Chemicals & Polymers segment. In this segment,
competition is based primarily on product functionality and quality, with the
more unique products commanding significant price premiums.
The Basic Chemicals & Polymers segment is characterized by large volume
commodity products and is subject to external changes in supply/demand
relationships, including changes in the strength of the overall economy,
customer inventory levels, industry manufacturing capacity and operating rates
and raw material feedstock costs. Participants in this segment compete for
business primarily on the basis of price and efficient delivery systems.
See pages 6 through 8 of the 1996 annual report to stockholders for
information about each segment's principal products, competitive position and
major competitors.
Union Carbide is a major marketer of petrochemical products throughout the
world. Products that the corporation markets are largely produced in the
United States, while products marketed by the corporation's joint ventures are
principally produced outside the United States. Competitive products are
produced throughout the world.
Union Carbide's international operations face competition from local producers
and global competitors and a number of risks inherent in carrying on business
outside the United States, including risks of nationalization, expropriation,
restrictive action by local governments and changes in currency exchange
rates, in addition to the risks stated above.
Part I (Cont.)
Item 2. Properties
In management's opinion, current facilities, together with planned expansions,
will provide adequate production capacity to meet Union Carbide's planned
business activities. Capital expenditures are discussed on page 18 of the 1996
annual report to stockholders.
Listed below are the principal manufacturing facilities operated by Union
Carbide worldwide. Research and engineering facilities are noted. Most of the
domestic properties are owned in fee. Union Carbide maintains numerous
domestic sales offices and warehouses, substantially all of which are leased
premises under relatively short-term leases. All principal international
manufacturing properties are owned or held under long-term leases.
International administrative offices, technical service laboratories, sales
offices and warehouses are owned in some instances and held under relatively
short-term leases in other instances. The corporation's headquarters are
located in Danbury, Connecticut, and are leased.
Principal domestic manufacturing facilities and the principal products
manufactured there are as follows:
Location City Principal Product(s)
Specialties & Intermediates Segment
California Torrance Latexes
Georgia Tucker Latexes
Illinois Alsip Latexes
Louisiana Greensburg Hydroxyethyl cellulose derivatives
Louisiana Taft Acrolein and derivatives, acrylic monomers,
caprolactone, UV-cured coatings,
cycloaliphatic epoxides, glycol ethers,
ethyleneamines, oxo alcohols
New Jersey Bound Brook Polyols, polyethylene compounding
New Jersey Edison Lanolin derivatives
New Jersey Somerset Latexes
Puerto Rico Bayamon Latexes
Texas Garland Latexes
Texas Seadrift Ethanolamines, glycol ethers, surfactants,
polyethylene compounding
Texas Texas City Organic acids and esters, alcohols,
surfactants, vinyl acetate, solution vinyl
resins, heat transfer fluids
Washington Washougal Crystals
West Virginia Institute Caprolactone derivatives, polyethylene
glycol, hydroxyethyl cellulose,
polyethylene oxide, surfactants, ethylidene
norbornene, glutaraldehyde, acetone and
derivatives
West Virginia South Charleston Alkyl alkanolamines, brake fluids,
miscellaneous specialty products,
polyalkylene glycols, surfactants,
specialty ketones, polyvinyl acetate
resins, heat transfer fluids
Basic Chemicals & Polymers Segment
Louisiana Norco (Cypress
Plant) Polypropylene
Louisiana Taft Ethylene oxide and glycol, olefins
Louisiana Taft (Star Plant) Polyethylene
Texas Seadrift Ethylene oxide and glycol, olefins,
polyethylene, polypropylene
Texas Texas City Olefins
Part I (Cont.)
Research and development for the Specialties & Intermediates segment is
carried on at technical centers in Bound Brook, Edison and Somerset, New
Jersey; Tarrytown, New York; Cary, North Carolina; Houston and Texas City,
Texas; and South Charleston, West Virginia. Research and development for the
Basic Chemicals & Polymers segment is carried on at technical centers in Bound
Brook and Somerset, New Jersey; Houston, Texas; and South Charleston, West
Virginia. Process and design engineering for both segments is conducted at a
technical center in South Charleston, West Virginia, in support of domestic
and foreign projects.
Principal international manufacturing facilities and the principal products
manufactured there are as
follows:
Country City Principal Product(s)
Specialties & Intermediates Segment
Belgium Vilvoorde Lanolin derivatives
Belgium Zwijndrecht Hydroxyethyl cellulose
Brazil Aratu Hydroxyethyl cellulose
Brazil Cubatao Polyethylene compounding
Brazil Cabo Vinyl acetate
Ecuador Guayaquil Latex
Indonesia Jakarta Latex
Malaysia Seremban Latex
People's Republic of China Guangdong Latex
Philippines Batangas Latex
Sri Lanka Colombo Latex
Thailand Nonthaburi Latex
United Arab Emirates Dubai Latex
United Kingdom Wilton Glycol ethers, ethanolamines
Basic Chemicals & Polymers Segment
Canada Boucherville Molded polyethylene products
Canada Prentiss Ethylene glycol
United Kingdom Wilton Ethylene oxide and glycol
Research and development for the Specialties & Intermediates segment is
carried on at international facilities in Antwerp, Belgium; Cubatao, Brazil;
Montreal East, Canada; Jurong, Singapore; Meyrin (Geneva), Switzerland; and
Wilton, United Kingdom. Research and development for the Basic Chemicals &
Polymers segment is carried on at international facilities in Montreal East,
Canada.
Item 3. Legal Proceedings
See Note 15 of Notes to Financial Statements on pages 39 through 40 of the
1996 annual report to stockholders.
Item 4. Submission of Matters to a Vote of Security Holders
The corporation did not submit any matters to a stockholder vote during the
last quarter of 1996.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market and dividend information for the corporation's common stock is
contained on pages 20 and 21 of the 1996 annual report to stockholders.
Information about the stock exchanges where the stock is traded in the United
States is listed on page 43 of the 1996 annual report to stockholders. The
declaration of dividends is a business decision made from time to time by the
Board of Directors based on the corporation's earnings and financial condition
and other factors the Board considers relevant.
The number of stockholders of record of the corporation's common stock is
contained on page 1 of the 1996 annual report to stockholders.
Sales of Unregistered Securities - On December 17, 1996, the corporation
issued 479 shares of Union Carbide Corporation common stock to a director
under the 1992 Stock Compensation Plan for Non-Employee Directors of Union
Carbide Corporation. Since the plan does not provide for any payment or other
voluntary contribution, the issuance of the shares of common stock does not
involve a "sale" of a security within the meaning of Section 2(3) of the
Securities Act of 1933 and, thus, is exempt from the registration requirements
of the act.
During 1996, put options were sold to institutional investors in a series of
private placements exempt from registration under Section 4(2) of the
Securities Act of 1933, entitling the holders to sell 3,835,081 shares of
Union Carbide Corporation common stock to the corporation, at prices ranging
from $36.50 to $45.31 per share. Premiums received for the sales of the
options totaled $4,907,913.
Item 6. Selected Financial Data
Information pertaining to consolidated operations is included under the
captions "From the Income Statement," and "From the Balance Sheet", and
dividend information is included under the caption "Other Data" in the
Selected Financial Data on pages 20 through 21 of the 1996 annual report to
stockholders.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
See the information covered in the 1996 annual report to stockholders on pages
10 through 19.
Item 8. Financial Statements and Supplementary Data
The consolidated balance sheet of Union Carbide Corporation and subsidiaries
at December 31, 1996 and 1995, and the consolidated statements of income,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1996, together with the report thereon of KPMG Peat
Marwick LLP dated January 17, 1997, are contained on pages 22 through 42 of
the 1996 annual report to stockholders.
Quarterly income statement data is contained on page 21 of the 1996 annual
report to stockholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Union Carbide has not had any disagreements covered by this item with KPMG
Peat Marwick LLP, its independent auditors.
Part III
Item 10. Directors and Executive Officers of the Registrant
For background information on the Directors of Union Carbide Corporation whose
terms are expected to continue after the annual meeting of stockholders and
persons nominated to become Directors, see pages 7 through 10 of the proxy
statement for the annual meeting of stockholders to be held on April 23, 1997.
The principal executive officers of the corporation are as follows. Data is as
of March 20, 1997.
Name Age Position Year
First
Elected
William H. Joyce 61 Chairman of the Board, President and
Chief Executive Officer 1993
Joseph S. Byck 55 Vice-President 1991
James F. Flynn 54 Vice-President 1993
Joseph E. Geoghan 59 Vice-President, General Counsel and
Secretary 1987
Malcolm A. Kessinger 53 Vice- President 1991
Lee P. McMaster 54 Vice-President 1993
Joseph C. Soviero 58 Vice-President 1993
Roger B. Staub 62 Vice-President 1993
Ronald Van Mynen 59 Vice-President, Health, Safety and
Environment 1992
John K. Wulff 48 Vice-President, Chief Financial Officer
and Controller 1988
There are no family relationships between any officers or directors of the
corporation. There is no arrangement or understanding between any officer and
any other person pursuant to which the officer was elected an officer. An
officer is elected by the Board of Directors to serve until the next annual
meeting of stockholders and until his successor is elected and qualified.
The table on the next page gives a summary of the positions held during at
least the past five years by each officer. Each of the officers has been
employed by the corporation or a subsidiary of the corporation for the past
five years.
Part III (Cont.)
Name Position Years Held
William H. Joyce Chairman of the Board, President and
Chief Executive Officer 1996 to present
President and Chief Executive Officer 1995 to 1995
President and Chief Operating Officer 1993 to 1995
President, Union Carbide Chemicals
and Plastics Company Inc. 1993 to 1994
Executive Vice-President 1991 to 1993
Executive Vice-President, Union Carbide
Chemicals and Plastics Company Inc. 1990 to 1993
Joseph S. Byck Vice-President 1991 to present
Vice-President, Union Carbide Chemicals
and Plastics Company Inc. 1991 to 1994
James F. Flynn Vice-President 1993 to present
Vice-President, General Manager
Solvents & Coatings Materials Division 1989 to 1993
Joseph E. Geoghan Vice-President, General Counsel and
Secretary 1990 to present
Malcolm A. Kessinger Vice-President 1991 to present
Vice-President, Human Resources,
Union Carbide Chemicals and Plastics
Company Inc. 1990 to 1994
Lee P. McMaster Vice-President 1993 to present
President, Industrial Chemicals
Division 1992 to 1993
Joseph C. Soviero Vice-President 1993 to present
President, Specialty Chemicals Division 1983 to 1993
Roger B. Staub Vice-President 1993 to present
President, Polyolefins Division 1990 to 1993
Ronald Van Mynen Vice-President, Health, Safety and
Environment 1992 to present
Vice-President, Health, Safety and
Environmental Affairs, Union Carbide
Chemicals and Plastics Company Inc. 1985 to 1994
John K. Wulff Vice-President, Chief Financial Officer
and Controller 1996 to present
Vice-President, Controller and Principal
Accounting Officer 1989 to 1996
See "Section 16(a) Beneficial Ownership Reporting Compliance" on page 24 of
the proxy statement for the annual meeting of stockholders to be held on April
23, 1997.
Part III (Cont.)
Item 11. Executive Compensation
See pages 20 through 22 of the proxy statement for the annual meeting of
stockholders to be held on April 23, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
See pages 23 and 24 of the proxy statement for the annual meeting of
stockholders to be held on April 23, 1997.
Item 13. Certain Relationships and Related Transactions
No reportable transactions in 1996.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
UNION CARBIDE CORPORATION
(a) The following documents are filed as part of this report:
1. The consolidated financial statements set forth on pages 22
through 41 and the Independent Auditors' Report set forth on page
42 of the 1996 annual report to stockholders are incorporated by
reference in this Annual Report on Form 10-K.
2. The Report on Schedule of KPMG Peat Marwick LLP appears on page 10
of this Annual Report on Form 10-K.
3. The following schedule should be read in conjunction with the
consolidated financial statements incorporated by reference in
Item 8 of this Annual Report on Form 10-K. Schedules other than
those listed have been omitted because they are not applicable.
Page in this
Form 10-K Report
Valuation and Qualifying Accounts (Schedule II),
three years ended December 31, 1996 11
(b) The corporation's Form 8-K dated October 2, 1996 contained the legal
opinion of Cahill Gordon & Reindel regarding the issuance of $200
million of 7.75 percent debentures maturing in 2096.
The corporation's Form 8-K dated December 3, 1996 reported an
amendment to the corporation's existing By-laws and an amendment to
the Amended and Restated Rights Agreement.
The corporation's Form 8-K dated January 20, 1997 contained the
corporation's press release dated January 20, 1997.
The corporation's Form 8-K dated January 22, 1997 contained exhibits
related to the corporation's Medium Term Notes Program.
(c) Exhibits-See Exhibit Index on pages 13 through 16 for exhibits filed
with this Annual Report on Form 10-K.
Part IV (Cont.)
Report of Independent Auditors
The Board of Directors
Union Carbide Corporation
Under date of January 17, 1997, we reported on the consolidated balance sheets
of Union Carbide Corporation and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1996, as contained on pages 22 through 41 in the 1996 annual report to
stockholders. These consolidated financial statements and our report thereon
are incorporated by reference in the Annual Report on Form 10-K for the year
1996. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedule as listed in Item 14(a)3. This financial statement schedule is the
responsibility of the company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Stamford, Conn.
January 17, 1997
Part IV (Cont.)
Schedule II-Valuation and Qualifying Accounts
Union Carbide Corporation and Consolidated Subsidiaries
Deductions
Items determined
to be uncollectible,
Additions less recovery
Balance at Charged to of amounts Balance at
beginning costs and previously end of
of period expenses written off period
Millions of dollars, year ended December 31, 1996
Allowance for
doubtful accounts $11 $1 $2 $10
Millions of dollars, year ended December 31, 1995
Allowance for
doubtful accounts $11 $5 $5 $11
Millions of dollars, year ended December 31, 1994
Allowance for
doubtful accounts $12 $2 $3 $11
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Union Carbide Corporation
March 20, 1997
/s/ John K. Wulff
by: John K. Wulff
Vice-President, Chief Financial Officer
and Controller
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
corporation and in the capacities indicated on March 20, 1997.
/s/William H. Joyce /s/John J. Creedon /s/Robert D. Kennedy
William H. Joyce John J. Creedon Robert D. Kennedy
Director, Chairman of the Director Director
Board, President and Chief
Executive Officer
/s/Joseph E. Geoghan /s/C. Fred Fetterolf /s/Ronald L. Kuehn, Jr.
Joseph E. Geoghan C. Fred Fetterolf Ronald L. Kuehn, Jr.
Director, Vice-President, Director Director
General Counsel
and Secretary
/s/John K. Wulff /s/Thomas P. Gerrity /s/Rozanne L. Ridgway
John K. Wulff Thomas P. Gerrity Rozanne L. Ridgway
Vice-President, Chief Director Director
Financial Officer
and Controller
/s/Rainer E. Gut /s/James M. Ringler
Rainer E. Gut James M. Ringler
Director Director
/s/Vernon E. Jordan, Jr. /s/William S. Sneath
Vernon E. Jordan, Jr. William S. Sneath
Director Director
Exhibit Index
Exhibit No.
3.1 Restated Certificate of Incorporation as filed May 2, 1994 (See
Exhibit 3.1 of the Corporation's 1994 Form 10-K).
3.2.1 By-Laws of the Corporation, amended as of December 3, 1996.
4.1 Indenture dated as of June 1, 1995, between the Corporation and The
Chase Manhattan Bank (formerly Chemical Bank), Trustee (See Exhibit
4.1.2 to the Corporation's Form S-3 effective October 13, 1995, Reg.
No. 33-60705).
4.2 The Corporation will furnish to the Commission upon request any other
debt instrument referred to in item 601(b)(4)(iii)(A) of Regulation
S-K.
4.3.1 Rights Agreement, dated as of July 26, 1989, as amended and restated
as of May 27, 1992, between the Corporation and Chemical Bank
(successor to Manufacturers Hanover Trust Company), as Rights
Agent (See Exhibit 4(a) of the Corporation's Form 8 filed June 1,
1992).
4.3.2 Amendment to Rights Agreement, dated as of December 3, 1996, between
the Corporation and Chase Mellon Shareholder Services Inc. as
Successor Rights Agent (See Exhibit 99.1 of the Corporation's Form 8-K
dated December 3, 1996).
10.1 Indemnity Agreement dated as of July 25, 1986, between the Corporation
and Robert D. Kennedy. The Indemnity Agreement filed with the
Commission is substantially identical in all material respects, except
as to the parties thereto and dates thereof, with Indemnity Agreements
between the Corporation and each other person who is a director or
officer of the Corporation (See Exhibit 10.2 of the Corporation's 1992
Form 10-K).
10.2.1 1984 Union Carbide Stock Option Plan.
10.2.2 Resolutions adopted by the Board of Directors of the Corporation on
January 22, 1986, with respect to the 1984 Union Carbide Stock
Option Plan.
10.2.3 Resolutions adopted by the Board of Directors of the Corporation on
April 17, 1986, with respect to the 1984 Union Carbide Stock
Option Plan.
10.2.4 Amendment to the 1984 Union Carbide Stock Option Plan effective June
1, 1989 (See Exhibit 10.13.4 of the Corporation's 1994 Form 10-K).
10.3.1 1988 Union Carbide Long-Term Incentive Plan (See Exhibit 10.14.1 of
the Corporation's 1993 Form 10-K).
10.3.2 Amendment to the 1988 Union Carbide Long-Term Incentive Plan effective
June 1, 1989 (See Exhibit 10.14.2 of the Corporation's 1994 Form
10-K).
Exhibit Index (Cont.)
Exhibit No.
10.3.3 Amendment to the 1988 Union Carbide Long-Term Incentive Plan effective
August 1, 1989 (See Exhibit 10.14.3 of the Corporation's 1994 Form
10-K).
10.3.4 Resolutions adopted by the Board of Directors of the Corporation on
February 26, 1992, with respect to stock options granted under the
1984 Union Carbide Stock Option Plan and the 1988 Union Carbide Long-
Term Incentive Plan (See Exhibit 10.14.4 of the Corporation's 1992
Form 10-K).
10.3.5 Resolutions adopted by the Compensation and Management Development
Committee of the Board of Directors of the Corporation on June 30,
1992, with respect to stock options granted under the 1984 Union
Carbide Stock Option Plan and the 1988 Union Carbide Long-Term
Incentive Plan (See Exhibit 10.14.5 of the Corporation's 1992 Form
10-K).
10.4.1 1983 Union Carbide Bonus Deferral Program.
10.4.2 Amendment to the 1983 Union Carbide Bonus Deferral Program effective
January 1, 1992 (See Exhibit 10.15.2 of the Corporation's 1992 Form
10-K).
10.5.1 1984 Union Carbide Cash Bonus Deferral Program.
10.5.2 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program
effective January 1, 1986.
10.5.3 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program
effective January 1, 1992 (See Exhibit 10.16.3 of the Corporation's
1992 Form 10-K).
10.6.1 Equalization Benefit Plan for Participants of the Retirement Program
Plan for Employees of Union Carbide Corporation and its Participating
Subsidiary Companies.
10.6.2 Amendment to the Equalization Benefit Plan effective January 1, 1994
(See Exhibit 10.18.2 of the Corporation's 1994 Form 10-K).
10.7.1 Supplemental Retirement Income Plan.
10.7.2 Amendment to the Supplemental Retirement Income Plan effective January
1, 1994 (See Exhibit 10.19.3 of the Corporation's 1994 Form 10-K).
10.7.3 Amendment to the Supplemental Retirement Income Plan effective January
1, 1995 (See Exhibit 10.18.3 of the Corporation's 1995 Form 10-K).
10.8.1 1992 Stock Compensation Plan for Non-Employee Directors of Union
Carbide Corporation.
10.8.2 Resolution adopted by the Board of Directors of the Corporation on
June 30, 1992, with respect to the 1992 Stock Compensation Plan for
Non-Employee Directors of Union Carbide Corporation (See Exhibit
10.20.2 of the Corporation's 1992 Form 10-K).
10.9.1 Severance Compensation Agreement, dated July 21, 1992, between the
Corporation and Ronald Van Mynen. The Severance Compensation Agreement
filed with the Commission is substantially identical in all material
aspects, except as to the parties thereto and dates thereof, with
Agreements between the Corporation and other officers and employees of
the Corporation (See Exhibit 10.21.1 of the Corporation's 1994 Form
10-K).
10.9.2 Amendment of Severance Compensation Agreement, dated September 24,
1993, between the Corporation and Ronald Van Mynen. Identical
amendments, except as to the parties thereto, were entered into
between the Corporation and other officers and employees of the
Corporation (See Exhibit 10.21.2 of the Corporation's 1994 Form 10-K).
Exhibit Index (Cont.)
Exhibit No.
10.10 Resolution adopted by the Board of Directors of the Corporation on
November 30, 1988, with respect to an executive life insurance
program for officers and certain other employees (See Exhibit 10.22 of
the Corporation's 1993 Form 10-K).
10.11 1994 Union Carbide Variable Compensation Plan (See Exhibit 10.23.2 of
the Corporation's 1993 Form 10-K).
10.12.1 Union Carbide Corporation Benefits Protection Trust (See Exhibit
10.24.1 of the Corporation's 1994 Form 10-K).
10.12.2 Amendment to the Union Carbide Corporation Benefits Protection Trust
effective October 23, 1991.
10.12.3 Amendment to the Union Carbide Corporation Benefits Protection Trust
effective January 1, 1994 (See Exhibit 10.24.3 of the Corporation's
1994 Form 10-K).
10.13 Resolutions adopted by the Board of Directors of the Corporation on
February 24, 1988, with respect to the purchase of annuities to cover
liabilities of the Corporation under the Equalization Benefit Plan for
Participants of the Retirement Program Plan for Employees of Union
Carbide Corporation and its Participating Subsidiary Companies and the
Supplemental Retirement Income Plan (See Exhibit 10.25 of the
Corporation's 1994 Form 10-K).
10.14 Resolutions adopted by the Board of Directors of the Corporation on
June 28, 1989, with respect to the purchase of annuities to cover
liabilities of the Corporation under the Supplemental Retirement
Income Plan (See Exhibit 10.26 of the Corporation's 1994 Form 10-K).
10.15 Union Carbide Corporation Non-Employee Directors' Retirement Plan (See
Exhibit 10.27 of the Corporation's 1994 Form 10-K).
10.16 1994 Union Carbide Long-Term Incentive Plan (See Exhibit 10.28 of the
Corporation's 1994 Form 10-K).
10.17.1 Union Carbide Compensation Deferral Program effective January 1, 1995
(See Exhibit 10.28 of the Corporation's 1995 Form 10-K).
10.17.2 Amendment to Union Carbide Compensation Deferral Program effective
January 1, 1995.
10.17.3 Amendment to Union Carbide Compensation Deferral Program effective
December 31, 1996.
10.18 Excess Long-Term Disability Plan effective January 1, 1994 (See
Exhibit 10.30 of the Corporation's 1994 Form 10-K).
10.19 1995 Union Carbide Performance Incentive Plan (See Appendix A of the
Corporation's proxy statement for the annual meeting of stockholders
held on April 26, 1995).
10.20.1 Completion Guarantee dated September 15, 1996 by the Corporation and
its partner, Petrochemical Industries Company K.S.C., for the benefit
of certain banks with respect to construction of a petrochemicals
complex in Kuwait (See Exhibit 10.1 of the Corporation's Form 10-Q for
the quarter ended September 30, 1996).
10.20.2 Definitions Agreement dated September 15, 1996 among the Corporation
and various parties relating to Exhibit 10.20.1 (See Exhibit 10.2 of
the Corporation's Form 10-Q for the quarter ended September 30, 1996).
11 Computation of Earnings per Share For The Five Years Ended December
31, 1996.
13 The Corporation's 1996 annual report to stockholders (such report,
except for those portions which are expressly referred to in this Form
10-K, is furnished for the information of the Commission and is not
deemed "filed'' as part of the Form 10-K).
Exhibit Index (Cont.)
Exhibit No.
21 Subsidiaries of the Corporation.
23 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule
Wherever an exhibit listed above refers to another exhibit or document (e.g.,
"See Exhibit 6 of..."), that exhibit or document is incorporated herein by
such reference.
A copy of any exhibit listed above may be obtained on written request to the
Secretary's Department, Union Carbide Corporation, Section E-4, 39 Old
Ridgebury Road, Danbury, CT 06817-0001. The charge for furnishing any exhibit
is 25 cents per page plus mailing costs.
Exhibit 3.2.1
BY-LAWS
OF
UNION CARBIDE CORPORATION
As Adopted
April 26, 1994
Amended
December 3, 1996
TABLE OF CONTENTS
Page
ARTICLE I STOCKHOLDERS
Section 1 - Annual Meetings............. 1
2 - Special Meetings............ 1
3 - Time and Place of Meetings.. 1
4 - Notice of Meetings.......... 1
5 - Quorum...................... 1
6 - Required Vote............... 1
7 - Record Date................. 1
8 - Organization................ 2
9 - Procedure................... 2
10 - Adjournments................ 2
11 - Notice of Stockholder
Business and Nominations... 2
ARTICLE II BOARD OF DIRECTORS
Section 1 - General Powers................. 5
2 - Number of Directors............ 5
3 - Term of Office................. 5
4 - Vacancies...................... 5
5 - Regular Meetings............... 5
6 - Special Meetings............... 5
7 - Notice of Meetings............. 6
8 - Quorum and Manner
of Acting..................... 6
9 - Action by Communications
Equipment..................... 6
10 - Action by Consent.............. 6
11 - Organization................... 6
12 - Compensation................... 7
ARTICLE III COMMITTEES
Section 1 - Executive Committee............ 7
2 - Other Committees............... 7
3 - Quorum and Manner
of Acting..................... 7
4 - Procedure...................... 7
5 - Changes in Committees.......... 7
TABLE OF CONTENTS
Page
ARTICLE IV OFFICERS
Section 1 - Number......................... 8
2 - Election and Term of
Office........................ 8
3 - Removal and Vacancies.......... 8
4 - Subordinate and Assistant
Officers...................... 8
5 - Duties......................... 8
ARTICLE V INDEMNIFICATION...................... 8
ARTICLE VI MISCELLANEOUS PROVISIONS
Section 1 - Transfer of Shares............. 10
2 - Regulations as to Stock
Certificates.................. 10
3 - Stockholder Inspection
Rights........................ 10
4 - Corporate Seal................. 10
5 - Definitions.................... 10
ARTICLE VII AMENDMENTS........................... 11
BY-LAWS
of
UNION CARBIDE CORPORATION
ARTICLE I
Stockholders
Section 1. Annual Meetings. The annual meeting of
stockholders for the election of directors and other
purposes shall be held at such place, date and hour as shall
be designated in the notice of meeting approved by the
Board.
Section 2. Special Meetings. A special meeting of
stockholders may be called at any time by the Board, the
Chairman, a President or a Vice-Chairman.
Section 3. Time and Place of Meetings. Each
meeting of stockholders shall be held at such time and in
such place within or without the State of New York as the
Board may determine.
Section 4. Notice of Meetings. Not less than 10 or
more than 50 days before the date of each meeting of
stockholders, notice of the meeting shall be given in the
manner prescribed by law to each stockholder entitled to
vote thereat.
Section 5. Quorum. Except as otherwise required by
law, at each meeting of stockholders, holders of at least a
majority of the outstanding shares of stock entitled to vote
at the meeting shall be present in person or by proxy to
constitute a quorum for the transaction of business.
Section 6. Required Vote. At each meeting of
stockholders for the election of directors at which a quorum
is present, the candidates, up to the number of directors to
be elected, shall be elected who receive a plurality of the
votes cast at the meeting by the holders of shares entitled
to vote in the election.
Except as otherwise required by law, at each meeting of
stockholders at which a quorum is present, all other matters
shall be decided by a majority of the votes cast at the
meeting by the holders of shares entitled to vote thereon.
Section 7. Record Date. The Board may prescribe a
day and hour not more than 50 or less than 10 days before
the date of a meeting of stockholders for the purpose of
determining the stockholders entitled to notice of or to
vote at such meeting or any adjournment thereof.
Section 8. Organization. At each meeting of
stockholders, one of the following shall act as chairman of
the meeting and shall preside thereat, in the following
order of precedence:
(a) the Chairman;
(b) any President;
(c) any Vice-Chairman or Vice-President
designated by the Board; or
(d) any person designated by a majority vote of
the stockholders present in person or by
proxy.
Section 9. Procedure. At each meeting of
stockholders, the chairman of the meeting shall determine
the order of business and all other matters of procedure.
He may establish rules to maintain order and for the conduct
of the meeting.
The Board in advance of every meeting of stockholders
shall appoint one or more inspectors of election to act at
the meeting.
Section 10. Adjournments. A meeting of stockholders
may be adjourned from time to time and place to place until
a quorum is present or until its business is completed.
Section 11. Notice of Stockholder Business and
Nominations.
(a) Annual Meetings of Stockholders.
(i) Nominations of persons for election as
directors and the proposal of business to be considered by
the stockholders may be made at an annual meeting of
stockholders (A) pursuant to the Corporation's notice of
meeting, (B) by or at the direction of the Board or (C) by
any stockholder who was a stockholder of record at the time
of giving of notice provided for in this By-law, who is
entitled to vote at the meeting and who complies with the
notice procedures set forth in this By-law.
(ii) For nominations or other business to be
properly brought before an annual meeting by a stockholder
pursuant to clause (C) of paragraph (a)(i) of this By-law,
the stockholder must have given timely notice thereof in
writing to the Secretary and such other business must
otherwise be a proper matter for stockholder action. To be
timely, a stockholder's notice shall be delivered to the
Secretary at the principal executive offices of the
Corporation not later than the close of business on the 90th
day nor earlier than the close of business on the 120th day
prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that
the date of the annual meeting is more than 30 days before
or more than 60 days after such anniversary date, notice by
the stockholder to be timely must be so delivered not
earlier than the close of business on the 120th day prior to
such annual meeting and not later than the close of business
on the later of the 90th day prior to such annual meeting or
the 10th day following the day on which public announcement
of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth: (A) as to
each person whom the stockholder proposes to nominate for
election or reelection as a director all information
relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an
election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 14a-11
thereunder (including such person's written consent to being
named in the proxy statement as a nominee and to serving as
a director if elected); (B) as to any other business that
the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought
before the meeting, the reasons for conducting such business
at the meeting and any material interest in such business of
such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (C) as to the stockholder
giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (x) the name and
address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (y)
the class and number of shares of the Corporation which are
owned beneficially and of record by such stockholder and
such beneficial owner.
(iii) Notwithstanding anything in the second
sentence of paragraph (a)(ii) of this By-law, in the event
that the number of directors to be elected to the Board is
increased and the public announcement by the Corporation
naming all of the nominees for director or specifying the
size of the increased Board occurs less than 100 days prior
to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this By-law
shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the
close of business on the 10th day following the day on which
such public announcement is first made.
(b) Special Meetings of Stockholders.
Nominations of persons for election as directors
may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's
notice of meeting (i) by or at the direction of the Board or
(ii) provided that the Board has determined that directors
shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of
giving of notice provided for in this By-law, who shall be
entitled to vote at the meeting and who complies with the
notice procedures set forth in this By-law. In the event
the Corporation calls a special meeting of stockholders for
the purpose of electing one or more directors to the Board,
any such stockholder may nominate a person or persons (as
the case may be), for election to such position(s) as are
specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (a)(ii) of this
By-law shall be delivered to the Secretary at the principal
executive offices of the Corporation not earlier than the
close of business on the 120th day prior to such special
meeting and not later than the close of business on the
later of the 90th day prior to such special meeting or the
10th day following the day on which public announcement is
first made of the date of the special meeting and of the
nominees proposed by the Board to be elected at such
meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period
for the giving of a stockholder's notice as described above.
(c) General.
(i) Only such persons who are nominated in
accordance with the procedures set forth in this By-law
shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance
with the procedures set forth in this By-law. The Chairman
of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought
before the meeting was made or proposed, as the case may be,
in accordance with the procedures set forth in this By-law
and, if any proposed nomination or business is not in
compliance with this By-law, to declare that such defective
proposal or nomination shall be disregarded.
(ii) For purposes of this By-law, "public
announcement" shall mean disclosure in a press release
reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(iii) Notwithstanding the foregoing
provisions of this By-law, a stockholder shall also comply
with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters
set forth in this By-law. Nothing in this By-law shall be
deemed to affect any rights (A) of stockholders to request
inclusion of proposals in the Corporation's proxy statement
pursuant to Rule 14a-8 under the Exchange Act or (B) of the
holders of any series of Preferred Stock to elect directors
under the circumstances specified by the terms of such
Preferred Stock.
ARTICLE II
Board of Directors
Section 1. General Powers. The business of the
Corporation shall be managed under the direction of the
Board.
Section 2. Number of Directors. The number of
directors shall be fixed and may from time to time be
increased or decreased by vote of a majority of the entire
Board, but in no event shall the number of directors be less
than three or more than 19. Each director shall be a
stockholder.
Section 3. Term of Office. Each director shall
hold office until the next annual meeting of stockholders
and until his successor has been elected and qualified.
Section 4. Vacancies. Except as otherwise required
by law, any vacancy occurring in the Board, and any newly
created directorship resulting from an increase in the
number of directors, may be filed by the Board.
Section 5. Regular Meetings. Regular meetings of
the Board shall be held at such times and places within or
without the State of New York as the Board may determine.
Section 6. Special Meetings. A special meeting of
the Board may be called at any time by the Chairman, a
President, a Vice-Chairman or any three directors and shall
be held at such time and place as shall be designed in the
notice of meeting or waiver thereof.
Section 7. Notice of Meetings. A notice shall be
effective if (i) it is mailed to each director at least
three days before the date of the meeting, (ii) it is sent
by telegraph, cable or other form of recorded communications
or delivered personally or by telephone on such shorter
notice, not less than six hours before the meeting, as the
person or persons calling the meeting deem appropriate in
the circumstances or (iii) in the case of a meeting held in
accordance with Article II, Section 9, the notice is sent by
telegraph, cable or other form of recorded communications or
delivered personally or by telephone on such shorter notice,
not less than three hours before the meeting, as the person
or persons calling the meeting deem appropriate in the
circumstances. Notices shall be given to each director at
the address which he has furnished to the Secretary as the
address for such notices.
Notice of a regular meeting of the Board need not be
given if the Board has previously fixed the time and place
of such meeting.
Section 8. Quorum and Manner of Acting. Except as
otherwise provided by law or in these By-laws, one-third of
the entire Board shall be present to constitute a quorum for
the transaction of business, and the vote of a majority of
the directors present at the time of the vote, if a quorum
is present at such time, shall be the act of the Board.
Section 9. Action by Communications Equipment. Any
one or more members of the Board or any committee thereof
may participate in a meeting of the Board or committee by
means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting
to hear each other at the same time. Participation by such
means shall constitute presence in person at a meeting.
Section 10. Action by Consent. Any action required
or permitted to be taken by the Board or any committee
thereof may be taken without a meeting if all members of the
Board or committee consent in writing to the adoption of a
resolution authorizing the action.
Section 11. Organization. At each meeting of the
Board, one of the following shall act as chairman of the
meeting and shall preside thereat, in the following order of
precedence:
(a) the Chairman;
(b) any President;
(c) any Vice-Chairman; or
(d) any other director chosen by a majority of
the directors present.
Section 12. Compensation. For services as a member
of the Board and any committee thereof, every director shall
receive such compensation, attendance fees and other
allowances as the Board may determine.
ARTICLE III
Committees
Section 1. Executive Committee. The Board, by
resolution adopted by a majority of the entire Board, shall
designate an Executive Committee, consisting of the Chairman
and four or more other directors. The chief executive
officer shall serve as chairman of the Executive Committee.
Subject to any limitations prescribed by law or by the
Board, the Executive Committee shall have and may exercise,
when the Board is not in session, all the powers of the
Board.
Section 2. Other Committees. The Board, by
resolution adopted by a majority of the entire Board, may
designate from among its members other committees, each
consisting of three or more directors. Subject to any
limitations prescribed by law, each committee shall have
such authority as the Board may determine.
Section 3. Quorum and Manner of Acting. Unless the
Board otherwise provides, a majority of a committee of the
Board shall be present to constitute a quorum for the
transaction of business, and the vote of a majority of the
members of the committee present at the time of the vote, if
a quorum is present at such time, shall be the act of such
committee.
Section 4. Procedure. Unless the Board otherwise
provides, each committee of the Board may adopt such rules
as it may see fit with respect to the calling of its
meetings, the procedures to be followed thereat, and its
functioning generally. Each committee shall report its
actions to the Board.
Section 5. Changes in Committees. Except as
otherwise provided in these By-laws, the Board at any time
may, by resolution adopted by a majority of the entire
Board, with or without cause, change or remove the members
of, fill vacancies in, and discharge any committee of the
Board.
ARTICLE IV
Officers
Section 1. Number. The officers of the Corporation
shall be a Chairman, one or more Presidents and Vice-
Presidents, a Treasurer, a Secretary, and a Controller and
may include one or more Vice-Chairmen. A chief executive
officer shall be designated by the Board from among the
officers.
Section 2. Election and Term of Office. Each
officer shall be elected by the Board and shall hold office
until the meeting of the Board following the next annual
meeting of stockholders and until his successor has been
elected and qualified or until his earlier retirement,
resignation or removal. The Chairman, and any President or
Vice-Chairman shall be chosen from among the directors.
Section 3. Removal and Vacancies. Any officer may
be removed at any time with or without cause by the Board.
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. Subordinate and Assistant Officers. The
Corporation may have such subordinate and assistant officers
as the Board may appoint. Each such officer shall hold
office at the pleasure of, and may be removed at any time
with or without cause by, the Board. Such officers may
include one or more Regional Vice-Presidents, Assistant
Vice-Presidents, Assistant Treasurers, Assistant
Secretaries, and Assistant Controllers.
Section 5. Duties. Each officer shall have such
authority and shall perform such duties as may be assigned
by the Board, the Chairman, a President or a Vice-Chairman
or as shall be conferred or required by law or these By-laws
or as shall be incidental to the office.
ARTICLE V
Indemnification
The Corporation shall, to the fullest extent permitted
by law, indemnify each of its past, present and future
directors, officers and employees and their heirs, executors
and administrators (collectively, the "indemnitees") for any
and all costs and expenses resulting from or relating to any
suit or claim arising out of, or alleged to arise out of,
past or future service to the Corporation or to another
corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise at the Corporation's
request.
Without limiting the generality of the foregoing, (i)
the costs and expenses for which each indemnitee shall, as a
matter of right, be entitled to indemnification shall
include all costs and expenses incurred by the indemnitee in
the defense or settlement of, or in the satisfaction of any
order or judgment entered in, any suit or claim (including
any suit or claim brought or alleged to be brought in the
right of the Corporation to procure a judgment in its favor)
arising out of, or alleged to arise out of, any act or
failure to act by the indemnitee as a director, officer or
employee of, or in any service to, the Corporation or to
another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise at the
Corporation's request, (ii) the stockholders or the Board of
the Corporation are authorized to, by a resolution of the
stockholders or the Board, as the case may be, indemnify the
indemnitees for costs and expenses, and (iii) the
Corporation may, to the extent authorized by resolution of
the Board or the stockholders, enter into agreements with
indemnitees to indemnify them for costs and expenses;
provided, however, that no indemnification may be made to or
on behalf of any director, officer, employee or other
indemnitee if a judgment or other final adjudication adverse
to the director, officer, employee or other indemnitee
establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated, or that he
personally gained in fact a financial profit or other
advantage to which he was not legally entitled, and provided
further that the foregoing proviso shall prohibit such
indemnification only to the extent that such indemnification
is prohibited by Sec. 721 of the New York Business
Corporation Law.
As used in this Article V,
(a) "costs and expenses" means any and all costs,
expenses and liabilities incurred by an indemnitee,
including but not limited to (i) attorney's fees, (ii)
amounts paid in settlement of, or in the satisfaction of any
order or judgment in, any suit or claim and (iii) fines,
penalties and assessments asserted or adjudged in any suit
or claim.
(b) "suit or claim" means any and all suits,
claims, actions, investigations or proceedings, and threats
thereof, whether civil, criminal or administrative,
heretofore or hereafter instituted or asserted.
ARTICLE VI
Miscellaneous Provisions
Section 1. Transfer of Shares. Shares of stock of
the Corporation shall be transferred only on the books of
the Corporation by the record holder thereof, in person or
by his attorney or legal representative thereunto duly
authorized in writing, upon surrender of certificates for a
like number or shares, except as otherwise required by law.
Section 2. Regulations as to Stock Certificates.
The Board, the Chairman, a President, a Vice-Chairman or the
Secretary may make all such rules and regulations as it or
such officer may deem advisable concerning the issue,
transfer, registration or replacement of certificates for
shares of stock of the Corporation.
Section 3. Stockholder Inspection Rights. A
stockholder shall have the right to inspect any book, record
or document of the Corporation to the extent that such right
is conferred by provisions of the New York Business
Corporation Law or is authorized by the Board or the
Chairman.
Section 4. Corporate Seal. The Corporation shall
have a suitable seal, containing the name of the
Corporation. The Secretary shall have custody of the seal,
but he may authorize others to keep and use a duplicate
seal.
Section 5. Definitions. As used herein, the
following terms have the following meanings:
"Board" means the Board of Directors of the
Corporation.
"Chairman" means the Chairman of the Board of
Directors.
"Corporation" means Union Carbide Corporation, a
New York Corporation.
"Entire Board" means the total number of
directors the Corporation would have if there
were no vacancies. It does not mean the maximum
number of directors authorized by these By-laws
unless the Board has fixed the number of
directors at 19.
"Vice-Chairman" means a Vice-Chairman of the
Board of Directors.
"Vice-President" includes any Executive Vice-
President, any Senior Vice-President, and any
other officer of the Corporation who is a Vice-
President however designated.
ARTICLE VII
Amendments
The By-laws may be adopted, amended or repealed by the
stockholders, or by the Board by a vote of a majority of the
entire Board.
Exhibit 10.2.1
1984 UNION CARBIDE STOCK OPTION PLAN
Effective January 1, 1984,
as amended through March 1, 1988
1984 UNION CARBIDE STOCK OPTION PLAN
Section 1: Purpose. The purpose of the 1984 Union Carbide Stock
Option Plan (hereinafter referred to as the "Plan") is to (a)
provide incentives and rewards to those employees who are in a
position to contribute to the long-term growth and profitability
of the Corporation; (b) assist the Corporation and its
subsidiaries in attracting, retaining, and motivating employees
with experience and ability; and (c) make the Corporation's
compensation program competitive with those of other major
employers.
Section 2: Administration. This Plan shall be administered by a
Committee of the Board of Directors (hereinafter referred to as
the "Committee") appointed by the Board. Members of the
Committee are not eligible to participate in this Plan and no
member may have been eligible within one year prior to serving on
the Committee. The Committee shall interpret the Plan, establish
administrative regulations to further the purpose of the Plan,
authorize awards to eligible participants and take any other
action necessary to the proper operation of the Plan. All
decisions and acts of the Committee shall be final and binding
upon all participants.
Section 3: Participation. This Plan is for Union Carbide
Corporation and such of its participating subsidiary companies as
shall be designated by the Board of Directors. Any employee of
Union Carbide Corporation or a participating subsidiary serving
in a managerial, administrative, or professional position which
is recommended to, and authorized by, the Committee shall be
eligible to participate in the Plan.
Section 4: Awards. Awards under this Plan may be stock option
awards, stock appreciation rights and exercise payment rights.
Section 5: Stock Options.
5.1: Each year during the Plan the Corporation may award
options to purchase common stock or restricted stock of the
Corporation (herein called "stock option awards") to such
eligible employees as the Committee in its discretion authorizes
and under such terms as it establishes.
5.2: The total number of shares of stock (including
restricted stock, if any) optioned under this Plan during the
five year period of the Plan shall not exceed 5,000,000 shares
(9,564,435 shares for the period commencing March 3, 1986 through
December 31, 1988), and no participant shall be granted options
in any one year for, in the aggregate, more than 50,000 shares
(150,000 shares for the period commencing March 3, 1986 through
December 31, 1988) including restricted shares, if any. Solely
for the purpose of computing the total number of shares of stock
optioned under this Plan, there shall not be counted any shares
covered by an option which, prior to such computation, has
terminated because the holder exercised a stock appreciation
right or the holder ceased for any reason other than death or
retirement to be an employee of the Corporation or a
participating subsidiary.
5.3: The option price of each share of stock subject to a
stock option award shall be the closing price of the common stock
of the Corporation on the date the award is authorized by the
Committee as reported in the New York Stock Exchange - Composite
Transactions.
5.4: A stock option by its terms shall not be transferable
by the participant other than by will or the laws of descent and
distribution, shall be of no more than 10 years' duration, and
shall be exercisable only after the earlier of: (i)(a) in the
case of options granted prior to October 28, 1987, two years
following the date of grant of such award, or (b) in the case of
options granted on or after October 28, 1987, such period of time
as the Committee shall determine but in no event less than one
year following the date of grant of such award; (ii) the
participant's death; (iii) the participant's retirement; or (iv)
a change in control of the Corporation, but only to the extent
permitted under subsection 5.7. An option shall be exercisable
following a participant's termination of employment by the
Corporation other than for cause only after such option otherwise
becomes exercisable in accordance with the first sentence of this
Section 5.4. An option is exercisable during a participant's
lifetime only by the participant or the participant's legal
guardian or legal representative.
An option is only exercisable by a participant while the
participant is in active employment with the Corporation except
(i) in the case of a participant's death, (ii) in the case of a
participant's retirement, (iii) in the case of a participant's
termination of employment by the Corporation other than for
cause, (iv) during a two-year period commencing on the date of
termination, by the participant or the Corporation, of employment
after a change in control of the Corporation, unless such
termination of employment is for cause, or (v) if the Committee
decides that it is in the best interest of the Corporation to
permit individual exceptions. In the case of a participant's
death, an option may be exercised within nine months after such
death and in the case of a participant's termination of
employment other than for cause under subclause (iii) of this
sentence, an option may be exercised only within three years
after such termination.
5.5: An option may be exercised with respect to part or all
of the shares subject to the option by giving written notice to
the Corporation of the exercise of the option. The option price
for the shares for which an option is exercised shall be paid on
or within ten business days after the date of exercise in cash,
in whole shares of common stock of the Corporation owned by the
participant prior to exercising the option, or in a combination
of cash and such shares of common stock. The value of any share
of common stock delivered in payment of the option price shall be
its Market Price on the date the option is exercised.
5.6: In the event of any change in capital, shares of
capital stock, or any special distribution to the stockholders,
the Board of Directors shall make equitable adjustments in the
number of shares and prices per share applicable to options then
outstanding and in the number of shares which are available
thereafter for stock option awards in total or to any one
participant.
5.7: Clauses (iii) and (iv) of the first sentence of
Section 5.4 herein, as amended and restated, shall not apply to a
stock option held by a "disqualified individual" within the
meaning of Section 280G(c) of the Internal Revenue Code who is a
party to an employment contract with the Corporation that grants
such person severance benefits in the event that the employment
is terminated subsequent to a change in control of the
Corporation, or who is entitled to receive benefits pursuant to a
severance plan in the event that the participant's employment is
terminated after a change in control to the extent that the
exercise of the option would cause such person to incur the tax
prescribed in Section 4999 of the Internal Revenue Code on
"excess parachute payments" within the meaning of Section 280G(b)
of the Internal Revenue Code.
Section 6: Stock Appreciation Rights.
6.1: The Committee may, in its discretion, grant stock
appreciation rights to employees who have received a stock option
award. The stock appreciation rights may relate to such number
of shares, not exceeding the number of shares that the employee
may acquire upon exercise of a related stock option, as the
Committee determines in its discretion. Upon exercise of a stock
option by an employee, the stock appreciation rights relating to
the shares covered by such exercise shall terminate. Upon
termination of a stock option, any unexercised stock appreciation
rights related to that option shall also terminate. Upon
exercise of stock appreciation rights, such rights and the
related option to the extent of an equal number of shares shall
terminate.
6.2: The Committee at its discretion may revoke at any time
any unexercised stock appreciation rights granted to an employee
under this Plan, without compensation to such employee.
Revocation of an employee's stock appreciation rights under this
section shall not affect any related stock options granted to the
employee under this Plan.
6.3: Upon an employee's exercise of some or all of the
employee's stock appreciation rights, the employee shall receive
an amount equal to the value of the stock appreciation for the
number of rights exercised, payable in cash, common stock,
restricted stock, or a combination thereof, at the discretion of
the Committee.
6.4: The Committee shall have the discretion either to
determine the form in which payment of a stock appreciation right
will be made, or to consent to or disapprove the election of the
employee to receive cash in full or partial settlement of the
right. Such consent or disapproval may be given at any time
before or after the election to which it relates.
Notwithstanding the foregoing provision, if an employee exercises
a stock appreciation right during the 60-day period commencing on
the date of a change in control of the Corporation, the form of
payment of such stock appreciation right shall be cash provided
that such stock appreciation right was granted at least six
months prior to the date of exercise, and shall be common stock
if such stock appreciation right was granted six months or less
prior to the date of exercise. Provided, however, that the
previous sentence shall not apply to a "disqualified individual"
within the meaning of Section 280G(c) of the Internal Revenue
Code who is a party to an employment contract with the
Corporation that grants such person severance benefits in the
event that his employment is terminated subsequent to a change in
control of the Corporation or who is entitled to receive benefits
pursuant to a severance plan in the event that his employment is
terminated after a change in control, to the extent that the
exercise of the stock appreciation right would cause such
participant to incur the tax prescribed in Section 4999 of the
Internal Revenue Code on "excess parachute payments" within the
meaning of Section 280G(b) of the Internal Revenue Code.
6.5: Except in the case of a stock appreciation right that
was granted at least six months prior to exercise and that is
exercised for cash during the 60-day period commencing on the
date of a change in control of the Corporation, any election by
the employee to receive cash in full or partial settlement of the
stock appreciation right, as well as any exercise by the employee
of the employee's stock appreciation right for such cash, shall
be made only during the period beginning on the third business
day following the date of release of the quarterly or annual
summary statements of sales and earnings and ending on the
twelfth business day following such date.
6.6: Settlement for exercised stock appreciation rights may
be deferred by the Committee in its discretion to such date and
under such terms and conditions as the Committee may determine.
6.7: A stock appreciation right is only exercisable during
the period when the stock option to which it is related is also
exercisable.
Section 7: Exercise Payments.
7.1: The Committee may, in its discretion, grant to holders
of stock options the right to receive exercise payments relating
to such number of shares covered by the holder's stock options as
the Committee determines in its discretion; provided, however,
that the exercise payment rights granted to each participant
under the Plan in any year shall be limited to optioned stock
having a total option price not exceeding $100,000 plus any
unused carryovers. The "carryover" from any year shall be one
half of the amount by which $100,000 exceeds the total option
price of the stock which was accompanied by exercise payment
rights and for which a participant was granted an option in such
year under this Plan or any prior incentive compensation plan of
the Corporation. A carryover may be used only in the three
calendar years immediately succeeding the year in which it
accrued. The amount of options granted in any calendar year
under this Plan shall be treated as first using up the $100,000
limitation and then as using up unused carryovers to such year in
the order of the calendar years in which the carryovers accrued.
A carryover shall not accrue for a participant for any calendar
year in which the participant was not granted a stock option
award.
7.2: At the discretion of the Committee, the exercise
payment may be made in cash, common stock, restricted stock, or a
combination thereof; provided, however, exercise payments may be
made in cash to participants subject to Section 16(b) of the
Securities Exchange Act of 1934 only if they exercise the related
stock option during a period beginning on the third business day
following the date of release of the quarterly or annual summary
statements of sales and earnings and ending on the twelfth
business day following such date. Exercise payments shall be
paid within 20 business days following the exercise of a related
stock option; provided, however, that payment may be deferred by
the Committee in its discretion to such date and under such terms
and conditions as the Committee may determine.
7.3: Exercise payments shall be paid only upon the exercise
of related stock options which are exercised by the holder while
an active employee; provided, however, that in the case of an
option holder's death or retirement, exercise payments will be
paid if such related stock options are exercised within nine
months after death or three months after retirement, as the case
may be, but before the expiration of the stock option's term.
Section 8: General Provisions.
8.1: Any assignment or transfer of any awards without the
written consent of the Corporation shall be null and void.
8.2: Nothing contained herein shall require the Corporation
to segregate any monies from its general funds, or to create any
trusts, or to make any special deposits for any immediate or
deferred amounts payable to any participant for any year.
8.3: Participation in this Plan shall not affect the
Corporation's right to discharge a participating employee.
Section 9: Definitions.
9.1: A 'change in control of the Corporation' shall be
deemed to occur in the event that any of the following
circumstances have occurred:
(i) if a change in control of the Corporation
would be required to be reported in response
to Item 1(a) of the Current Report on Form
8-K, as in effect on the date hereof,
pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934, as amended
(the 'Exchange Act'), whether or not the
Corporation is then subject to such reporting
requirement;
(ii) any 'person' or 'group' within the
meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act (x) becomes the 'beneficial
owner' as defined in Rule 13d-3 under the
Exchange Act of more than 35% of the then
outstanding voting securities of the
Corporation, otherwise than through a
transaction or transactions arranged by, or
consummated with the prior approval of, the
Board or (y) acquires by proxy or otherwise
the right to vote for the election of
directors, for any merger or consolidation of
the Corporation or for any other matter or
question, more than 35% of the then
outstanding voting securities of the
Corporation, otherwise than through an
arrangement or arrangements consummated with
the prior approval of the Board;
(iii)if during any period of twenty-four
consecutive months (not including any period
prior to the adoption of this section),
Present Directors and/or New Directors cease
for any reason to constitute a majority of
the Board. For purposes of this subsection
(iii), 'Present Directors' shall mean
individuals who at the beginning of such
consecutive twenty-four month period were
members of the Board and 'New Directors'
shall mean any director whose election by the
Board or whose nomination for election by the
Corporation's stockholders was approved by a
vote of at least two-thirds of the Directors
then still in office who were Present
Directors or New Directors; or
(iv) any 'person' or 'group' within the
meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act that is the 'beneficial owner'
as defined in Rule 13d-3 under the Exchange
Act of 20% or more of the then outstanding
vesting securities of the Corporation
commences soliciting proxies.
9.2: "Employee" means all employees of the Corporation or
of a subsidiary of the Corporation participating in the Plan,
including officers of the Corporation, as well as officers of the
Corporation who are also Directors of the Corporation. However,
an individual who is a member of the Committee shall not be an
"employee" for purposes of this Plan.
9.3: "Exercise payment" is a payment upon the exercise of a
stock option of an amount determined by the Committee in its
discretion, which amount shall not be greater than 60% of the
excess of the Market Price (on the date the related stock option
is exercised) over the option price of the stock acquired upon
the exercise of the option.
9.4: "Market price" is the mean of the high and low prices
of the common stock of the Corporation as reported in the New
York Stock Exchange - Composite Transactions on the date the
option or stock appreciation right is exercised (or on the next
preceding day such stock was traded on a stock exchange included
in the New York Stock Exchange - Composite Transactions if it was
not traded on any such exchange on the date the option or stock
appreciation right is exercised), except that in the case of a
stock appreciation right that is exercised for cash during the
first three days of the ten-day period set forth in Section 6.5,
"Market Price" is the highest daily closing price of the common
stock of the Corporation as reported in the New York Stock
Exchange-Composite Transactions during such ten-day period.
Notwithstanding the foregoing provision, if a stock appreciation
right is exercised during the 60-day period commencing on the
date of a change in control of the Corporation, the Market Price
for purposes of determining the stock appreciation shall be the
highest of (1) the market price of the common stock of the
Corporation, as determined under the preceding sentence on the
date of exercise of the stock appreciation right; (2) the highest
market price of a share of the common stock of the Corporation
during the period commencing on the ninetieth day preceding the
date of exercise of the stock appreciation right and ending on
the date of exercise of the stock appreciation right; (3) the
highest price per share of common stock of the Corporation shown
on Schedule 13D or an amendment thereto filed pursuant to Section
13(d) of the Securities Exchange Act of 1934 by any person
holding 35% of the combined voting power of the Corporation's
then outstanding voting securities; or (4) the highest price paid
or to be paid per share of common stock of the Corporation
pursuant to a tender or exchange offer as determined by the
Committee. Provided, however, that the previous sentence shall
not apply to a 'disqualified individual' within the meaning of
Section 280G(c) of the Internal Revenue Code who prior to
December 1, 1986 is a party to an employment contract with the
Corporation that grants such person severance benefits in the
event that the employment is terminated subsequent to a change in
control of the Corporation, and after that date shall not apply
if the exercise of the stock appreciation right would cause such
participant to incur the tax prescribed in Section 4999 of the
Internal Revenue Code on 'excess parachute payments' within the
meaning of Section 280G(b) of the Internal Revenue Code.
9.5: "Retirement" shall mean retirement from employment by
the Corporation or a participating subsidiary with the right to
receive immediately a non-actuarially reduced pension under the
Corporation's Retirement Program.
9.6: "Restricted stock" means stock of the Corporation
subject to restrictions on the transfer of such stock, conditions
of forfeitability of such stock, or any other limitations or
restrictions as determined by the Committee.
9.7: "Stock Appreciation" shall be based on the excess of
the Market Price of the common stock over the option price of the
related option stock, as determined by the Committee.
Section 10: Amendment, Suspension, or Termination.
10.1: The Board of Directors may suspend, terminate, or
amend the Plan, but may not, without approval by the holders of a
majority of all outstanding shares entitled to vote on the
subject at a meeting of stockholders of Union Carbide
Corporation, increase the total number of shares of stock that
may be optioned under this Plan or that may be optioned to a
single participant during the term of this Plan.
10.2: This Plan is intended to comply with the requirements
of Rule 16b-3 under the Securities Exchange Act of 1934, as
applicable during the term of this Plan. Should the requirements
of Rule 16b-3 change, the Board of Directors may amend this Plan
to comply with the requirements of that rule or its successor
provision or provisions.
Section 11: Effective Date and Duration of the Plan.
This Plan shall be effective following approval by the
stockholders of the Corporation for years beginning on or after
January 1, 1984. No award shall be granted under this Plan for
any year commencing on or after January 1, 1989.
Exhibit 10.2.2
RESOLUTIONS ADOPTED BY THE
BOARD OF DIRECTORS OF
UNION CARBIDE CORPORATION ON
JANUARY 22, 1986, WITH RESPECT TO THE
1984 UNION CARBIDE STOCK OPTION PLAN
RESOLVED, that upon the recommendation of management, and in
accordance with Section 6.6 of the 1979 Union Carbide Incentive
Compensation Plan and Section 5.6 of the 1984 Union Carbide Stock
Option Plan (the "Plans"), the Committee approves and recommends
that the Board authorize that, in view of the Special
Distribution to shareholders of record on February 15, 1986 upon
the sale of the Consumer Products Businesses ("Special
Distribution") and the 3-for-1 stock split authorized by the
Board on January 2, 1986, the following equitable adjustments be
made in (i) the number of shares and prices per share applicable
to outstanding stock options and for the purposes of stock
appreciation rights ("SARs") and exercise payments ("EPs") and
(ii) the number of shares which are hereafter available for stock
option awards in total or to any participant in the Plans:
(a) There shall be no adjustment in
the option prices presently in effect (the
"Original Option Prices") for any stock
options, or for the purpose of SARs or EPs,
exercised on or prior to the 10th day of
trading on the New York Stock Exchange of the
Rights to receive the Special Distribution
(the "Special Distribution Rights").
(b) Effective on the 11th day of
trading on the New York Stock Exchange of the
Special Distribution Rights, the option
prices for then outstanding stock options and
for the purpose of SARs and EPs shall be
reduced by an amount equal to the average of
the closing prices of the Special
Distribution Rights on the first 10 days of
trading of such Rights on the New York Stock
Exchange, as reported on the New York Stock
Exchange--Composite Transactions, but no
option price shall be reduced to less than $3
per share under this paragraph. The option
price as adjusted under this paragraph shall
continue in effect until further adjusted
under paragraph (c), (d) or (f) below.
(c) When the entire Special
Distribution has been determined and
announced by the Board of Directors, the
option prices then in effect for the then
outstanding stock options and for the purpose
of SARs and EPs shall be adjusted to a price
equal to the Original Option Prices minus the
amount of the Special Distribution, effective
on the date of said announcement, but no
option price shall be reduced to less than $3
per share under this paragraph. If the
Special Distribution is determined and
announced by the Board of Directors in parts
at different times rather than in whole at
one time, no adjustment shall be made in the
option prices pursuant to this paragraph (c)
until the entire Special Distribution has
been determined and announced.
(d) From and after aforesaid 3-for-1
stock split, (i) the Original Option Prices
if they are still in effect, or the option
prices as adjusted pursuant to paragraph (b)
or (c) above, as the case may be, shall be
divided by three for the then outstanding
stock options and for the purpose of the SARs
and EPs, and (ii) the number of shares of
stock covered by then outstanding stock
options, and the number of corresponding SARs
and EPs, shall be multiplied by three.
(e) Effective as of the date of the
3-for-1 stock split, the total number of
shares of stock which are thereafter
available for stock option awards shall be
increased from 3,188,145 to 9,564,435, and no
participant in the Plans shall be granted
options in any one year for, in the
aggregate, more than 150,000 shares.
(f) If any circumstances hereafter
become known or develop which, in the
judgment of the Board of Directors, cause any
adjustment in the option prices to be not
equitable to a significant extent, the Board
shall have the right to make such further
adjustments, in such amounts and at such
times, as the Board in its judgment
determines are necessary to achieve equity.
_________________________
Exhibit 10.2.3
RESOLUTIONS ADOPTED BY THE
BOARD OF DIRECTORS OF
UNION CARBIDE CORPORATION ON
APRIL 17, 1986, WITH RESPECT TO THE
1984 UNION CARBIDE STOCK OPTION PLAN
RESOLVED, that, in accordance with Section 6.6 of the 1979
Union Carbide Incentive Compensation Plan and Section 5.6 of the
1984 Union Carbide Stock Option Plan (the "Plans"), and in view
of circumstances which have developed since the adjustments
authorized by the Board at its January 22, 1986 meeting to the
option prices of all outstanding stock options, stock
appreciation rights ("SARs") and exercise payments ("EPs")
because of the special distribution upon the sale of the consumer
products business ("Special Distribution"), the following
equitable adjustments be made in the prices per share applicable
to outstanding stock options, SARs and EPs:
(a) Effective on the date the
estimated amount of the Special Distribution
is announced by the Corporation, the option
prices presently in effect for the then
outstanding stock options and for purposes of
SARs and EPs shall be readjusted in
accordance with the resolutions adopted by
the Board on January 22, 1986 using the
estimated amount of the Special Distribution
as announced by the Board rather than the ten
day trading average of the Special
Distribution Rights. The option prices
adjusted under this paragraph shall continue
in effect until further adjusted under
paragraph (b) below or in accordance with the
resolutions adopted by the Board on January
22, 1986 at the time the actual amount of the
Special Distribution is announced by the
Corporation.
(b) If any circumstances hereafter
become known or develop which, in the
judgment of the Board of Directors, cause any
adjustment in the option prices to be not
equitable to a significant extent, the Board
shall have the right to make such further
adjustments in such amounts and at such
times, as the Board in its judgment
determines are necessary to achieve equity.
Exhibit 10.4.1
1983 UNION CARBIDE BONUS DEFERRAL PROGRAM
Table of Contents
Section 1: Purpose 1
Section 2: Definitions 1
2.1: Beneficiary 1
2.2: Committee 1
2.3: Corporation 1
2.4: Employee and Eligible Employee 1
2.5: Disability 1
2.6: Participant 1
2.7: Retirement Date 1
2.8: Date of Deferral 2
Section 3: Administration 2
Section 4: Eligibility To Participate 2
Section 5: Election To Participate 2
Section 6: Payments to Participants
and Beneficiaries 2
6.1: Normal Payments 2
6.2: Alternate Payments 3
6.3: Payment Dates of Annual Payments
after the Initial Payment 3
6.4: Payments upon Disability 3
6.5: Payments upon Death 4
6.6: Committee's Right To Commute Annual
Payments 4
6.7: Payment upon Termination of
Employment 4
6.8: Payment upon Showing of
Hardship 4
6.9: Payments upon Program Termination 5
A: Program Termination on or
before November 30, 1984 5
B: Program Termination after
November 30, 1984 5
C: Effective Date 6
D: Meaning of "already become
entitled to payment" 6
6.10: Reduction of Payments 6
Section 7: Beneficiary 6
Section 8: General Provisions 7
8.1: Prohibition of Assignment
or Transfer 7
8.2: Program Not To Be Funded 7
8.3: Effect of Participation 7
8.4: Communications To Be in Writing 7
8.5: Absence of Liability 7
8.6: New York Law To Govern 7
8.7: Amendment 8
1983 UNION CARBIDE BONUS DEFERRAL PROGRAM
Section 1: Purpose
Section 5.3 of the 1979 Union Carbide Incentive Compensation
Plan (the "1979 Plan") provides that the Committee administering
the 1979 Plan may defer payment of some or all annual bonus
awards to such date, and upon such terms and conditions, as the
Committee may designate. The Committee has not previously
deferred payment of any bonus awards or designated terms and
conditions for deferrals. The purpose of the 1983 Union Carbide
Bonus Deferral Program (the "Program") is to provide a procedure,
as authorized by the 1979 Plan, by which certain potential
recipients may elect to defer a portion or all of their 1983
bonus awards under the 1979 Plan.
Section 2: Definitions
2.1: "Beneficiary" means the person, persons or estate
entitled (as determined under Section 7) to receive payment under
the Program following a Participant's death.
2.2: "Committee" means the Compensation and Management
Development Committee from time to time serving and appointed by
the Board of Directors of the Corporation.
2.3: "Corporation" means Union Carbide Corporation, a New
York corporation, and any successor thereof by merger,
consolidation or otherwise.
2.4: "Employee" means a person who is a common law employee
of the Corporation or any of its subsidiary corporations, and
"Eligible Employee" means a person who was an Employee on
November 23, 1983 or who thereafter became an Employee, and who
is offered an opportunity to participate in the Program as
provided in Section 4.
2.5: "Disability" means a Participant's total physical or
mental inability to perform any work for compensation or profit
in any occupation for which the Participant is reasonably
qualified by reason of training, education or ability, and which
inability is adjudged to be permanent, as determined by the
Committee.
2.6: "Participant" means an Eligible Employee who elects
under the Program to defer a portion or all of the Employee's
1983 bonus award, if one were to be paid, and who is in fact
subsequently awarded a 1983 bonus award.
2.7: "Retirement Date" means the earliest date on which a
Participant could have retired with the right to receive
immediately a non-actuarially reduced pension under the
Corporation's Retirement Program.
2.8: "Date of Deferral" means the date on which the
Corporation issues checks for 1983 bonus awards.
Section 3: Administration
The Committee shall supervise the administration and
interpretation of the Program, may establish administrative
regulations to further the purpose of the Program and shall take
any other action necessary to the proper operation of the
Program. All decisions and acts of the Committee shall be final
and binding upon all Participants, their Beneficiaries and all
other persons.
Section 4: Eligibility To Participate
All Employees eligible to be awarded bonuses for the 1983
plan year under the 1979 Plan shall be offered an opportunity to
participate in the Program ("Eligible Employee").
Section 5: Election To Participate
On and after December 5, 1983, Eligible Employees shall be
informed of the opportunity to participate in the Program, and
the terms and conditions of participation. An Eligible Employee
choosing to participate must make an irrevocable election to do
so not later than December 31, 1983, and otherwise in accordance
with such procedures as may be established. Participation, and
the right to receive payment under the Program, shall become
effective on and after the Deferral Date.
Section 6: Payments to Participants and Beneficiaries
6.1: Normal Payments. A Participant, who remains an
Employee at least until the Participant's Retirement Date, shall
be entitled to 15 annual Normal Payments, commencing within 120
days following the latest of:
(a) the date of actual retirement,
(b) the Participant's 65th birthday, or
(c) ten years following the Date of Deferral.
Payments shall be made in accordance with the following table
(unless the Participant has elected the Alternate Payments
provided by Section 6.2):
Annual 15-Year Approximate
Payment for Rate of Return
Each $1,000 of Calculated through
Age on Bonus Award Total of Receipt of the Last
December 31, 1983 Deferred Annual Payments of 15 Annual Payments
35 $3,927 $58,905 12.00%
36 3,560 53,400 12.05
37 3,224 48,360 12.10
38 2,918 43,770 12.15
39 2,638 39,570 12.20
40 2,383 35,745 12.25
41 2,150 32,250 12.30
42 1,939 29,085 12.35
43 1,746 26,190 12.40
44 1,572 23,580 12.45
45 1,413 21,195 12.50
46 1,256 18,840 12.55
47 1,140 17,100 12.60
48 1,022 15,330 12.65
49 916 13,740 12.70
50 820 12,300 12.75
51 733 10,995 12.80
52 655 9,825 12.85
53 585 8,775 12.90
54 522 7,830 12.95
55 or older 465 6,975 13.00
6.2: Alternate Payments. In lieu of the Normal Payments
provided by Section 6.1, a Participant, who remains an Employee
at least until the Participant's Retirement Date, and who
irrevocably so elects at the time the election to participate is
made, shall be entitled to 15 annual Alternate Payments,
commencing within 120 days following the latest of:
(a) the date of actual retirement,
(b) the Participant's 62nd birthday, or
(c) seven years following the Date of Deferral.
Alternate Payments may not commence more than 36 months earlier
than Normal Payments would have commenced. If Alternate Payments
commence earlier than Normal Payments would have commenced, the
Alternate Payments shall be the amount of the applicable Normal
Payments reduced by .4167 percent (.004167) for each month of
early commencement.
6.3: Payment Dates of Annual Payments after the Initial
Payment. All annual Normal or Alternate Payments after the
initial payment shall be made on April 1, commencing on the April
1 next following the date the initial payment was due in
accordance with Section 6.1 or 6.2.
6.4: Payments upon Disability. A Participant determined by
the Committee to have suffered a Disability while an Employee, as
defined in Section 2.5, shall be entitled to 15 annual Normal
Payments (or 15 annual Alternate Payments if the Participant so
elected). Such payments shall commence and continue at the times
provided in Sections 6.1, 6.2 or 6.3, as if the Participant had
actually retired on the Participant's Retirement Date.
6.5: Payments upon Death. If a Participant already
receiving payments under Sections 6.1, 6.2 or 6.4 dies at any
time before having received 15 annual (Normal or Alternate)
Payments, the remaining payments shall be made, as they become
due, to the Participant's Beneficiary. If death occurs before
annual payments to the Participant commence, the Participant's
Beneficiary shall receive 15 annual Normal Payments (any election
to receive Alternate Payments shall be disregarded), commencing
within 120 days following the Participant's death. Annual
payments after the initial payment shall be made on April 1,
commencing on the April 1 next following the date the initial
payment was made.
6.6: Committee's Right To Commute Annual Payments. The
Committee, in its discretion, may decide to make lump sum
payments to all Participants in lieu of the annual (Normal or
Alternate) payments provided for in Sections 6.1, 6.2, 6.4 or
6.5. A Participant or Beneficiary who is already receiving
Normal or Alternate Payments shall receive a lump sum payment
equal to the amount remaining to be paid to the Participant or
Beneficiary under the Program, using as a discount factor the
rate of return applicable to the Participant's age on December
31, 1983, provided in the table in Section 6.1. Such lump sum
payments shall be computed as of a date to be determined by the
Committee in its discretion, and shall be paid within 120 days
thereafter. A Participant who has not already become entitled to
payment as provided by Section 6.9.D, or who has become entitled
to payment but has not received the initial payment, shall
receive a lump sum payment, discounted as in the case of
Participants who are already receiving annual payments, within
120 days after the date the Participant would have received the
initial payment.
6.7: Payment upon Termination of Employment. A Participant
whose employment by the Corporation terminates, for any reason
other than (a) retirement on or after the Participant's
Retirement Date, (b) death, (c) Disability, or (d) a reason
approved by the Committee, shall receive, within 120 days
following the effective date of termination of employment, a lump
sum payment, in lieu of any other payment under the Program,
equal to the amount of bonus award deferred, plus interest
thereon from April 1, 1984 to the date of payment at the rate of
six per cent per year, compounded annually.
6.8: Payment upon Showing of Hardship. A Participant who,
prior to commencing to receive Normal or Alternate Payments,
demonstrates, to the Committee's satisfaction in its sole
discretion, severe, substantial and unanticipated financial
hardship, shall receive a lump sum payment, in lieu of any other
payment under the Program, equal to the amount of bonus award
deferred, plus interest thereon from April 1, 1984 to the date of
payment at the rate of six per cent per year, compounded
annually, payable at such time as the Committee shall determine.
6.9: Payments upon Program Termination.
A: Program Termination on or before November 30, 1984.
The Corporation may terminate the Program at any time for any
reason on or before November 30, 1984. In such event, each
Participant or Beneficiary who, in accordance with Sections 6.4,
6.5, 6.7 or 6.8, has, on or before the effective date of Program
termination, already become entitled to payment under those
Sections, shall receive the payments provided for in those
Sections, unless the Committee, in its discretion, upon Program
termination or at any time thereafter, decides to make lump sum
payments in lieu of annual payments to Participants or
Beneficiaries already entitled to annual payments under Sections
6.4 or 6.5, using as discount factors the rates of return,
applicable to Participants' ages on December 31, 1983, provided
in the table in Section 6.1. Such lump sum payments shall be
computed as of a date to be determined by the Committee in its
discretion, and shall be paid within 120 days thereafter. Each
other Participant or Beneficiary shall receive, within 120 days
following the effective date of Program termination, in lieu of
any other payment under the Program, a lump sum payment equal to
the amount of bonus award deferred, plus interest thereon from
April 1, 1984 to the date of payment at the rate of six per cent
per year, compounded annually.
B: Program Termination after November 30, 1984. The
Corporation may terminate the Program at any time after November
30, 1984 if the Committee, in its sole discretion, determines
that changes in Federal or state law, changes in general economic
conditions or changes in the financial condition of the
Corporation render continuation of the Program undesirable. In
such event, each Participant or Beneficiary who has, on or before
the effective date of Program termination, already become
entitled to payment under the Program, shall receive the payments
to which such person was entitled under the Program, unless the
Committee, in its discretion, upon Program termination or at any
time thereafter, decides to make lump sum payments in lieu of
annual payments, using as discount factors the rates of return,
applicable to Participants' ages on December 31, 1983, provided
in the table in Section 6.1. Such lump sum payments shall be
computed as of a date to be determined by the Committee in its
discretion, and shall be paid within 120 days thereafter. Each
other Participant or Beneficiary shall receive, within 120 days
following the effective date of Program termination, in lieu of
any other payment under the Program, a lump sum payment to be
determined by the Committee at least equal to the sum of (i) the
amount of bonus deferred and (ii) interest thereon from April 1,
1984 to the date of payment at the rate of six per cent per year,
compounded annually.
C: Effective Date. The effective date of any Program
termination shall be determined by the Committee.
D: Meaning of "already become entitled to payment."
The phrase "already become entitled to payment" used in Section
6.6 and this Section 6.9 means that
(i) A Participant has retired
on or after the Participant's Retirement
Date, but the annual payments provided for by
Sections 6.1 or 6.2 have not all been made,
(ii) A Participant has been
determined by the Committee to have suffered
a Disability, but the payments provided for
by Section 6.4 have not all been made,
(iii) A Participant has died, but
the payments provided for by Section 6.5 have
not all been made,
(iv) A Participant's employment
with the Corporation has terminated, but the
payment provided for by Section 6.7 has not
been made, or
(v) A Participant has
demonstrated hardship to the Committee's
satisfaction, but the payment provided for by
Section 6.8 has not been made.
6.10: Reduction of Payments. All payments under the
Program shall be reduced by amounts the Corporation is required
to withhold under applicable law.
Section 7: Beneficiary
A Participant may at any time and from time to time prior to
death designate one or more Beneficiaries to receive payments to
be made following the Participant's death. If no such
designation is on file with the Corporation at the time of a
Participant's death, the Participant's Beneficiary shall be the
beneficiary or beneficiaries named in the beneficiary designation
most recently filed by the Participant with the Corporation under
The Savings Plan for Employees of Union Carbide Corporation and
Participating Subsidiary Companies. If the Participant has not
effectively designated a beneficiary under such Savings Plan, or
if no beneficiary so designated has survived the Participant, the
Participant's Beneficiary shall be the beneficiary or
beneficiaries named in the beneficiary designation most recently
filed by the Participant with the Corporation under the 401(k)
Opportunity Plan for Salaried Employees of Union Carbide
Corporation. If the Participant has not effectively designated a
beneficiary under either such Plan, or no beneficiary so
designated has survived the Participant, the Participant's
Beneficiary shall be the Participant's surviving spouse, or, if
no spouse has survived the Participant, the estate of the
deceased Participant. If an individual Beneficiary cannot be
located for a period of one year following the Participant's
death, despite mailing to the Beneficiary's last known address,
and if the Beneficiary has not made a written claim for benefits
within such period to the Committee, the Beneficiary shall be
treated as having predeceased the Participant. The Committee may
require such proof of death and such evidence of the right of any
person to receive all or part of the benefit of a deceased
Participant as the Committee may consider to be appropriate. The
Committee may rely upon any direction by the legal
representatives of the estate of a deceased Participant, without
liability to any other person.
Section 8: General Provisions
8.1: Prohibition of Assignment or Transfer. Any
assignment, hypothecation, pledge or transfer of a Participant's
or Beneficiary's right to receive payments under the Program,
without the written consent of the Committee, shall be null and
void and shall be disregarded.
8.2: Program Not To Be Funded. The Corporation is not
required to, and will not, for the purpose of funding the
Program, segregate any monies from its general funds, create any
trusts, or make any special deposits.
8.3: Effect of Participation. Neither selection as an
Eligible Employee, nor participation in the Program, shall
entitle an Eligible Employee to receive a 1983 bonus award, or
affect the Corporation's right to discharge an Eligible Employee
or a Participant.
8.4: Communications To Be in Writing. All elections,
requests and communications to the Corporation from Participants,
and all communications to Participants from the Corporation,
shall be in writing, and in such form and manner, and within such
time, as the Corporation shall determine.
8.5: Absence of Liability. No officer, director or
employee of the Corporation shall be personally liable for any
act or omission to act, under the Program, of any other person,
or, except in circumstances involving bad faith, for such
officer's, director's or employee's own act or omission to act.
8.6: New York Law To Govern. All questions pertaining to
the construction, regulation, validity and effect of the
provisions of the Program shall be determined in accordance with
New York law.
8.7: Amendment. The Corporation may at any time amend the
Program, as set forth herein, but no amendment may be adopted
which alters the payments due Participants, or the times at which
payments are due, without the consent of each Participant
affected by the amendment and of each Beneficiary (of a then
deceased Participant) affected by the amendment.
Exhibit 10.5.1
1984 UNION CARBIDE CASH BONUS DEFERRAL PROGRAM
Section 1: Purpose
Section 5.3 of the 1984 Union Carbide Cash Bonus Plan
(the "1984 Plan") provides that the Committee administering the
1984 Plan may defer payment of some or all cash bonus awards, and
upon such terms and conditions, as the Committee in its
discretion may determine. The purpose of the 1984 Union Carbide
Cash Bonus Deferral Program (the "Program") is to provide a
procedure, as authorized by the 1984 Plan, by which potential
recipients of bonus awards may annually elect in advance to defer
a portion or all of their bonus awards under the 1984 Plan. The
Program shall be effective for the five calendar years 1984
through 1988.
Section 2: Definitions
2.1: "Beneficiary" means the person, persons or estate
entitled (as determined under Section 7) to receive payment under
the Program following a Participant's death.
2.2: "Committee" means the Compensation and Management
Development Committee from time to time serving and appointed by
the Board of Directors of the Corporation.
2.3: "Corporation" means Union Carbide Corporation, a
New York corporation, and any successor thereof by merger,
consolidation or otherwise.
2.4: "Date of Deferral" means the date on which the
Corporation issues checks for bonus awards for a given Service
Year.
2.5: "Disability" means a Participant's total physical
or mental inability to perform any work for compensation or
profit in any occupation for which the Participant is reasonably
qualified by reason of training, education or ability, and which
inability is adjudged to be permanent, as determined by the
Committee.
2.6: "Employee" means a person who is a common law
employee of the Corporation or one of its subsidiary corporations
and "Eligible Employee" means a person who is an Eligible
Employee within the meaning of the 1984 Plan.
2.7: "Participant" means an Eligible Employee who
elects in advance under the Program to defer a portion or all of
the employee's bonus award for a given Service Year under the
1984 Plan, if one were to be paid to that employee for that year,
and who is in fact subsequently awarded a bonus for that year,
payable during the following year on the Date of Deferral.
2.8: "Retirement Date" means the earliest date on which
a Participant could have retired with the right to receive
immediately a non-actuarially reduced pension under the
Corporation's Retirement Program.
2.9: "Service Year" means one of the calendar years 1984
through 1988, as to which an election may be made in accordance
with Section 5, and in respect of which a bonus may be paid
during the following year on the Date of Deferral.
Section 3: Administration
The Committee shall supervise the administration and
interpretation of the Program, may establish administrative
regulations to further the purpose of the Program and shall take
any other action necessary to the proper operation of the
Program. All decisions and acts of the Committee shall be final
and binding upon all Participants, their Beneficiaries and all
other persons.
Section 4: Eligibility To Participate
To be eligible to participate in the Program for a
given Service Year, a person must have become an Eligible
Employee not later than the day on or before which Eligible
Employees must make the election provided for in Section 5 for
that Service Year, reach the age of 40 on or before the last day
of that Service Year and be living on the Date of Deferral for
that Service Year.
Section 5: Election To Participate
5.1: Participation in Program for Service Year 1984.
On and after October 24, 1984, Eligible Employees shall be
informed of the opportunity to participate in the Program for the
1984 Service Year, and the terms and conditions of participation.
An Eligible Employee choosing to participate for the 1984
Service Year must make an irrevocable election to do so not later
than November 21, 1984 and otherwise in accordance with such
procedures as may be established.
5.2: Participation in Program for Service Years 1985
through 1988. During each of the years 1984 through 1987,
Eligible Employees shall be informed of the opportunity to
participate in the Program for the Service Year immediately
following, and the terms and conditions of participation. An
Eligible Employee choosing to participate must make an
irrevocable election to do so on or before the day designated by
the Committee and in any event prior to the first day of the
Service Year, and otherwise in accordance with such procedures as
may be established.
5.3: Effective Date of Participation. While an
election shall be irrevocable when made, participation, and the
right to receive payment under the Program, shall become
effective only on the Date of Deferral and only if, on such date,
the Eligible Employee receives a cash bonus under the 1984 Plan
(or would have received a cash bonus but for an election to defer
under the Program).
Section 6: Payments to Participants and Beneficiaries
6.1: Normal Payments. A Participant who remains an
Employee at least until the Participant's Retirement Date shall
be entitled to 15 annual Normal Payments, commencing within 120
days following the latest of:
(a) the date of actual retirement,
(b) the Participant's 65th birthday, or
(c) 10 years following the Date of Deferral.
Unless the Participant elects the Alternate Payments provided for
by Section 6.2, payments shall be made in accordance with a
payment table established by the Committee for each Service Year
and communicated to Eligible Employees at the time they are
offered the opportunity to participate in the Program for that
year. The payment table attached as Exhibit A shall apply to the
deferral of cash bonus awards in respect of the 1984 and 1985
Service Years.
6.2: Alternate Payments. In lieu of the Normal
Payments provided for by Section 6.1, a Participant who remains
an Employee at least until the Participant's Retirement Date and
who irrevocably so elects at the time the applicable election to
participate is made, shall be entitled to 15 annual Alternate
Payments, commencing within 120 days following the latest of:
(a) the date of actual retirement,
(b) the Participant's 62nd birthday, or
(c) seven years following the Date of
Deferral.
Alternate Payments may not commence more than 36 months earlier
than Normal Payments would have commenced. If Alternate Payments
commence earlier than Normal Payments would have commenced, the
Alternate Payments shall be the amount of the applicable Normal
Payments reduced by .4167 percent (.004167) for each month of
early commencement.
6.3: Payment Dates of Annual Payments after the
Initial Payment. All annual Normal or Alternate Payments after
the initial payment shall be made on April 1, commencing on the
April 1 next following the date the initial payment was due in
accordance with Section 6.1 or 6.2.
6.4: Payments upon Disability. A Participant
determined by the Committee to have suffered a Disability (as
defined in Section 2.5) while an Employee shall be entitled to 15
annual Normal Payments (or 15 annual Alternate Payments if the
Participant so elected). Such payments shall commence and
continue at the times provided in Sections 6.1, 6.2 or 6.3, as if
the Participant had actually retired on the Participant's
Retirement Date.
6.5: Payments upon Death. If a Participant already
receiving payments under Sections 6.1, 6.2 or 6.4 dies at any
time before having received 15 annual (Normal or Alternate)
Payments, the remaining payments shall be made, as they become
due, to the Participant's Beneficiary. If death occurs before
annual payments to the Participant commence, the Participant's
Beneficiary shall receive 15 annual Normal Payments (any election
to receive Alternate Payments shall be disregarded), commencing
within 120 days following the Participant's death. Annual
payments after the initial payment shall be made on April 1,
commencing on the April 1 next following the date the initial
payment was made.
6.6: Committee's Right To Commute Annual Payments in
respect of One or More Service Years. The Committee, in its
discretion, may decide to make lump sum payments to all
Participants, in respect of a particular Service Year, in lieu of
the annual (Normal or Alternate) payments provided for in
Sections 6.1, 6.2, 6.4 or 6.5. In such event, a Participant or
Beneficiary who is already receiving Normal or Alternate Payments
in respect of that Service Year shall receive a lump sum payment
in lieu of annual payments equal to the present value of the
amount remaining to be paid to the Participant or Beneficiary
under the Program, using as a discount factor the rate of return
applicable to the Participant's age on the last day of that
Service Year, provided in the payment table applicable to that
Service Year. Such lump sum payments shall be computed as of a
date to be determined by the Committee in its discretion, and
shall be paid within 120 days thereafter. A Participant who has
not already become entitled to payment for that Service Year, as
described in Section 6.9, or who has become entitled to payment
but has not received the initial payment, shall receive, in lieu
of any other payment under the Program, a lump sum payment,
discounted as in the case of Participants who are already
receiving annual payments, within 120 days after the date the
Participant would have received the initial payment.
6.7: Payment upon Termination of Employment. A
Participant whose employment by the Corporation terminates, for
any reason other than (a) retirement on or after the
Participant's Retirement Date, (b) death, (c) Disability, (d) the
reason set forth in the next sentence, or (e) a reason approved
by the Committee, shall receive, within 120 days following the
effective date of termination of employment, a lump sum payment,
in lieu of any other payment under the Program, equal to the
amount of bonus award or awards deferred, plus interest thereon
from the April 1 following the applicable Service Year or Service
Years to the date of payment at the rate of six per cent per
year, compounded annually. A Participant whose employment is
terminated by the Corporation for willful failure to perform the
normal duties of employment, or for an act of dishonesty in
connection with such Participant's employment, shall receive,
within 120 days following the effective date of termination of
employment, a lump sum payment, in lieu of any other payment
under the Program, equal to the amount of bonus award or awards
deferred.
6.8: Payments upon Program Termination. The
Corporation may terminate the Program at any time if the
Committee, in its sole discretion, determines that changes in
Federal or state law, changes in general economic conditions or
changes in the financial condition of the Corporation render
continuation of the Program undesirable. In such event, each
Participant or Beneficiary who has, on or before the effective
date of Program termination, already become entitled to payment
under the Program, as described in Section 6.9, shall receive the
payments to which such person was entitled under the Program,
unless the Committee, in its discretion, upon Program termination
or at any time thereafter, decides to make lump sum payments in
lieu of annual payments equal to the present value of such
payments, using as discount factors the rates of return,
applicable to Participants' ages on the last days of the
applicable Service Years, provided in the applicable payment
tables. Such lump sum payments shall be computed as of a date to
be determined by the Committee in its discretion, and shall be
paid within 120 days thereafter. Each other Participant or
Beneficiary shall receive, within 120 days following the
effective date of Program termination (to be determined by the
Committee), in lieu of any other payment under the Program, a
lump sum payment to be determined by the Committee and at least
equal to the sum of (i) the amount of bonus award or awards
deferred and (ii) interest thereon from the April 1 following the
applicable Service Year to the date of payment at the rate of six
per cent per year, compounded annually.
6.9: Meaning of "already become entitled to payment."
The phrase "already become entitled to payment" used in Sections
6.6 and 6.8 means that
(i) A Participant has retired on or after the
Participant's Retirement Date, but the
payments provided for by Sections
6.1 or 6.2 have not all been made,
(ii) A Participant has been determined by the
Committee to have suffered a Disability,
but the payments provided for by Section
6.4 have not all been made,
(iii) A Participant has died, but the payments
provided for by Section 6.5 have not all
been made, or
(iv) A Participant's employment with the
Corporation has terminated, but the
payment provided for by Section 6.7 has
not been made.
6.10: Reduction of Payments. All payments under the
Program shall be reduced by amounts the Corporation is required
to withhold under applicable law.
Section 7: Beneficiaries
A Participant may at any time and from time to time
prior to death designate one or more Beneficiaries to receive
payments to be made following the Participant's death. If no
such designation is on file with the Corporation at the time of a
Participant's death, the Participant's Beneficiary shall be the
beneficiary or beneficiaries named in the beneficiary designation
most recently filed by the Participant with the Corporation under
The Savings Plan for Employees of Union Carbide Corporation and
Participating Subsidiary Companies. If the Participant has not
effectively designated a beneficiary under such Savings Plan, or
if no beneficiary so designated has survived the Participant, the
Participant's Beneficiary shall be the beneficiary or
beneficiaries named in the beneficiary designation most recently
filed by the Participant with the Corporation under the 401(k)
Opportunity Plan for Salaried Employees of Union Carbide
Corporation. If the Participant has not effectively designated a
beneficiary under either such Plan, or no beneficiary so
designated has survived the Participant, the Participant's
Beneficiary shall be the Participant's surviving spouse, or, if
no spouse has survived the Participant, the estate of the
deceased Participant. If an individual Beneficiary cannot be
located for a period of one year following the Participant's
death, despite mail notification to the Beneficiary's last known
address, and if the Beneficiary has not made a written claim for
benefits within such period to the Committee, the Beneficiary
shall be treated as having predeceased the Participant. The
Committee may require such proof of death and such evidence of
the right of any person to receive all or part of the benefit of
a deceased Participant as the Committee may consider to be
appropriate. The Committee may rely upon any direction by the
legal representatives of the estate of a deceased Participant,
without liability to any other person.
Section 8: General Provisions
8.1: Prohibition of Assignment or Transfer. Any
assignment, hypothecation, pledge or transfer of a Participant's
or Beneficiary's right to receive payments under the Program
shall be null and void and shall be disregarded.
8.2: Program Not To Be Funded. The Corporation is not
required to, and will not, for the purpose of funding the
Program, segregate any monies from its general funds, create any
trusts, or make any special deposits, and the right of a
Participant or Beneficiary to receive a payment under the Program
shall be no greater than the right of an unsecured general
creditor of the Corporation.
8.3: Effect of Participation. Neither selection as an
Eligible Employee, nor an election to participate or
participation in the Program, shall entitle an Eligible Employee
to receive a bonus award under the 1984 Plan, or affect the
Corporation's right to discharge an Eligible Employee or a
Participant.
8.4: Medical Examinations. An Eligible Employee
making an election under Section 5 may be required, for the
Service Year as to which an election has been made, to submit to
a physical examination in connection with that election. If an
electing Eligible Employee refuses to submit to such an
examination, the Committee may, in its discretion, on or before
the applicable Date of Deferral, cancel the Employee's
participation in the Program for that Service Year.
8.5: Communications To Be in Writing. All elections,
requests and communications to the Corporation from Participants
and Beneficiaries, and all communications to such persons from
the Corporation, shall be in writing, and in such form and
manner, and within such time, as the Corporation shall determine.
8.6: Absence of Liability. No officer, director or
employee of the Corporation shall be personally liable for any
act or omission to act, under the Program, of any other person,
or, except in circumstances involving bad faith, for such
officer's, director's or employee's own act or omission to act.
8.7: Titles for Reference Only. The titles given
herein to Sections and subsections are for reference only and are
not to be used to interpret the provisions of the Program.
8.8: New York Law To Govern. All questions pertaining
to the construction, regulation, validity and effect of the
provisions of the Program shall be determined in accordance with
New York law.
8.9: Amendment. The Corporation may at any time amend
the Program, as set forth herein, but no amendment may be adopted
which alters the payments due Participants or Beneficiaries, or
the times at which payments are due, without the consent of each
Participant affected by the amendment and of each Beneficiary (of
a then deceased Participant) affected by the amendment.
EXHIBIT A
Payment Table for 1984 and 1985 Service Years
Approximate
Rate of Return
Age on the Annual 15-Year Calculated through
Last Day of Payment for Each Receipt of the
the Service $1,000 of Bonus Total of Last of 15
Year Award Deferred Annual Payments Annual Payments
40 2,721 40,815 12.75
41 2,445 36,675 12.80
42 2,194 32,910 12.85
43 1,968 29,520 12.90
44 1,763 26,445 12.95
45 1,578 23,670 13.00
46 1,411 21,165 13.05
47 1,261 18,915 13.10
48 1,126 16,890 13.15
49 1,004 15,060 13.20
50 895 13,425 13.25
51 797 11,955 13.30
52 709 10,635 13.35
53 630 9,450 13.40
54 559 8,385 13.45
55 or older 496 7,440 13.50
1984 UNION CARBIDE CASH BONUS DEFERRAL PROGRAM
Table of Contents
Section 1: Purpose 1
Section 2: Definitions 1
2.1: Beneficiary 1
2.2: Committee 1
2.3: Corporation 1
2.4: Date of Deferral 1
2.5: Disability 1
2.6: Employee and Eligible Employee 1
2.7: Participant 1
2.8: Retirement Date 2
2.9: Service Year 2
Section 3: Administration 2
Section 4: Eligibility To Participate 2
Section 5: Election To Participate 2
5.1: Participation in Program for Service
Year 1984 2
5.2: Participation in Program for Service
Years 1985 through 1988 2
5.3: Effective Date of Participation 3
Section 6: Payments to Participants
and Beneficiaries 3
6.1: Normal Payments 3
6.2: Alternate Payments 3
6.3: Payment Dates of Annual Payments
after the Initial Payment 4
6.4: Payments upon Disability 4
6.5: Payments upon Death 4
6.6: Committee's Right To Commute Annual
Payments in respect of One or
More Service Years 4
6.7: Payment upon Termination of
Employment 5
6.8: Payments upon Program Termination 5
6.9: Meaning of "already become
entitled to payment" 6
6.10: Reduction of Payments 6
Section 7: Beneficiaries 6
Section 8: General Provisions 7
8.1: Prohibition of Assignment
or Transfer 7
8.2: Program Not To Be Funded 7
8.3: Effect of Participation 7
8.4: Medical Examinations 7
8.5: Communications To Be in Writing 7
8.6: Absence of Liability 7
8.7: Titles for Reference Only 8
8.8: New York Law To Govern 8
8.9: Amendment 8
Exhibit 10.5.2
AMENDMENT TO THE 1984 UNION CARBIDE
CASH BONUS DEFERRAL PROGRAM
The 1984 Union Carbide Cash Bonus Deferral Program (the
"Plan") is hereby amended as follows:
1. The following paragraph is to be added to Section
8 of the Plan:
"8.10. At any time prior to the Date of
Deferral for a Service Year under the
Program, the Committee shall have the right
in its sole discretion to determine that no
bonus awards for that Service Year shall be
deferred in payment, and such determination
shall be applicable to all Eligible Employees
designated by the Committee whether or not
such Eligible Employees have theretofore
elected to defer payment of any part of all
of any bonus award for that Service Year."
2. The amendment contained herein shall be effective as
of January 1, 1986.
UNION CARBIDE CORPORATION
By:/s/ R.V. Welty
Vice President
ATTEST:/s/ J. Macdonald
ASSISTANT SECRETARY
Exhibit 10.6.1
EQUALIZATION BENEFIT PLAN
FOR PARTICIPANTS OF THE RETIREMENT
PROGRAM PLAN FOR EMPLOYEES OF
UNION CARBIDE CORPORATION
AND ITS PARTICIPATING
SUBSIDIARY COMPANIES
As Amended Through March 27, 1985
EQUALIZATION BENEFIT PLAN
FOR PARTICIPANTS OF THE RETIREMENT
PROGRAM PLAN FOR EMPLOYEES OF
UNION CARBIDE CORPORATION
AND ITS PARTICIPATING
SUBSIDIARY COMPANIES
General
This is an Equalization Benefit Plan for the participants of
the Retirement Program Plan for Employees of Union Carbide
Corporation and Its Participating Subsidiary Companies who
retire, or who have retired, under the said Retirement Program
Plan and the spouses of such participants. This Plan is
completely separate from the Retirement Program Plan for
Employees of Union Carbide Corporation and Its Participating
Subsidiary Companies and is not funded or qualified for special
tax treatment under the Internal Revenue Code. The purpose of
this Plan is to restore retirement benefit payments to those
participants, and to the spouses of such participants, who retire
under the Retirement Program Plan for Employees of Union Carbide
Corporation and Its Participating Subsidiary Companies, and whose
retirement benefits are, or will be, reduced by the limitations
imposed by Section 415 of the Internal Revenue Code, as from time
to time amended.
ARTICLE I
Benefits
Any participant in the Retirement Program Plan for Employees
of Union Carbide Corporation and Its Participating Subsidiary
Companies (the "Retirement Program Plan") who retires or who has
retired under the Retirement Program Plan, or such participant's
spouse, shall be entitled to a benefit, payable hereunder in
accordance with Article II of this Plan, equal to the excess, if
any, of
(a) the amount of such participant's or surviving
spouse's annual benefit under the Retirement Program Plan
computed under the provisions of the Retirement Program Plan
without regard to the limitations of Section 415 of the Internal
Revenue Code
over
(b) the amount of such participant's or surviving
spouse's annual benefit actually payable for each year under the
Retirement Program Plan computed under the provisions of the
Retirement Program Plan and subject to the above mentioned
limitations of Section 415 of the Internal Revenue Code.
Benefits payable under this Plan shall be payable to a
participant and the participant's spouse in the same manner and
subject to all the same options, conditions, privileges and
restrictions as are applicable to the benefits payable to a
participant or to a spouse of a participant under the Retirement
Program Plan.
ARTICLE II
The benefits under this Plan shall become payable when a
participant retires and begins to receive payments or to a
retired participant or spouse receiving payments under the
Retirement Program Plan, and shall be payable in the same manner
and at the same time as the participant's or spouse's benefits
under the Retirement Program Plan are paid. The Corporation may
amend or terminate this plan at any time, but any such amendment
or termination shall not adversely affect the rights of any
participant or spouse then receiving benefits, or the spouse of
any participant then receiving benefits under this Plan, or the
rights of any employee who is eligible to receive a Vested
Retirement Benefit under the Retirement Program Plan.
Exhibit 10.7.1
April 1, 1990
SUPPLEMENTAL RETIREMENT
INCOME PLAN
As Amended Through November 30, 1988
SUPPLEMENTAL RETIREMENT INCOME PLAN
General
This is a supplemental retirement income plan for
participants in the Retirement Program Plan who are also eligible
to participate in designated incentive compensation plans of
Union Carbide Corporation. This plan has been established
primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees.
Specifically, the purpose of this plan is to provide a retirement
benefit, determined without regard to Code Section 415 or Code
Section 401(a)(17), equal to the excess of the retirement benefit
which would be provided by the Retirement Program Plan if (a)
average monthly compensation included deferred cash bonuses
awarded under designated incentive compensation plans, and (b)
all cash bonuses, whether deferred or not, were averaged
separately from base compensation, and the Equalization Benefit
Plan, over the retirement benefit actually provided by the
Retirement Program Plan and the Equalization Benefit Plan. This
plan is completely separate from the Retirement Program Plan and
the Equalization Benefit Plan, is unfunded, and is not qualified
for special tax treatment under the Internal Revenue Code.
ARTICLE I
Eligibility
Section 1. An employee, or the survivor of an employee who
has not declined the coverage of a survivor's benefit, will be
eligible to receive Supplemental Retirement Income under this
plan, provided that, on or after the date on which this plan is
approved by the Board of Directors of the Corporation, such
employee:
(a) has received (or has been
awarded and receipt has been deferred) at
least one Bonus, and either
(b) dies while in the service of the
Corporation or a subsidiary of the
Corporation which is then participating in
the Retirement Program Plan, provided that
such employee's survivor is eligible to
receive a survivor's benefit under the
Retirement Program Plan, or
(c) termination from employment with
the Corporation or said subsidiary and is
eligible to receive a pension benefit or a
disability benefit under the Retirement
Program Plan.
Section 2. An employee, or the survivor of an employee who
has not declined the coverage of a survivor's benefit, will also
be eligible to receive Supplemental Retirement Income under this
plan if such employee receives compensation in excess of the
compensation which may be considered by the Retirement Program
Plan under Code Section 401(a)(17).
ARTICLE II
Amount of Supplemental Retirement Income
Section 1. The monthly amount of Supplemental Retirement
Income payable to an employee will be the excess, if any, of (1)
the employee's monthly retirement income, as determined under
section 2, over (2) the employee's monthly pension under the
Retirement Program Plan and the Equalization Plan.
Section 2. The amount of monthly retirement income payable
to an eligible employee shall be computed by using the applicable
formula provided in Article V of the Retirement Program Plan
except that average monthly compensation shall for this purpose
be equal to an amount determined under section 3 of Article II of
this plan, and shall be determined without regard to the
limitation of Code Section 401(a)(17).
Section 3. An employee's average monthly compensation shall
be computed in the following manner:
(a) For employees who retire or die
prior to April 27, 1983, average monthly
compensation shall be computed by taking the
larger of:
(i) 1/36 of base salary
and Bonuses related to the three full
calendar years in which these combined
amounts were largest during the 10 full
calendar years next preceding the date
of death or retirement or
(ii) 1/36 of the sum of
(a) the base salary for the 36 full
calendar months next preceding the date
of death or retirement; provided that
for purposes of this calculation the
base salary received in any calendar
month within the third preceding
calendar year shall be the total
compensation received in such year
divided by the number of months worked
in such year and (b) the Bonuses related
to the three full calendar years next
preceding the date of death or
retirement.
(b) For employees who retire or die
on or after April 27, 1983, but prior to
February 22, 1984, average monthly
compensation shall be computed by determining
the sum of the following amounts:
(i) the larger of:
(I) 1/36 of base
salary related to the three full
calendar years in which such salary was
largest during the 10 full calendar
years next preceding the date of death
or retirement or
(II) 1/36 of base
salary for the 36 full calendar months
next preceding the date of death or
retirement calculated in the manner
described under Section 3(a)(ii) above;
and
(ii) 1/36 of the
employee's Bonuses related to the three
full calendar years in which such
Bonuses were the largest during the five
full calendar years next preceding the
date of death or retirement;
provided, that if it would
produce a larger benefit under the plan,
then payments under the plan shall be
computed in accordance with subpart (a)
of this Section for any participant who
received a Bonus related to a year prior
to 1983 who dies or retires prior to
January 1, 1993.
(c) For employees who retire or die
on or after February 22, 1984, average
monthly compensation shall be computed by
determining the sum of the following amounts
(or shall be computed in accordance with
subpart (a) of this Section if an employee is
eligible for such computation and such
computation produces a larger benefit under
the plan):
(i) the larger of:
(I) 1/36 of base
salary related to the three full
calendar years in which such salary was
largest during the 10 full calendar
years next preceding the date of death
or retirement or
(II) 1/36 of base
salary for the 36 full calendar months
next preceding the date of death or
retirement calculated in the manner
described under Section 3(a)(ii) above;
and
(ii) 1/36 of the
employee's Bonuses related to the three
full calendar years in which such
Bonuses were the largest during the 10
full calendar years next preceding the
date of death or retirement provided,
that for an employee retiring on or
after January 1, 1988, the calendar
years in which the employee was hired or
terminates employment shall each be
considered a full calendar year for the
purposes of this clause (ii).
(d) For purposes of the calculations
under subparts (a), (b) and (c) of this
Section, a Bonus will be related to the
calendar year in which an employee performed
the services for which the Bonus was paid
irrespective of the calendar year in which
the Bonus was awarded or paid. For purposes
of the calculations under subparts (a), (b)
and (c) of this Section, the amount of base
salary received in any calendar month will be
calculated in the same manner in which
average monthly compensation used to compute
pension benefits under the Retirement Program
Plan is calculated (determined without regard
to Incentive Compensation as defined
therein).
Section 4. If the Supplemental Retirement Income payable to
an employee under this plan commences before the award to such
employee of a Bonus (whether or not paid) which may be used to
determine average monthly compensation under Section 3 of this
Article II, the monthly amount of Supplemental Retirement Income
payable hereunder shall be recalculated after such Bonus is
awarded (whether or not paid). The monthly amount of
Supplemental Retirement Income resulting from said recalculation
shall be paid commencing in or before the third calendar month
after the month in which such Bonus is awarded, provided that the
first monthly payment of such recalculated Supplemental
Retirement Income shall be increased to reflect any prior
underpayment of Supplemental Retirement Income resulting from the
failure to include such Bonus in the initial calculation of
Supplemental Retirement Income.
Section 5. For purposes of calculating the amount of an
employee's Supplemental Retirement Income pursuant to Section 1
of this Article II, the amount of an employee's monthly
retirement income and monthly pension under the Retirement
Program Plan and the Equalization Benefit Plan shall be
determined without any adjustment on account of (i) a Survivor's
Benefit or (ii) an election to receive level retirement income.
Section 6. If an employee does not decline the coverage of
a survivor's benefit, the monthly amount of Supplemental
Retirement Income which such employee would otherwise have
received shall be reduced by applying the same factor used in the
Retirement Program Plan in connection with survivor's benefits.
Section 7. The monthly amount of Supplemental Retirement
Income payable to the eligible survivor of an employee shall be
calculated in the same manner that such survivor's benefit is
calculated under the Retirement Program Plan.
ARTICLE III
Vesting
Section 1. Subject to Section 4 of Article IV, an employee
will be vested in such employee's right to receive Supplemental
Retirement Income under the plan in the same manner and to the
same extent as provided under the Retirement Program Plan. Once
an employee has become vested, all of such employee's rights to
receive Supplemental Retirement Income under this Plan shall be
nonforfeitable.
ARTICLE IV
Payments
Section 1. Supplemental Retirement Income shall be paid
monthly to an employee or his survivor commencing with the month
such employee or his survivor commence benefits under the
Retirement Program Plan, and shall cease or be suspended at the
same time the employee or his survivor cease or have suspended
benefits under the Retirement Program Plan. However,
Supplemental Retirement Income shall in no event be payable after
the death of an employee who has declined the coverage of a
survivor's benefit.
Section 2. Unless otherwise elected, Supplemental
Retirement Income payable under this plan shall include the
coverage of a survivor's benefit. A survivor's benefit payable
from this plan shall be paid to that person designated to receive
a survivor's benefit under the Retirement Program Plan.
Section 3. Supplemental Retirement Income shall be received
in the same form, and with the same actuarial adjustments, as the
participant is receiving distributions from the Retirement
Program Plan.
Section 4. If the Compensation and Management Development
Committee of the Board of Directors determines, after a hearing,
that an employee who is eligible to receive or is receiving
Supplemental Retirement Income has engaged in any activities
which, in the opinion of that Committee, are detrimental to the
interests of, or are in competition with, this Corporation or any
of its subsidiaries, such Supplemental Retirement Income shall
thereupon be terminated.
ARTICLE V
Miscellaneous
Section 1. The Compensation and Management Development
Committee of the Board of Directors shall administer this plan.
The Committee may adopt such rules as it may deem necessary for
the proper administration of this plan and its decision in all
matters involving the interpretation and application of the plan
shall be final, conclusive, and binding.
Section 2. The Corporation may amend or terminate this plan
at any time, but any such amendment or termination shall not
adversely affect the rights of any participant or spouse then
receiving benefits, or the spouse of any participant then
receiving benefits under this plan, or the vested rights of any
employee whose rights have vested.
Section 3. Except to the extent required by law, no
assignment of the rights and interests of an employee or survivor
under this plan will be permitted nor shall such rights be
subject to attachment or other legal processes for debts.
Section 4. "Corporation" as used in this plan means Union
Carbide Corporation.
Section 5. "Retirement Program Plan" as used in this plan
means the Retirement Program Plan for Employees of Union Carbide
Corporation and its Participating Subsidiary Companies.
Section 6. "Equalization Benefit Plan" as used in this Plan
means the Equalization Benefit Plan for Participants of the
Retirement Program Plan for Employees of Union Carbide
Corporation and Its Participating Subsidiary Companies, the
purpose of which is to restore retirement benefit payments to
those participants, and the spouses of such participants, whose
retirement benefits are, or will be, reduced by Section 415 of
the Internal Revenue Code, as from time to time amended.
Section 7. "Bonus" as used in this plan means those annual
cash bonuses paid under the 1984 Union Carbide Cash Bonus Plan,
the 1979 Union Carbide Incentive Compensation Plan, the 1974
Union Carbide Incentive Program (exclusive of long term and
multi-year bonus awards and bonus awards for a partial year of
service) the 1989 Union Carbide Bonus Plan and the Union Carbide
Mid-Management Incentive Plan and any cash bonuses awarded
(whether or not paid) under any other incentive compensation plan
designated by the Board of Directors (or such other plan as the
Board may authorize the Compensation and Management Development
Committee to designate).
Section 8. For purposes of this plan an employee will be
considered retired on the first day of the month following the
last month in which such employee is employed.
Section 9. The Corporation may satisfy all or any part of
its obligation to provide benefits hereunder by purchasing, and
distributing to a participant or survivor, an annuity from an
insurance carrier to provide such benefits.
Exhibit 10.8.1
1992 STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
OF
UNION CARBIDE CORPORATION
Section 1: Purpose. The Purpose of the 1992 Stock Compensation Plan
for Non-Employee Directors of Union Carbide Corporation (hereinafter referred
to as the "Plan") is to enable the Corporation to pay part of the compensation
of its non-employee Directors in shares of the Corporation's common stock.
Section 2: Effective Date. This Plan shall be effective upon the
approval of the Plan by the stockholders of the Corporation.
Section 3: Administration. This Plan shall be administered by the
Nominating Committee of the Board of Directors (hereinafter referred to as the
"Committee"). The Committee may interpret the Plan, establish administrative
regulations to further the purpose of the Plan and take any other action
necessary to the proper operation of the Plan. All decisions and acts of the
Committee shall be final and binding upon all Participants.
Section 4: Participation. Each non-employee who is a Director of
the Corporation on the Effective Date of the Plan or who thereafter becomes a
Director of the Corporation shall be a Participant in the Plan (hereinafter
referred to as the "Participant").
Section 5: Grant of Shares. On the Effective Date the Corporation
will grant to each Participant shares of the Corporation's Common Stock
(hereinafter referred to as the "Shares") in an amount equal to 200 times the
number of full or partial calendar years that such Participant is eligible to
serve as a Director between the Effective Date and December 31, 1996.
On the date any other non-employee is elected a Director and becomes
a Participant, the Corporation will grant to such Participant, Shares in an
amount equal to 200 times the number of full or partial calendar years that
such Participant is eligible to serve as a Director between said date of
election and December 31, 1996.
The grants of Shares, and the Shares granted, under this Plan are
subject to the following:
5.1: The Shares granted to each Participant shall be
compensation for services performed as a Director in each of the
five consecutive calendar years beginning with 1992, such
compensation to be at the rate of 200 Shares per calendar year.
Subject to Subsections 5.4, 5.4.1 and 5.5, 200 of the total Shares
granted to each Participant shall become non-forfeitable on
January 1, 1993 and thereafter on each January 1 of the next four
consecutive calendar years. For purposes of this Subsection 5.1,
the period between the date a Participant becomes a Director and
the following December 31 shall be deemed to be a calendar year,
regardless of the date on which such Participant becomes a
Director.
5.2: Each Participant shall have full rights to vote, and
to receive dividends and special distributions on, the total
number of the non-forfeitable Shares granted to such Participant.
5.3: Except as otherwise provided in Subsections 5.4, 5.4.1
and 5.5, none of the Shares granted to a Participant may be sold
or transferred by the Participant until five years after the date
on which such Shares become non-forfeitable. Until the
termination of the restrictions on the transferability of the
Shares, stock certificates representing the Shares granted to each
Participant shall be held by the Corporation.
5.4: If a Participant ceases to be a Director on account of
retirement from the Board under the Board's retirement policy for
Directors or on account of death or disability, the Shares granted
to such Participant which have not theretofore become non-
forfeitable shall immediately become non-forfeitable, the
restriction on transferability shall terminate and a stock
certificate for the total number of Shares granted to such
Participant shall be delivered to the Participant, or in the event
of the Participant's death, to the Participant's Beneficiary.
5.4.1: In the event of a Change in Control of the
Corporation, the Shares granted to each Participant which
have not theretofore become non-forfeitable shall
immediately become non-forfeitable, the restriction on
transferability shall terminate and a stock certificate for
the total number of Shares granted to such Participant shall
be delivered to the Participant. For purposes of this
Subsection 5.4.1, a Change in Control of the Corporation
shall be deemed to occur if:
(a) a Change in Control of the Corporation
would be required to be reported in response to item
1(a) of the current Report of Form 8-K, as in effect
on the date hereof, pursuant to Sections 13 or 15(d)
of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), whether or not the Corporation
is then subject to such reporting requirement;
(b) there shall be consummated (A) any
consolidation or merger of the Corporation in which
the Corporation is not the continuing or surviving
corporation or pursuant to which shares of the
Corporation's common stock would be converted into
cash, securities or other property, other than a
merger of the Corporation in which the holders of the
Corporation's common stock immediately prior to the
merger have the same proportion and ownership of
common stock of the surviving corporation immediately
after the merger, or (B) any sale, lease, exchange or
other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of
the assets of the Corporation, provided, that the
divestiture of less than substantially all of the
assets of the Corporation in one transaction or a
series of related transactions, whether effected by
sale, lease, exchange, spin-off, sale of the stock or
merger of a subsidiary or otherwise, shall not
constitute a Change in Control;
(c) any "person" or "group" within the meaning
of Sections 13(d) and 14(d)(2) of the Exchange Act (A)
becomes the "beneficial owner" as defined in Rule 13d-
3 under the Exchange Act of more than 20% of the then
outstanding voting securities of the Corporation,
otherwise than through a transaction or transactions
arranged by, or consummated with the prior approval
of, the Board of Directors of the Corporation; or (B)
acquires by proxy or otherwise the right to vote for
the election of directors, for any merger or
consolidation of the Corporation or for any other
matter or question more than 20% of the then
outstanding voting securities of the Corporation; or
(d) during any period of twenty-four
consecutive months (not including any period prior to
the adoption of this Agreement), Present Directors
and/or New Directors cease for any reason to
constitute a majority of the Board of Directors of the
Corporation. For purposes of this Subsection 5.4.1,
"Present Directors" shall mean individuals who at the
beginning of such consecutive twenty-four month period
were members of the Board and "New Directors" shall
mean any director whose election by the Board of
Directors of the Corporation or whose nomination for
election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the
Directors then still in office who were Present
Directors or New Directors.
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur pursuant to Subparagraph
5.4.1(c), above, solely because twenty percent (20%) or more
of the combined voting power of the Corporation's then
outstanding securities is acquired by one or more employee
benefits plans maintained by the Corporation. However, a
transaction or transactions described in Subparagraphs
5.4.1(a), 5.4.1(b), or 5.4.1(c), arranged by, or consummated
with the prior approval of, a majority of the Present
Directors and New Directors, shall not be deemed a Change in
Control.
5.5: If a Participant ceases to be a Director due to any
other reason, the number of Shares of such Participant which
theretofore had become non-forfeitable shall be increased by
adding thereto one-twelfth of the number of Shares which would
have become non-forfeitable on the next January 1 for each
complete month that such Participant was a Director in the
calendar year in which such Participant ceased to be a Director,
the restriction on the transferability of the total of the non-
forfeitable Shares of such Participant shall terminate and a stock
certificate for the total of the non-forfeitable Shares of such
Participant shall be delivered to such Participant. The remaining
Shares that had been granted to such Participant shall be
forfeited and shall revert to the Corporation.
5.6: On each date that an amount of the Shares granted to a
Participant becomes non-forfeitable, a Share Payment shall be made
to such Participant (or the Participant's beneficiary in the event
of death) in cash in an amount equal to such Participant's
federal, foreign or commonwealth income tax liability with respect
to the non-forfeitable portion of the Shares and the amount of the
Share Payment, based on the maximum applicable federal, foreign or
commonwealth ordinary income tax rates for individuals in effect
on the date such portion of the Shares granted to such Participant
becomes non-forfeitable.
Section 6: Beneficiary. A Participant may file with the Committee
a written designation of a beneficiary, on such form as may be prescribed by
the Committee, to receive any Shares or Share Payments that become deliverable
to the Participant pursuant to the Plan as a result of the Participant's
death. A Participant may, from time to time, amend or revoke a designation of
beneficiary. If no designated beneficiary survives the Participant, the
executor or administrator of the Participant's estate shall be deemed to be
the Participant's beneficiary.
Section 7: Amendment, Suspensions or Termination. The Board of
Directors may amend, suspend or terminate the Plan, but no such amendment,
suspension or termination shall (i) increase the number of Shares that may be
granted to any Participant under this Plan, (ii) increase the rate at which
the Shares become non-forfeitable or (iii) alter or impair the rights of a
Participant to receive the Shares granted under the Plan; provided, however,
that the Plan may not be amended more than once every six months other than to
comply with changes in the Internal Revenue Code of 1986, as amended, or any
rules or regulations promulgated thereunder.
Section 8: Miscellaneous.
8.1: Nothing in the Plan shall be deemed to create any
obligation on the part of the Board to nominate any Director for
re-election by the Corporation's stockholders.
8.2: Shares granted under the Plan may be newly-issued
shares or treasury shares which theretofore have been issued and
reacquired by the Corporation.
8.3: Shares granted pursuant to the Plan and payments made
under Section 5 of the Plan shall be in addition to any annual
retainer, attendance fees or other compensation payable to a
Participant.
8.4: In the event of any change in capital, shares of
capital stock, or any special distribution to the stockholders,
the Board of Directors shall make equitable adjustments in the
number of Shares that have been, or thereafter may be, granted to
Participants.
8.5: The Plan shall be interpreted in accordance with, and
the enforcement of the Plan shall be governed by, the laws of the
State of New York.
Exhibit 10.12.2
FIRST AMENDMENT
TO
THE BENEFITS PROTECTION TRUST AGREEMENT
BY AND BETWEEN UNION CARBIDE CORPORATION
AND MANUFACTURERS HANOVER TRUST COMPANY
The Benefits Protection Trust Agreement dated August 1, 1989
between Union Carbide Corporation and Manufacturers Hanover Trust
Company, as Trustee, is hereby amended as follows:
1. Schedule 2 to the Trust Agreement is hereby amended by
adding the Union Carbide Corporation Non-Employee Directors'
Retirement Plan thereto.
2. The provisions of this First Amendment shall be
effective as of October 23, 1991.
UNION CARBIDE CORPORATION
By: /s/ M.A. Kessinger
Title: Vice President
Human Resources
Date: October 23, 1991
MANUFACTURERS HANOVER TRUST
COMPANY, AS TRUSTEE
By: /s/ Geoffrey D. Tripp
Title: Vice President
Date: October 24, 1991
Exhibit 10.17.2
FIRST AMENDMENT TO THE
UNION CARBIDE
COMPENSATION DEFERRAL PROGRAM
The Union Carbide Compensation Deferral Program (the "Plan") is
hereby amended as follows:
1. The last sentence of Section 2.27 of the Plan is amended in
its entirety to read as follows:
"The value of the Corporation's common stock
for purposes of this Section 2.27 with respect to any
relevant date of determination shall be determined in
the same manner as provided in the Savings Program."
2. The provisions of this First Amendment shall be effective
as of January 1, 1995.
UNION CARBIDE CORPORATION
By: /s/ M.A. Kessinger
Exhibit 10.17.3
THIRD AMENDMENT TO THE
UNION CARBIDE
COMPENSATION DEFERRAL PROGRAM
The Union Carbide Compensation Deferral Program (the "Plan") is
hereby amended as follows:
1. Section 6.4: of the Plan is hereby amended in its entirety
to read as follows:
"6.4: Payment Medium. All payments under this
Program with respect to amounts which (i) at the time of such
payment were accruing at the Fixed Income Rate, or an Applicable
Equity Investment Fund Rate, or (ii) at the time of such payment,
if such payment is made before December 31, 1996, were accruing at
either the UCC Stock Value Rate or the UCC Discounted Stock Value
Rate, shall be made in U.S. dollars. Effective for any payments
made to a Participant who is or has been an executive officer
within the meaning of the Exchange Act on or after December 31,
1996, with respect to amounts which were accruing under either the
UCC Stock Value Rate or the UCC Discounted Stock Value Rate, such
payment shall be made in shares of common stock of the
Corporation."
2. Section 6.5 of the Plan is hereby amended in its entirety
to read as follows:
"6.5: Reduction of Payments; Share Withholding. (a) All
payments under this Program shall be reduced by any and all
amounts that the Corporation is required to withhold pursuant to
applicable law.
(b) In order to enable the Corporation to meet any
applicable federal, state or local tax withholding requirements, a
Participant (or Beneficiary) who is receiving payment in shares of
common stock of the Corporation, may elect to have the Corporation
withhold shares that would otherwise be delivered to such
Participant, or by delivering to the Corporation other shares of
common stock of the Corporation owned by the Participant. The
value of any such shares of common stock to be withheld by the
Corporation, or so delivered to the Corporation, shall be the mean
of the high and low prices of the common stock of the Corporation
as reported in the New York Stock Exchange - Composite
Transactions on the date of payment."
3. The provisions of this Third Amendment shall be effective as
of December 31, 1996.
As hereby amended, the Union Carbide Compensation Deferral Program
shall continue in full force and effect.
UNION CARBIDE CORPORATION
By: /s/ M.A. Kessinger
EXHIBIT 11
<TABLE>
UNION CARBIDE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1996
(In millions of dollars except per share amounts)
Year Ended December 31,
1996 1995
Earnings Per Share - Primary
<S> <C> <C>
Income (loss) from continuing operations $ 593 $ 925
Less: Preferred stock dividend 13 13
Net income (loss) from continuing operations
for primary income calculation 580 912
Income from discontinued operations - -
Cumulative effect of accounting changes - -
Net income (loss) - common stockholders $ 580 $ 912
Weighted average number of common
and common equivalent shares applicable
to primary earnings per share calculation
Weighted average number of
shares outstanding 131,029,621 137,219,676
Dilutive effect of stock options 4,492,283 4,443,980
135.521.904 141,663,656
Earnings per share - primary
Income (loss) from continuing operations $ 4.28 $ 6.44
Discontinued operations - -
Cumulative effect of accounting changes - -
Net income (loss) - common stockholders $ 4.28 $ 6.44
Earnings Per Share Assuming Full Dilution
Income (loss) from continuing operations $ 593 $ 925
Plus: Interest on convertible debentures
(net of taxes) - -
Less: Additional ESOP contribution resulting
from assumed conversion of preferred
stock 1 1
Income (loss) from continuing operations
for fully diluted income calculation 592 924
Income from discontinued operations - -
Cumulative effect of accounting changes - -
Net income (loss) for fully diluted
income calculation $ 592 $ 924
Weighted average number of common
and common equivalent shares applicable to
fully diluted earnings per share calculation
Weighted average number of
shares outstanding 131,029,621 137,219,676
Dilutive effect of stock options 4,492,283 4,819,502
Shares issuable upon conversion of UCC
convertible debentures - -
Shares issuable upon conversion of UCC
convertible preferred stock 16,120,754 16,341,367
151,642,658 158,380,545
Per share assuming full dilution
Income (loss) from continuing operations $ 3.90 $ 5.83
Discontinued operations - -
Cumulative effect of accounting changes - -
Net income (loss) $ 3.90 $ 5.83
<FN>
* Fully diluted per share amounts are not presented in the consolidated
statements of income where amounts are antidilutive. Fully diluted per
share amounts are shown equal to primary per share amounts in the
Selected Financial Data on pages 20 through 21 of the 1996 annual report
to stockholders where amounts are antidilutive.
<CAPTION>
UNION CARBIDE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1996
(In millions of dollars except per share amounts)
Year Ended December 31,
1994 1993
Earnings Per Share - Primary
<S> <C> <C>
Income (loss) from continuing operations $ 389 $ 165
Less: Preferred stock dividend 13 13
Net income (loss) from continuing operations
for primary income calculation 376 152
Income from discontinued operations - -
Cumulative effect of accounting changes - (97)
Net income (loss) - common stockholders $ 376 $ 55
Weighted average number of common
and common equivalent shares applicable
to primary earnings per share calculation
Weighted average number of
shares outstanding 149,904,755 147,821,255
Dilutive effect of stock options 4,270,033 3,549,905
154,174,788 151,371,160
Earnings per share - primary
Income (loss) from continuing operations $ 2.44 $ 1.00
Discontinued operations - -
Cumulative effect of accounting changes - (0.64)
Net income (loss) - common stockholders $ 2.44 $ 0.36
Earnings Per Share Assuming Full Dilution
Income (loss) from continuing operations $ 389 $ 165
Plus: Interest on convertible debentures
(net of taxes) - 4
Less: Additional ESOP contribution resulting
from assumed conversion of preferred
stock 1 1
Income (loss) from continuing operations
for fully diluted income calculation 388 168
Income from discontinued operations - -
Cumulative effect of accounting changes - (97)
Net income (loss) for fully diluted
income calculation $ 388 $ 71
Weighted average number of common
and common equivalent shares applicable to
fully diluted earnings per share calculation
Weighted average number of
shares outstanding 149,904,755 147,821,255
Dilutive effect of stock options 4,439,006 4,244,866
Shares issuable upon conversion of UCC
convertible debentures - 4,482,931
Shares issuable upon conversion of UCC
convertible preferred stock 16,542,644 16,796,109
170,886,405 173,345,161
Per share assuming full dilution
Income (loss) from continuing operations $ 2.27 $ 0.97
Discontinued operations - -
Cumulative effect of accounting changes - (0.56)
Net income (loss) $ 2.27 $ 0.41 *
<FN>
* Fully diluted per share amounts are not presented in the consolidated
statements of income where amounts are antidilutive. Fully diluted per
share amounts are shown equal to primary per share amounts in the
Selected Financial Data on pages 20 through 21 of the 1996 annual report
to stockholders where amounts are antidilutive.
<CAPTION>
UNION CARBIDE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1996
(In millions of dollars except per share amounts)
Year Ended December 31,
1992
Earnings Per Share - Primary
<S> <C>
Income (loss) from continuing operations $ 119
Less: Preferred stock dividend 17
Net income (loss) from continuing operations
for primary income calculation 102
Income from discontinued operations 67
Cumulative effect of accounting changes (361)
Net income (loss) - common stockholders $ (192)
Weighted average number of common
and common equivalent shares applicable
to primary earnings per share calculation
Weighted average number of
shares outstanding 129,723,738
Dilutive effect of stock options 2,625,735
132,349,473
Earnings per share - primary
Income (loss) from continuing operations $ 0.76
Discontinued operations 0.51
Cumulative effect of accounting changes (2.73)
Net income (loss) - common stockholders $(1.46)
Earnings Per Share Assuming Full Dilution
Income (loss) from continuing operations $ 119
Plus: Interest on convertible debentures
(net of taxes) 17
Less: Additional ESOP contribution resulting
from assumed conversion of preferred
stock 7
Income (loss) from continuing operations
for fully diluted income calculation 129
Income from discontinued operations 67
Cumulative effect of accounting changes (361)
Net income (loss) for fully diluted
income calculation $ (165)
Weighted average number of common
and common equivalent shares applicable to
fully diluted earnings per share calculation
Weighted average number of
shares outstanding 129,723,738
Dilutive effect of stock options 4,038,716
Shares issuable upon conversion of UCC
convertible debentures 15,774,784
Shares issuable upon conversion of UCC
convertible preferred stock 14,655,935
164,193,173
Per share assuming full dilution
Income (loss) from continuing operations $ 0.78
Discontinued operations 0.41
Cumulative effect of accounting changes (2.20)
Net income (loss) $(1.01)*
<FN>
* Fully diluted per share amounts are not presented in the consolidated
statements of income where amounts are antidilutive. Fully diluted per
share amounts are shown equal to primary per share amounts in the
Selected Financial Data on pages 20 through 21 of the 1996 annual report
to stockholders where amounts are antidilutive.
</TABLE>
Exhibit 13
UNION CARBIDE CORPORATION
1996 ANNUAL REPORT
(The cover depicts two partially overlapping hexagons. One of them is labeled
"Specialties & Intermediates" and the other is labeled "Basic Chemicals and
Plastics".)
Contents
Financial Highlights - Summary comparison of 1996 and 1995 results 1
Chairman's Letter - Bill Joyce on 1996 performance, strategic
objectives and long-term outlook 2
Principal Products &
Services - Description of Specialties & Intermediates
and Basic Chemicals & Polymers segments,
including competitors 6
- Partnerships and Corporate Joint Ventures 8
Chemical Glossary - Chemicals and polymers central to Carbide's
businesses 9
Management's Discussion
& Analysis - Results of Operations 10
Liquidity, Capital Resources and Other
Financial Data 18
Selected Financial Data 20
Quarterly Data 21
Financial Statements - Consolidated Statement of Income 22
Consolidated Balance Sheet 23
Consolidated Statement of Cash Flows 24
Consolidated Statement of Stockholders'
Equity 25
Notes to Financial Statements 26
Management's Statement of Responsibility
for Financial Statements 42
Independent Auditors' Report 42
Corporate Information - Important dates, names, addresses,
telephone numbers and other information 43
Directors and Corporate
Officers - List of directors, corporate officers
and other senior management 44
Around the World - Listing of worldwide locations Inside Back Cover
Definition of Terms - Definition of nonchemical terms Inside Back Cover
Cautionary statement for the purposes of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995: All statements in this
annual report that do not reflect historical information are forward looking
statements. These include statements about the chemical markets in 1997; cost
reduction targets; the corporation's share price; earnings and profitability
targets; development, production and acceptance of new products and process
technologies; ongoing and planned capacity additions and expansions; joint
ventures, and Management's Discussion & Analysis. Important factors that could
cause actual results to differ materially from those discussed in such forward
looking statements include the supply/demand balance for the corporation's
products, customer inventory levels, competitive pricing pressures, feedstock
costs, changes in industry production capacities and operating rates,
competitive technology positions and failure to achieve the corporation's cost
reduction targets or complete construction projects on schedule.
Financial Highlights
Dollar amounts in millions
(except per share figures) 1996 1995 % Change
For the Year -
Net sales - $ 6,106 $ 5,888 4
Operating profit - 921 1,348 (32)
Net income - common stockholders - 583 915 (36)
Per common share - primary - 4.28 6.44 (34)
Per common share - fully diluted - 3.90 5.83 (33)
Cash dividends on common stock - 99 103 (4)
Per common share - 0.75 0.75 -
Capital expenditures - 721 542 33
At Year-End -
Total assets - $ 6,546 $ 6,256 5
Total debt - 1,599 1,323 21
Stockholders' equity - 2,114 2,045 3
Per common share - 16.72 15.14 10
Common shares outstanding (thousands) - 126,440 135,108 (6)
Common stockholders of record - 51,023 53,648 (5)
Employees - 11,745 11,521 2
At a Glance
Union Carbide Corporation is a worldwide chemicals and polymers company.
The company possesses many of the industry's most advanced process and
catalyst technologies and some of the most cost efficient large-scale
production facilities in the world. In addition to its consolidated
operations, the corporation participates in partnerships and corporate joint
ventures whose combined revenues totaled more than $4.1 billion in 1996.
Union Carbide operates two business segments:
Specialties & Intermediates, which accounted for 70 percent of revenues
and 81 percent of operating profit in 1996, produces a broad range of
products, including specialty polyolefins used in wire and cable insulation;
surfactants for industrial cleaners; catalysts for the manufacture of
polymers; acrolein and derivatives; water soluble polymers; cellulose-,
glucose- and lanolin-based materials for personal care products; specialty
coatings; acrylic and vinyl acrylic latex used in paints and adhesives;
solvents; vinyl acetate monomer, and ethylene oxide derivatives. This segment
also licenses olefins-based technologies and offers other specialized
technology licensing and services.
Basic Chemicals & Polymers converts various hydrocarbon feedstocks,
principally liquefied petroleum gases and naphtha, into the basic building-
block chemicals ethylene and propylene (also known as olefins) that are in
turn converted to polyethylene (the world's most widely used plastic),
polypropylene (one of the world's fastest-growing plastics), and ethylene
oxide and ethylene glycol (used to make polyester fiber, film and resin, and
automotive antifreeze). This segment provides ethylene, propylene, ethylene
oxide and ethylene glycol to the Specialties & Intermediates segment.
Union Carbide's leading end markets as a percentage of sales are:
Paints, coatings and adhesives 22%
Packaging and consumer plastics 21%
Wire and cable 12%
Textile 9%
Household and personal care 7%
Automotive, including antifreeze 4%
Agriculture and food 4%
Oil and gas 2%
Industrial cleaners 2%
Good Progress in a Demanding Year
(Contained within this section is a picture of William H. Joyce, Chairman,
President and Chief Executive Officer.)
I am pleased to report that our company had a good year in 1996, under market
conditions that made a good year a real achievement. Had we been operating in
similar market conditions just a few years ago, Carbide would almost certainly
have lost money.
Worldwide sales for 1996 rose 3.7 percent to $6.1 billion. Net income
available to common stockholders of $583 million declined 36.3 percent
compared to the record $915 million earned in 1995.
Soaring raw material costs in 1996, and weak pricing in key products,
drove variable margin as a percent of sales below even the very low levels
reached at the bottom of the last chemical business cycle in 1993. Carbide's
ability to earn $3.90 per fully diluted share in those circumstances confirms
that our profit improvement program has been a huge success.
We also maintained a strong balance sheet in 1996, and generated
sufficient funds to invest for the future and buy back 12.8 million common
shares, continuing a practice that has brought the total number of shares
repurchased since 1993 to 42.3 million.
Carbiders are proud of our profit improvement success, and rightly so,
since it was their hard work and innovative thinking, and the work process
improvements they engineered, that reduced costs, raised productivity and
generated returns on invested capital that rank Carbide among the most
profitable companies in our industry.
We are nevertheless disappointed that solid performance in a demanding
year was not reflected in the price of Carbide stock, which appreciated only 9
percent in 1996, closing the year at $40.88 per share ($47.00 at the close of
business on Feb. 26, 1997).
But we believe Carbide's value will be recognized once we demonstrate
that our company can post superior results through all phases of the chemical
cycle: that our Basic Chemicals & Polymers (BC&P) segment will not only be
very profitable over the business cycle, but also break even in the worst year
of the cycle; and, most important, that our much larger Specialties &
Intermediates (S&I) segment can show a longer history of double digit earnings
growth.
Although the industry outlook is for commodity prices to begin weakening
toward the end of 1997 as substantial additional capacity begins to come on
line, Carbide will see increasing benefits over the course of the chemical
cycle from our continuing, ambitious profit improvement initiatives and from
our investments aimed at promoting the profitable growth of our less cyclical
S&I segment.
For the longer term, we also anticipate a strong contribution from our
joint ventures on several continents, and from new businesses based on our
chemical process technologies.
One new business we think has excellent potential (ethylene propylene
rubber) was well into start-up at this writing, while four others we've yet to
announce are still in the development stage.
We also completed the purchase, at the start of 1996, of the
polypropylene business and assets of Shell Oil Company and expanded our
polypropylene production facilities at Seadrift, Tex., and Norco, La.
Polypropylene is one of the world's fastest-growing, large-volume plastics.
Although growth is vitally important to our success, our solid position
as a low-cost producer is fundamental.
We are mindful that the success of our long-range strategy depends in
large part on our ability to keep improving productivity in both our
specialties and intermediates and our basic chemicals businesses. We have made
considerable progress over the past several years, and we are planning a good
deal more.
In 1996 we passed the halfway mark - ahead of schedule - toward our
announced target of $637 million of profit improvement by year-end 2000 (in
then-current dollars) compared to costs in 1993, and we are looking for other
opportunities to raise the target.
Among the profit improvement projects completed during the year was
Pathfinder, a project cutting across nearly all of our businesses. Pathfinder
reduced our costs for delivering product to customers by about $85 million, a
permanent annual saving that exceeded Pathfinder's target by nearly $5
million.
Carbide also has moved aggressively to reduce the cost of energy at two
Gulf Coast plants. A new cogeneration (steam and electric power) unit that
went on line at our Texas City, Tex., plant in May has cut the plant's energy
bill by some $50,000 a day. A $140 million cogeneration unit at our Taft, La.,
plant, under construction since October 1995 and scheduled to start-up in
March 1997, will slash much more from energy costs.
Through a combination of new technology and advantageous location, a new
butanol unit in our Solvents, Intermediates and Monomers (SIM) business, built
for 25 percent less than if prior technology had been used, achieved estimated
annual savings of $4 million in operating and logistics costs in its first
full year of operation.
In commodity operations, a program of our Hydrocarbons group aimed at
boosting the efficiency of Carbide's Gulf Coast olefins units is 70 percent of
the way toward its $126 million a year profit improvement target.
In this latest round of profit improvement initiatives we expect our S&I
segment to enlarge its contribution to our target. And we shouldn't have to
commit as much of those savings to lower prices as we did initially with the
savings in our BC&P segment, since many chemical specialties and intermediates
tend to compete less on price than on performance. That means more S&I savings
can fall directly to the bottom line.
S&I accounted for 70 percent of sales in 1996 and 81 percent of operating
profit. Although segment performance fell short of our double digit earnings
growth target for the first time in several years, we saw a number of
important developments in 1996 that, along with a more determined effort to
widen margins, should strengthen the businesses in this segment and create for
them an even larger role in Carbide's overall financial performance. Among the
developments:
- - Industrial Performance Chemicals (IPC) introduced a line of remarkable new
TRITON SP surfactants - chemicals used in industrial cleaners and metalworking
fluids, and potentially as process aids in paper and textile manufacturing -
that permit rapid separation of pollutants from process wastewater.
Our new surfactants were the subject of the first industry partnership
with the Environmental Protection Agency under its Environmental Technology
Initiative for Chemicals, a nonregulatory alternative for managing
environmental risk.
- - Our plant at Seadrift, Tex., added 45 million pounds of capacity for
producing butyl glycol ethers, raising our total worldwide capacity to more
than 320 million pounds - the largest of any company. Butyl glycol ethers are
used as solvents in industrial coatings and cleaners.
- - UNIPOL Systems licensees in South Korea, the Philippines and Saudi Arabia
announced major expansions, as well as new UNIPOL Process facilities
representing a total of 2.5 billion pounds of polyethylene and 1.2 billion
pounds of polypropylene.
Ten licensees, including 3 in China, started up UNIPOL polyethylene and
polypropylene units during the year with combined capacities of nearly 2.1
billion pounds and 1.5 billion pounds, respectively.
- - Our UCAR Emulsions Systems business began construction of a joint venture
plant in China to manufacture latex for the growing paint industry in the
Shanghai area.
- - Amerchol Corporation, a Union Carbide subsidiary, began construction on the
site of our plant in Guangdong, China, of a joint venture plant to manufacture
cellulosic polymers to help meet the rapidly growing demand there for hair
care and other personal care products. Amerchol started up a similar plant at
Greensburg, La., to meet the growing worldwide demand for these products.
- - IPC also began two major capital projects during the year, both at our Taft
plant: a 330 million-pounds-per-year facility for producing our CARBOWAX
polyethylene glycols and TERGITOL surfactants, and a 200 million-pounds-per-
year facility for producing ethanolamines, used in detergents and personal
care products, and in natural gas processing.
- - SIM acquired a Brazilian producer of vinyl acetate monomer along with its
175 million-pounds-per-year plant, and started up a 330 million-pounds-per-
year vinyl acetate unit in South Korea, part of a joint venture with BP
Chemicals and Samsung Fine Chemicals Co. Vinyl acetate is used in the coatings
and adhesives industries in the production of emulsion resins.
Our BC&P segment also gained competitive strength in 1996. Among
developments:
- - Operating improvements at our Texas City plant resulted in an increase in
refining capacity for higher glycols, along with productivity improvements and
inventory reductions worth $7 million.
- - We announced a major modernization of the olefins production unit at Taft
that will increase ethylene capacity by 665 million pounds per year to 2.2
billion pounds and add new flexibility for switching feedstocks to gain
maximum advantage from raw material price changes.
We also made good progress in 1996 toward expanding the contribution of
partnerships and joint ventures to Carbide's growth and profitability.
We announced plans with Nova Corporation of Canada to jointly build and
share the output of an expandable 2 billion-pounds-per-year olefins cracker in
Alberta, scheduled for start-up in 2000. A new UNIPOL polyethylene plant to be
built in Alberta at the same time would use Carbide's share of the olefins
plant output for feedstock.
In a new Asian venture, we signed a letter of intent with Petronas (the
national oil company of Malaysia) to form a joint venture to build a major
petrochemical complex in Malaysia scheduled for completion in 2000.
The output of the joint venture would include ethylene glycol and a
number of chemical specialties and intermediates, such as oxo alcohols and
derivatives, ethanolamines and surfactants. The complex, which would have
access to advantaged raw materials from nearby natural gas resources, would
serve Southeast Asia, the world's fastest growing market for petrochemicals.
And in August Carbide and Exxon Chemical announced an agreement to form a
50/50 joint venture to research, develop, market and license leading edge
technologies and catalysts for the production of polyethylene. We expect the
combination of Carbide's UNIPOL Process technology and Exxon's metallocene
catalyst and operating technologies to set the worldwide standard for
polyethylene production well into the next century.
Construction of the EQUATE petrochemical complex, our Kuwait joint
venture, continues on schedule toward midyear 1997 completion, and Polimeri
Europa, our joint venture in Italy, made good progress with cost reduction
efforts in a year when performance was hurt by very high raw material costs.
Summing up, 1996 was a demanding year, but one in which we did well,
gaining competitive strength and making substantial progress toward our target
of becoming the low-cost, preferred supplier in all of our core businesses.
Proud as we are of our progress, Carbiders know that advancing our
business agenda must be accompanied by solid, responsible environmental and
safety performance, and that is exactly what they delivered again in 1996.
We marked our fifth consecutive year without a fatality or major process
related accident, and we reduced key spills by 16 percent and reduced lost-
workday injuries by 32 percent compared to 1995.
We believe this record has a strong connection to the fact that in 1996
we completed implementing all 106 management practices of the industry's
Responsible Care initiative, and that employees at all levels have accepted a
high degree of personal accountability for meeting our Responsible Care goals.
(For more information about our environmental and safety performance,
write to Carbide's Public Affairs Department for our Responsible Care progress
report.)
I would like to note that in addition to our solid business and
Responsible Care performance, Carbide, and the chemical industry as a whole,
again contributed to the U.S. balance of trade in 1996. Exports accounted for
some 17 percent of sales from Carbide's U.S. production. Fair and open trade
is important to us, and to the nation, and we hope the Administration and the
Congress will keep trade high on their list of economic priorities.
I am pleased to report that we have added two highly accomplished
individuals to our board of directors, bringing total membership to 12: James
M. Ringler, president and CEO of Premark International, Inc. was elected to
the board in December, and Dr. Thomas P. Gerrity, dean of the Wharton School
at the University of Pennsylvania, became a board member in February 1997.
We welcome them and look forward to their contributions.
William H. Joyce
Feb. 26, 1997
(Within the preceding section, the following three phrases are set in larger
type within colored ovals:
- - Growth is vitally important, but our low-cost position is fundamental
- - We made good progress toward expanding the contribution of partnerships
and joint ventures
- - Business progress must be accompanied by responsible environmental and
safety performance)
Principal Products & Services
Customer Sales(a)
(Dollar amounts in millions)
1996 1995 1994
S&I BC&P S&I BC&P S&I BC&P
($) 4,286 1,820 4,123 1,765 3,636 1,229
(%) 70 30 70 30 75 25
(a) After intersegment eliminations. See Note 5 to the financial statements.
Operating Profit (Loss)(a)
(Dollar amounts in millions)
1996 1995 1994
S&I BC&P S&I BC&P S&I BC&P
($) 742 162 709 444 634 (22)
(%) 82 18 61 39 104 (4)
(a) Excludes Other segment. See Note 5 to the financial statements.
Specialties & Intermediates Segment
Union Carbide's Specialty Polymers and Products group manufactures and
markets numerous specialty products. Many of its technologies are targeted for
sharply defined market segments.
- Specialty Industrial Products produces acrolein and derivatives such as
glutaraldehyde, a biocide; ethylidene norbornene (ENB), used in the production
of ethylene propylene rubber; and specialty ketones.
- Performance Polymers produces POLYOX water-soluble resins, used in
personal care products, pharmaceuticals, inks and thermoplastics. It also
produces polyvinyl acetate resins, used in chewing-gum resins, low-profile
additives, NEULON polyester modifiers, fast-cure additives and pigmentable
systems, and UCURE reactive modifiers.
- Coating Materials reaches markets for paints, coatings, inks,
substrates and other materials for magnetic tape, food and beverage packaging,
plastics and orthopedic materials. Its products include CELLOSIZE hydroxyethyl
cellulose (HEC); UCAR solution vinyl resins; TONE caprolactone-based
materials; cycloaliphatic epoxides, including CYRACURE ultraviolet-curing
products, and FLEXOL plasticizers.
- Amerchol Corporation, a Union Carbide subsidiary, manufactures and
sells a wide variety of cellulose-, glucose- and lanolin-based materials for
personal care products.
Major Competitors - Union Carbide's competitive position varies widely from
one product/market segment to another. Competitors include a number of
domestic and foreign companies, both diversified and specialized, including
BASF, Hercules, Wacker, Solvay, DeGussa and National Starch & Chemical.
UCAR Emulsion Systems products are used in interior and exterior house
paints, adhesives and sealants. They include UCAR POLYPHOBE Rheology Modifiers
(used to thicken or thin coatings) and UCAR latex products (acrylics and
vinyl-acrylics that impart enhanced staining, weather and scrub resistance to
paints, and acrylic latexes for caulks and sealants).
Major Competitors - Rohm & Haas, Air Products, Reichhold Chemicals
Specialty Polyolefins manufactures and markets worldwide a variety of
performance polyolefin products. Chief among these are polyolefin-based
compounds for sophisticated insulation, semiconductives, and jacketing systems
for power distribution, telecommunications and flame-retardant wire and cable.
Other Specialty Polyolefins products are used in adhesives, laminating film
and flexible tubing.
Major Competitors - AT Plastics, Borealis AS, Mitsui Petrochemical, Millennium
Chemicals, Ube Industries
UNIPOL Systems licenses UNIPOL Process technology, the most cost-
efficient and versatile method of manufacturing polyethylene and
polypropylene, to producers of these products worldwide. It also develops new
process technology for the manufacture of other olefins-based polymers, such
as ethylene propylene rubber, and sells catalysts to UNIPOL Process licensees
worldwide.
Major Competitors - BASF, British Petroleum, Mitsui Petrochemical, Montell
Polyolefins, Phillips Chemicals.
Industrial Performance Chemicals manufactures and sells a broad range of
ethylene oxide derivatives and formulated glycol products for specialty
applications. These include CARBOWAX polyethylene glycols, with a wide range
of applications in pharmaceutical, personal care, household and industrial
markets; ethanolamines, for detergents, personal care products and in natural
gas conditioning and refining; ethyleneamines, for many industrial uses;
TERGITOL and TRITON specialty and commodity surfactants for institutional and
household cleaning products and other industrial applications; UCON fluids and
lubricants, and alkyl alkanolamines for water-treating chemicals. Formulated
glycol products include UCAR and UCAR ULTRA+ deicing and anti-icing fluids for
the aviation industry, UCARTHERM and NORKOOL heat-transfer fluids, and gas-
treating products, including UCARSOL and SELEXOL solvents.
Major Competitors - BASF, Dow Chemical, Huntsman, Rhone-Poulenc
Solvents, Intermediates and Monomers supplies one of the industry's
broadest product lines of solvents, intermediates and monomers. Its products
include aldehydes, acids and alcohols, including high-quality industrial-grade
synthetic and fermentation ethanol; esters; glycol ethers
(CARBITOL and CELLOSOLVE solvents); ketones, and monomers (vinyl acetate and
acrylics for waterborne coatings). Principal customers are the paints and
coatings industries, and many of SIM's products are also used widely in
cosmetics and personal care preparations, adhesives, household and
institutional products, drugs and pharmaceuticals, fuel and lube oil additives
and agricultural products. The UNICARB System is a pollution reducing,
supercritical fluid technology that can cut costs and reduce volatile organic
compounds (VOCs) in spray-applied coatings by up to 80 percent.
Major Competitors - Eastman Chemical, Hoechst Celanese, BASF, Shell Chemical
Basic Chemicals & Polymers Segment
Union Carbide's Hydrocarbons group manufactures about two thirds of the
company's ethylene requirements and almost one third of its propylene
requirements. Ethylene and propylene are the key raw materials for many of
Union Carbide's businesses.
Union Carbide is the world's leading producer of ethylene oxide and
ethylene glycol. Ethylene oxide is a chemical intermediate primarily used in
the manufacture of ethylene glycol, polyethylene glycol, glycol ethers,
ethanolamines, surfactants and other performance chemicals and polymers.
Ethylene glycol is used extensively in the production of polyester fiber,
resin and film, automotive antifreeze and engine coolants, and aircraft anti-
icing and deicing fluids. Other ethylene oxide-based glycol products include
di-, tri-, and tetraethylene glycols, used as chemical intermediates and in
dehydrating natural gas.
Major Competitors - Dow Chemical, Huntsman, Occidental Chemical, Saudi Basic
Industries, Shell Chemical
Union Carbide is a leading manufacturer of polyethylene, the world's most
widely used plastic. UNIPOL Polymers produces and markets linear low-, medium-
and high-density polyethylenes, used in high-volume applications such as
housewares, milk and water bottles, grocery sacks, trash bags, packaging,
water and gas pipe, and FLEXOMER very low-density resins, used as a polymer
modifier in other polyolefins and to produce flexible hose and tubing, frozen-
food bags and stretch wrap.
Major Competitors - Exxon Chemical, Dow Chemical, Mobil Chemical, Nova
Chemicals, Phillips Chemicals
Carbide's Polypropylene Resins operations manufacture and sell
polypropylene, one of the world's large-volume, fastest-growing plastics. End
use applications include carpeting and upholstery, apparel, packaging films,
food containers, housewares and appliances and automobile interior trim and
panels.
Major Competitors - Montell Polyolefins, Amoco, Exxon Chemical, Fina, Huntsman
For a summary of geographic segment data, see Note 5 to the financial
statements.
Partnerships and Corporate Joint Ventures
The corporation has for many years participated in a number of businesses
through partnerships and corporate joint ventures. These affiliations have
enabled Union Carbide to combine its competitive strengths in technology,
project engineering and operational know-how with complementary strengths of
its partners.
The most significant partnerships and corporate joint ventures of the
Specialties & Intermediates segment include:
UOP - this partnership with AlliedSignal Inc. is a leading worldwide
supplier of process technology, catalysts, molecular sieves and adsorbents to
the petrochemical and gas-processing industries. UOP has facilities in Mobile,
Ala.; Anaheim and Eldorado Hills, Calif.; Des Plaines and McCook, Ill.;
Shreveport, La.; Tonawanda, N.Y.; Shanghai, China; Reggio di Calabria, Italy,
and Brimsdown, U.K.
Nippon Unicar Company Limited - Japan-based producer of commodity and
specialty polyethylene resins and specialty silicone products. This joint
venture with Tonen Corporation has a facility in Kawasaki, Japan.
Aspell Polymeres SNC - French producer of specialty polyethylenes. This
partnership with Elf Atochem has a facility in Gonfreville, France.
World Ethanol Company - this U.S.-based partnership with Archer Daniels
Midland Company supplies ethanol worldwide.
Asian Acetyls Co., Ltd. - South Korea-based producer of vinyl acetate
monomers used in the production of emulsion resins by customers in the
coatings and adhesives industries. This joint venture with BP Chemicals and
Samsung Fine Chemicals Company has a facility in Ulsan, South Korea.
The most significant partnerships and corporate joint ventures of the
Basic Chemicals & Polymers segment include:
Polimeri Europa S.r.l. - Europe-based producer of ethylene and
polyethylene resins. This joint venture with EniChem S.p.A. of Italy has
facilities at Dunkirk, France; Oberhausen, Germany; and Brindisi, Ferrara,
Gela, Priolo and Ragusa, Italy.
EQUATE Petrochemical Company K.S.C. - this joint venture with
Petrochemical Industries Company and Boubyan Petrochemical Company, both of
Kuwait, is building a world-scale petrochemicals complex in Shuaiba, Kuwait,
for the manufacture of polyethylene and ethylene glycol, scheduled for
completion at mid-year 1997.
Petromont and Company Limited Partnership - Canada-based olefins and
polyethylene resins producer owned jointly with Ethylec, a subsidiary of SGF
in Quebec, Canada. This partnership has facilities at Montreal and Varennes,
Canada.
Alberta & Orient Glycol Company Limited - joint venture with Mitsui &
Co., Ltd., Japan, and Far Eastern Textile Ltd., Taiwan. This Canada-based
producer of ethylene glycol has a facility in Prentiss, Alberta, Canada.
For a summary of partnership and corporate joint venture results for the
past three years, see page 16 and Note 8 to the financial statements.
Chemical Glossary
Acrolein - chemical intermediate used mainly to produce glutaraldehyde, animal
feed supplements and cycloaliphatic epoxides for coatings.
Alcohols - chemicals, such as butanol, ethanol and isopropanol, that serve as
solvents and intermediates for the manufacture of personal care products,
pharmaceuticals, esters, ketones, monomers for latexes, herbicides, petroleum
additives and synthetic lubricants.
Biocide - chemical used to control or inhibit the growth of bacteria, algae,
fungi and mold.
Esters - chemical intermediates, such as ethyl acetate and butyl acrylate,
made by reacting alcohols and acids. Esters are used in a wide range of
solvent applications and as monomers.
Ethanolamines - chemical intermediates made from ethylene oxide and ammonia.
They are used in detergents, personal care and agricultural products, and in
gas purification for the delivery of consistently high-quality natural gas to
homes.
Ethylene - reactive chemical made from natural gas or crude oil components.
Ethylene is the starting material from which Carbide makes many of the
company's chemical and polymer products.
Ethyleneamines - chemical intermediates made from ethylene oxide or ethylene
dichloride that are used in fuel, lubricants and motor oil additives,
adhesives, wet strength paper resins inhibitors and epoxy curing agents.
Ethylene glycol - chemical made from ethylene oxide and water. It is used to
make polyester fiber, resin and film, and automotive antifreeze and engine
coolants.
Ethylene oxide - chemical made from ethylene and oxygen. It combines with
other chemicals to produce a wide range of products, such as ethylene glycol,
water soluble polymers for personal care products and surfactants for
detergents and cleaning products.
Glutaraldehyde - an acrolein derivative predominantly used as a biocide for
applications such as industrial water treatment, the manufacture of paper,
secondary oil recovery, and as a disinfectant and a sanitizer.
Glycol ethers - solvents used in higher-technology coating applications, such
as waterborne industrial finishes for the automotive market, and noncoating
applications, such as in hard surface cleaners, military jet fuels and brake
fluids.
Ketones - chemicals, such as acetone, used as solvents for vinyl resins,
industrial lacquers and pharmaceuticals, and as an intermediate for resins,
dyes and rubber chemicals.
Monomer - reactive chemical that can be converted into a polymer. For example,
ethylene is a monomer that is made into polyethylene.
Olefins - generic name for ethylene, propylene and other unsaturated
hydrocarbons (carbon atoms with double bonds) made from components of crude
oil or natural gas. Olefins are the starting material from which most of Union
Carbide's chemical and polymer products are made.
Oxo alcohols, aldehydes and acids - chemicals Carbide manufactures via its Oxo
Process, such as butanol and propionic acid, which are used as chemical
intermediates and industrial solvents.
Polyethylene - world's most widely used plastic, made by reacting ethylene and
other olefins to form polymers. Union Carbide uses its low-pressure UNIPOL
Process technology to make most of its polyethylene.
Polymer - chain or network made by linking monomer units, such as ethylene.
All plastics are polymers.
Polypropylene - one of the world's large-volume, fastest-growing plastics,
made by reacting propylene and other olefins to form polymers. Union Carbide
uses its low-pressure UNIPOL Process technology to make much of its
polypropylene.
Propylene - basic chemical made from crude oil and natural gas components. It
is used as a starting material to produce many of Carbide's chemical and
polymer products.
Solvent - liquid chemical used to dissolve or absorb other chemicals. For
example, ketones, esters, alcohols and glycol ethers are effective solvents
commonly used in coatings.
Surfactants - chemicals that increase the cleaning and wetting properties of
household and industrial cleaners and detergents, textile wet processing and
paper-processing products. Surfactants also are present in cosmetics, shampoos
and other personal care products. Carbide makes its surfactants primarily from
ethylene oxide and alcohols.
Management's Discussion & Analysis
Results of Operations
Millions of dollars
for the year ended December 31,
(except per share figures) 1996 1995 1994
Net sales - $6,106 $5,888 $4,865
Operating profit(a) - 921 1,348 551
Interest expense - 76 89 80
Pre-tax income - 845 1,259 471
Net income - 593 925 389
Net income -
common stockholders - 583 915 379
Per share, primary - $ 4.28 $ 6.44 $ 2.44
Per share, fully diluted - 3.90 5.83 2.27
a) See Note 5 to the financial statements for a discussion of the special
items included in operating profit.
(Included within this section are seven bar charts which provide the following
data:
(1) Average Customer Selling Price (Cents/pound)
S&I BC&P
1991 56.7 28.2
1992 56.0 22.7
1993 54.0 21.0
1994 51.3 21.6
1995 58.0 30.0
1996 55.3 27.1
(2) Variable Margin (Millions of dollars)
S&I BC&P Total
1991 1663 585 2248
1992 1794 425 2219
1993 1754 362 2116
1994 1748 480 2228
1995 1906 965 2871
1996 1910 735 2645
(3) Volume (Millions of pounds)
S&I BC&P Total
1991 6144 4958 11102
1992 6458 5510 11968
1993 6454 5502 11956
1994 7093 5680 12773
1995 7112 5878 12990
1996 7743 6706 14449
(4) Unit Variable Margin (Cents/pound)
S&I excluding the
OrganoSilicon
business sold
S&I in 1993 BC&P
1991 27.1 24.5 11.8
1992 27.8 25.0 7.7
1993 27.2 25.7 6.6
1994 24.6 24.6 8.5
1995 26.8 26.8 16.4
1996 24.7 24.7 11.0
(5) Fixed Costs (Millions of dollars)
S&I BC&P Total
1991 1267 456 1723
1992 1225 424 1649
1993 1130 414 1544
1994 1067 395 1462
1995(a) 1122 423 1545
1996 1140 447 1587
Totals in 1990 constant dollars:
1991-$1,660; 1992-$1,545; 1993-$1,409; 1994-$1,299; 1995-$1,349; 1996-$1,358
(6) Fixed Costs per Pound (Cents/pound)
S&I BC&P
1991 20.6 9.2
1992 19.0 7.7
1993 17.5 7.5
1994 15.0 7.0
1995(a) 15.8 7.2
1996 14.7 6.7
Below the preceding two tables appears the following:
a) Excludes charge of $68 million for postemployment benefits.
(7) Employee Productivity
Number of Thousands of pounds
Employees per employee
1991 16705 665
1992 15075 794
1993 13051 916
1994 12004 1064
1995 11521 1128
1996 11745 1230 )
Summary and Outlook
Union Carbide operates two business segments. Specialties & Intermediates
converts basic and intermediate chemicals into a diverse portfolio of
chemicals and polymers serving industrial customers in many markets. This
segment also provides technology services, including licensing, to the oil and
petrochemicals industries. Basic Chemicals & Polymers converts hydrocarbon
feedstocks, principally liquefied petroleum gas and naphtha, into ethylene or
propylene and then into polyethylene, polypropylene, ethylene oxide and
ethylene glycol for sale to third-party customers, as well as ethylene,
propylene, ethylene oxide and ethylene glycol for consumption by the
Specialties & Intermediates segment. In contrast to those of Specialties &
Intermediates, the revenues and operating profit of Basic Chemicals & Polymers
tend to be more cyclical and very sensitive to a number of external variables,
including overall economic demand, hydrocarbon feedstock costs, industry
capacity increases and plant operating rates.
In 1996 the corporation's earnings were adversely impacted by declines in
selling prices, particularly in ethylene glycol, polyethylene and vinyl
acetate monomer, and by high raw material and energy costs. These factors
significantly impacted Basic Chemicals & Polymers operating profit, which
decreased by 63.5 percent versus 1995, and limited Specialties & Intermediates
operating profit growth to only 4.7 percent. Sales volumes increased by 11.2
percent versus the prior year, the largest volume increase in the past decade,
while productivity improved by 7.7 percent, as measured by fixed cost per
pound of product sold. Partnerships continued to report strong profits, while
equity company results declined due to preoperating costs of the Kuwait joint
venture and increased raw material costs of Polimeri Europa, the corporation's
European polyethylene joint venture.
In 1995 the corporation's profitability benefited from improved pricing
in virtually all product groups, with particular strength in polyethylene
through midyear and in ethylene oxide and ethylene glycol throughout the year,
modest volume increases, lower average feedstock costs, continued benefits
from ongoing productivity improvement programs and strong partnership
earnings. In addition, 1995 net income was enhanced by a nonrecurring after-
tax gain associated with the sales of the corporation's investment in UCAR
International Inc., partially offset by a number of nonrecurring after-tax
losses.
Corporate results in 1994 were negatively affected by low margins in
ethylene oxide, ethylene glycol and polyethylene, leading, in turn, to an
operating loss in the Basic Chemicals & Polymers segment. Specialties &
Intermediates reported an increased 1994 operating profit, reflecting the
benefits of improved volumes, cost reduction programs and good partnership
results.
Highlights of 1996 included:
- Completion of a new ethylene propylene rubber production facility in
Seadrift, Tex., with start-up in early 1997.
- Acquisition of Shell Oil Company's polypropylene business.
- Acquisition of 95 percent of Companhia Alcoolquimica Nacional, a
Brazilian manufacturer of vinyl acetate monomer.
- Start-up of a new 330 million-pounds-per-year vinyl acetate monomer
production unit in Ulsan, South Korea, by a joint venture with BP
Chemicals and Samsung Fine Chemicals Company.
- Formation of two joint ventures in the People's Republic of China, one to
manufacture and market latex polymer emulsions, and the other to
manufacture and market cellulosic polymers for the personal care
industry.
- Announcement of a planned 50-50 joint venture with Exxon Chemical Company
to research, develop, market and license leading-edge technologies and
catalysts for the production of polyethylene.
- Sale of $200 million of 7.75 percent debentures maturing in the year
2096.
- Completion of $1.2 billion of long-term financing by the EQUATE joint
venture; construction of the EQUATE facility is on schedule for mid-1997
completion.
- Repurchase of 12.8 million common shares, bringing the total number of
shares repurchased since the beginning of 1993 to 42.3 million.
- Continued progress toward achievement of the annual net savings target of
$637 million by year-end 2000.
As 1997 progresses, raw material and energy costs are expected to decline
from fourth quarter 1996 levels. This trend, coupled with continuation of the
improvement in ethylene glycol demand, which commenced in the fourth quarter
of 1996, should result in an improvement in the 1997 operating profit of Basic
Chemicals & Polymers at least through the first three quarters of the year;
thereafter, profits may be impacted by anticipated capacity increases.
Specialties & Intermediates operating profit should also improve over 1996
levels reflecting continued strong demand and lower energy costs. Earnings
from partnerships should remain strong, while earnings from corporate joint
ventures are expected to improve after start-up of the EQUATE facility,
scheduled for the second half of 1997.
The corporation regularly reviews its assets with the objective of
maximizing the deployment of resources in core operations. In this regard, UCC
continues to consider strategies and/or transactions with respect to certain
noncore assets and other assets not essential to the operation of the business
that, if implemented, could result in material nonrecurring gains or losses.
Specialties & Intermediates
Millions of dollars 1996 1995 1994
Sales - $4,286 $4,123 $3,636
Depreciation and amortization - 188 194 169
Operating profit - 742 709 634
Capital expenditures - 522 392 253
Identifiable assets - 3,892 3,527 3,111
1996 Compared with 1995
Revenues of the Specialties & Intermediates segment increased 4.0 percent, as
the result of an 8.9 percent increase in volume partially offset by a 4.7
percent decline in average selling prices. The reduction in average selling
prices reflects the combined effect of increases in sales of lower priced
products and declines in prices of certain products from unusually high levels
experienced in 1995. Variable margin (revenues less variable manufacturing and
distribution costs) as a percentage of sales dropped by 1.6 percentage points,
from 46.2 percent in 1995 to 44.6 percent in 1996, while gross margin
(variable margin less fixed manufacturing and distribution costs) as a
percentage of sales declined by 0.8 percentage points, to 27.0 percent in 1996
from 27.8 percent in 1995. Fixed manufacturing and distribution costs were
held at 1995 levels.
The segment's 1996 selling, administration and other expenses (SA&O)
decreased $45 million, or 15.1 percent, because of the inclusion in 1995 SA&O
of a nonrecurring $48 million charge for postemployment benefits. Excluding
this charge, SA&O increased $3 million, or 1.2 percent. Research and
development expenditures increased $14 million to $128 million.
Operating profit increased in 1996 to $742 million from $709 million in
1995.
1995 Compared with 1994
The segment's revenues increased 13.4 percent, almost entirely because of
increased average selling prices, primarily in the solvents and intermediates
area. Volumes increased slightly. Although variable margin increased by 9.0
percent from 1994 to 1995, it declined as a percentage of sales, from 48.1
percent to 46.2 percent, the result of increased raw material costs. Gross
margin as a percentage of sales remained stable at 27.8 percent in 1995
compared to 27.9 percent in 1994. Fixed manufacturing and distribution costs
rose $23 million, or 3.1 percent, compared to 1994, because of expenses
related to new growth projects, start-up costs related to new manufacturing
facilities and increased profit sharing.
Excluding the 1995 charge of $48 million for postemployment benefits, the
segment's SA&O increased by $27 million, or 12.1 percent, reflecting increased
profit sharing and the costs of new ventures and currency effects. Research
and development expenditures increased by $6 million to $114 million.
Operating profit increased in 1995 to $709 million from $634 million in
1994. In addition to the postemployment benefit charge, operating profit in
1995 included an increase in depreciation expense of $12 million, representing
the cumulative effect of a reduction in the lives of certain computer
equipment.
Basic Chemicals & Polymers
Millions of dollars 1996 1995 1994
Sales - $2,125 $2,080 $1,411
Depreciation and amortization - 124 112 105
Operating profit (loss) - 162 444 (22)
Capital expenditures - 199 150 156
Identifiable assets - 2,328 2,095 1,511
1996 Compared with 1995
Revenues of the Basic Chemicals & Polymers segment increased 2.2 percent, due
to a 14.1 percent increase in customer volume, 11.5 percent of which was due
to the acquisition of the polypropylene business of Shell Oil Company in
January of 1996, offset by a 9.7 percent decrease in selling prices. Variable
margin as a percent of sales declined from 46.4 percent in 1995 to 34.6
percent in 1996. Ethylene glycol selling prices declined throughout the first
three quarters of 1996. While polyethylene prices began to improve in the
second quarter of 1996, they nonetheless averaged below 1995 levels for the
full year. Raw material and energy costs rose during 1996, especially in the
fourth quarter. Gross margin as a percentage of sales declined to 18.2 percent
in 1996 as compared to 30.8 percent in 1995. Fixed manufacturing and
distribution costs increased $24 million, or 7.4 percent, from 1995 to 1996,
principally due to the acquisition of Shell's polypropylene assets and
business.
SA&O decreased $20 million, or 23.0 percent, versus 1995. Prior year SA&O
included a nonrecurring $20 million charge for postemployment benefits.
Research and development expenditures increased $1 million to $31 million.
Operating profit declined to $162 million in 1996 from $444 million in
1995.
1995 Compared with 1994
The segment's revenues increased 47.4 percent, primarily due to a 38.9 percent
increase in average customer selling prices and 3.5 percent higher volumes.
Variable margin as a percentage of sales rose to 46.4 percent in 1995 from
34.0 percent in 1994. Ethylene oxide and ethylene glycol margins improved
through the third quarter of 1995 and remained stable thereafter, while
polyethylene margins improved in the first half of the year and declined
thereafter due to falling prices. Gross margin as a percentage of sales rose
to 30.8 percent in 1995, as compared to 12.7 percent in 1994. Fixed
manufacturing and distribution costs increased by $24 million, or 8.0 percent,
compared to 1994, due to acquired businesses, start-up costs related to new
facilities and profit sharing.
SA&O included a charge of $20 million for postemployment benefits.
Excluding this charge, SA&O increased by 1.7 percent to $67 million from 1994
to 1995 after absorbing the cost of increased profit sharing and acquired
businesses. Research and development expenditures remained stable on a year-
to-year basis.
Operating profit in 1995, including the $20 million postemployment
benefit charge, was $444 million, compared to an operating loss of $22 million
in 1994.
Other
Millions of dollars
for the year ended December 31, 1996 1995 1994
Operating profit (loss) - $17 $195 $(61)
The Other segment includes the operating profit (loss) of noncore
activities and financial transactions. The 1995 operating profit included a
nonrecurring pre-tax gain of $381 million from the sales of the corporation's
remaining interest in UCAR International Inc., partially offset by a $191
million charge for unused office space, principally at the corporation's
headquarters. The 1994 operating loss included a $24 million charge on the
write-down and sale of the corporation's stockholding in Union Carbide India
Limited and a $12 million loss on the sale of interests in a uranium mill and
mines.
Costs Relating to Protection of the Environment
Worldwide costs relating to environmental protection continue to be
significant, due primarily to stringent laws and regulations and to the
corporation's commitment to industry initiatives such as Responsible Care, as
well as to its own internal standards. In 1996 worldwide expenses related to
environmental protection for compliance with Federal, state and local laws
regulating solid and hazardous wastes and discharge of materials to air and
water, as well as for waste site remedial activities, totaled $110 million.
Expenses in 1995 and 1994 were $138 million and $153 million, respectively.
Such expenses were material to operating results in 1996, 1995 and 1994, and
will be material to operating results in future years. In recent years, such
environmental expenses have decreased as the corporation has made progress
toward completing major remediation projects. In addition, worldwide capital
expenditures relating to environmental protection in 1996 totaled $43 million,
compared with $49 million and $57 million in 1995 and 1994, respectively.
The corporation, like other companies in the U.S., periodically receives
notices from the U.S. Environmental Protection Agency and from state
environmental agencies, as well as claims from other companies, alleging that
the corporation is a potentially responsible party (PRP) under the
Comprehensive Environmental Response, Compensation and Liability Act and
equivalent state laws (hereafter referred to collectively as Superfund) for
past and future cleanup costs at hazardous waste sites at which the
corporation is alleged to have disposed of, or arranged for treatment or
disposal of, hazardous substances. The corporation is also undertaking
environmental investigation and remediation projects at hazardous waste sites
located on property currently and formerly owned by the corporation pursuant
to Superfund, as well as to the Resource Conservation and Recovery Act and
equivalent state laws.
There are approximately 124 hazardous waste sites at which management
believes it is probable or reasonably possible that the corporation will incur
liability for investigation and/or remediation costs. The corporation has
established accruals for those hazardous waste sites where it is probable that
a loss has been incurred and the amount of the loss can reasonably be
estimated. The reliability and precision of the loss estimates are affected by
numerous factors, such as the stage of site evaluation, the allocation of
responsibility among PRPs and the assertion of additional claims. The
corporation adjusts its accruals as new remediation requirements are defined,
as information becomes available permitting reasonable estimates to be made,
and to reflect new and changing facts.
At Dec. 31, 1996, the corporation's accruals for environmental
remediation totaled $310 million ($327 million in 1995). Approximately 58
percent of the accrual (59 percent in 1995) pertains to estimated future
expenditures for site investigation and cleanup, and approximately 42 percent
(41 percent in 1995) pertains to estimated expenditures for closure and
postclosure activities. See Note 15 to the financial statements for a
discussion of the environmental sites for which the corporation has
remediation responsibility. In addition, the corporation had environmental
loss contingencies of $134 million at Dec. 31, 1996.
Estimates of future costs of environmental protection are necessarily
imprecise, due to numerous uncertainties. These include the impact of new laws
and regulations, the availability and application of new and diverse
technologies, the identification of new hazardous waste sites at which the
corporation may be a PRP and, in the case of Superfund sites, the ultimate
allocation of costs among PRPs and the final determination of the remedial
requirements. While estimating such future costs is inherently imprecise,
taking into consideration the corporation's experience to date regarding
environmental matters of a similar nature and facts currently known, the
corporation estimates that worldwide expenses related to environmental
protection, expressed in 1996 dollars, should average about $125 million
annually over the next five years.
Worldwide capital expenditures for environmental protection, also
expressed in 1996 dollars, are expected to average about $50 million annually
over the same period. Management anticipates that future annual costs for
environmental protection after 2001 will continue at levels comparable to the
five-year average estimates.
Subject to the inherent imprecision and uncertainties in estimating and
predicting future costs of environmental protection, it is management's
opinion that any future annual costs for environmental protection in excess of
the five-year average estimates stated here, plus those costs anticipated to
continue thereafter, would not have a material adverse effect on the
corporation's consolidated financial position.
Litigation
The corporation and its consolidated subsidiaries are involved in a number of
legal proceedings and claims with both private and governmental parties. These
cover a wide range of matters, including, but not limited to, product
liability; governmental regulatory proceedings; health, safety and
environmental matters; employment; patents; contracts, and taxes. In addition,
the corporation continues to be named as one of a number of defendants in
lawsuits involving silicone breast implants. The corporation supplied bulk
silicone materials to certain companies that at various times were involved in
the manufacture of breast implants. These cases are discussed in more detail
in Note 15 to the financial statements. In some of these legal proceedings and
claims, the cost of remedies that may be sought or damages claimed is
substantial. While it is impossible at this time to determine with certainty
the ultimate outcome of any such legal proceedings and claims, management
believes that adequate provisions have been made for probable losses with
respect thereto and that such ultimate outcome, after provisions therefor,
will not have a material adverse effect on the consolidated financial position
of the corporation but could have a material effect on consolidated results of
operations in a given quarter or year. Should any losses be sustained in
connection with any of such legal proceedings and claims in excess of
provisions therefor, they will be charged to income in the future.
Partnerships and Corporate Joint Ventures
As described on page 8, the corporation's most significant partnerships and
corporate joint ventures are UOP, Nippon Unicar, Aspell Polymeres, World
Ethanol and Asian Acetyls within the Specialties & Intermediates segment, and
Polimeri Europa, EQUATE Petrochemical Company, Petromont and Alberta & Orient
Glycol within the Basic Chemicals & Polymers segment.
The combined results and net assets of the partnerships and corporate
joint ventures in each segment, and the corporation's proportionate share
thereof, are presented in the following tables.
Specialties & Intermediates
Combined UCC's Proportionate
Share(a)
Millions of dollars 1996 1995 1994 1996 1995 1994
Net sales - $2,238 $2,311 $1,823 $1,082 $1,114 $855
Cost of sales - 1,456 1,486 1,142 680 720 526
Depreciation - 86 67 49 39 35 25
Income from operations - 322 338 302 187 175 133
Interest expense - 31 32 21 12 15 11
Provision for income taxes - 63 54 36 32 27 18
Net Income - $ 227 $ 257 $ 248 $ 143 $ 136 $104
UCC share of dividends
and distributions - $ 101 $ 92 $ 84
Total assets - $1,769 $1,707 $ 757 $ 762
Total third party debt - 577 550 212 229
Net Assets - $ 561 $ 567 $ 263 $ 258
Basic Chemicals & Polymers
Combined UCC's Proportionate
Share(a)
Millions of dollars 1996 1995 1994 1996 1995 1994
Net sales - $1,930 $1,512 $ 242 $ 965 $ 756 $121
Cost of sales - 1,575 1,014 151 798 507 76
Depreciation - 126 115 20 51 58 10
Income from operations - 96 209 9 30 105 2
Interest expense - 67 61 12 34 30 6
Provision for income taxes - 20 36 1 11 17 1
Net Income (Loss) - $ 9 $ 114 $ (7) $ (15) $ 58 $ (5)
UCC share of dividends
and distributions - $ 40 $ 0 $ 0
Total assets - $3,536 $2,413 $1,650 $1,168
Total third party debt - 1,197 294 561 147
Net Assets - $ 972 $ 994 $ 432 $ 481
a) Includes U.S. GAAP adjustments made by the corporation, such as goodwill
and related amortization, and adjustments needed to conform the accounting
policies of the partnerships and corporate joint ventures to those of UCC.
Specialties & Intermediates
The corporation's share of the net income of Specialties & Intermediates
partnerships and corporate joint ventures increased slightly in 1996 as
compared to 1995, as the result of increased earnings from UOP being partially
offset by the elimination of earnings of the polypropylene partnership with
Shell Oil Company. Earnings from the polypropylene business are now included
in consolidated results. The corporation's share of the net income of S&I
partnerships and corporate joint ventures in 1995 increased by 31.7 percent
over the prior year due to improved UOP results.
Basic Chemicals & Polymers
The corporation's share of the net income of Basic Chemicals & Polymers
partnerships and corporate joint ventures declined $73 million from 1995 to
1996 due to losses from Polimeri Europa and decreased earnings from Petromont,
caused by lower polyethylene prices and higher raw material costs, and the
recognition of preoperating expenses of EQUATE. The increase of $63 million
from 1994 to 1995 was the result of improved results from Petromont and the
addition of the Polimeri Europa joint venture.
In 1995 the corporation and two Kuwaiti corporations formed a joint
venture, EQUATE Petrochemical Company, for development of a world-scale
petrochemical complex in Kuwait. The cost of design, construction and initial
working capital is expected to approximate $2 billion by the planned start-up
date. As of Dec. 31, 1996, the corporation had invested approximately $138
million in EQUATE, representing its 45 percent equity interest. The
corporation anticipates making an additional $12 million investment in early
1997. The corporation recognized losses related to EQUATE's preliminary
operating expenses of $23 million in 1996 ($3 million in 1995). These expenses
are expected to continue until start-up.
In September 1996 EQUATE completed its long-term financing arrangements
for construction and operating funds. The corporation has severally guaranteed
45 percent (approximately $608 million at Dec. 31, 1996) of EQUATE's debt and
working capital needs until certain completion tests are achieved. Thereafter,
a $54 million several guarantee will provide ongoing support. The corporation
also severally guaranteed certain sales volume targets until EQUATE's sales
capabilities are proved. In addition, the corporation has pledged its shares
in EQUATE as security for EQUATE's debt. The corporation has political risk
insurance coverage for its equity investment and, until the completion tests
are concluded, substantially all of its debt guarantee of EQUATE's debt.
EQUATE's debt is expected to reach its maximum level by the end of 1997.
Other
The corporation's remaining interest in UCAR International Inc., a
manufacturer of carbon and graphite products, was sold in 1995. Income (loss)
from corporate investments carried at equity included $4 million and $54
million in 1995 and 1994, respectively, representing the corporation's share
of UCAR's earnings in those years. Additionally, the corporation's share of
dividends and distributions from UCAR was $5 million and $44 million in 1995
and 1994, respectively.
Interest Expense
Interest expense decreased $13 million to $76 million in 1996 as a result of
increased capitalized interest. The 1995 increase of $9 million to $89 million
was due to increased borrowings, partially offset by increased capitalized
interest and lower interest rates.
Provision for Income Taxes
The effective tax rate was 27.9 percent in 1996 as compared to 30.2 percent
and 29.1 percent in 1995 and 1994, respectively. In each of these years, the
corporation's effective tax rate was reduced as a result of foreign sales
corporation income taxed at a preferential rate and development tax credits.
The 1995 effective tax rate was increased as a result of taxes provided on the
sale of UCAR International Inc.
Accounting Changes
In 1996 the corporation adopted Financial Accounting Standard (FAS) 123,
"Accounting for Stock-Based Compensation," under which the corporation elected
to continue following Accounting Principles Board Opinion 25. In 1995 the
corporation adopted FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." In 1994 the corporation
adopted FAS 115, "Accounting for Certain Investments in Debt and Equity
Securities." The effects of the adoptions of FAS 121 and FAS 115 were not
material.
Liquidity, Capital Resources and Other Financial Data
(Included within this section are two bar charts which provide the following
data:
(1) Capital Expenditures (Millions of dollars)
S&I BC&P Total
1991 158 242 400
1992 143 216 359
1993 240 155 395
1994 253 156 409
1995 392 150 542
1996 522 199 721
(2) Shares Repurchased (Millions)
Net of
Reissuances Total
1993 1.4 3.8
1994 6.1 11.6
1995 9.3 14.1
1996 8.7 12.8 )
Cash Flow From Operations
Cash flow from operations increased by $99 million to $862 million in 1996, as
compared to $763 million in 1995. Decreased earnings for the year were offset
by lower tax payments and the improved turnover of accounts receivable and
inventory. Net gains on investing transactions decreased from 1995, which
included a $381 million gain on the sales of the corporation's interest in
UCAR International Inc. Other noncash charges also declined, due to the
inclusion in 1995 of a $191 million charge for future lease payments on unused
office space.
Cash Flow Used for Investing
Cash flow used for investing includes capital expenditures, investments and
acquisitions, and proceeds from the sale of investments and assets.
Capital expenditures increased to $721 million in 1996 from $542 million
in 1995 and $409 million in 1994. Major projects in 1996 included an ethylene
propylene rubber facility at Seadrift, Tex. (Specialties & Intermediates),
expansion of ethylene production units at Taft, La. (Basic Chemicals &
Polymers), as well as new cogeneration facilities at Texas City, Tex. and
Taft, La., and new information technology infrastructure throughout the
company (applicable to both segments). Major Specialties & Intermediates
projects in 1995 and 1994 included a new butanol unit at Taft, La., an energy
systems upgrade at Texas City, Tex., and new TRITON surfactants production
facilities at South Charleston, W.Va. A new UNIPOL II polyethylene production
facility was completed in 1995 at Taft, La., in the Basic Chemicals & Polymers
segment.
Over the past three years 48 percent of capital expenditures was directed
to new capacity, 47 percent to cost reduction and replacement, and 5 percent
to environmental, safety and health facilities. Of these expenditures, 95
percent was in the U.S. and Puerto Rico.
Investments and acquisitions in 1996 included the purchases of Shell's
polypropylene assets and business and of 95 percent of the outstanding shares
of Companhia Alcoolquimica Nacional, a Brazilian producer of vinyl acetate
monomer. Investments and acquisitions during 1995 included the $216 million
acquisition of a 50 percent interest in Polimeri Europa, a $134 million
investment in the EQUATE joint venture, and the $71 million purchase of
certain ethylene oxide derivative businesses in the U.K.
Net proceeds from the sale of investments in 1995 included $542 million
from the sales of the corporation's remaining interest in UCAR International
Inc. In 1994 proceeds from the sale of investments included $86 million from
the sale of the corporation's preferred stock investment in the OrganoSilicon
business (OSi).
Proceeds from the sale of fixed and other assets of $138 million in 1994
included $84 million from the sale of a manufacturing facility and
distribution terminal in Hong Kong and $13 million from the divestiture of the
corporation's specialty electronic materials business and its interest in a
Zimbabwe mining and smelting operation.
At Dec. 31, 1996, the cost of completing authorized construction projects
was estimated to be $1.074 billion, of which $17 million is covered by firm
commitments. Future construction expenditures are anticipated to be sourced
through operating cash flows and borrowings.
Cash Flow Used for Financing
Cash flow used for financing includes stockholder dividends and funds used to
buy back common stock and for debt reduction, offset in part by proceeds from
long-term debt and sales of common stock pursuant to the corporation's
dividend reinvestment plan and its employee savings and investment programs.
Cash flow used for financing in 1996 totaled $254 million, compared to
$57 million in 1995 and $360 million in 1994. In October 1996 the corporation
issued $200 million of 7.75 percent debentures maturing in 2096, the proceeds
of which were used to finance ongoing share repurchases and to pay down
existing short-term debt. In 1995 the corporation completed a $400 million,
two-part public offering of debt securities. During 1996, pursuant to a share
repurchase program authorized by the board of directors, the corporation
repurchased 12.8 million shares of its common stock for $544 million, at an
average effective price of $42.46 per share, bringing the total amount
repurchased since the beginning of 1993 to 42.3 million shares for $1.376
billion, at an average effective price of $32.53 per share.
At Dec. 31, 1996, there were no outstanding borrowings under the
corporation's then-existing $1 billion bank credit agreement. In January 1997
the corporation entered into a new bank credit agreement, which also provides
the corporation with $1 billion in credit for the next five years, but with
the option, subject to certain conditions, to increase the available credit by
$250 million and to extend the maturity date of the agreement by one year on a
rolling basis. Several options are available to borrow at floating interest
rates.
In January 1997 the corporation established a medium term note program
that allows for borrowings of up to $500 million. Notes issued under the
program will have a maturity of nine months or longer and will bear interest
at either a fixed or a floating rate determined by reference to interest rate
formulas. Also in January 1997, the corporation formed a real estate
investment trust subsidiary that issued $250 million of preferred stock
bearing a current dividend yield of 14 percent for 10 years and 1 percent
thereafter. Domestic real estate with a fair market value of approximately
$500 million will be mortgaged via intercompany debt in conjunction with this
transaction. The preferred stock may be redeemed if, as a result of a change
in tax laws, rules or regulations, dividends on the preferred stock or
interest paid on the mortgage note is not fully deductible for Federal income
tax purposes.
Debt Ratios
Total debt outstanding at year-end for the past three years was:
Millions of dollars 1996 1995 1994
Domestic - $1,492 $1,254 $862
International - 107 69 84
Total - $1,599 $1,323 $946
Year-end ratios of total debt to total capital were:
1996 1995 1994
Debt ratio - 42.7% 39.0% 38.2%
Total debt consists of short-term debt, long-term debt and the current
portion of long-term debt. Total capital consists of total debt plus minority
stockholders' equity in consolidated subsidiaries and stockholders' equity.
<TABLE>
Selected Financial Data
Union Carbide Corporation and Subsidiaries
<CAPTION>
Millions of dollars
(except per share figures) 1996 1995 1994
<S> <C> <C> <C>
From the Income Statement -
Net sales - $ 6,106 $ 5,888 $ 4,865
Cost of sales - 4,568 4,100 3,673
Research and development - 159 144 136
Selling, administration and other expenses - 321 387(a) 290
Depreciation and amortization - 312 306 274
Partnership (income) loss - (144) (152) (98)
Other (income) expense - net - (31) (245) 39
Income before interest expense and -
provision for income taxes - 921 1,348 551
Interest expense - 76 89 80
Pre-tax income (loss)
from continuing operations - 845 1,259 471
Provision (credit) for income taxes - 236 380 137
Income (loss) from corporate
investments carried at equity - (16) 46 55
Income (loss) from continuing operations - 593 925 389
Net income (loss) - common stockholders - 583 915 379
Per common share
Primary - Income (loss)
from continuing operations - $ 4.28 $ 6.44 $ 2.44
- Net income (loss) - 4.28 6.44 2.44
Fully diluted(b) - Income (loss)
from continuing operations - 3.90 5.83 2.27
- Net income (loss) - 3.90 5.83 2.27
From the Balance Sheet -
Net current assets of continuing operations - $ 595 $ 858 $ 329
Total assets - 6,546 6,256 5,028
Long-term debt - 1,487 1,285 899
Other long-term obligations - 811 834 537
Total capital(c) - 3,742 3,392 2,479
Stockholders' equity - 2,114 2,045 1,509
Stockholders' equity per common share - 16.72 15.14 10.45
Other Data -
Cash dividends on common stock - $ 99 $ 103 $ 113
Cash dividends per common share - 0.75 0.75 0.75
Special distribution per common share - - - -
Market price per common share - high(d) - 49.88 42.75 35.88
Market price per common share - low(d) - 36.38 25.50 21.50
Common shares outstanding (thousands) - 126,440 135,108 144,412
Capital expenditures - 721 542 409
Employees - continuing operations - 11,745 11,521 12,004
Selected Financial Ratios -
Total debt/total capital - 42.7% 39.0% 38.2%
Return on capital(c) - 18.6% 39.2% 18.0%
Return on equity(f) - 28.5% 60.6% 26.5%
Income from continuing operations/
average stockholders' equity - 28.5% 52.1% 26.5%
Cash dividends on common stock/income
from continuing operations - 16.7% 11.1% 29.0%
<CAPTION>
Millions of dollars
(except per share figures) 1993 1992 1991
<S> <C> <C> <C>
From the Income Statement -
Net sales - $ 4,640 $ 4,872 $ 4,877
Cost of sales - 3,589 3,764 3,787
Research and development - 139 155 157
Selling, administration and other expenses - 340 383 408
Depreciation and amortization - 276 293 287
Partnership (income) loss - (67) (60) 22
Other (income) expense - net - 66 13 135
Income before interest expense and -
provision for income taxes - 297 324 81
Interest expense - 70 146 228
Pre-tax income (loss)
from continuing operations - 227 178 (147)
Provision (credit) for income taxes - 78 45 (50)
Income (loss) from corporate
investments carried at equity - 16 (14) (21)
Income (loss) from continuing operations - 165 119 (116)
Net income (loss) - common stockholders - 58 (187) (28)
Per common share
Primary - Income (loss)
from continuing operations - $ 1.00 $ 0.76 $ (1.06)
- Net income (loss) - 0.36 (1.46) (0.22)
Fully diluted(b) - Income (loss)
from continuing operations - 1.00 0.76 (1.06)
- Net income (loss) - 0.36 (1.46) (0.22)
From the Balance Sheet -
Net current assets of continuing operations - $ 233 $ 66 $ 209
Total assets - 4,689 4,941 6,826
Long-term debt - 931 1,113 1,160
Other long-term obligations - 378 277 428
Total capital(c) - 2,395 2,710 4,694
Stockholders' equity - 1,428 1,238 2,239
Stockholders' equity per common share - 9.49 9.32 17.55
Other Data -
Cash dividends on common stock - $ 110 $ 114 $ 126
Cash dividends per common share - 0.75 0.875 1.00
Special distribution per common share - - 15.875 -
Market price per common share - high(d) - 23.13 17.13(e) 22.63
Market price per common share - low(d) - 16.00 10.88(e) 15.13
Common shares outstanding (thousands) - 150,548 132,865 127,607
Capital expenditures - 395 359 400
Employees - continuing operations - 13,051 15,075 16,705
Selected Financial Ratios -
Total debt/total capital - 40.3% 54.3% 52.0%
Return on capital(c) - 7.7% 6.9% -
Return on equity(f) - 4.7% (8.4)% (1.2)%
Income from continuing operations/
average stockholders' equity - 12.4% 6.8% -
Cash dividends on common stock/income
from continuing operations - 66.7% 95.8% -
<CAPTION>
Millions of dollars
(except per share figures) 1990 1989 1988
<S> <C> <C> <C>
From the Income Statement -
Net sales - $ 5,238 $ 5,613 $ 5,525
Cost of sales - 3,876 3,909 3,696
Research and development - 157 143 124
Selling, administration and other expenses - 466 442 394
Depreciation and amortization - 278 261 255
Partnership (income) loss - (70) (82) (95)
Other (income) expense - net - (103) (108) 1
Income before interest expense and -
provision for income taxes - 634 1,048 1,150
Interest expense - 269 268 172
Pre-tax income (loss)
from continuing operations - 365 780 978
Provision (credit) for income taxes - 130 257 381
Income (loss) from corporate
investments carried at equity - (42) 27 33
Income (loss) from continuing operations - 188 530 608
Net income (loss) - common stockholders - 308 573 662
Per common share
Primary - Income (loss)
from continuing operations - $ 1.34 $ 3.76 $ 4.48
- Net income (loss) - 2.19 4.07 4.88
Fully diluted(b) - Income (loss)
from continuing operations - 1.34 3.63 4.29
- Net income (loss) - 2.13 3.92 4.66
From the Balance Sheet -
Net current assets of continuing operations - $ 7 $ 22 $ 14
Total assets - 7,389 7,355 7,327
Long-term debt - 2,058 2,060 2,271
Other long-term obligations - 357 572 594
Total capital(c) - 5,338 5,319 4,805
Stockholders' equity - 2,373 2,383 1,836
Stockholders' equity per common share - 18.88 16.83 13.34
Other Data -
Cash dividends on common stock - $ 138 $ 140 $ 155
Cash dividends per common share - 1.00 1.00 1.15
Special distribution per common share - - - -
Market price per common share - high(d) - 24.88 33.25 28.38
Market price per common share - low(d) - 14.13 22.75 17.00
Common shares outstanding (thousands) - 125,674 141,578 137,602
Capital expenditures - 381 483 380
Employees - continuing operations - 17,722 18,032 17,258
Selected Financial Ratios -
Total debt/total capital - 54.0% 49.9% 56.1%
Return on capital(c) - 8.4% 21.2% 24.5%
Return on equity(f) - 12.9% 31.2% 53.1%
Income from continuing operations/
average stockholders' equity - 7.9% 25.1% 39.4%
Cash dividends on common stock/income
from continuing operations - 73.4% 26.4% 25.5%
<FN>
a) Selling, administration and other expenses in 1995 include a charge of $68
million for postemployment benefits.
b) Fully diluted per share amounts are shown equal to primary per share
amounts when antidilution occurs.
c) Return on capital is computed by dividing income by beginning-of-year
capital. Income consists of income from continuing operations, less
preferred dividends, plus after-tax interest cost (net of interest income
received from Praxair), plus income attributable to minority interests.
Capital consists of total debt plus minority stockholders' equity in
consolidated subsidiaries and stockholders' equity, adjusted for the
corporation's Praxair-related assets and the cumulative effect of changes
in accounting principles. Total debt consists of short-term debt, long-term
debt and the current portion of long-term debt.
d) Prices are based on New York Stock Exchange Composite Transactions.
e) In 1992 the corporation spun off Praxair, Inc. The high and low presented
in the table for 1992 represent the value of the common stock after the
spin-off. The high and low for 1992 before the spin-off were $29.63 and
$20.13, respectively.
f) Return on equity is computed by dividing net income-common stockholders by
beginning-of-year stockholders' equity.
</TABLE>
Quarterly Data
Union Carbide Corporation and Subsidiaries
Millions of dollars 1Q 2Q 3Q 4Q Year
1996 -
Net sales - $1,501 $1,559 $1,538 $1,508 $6,106
Cost of sales - 1,099 1,150 1,145 1,174 4,568
Gross profit - 402 409 393 334 1,538
Depreciation and amortization - 75 79 81 77 312
Operating profit - 259 245 242 175 921
Net income - 157 173 161 102 593
Net income - -
common stockholders - 155 170 159 99 583
1995 -
Net sales - $1,453 $1,541 $1,495 $1,399 $5,888
Cost of sales - 999 1,103 1,038 960 4,100
Gross profit - 454 438 457 439 1,788
Depreciation and amortization - 83 72 72 79 306
Operating profit - 341 308 398 301 1,348
Net income(a) - 230 228 277 190 925
Net income -
common stockholders - 228 225 275 187 915
Dollars per common share 1Q 2Q 3Q 4Q Year
1996 -
Primary net income - $ 1.11 $ 1.23 $ 1.19 $ 0.74 $ 4.28
Fully diluted net income - 1.01 1.12 1.08 0.68 3.90
Cash dividends - 0.1875 0.1875 0.1875 0.1875 0.75
Market price - high(b) - 49.88 49.63 46.25 47.00 49.88
Market price - low(b) - 36.63 39.00 36.38 39.00 36.38
1995 -
Primary net income - $ 1.57 $ 1.59 $ 1.96 $ 1.33 $ 6.44
Fully diluted net income - 1.43 1.44 1.77 1.21 5.83
Cash dividends - 0.1875 0.1875 0.1875 0.1875 0.75
Market price - high(b) - 32.00 33.63 42.75 41.38 42.75
Market price - low(b) - 25.50 28.38 33.00 36.38 25.50
a) Net income for the first quarter of 1995 included an after-tax net gain of
$12 million, or $0.07 per share fully diluted, due to a gain on the sale of
a portion of the corporation's interest in UCAR International Inc.; a
charge for future lease payments on unused office space, primarily at the
corporation's headquarters, and an increase in depreciation expense related
to a reduction in the depreciable lives of certain computer equipment. Net
income for the third quarter of 1995 included an after-tax net gain of $50
million, or $0.32 per share fully diluted, due to a gain on the sale of the
corporation's remaining interest in UCAR International Inc. and a charge
for postemployment benefits.
b) Prices are based on New York Stock Exchange Composite Transactions.
Consolidated Statement of Income
Union Carbide Corporation and Subsidiaries
Millions of dollars (except per share figures),
year ended December 31, 1996 1995 1994
Net Sales - $6,106 $5,888 $4,865
Cost of sales, exclusive of
depreciation and amortization - 4,568 4,100 3,673
Research and development - 159 144 136
Selling, administration and other expenses - 321 387 290
Depreciation and amortization - 312 306 274
Partnership income - (144) (152) (98)
Other (income) expense - net - (31) (245) 39
Income Before Interest Expense and Provision
for Income Taxes - 921 1,348 551
Interest expense - 76 89 80
Income Before Provision for Income Taxes - 845 1,259 471
Provision for income taxes - 236 380 137
Income of Consolidated Companies - 609 879 334
Income (loss) from corporate investments
carried at equity - (16) 46 55
Net Income - 593 925 389
Preferred stock dividends, net of income taxes - 10 10 10
Net Income - Common Stockholders - $ 583 $ 915 $ 379
Earnings per Common Share
Primary - $ 4.28 $ 6.44 $ 2.44
Fully diluted - 3.90 5.83 2.27
Cash Dividends Declared per Common Share - $ 0.75 $ 0.75 $ 0.75
The Notes to Financial Statements on pages 26 through 41 should be read in
conjunction with this statement.
Consolidated Balance Sheet
Union Carbide Corporation and Subsidiaries
Millions of dollars at December 31, 1996 1995
Assets -
Cash and cash equivalents - $ 94 $ 449
Notes and accounts receivable - 1,047 996
Inventories - 541 544
Other current assets - 191 207
Total Current Assets - 1,873 2,196
Property, plant and equipment - 7,159 6,357
Less: Accumulated depreciation - 3,750 3,549
Net Fixed Assets - 3,409 2,808
Companies carried at equity - 695 739
Other investments and advances - 77 84
Total Investments and Advances - 772 823
Other assets - 492 429
Total Assets - $6,546 $6,256
Liabilities and Stockholders' Equity -
Accounts payable - $ 268 $ 316
Short-term debt and current portion
of long-term debt - 112 38
Accrued income and other taxes - 133 259
Other accrued liabilities - 765 725
Total Current Liabilities - 1,278 1,338
Long-term debt - 1,487 1,285
Postretirement benefit obligation - 473 480
Other long-term obligations - 811 834
Deferred credits - 301 201
Minority stockholders' equity in
consolidated subsidiaries - 29 24
Convertible preferred stock - ESOP - 144 146
Unearned employee compensation - ESOP - (91) (97)
Stockholders' equity -
Common stock
Authorized - 500,000,000 shares
Issued - 154,609,669 shares - 155 155
Additional paid-in capital - 370 343
Translation and other equity adjustments - (33) (15)
Retained earnings - 2,629 2,145
Less: Treasury stock, at cost -
28,169,324 shares (19,501,701 in 1995) - (1,007) (583)
Total Stockholders' Equity - 2,114 2,045
Total Liabilities and Stockholders' Equity - $6,546 $6,256
The Notes to Financial Statements on pages 26 through 41 should be read in
conjunction with this statement.
Consolidated Statement of Cash Flows
Union Carbide Corporation and Subsidiaries
Increase (decrease) in cash and cash equivalents
Millions of dollars, year ended December 31, 1996 1995 1994
Operations -
Net income - $ 593 $ 925 $ 389
Noncash charges (credits) to net income
Depreciation and amortization - 312 306 274
Deferred income taxes - 82 (29) 31
Other noncash charges - 16 186 88
Net gains on investing transactions - (3) (379) (100)
Increase in working capital(a) - (92) (242) (151)
Long-term assets and liabilities - (46) (4) 30
Cash Flow From Operations - 862 763 561
Investing -
Capital expenditures - (721) (542) (409)
Investments and acquisitions
(excluding cash acquired) - (263) (431) (16)
Sale of investments - - 552 87
Sale of fixed and other assets - 22 54 138
Cash Flow Used for Investing - (962) (367) (200)
Financing -
Change in short-term debt (3 months or less) - 96 (11) 8
Proceeds from short-term debt - 21 6 43
Repayment of short-term debt - (37) - (48)
Proceeds from long-term debt - 203 402 18
Repayment of long-term debt - (10) (22) (36)
Issuance of common stock - 129 116 111
Purchase of common stock - (544) (425) (337)
Payment of dividends - (111) (116) (126)
Other - (1) (7) 7
Cash Flow Used for Financing - (254) (57) (360)
Effect of exchange rate changes on cash
and cash equivalents - (1) 1 -
Change in cash and cash equivalents - (355) 340 1
Cash and cash equivalents beginning-of-year - 449 109 108
Cash and Cash Equivalents End-of-Year - $ 94 $ 449 $ 109
Cash paid for interest and income taxes
Interest (net of amount capitalized) - $ 66 $ 68 $ 89
Income taxes - 169 329 74
a) Net change in certain components of working
capital (excluding noncash transactions):
(Increase) decrease in current assets
Notes and accounts receivable - $ (26) $(111) $(206)
Inventories - 43 (144) (22)
Other current assets - 25 8 (19)
Increase (decrease) in payables and accruals - (134) 5 96
(Increase) in working capital - $ (92) $(242) $(151)
The Notes to Financial Statements on pages 26 through 41 should be read in
conjunction with this statement.
<TABLE>
Consolidated Statement of Stockholders' Equity
Union Carbide Corporation and Subsidiaries
<CAPTION>
1996
Shares Millions
(in thousands) of dollars
<S> <C> <C>
Common Stock -
Balance at December 31 - 154,610 $ 155
Additional Paid-In Capital -
Balance at January 1 - $ 343
Put options, net - 8
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan - 2
For employee savings and
incentive plans - 17
Balance at December 31 - $ 370
Translation and Other
Equity Adjustments -
Balance at January 1 - $ (15)
Translation and other adjustments - (18)
Sale of businesses - -
Balance at December 31 - $ (33)
Retained Earnings -
Balance at January 1 - $2,145
Net income - common stockholders - 583
Cash dividends on common stock - (99)
Balance at December 31 - $2,629
Treasury Stock -
Balance at January 1 - 19,502 $ 583
Common stock repurchase program - 12,821 550
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan - (212) (7)
For employee savings and
incentive plans - (3,942) (119)
Balance at December 31 - 28,169 $1,007
Total Stockholders' Equity - $2,114
<CAPTION>
1995
Shares Millions
(in thousands) of dollars
<S> <C> <C>
Common Stock -
Balance at December 31 - 154,610 $ 155
Additional Paid-In Capital -
Balance at January 1 - $ 369
Put options, net - (19)
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan - 1
For employee savings and
incentive plans - (8)
Balance at December 31 - $ 343
Translation and Other
Equity Adjustments -
Balance at January 1 - $ (59)
Translation and other adjustments - (11)
Sale of businesses - 55
Balance at December 31 - $ (15)
Retained Earnings -
Balance at January 1 - $1,333
Net income - common stockholders - 915
Cash dividends on common stock - (103)
Balance at December 31 - $2,145
Treasury Stock -
Balance at January 1 - 10,197 $ 289
Common stock repurchase program - 14,127 426
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan - (322) (9)
For employee savings and
incentive plans - (4,500) (123)
Balance at December 31 - 19,502 $ 583
Total Stockholders' Equity - $2,045
<CAPTION>
1994
Shares Millions
(in thousands) of dollars
<S> <C> <C>
Common Stock -
Balance at December 31 - 154,610 $ 155
Additional Paid-In Capital -
Balance at January 1 - $ 366
Put options, net - -
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan - 1
For employee savings and
incentive plans - 2
Balance at December 31 - $ 369
Translation and Other
Equity Adjustments -
Balance at January 1 - $ (84)
Translation and other adjustments - 7
Sale of businesses - 18
Balance at December 31 - $ (59)
Retained Earnings -
Balance at January 1 - $1,067
Net income - common stockholders - 379
Cash dividends on common stock - (113)
Balance at December 31 - $1,333
Treasury Stock -
Balance at January 1 - 4,062 $ 76
Common stock repurchase program - 11,624 337
Issued:
For the Dividend Reinvestment
and Stock Purchase Plan - (275) (6)
For employee savings and
incentive plans - (5,214) (118)
Balance at December 31 - 10,197 $ 289
Total Stockholders' Equity - $1,509
The Notes to Financial Statements on pages 26 through 41 should be read in
conjunction with this statement.
</TABLE>
Notes to Financial Statements
Index
The Notes to Financial Statements are found on the following pages:
1. Summary of Significant Accounting Policies.....26
2. Financial Instruments.....28
3. Supplementary Income Statement Detail.....29
4. Supplementary Balance Sheet Detail.....29
5. Business and Geographic Segment Information.....30
6. Acquisitions and Divestitures.....31
7. Income Taxes.....32
8. Partnerships and Corporate Joint Ventures.....33
9. Long-Term Debt.....34
10. Convertible Preferred Stock - ESOP.....34
11. Stockholders' Equity.....35
12. Leases.....35
13. Retirement Programs.....36
14. Incentive Plans.....38
15. Commitments and Contingencies.....39
16. Subsequent Events.....41
1. Summary of Significant Accounting Policies
Nature of Operations - Union Carbide Corporation is engaged in two segments of
the chemicals and plastics industry, Specialties & Intermediates and Basic
Chemicals & Polymers. See Note 5.
Principles of Consolidation - The consolidated financial statements include
the accounts of all significant subsidiaries. All significant intercompany
transactions have been eliminated in consolidation. Investments in 20 percent-
to 50 percent-owned companies and partnerships are carried at equity in net
assets. Other investments are carried generally at cost.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles, which require the corporation
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Accounting Changes - The corporation adopted Financial Accounting Standard
(FAS) 123, "Accounting for Stock-Based Compensation," in 1996, under which the
corporation elected to continue following Accounting Principles Board (APB)
Opinion 25. The corporation adopted FAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," in 1995, and
adopted FAS 115, "Accounting for Certain Investments in Debt and Equity
Securities," in 1994. The effects of the adoptions of FAS 121 and FAS 115 were
not material.
Foreign Currency Translation - Unrealized gains and losses resulting from
translating foreign subsidiaries' assets and liabilities into U.S. dollars
generally are accumulated in an equity account on the balance sheet until such
time as the subsidiary is sold or substantially or completely liquidated.
Translation gains and losses relating to operations located in Latin American
countries, where hyperinflation exists, and to international operations using
the U.S. dollar as their functional currency are included in the income
statement.
Financial Instruments - Financial instruments are used to hedge financial risk
caused by fluctuating interest and currency rates. The amounts to be paid or
received on interest rate risk instruments that hedge debt accrue and are
recognized over the lives of the instruments. Gains and losses on foreign
currency risk instruments used to hedge firm commitments are deferred and
recognized as part of the related foreign currency transactions.
Foreign currency instruments that are designated to offset earnings
fluctuations from anticipated foreign currency cash flows are marked to market
and the results recognized immediately as other income or other expense.
Cash Equivalents - The corporation considers as cash equivalents all highly
liquid investments that are readily convertible to known amounts of cash and
are so near their maturity that they present insignificant risk of changes in
value because of changes in interest rates.
Inventories - Inventories are stated at cost or market, whichever is lower.
These amounts do not include depreciation and amortization, the impact of
which is not significant to the financial statements.
Approximately 63 percent of inventory amounts before application of the
LIFO method at Dec. 31, 1996 (59 percent at Dec. 31, 1995) have been valued on
the LIFO basis; the "average cost" method is used for the balance. It is
estimated that if inventories had been valued at current costs, they would
have been approximately $329 million and $340 million higher than reported at
Dec. 31, 1996 and 1995, respectively.
Fixed Assets - Fixed assets are carried at cost. Expenditures for replacements
are capitalized, and the replaced items are retired. Gains and losses from the
sale of property are included in income.
Depreciation is calculated on a straight-line basis. The corporation and
its subsidiaries generally use accelerated depreciation methods for tax
purposes where appropriate.
Patents, Trademarks and Goodwill - Amounts paid for purchased patents and
newly acquired businesses in excess of the fair value of the net assets of
such businesses have been charged to patents, trademarks and goodwill. The
portion of such amounts determined to be attributable to patents is amortized
over their remaining lives, while trademarks and goodwill are amortized over
the estimated period of benefit, generally 5 to 20 years.
Research and Development - Research and development costs are charged to
expense as incurred. Depreciation expense applicable to research and
development facilities and equipment is included in Depreciation and
amortization in the Consolidated Statement of Income ($11 million in 1996, $14
million in 1995 and $13 million in 1994).
Income Taxes - Provisions have been made for deferred income taxes based on
differences between financial statement and tax bases of assets and
liabilities using currently enacted tax rates and regulations.
Environmental Costs - Environmental expenditures are expensed or capitalized
as appropriate, depending on their future economic benefit. Expenditures
relating to an existing condition caused by past operations and having no
future economic benefits are expensed. Environmental expenditures include site
investigation, physical remediation, operation and maintenance, and legal and
administrative costs. Environmental accruals are established for sites where
it is probable that a loss has been incurred and the amount of the loss can
reasonably be estimated. Where the estimate is a range and no amount within
the range is a better estimate than any other amount, the corporation accrues
the minimum amount in the range and includes the balance of the range in its
reported contingencies.
Retirement Programs - The cost of pension benefits under the U.S. Retirement
Program is determined by an independent actuarial firm using the projected
unit credit actuarial cost method, with an unrecognized net asset at Jan. 1,
1986, amortized over 15 years. Contributions to this program are made in
accordance with the regulations of the Employee Retirement Income Security Act
of 1974.
The cost of postretirement benefits is recognized on the accrual basis
over the period in which employees become eligible for benefits.
Incentive Plans - The corporation applies APB Opinion 25 in accounting for the
stock option portion of its employee compensation and stock purchase plans.
Compensation expense is recognized for other stock-based incentives issued
under the long-term incentive plan.
Earnings per Common Share - Primary earnings per common share is computed by
dividing Net income - common stockholders, excluding tax benefits related to
unallocated preferred stock dividends, by the weighted average number of
common shares outstanding during the year and common stock equivalents related
to dilutive stock options. Fully diluted earnings per common share is computed
by dividing Net income by the weighted average number of common shares
outstanding, common stock equivalents related to dilutive stock options and
convertible preferred stock.
The number of common shares used to compute earnings per share amounts
was:
1996 1995 1994
Primary - 135,521,904 141,663,656 154,174,788
Fully diluted - 151,642,658 158,380,545 170,886,405
2. Financial Instruments
Fair values of financial instruments are estimated by using a method that
indicates the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation
sale. The fair values of the financial instruments included on the
Consolidated Balance Sheet were estimated as follows:
Cash, Short-Term Receivables and Accounts Payable - At Dec. 31, 1996 and 1995,
the carrying amounts approximate fair value because of the short maturity of
these instruments. The corporation had foreign currency forward contracts of
$38 million at Dec. 31, 1996 ($32 million at Dec. 31, 1995), to hedge
fluctuations in the dollar value of short-term foreign currency receivables
and payables. Deferred gains or losses on these contracts were not material.
Other outstanding foreign currency forward contracts and options used as
a means of offsetting fluctuations in the dollar value of other foreign
currency accounts receivable and payable and earnings fluctuations from
anticipated foreign currency cash flows totaled $188 million at Dec. 31, 1996
($173 million at Dec. 31, 1995). During 1996 and 1995 the average fair values
of, and the resultant losses and gains associated with, these contracts were
nominal.
Investments - The corporation's investments in equity companies, partnerships
and other businesses generally involve joint ventures for which it is not
practicable to determine fair values.
Long-Term Receivables - The fair values of long-term and insurance recovery
receivables are calculated using current interest rates and consideration of
underlying collateral where appropriate. The fair values approximate the
carrying values of $186 million and $200 million included in Other assets in
the Consolidated Balance Sheet at Dec. 31, 1996 and 1995, respectively.
Debt - The corporation uses various types of financial instruments, including
interest rate swaps and forward rate agreements, to manage exposure to
financial market risk caused by interest rate fluctuations. An interest rate
swap held at Dec. 31, 1996 and 1995, had a nominal carrying amount and fair
value.
Carrying and Fair Values - The carrying values and fair values of the
corporation's investments, receivables and debt financial instruments at Dec.
31, 1996 and 1995, are summarized in the table below. Fair values are based on
quoted market values, where available, or discounted cash flows (principally
long-term debt).
Millions of dollars
at December 31, 1996 1995
Carrying Fair Carrying Fair
Assets (Liabilities) Amount Value Amount Value
Investments and
receivables - $ 263 $ 263 $ 284 $ 286
Short- and
long-term debt - (1,599) (1,619) (1,323) (1,389)
3. Supplementary Income Statement Detail
Millions of dollars
for the year ended December 31, 1996 1995 1994
Selling, Administration
and Other Expenses -
Selling - $130 $128 $126
Administration(a) - 121 186 99
Other expenses - 70 73 65
$321 $387 $290
Other (Income) Expense - Net -
Gains on sales and
disposals of businesses and
other assets(b) - $ - $(387) $(67)
Investment and
interest income - (32) (19) (11)
Foreign currency adjustments - 7 6 16
Unused space charge(c) - - 191 -
Other(d) - (6) (36) 101
$(31) $(245) $ 39
Interest Expense -
Interest incurred(e) - $121 $119 $ 93
Less: Interest capitalized
and other adjustments - 45 30 13
$ 76 $ 89 $ 80
a) Includes a charge of $68 million for postemployment benefits in 1995.
b) Includes for 1995 a $381 million gain from the sales of the corporation's
remaining interest in UCAR International Inc. Includes for 1994 an
$81 million gain on the sale of a manufacturing facility and distribution
terminal in Hong Kong; a $24 million gain on the sale of a preferred stock
investment in OSi; a $24 million charge from the write-down and sale of the
corporation's stockholding in Union Carbide India Limited, and a
$12 million loss on the sale of the corporation's interest in a uranium
mill and mines.
c) See Note 12.
d) Includes for 1994 $68 million for litigation costs and other costs related
to divested operations. Includes income of $5 million in 1995 and charges
of $7 million in 1994 related to discontinued and noncore businesses.
e) Includes $12 million, $12 million and $17 million in 1996, 1995 and 1994,
respectively, representing the interest component of certain leases.
4. Supplementary Balance Sheet Detail
Millions of dollars at December 31, 1996 1995
Notes and Accounts Receivable -
Trade - $ 846 $ 824
Other - 211 183
1,057 1,007
Less: Allowance for doubtful accounts - 10 11
$1,047 $ 996
Inventories -
Raw materials and supplies - $ 114 $ 117
Work in process - 54 46
Finished goods - 373 381
$ 541 $ 544
Property, Plant and Equipment -
Land and improvements - $ 326 $ 307
Buildings - 393 380
Machinery and equipment - 5,795 5,221
Construction in progress and other - 645 449
$7,159 $6,357
Other Assets -
Deferred charges - $ 193 $ 163
Insurance recovery receivables - 135 145
Long-term receivables - 51 55
Patents, trademarks and goodwill - 113 66
$ 492 $ 429
Other Accrued Liabilities -
Accrued accounts payable - $ 335 $ 241
Payrolls - 56 53
Environmental remediation costs - 58 65
Postretirement benefit obligation - 33 28
Employee profit sharing - 51 85
Other - 232 253
$ 765 $ 725
Other Long-Term Obligations -
Environmental remediation costs - $ 252 $ 262
Product liability costs - 170 180
Impairment of unused office space - 151 158
Postemployment benefits - 83 87
Other - 155 147
$ 811 $ 834
Translation and Other
Equity Adjustments -
Canada - $ (44) $ (43)
Europe - 18 15
Far East & Other - (7) 13
$ (33) $ (15)
5. Business and Geographic Segment Information
The company's operations are classified into two business segments. The
Specialties & Intermediates segment includes the corporation's specialty
chemicals and polymers product lines, licensing, and solvents and chemical
intermediates. The Basic Chemicals & Polymers segment includes the
corporation's ethylene and propylene manufacturing operations as well as the
production of first-level ethylene and propylene derivatives - polyethylene,
polypropylene, ethylene oxide and ethylene glycol. The corporation's noncore
operations and financial transactions are included in the Other segment.
Millions of dollars 1996 1995 1994
Net Sales -
Specialties & Intermediates - $4,286 $4,123 $3,636
Basic Chemicals & Polymers - 2,125 2,080 1,411
Intersegment eliminations - (305) (315) (182)
Total - $6,106 $5,888 $4,865
Partnership Income (Loss) -
Specialties & Intermediates - $ 134 $ 130 $ 102
Basic Chemicals & Polymers - 10 22 (4)
Total - $ 144 $ 152 $ 98
Depreciation and Amortization -
Specialties & Intermediates - $ 188 $ 194 $ 169
Basic Chemicals & Polymers - 124 112 105
Total - $ 312 $ 306 $ 274
Operating Profit (Loss) -
Specialties & Intermediates - $ 742 $ 709 $ 634
Basic Chemicals & Polymers - 162 444 (22)
Other - 17 195 (61)
Total - $ 921 $1,348 $ 551
Capital Expenditures -
Specialties & Intermediates - $ 522 $ 392 $ 253
Basic Chemicals & Polymers - 199 150 156
Total - $ 721 $ 542 $ 409
Identifiable Assets -
Specialties & Intermediates - $3,892 $3,527 $3,111
Basic Chemicals & Polymers - 2,328 2,095 1,511
Other - 326 634 406
Total - $6,546 $6,256 $5,028
Sales of the Basic Chemicals & Polymers segment include intersegment
sales, principally ethylene oxide, which are made at the estimated market
value of the products transferred. Operating profit is Income before interest
expense and provision for income taxes.
The operating profit of the Specialties & Intermediates segment for 1995
includes a $48 million charge for postemployment benefits and an increase of
$12 million in depreciation expense related to a reduction in the depreciable
lives of certain computer equipment. The operating profit of the Basic
Chemicals & Polymers segment for 1995 includes a $20 million charge for
postemployment benefits. Other operating profit for 1995 includes a gain of
$381 million on the sales of the corporation's interest in UCAR International
Inc. and a charge of $191 million for future lease costs on unused office
space, primarily at the corporation's headquarters.
The 1994 operating profit of the Specialties & Intermediates segment
includes an $81 million gain on the sale of a manufacturing facility and
distribution terminal in Hong Kong, a $68 million charge for litigation costs
and other costs primarily related to divested operations and a $24 million
gain on the sale of a preferred stock investment in the OrganoSilicon business
(OSi). Other 1994 operating profit includes a $24 million charge from the
write-down and sale of the corporation's stockholding in Union Carbide India
Limited and a $12 million loss on the sale of the corporation's interest in a
uranium mill and mines.
Net sales, operating profit (loss) and identifiable assets by geographic
area were as follows:
Millions of dollars 1996 1995 1994
Net Sales -
United States & Puerto Rico(a) - $4,336 $4,071 $3,535
Canada - 147 142 136
Europe - 664 719 474
Latin America - 228 227 218
Far East & Other - 731 729 502
International operations - 1,770 1,817 1,330
Total - $6,106 $5,888 $4,865
a) Includes export sales of $743 million in 1996 ($732 million in 1995 and
$532 million in 1994).
Operating Profit (Loss) -
United States & Puerto Rico - $ 820 $1,228 $ 433
Canada - 28 36 14
Europe - 41 50 12
Latin America - (11) 12 16
Far East & Other - 37 29 74
International operations - 95 127 116
Intersegment eliminations - 6 (7) 2
Total - $ 921 $1,348 $ 551
Identifiable Assets -
United States & Puerto Rico - $4,977 $4,433 $3,670
Canada - 305 277 244
Europe - 408 404 281
Latin America - 224 191 190
Far East & Other - 312 322 244
International operations - 1,249 1,194 959
Intersegment eliminations - (6) (5) (7)
Other - 326 634 406
Total - $6,546 $6,256 $5,028
6. Acquisitions and Divestitures
On Jan. 18, 1996, the corporation purchased the polypropylene assets and
business of Shell Oil Company. The purchased assets, located in the U.S.,
consist of Shell's polypropylene technology and manufacturing facilities and
polypropylene assets previously held jointly by both companies.
On Feb. 29, 1996, the corporation purchased 95 percent of the outstanding
shares of Companhia Alcoolquimica Nacional, a Brazilian producer of vinyl
acetate monomer.
In July 1995 the corporation and two Kuwaiti corporations, Petrochemical
Industries Company and Boubyan Petrochemical Company, formed EQUATE
Petrochemical Company, a joint venture for development of a world-scale
petrochemical complex in Kuwait. The cost of design, construction and initial
working capital is expected to approximate $2 billion by the planned start-up
date in 1997. At Dec. 31, 1996, the corporation had invested approximately
$138 million in EQUATE, representing its 45 percent equity investment in
EQUATE. The corporation anticipates making an additional investment of $12
million in early 1997. The corporation has political risk insurance coverage
for its equity investment.
In March 1995 the corporation acquired 50 percent of the equity of
Polimeri Europa S.r.l., from EniChem S.p.A. for $216 million. EniChem retained
the other 50 percent. In anticipation of the corporation's acquisition,
EniChem had transferred to Polimeri Europa all of its polyethylene business,
excluding its wire and cable compounds business.
In February 1995 the corporation purchased certain ethylene oxide
derivative businesses from Imperial Chemical Industries of London for $71
million.
In January 1995 the corporation and Mitsubishi Corporation concluded the
sale of newly issued common stock of UCAR International Inc. to a new company
formed by Blackstone Capital Partners II Merchant Banking Fund L.P. and a
repurchase of certain shares by UCAR that resulted in Blackstone acquiring a
75 percent interest in UCAR. The corporation received $343 million in net cash
proceeds and retained a 25 percent equity interest in UCAR. This transaction
resulted in a gain of $220 million ($154 million after-tax). In August 1995
the corporation joined in UCAR's initial public offering to sell its remaining
equity interest in UCAR for net cash proceeds of $199 million. This sale
resulted in a gain of $161 million ($99 million after-tax).
7. Income Taxes
The following is a summary of the U.S. and non-U.S. components of Income
before provision for income taxes:
Millions of dollars
for the year ended
December 31, 1996 1995 1994
U.S. - $ 766 $1,137 $ 362
Non-U.S. - 79 122 109
$ 845 $1,259 $ 471
The following is an analysis of income tax expense:
Millions of dollars 1996 1995
for the year ended December 31, Current Deferred Current Deferred
U.S. Federal income taxes - $107 $ 79 $332 $(24)
U.S. business and research and
experimentation tax credits - (8) - (17) -
U.S. state and local taxes
based on income - 1 2 47 (7)
Non-U.S. income taxes - 54 1 47 2
154 82 409 (29)
Provision for Income Taxes - $236 $380
Millions of dollars 1994
for the year ended December 31, Current Deferred
U.S. Federal income taxes - $77 $46
U.S. business and research and
experimentation tax credits - (10) -
U.S. state and local taxes
based on income - 4 (2)
Non-U.S. income taxes - 35 (13)
106 31
Provision for Income Taxes - $137
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows:
1996
Deferred Deferred
Millions of dollars at December 31, Assets Liabilities
Depreciation and amortization - $ - $435
Postretirement and postemployment benefits - 229 -
Environmental and litigation costs - 133 -
Sale/leaseback and related deferrals - 103 -
Other - 199 246
Gross deferred tax assets and liabilities - 664 681
Net Deferred Tax (Liability) Asset - $(17)
1995
Deferred Deferred
Millions of dollars at December 31, Assets Liabilities
Depreciation and amortization - $ - $392
Postretirement and postemployment benefits - 249 -
Environmental and litigation costs - 147 -
Sale/leaseback and related deferrals - 109 -
Other - 153 191
Gross deferred tax assets and liabilities - 658 583
Net Deferred Tax (Liability) Asset - $75
Net noncurrent deferred tax liabilities of $142 million ($62 million in
1995) are included in Deferred credits in the Consolidated Balance Sheet. Net
current deferred tax assets of $118 million ($132 million in 1995) are
included in Other current assets. Net noncurrent deferred tax assets of $7
million ($5 million in 1995) are included in Other assets. In 1996 there were
$2 million in non-U.S. net operating loss carryforwards included in the
deferred tax assets above ($6 million in 1995).
Undistributed earnings of affiliates intended to be reinvested
indefinitely amounted to approximately $403 million at Dec. 31, 1996 ($393
million at Dec. 31, 1995). Determination of deferred taxes related to these
earnings is not practicable.
An analysis of the difference between Provision for income taxes and the
amount computed by applying the statutory Federal income tax rate to Income
before provision for income taxes is as follows:
Percentage of
Pre-Tax Income
Year ended December 31, 1996 1995 1994
Tax at statutory Federal rate - 35.0% 35.0% 35.0%
Taxes related to operations
outside the U.S. - (1.0) 0.1 -
U.S. state and local taxes
based on income - 0.3 1.0 0.2
Foreign sales corporation - (3.0) (1.4) (2.8)
Business credits - (0.9) (1.4) (2.1)
Other, net - (2.5) (3.1) (1.2)
Consolidated effective
income tax rate - 27.9% 30.2% 29.1%
8. Partnerships and Corporate Joint Ventures
The following are financial summaries of partnerships and 20 percent- to 50
percent-owned corporate investments carried at equity. The corporation's most
significant partnerships include UOP, Petromont and Company Limited
Partnership, Aspell Polymeres SNC, and World Ethanol Company. The corporation
purchased the balance of the Union Carbide/Shell polypropylene partnership in
January 1996 (see Note 6).
Partnerships
Millions of dollars 1996 1995 1994
Net sales(a) - $2,109 $2,146 $1,616
Cost of sales - 1,338 1,312 954
Depreciation - 83 66 51
Partnership income - 242 283 229
UCC Share of
Partnership Income - $ 144 $ 152 $ 98
Current assets - $ 704 $ 599
Noncurrent assets - 806 824
Total assets - 1,510 1,423
Current liabilities - 608 483
Noncurrent liabilities - 385 441
Total liabilities - 993 924
Net assets - 517 499
UCC Equity - $ 251 $ 243
a) Includes $159 million net sales to the corporation in 1996
($177 million in 1995 and $209 million in 1994).
Corporate investments carried at equity include Polimeri Europa S.r.l.,
EQUATE Petrochemical Company K.S.C., Nippon Unicar Company Limited, Alberta &
Orient Glycol Company Limited, Asian Acetyls Co., Ltd. and several smaller
entities and, in 1995 and 1994, UCAR International Inc.
20%- to 50%-Owned
Corporate Investments
Millions of dollars 1996 1995 1994
Net sales(a) - $2,059 $1,731 $1,206
Cost of sales - 1,693 1,221 817
Depreciation - 129 119 58
Net income (loss) - (6) 96 109
UCC Share of
Net Income (Loss) - $ (16) $ 46 $ 55
Current assets - $ 877 $ 811
Noncurrent assets - 2,918 1,886
Total assets - 3,795 2,697
Current liabilities - 888 713
Noncurrent liabilities - 1,891 922
Total liabilities - 2,779 1,635
Net assets - 1,016 1,062
UCC Equity - $ 444 $ 496
a) Includes $153 million net sales to the corporation in 1996
($167 million in 1995 and $73 million in 1994).
Dividends and distributions received from partnerships and corporate
joint ventures aggregated $141 million in 1996 ($97 million in 1995 and $128
million in 1994).
9. Long-Term Debt
Millions of dollars at December 31, 1996 1995
6.75% Notes due 2003 - $ 125 $ 125
6.79% Debentures due 2025 - 250 250
7.00% Notes due 1999 - 175 175
7.50% Debentures due 2025 - 150 150
7.75% Debentures due 2096 - 200 -
7.875% Debentures due 2023 - 175 175
8.75% Debentures due 2022 - 125 125
Pollution control and other
facility obligations - 243 246
Other debt - various maturities and
interest rates - 54 53
1,497 1,299
Less: Payments to be made
within 1 year - 10 14
$1,487 $1,285
On Oct. 2, 1996, the corporation issued $200 million of 7.75 percent
debentures maturing in 2096. The maturity of the debentures may be shortened
under certain circumstances to preserve the deductibility of interest payments
for Federal income tax purposes.
At Dec. 31, 1996, there were no outstanding borrowings under the
corporation's then existing $1 billion credit agreement. On Jan. 20, 1997, the
corporation entered into a replacement credit agreement. See Note 16.
The indentures under which the corporation's notes and debentures are
issued contain convenants, normal for these types of instruments, that place
certain limits on the corporation's ability to merge with another entity or
encumber assets.
Pollution control and other facility obligations represent state,
commonwealth and local governmental bond financing of pollution control and
other facilities, and are treated for accounting and tax purposes as debt of
the corporation. These tax-exempt obligations mature at various dates from
1998 through 2023 and have an average annual effective rate of 7.3 percent.
The average and effective interest rates in 1996 on the corporation's
fixed-rate debt, other than pollution control and other facility obligations,
were 7.4 percent. The corporation's weighted average interest rate on short-
term borrowings outstanding as of Dec. 31, 1996, was 5.7 percent (4.0 percent
as of Dec. 31, 1995).
Payments due on long-term debt in the four years following 1997 are:
1998, $14 million; 1999, $184 million; 2000, $21 million, and 2001, $23
million.
10. Convertible Preferred Stock - ESOP
The Union Carbide Corporation Employee Stock Ownership Plan (ESOP) is an
integral part of the Savings and Investment Program for employees. Each share
of ESOP stock is convertible into and has the same voting rights as one share
of the corporation's common stock, and is protected from dilution. The annual
preferred dividend is $0.794 per share.
Substantially all full-time employees in the U.S. are eligible to
participate in the ESOP through the corporation's matching contribution of 75
percent (50 percent in 1994) on eligible employee contributions.
At the corporation's option, ESOP shares may be redeemed either in cash
or the corporation's common stock when employees make withdrawals from their
accounts. It has been the corporation's policy to redeem ESOP shares with
cash.
The cost of the ESOP is recognized as incurred and was $2 million in 1996
($4 million in 1995 and $6 million in 1994). Reductions in ESOP costs in 1996
and 1995 were due primarily to appreciation in the corporation's common stock.
At Dec. 31, 1996, 16.0 million preferred shares were outstanding, 5.8 million
of which were credited to employees' accounts, including 0.6 million credited
during 1996.
11. Stockholders' Equity
Each outstanding share of common stock bears one Right entitling its holder,
under certain circumstances, to buy a share of common stock at a purchase
price of $37.67 (subject to adjustment). The Rights may not be exercised until
10 days after a person or group acquires 20 percent or more of UCC's common
stock, or until a date determined by the board of directors following
announcement of a tender offer that, if consummated, would result in 20
percent or more ownership of the common stock. Until then, separate Rights
certificates will not be issued, nor will the Rights be traded separately from
the stock.
Should an acquirer become the beneficial owner of 20 percent of the
common stock, and under certain additional circumstances, the corporation's
stockholders (other than the acquirer) would have the right to buy common
stock in Union Carbide Corporation, or in the surviving enterprise if the
corporation is acquired, having a value equal to two times the purchase price
of the Right then in effect.
The Rights will expire on Aug. 31, 1999, unless redeemed prior to that
date. The redemption price is $0.01 per Right.
On July 24, 1996, the board of directors of the corporation increased the
number of shares that may be repurchased under the existing common stock
repurchase program to 50 million shares. Through Dec. 31, 1996, the
corporation had repurchased 42.3 million shares since inception of the program
in 1993 (12.8 million during 1996) at an average effective price of $32.53 per
share. The corporation will continue to acquire additional shares from time to
time at prevailing market prices, at a rate consistent with the combination of
corporate cash flow and market conditions.
In conjunction with the corporation's common stock buyback program, put
options were sold in a series of private placements entitling the holders to
sell 10.2 million shares of common stock to UCC, at specified prices upon
exercise of the options. Since inception of this program through Dec. 31,
1996, options representing 7.6 million common shares have expired unexercised,
while options representing 2.1 million shares were exercised for $79 million,
or an average price of $37.05 per share. Options representing 0.5 million
shares remain outstanding at Dec. 31, 1996. Premiums received since inception
of the program, which are recorded as Additional paid-in capital, have reduced
the average price of repurchased shares to $32.53 per share from $32.77.
12. Leases
Leases that meet the criteria for capitalization have been classified and
accounted for as capital leases. For operating leases, primarily involving
facilities and distribution equipment, the future minimum rental payments
under leases with remaining noncancelable terms in excess of one year are:
Millions of dollars,
year ending December 31,
1997 - $ 74
1998 - 61
1999 - 56
2000 - 52
2001 - 50
Subsequent to 2001 - 246
Total minimum payments 539
Future sublease rentals - 94
Net Minimum Rental Commitments - $445
The present value of the net minimum rental payments amounts to $319
million, of which $220 million pertains to the corporation's headquarters
lease. Total lease and rental payments (net of sublease rental of $20 million
in 1996, 1995 and 1994) were $53 million, $67 million and $65 million for
1996, 1995 and 1994, respectively.
During 1995 the corporation recognized a nonrecurring, noncash charge of
$191 million ($134 million after-tax) for future minimum lease payments on
unused office space, primarily at the corporation's headquarters. The
headquarters charge reflects the pro rata costs of unused office space over
the remaining term of the lease, which runs to 2006, less anticipated net
sublease income. Neither the expected future costs nor expected net sublease
revenues were discounted.
13. Retirement Programs
Pension Benefits
The noncontributory defined benefit retirement program of Union Carbide
Corporation ("U.S. Retirement Program") covers substantially all U.S.
employees and certain employees in other countries. Pension benefits are based
primarily on years of service and compensation levels prior to retirement.
Pension coverage for employees of the corporation's non-U.S. consolidated
subsidiaries is provided through separate plans, to the extent deemed
appropriate. Obligations under such plans are principally provided for by
depositing funds with trustees.
The components of net periodic pension cost for the plans combined are as
follows:
Millions of dollars
for the year ended December 31, 1996 1995 1994
(Gain) loss on plan assets -
Actual - $(190) $(904) $ 154
Deferred - (31) 692 (355)
(221) (212) (201)
Service cost - benefits
earned during the period - 54 44 51
Interest cost on projected
benefit obligation - 196 197 180
Amortization - (3) (6) (9)
Net Periodic Pension Cost - $ 26 $ 23 $ 21
The funded status of the plans combined is as follows:
Millions of dollars at December 31, 1996 1995
Actuarial present value
of plan benefits -
Accumulated benefit obligation
Vested - $2,599 $2,596
Nonvested - 132 127
2,731 2,723
Projected benefit obligation - 3,001 2,986
Fair value of plan assets, primarily
invested in common stocks and
fixed-income securities - 3,180 3,173
Plan assets in excess of
projected benefit obligation - 179 187
Unamortized net asset at transition - (64) (77)
Unamortized prior service cost - 19 22
Unrecognized gains - net - (127) (103)
Prepaid Pension Cost - $ 7 $ 29
Pension obligations are valued using the 1983 Group Annuity Mortality
Table. The actuarial assumptions used were as follows:
At December 31, 1996 1995
Discount rate for determining
projected benefit obligation - 7.25% 6.75%
Rate of increase in
compensation levels - 4.50% 4.00%
Expected long-term rate of return
on plan assets - 8.50% 8.25%
Postretirement Benefits Other Than Pensions
The corporation provides health care and life insurance benefits for eligible
retired employees and their eligible dependents. These benefits are provided
through various insurance companies and health care providers.
The obligation is determined by application of the terms of health and
life insurance plans, together with relevant actuarial assumptions and health
care cost trends projected to increase annually at rates of 9.25 percent in
1997 and 8.75 percent in 1998, falling incrementally to a 5.75 percent annual
increase in 2004 and thereafter.
The effect of a 1 percent annual increase in the assumed health care cost
trend rates would increase the accumulated postretirement benefits obligation
at Dec. 31, 1996 by $29 million, and the aggregate of service and interest
cost components of net periodic postretirement benefit costs by $3 million.
Measurement of the accumulated postretirement benefit obligation was based on
the same actuarial assumptions used in the pension calculations.
The corporation has funded postretirement benefits for certain retirees
who retired prior to Dec. 31, 1988. The funds are invested primarily in common
stocks.
The components of net periodic postretirement benefit cost are as
follows:
Millions of dollars
for the year ended December 31, 1996 1995 1994
(Gain) loss on plan assets -
Actual - $ (4) $ (8) $ 1
Deferred - 2 6 (3)
(2) (2) (2)
Service cost - benefits
earned during the period - 13 11 12
Interest cost - 31 35 32
Amortization - (21) (21) (21)
Net Periodic
Postretirement Benefit Cost - $ 21 $ 23 $ 21
The funded status of the postretirement benefit obligation is as follows:
Millions of dollars at December 31, 1996 1995
Accumulated postretirement
benefit obligations -
Retirees - $366 $361
Fully eligible active
plan participants - 79 75
Other active plan participants - 27 26
472 462
Fair value of plan assets - 17 21
Accumulated postretirement
benefits in excess of plan assets - 455 441
Unrecognized gains - net - 51 67
Accrued Unfunded Postretirement
Benefit Obligations - $506 $508
The accumulated postretirement benefit obligation for retirees is net of
$130 million at Dec. 31, 1996 ($134 million at Dec. 31, 1995), which is
reimbursed to the corporation in part by previously owned businesses under
ongoing benefit-sharing agreements.
Deferred Compensation Plan
Since Jan. 1, 1995, the corporation has provided an unfunded, nonqualified
deferred compensation plan to certain key employees, offering them an election
to defer a portion of their gross pay. The corporation's obligation to
employees is adjusted to reflect changes in the market values of employees'
investment choices. With limited exceptions, participants' deferred account
balances are scheduled for payment at or after full retirement.
Postemployment Benefits
During 1995 the corporation recorded a charge of $68 million ($49 million
after-tax) for postemployment benefits. The charge includes severance costs
relating to future staff reductions associated with work process
simplification efforts and changes in the corporation's severance benefits.
14. Incentive Plans
The 1994 Union Carbide Long-Term Incentive Plan for key employees, which is
effective until the 1997 shareholders' meeting, provides for granting
incentive and nonqualified stock options; stock appreciation rights; exercise
payment rights; grants of stock, including restricted stock, and performance
awards. Holders of options may be granted the right to receive payments of
amounts equal to the regular cash dividends paid to holders of the
corporation's common stock during the period an option is outstanding. The
number of shares granted or subject to options cannot exceed 7.5 million under
the plan. Option prices are equal to the closing price of the corporation's
common stock on the date of the grant, as listed on the New York Stock
Exchange Composite Transactions. Options generally become exercisable two
years after such date. Options may not have a duration of more than 10 years.
Restricted stock award shares are entitled to vote and dividends are credited
to the holder's account, but these shares are generally nontransferable for
three years after the grant date. These restricted stock awards and
accumulated dividends are generally subject to forfeiture if matching
employee-owned stock on deposit with the corporation is withdrawn or if other
conditions are not met. Performance awards may be paid in common stock, cash
or any other form of property. No stock appreciation rights or performance
awards were granted in 1996.
No further awards can be made under previous plans, which still have
options outstanding whose terms are similar to nonqualified stock options
under the 1994 plan.
Changes in outstanding fixed price options were as follows:
1996 1995
Weighted Weighted
Average Average
Shares in thousands Shares Exercise Price Shares Exercise Price
Outstanding at January 1 - 13,350 $18.54 13,807 $15.70
Granted - 1,166 45.55 1,270 40.38
Exercised - (1,569) 13.05 (1,667) 11.37
Canceled or expired - (165) 36.00 (60) 27.25
Outstanding at December 31 - 12,782 $21.45 13,350 $18.54
Options exercisable
at December 31 - 10,460 10,200
1994
Weighted
Average
Shares in thousands Shares Exercise Price
Outstanding at January 1 - 14,112 $12.94
Granted - 1,930 28.63
Exercised - (2,213) 9.33
Canceled or expired - (22) 19.94
Outstanding at December 31 - 13,807 $15.70
Options exercisable
at December 31 - 6,488
Options were exercised during 1996 at prices ranging from $6.70 to $28.63
per share ($1.00 to $21.63 per share during 1995 and $1.00 to $16.75 per share
during 1994).
The following table summarizes information about fixed price option
shares outstanding at Dec. 31, 1996:
Weighted
Average
Shares Remaining Weighted Average
Shares in thousands Outstanding Contractual Life Exercise Price
Range of Exercise Prices -
$ 6.70 to $ 9.69 - 3,363 4.0 years $ 8.31
$11.27 to $16.75 - 3,074 4.8 years $15.21
$21.63 to $28.63 - 4,023 7.4 years $24.78
$39.88 to $45.63 - 2,322(a) 9.4 years $42.97
12,782
a) Not exercisable at Dec. 31, 1996.
Had compensation cost related to the fixed price option and certain
employee plans been recorded at fair value on the date of grant in accordance
with FAS 123, the effect on the corporation's net income and earnings per
share amounts would have been immaterial.
15. Commitments and Contingencies
Purchase Agreements - The corporation has three major agreements for the
purchase of ethylene-related products and two other purchase agreements in the
U.S. and Canada. Total purchases under these agreements were $233 million,
$251 million and $187 million in 1996, 1995 and 1994, respectively. The net
present value of the fixed and determinable portion of obligations under these
purchase commitments at Dec. 31, 1996 (at current exchange rates, where
applicable), is presented in the following table.
Millions of dollars,
year ending December 31,
1997 - $ 75
1998 - 65
1999 - 56
2000 - 30
2001 - 22
2002 to expiration of contracts - 103
Total - $351
Environmental - The corporation is subject to loss contingencies resulting
from environmental laws and regulations, which include obligations to remove
or remediate the effects on the environment of the disposal or release of
certain wastes and substances at various sites. The corporation has
established accruals in current dollars for those hazardous waste sites where
it is probable that a loss has been incurred and the amount of the loss can
reasonably be estimated. The reliability and precision of the loss estimates
are affected by numerous factors, such as different stages of site evaluation,
the allocation of responsibility among potentially responsible parties and the
assertion of additional claims. The corporation adjusts its accruals as new
remediation requirements are defined, as information becomes available
permitting reasonable estimates to be made, and to reflect new and changing
facts.
At Dec. 31, 1996, the corporation had established environmental
remediation accruals in the amount of $310 million ($327 million in 1995), of
which $252 million is classified as Other long-term obligations ($262 million
in 1995). These accruals have two components, estimated future expenditures
for site investigation and cleanup and estimated future expenditures for
closure and postclosure activities. In addition, the corporation had
environmental loss contingencies of $134 million at Dec. 31, 1996.
The corporation has sole responsibility for the remediation of
approximately 40 percent of its environmental sites for which accruals have
been established. These sites are well advanced in the investigation and
cleanup stage. The corporation's environmental accruals at Dec. 31, 1996,
included $222 million for these sites ($245 million at Dec. 31, 1995), of
which $92 million ($109 million at Dec. 31, 1995) was for estimated future
expenditures for site investigation and cleanup and $130 million ($136 million
at Dec. 31, 1995) was for estimated future expenditures for closure and
postclosure activities. In addition, $67 million of the corporation's
environmental loss contingencies at Dec. 31, 1996, related to these sites. The
site with the largest total potential cost to the corporation is a
nonoperating site. Of the above accruals, this site accounted for $32 million
($47 million at Dec. 31, 1995), of which $18 million ($26 million at Dec. 31,
1995) was for estimated future expenditures for site investigation and cleanup
and $14 million ($21 million at Dec. 31, 1995) was for estimated future
expenditures for closure and postclosure activities. In addition, $24 million
of the above environmental loss contingencies related to this site.
The corporation does not have sole responsibility at the remainder of its
environmental sites for which accruals have been established. All of these
sites are in the investigation and cleanup stage. The corporation's
environmental accruals at Dec. 31, 1996, included $88 million for estimated
future expenditures for site investigation and cleanup at these sites ($82
million at Dec. 31, 1995). In addition, $67 million of the corporation's
environmental loss contingencies related to these sites. The largest two of
these sites are also nonoperating sites. Of the above accruals, these sites
accounted for $37 million ($24 million at Dec. 31, 1995) for estimated future
expenditures for site investigation and cleanup. In addition, $12 million of
the above environmental loss contingencies related to these sites.
Worldwide expenses related to environmental protection for compliance
with Federal, state and local laws regulating solid and hazardous wastes and
discharge of materials to air and water, as well as for waste site remedial
activities, totaled $110 million in 1996, $138 million in 1995 and $153
million in 1994.
Other - The corporation has severally guaranteed 45 percent (approximately
$608 million at Dec. 31, 1996) of EQUATE Petrochemical Company's debt and
working capital financing needs until certain completion tests are achieved;
thereafter, a $54 million guarantee will provide ongoing support. The
corporation also severally guaranteed certain sales volume targets until
EQUATE's sales capabilities are proved. In addition, the corporation has
pledged its shares in EQUATE as security for EQUATE's debt. The corporation
has political risk insurance coverage for its equity investment and, until the
completion tests are concluded, substantially all of its guarantee of EQUATE's
debt.
The corporation and its consolidated subsidiaries had additional
contingent obligations at Dec. 31, 1996, totaling $64 million, of which $36
million related to guarantees of debt.
Litigation - The corporation is one of a number of defendants named in
approximately 4,500 lawsuits, some of which have more than one plaintiff,
involving silicone breast implants. The corporation was not a manufacturer of
breast implants but did supply generic bulk silicone materials to certain
manufacturers. Also, the corporation in 1990 acquired and in 1992 divested the
stock of a small specialty silicones company that, among other things,
supplied silicone gel intermediates and silicone dispersions for breast
implants. In 1993 most of the suits that were brought in Federal courts were
consolidated for pretrial purposes in the United States District Court,
Northern District of Alabama. In 1994 the corporation provisionally joined a
multibillion-dollar settlement of the claims consolidated in that court.
The District Court later determined that the total amount of current
claims likely to be approved for payment under the original settlement
schedule would substantially exceed the funds available. Consequently, the
defendants and the Plaintiffs' Negotiating Committee, at the request of the
court, initiated negotiations to reconsider the structure and funding of the
settlement. Subsequently, certain defendants, including the corporation,
proposed, and the court approved, a revised settlement program. While the
corporation cannot predict the number of claimants who will participate in the
settlement, based on sample data prepared under supervision of the court, the
corporation estimates that its maximum expenditures under the revised
agreement should not exceed $100 million prior to insurance recovery. Although
insurance coverage is subject to issues as to scope and application of
policies, retention limits, exclusions and policy limits, and the insurers
have reserved their right to deny coverage, the corporation believes that
after probable insurance recoveries neither the settlement nor litigation
outside the settlement will have a material adverse effect on the consolidated
financial position of the corporation.
In addition to the above, the corporation and its consolidated
subsidiaries are involved in a number of legal proceedings and claims with
both private and governmental parties. These cover a wide range of matters,
including, but not limited to, product liability; governmental regulatory
proceedings; health, safety and environmental matters; employment; patents;
contracts, and taxes. In some of these legal proceedings and claims, the cost
of remedies that may be sought or damages claimed is substantial.
The corporation has recorded nonenvironmental litigation accruals of $194
million, and related insurance recovery receivables of $135 million. At Dec.
31, 1996, the corporation had nonenvironmental litigation loss contingencies
of $53 million.
While it is impossible at this time to determine with certainty the
ultimate outcome of any legal proceedings and claims referred to in this note,
management believes that adequate provisions have been made for probable
losses with respect thereto and that such ultimate outcome, after provisions
therefor, will not have a material adverse effect on the consolidated
financial position of the corporation, but could have a material effect on
consolidated results of operations in a given quarter or year. Should any
losses be sustained in connection with any of such legal proceedings and
claims in excess of provisions therefor, they will be charged to income in the
future.
16. Subsequent Events
On Jan. 20, 1997, the corporation entered into a new credit agreement with a
group of banks, replacing an existing $1 billion credit agreement. The new
agreement also provides the corporation with $1 billion in credit for the next
five years, but with the option, subject to certain conditions, to increase
the available credit by $250 million and to extend the maturity date of the
agreement by one year on a rolling basis. Several options are available to
borrow at floating interest rates based on LIBOR (London Interbank Offered
Rate) or CD (Certificate of Deposit Rate) on a revolving basis. The credit
agreement contains covenants that place certain limits on the corporation's
ability to merge with another entity, incur debt or create liens on assets. In
addition, the credit agreement requires the corporation to meet leverage and
interest coverage tests.
On Jan. 22, 1997, the corporation established a medium term note program
that allows for borrowings of up to $500 million. Notes issued under the
program will have a maturity of nine months or longer and will bear interest
at either a fixed or floating rate determined by reference to interest rate
formulas. The notes will be subject to covenants that place certain limits on
the corporation's ability to create liens on assets, engage in sale-leaseback
transactions, and incur secured debt.
On Jan. 30, 1997, a newly formed real estate investment trust subsidiary
issued $250 million of preferred stock bearing a current dividend yield of 14
percent for 10 years and 1 percent thereafter. Domestic real estate with a
fair market value of approximately $500 million will be mortgaged via
intercompany debt in conjunction with this transaction. The preferred stock
may be redeemed if, as a result of a change in tax laws, rules or regulations,
dividends on the preferred stock or interest paid on the mortgage note is not
fully deductible for Federal income tax purposes.
Management's Statement of Responsibility for Financial Statements
Union Carbide Corporation's financial statements are prepared by management,
which is responsible for their fairness, integrity and objectivity. The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles and, accordingly, include amounts
that are estimates and judgments. All historical financial information in this
annual report is consistent with the accompanying financial statements.
The corporation maintains accounting systems, including internal
accounting controls monitored by a staff of internal auditors, that are
designed to provide reasonable assurance of the reliability of financial
records and the protection of assets. The concept of reasonable assurance is
based on recognition that the cost of a system must not exceed the related
benefits. The effectiveness of those systems depends primarily upon the
careful selection of financial and other managers, clear delegation of
authority and assignment of accountability, inculcation of high business
ethics and conflict-of-interest standards, policies and procedures for
coordinating the management of corporate resources and the leadership and
commitment of top management.
The corporation's financial statements are audited by KPMG Peat Marwick
LLP, independent certified public accountants, in accordance with generally
accepted auditing standards. These standards provide for the auditors to
consider the corporation's internal control structure to the extent they deem
necessary in order to issue their opinion on the financial statements.
The Audit Committee of the board of directors, which consists solely of
nonemployee directors, is responsible for overseeing the functioning of the
accounting system and related controls and the preparation of annual financial
statements. The Audit Committee recommends to the board of directors the
selection of the independent auditors, subject to the approval of
stockholders. The Audit Committee periodically meets with the independent
auditors, management and internal auditors to review and evaluate their
accounting, auditing and financial reporting activities and responsibilities.
The independent and internal auditors have full and free access to the Audit
Committee and meet with the committee, with and without management present.
/s/William H. Joyce /s/John K. Wulff
William H. Joyce John K. Wulff
Chairman, President and Vice-President, Chief Financial
Chief Executive Officer Officer and Controller
Danbury, Conn.
Jan. 17, 1997
Independent Auditors' Report
KPMG Peat Marwick LLP
To the Stockholders and Board of Directors of
Union Carbide Corporation:
We have audited the accompanying consolidated balance sheet of Union Carbide
Corporation and subsidiaries as of Dec. 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the years in the three-year period ended Dec. 31, 1996. These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Union
Carbide Corporation and subsidiaries at Dec. 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended Dec. 31, 1996, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Stamford, Conn.
Jan. 17, 1997
Corporate Information
1997 Annual Meeting
The 1997 annual meeting of stockholders will be held on Wednesday, April 23,
at the John C. Creasy Health Education Center, 24 Hospital Ave., Danbury, CT
06810, beginning at 10 a.m.
A notice of the annual meeting, a proxy statement and a proxy voting card
are mailed to each stockholder in March, together with a copy of the current
annual report.
General Offices
The general offices of Union Carbide Corporation are located at 39 Old
Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794-2000).
Inquiries from the public about Union Carbide and its products and
services should be directed to the Corporate Information Center, Union Carbide
Corporation, Section N-0, 39 Old Ridgebury Road, Danbury, CT 06817-0001
(Telephone: 203-794-5300).
Stock Exchanges
Union Carbide stock is traded primarily on the New York Stock Exchange (ticker
symbol: UK). The stock is also listed on the Chicago and Pacific Stock
Exchanges in the U.S.
Stockholder Inquiries
Inquiries about stockholder accounts and dividend reinvestment should be
directed to Union Carbide Corporation, William H. Smith, manager, Shareholder
Services Department, Section G-1328, 39 Old Ridgebury Road, Danbury, CT 06817-
0001 (Telephone: 203-794-3350).
Stock Records and Transfer
The corporation acts as its own stock transfer agent through Shareholder
Services, which also maintains stockholder records, transfers stock and
answers questions regarding stockholders' accounts, including dividend
reinvestment accounts. Stockholders wishing to transfer stock to someone else
or to change the name on a stock certificate should contact Shareholder
Services for assistance. The Registrar is Chase Mellon Shareholder Service.
Dividend Reinvestment
Stockholders of record may purchase shares directly through Union Carbide's
Dividend Reinvestment and Stock Purchase Plan. Under the plan, shares may be
purchased from Union Carbide free of commissions and service charges.
Requests for a prospectus that explains the plan in detail should be
directed to Shareholder Services (Telephone: 800-934-3350).
Form 10-K
A Form 10-K report for the year ended Dec. 31, 1996, will be available in
April 1997. A copy without exhibits may be obtained without charge by writing
to Union Carbide Corporation, Joseph E. Geoghan, secretary, 39 Old Ridgebury
Road, Danbury, CT 06817-0001.
Charitable Contributions Booklet
Union Carbide annually publishes a booklet that lists organizations receiving
charitable, educational, cultural or similar grants of $250 or more from the
corporation. The booklet is available on written request to the secretary.
Responsible Care Progress Report
This reports covers health, safety and environmental progress at Union
Carbide. Information includes performance data for U.S. and other worldwide
locations, Responsible Care goals and progress Carbide made in 1996 as it
completed full implementation of Responsible Care management practices in the
U.S. To obtain a copy, write to Union Carbide Corporation, Public Affairs
Department, Section L-4505, 39 Old Ridgebury Road, Danbury, CT 06817-0001
(Telephone: 800-552-5272).
Inquiries
Institutional investors, financial analysts and portfolio managers should
direct questions about Union Carbide to Union Carbide Corporation, D. Nicholas
Thold, director of investor relations, Investor Relations Department, Section
E-4286, 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794-
6440).
Financial journalists should direct questions to Union Carbide
Corporation, David N. Kernis, assistant director, communications, Public
Affairs Department, Section L-4502, 39 Old Ridgebury Road, Danbury, CT 06817-
0001 (Telephone: 203-794-6929).
Information on Union Carbide also may be found on the company's home page
on the Internet at www.unioncarbide.com. Union Carbide's site provides
information in five categories: general, financial, business, Responsible Care
and recruitment.
Directors and Corporate Officers
Directors
John J. Creedon is retired president and chief executive officer of
Metropolitan Life Insurance Company. A Carbide director since 1984, he chairs
the Audit Committee and serves on the Compensation & Management Development,
Executive and Health, Safety & Environmental Affairs (HS&EA) Committees.
C. Fred Fetterolf is a retired director, president and chief operating officer
of Aluminum Company of America. A UCC director since 1987, he chairs the HS&EA
Committee and serves on the Audit, Compensation & Management Development and
Nominating Committees.
Joseph E. Geoghan is vice-president, general counsel and secretary of Union
Carbide, and has been a director since 1990. He serves on the Executive and
Public Policy Committees.
Thomas P. Gerrity has been dean at the Wharton School of the University of
Pennsylvania since 1990. He became a board member in February 1997 and is a
member of the Audit Committee.
Rainer E. Gut is chairman of Credit Suisse Group, Zurich, Switzerland, and
Credit Suisse First Boston. A UCC board member since 1994, he is a member of
the Compensation & Management Development, Finance & Pension and Nominating
Committees.
Vernon E. Jordan, Jr. is a partner with Akin, Gump, Strauss, Hauer & Feld. He
is chairman of the Nominating Committee and a member of the Executive, Finance
& Pension and Public Policy Committees. He has been a board member since 1987.
William H. Joyce is chairman, president and chief executive officer of Union
Carbide Corporation. A director since 1992, he is chairman of the Executive
Committee.
Robert D. Kennedy is retired chairman and chief executive officer of Union
Carbide Corporation and has been a director since 1985. He serves on the
Audit, Executive, Nominating and Public Policy Committees.
Ronald L. Kuehn, Jr. is a director and chairman, president and chief executive
officer of Sonat, Inc. A UCC board member since 1984, he chairs the
Compensation & Management Development Committee and serves on the Finance &
Pension and HS&EA Committees.
Rozanne L. Ridgway is former assistant secretary of state for Europe and
Canada. A director since 1990, she chairs the Public Policy Committee and is a
member of the Audit, HS&EA and Nominating Committees.
James M. Ringler is a director, president and chief executive officer of
Premark International, Inc. Elected a director in 1996, he is a member of the
Finance & Pension Committee.
William S. Sneath is a director of various corporations and retired chairman
and chief executive officer of Union Carbide Corporation. He chairs the
Finance & Pension Committee and serves on the Executive, HS&EA and Nominating
Committees. He has been a director since 1969.
Corporate Officers
William H. Joyce
Chairman of the Board, President and Chief Executive Officer
Joseph S. Byck
Vice-President, Strategic Planning, Investor Relations and Public Affairs
James F. Flynn
Vice-President, General Manager, Solvents, Intermediates and Monomers
Joseph E. Geoghan
Vice-President, General Counsel and Secretary
Malcolm A. Kessinger
Vice-President, Human Resources
Lee P. McMaster
Vice-President, General Manager, Ethylene Oxide/Glycol
Joseph C. Soviero
Vice-President, Corporate Ventures and Purchasing
Roger B. Staub
Vice-President, General Manager, UNIPOL Systems
Ronald Van Mynen
Vice-President, Health, Safety and Environment
John K. Wulff
Vice-President, Chief Financial Officer and Controller
Other Senior Management
Eugene J. Boros
Vice-President, General Manager, Specialty Polymers and Products, UCAR
Emulsion Systems
David L. Brucker
Vice-President, Engineering and Operations
John L. Gigerich
Vice-President, Information Systems
W. William Lindner
Vice-President, Purchasing
Kevin P. Lynch
Vice-President, General Manager, UNIPOL Polymers
Philip F. McGovern
Vice-President, Tax
Gordon D. Mounts
Vice-President, General Manager, Industrial Performance Chemicals
F. Don Ryan
Vice-President, General Manager, Specialty Polyolefins
Lee C. Stewart
Vice-President and Treasurer
Vince F. Villani
Vice-President, General Manager, Olefins
Donald R. Wood
Vice-President, Polypropylene Resins
John P. Yimoyines
Vice-President, Venture Management
Union Carbide Around the World
(Excluding partnership or corporate joint venture locations)
United States & Puerto Rico
California
Costa Mesa
Torrance
Colorado
Grand Junction
Connecticut
Danbury (headquarters)
District of Columbia
Washington
Georgia
Atlanta
Tucker
Illinois
Alsip
Lisle
Louisiana
Greensburg
Napoleonville
Norco
Taft
New Jersey
Bound Brook
Carteret
Edison
Somerset
New York
Tarrytown
North Carolina
Cary
Texas
Clear Lake
Dallas
Garland
Houston
Markham
Seadrift
Texas City
Vermont
Morrisville
Washington
Washougal
West Virginia
Charleston
Institute
South Charleston
Puerto Rico
Bayamon
Ponce
San Juan
Canada
Alberta
Calgary
Prentiss
Quebec
Anjou
Boucherville
Montreal
Ontario
Toronto
Willowdale
Europe
Austria
Vienna
Belgium
Antwerp
Vilvoorde
Zwijndrecht
France
Rungis
Germany
Dusseldorf
Italy
Milan
Russia
Moscow
Spain
Barcelona
Sweden
Stockholm
Switzerland
Geneva
United Kingdom
Wilton
Latin America
Argentina
Avellaneda
Buenos Aires
Brazil
Aratu
Cabo
Cubatao
Sao Paulo
Chile
Santiago
Colombia
Barranquilla
Bogota
Medellin
Costa Rica
San Jose
Ecuador
Guayaquil
Quito
Guatemala
Guatemala City
Mexico
Mexico City
Monterrey
Tultitlan
Peru
Lima
Venezuela
Caracas
Valencia
Far East & Other
Australia
Gladesville
Melbourne
Sydney
China
Beijing
Guangdong
Shanghai
Egypt
Cairo
Hong Kong
Tsimshatsui
Indonesia
Cimanggis
Jakarta
Japan
Shibuya-ku
Jordan
Amman
Malaysia
Petaling Jaya
Morocco
Casablanca
Philippines
Batangas
Manila
Singapore
Jurong
South Africa
Durban
Johannesburg
South Korea
Seoul
Sri Lanka
Colombo
Taiwan
Taipei
Thailand
Bangkok
Nonthaburi
Turkey
Istanbul
United Arab Emirates
Dubai
Definition of Terms
Unless the context otherwise requires, the terms below refer to the following:
Union Carbide Corporation, Union Carbide Corporation,
Union Carbide, Carbide, the parent company, and its
the corporation, we, our, consolidated subsidiaries
the company, UCC
Domestic United States and Puerto Rico
Domestic operations Operations of Union Carbide in this
area, including exports
International operations Operations of Union Carbide in areas
of the world other than the United
States and Puerto Rico
The use of these terms is for convenience of reference only. The consolidated
subsidiaries are separate legal entities that are managed by, and accountable
to, their respective boards of directors.
CARBITOL, CARBOWAX, CELLOSIZE, CELLOSOLVE, CYRACURE, FLEXOL, FLEXOMER, NEULON,
NORKOOL, POLYOX, POLYPHOBE, SELEXOL, TERGITOL, TONE, TRITON, TUFLIN, UCAR,
UCARSOL, UCARTHERM, UCON, UCURE, UCAR ULTRA+, UNICARB, UNIPOL and
UNION CARBIDE are registered trademarks of Union Carbide Corporation.
RESPONSIBLE CARE is a registered service mark of the Canadian Chemical
Producers Association and the Chemical Manufacturers Association.
EQUATE is a trademark of the EQUATE Petrochemical Company K.S.C. of Kuwait.
Printed on Recycled, Recyclable Paper.
(The back cover depicts a hexagon containing the words "Union Carbide".)
UNION CARBIDE CORPORATION
39 Old Ridgebury Road
Danbury, CT. 06817-0001
UC-1564
Exhibit 21
SUBSIDIARIES OF THE CORPORATION
Percentage
of Voting
State or Securities
Sovereign Owned By
Power of Immediate
Name of Company Incorporation Parent
Union Carbide Corporation (the "Corporation") New York - %
Subsidiaries included in the Consolidated Financial Statements except where
noted otherwise:
Amerchol Corporation Delaware 100.00
Benefit Capital Management Corporation Delaware 100.00
Calidria Corporation Delaware 100.00
Catalysts, Adsorbents & Process Systems, Inc. Maryland 100.00
KTI Chemicals, Inc. Delaware 100.00
P.T. Union Carbide Indonesia Indonesia 100.00
Prentiss Glycol Company Delaware 100.00
Seadrift Pipeline Corporation Delaware 100.00
South Charleston Sewage Treatment Co. West Virginia 100.00
UCAR Emulsion Systems International, Inc. Delaware 100.00
UCAR Interm, Inc. Delaware 100.00
UCAR Louisiana Pipeline Company Delaware 100.00
UCAR Pipeline Inc. Delaware 100.00
UCAR, Polimeros y Quimicos C.A. Ecuador 100.00
UCAR Vanor (Proprietary) Limited South Africa 100.00
Ucex (U.K.) Limited England 100.00
Umetco Minerals Corporation Delaware 100.00
Union Carbide Argentina S.A.I.C.S. Argentina 100.00
Union Carbide Asia Limited Hong Kong 100.00
Union Carbide Asia Pacific, Inc. Delaware 100.00
Union Carbide Benelux N.V. Belgium (1)
Union Carbide do Brasil S/A Brazil 100.00
Union Carbide Caribe Inc. Delaware 100.00
Union Carbide Canada Inc. Canada 100.00
Union Carbide Chemicals and Plastics
Technology Corporation Delaware 100.00
Union Carbide Chemicals (Australia) Pty. Ltd. Australia 100.00
Union Carbide Chemicals Korea Limited Korea 100.00
Union Carbide Chemicals (Malaysia) Sdn. Bhd. Malaysia 100.00
Union Carbide Comercial, C.A. Venezuela 100.00
Union Carbide Customer Services Pte. Ltd. Singapore 100.00
Union Carbide Engineering and Hydrocarbons
Service Company, Inc. Delaware 100.00
Union Carbide Ethylene Oxide/Glycol Company Delaware 100.00
Union Carbide Eurofinance B.V. Netherlands 100.00
Union Carbide (Europe) S.A. Switzerland 100.00
Union Carbide Foreign Sales Corporation US Virgin Is. 100.00
(1) 99.83% of the voting securities of Union Carbide Benelux N.V. is
owned by Union Carbide Corporation; and 00.17% by Union Carbide
(Europe) S.A.
Percentage
of Voting
State or Securities
Sovereign Owned By
Power of Immediate
Name of Company Incorporation Parent
Union Carbide Corporation. (Continued)
Union Carbide Formosa Co., Ltd. Taiwan 100.00
Union Carbide Imaging Systems, Inc. Delaware 100.00
Union Carbide Inter-America Inc. Delaware 100.00
Union Carbide Inter-America Inc. New Jersey 100.00
Union Carbide Investimentos e Participacoes S/C Ltda. Brazil 100.00
Union Carbide Japan K.K. Japan 100.00
Union Carbide Limited England 100.00
Union Carbide Pan America, Inc. Delaware 100.00
Union Carbide Philippines (Far East) Inc. Philippines 100.00
Union Carbide Quimicos y Plasticos, S.A. de C.V. Mexico 100.00
Union Carbide South Africa (Proprietary) Limited South Africa 100.00
Union Carbide Subsidiary L, Inc. Delaware 100.00
Union Carbide Thailand Limited Thailand 100.00
Union Polymers Sdn. Bhd. Malaysia 60.00
Westbridge Insurance Ltd. Bermuda 100.00
Companies reported in the Consolidated Financial Statements on an Equity in
Net Assets Basis included:
Asian Acetyls Rep. of Korea 33.00
Alberta & Orient Glycol Company Limited Canada 50.00
ASPELL Polymeres SNC France 50.00
Commercial Alcohols Limited Canada 50.00
Equate Petrochemical Company K.S.C. Kuwait 45.00
Nippon Unicar Company Limited Japan 50.00
Petromont and Company, Limited Partnership Canada 49.95
Petromont Inc. Canada 50.00
Polimeri Europa S.r.l. Italy 50.00
Seadrift Polypropylene Company Texas 50.00
Shawinigan Pipeline Reg'd. Canada 50.00
Union Carbide Lanka Limited Sri Lanka 49.00
UOP New York 50.00
Union Showa K.K. Japan 50.00
World Ethanol Company Illinois 50.00
* * * * * * * * * * * *
The names of the Corporation's other consolidated subsidiaries and companies
carried on an equity in net assets basis are not listed. These subsidiaries
and companies, if considered in the aggregate as a single subsidiary, would
not constitute a significant subsidiary. In addition, the Corporation has
investments in other subsidiaries and 20-to-50%-owned companies for which
financial statements are not submitted because all such subsidiaries and
companies, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Union Carbide Corporation
We consent to the incorporation by reference in each of the
Registration Statements of Union Carbide Corporation on Form S-3
(Nos. 33-26185, 33-60705 and 333-17309), and on Form S-8 (Nos.
2-90419, 33-22125, 33-38714, 33-53573, 33-58931 and 333-02829) of
our reports dated January 17, 1997, relating to the consolidated
balance sheets of Union Carbide Corporation and subsidiaries as
of December 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity and cash flows and
related schedule for each of the years in the three-year period
ended December 31, 1996, appearing and incorporated by reference
in the Annual Report on Form 10-K of Union Carbide Corporation
for the year ended December 31, 1996.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Stamford, Connecticut
March 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNION
CARBIDE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000100790
<NAME> UNION CARBIDE CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 94
<SECURITIES> 0
<RECEIVABLES> 1047
<ALLOWANCES> 0
<INVENTORY> 541
<CURRENT-ASSETS> 1873
<PP&E> 7159
<DEPRECIATION> 3750
<TOTAL-ASSETS> 6546
<CURRENT-LIABILITIES> 1278
<BONDS> 1487
144
0
<COMMON> 155
<OTHER-SE> 1959
<TOTAL-LIABILITY-AND-EQUITY> 6546
<SALES> 6106
<TOTAL-REVENUES> 6106
<CGS> 4568
<TOTAL-COSTS> 4568
<OTHER-EXPENSES> 471
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76
<INCOME-PRETAX> 845
<INCOME-TAX> 236
<INCOME-CONTINUING> 593
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 593
<EPS-PRIMARY> 4.28
<EPS-DILUTED> 3.90
<FN>
<F1>Other Expenses are equal to Research and Development of 159 and
Depreciation and Amortization of 312.
</FN>
</TABLE>
