TEXAS PETROCHEMICALS LP, 10-K405, 2000-09-28

TEXAS PETROCHEMICALS LP
10-K405, 2000-09-28
MISCELLANEOUS CHEMICAL PRODUCTS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

FOR FISCAL YEAR ENDED JUNE 30, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO
----------- ---------------

REGISTRATION NUMBER 333-11569

TEXAS PETROCHEMICALS LP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

TEXAS 74-1778313
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

THREE RIVERWAY, SUITE 1500
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(713) 627-7474
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) AND 12(g) OF THE ACT:
NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---

The number of shares of common stock of the registrant outstanding as of
September 25, 2000 is 4,162,000.

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TEXAS PETROCHEMICALS LP
(FORMERLY TEXAS PETROCHEMICALS CORPORATION)

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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PART I

<S> <C>
Item 1. Business 1

Item 2. Properties 7

Item 3. Legal Proceedings 8

Item 4. Submission of Matters to a Vote of Security Holders 8

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 9

Item 6. Selected Financial Data 9

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10

Item 7A. Quantitative and Qualitative Disclosures About Market Risks 15

Item 8. Financial Statements and Supplementary Data 16

Item 9. Changes in and Disagreements With Accountants on Accounting 32
and Financial Disclosure

PART III

Item 10. Directors and Executive Officers of the Registrant 33

Item 11. Executive Compensation 35

Item 12. Security Ownership of Certain Beneficial Owners and Management 36

Item 13. Certain Relationships and Related Transactions 36

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 36

Signatures 38
</TABLE>

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PART I

ITEM 1. BUSINESS

Texas Petrochemicals LP, formerly Texas Petrochemicals Corporation,
referred to as the "Company" herein, is the second largest producer of
butadiene, the largest producer of butene-1, and the third largest producer of
methyl teritiary-butyle ether (MTBE) in North America. In addition, the Company
is the sole producer of diisobutylene and isobutylene concentrate in the United
States and the largest domestic merchant supplier of high purity isobutylene to
the chemical market. The Company's products include: (i) butadiene, primarily
used to produce synthetic rubber; (ii) MTBE, used as an oxygenate and octane
enhancer in gasoline; (iii) n-butylenes (butene-1 and butene-2), used in the
manufacture of plastic resins, fuel additives and synthetic alcohols; and (iv)
specialty isobutylenes, primarily used in the production of specialty rubbers,
lubricant additives, detergents and coatings.

The Company's manufacturing facility, located approximately one mile from
the Houston Ship Channel provides convenient access to other Gulf Coast
petrochemical producers and is connected to several of its customers and raw
material suppliers through an extensive pipeline network. In addition, the
Company's facility is serviced by rail, tank truck and barge. During fiscal 1997
the Company successfully gained access to the MTBE market on the East Coast of
the United States through the negotiation of a terminalling and storage
agreement with the Northville terminal in Linden, New Jersey.

The Company was founded in 1968, at which time the Company was principally
engaged in the installation of crude butadiene processing facilities. In 1984,
Mr. Dave C. Swalm acquired from Tenneco, Inc. the assets (principally comprised
of the Houston facility) of Petro-Tex Chemical Corporation ("Petro-Tex") the
prior owner of the Company's manufacturing facility.

On July 1, 1996 Texas Olefins Company ("TOC"), Texas Petrochemicals
Corporation and a raw material supply contract of Clarkston Corporation
(collectively referred to as the "Predecessor") were acquired for approximately
$371 million in a series of transactions (the "Acquisition"). After the
transactions, TOC was merged with and into Texas Petrochemicals Corporation with
Texas Petrochemicals Corporation becoming a 100% owned subsidiary of TPC Holding
Corporation, which is a 100% owned subsidiary of Texas Petrochemical Holdings,
Inc. (the "Parent"). The closely held Parent was formed by a group of investors.

Effective July 1, 2000 the Texas Petrochemicals Corporation converted its
legal form from a corporation to a limited partnership, Texas Petrochemicals LP,
pursuant to the conversion provisions of the Texas Business Corporation Act and
the Texas Revised Limited Partnership Act. TPC Holding Corp., the Company's
immediate parent prior to the conversion, retained a direct 1% ownership
interest in the partnership and became its sole general partner. Petrochemical
Partnership Holdings, Inc., a new wholly owned subsidiary of TPC Holding Corp.,
acquired the remaining 99% ownership interest and simultaneously became a
limited partner of the partnership. This change has no effect on the current
management of the Company or its existing operations. The Texas Business
Corporation Act provides that the effect of the conversion is that the Company
as a legal entity continues to exist, without interruption, but in the
organizational form of a Texas limited partnership rather than in the prior
organizational form of a Texas corporation.

The Company's principal executive offices are located at Three Riverway,
Suite 1500, Houston, Texas 77056. The Company's telephone number is (713)
627-7474.

PRODUCTS

Butadiene is the most widely used feedstock for synthetic rubber products
and is also used in the manufacture of engineered plastics, nylon fibers and
other products. The Company sells butadiene to a stable customer base. As the
second largest producer of butadiene in North America, the Company believes that
many of its customers place significant value on its ability to provide a
reliable domestic supply of butadiene and as a result have entered into
long-term sales contracts with the Company.

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The Company extracts butadiene from crude butadiene, which is generated
from the production of ethylene and is comprised of a number of valuable
components, including butadiene, isobutylene, n-butylenes, isobutane and
n-butane. Many U.S. ethylene producers rely on third parties such as the Company
to process their crude butadiene streams, as the crude butadiene volumes they
produce are not sufficient to justify the construction of on-site butadiene
recovery facilities. The Company is the largest non-integrated crude butadiene
processor in North America and as a result of its strategic importance to
ethylene producers, the Company has been able to secure long-term supply
contracts covering the majority of its crude butadiene requirements. Such
contracts provide for a fixed profit based on the Company's selling prices for
butadiene, and account for the relatively stable profitability of the Company's
butadiene operations.

MTBE is a motor gasoline blending stock which reduces carbon monoxide and
volatile organic compound emissions and enhances the octane content of gasoline,
and has been one of the fastest growing petrochemicals, in terms of volume, over
the past fifteen years. MTBE is produced by reacting methanol and isobutylene.
The Company's ability to produce isobutylene by three alternative methods
enables it to produce MTBE by the most economical process available to the
Company. The U.S. Clean Air Act of 1990 requires the use of an "oxygenate" in
gasoline sold in certain regions that are not in compliance with air quality
standards. MTBE is the predominate oxygenate used in gasoline. However, as a
result of incidents in which MTBE from gasoline has contaminated drinking water,
the federal government and certain state governments are considering actions
that could reduce or even eventually eliminate the use of MTBE in gasoline.
There can be no assurance that these activities will not impact the Company's
market for MTBE. A significant reduction in the demand for MTBE could have a
material adverse effect on the Company's financial condition or results of
operations. See "MTBE Environmental and Market Issues" section for a further
discussion of MTBE.

The Company is the leading producer of chemical grade butene-1 and
specialty isobutylenes in North America. In recent years, the Company has
increased its sales of these products by increasing its market share in
polyolefin applications and the development of new end-use applications.
Butene-1 is used as a comonomer in the production of high-density polyethylene
("HDPE") and linear low-density polyethylene ("LLDPE"). Both HDPE and LLDPE are
raw materials for the production of trash bags, film wrap, pipe and plastic
containers. Butene-1 is also used to produce butylene oxide, a key component of
detergent additive packages used in many gasoline formulations.

High purity isobutylene is used in the production of butyl rubber, which is
used to produce tires and in specialty chemical applications such as in the
production of resins, antioxidants, paints and coatings, synthetic lubricant
oils and rubber chemicals. The Company is currently the largest domestic
merchant supplier of high purity isobutylene to the chemical market. Isobutylene
concentrate is similar to high purity isobutylene in composition, although its
purity is 88% isobutylene compared to 99.9% in high purity isobutylene. The
Company markets isobutylene concentrate for use in the lubricant additives
business as well as for use in the production of butyl rubber. The Company is
the sole U.S. producer of isobutylene concentrate. Diisobutylene is used
primarily as an intermediate in the manufacturing of alkylphenols for the
surfactant and phenolic resins markets. Other uses include the production of
tackifier and ink resins, dispersants and lubricant oil additives, and rubber
and processing chemicals. The Company is the sole U.S. producer of
diisobutylene.

During 2000 the Company completed the development and construction of a $12
million polyisobutylene plant. The plant processes various grades of
polyisobutylenes, which are used to produce a broad range of chemicals including
industrial specialties, lubricants and fuel dispersant additives.

The Company's principal feedstocks are crude butadiene, isobutane and
methanol. One of the Company's intermediate products, isobutylene, is used in
the manufacture of MTBE and specialty isobutylenes.

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COMPANY STRATEGY

The Company believes that it has become an industry leader in the
production of the majority of its products by capitalizing on its production
flexibility, its ability to add significant cost effective incremental capacity
across its product lines, the marketing experience of its management team, its
competitive cost position and its customer focus. The Company's strategy is to
strengthen its established presence in its selected markets by focusing on the
following factors:

REDUCE EXPOSURE TO CYCLICAL END-MARKETS The markets in which the Company
competes are cyclical. The Company intends to mitigate the effects of this
cyclicality while benefiting from potential upturns in industry profitability by
optimizing the production of its sales under contracts allowing for a fixed
profit or at prices linked directly or indirectly to raw material prices.

CAPITALIZE ON PRODUCTION FLEXIBILITY The Company has the ability to produce
a number of its intermediate and finished products (i.e. crude butadiene,
isobutylene and butene-1) by a variety of processes. The Company intends to
capitalize on this ability by shifting production to the most economical process
and production level based upon market conditions, thus ensuring a reliable
source of supply for its customers.

UTILIZE INCREMENTAL CAPACITY The Company can increase its capacity to
produce butadiene, isobutylene and its derivatives at significantly lower cost
than that of new construction. The Company's ability to add incremental
butadiene capacity and its relationships with several North American ethylene
producers are expected to enable it to capture the benefit of increased U.S.
crude butadiene supply.

RESPOND TO FAVORABLE INDUSTRY DYNAMICS The Company's production flexibility
and its ability to add low-cost capacity are crucial to its capitalizing on
market opportunities. The U.S. supply of crude butadiene is increasing in line
with domestic ethylene production, although it is currently insufficient to meet
U.S. demand. Industry operating rates are expected to remain at current high
levels as the increase in domestic crude butadiene production is expected to
replace imports with butadiene demand remaining strong in support of derivative
businesses.

SUSTAIN CUSTOMER FOCUS The Company believes that producing quality products
and providing quality service with dependable supply are key factors in its
ability to compete in the market place for its products. Management believes
that its focus on customer service has resulted in strong customer relationships
and a high degree of customer loyalty. This is evidenced by the fact that
approximately 60% of the Company's current customers have purchased products
from the Company for more than ten years.

REDUCE EMPHASIS ON MTBE The future MTBE market in the United States is
faced with significant uncertainty due to current proposed legislation (See
"MTBE Environmental and Market Issues"). As a result of this uncertainty the
Company has been evaluating and pursuing strategies to reduce its reliance on
profitability from MTBE. The Company plans are to continue to expand in its
existing core businesses and develop new products. There can be no assurance
that such plans will be successful or sufficient to offset any potential future
decline in MTBE profitability. MTBE sales represented 51% and 58% of total sales
revenue in fiscal 1999 and 2000, respectively, while variable margin
contribution from MTBE sales represented 28% and 42% of total variable margin in
fiscal 1999 and 2000, respectively.

OTHER OPERATIONS

The Company operates a cogeneration power plant that supplies electricity
and process steam to the facility's chemical processing operations. Excess
capacity of this power plant, as well as steam and boiler feed water are
currently sold to neighboring facilities under contracts at a price equal to the
cost of fuel plus a fixed profit. In addition, the Company generates revenues
from its terminals in Baytown, Texas and Lake Charles, Louisiana and from
chemical by-product sales to third parties.

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CONTRACTS

The Company enters into three general types of contracts in connection with
its production processes: feedstock supply contracts, product sales contracts
and, to a lesser extent, toll manufacturing agreements. The majority of these
contracts have terms of two to three years and provide for successive one-year
renewals unless either party objects to such renewal in a timely manner.

Certain of the Company's largest customers account for a significant
percentage of the Company's sales of particular products. The Company had 2
customers, which represented 11% and 14% of sales during the year ended June 30,
2000, and 1999, and 13% and 15% of sales during the year ended June 30, 1998.
Although the Company believes its relationships with its largest customers are
good, the loss of a significant customer or a number of significant customers
would have a material adverse effect on the Company's financial condition,
results of operations and cash flows.

COMPETITION

The petrochemicals businesses in which the Company operates are highly
competitive. Many of the Company's competitors, particularly in the
petrochemicals industry, are larger and have greater financial resources than
the Company. Among the Company's competitors are some of the world's largest
chemical companies and major integrated petroleum companies that have their own
raw material resources. In addition, a significant portion of the Company's
business is based upon widely available technology. Accordingly, barriers to
entry, apart from capital availability, may be low in the commodity product
section of the Company's business, and the entrance of new competitors into the
industry may reduce the Company's ability to capture improving profit margins in
circumstances where overcapacity in the industry is diminishing. Further,
petroleum-rich countries have recently become more significant participants in
the petrochemical industry and may continue to expand their role in this
industry in the future. Any of these developments would have a negative impact
on the Company's financial position, results of operations and cash flows.

Given the nature of the markets in which it competes, the Company believes
it has two primary competitive advantages over its competitors. First, the
Company's position as the most significant merchant crude butadiene processor in
the world has allowed it to secure supply arrangements for crude butadiene that
provide for a fixed profit based on the Company's selling prices for the
finished product. The Company believes that this partially limits its exposure
to fluctuations in raw materials prices. Secondly, the Company's flexible
production processes enable it to take advantage of increases in demand for its
products at a lower cost than its competitors, thus allowing the Company to meet
its customers' needs through the most economic processes. Also, the Company's
flexible production processes enable the Company to conduct maintenance work on
its plant equipment with minimal loss of production.

PATENTS AND LICENSES

The Company presently owns, controls or holds right to approximately 21
patents and seeks patent protection for its proprietary processes where feasible
to do so.

MTBE ENVIRONMENTAL AND MARKET ISSUES

There is concern in a number of states that MTBE may enter drinking water
supplies as a result of leaks in underground gasoline storage tanks. As a result
of this concern, California enacted a law banning MTBE from gasoline as of
December 31, 2002. Seven other states (Arizona, Connecticut, Maine, Minnesota,
Nebraska, New York and South Dakota) have enacted similar laws, providing for
reduction or elimination of MTBE from gasoline. In addition, the State of
California has adopted a maximum contaminant level ("MCL") for MTBE in drinking
water supplies of 13 ppb. If MTBE is found at levels exceeding 13 ppb, it is
expected that the water would have to be treated to reduce MTBE concentration to
a level at or below 13 ppb. In addition, a bill (S.B. 2962) has been introduced
in Congress to eliminate the use of MTBE nationwide within four (4) years of
enactment of the bill, and to allow states to opt out of the oxygenate
requirement of the CAA beginning in 2001. The Company is not able to predict
whether such legislation will be adopted, or, if adopted, the extent to which
MTBE demand would be reduced as a result; it is possible, however, that such
reduction could be material.

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Various scientific bodies have evaluated MTBE as a possible human carcinogen. To
date, the International Agency on Research on Cancer (IARC), the National
Toxicology Program (NTP) and the California Cancer Identification Committee
(CIC) have found MTBE not to be classifiable as a possible, probable or known
human carcinogen. California EPA has designated MTBE as a possible human
carcinogen.

Although the EPA continues to require oxygenates to be added to gasoline in
certain regions of the country either year-round or during the winter months,
and MTBE continues to be the leading oxygenate used, the EPA has called for
reduction in the use of MTBE in gasoline. Any restriction on or prohibition of
the use of MTBE could have a material adverse effect on the Company's financial
condition or results of operations.

ENVIRONMENTAL REGULATION

The Company's policy is to be in compliance with all applicable
environmental laws. The Company is also committed to Responsible Care(R), a
chemical industry initiative to enhance the industry's responsible management of
chemicals. The Company's operations are subject to federal, state, and local
laws and regulations administered by the U.S. Environmental Protection Agency
("EPA"), the U.S. Coast Guard, the Army Corps of Engineers, the Texas Natural
Resource Conservation Commission ("TNRCC"), the Texas General Land Office, the
Texas Department of Health and various local regulatory agencies. The Company
holds all required permits and registrations necessary to comply substantially
with all applicable environmental laws and regulations, including permits and
registrations for wastewater and stormwater discharges, solid and hazardous
waste disposal and air emissions, and management believes that the Company is in
substantial compliance with the laws and regulations that materially affect its
operations. While management does not expect that compliance with existing
environmental laws will have a material adverse effect on the Company's
financial condition or results of operations, there can be no assurance that
future legislation, regulation or judicial or administrative decisions will not
have such an effect.

Under federal and state environmental laws, companies may be liable for
remediation of contamination at on-site and off-site waste management and
disposal areas. Management believes that the Company is not likely to be
required to incur material remediation costs related to its management,
transportation and disposal of solid and hazardous materials and wastes, or to
its pipeline operations. If the Company were to be required to incur such costs,
however, management believes that such costs would not have a material adverse
effect on the Company's results of operations.

The day-to-day operations of the Company are subject to extensive
regulation under the Resource Conservation and Recovery Act ("RCRA"), the
Federal Clean Water Act, the Clean Air Act ("CAA") and similar requirements of
state law. In particular, under the CAA, the EPA and the TNRCC have promulgated,
or are required to promulgate, numerous regulations which affect or will affect
the operations of the Company. The most significant of these are the so-called
Hazardous Organics National Emission Standard for Hazardous Air Pollutants or
HON Rule, the requirements of Title V of the CAA and rules relating to the
control of emissions of nitrogen oxides to reduce ozone levels in greater
Houston's ozone non-attainment area.

The HON Rule requires controls on emissions of certain listed hazardous air
pollutants ("HAPs"). Butadiene, methanol, dimethylformamide, benzene, styrene,
acrylonitrile and MTBE, which are manufactured, used and/or processed by the
Company, have been identified as HAPs for purposes of regulation under the CAA.
Areas of concern in the Company's operations for HAP emissions include equipment
leaks, process vents, product storage, transfer operations and emissions from
wastewater streams. The Company expended $600,000 on wastewater collection and
treatment systems over the past year to comply with the HON rule.

NOx emission control rules adopted in 1994 required compliance by November
15, 1999. The Company has installed predictive emission monitoring equipment for
NOx emissions on stationary sources at its boiler house. The Company expended
$1.1 million to comply with the NOx RACT Rules.

The Company's Houston facility is located in Harris County, Texas, which
has been designated as a severe non-attainment area for ozone under the CAA.
Accordingly, the State of Texas is in the process of developing a

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revised State Implementation Plan ("SIP") which is expected to require
significant reductions in emissions of ozone precursors, including volatile
organic compounds and oxides of nitrogen in Harris County. The Company
anticipates that the revised SIP will require certain additional emission
reductions from the Company's facilities. Such reductions will require the
Company to modify existing controls, install additional controls for air
emissions, or install new equipment. Since the SIP rules have not yet been
finalized, the Company is unable at this time to predict the cost of modifying
its facilities to comply with any additional requirements that the revised SIP
may impose.

The Company has elected to participate in the Voluntary Emissions Reduction
Program ("VERP") sponsored by the TNRCC under which the Company will voluntarily
obtain permits for certain air emission sources that had historically been
"grandfathered" from certain permit requirements. The Company expects to be
required to commit to certain emission reductions in connection with the VERP.
Since the Company voluntarily committed itself to this permitting effort in
1998, the Texas Legislature enacted Senate Bill 766 which provides incentives
for grandfathered emissions sources to apply for a voluntary emissions reduction
permit instead of remaining grandfathered. In particular, grandfathered sources
are invited to apply for a permit prior to September 1, 2001. The permits
provided for under Senate Bill 766 are expected to establish less stringent
emissions controls than would be required under permits for new emissions
sources. Failure to apply for and obtain a permit will result in emissions fees
that will treble annually until a grandfathered facility applies for a permit.
The TNRCC has recently promulgated rules to implement the requirements of Senate
Bill 766. The Company is pursuing available options with respect to its
grandfathered emissions sources that allow the Company to meet applicable air
emissions requirements in a cost-effective manner. Measures likely to be
required as part of the Senate Bill 766 implementation are not anticipated to
have a materially adverse impact on the Company or its operations.

Section 112 of the CAA requires prevention of accidental releases of
certain listed extremely hazardous substances. The EPA's rules implementing
portions of Section 112, which were signed by the EPA Administrator on May 24,
1996, required the Company to conduct a hazards assessment and to develop a risk
management plan by June 1999. The Company completed the plan and filed it with
the appropriate agencies in a timely manner.

Regulations under Title V of the CAA require a facility-wide inventory of
emissions, sources and the air pollution control requirements applicable to
those sources. The Company filed its Title V application with the TNRCC in July
2000. In connection with the Title V program, the Company may be required to
upgrade its on-going monitoring program once it has received its operating
permit. It is also possible that the Company may be required to make
modifications to some of its equipment in order to comply with requirements
identified through the facility-wide Title V permit process. These anticipated
commitments are not expected to have a material adverse impact on the Company's
operations.

The Company has an active program to manage asbestos-containing material at
its Houston facility in accordance with federal state, and local environmental,
health and safety regulations. The Company does not believe that, when properly
managed, these materials pose a hazard to the health of Company employees or to
the environment. There is no requirement to remove these materials, provided
they are properly managed. As the plant is reconfigured or additions are made,
asbestos-containing materials are appropriately handled by a certified
contractor.

The wastewater treatment system for the Houston facility is 75 percent
owned by the Company and 25 percent owned by a third party, the owner of an
adjacent facility. The treatment system is operated by the Company. The state
discharge permit is held jointly by the Company and a third party. The Company
believes that the system has sufficient capacity for the Company's projected
needs.

The Company has completed the first phase of its work on its stormwater
discharge system and is currently evaluating potential improvements to the
system. The Company has completed installation of noise barriers for certain
equipment.

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The Company received a Notice of Violation ("NOV") on March 10, 2000 from
the EPA relating to certain discrepancies alleged to have been found during
routine inspections conducted by EPA in 1995 and 1997. The NOV has not yet led
to the filing of a judicial complaint against the Company. The EPA, the
Department of Justice, and the Company are currently exploring the possibility
of an agreed upon settlement of issues. The anticipated settlement of such
issues is not expected to have a material adverse impact on the Company's
financial condition, results of operations or cash flows.

The terminals in Baytown and Lake Charles are subject to many of the same
or similar environmental laws and regulations as are applicable at the Houston
facility. Management believes that the terminals are in substantial compliance
with these requirements and that no significant expenditures will be required at
these facilities to allow them to continue to comply with such laws and
regulations.

The EPA has determined that butadiene is a probable human carcinogen.
Effective February 1997, the Occupational Safety and Health Administration
lowered the employee permissible exposure limit ("PEL") over an 8-hour
time-weighted average for butadiene from 1000 parts per million ("ppm") to 1
ppm. The Company has conducted employee exposure monitoring and believes that it
currently meets the PEL at most of its operations. For some operations, the
Company anticipates employees will need to use respirators and that additional
emission controls may be necessary. The Company does not expect that the current
health concerns regarding butadiene will have a material adverse effect on the
Company's financial condition or results of operations, although no assurance
can be given that future studies will not result in more stringent regulation of
butadiene.

EMPLOYEES

As of June 30, 2000, the Company had approximately 294 full-time employees,
all of whom were salaried employees. In addition, the Company contracts with a
third party to provide approximately 129 contract employees to perform routine
maintenance on and around its Houston facility. The Company believes its
relationship with its employees is satisfactory.

SAFETY RECORD

The Company maintains one of the best worker's compensation records in
Texas, equivalent to most clerical operations. Over the last five years, the
Company only experienced one lost time injury at the Houston Plant Site. The
Company believes this record is accomplished through extensive classroom and
on-the-job training as well as the efforts of its highly trained, 75-member
volunteer emergency response team.

ITEM 2. PROPERTIES

The Company's plant is located on a 257-acre tract approximately one mile
from the Houston Ship Channel and near one of the chemical industry's largest
domestic processing facilities. Approximately 230 acres is owned by the Company,
and 25% of the remaining 27 acres is owned by a third party. The Company leases
from the Port of Houston two ship docks, which accommodate barge and ocean-going
vessels, and has the facilities to be served by rail and by truck. In addition,
the facility is connected by pipeline to customers and suppliers of raw
materials, directly and through other major pipelines in the immediate area as
well as in Texas City, and with salt dome storage facilities of other companies
located at both Mont Belvieu and Pierce Junction, Texas. The Company's facility
also has a laboratory for sampling and testing. The Company owns and operates a
storage and terminal facility at Baytown, Texas, leases storage and terminal
facilities in Lake Charles, Louisiana and Linden, New Jersey, and leases tank
storage capacity in Bayonne, New Jersey. The Company also leases office space in
Three Riverway Plaza, Houston, Texas as its principal executive offices. The
Company believes that is has adequate facilities for the conduct of its current
and planned operations.

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ITEM 3. LEGAL PROCEEDINGS

In addition to the matters disclosed under "Environmental Regulation," the
Company is a party to various claims and litigation arising in the ordinary
course of its business. Management recognizes the uncertainties of litigation
and the possibility that one or more adverse rulings could materially impact
operating results. However, although no assurances can be given, management
believes that other than as disclosed, based on the nature of and its
understanding of the facts and circumstances which give rise to such claims and
litigation, and after considering appropriate reserves that have been
established, that the ultimate resolution of such issues, individually and in
the aggregate, will not have a material adverse effect on the Company's
financial position or results of operation.

Legal actions have been filed in several states for recovery for alleged
property damage and/or costs of remediation and replacement of water supplies
due to the presence of MTBE. As of this point in time, the Company has not been
named in any of these actions; however, no assurance can be given that the
Company will not be named in these or other future actions.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended June 30, 2000.

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<PAGE> 11

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Not applicable

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data for the Company set forth below for the four
years ended June 30, 2000, the one month period ended June 30, 1996 and the
twelve months ended May 31, 1996 should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements.

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------- ---------------------------------------------
TWELVE ONE
MONTHS MONTH
ENDED ENDED
MAY 31, JUNE 30, YEAR ENDED JUNE 30,
------- -------- ---------------------------------------------
1996(2) 1996 1997(3) 1998 1999(1) 2000
------- -------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Revenues $ 455.6 $ 41.4 $ 490.2 $ 514.8 $ 448.2 $ 744.7

Income from operations 42.0 2.4 18.3 37.4 38.7 68.0

Interest expense 1.6 0.1 35.2 35.7 34.0 33.5

Net income (loss) 16.7 1.2 (12.7) (1.4) 1.4 16.5

Gain (Loss) per common share
Before extraordinary loss -- -- $ (2.71) $ (0.34) $ 0.34 $ 3.97
Extraordinary loss -- -- (0.35) -- -- --
------- ------- ------- -------
$ (3.06) $ (0.34) $ 0.34 $ 3.97
======= ======= ======= =======

BALANCE SHEET DATA (AT PERIOD END):

Total assets $ -- $ 167.9 $ 521.1 $ 496.8 $ 482.4 $ 523.9

Long-term debt -- 13.0 317.7 310.8 293.5 285.4
</TABLE>

----------

(1) In January 1999, the estimated useful live of certain plant assets were
increased from 10 to 15 years. This change was accounted for as a change in
accounting estimate and resulted in $4.2 million decrease in depreciation
expense.

(2) Net income (loss) for the twelve months ended may 31, 1996 includes a
non-recurring charge for impairment of investment in land of $12.6 million, with
an associated income tax benefit of $4.7 million

(3) Net loss for the year ended June 30, 1997 includes an extraordinary loss of
$1.5 million for early extinguishment of debt.

9
<PAGE> 12

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

The Company's revenues are derived primarily from merchant market sales of
butadiene, MTBE, n-butylenes (butene-1 and butene-2) and specialty isobutylenes
(isobutylene concentrate, high purity isobutylene, and diisobutylene). The
Company's results of operations are affected by a number of factors, including
variations in market demand, production volumes, and the pricing of its products
and primary raw materials. The Company believes that the pricing for its
principal products is primarily dependent on the balance between the global
supply and North American demand for each product, the cost structure of the
various global producers (including their cost of raw materials), and from time
to time, other external factors, such as the implementation of the Clean Air Act
Amendments of 1990, which has significantly increased the demand for MTBE over
the past 10 years. Historically, the Company has successfully mitigated the
cyclicality of the markets for certain of its end products by entering into
contracts with pricing which allows for a fixed profit by linking prices
directly or indirectly to raw material costs. In addition, the Company has
attempted to optimize the use of isobutylene, an intermediate product produced
by the Company, to produce MTBE or higher margin specialty products depending on
prevailing market conditions. See "Environmental Regulation" section for a
further discussion of MTBE.

REVENUES

The Company's revenues are a function of the volume of products sold by the
Company and the prices for such products. The following tables set forth the
Company's historical revenues and the percentages of historical revenues by
product and volume of products sold.

Revenues

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------
1998 1999 2000
----------------- ----------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Butadiene $135.0 26% $ 98.2 22% $134.2 18%
MTBE 235.4 46 229.3 51 429.5 58
n-Butylenes 55.2 11 45.2 10 76.7 10
Specialty Isobutylenes 73.7 14 62.7 14 89.8 12
Other(1) 15.5 3 12.8 3 14.5 2
------ ------ ------ ------ ------ ------
Total $514.8 100% $448.2 100% $744.7 100%
====== ====== ====== ====== ====== ======
</TABLE>

----------

(1) Includes utility revenues and revenues realized from the Company's
terminalling facilities.

Sales Volumes

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------
1998 1999 2000
----- ----- -----
(MILLIONS OF POUNDS, EXCEPT WHERE NOTED)
<S> <C> <C> <C>
Butadiene 822.0 821.1 844.6
MTBE(1) 300.4 376.9 450.9
n-Butylenes 320.4 317.5 456.0
Specialty Isobutylenes 369.7 330.9 375.5
</TABLE>

----------

(1) Volumes in millions of gallons. Includes 17.8 million, and 98.5 million and
15.0 million gallons finished MTBE purchased for resale for the years ended
June 30, 2000, 1999 and 1998, respectively.

10
<PAGE> 13

RESULTS OF OPERATIONS

The following table sets forth an overview of the Company's results of
operations.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------
1998 1999 2000
----------------- ----------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues $514.8 100% $448.2 100% $744.7 100%
Cost of goods sold 438.7 85 374.4 84 643.2 87
Non-cash ESOP compensation -- 0.4 -- 0.6 --
Depreciation and amortization 31.8 6 26.8 6 23.8 3
------ ------ ------ ------ ------ ------
Gross profit 44.3 9 46.6 10 77.1 10
Selling, general and administrative 6.9 2 7.9 2 9.1 1
------ ------ ------ ------ ------ ------
Income from operations $ 37.4 7% $ 38.7 8% $ 68.0 9%
====== ====== ====== ====== ====== ======
</TABLE>

YEAR ENDED JUNE 30, 2000 COMPARED TO THE YEAR ENDED JUNE 30, 1999

Revenues

The Company's revenues increased by approximately 66%, or $296.5 million,
to $744.7 million for the year ended June 30, 2000 from $448.2 million for the
year ended June 30, 1999. The increase was due to higher product sales prices
and sales volumes.

Butadiene revenues increased by approximately 37%, or $36.0 million, to
$134.2 million for the year ended June 30, 2000 from $98.2 million for the year
ended June 30, 1999. The increase was attributable to higher sales prices and
slightly higher sales volumes. A shortage of butadiene supply in the U.S. market
contributed to higher sales prices.

MTBE revenues increased by approximately 87%, or $200.2 million, to
$429.5 million for the year ended June 30, 2000 from $229.3 million for the year
ended June 30, 1999. The increase was due to higher sales prices and sales
volumes. MTBE prices were significantly higher particularly during the last half
of the fiscal year as a result of increases in gasoline and crude oil prices.
In addition, during the last quarter of the fiscal year MTBE prices rose
dramatically as a result of new Reformulated Gas (RFG II) requirements. MTBE
sales volumes were higher due to increased production rates resulting from
operational efficiencies and no scheduled turnarounds for catalyst change.

n-Butylenes revenues increased by approximately 70%, or $31.5 million to
$76.7 million for the year ended June 30, 2000 from $45.2 million for the year
ended June 30, 1999. N-Butylene sales revenue increased due to higher sales
prices and sales volumes. B-2 sales volumes were significantly higher as these
products were sold into the fuels market.

Speciality isobutylene revenues increased by approximately 43%, or
$27.1 million to $89.8 million for the year ended June 30, 2000 from $62.7
million for the year ended June 30, 1999. The increase was due to higher sales
volumes and sales prices. Sales volumes were higher due to increased customer
demand and a new export business. Sales prices increased due to higher
isobutylene values during the year.

Gross Profit

Gross profit increased by approximately 65%, or $30.5 million to
$77.1 million for the year ended June 30, 2000 from $46.6 million for the year
ended June 30, 1999. Gross margin during the period remained steady at 10.4%.
Gross profit increased during the current fiscal year due to higher sales
volumes of all product groups and higher margins on butadiene and MTBE sales.
Butadiene margins improved over prior year period

11
<PAGE> 14

due to improved spot business, processing efficiencies from new control room
instrumentation and positive inventory impacts from higher butadiene sale
prices. MTBE margins improved over the prior year period due to higher
production rates and a larger spread of sales prices over raw material costs.
Gross profit from specialty isobutylenes was unchanged as higher sales volumes
offset the impact of higher raw material costs. Gross profit also increased due
to lower depreciation and amortization charges during the current period.

Income from Operations

Income from operations increased by approximately 76%, or $29.3 million,
to $ 68.0 million for the year ended June 30, 2000 from $38.7 million for the
year ended June 30, 1999. Operating margin during this period increased to 9.1%
from 8.6%. The increase in income from operations was primarily due to the same
factors contributing to the increase in gross profit described above. The
increase in selling, general and administrative costs was primarily due to
higher MTBE advocacy and consulting costs.

YEAR ENDED JUNE 30, 1999 COMPARED TO THE YEAR ENDED JUNE 30, 1998

Revenues

The Company's revenues decreased by approximately 13%, or $66.6 million, to
$448.2 million for the year ended June 30, 1999 from $514.8 million for the year
ended June 30, 1998. The decrease was primarily due to lower product sales
prices, which was partially offset by higher sales volumes.

Butadiene revenues decreased by approximately 27%, or $36.8 million, to
$98.2 million for the year ended June 30, 1999 from $135.0 million for the year
ended June 30, 1998. The decrease was attributable to a decrease in sales
prices. Excess supply and imports of butadiene into the U.S. market contributed
to lower prices. Sales volumes remained stable over the prior year.

MTBE revenues decreased by approximately 3%, or $6.1 million, to $229.3
million for the year ended June 30, 1999 from $235.4 million for the year ended
June 30, 1998. The decrease was due to lower sales prices, which was partially
offset by higher sales volumes. MTBE prices were lower in the current year due
to the lower unleaded gasoline and crude oil prices. Sales volumes increased
over the prior year due to purchases of finished MTBE for resale.

n-Butylenes revenues decreased by approximately 18%, or $10.0 million, to
$45.2 million for the year ended June 30, 1999 from $55.2 million for the year
ended June 30, 1998. n-Butylene sales revenue decreased due to lower sales
prices during most of the fiscal year. Sales volumes of butene-1 and butene-2
were relatively unchanged as compared to the prior year.

Specialty isobutylene revenues decreased by approximately 15%, or $11.0
million, to $62.7 million for the year ended June 30, 1999 from $73.7 million
for the year ended June 30, 1998. The decrease was due to lower sales prices of
all of the Company's specialty products and lower sales volumes of isobutylene
concentrate. Isobutylene concentrate sales volumes were lower due to a planned
turnaround by one of the company's customers during the first half of the fiscal
year.

Gross Profit

Gross profit increased by approximately 5%, or $2.3 million, to $46.6
million for the year ended June 30, 1999 from $44.3 million for the year ended
June 30, 1998. Gross margin during the period increased to 10.4% from 8.6%. The
gross profit increase was primarily due to a change in accounting estimate,
which reduced depreciation expense by $4.2 million during the current year. In
January 1999, the depreciable lives of a certain plant assets were increased
from 10 years to 15 years. With this adjustment excluded, gross margin would
have decreased by $1.9 million over the prior year. The decrease is attributable
to lower MTBE margins caused by a smaller spread between sales prices and raw
materials. The decrease in MTBE margins was partially offset by improved margins
in butadiene, specialty isobutylenes and reductions in operating costs.

12
<PAGE> 15

Income from Operations

Income from operations increased by approximately 3%, or $1.3 million, to
$38.7 million for the year ended June 30, 1999 from $37.4 million for the year
ended June 30, 1998. Operating margin during this period increased to 8.6% from
7.3%. The increase in income from operations was primarily due to the same
factors contributing the increase in gross profit described above, partially
offset by an increase in selling, general and administrative expenses. This
increase was associated with increased MTBE advocacy costs, software integration
costs and business development activity in the current year.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

YEAR ENDED JUNE 30, 2000 COMPARED TO THE YEAR ENDED JUNE 30, 1999

Net cash provided by operating activities was $42.5 million for the year
ended June 30, 2000 compared to $34.2 million for the year ended June 30, 1999.
The increase of $ 8.3 million was primarily attributable to changes in working
capital. Net cash used in investing activities was $18.4 million for the year
ended June 30, 2000 compared to $ 12.9 million for the year ended June 30, 1999.
The increase of $ 5.5 million was caused by higher capital expenditures during
the current year. Net cash used in financing activities was $ 9.3 million for
the year ended June 30, 2000 compared to $22.1 million for the year ended June
30, 1999. The decrease of $12.8 million is primarily due to lower repayments on
the revolving line of credit during the current year.

YEAR ENDED JUNE 30, 1999 COMPARED TO THE YEAR ENDED JUNE 30, 1998

Net cash provided by operating activities was $34.2 million for the year
ended June 30, 1999 compared to $34.9 million for the year ended June 30, 1998.
The decrease of $0.7 million was primarily attributable to changes in working
capital. Net cash used in investing activities was $12.9 million for the year
ended June 30, 1999 compared to $11.2 million for the year ended June 30, 1998.
The increase of $1.7 million was primarily attributable to an increase in
capital expenditures during the current year. Net cash used in financing
activities was $22.1 million for the year ended June 30, 1999 compared to $22.9
million for the year ended June 30, 1998. The decrease of $0.8 million was
primarily attributable to the net change in bank overdraft and reduction in the
outstanding revolving line of credit.

LIQUIDITY

In July 1996 the Company issued $175 million of 11 1/8% Senior Subordinated
Notes due 2006 and borrowed $140 million under a Bank Credit Agreement. The
Company used the combined proceeds to finance the Acquisition of the Company.
The Company's liquidity needs arise primarily from principal and interest
payments under the Bank Credit Agreement and the Subordinated Notes. The
Company's primary source of funds to meet debt service requirements is net cash
flow provided by operating activities. Operating cash flow is significantly
impacted by raw materials cost as well as the selling price and volume variances
of finished goods. The Company enters into supply contracts for certain of its
products in order to mitigate the impact of changing prices. Additionally, the
Company has a $40 million Revolving Credit Facility, of which $1.7 million was
in use at June 30, 2000, to provide funds for ongoing operations, working
capital and planned capital expenditures. The Company believes that the
availability of funds under the Revolving Credit Facility are sufficient to
cover any current liquidity needs which could arise as a result of negative
working capital. The Company's ability to borrow under the Revolving Credit
Facility is limited by the terms of the Bank Credit Agreement and the
Subordinated Notes. The Bank Credit Agreement and the Subordinated Notes include
certain restrictive covenants, which include but are not limited to, limitations
on capital expenditures, indebtedness, investments and sales of assets and
subsidiary stock. Additionally, the Bank Credit Agreement requires the Company
to maintain certain financial ratios. Effective June 30, 1999 the Company
obtained an

13
<PAGE> 16

amendment to the Bank Credit Agreement to update the financial ratios relating
to fixed charge coverage and debt to EBITDA for fiscal 2000.

CASH BONUS PLAN

In connection with the Acquisition, the Predecessor established a $35
million Cash Bonus Plan covering substantially all employees of the Predecessor
(or certain affiliates of the Predecessor) and covering certain third-party
contractors who had contributed to the past success of the Predecessor. During
the year ended June 30, 2000, $9.6 million of this amount was paid to eligible
participants and the remaining $0.2 million, which fully retires the debt, was
paid in July 2000.

CAPITAL EXPENDITURES

The Company's capital expenditures for fiscal 2000 related principally to
constructing a polyisobutylene plant at a cost of $12 million, improving
operating efficiencies and maintaining environmental compliance. Capital
expenditures for year ended June 30, 2000 were $18.8 million, compared to $14.4
million for the year ended June 30, 1999. The Company expenses approximately $20
million annually for plant maintenance. These maintenance costs are not treated
as capital expenditures.

RECENTLY ISSUED PRONOUNCEMENTS

In June 1998 the Financial Accounting Standard Board (FASB) issued
Statement of Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Certain Hedging Activities." In June 2000 the FASB issued SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activity, an Amendment of SFAS 133." SFAS No. 133 and SFAS No. 138 requires that
all derivative instruments be recorded on the balance sheet at their respective
fair values. Changes in the fair value of derivatives are recorded each period
in current earnings or other comprehensive income, depending on whether the
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. SFAS No. 133 and SFAS No. 138 are effective for all fiscal
quarters of all fiscal years beginning after June 30, 2000; the Company adopted
SFAS No. 133 and SFAS No. 138 on July 1, 2000. The Company has both
interest-rate related derivative instruments to manage its exposure on its debt
instruments, as well as commodity derivatives to manage its exposure to
commodity price fluctuations. Upon adoption of SFAS No. 133 and 138 the
Company's management decided not to designate any of its derivative instruments
as part of hedge transactions. Accordingly, during the first quarter of fiscal
2001 the Company recorded a net-of-tax cumulative-effect loss of $0.4 million
into earnings to recognize at fair value all derivative instruments.

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

Part I, Items 1 and 2 of this document include forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Although the Company believes that the expectations reflected in such
forward looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. Important factors that could
cause actual results to differ materially from the Company's expectations are
disclosed in conjunction with the forward looking statements included herein
("Cautionary Disclosures"). Subsequent written or oral forward looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Disclosures.

14
<PAGE> 17

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

INTEREST RATE RISK

The Company maintains on overall interest rate risk-management strategy
that incorporates the use of derivative instruments to minimize its exposure to
changes in the fair value of its fixed rate debt and to volatility in LIBOR
rates associated with its floating rate debt. The derivative instruments that
are used as part of the Company interest rate risk-management strategy include
interest-rate swaps and cap contracts.

In February 1998, the Company entered into a three-year agreement for $125
million of its Senior Subordinated Notes. The swap agreement effectively
converts a portion of the 11 1/8% fixed rate Senior Subordinated Notes to a
floating debt with a structured collar. Under the agreement the Company's
interest rate is fixed at 10.8% while the six month LIBOR is set between 5.45%
and 5.76%. If LIBOR rates are set above 6.75% the Company's interest rate is
floating at current LIBOR plus 5.35%. If LIBOR rates are set below 5.25% the
Company's interest rate is fixed at 10.8%. As of June 30, 2000 LIBOR rates were
7.01% resulting in an additional $0.9 million in annual interest expense.

In June 1998, the Company entered into a three-year interest rate cap for
$64 million of its senior debt under the Bank Credit Agreement. The cap
effectively converts a portion of the Company's floating rate bank debt to a
fixed rate of $6.75% plus a margin if the three month LIBOR rates are above
6.75%. The notional amount on the cap amortizes from $64 million to $32 million
on a quarterly basis over three-year term. As of June 30, 2000 the notional
amount of the cap is $47 million.

Reporting fair value of these derivative instruments as of June 30, 2000
would result in a loss of approximately $1.3 million.

At June 30, 2000 a hypothetical 1% increase in interest rates would result
in a $0.6 million increase in annual interest expense.

COMMODITY PRICES

The Company manages its exposure to commodity price fluctuations by
entering into contracts on raw material purchases and product sales with third
parties. In addition, the Company periodically enters into future contracts and
swaps to either purchase or sell raw materials or other products in the market.
At June 30, 2000, the Company had open futures contracts to sell unleaded gas
with notional volumes totaling 79,000 barrels. The Company also had open swap
contracts with notional volumes totaling 150,000 barrels. All of these commodity
contracts mature within three months. Reporting fair value of these derivative
instruments at fiscal year-end 2000 would result in a gain of approximately $0.7
million.

15
<PAGE> 18

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF
TEXAS PETROCHEMICALS CORPORATION*

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Auditors 17

Financial Statements

Consolidated Balance Sheet 18

Consolidated Statement of Operations 19

Consolidated Statement of Stockholder's Equity 20

Consolidated Statement of Cash Flows 21

Notes to Consolidated Financial Statements 22
</TABLE>

* As of June 30, 2000, the Company's legal form was a corporation and operated
under the name of Texas Petrochemicals Corporation. Effective July 1, 2000,
Texas Petrochemicals Corporation converted its legal form from a corporation to
a limited partnership, Texas Petrochemicals LP, pursuant to the conversion
provisions of the Texas Business Corporation Act and the Texas Revised Limited
Partnership Act.

16
<PAGE> 19

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Texas Petrochemicals Corporation:

We have audited the accompanying consolidated balance sheets of Texas
Petrochemicals Corporation and subsidiary (the "Company") as of June 30, 2000
and 1999, and the related consolidated statements of operations, stockholder's
equity, and cash flows for each of the three years in the period ended June 30,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, such financial statements present fairly, in all material
respects, the financial position of the Company at June 30, 2000 and 1999 and
the results of its operations and its cash flows for each of the three years in
the period ended June 30, 2000, in conformity with accounting principles
generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Houston, Texas
August 4, 2000

17
<PAGE> 20

TEXAS PETROCHEMICALS CORPORATION

CONSOLIDATED BALANCE SHEET
(IN THOUSAND OF DOLLARS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
JUNE 30,
------------------------
2000 1999
--------- ---------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents $ 14,919 $ 103
Accounts receivable - trade 64,235 40,220
Inventories 35,957 19,973
Investments in land held for sale 1,068 --
Other current assets 11,631 18,624
--------- ---------
Total current assets 127,810 78,920

Property, plant and equipment, net 219,517 219,706
Investment in land held for sale 990 2,058
Investment in and advances to limited partnership 2,769 2,820
Goodwill, net of accumulated amortization of $19,508 and $14,925 164,978 169,560
Other assets, net 7,835 9,374
--------- ---------
Total assets $ 523,899 $ 482,438
========= =========

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
Bank overdraft $ 7,146 $ 874
Accounts payable - trade 71,775 38,992
Payable to Parent 639 1,987
Accrued expenses 18,190 17,228
Current portion of cash bonus plan liability 213 7,811
Current portion of long-term debt 8,086 7,465
--------- ---------
Total current liabilities 106,049 74,357

Revolving line of credit 1,650 2,000
Long-term debt 275,665 284,073
Cash bonus plan liability -- 1,959
Deferred income taxes 61,944 60,531

Commitments and contingencies (Note 7)

Stockholder's equity:
Common stock, $1 par value, 4,500,000 shares authorized
and 4,126,000 shares issued outstanding 4,162 4,162
Additional paid in capital 72,620 72,050
Accumulated earnings (deficit) 3,809 (12,694)
Note receivable from ESOP (2,000) (4,000)
--------- ---------
Total stockholder's equity 78,591 59,518
--------- ---------
Total liabilities and stockholder's equity $ 523,899 $ 482,438
========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

18
<PAGE> 21

TEXAS PETROCHEMICALS CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSAND OF DOLLARS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 744,725 $ 448,155 $ 514,790
Cost of goods sold 643,195 374,401 438,725
Non-cash ESOP compensation 570 407 --
Depreciation and amortization 23,800 26,784 31,787
----------- ----------- -----------
Gross profit 77,160 46,563 44,278

Selling, general and administrative expenses 9,139 7,916 6,888
----------- ----------- -----------
Income from operations 68,021 38,647 37,390

Interest expense 33,524 33,953 35,720

Other income (expense)
Loss on disposal of assets and
investment securities, net -- (44) (436)
Other, net (38) 1,320 993
----------- ----------- -----------
(38) 1,276 557
----------- ----------- -----------

Income before income taxes 34,459 5,970 2,227

Provision for income taxes 17,956 4,538 3,624
----------- ----------- -----------

Net income (loss) $ 16,503 $ 1,432 $ (1,397)
=========== =========== ===========

Basic and diluted income (loss) per common share: $ 3.97 $ 0.34 $ (0.34)
=========== =========== ===========

Weighted average shares outstanding 4,162,000 4,162,000 4,162,000
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

19
<PAGE> 22

TEXAS PETROCHEMICALS CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
ADDITIONAL NOTE
COMMON STOCK PAID IN RECEIVABLE ACCUMULATED
SHARES VALUE CAPITAL FROM ESOP EARNINGS (DEFICIT) TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 4,162,000 $ 4,162 $ 71,643 $ (8,000) $ (12,729) $ 55,076
Net loss (1,397) (1,397)
Reduction in ESOP Note 2,000 2,000
--------- --------- --------- --------- --------- ---------
Balance, June 30, 1998 4,162,000 4,162 71,643 (6,000) (14,126) 55,679
Net income 1,432 1,432
Non-cash ESOP compensation 407 407
Reduction in ESOP Note 2,000 2,000
--------- --------- --------- --------- --------- ---------
Balance, June 30, 1999 4,162,000 4,162 72,050 (4,000) (12,694) 59,518
--------- --------- --------- --------- --------- ---------
Net income 16,503 16,503
Non-cash ESOP compensation 570 570
Reduction in ESOP Note 2,000 2,000
--------- --------- --------- --------- --------- ---------
Balance, June 30, 2000 4,162,000 $ 4,162 $ 72,620 $ (2,000) $ 3,809 $ 78,591
========= ========= ========= ========= ========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

20
<PAGE> 23

TEXAS PETROCHEMICALS CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 16,503 $ 1,432 $ (1,397)
Adjustments to reconcile net income (loss)
to cash flow from operating activities:
Depreciation of fixed assets 18,985 21,924 25,208
Amortization of intangibles 4,815 4,860 6,579
Amortization of debt issue costs and deferred premium 1,173 1,159 1,089
Deferred income taxes 3,628 (1,460) (1,680)
Earnings from limited partnership (324) (775) (476)
Non-cash ESOP expense 570 407 --
Change in:
Accounts receivable (24,015) 5,078 (636)
Inventories (15,984) (2,763) 716
Other assets 4,741 (4,183) 1,843
Accounts payable, accrued and other 32,397 8,489 3,661
-------- -------- --------
Net cash provided by operating activities 42,489 34,168 34,907

Cash flows from investing activities:
Capital expenditures (18,796) (14,413) (12,466)
Proceeds from asset sales -- 477 871
Distribution received from partnership 375 990 410
-------- -------- --------
Net cash used in investing activities (18,421) (12,946) (11,185)

Cash flows from financing activities:

Bank overdraft 6,272 874 (10,157)
Net repayments on revolving line of credit (350) (10,000) --
Proceeds from issuance of long-term debt -- -- 3,192
Payments on long-term debt (7,465) (6,979) (9,706)
Cash bonus plan payments (9,557) (7,807) (7,807)
Debt issuance and organizational costs (152) (163) (389)
Reduction in note receivable from ESOP 2,000 2,000 2,000
-------- -------- --------
Net cash used in financing activities (9,252) (22,075) (22,867)
-------- -------- --------

Net increase (decrease) in cash and cash equivalents 14,816 (853) 855

Cash and cash equivalents, beginning 103 956 101
-------- -------- --------

Cash and cash equivalents, ending $ 14,919 $ 103 $ 956
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

21
<PAGE> 24

TEXAS PETROCHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY

On July 1, 1996, Texas Olefins Company ("TOC"), Texas Petrochemicals
Corporation and a raw material supply contract of Clarkston Corporation
(collectively referred to as the "Predecessor") were acquired for approximately
$371 million in a series of transactions (the "Acquisition"). After the
transactions, TOC was merged with and into Texas Petrochemicals Corporation with
Texas Petrochemicals Corporation (the "Company") becoming a 100% owned
subsidiary of Texas Petrochemicals Holdings, Inc. (the "Parent"). In connection
with the Acquisition, the Company issued $175 million of Senior Subordinated
Notes due 2006 (the "Subordinated Notes") and borrowed $140 million under the
Bank Credit Agreement.

Effective July 1, 2000 the Company converted its legal form from a
corporation to a limited partnership pursuant to the conversion provisions of
the Texas Business Corporation Act and the Texas Revised Limited partnership
Act. See discussion in Note 12.

The Company through its facility in Houston, Texas is the third largest
producer of butadiene, the largest producer of butene-1, and the third largest
producer of methyl tertiary-butyl ether ("MTBE") in North America. In addition,
the Company is the sole producer of diisobutylene and isobutylene concentrate in
the United States and is the largest domestic merchant supplier of high purity
isobutylene to the chemical market. The Company's products include: (i)
butadiene, primarily used to produce synthetic rubber; (ii) MTBE, used as an
oxygenate and octane enhancer in gasoline; (iii) n-butylenes (butene-1 and
butene-2), used in the manufacture of plastic resins, fuel additives and
synthetic alcohols; (iv) specialty isobutylenes, primarily used in the
production of specialty rubbers, lubricant additives, detergents and coatings;
and (v) polyisobutylenes, used in the production of fuel and lube additives,
adhesives, sealants and packaging.

The Company's principal feedstocks are crude butadiene, isobutane and
methanol. The Company purchases a significant portion of its crude butadiene
requirements at prices, which are adjusted based on the Company's selling price
of butadiene as well as the cost of natural gas used to produce butadiene,
thereby providing the Company with a fixed profit on such sales. Methanol and
isobutane are purchased at prices linked to prevailing market prices.

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements as of and for the three years ended
June 30, 2000 include the accounts of Texas Petrochemicals Corporation and its
wholly owned subsidiary, Texas Butylene Chemical Company, (collectively referred
to as) the "Company". Intercompany accounts and transactions have been
eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of
three months or less at the date of purchase to be cash equivalents.

22
<PAGE> 25

TEXAS PETROCHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

Inventories

Inventories consist of raw materials, finished goods and chemicals used in
processing and are valued at the lower of average cost or market.

The Company may enter into product exchange agreements with suppliers
whereby certain inventories are exchanged for raw materials. These exchanges are
recorded at the lower of cost or market. Any resulting gains or losses from the
utilization of these exchanges are reflected in cost of chemical products sold.
Balances related to quantities due to or payable by the Company are included in
inventory.

Investment in and Advances to Limited Partnership

The Company and Hollywood Marine, Inc. formed a limited partnership,
Hollywood/Texas Petrochemicals, Ltd., to operate four barges capable of
transporting chemicals. The Company is a 50% limited partner in the limited
partnership. The Company accounts for this investment under the equity method
and records its portion of the limited partnership's net income as other income
in the accompanying statement of operations. Summarized financial information of
the partnership has not been presented because the Company's investment in and
its proportionate share of the partnership's operations are not material.

Long-Lived Assets

Property, plant and equipment are recorded at cost. Turnaround costs for
major units of the manufacturing facilities are capitalized and amortized over
the life of the turnaround. Maintenance and repairs are charged to expense as
incurred while significant improvements are capitalized. Upon retirement or sale
of an asset, the asset and the related accumulated depreciation are removed from
the accounts and any resulting gain or loss is reflected in operations.

Depreciation of property, plant and equipment is computed using the
straight-line method over their estimated useful lives ranging from 3 to 31
years. In January 1999, the estimated useful lives of certain plant assets were
increased from 10 years to 15 years based on engineering analysis. This change
was accounted for as a change in accounting estimate and resulted in a $4.2
million decrease in depreciation expense for fiscal year 1999.

Goodwill represents the excess of purchase price paid over the value
assigned to the net tangible and identifiable intangible assets of a business
acquired. Goodwill is amortized over 40 years using the straight-line method.

Debt issue costs relating to the Company's long-term debt are amortized to
interest expense over the scheduled maturity of debt utilizing the effective
interest method. Other assets include patents and catalysts, which are amortized
using the straight-line method over their useful lives ranging from 2 to 7
years.

The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. If the undiscounted future cash flows of such assets are
less than the carrying amount, the carrying amount is reduced to fair value and
an impairment loss is recognized.

Revenue Recognition

The Company recognizes revenue from sales of refined products in the period
of delivery.

23
<PAGE> 26

TEXAS PETROCHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires that deferred taxes be provided at
enacted tax rates on temporary differences between the carrying amounts of
assets and liabilities for financial and tax reporting purposes. The Company's
Parent files a consolidated federal tax return for all of its subsidiaries. The
Parent's tax allocation policy provides for the Company to calculate its own
provision on a "separate return basis" and amounts payable and/or receivable are
reflected in intercompany accounts.

Employee Stock Ownership Plan

The balance of the note receivable from the Employee Stock Ownership Plan
(See Note 8), is reported as a contra account in the stockholder's equity
section of the balance sheet. The Company has recognized as non-cash ESOP
compensation, the increase in the fair value of the common stock as those shares
are allocated to participant's accounts with the corresponding offset credited
to additional paid in capital.

Management Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount 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.

Recently Issued Pronouncements

Reclassifications

Certain reclassifications have been made to previously issued financial
statements to conform to the current presentation.

24
<PAGE> 27

TEXAS PETROCHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

3. Detail of Certain Balance Sheet Accounts (in thousands of dollars)

INVENTORIES:

<TABLE>
<CAPTION>
JUNE 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Finished goods $ 18,505 $ 10,594
Raw materials 15,915 8,053
Chemicals and supplies 1,537 1,326
-------- --------
$ 35,957 $ 19,973
======== ========
</TABLE>

OTHER CURRENT ASSETS:

<TABLE>
<CAPTION>
JUNE 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Catalyst Inventory $ 7,402 $ 7,463
Deferred turnaround costs 452 2,585
Prepaid and other 3,777 8,576
-------- --------
$ 11,631 $ 18,624
======== ========
</TABLE>

PROPERTY, PLANT AND EQUIPMENT:

<TABLE>
<CAPTION>
JUNE 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Chemical plants $295,124 $277,117
Construction in progress 9,233 8,834
Other 5,592 5,202
-------- --------
309,949 291,153
Less accumulated depreciation and depletion 90,432 71,447
-------- --------
$219,517 $219,706
======== ========
</TABLE>

ACCRUED EXPENSES:

<TABLE>
<CAPTION>
JUNE 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Accrued interest $ 13,780 $ 13,893
Property and sales taxes 2,218 1,995
State income taxes -- 744
Other 2,192 596
-------- --------
$ 18,190 $ 17,228
======== ========
</TABLE>

25
<PAGE> 28

TEXAS PETROCHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

4. LONG-TERM DEBT

<TABLE>
<CAPTION>
JUNE 30,
---------------------
2000 1999
-------- --------
<S> <C> <C>
Bank Credit Agreement:
Term A Loan $ 14,402 $ 18,002
Term B Loan 40,421 41,407
ESOP Loan 2,000 4,000
Revolving Credit Loans 1,650 2,000
Senior Subordinated Notes 225,000 225,000
Deferred premium on Senior Subordinated Notes 1,928 2,250
Long-term financing -- 879
-------- --------
285,401 293,538
Less current maturities 8,086 7,465
-------- --------
Long-term debt $277,315 $286,073
======== ========
</TABLE>

The Bank Credit Agreement originally provided for term loans in the amount
of $130 million, an ESOP loan of $10 million, and a revolving credit facility of
up to $40 million. Quarterly principal and interest payments are made under the
Bank Credit Agreement. The final payments under the ESOP Loan, Term A Loan and
Term B Loan are due on June 30, 2001, December 31, 2002 and June 30, 2004,
respectively. The Revolving Credit Loan facility is currently scheduled to
expire on December 31, 2002. The debt under the Bank Credit Agreement bears
interest, at the option of the borrower, based on the LIBOR rate plus a margin
(1.75% and 3% at June 30, 2000) or the greater of the prime rate and the federal
funds rate plus 1/2% plus a margin (.75% at June 30, 2000). Substantially all
assets of the Company are pledged as collateral under the Bank Credit Agreement.
The Senior Subordinated Notes are due 2006 and bear interest at 11 1/8% payable
semiannually on January 1 and July 1. The Bank Credit Agreement and the Senior
Subordinated Notes include certain restrictive covenants, which include but are
not limited to, limitations on capital expenditures, indebtedness, investments
and sales of assets and subsidiary stock. Additionally, the Bank Credit
Agreement requires the Company to maintain certain financial ratios. Effective
June 30, 1999 the Company obtained an amendment to the Bank Credit Agreement to
update the financial ratios relating to fixed charge coverage and debt to EBITDA
for fiscal 2000.

The fair value of the Senior Subordinated Notes, based on quoted market
prices, was approximately $191 million and $200 million as of June 30, 2000 and
1999, respectively. The long-term debt under the Bank Credit Agreement carries a
floating interest rate, therefore, the Company estimates that the carrying
amount of such debt was not materially different from its fair value as of June
30, 2000 and 1999.

In February 1998, the Company entered into a three-year swap agreement for
$125 million of its Senior Subordinated Notes. The swap agreement effectively
converts a portion of the 11 1/8% fixed rate Senior Subordinated Notes to a
floating debt with a structured collar. Under the agreement the Company's
interest rate is fixed at 10.8% while LIBOR is set between 5.45% and 6.75%. If
LIBOR rates are set above 6.75% the Company's interest rate is floating at
current LIBOR plus 5.35%. If LIBOR rates are set between 5.25% and 5.45% the
Company's interest rate is floating at current LIBOR plus 5.35%. If LIBOR rates
are set below 5.25% the Company's interest rate is fixed at 10.8%. As of June
30, 2000 LIBOR rates were 7.01% resulting in an additional $0.9 million in
annual interest expense. In June 1998, the Company entered into a three-year
interest rate cap for $64 million of its senior debt under the Bank Credit
Agreement. The cap effectively converts a portion of the Company's floating rate
bank debt to a fixed rate of 6.75% plus the margin if LIBOR rates are set above
6.75%. The notional amount of the cap amortizes from $64 million to $32 million
on a quarterly basis over the three-year term. As of June 30, 2000 the notional
amount of the cap is $47 million.

26
<PAGE> 29

TEXAS PETROCHEMICALS CORPORATION

NOTE TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

Upon adoption of SFAS No. 133 and SFAS No. 138 on July 1, 2000, the Company
marked-to-market the fair value of these derivative instruments into earnings as
the Company decided not to designate these derivatives as part of a hedge
transaction under the requirements of SFAS No. 133 and 138. Accordingly, the
Company recorded a $1.3 million loss as a cumulative-effect adjustment into
earnings during the first quarter of fiscal 2001.

The aggregate scheduled maturities outstanding debt for the succeeding five
years are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
2001 $ 8,086
2002 6,987
2003 18,753
2004 24,647
2005 --
</TABLE>

5. FEDERAL AND STATE INCOME TAXES

Significant components of the Company's deferred tax assets and liabilities
at June 30, 2000 and June 30, 1999 are as follows (in thousands of dollars):

<TABLE>
<CAPTION>
JUNE 30,
----------------------
2000 1999
-------- --------
<S> <C> <C>
Deferred tax asset (liability) - current:
Cash bonus plan $ 74 2,756
Turnaround costs (159) (905)
Other (816) (537)
-------- --------
Total current $ (901) $ 1,314
======== ========

Deferred tax asset (liability) - noncurrent:
Investment in land $ 4,573 $ 4,828
Cash bonus plan -- 733
Property, plant and equipment (64,275) (65,872)
Other (170) (220)
-------- --------
(59,872) (60,531)
Valuation allowance (2,072) --
-------- --------
Total noncurrent $(61,944) $(60,531)
======== ========
</TABLE>

The Company recognized a $2.1 million valuation allowance in current year
earnings against the deferred tax benefit for the investment in land, which was
not likely to be realized for the portion of the capital loss carryforward,
which expires in fiscal year 2003.

27
<PAGE> 30

TEXAS PETROCHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

The current deferred tax asset (liability) is included in other current
assets in the accompanying balance sheet. The provision for federal and state
income taxes is comprised of the following (in thousand of dollars):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 12,308 $ 5,296 $ 4,368
State 2,020 702 936
-------- -------- --------
14,328 5,998 5,304
-------- -------- --------
Deferred:
Federal 3,628 (1,460) (1,680)
State -- -- --
-------- -------- --------
3,628 (1,460) (1,680)
-------- -------- --------
Total provision
for income taxes $ 17,956 $ 4,538 $ 3,624
======== ======== ========
</TABLE>

The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before income taxes. The reasons
for this difference are as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Statutory federal income tax rate 35% 35% 35%
Computed "expected" federal income tax $12,061 $ 2,090 $ 779
Increase in tax resulting from:
State income taxes, net of
federal benefit 1,313 456 608
Valuation allowance on land
held for sale 2,072 -- --
Other, net 707 388 328
Amortization of goodwill and other 1,803 1,604 1,909
------- ------- -------
Provision for income taxes $17,956 $ 4,538 $ 3,624
======= ======= =======
</TABLE>

6. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for interest and income taxes are as follows (in thousands of
dollars):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Interest $32,479 $34,641 $33,735
Income taxes 16,407 6,897 1,641
</TABLE>

28
<PAGE> 31

TEXAS PETROCHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

7. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company leases tank cars under noncancelable operating leases. Under
the terms of the lease agreements, the Company is reimbursed by customers at a
fixed rate per mile, based on the distance the tank cars travel. Reimbursements
were approximately $0.7 million, $0.5 million, $0.8 million, for the three years
ended June 30, 2000, respectively.

Total rent expense was approximately $4.4 million, $4.6 million and $3.6
million, (net of reimbursements described above and including $0.9 million, $0.7
million and $.7 million for the rental of barges) for the three years ended June
30, 2000, respectively. Future minimum lease payments at June 30, 2000 are as
follows (in thousands of dollars):

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
2001 $3,984
2002 2,633
2003 1,198
2004 278
2005 --
</TABLE>

PURCHASE COMMITMENTS

The Company has purchase commitments incident to the ordinary conduct of
business. The prices of such purchase commitments are based on formulas, which
are determined from the prevailing market rate for such products. These
commitments generally have cancellation provisions given proper notification.

LITIGATION

The Company is involved in various routine legal proceedings which are
incidental to the business. Management of the Company is vigorously defending
such matters and is of the opinion that their ultimate resolution will not have
a material adverse impact on the Company's financial position, results of
operations or cash flows.

ENVIRONMENTAL REGULATION

The Company's operations are subject to federal, state and local laws and
regulations administered by the U.S. Environmental Protection Agency, the U.S.
Coast Guard, the Army Corps of Engineers, the Texas Natural Resource
Conservation Commission, the Texas General Land Office, the Texas Department of
Health and various local regulatory agencies. The Company holds all required
permits and registrations necessary to

29
<PAGE> 32

TEXAS PETROCHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

comply substantially with all applicable environmental laws and regulations,
including permits and registrations for wastewater discharges, solid and
hazardous waste disposal and air emissions, and management believes that the
Company is in substantial compliance with all such laws and regulations. While
management does not expect the cost of compliance with existing environmental
laws will have a material adverse effect on the Company's financial condition,
results of operations or cash flows, there can be no assurance that future
legislation, regulation or judicial or administrative decisions will not have
such an effect.

A bill (S.B. 2962) has been introduced in Congress to reduce the use of
MTBE nationwide within four (4) years of enactment of the bill, and to allow
states to opt out of the oxygenate requirement of the CAA beginning in 2001. The
Company is not able to predict whether such legislation will be adopted, or, if
adopted, the extent to which MTBE demand would be reduced as a result; it is
possible, however, that such reduction could be material. Although the EPA
continues to require oxygenates to be added to gasoline in certain regions of
the country either year-round or during the winter months, and MTBE continues to
be the leading oxygenate used, EPA has called for reduction in the use of MTBE
in gasoline. Any restriction on or prohibition of the use of MTBE could have a
material adverse effect on the Company's financial condition or results of
operations.

8. EMPLOYEE BENEFITS

PROFIT SHARING PLAN

The Company has a profit sharing plan that covers all full-time employees
that have completed 90 days or more of service. Employees can contribute up to
10% of their base compensation to a tax deferred fund. The Company matches at
the rate of $.25 per one dollar contributed by the employee up to 6% of the
employee's base compensation. The Company's expense to match employee
contributions was approximately $0.2 million for each of the proceeding three
years, respectively. Additionally, the Company made additional discretionary
contributions to the plan, which amounted to approximately $2.3 million, $2.0
million and $2.1 million, for the three years ended June 30, 2000, respectively.
The Company's contributions vest with the employee at a rate of 20% per year.

EMPLOYEE STOCK OWNERSHIP PLAN

In connection with the Acquisition, the Parent established an Employee
Stock Ownership Plan (the "ESOP"), covering substantially all full-time
employees of the Company. The ESOP borrowed $10 million under the Bank Credit
Agreement to purchase 100,000 shares of the Parent's Common Stock at the closing
of

30
<PAGE> 33

TEXAS PETROCHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

the Acquisition. The shares of Common Stock purchased by the ESOP were pledged
as security for the ESOP Loan, and such shares will be released and allocated to
ESOP participants' accounts as the ESOP Loan is discharged. For employees whose
employment commenced prior to October 1, 1996 and who have attained 21 years,
participation begins as of the Acquisition date or the date of commencement of
the participant's employment. A participant's ESOP account vests at the rate of
20% per year. The Company's contributions to the ESOP, which are used to retire
principal and pay interest on the loan is reported as compensation expense.
Principal and interest payments made for the three years ended June 30, 2000
amounted to $2.2 million, $2.4 million and $2.6 million, respectively. As of
June 30, 2000, 80,000 shares have been allocated to employees.

CASH BONUS PLAN LIABILITY

In connection with the Acquisition, the Predecessor established the $35
million Cash Bonus Plan covering substantially all employees of the Predecessor
(or certain affiliates of the Predecessor) and covering the employees of certain
third-party contractors who had contributed to the past success of the
Predecessor. All participants of the plan as of July 2, 1996 were distributed
10% of the cash bonus in August 1996, and the remaining amount is to be paid in
sixteen quarterly installments which began in October 1996. During the year
ended June 30, 2000 $9.6 million was paid to eligible participants and the
remaining $.02 million, which fully retires the debt, was paid in July 2000.

9. RELATED PARTY TRANSACTIONS

In December 1999 the Company made a loan to its Director of Research in the
amount of $0.2 million of which $0.2 million remained outstanding as of June 30,
2000. The loan carries an interest rate of 8%.

In June 1998 the Company issued $0.2 million to its Executive Vice
President and Chief Financial Officer which has been paid in full as of June 30,
2000. The proceeds from the loan were utilized to purchase outstanding shares of
the Parent's common stock at fair market value. The loan carried an interest
rate of 7%.

During fiscal 1999 the Company made payments totaling $0.3 million to a
consulting firm whose majority shareholder is also an outside director and
shareholder of the Company. No such expenditures were made in fiscal 2000. The
Chairman of the Company receives annual compensation of $0.2 million for
consulting services provided to the Company and reimbursements of approximately
$25,000 per year for office expenses.

10. CONCENTRATION OF CREDIT RISK

The Company sells its products primarily to chemical and petroleum based
companies in North America. For the three years ended June 30, 2000
approximately 34%, 34% and 41%, respectively, of the Company's sales were to
four customers. The Company had two customers, which represented 11% and 14% of
sales during the year ended June 30, 2000 and 1999, and 13% and 15% of sales
during the year ended June 30, 1998. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral for
accounts receivable. The Company's credit losses have been minimal.

The Company maintains its cash deposits and short-term investments with a
major bank and a financial services company which at certain times exceed the
federally insured limits. Management assesses the financial condition of these
institutions and believes that any possible credit loss is minimal.

31
<PAGE> 34

TEXAS PETROCHEMICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

11. FINANCIAL INSTRUMENTS

At June 30, 2000 the Company estimated that the carrying value and fair
value of its financial instruments, other than long-term debt (See Note 4), were
approximately equal due to the short-term nature of the instruments. Such
instruments include cash and cash equivalents, accounts receivable and accounts
payable.

The Company enters into certain derivative financial instruments as part of
its interest rate risk management and commodity price risk management. See Note
4 for a discussion of interest rate derivative financial instruments. At June
30, 2000, the Company had open futures contracts to sell unleaded gas with
notional volumes totaling 79,000 barrels. The Company also had open swap
contracts with notional volumes totaling 150,000 barrels. All of these commodity
contracts mature within three months. Interest rate swaps, caps, collars and
floors are classified as matched transactions. The differential to be paid or
received as interest rates change is accrued and recognized as an adjustment to
interest expense. Gains and losses associated with commodity-related derivative
instruments are recognized in earnings concurrently with the related hedged
transaction. The fair value of derivative financial instruments are the amounts
at which they could be settled based on estimates from dealers. As of June 30,
2000, reporting the estimated fair values of derivative financial instruments
would result in a loss of approximately $1.3 million on the interest-rate
instruments and a gain of approximately $0.7 million on the commodity
instruments. See discussion of the impact of adopting SFAS No. 133 and SFAS No.
138, effective July 1, 2000, in Notes 2 and 4.

12. SUBSEQUENT EVENT

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On September 13, 2000 the Audit Committee of the Board of Directors of TPC
Holding Corp., general partner of Texas Petrochemicals LP (formerly Texas
Petrochemicals Corporation) recommended, and the Company's Board of Directors
approved, the engagement of PricewaterhouseCoopers LLP to audit the consolidated
financial statements of the Company for the fiscal year ending June 30, 2001. In
connection with the audits of the Company's consolidated financial statements
for the three years ended June 30, 2000, (i) the Company had no disagreements
with Deloitte & Touche LLP ("D&T"), the Company' former auditors, on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure which, if not resolved to the satisfaction of D&T,
would have caused D&T to make reference to the matter in their reports; and (ii)
there were no "reportable events" as defined in Item 304(a)(1)(v) of Regulation
S-K under the Securities Exchange Act of 1934.

32
<PAGE> 35

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information concerning the directors
and executive officers of the Company. Each director is elected for a one-year
term or until such person's successor is duly elected and qualified.

<TABLE>
<CAPTION>
Years of
service with the
Company
Name Age Position or its predecessors
---- --- -------- -------------------
<S> <C> <C> <C>
Hunter W. Henry Jr. 72 Director 2
William R. Huff 50 Director 4
William A. McMinn 70 Director and Chairman 16
Steve A. Nordaker 53 Director 3
Susan O. Rheney 41 Director 4
Gary L. Rosenthal 51 Director 2
John T. Shelton 69 Director 16
Guy E. Sutherland 64 Director 1
B. W. Waycaster 61 Director, President and Chief Executive Officer 8
Carl S. Stutts 53 Executive Vice President, Chief Financial Officer 2
Stephen R. Wright 52 Sr. Vice President, Secretary and General Counsel 4
William F. Howard 57 Sr. Vice President Operations 24
</TABLE>

Mr. Henry has held various manufacturing and management positions in the
Dow Chemical Company, including Vice President - Business Operations for Latin
America, Vice President - Manufacturing Dow Badische, General Manager - Michigan
Division, President - Dow Brazil, President - Dow USA and Executive Vice
President of Dow Chemical Company (1982 - 1988). Mr. Henry was on Dow's board
from 1979 to 1993 and has served on the Executive, Compensation, Health and
Safety Committees and as Chairman of the Finance and Investment Policy
Committee. Mr. Henry also served as Chairman of the Board of Dowell
Schlumberger, 1985 - 1988.

Mr. Huff has been President of the General Manager of WRH Partners, L.L.C.,
the General Partner of The Huff Alternative Income Fund, L.P. (the "Huff Fund")
since 1994. He also has been President of one of the general managers of W.R.
Huff Asset Management Co., L.L.C., an investment management firm, since 1984.
Mr. Huff serves on the Board of Directors as the designee of the Huff Fund and
also services on the Board of Directors of e.spire Communications, Inc.

Mr. McMinn has been Chairman of the Board of the Company since 1996. He was
Corporate Vice President and Manager of the Industrial Chemical Group of FMC
Corporation, a manufacturer of machinery and chemical products, from 1973
through 1985. He became President and Chief Executive Officer of Cain Chemical
Inc., a producer of petrochemicals, in 1987 and served in that capacity until
its acquisition by Occidental Petroleum in May 1988. He became Chairman of the
Board of Directors of Arcadian Corporation in August 1990 and served in that
capacity until it was sold in April 1997.

Mr. Nordaker has been a Managing Director of Chase Securities since August
1995. From 1982 to 1995, he was a Group Manager at Texas Commerce Bank National
Association and, in addition, served in several capacities at Texas Commerce
Bank in the Energy Group, including Section Manager and Division Manager. From
May 1977 to March 1982, Mr. Nordaker was a Manager of Projects for The Frantz
Company, an engineering consulting firm servicing the oil refinery and
petrochemical industry. Prior thereto, he was a

33
<PAGE> 36

chemical engineer with Universal Oil Products. Mr. Nordaker serves on the Board
of Directors as the Designee of Chase Venture, an affiliate of Chase Securities.

Ms. Rheney has been a principal of The Sterling Group, Inc. since February
1992. She worked as an independent financial consultant from December 1990 to
January 1992. Prior to that time, from June 1987 to November 1990, she was an
associate at Sterling. Ms. Rheney is also a director of American Plumbing &
Mechanical, Inc.

Mr. Rosenthal has served as President of Heaney Rosenthal, Inc. which
focuses on investment, acquisition and advice to various businesses since 1994,
and as Chairman of the Board, President and CEO of AXIA Incorporated since 1998.
Mr. Rosenthal previously served as Chairman of the Board (1990-1994) and CEO
(1994) of Wheatley TXT Corp.

Mr. Shelton previously served as Vice Chairman of the Board, Executive Vice
President and Chief Operations Officer of the Company from 1983 to 1996. Prior
thereto, Mr. Shelton held various positions in the chemicals industry including
Vice President - Manufacturing of Oxirane Corporation and Manager -
Manufacturing/Engineering of Atlantic Richfield Company.

Mr. Sutherland has held various management positions in Phillips Petroleum
Company including President, Phillips Driscopipe, President, Applied Automation,
Vice President, Chemicals and Senior Vice President Phillips Chemical Company.
Mr. Sutherland was employed by Phillips for 41 years and spent time on Wall
Street for the Company as well as in Washington, DC where he was on loan to the
government as part of the Presidents Executive Exchange Program. He was Chairman
of the NPRA Petrochemical Committee and on the Executive Committee of the NPRA
and was active in CMA. He currently serves on the Board of WeststarBank, member
Arvest Group, the Advisory Board of ChemConnect, Inc. and as Managing Member of
Sutherland-Wheeler Farm LLC.

Mr. Waycaster has been President and Chief Executive Officer of the Company
since 1992. Prior thereto, Mr. Waycaster spent 27 years with The Dow Chemical
Company and was serving as Vice President of the Hydrocarbons and Resources when
he left to join the Company. Mr. Waycaster is a Board member of the American
Chemistry Council, National Petrochemical and Refiners Association, and serves
on the Advisory Board of ChemConnect, Inc.

Mr. Stutts joined the Company in April 1998 as Vice President of Finance
and Corporate Development, and in March 2000 was promoted to Executive Vice
President. Previously, he was a general partner of Columbine Venture Funds, an
institutional venture capital fund focusing on investments in early stage
companies. From 1971 to 1988 he held various management positions in Tenneco,
Inc. and its subsidiary companies. He is on the Board of Compensation Committee
of Bolder Technologies Corp.

Mr. Wright joined the Company in August 1996 as Vice President and General
Counsel. From January 1996 until he joined the Company, Mr. Wright was engaged
in the private practice of law, either as a sole practitioner or of counsel to
Andrews & Kurth, L.L.P. For over five years prior thereto, Mr. Wright was the
Vice President and General Counsel or the Senior Vice President and General
Counsel of Destec Energy, Inc. In July 1999, he was named Senior Vice President
for Law and Administration.

Mr. Howard has been Vice President Operations of the Company since July
1999, and he was promoted to Senior Vice President Operations in March 2000. He
joined the Company in 1976 and has held various positions in Manufacturing and
Maintenance. Prior to 1976, Mr. Howard was with Exxon Chemical. Mr. Howard has
30 years of experience in the chemicals industry.

34
<PAGE> 37

COMPENSATION OF DIRECTORS

Directors of the Company who are not employees of the Company receive an
annual retainer of $15,000 and a fee of $500 for each meeting of the Board or
any committee thereof that they attend. Directors who are also employees of the
Company do not receive Director compensation.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the total value of compensation received by
the Chief Executive Officer and the four most highly compensated executive
officers, other than the Chief Executive Officer, who served as executive
officers of the Company for the three years ended June 30, 2000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Name and Principal Position Year(1) Salary Bonus
--------------------------- ------- ------ -----
<S> <C> <C> <C>
B. W. Waycaster, President and
Chief Executive Officer 2000 $300,000 $575,436
1999 300,000 459,156
1998 300,000 507,186

Stephen R. Wright, Senior Vice
President, Secretary and
General Counsel 2000 $180,000 $345,272
1999 180,000 275,494
1998 180,000 281,138

H.E. Sebastian
Vice President, Marketing and Supply (2)2000 $131,250 $335,671
1999 175,000 265,500
1998 58,333 19,779

Carl S. Stutts, Executive Vice President,
Chief Financial Officer 2000 $175,000 $335,671
1999 175,000 267,841
1998 41,761 --

William F. Howard, Senior Vice President
Operations 2000 $150,000 $223,762
</TABLE>

----------

(1) None of the executive officers has received perquisites, the value of which
exceeded the lesser of $50,000 or 10% of the salary and bonus of such
executive officer.

(2) Mr. Sebastian resigned from the Company in March 2000.

35
<PAGE> 38

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Texas Petrochemical Holdings, Inc. owns 100% of the outstanding shares of
the Company's common stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

9. RELATED PARTY TRANSACTIONS

During fiscal 1999 the Company made payments totaling $0.3 million to a
consulting firm whose majority shareholder is also an outside director and
shareholder of the Company. The Chairman of the Company receives annual
compensation of $0.2 million for consulting services provided to the Company and
reimbursements of approximately $25,000 per year for office expenses.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 Certificate of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 of Form S-4, File
No. 333-11569).

3.2 Bylaws of the Company (incorporated by reference to Exhibit
3.2 of Form S-4, File No. 333-11569).

3.3 Certificate of Limited partnership of Texas Petrochemicals
LP.

3.4 Agreement of Limited partnership of Texas Petrochemicals LP.

4.1 Indenture dated as of July 1, 1996 by and between the
Company and Fleet National Bank, as Trustee, with respect to
the 11 1/8% Senior Subordinated Notes due 2006, including
the form of the Note (incorporated by reference to Exhibit
4.1 of Form S-4, File No. 333-11569).

4.2 Indenture dated as of March 1, 1997 by and between the
Company and Fleet National Bank, as Trustee, with respect to
the 11 1/8% Series B Senior Subordinated Notes due 2006,
including the form of Note (incorporated by reference to
Exhibit 4.2 of Form S-4, File No. 333-24589).

4.3 First Supplemental Indenture dated June 28, 2000 amending
and supplementing Senior Discount Notes due 2007.

5.1 Opinion of Bracewell & Patterson as to the validity of the
11 1/8% Senior Subordinated Notes die 2006 and the validity
of the 11 1/8% Series B Senior Subordinated Notes due 2006.
(incorporated by reference to Exhibit 5.1 of Forms S-4 File
No. 333-24589).

10.1 Holdings' 1996 Stock Option Plan (incorporated by reference
to Exhibit 10.1 of Form S-4, File No. 333-11569).

10.2 TPC Employee Stock Ownership Plan (incorporated by reference
to Exhibit 10.2 of Form S-4, file No. 333-11569).

10.3 TPC Employee Stock Ownership Plan Trust Agreement
(incorporated by reference to Exhibit 10.3 of Form S-4, File
No. 333-11569).

10.4 TPC Cash Bonus Plan (incorporated by reference to Exhibit
10.4 of Form S-4, File No. 333-11569).

10.5 Security Agreement by and between Boatmen's Trust Company of
Texas and the Company (incorporated by reference to Exhibit
10.5 of Form S-4, File No. 333-11569).

36
<PAGE> 39

10.6 TPC Profit Sharing Plan (incorporated by reference to
Exhibit 10.6 of Form S-4, File No. 333-11569).

10.7 Lease for Calcasieu Parish, Louisiana (incorporated by
reference to Exhibit 10.7 of Form S-4, File No. 333-11569).

10.8 Credit Agreement dated as of July 1, 1996 among the Company,
Texas Commerce Bank, National Association, ABN AMRO North
America, Inc., and The Bank of Nova Scotia (incorporated by
reference to Exhibit 10.8 of Form S-4, File No. 333-11569).

10.9 Security Agreement date as of July 1, 1996 by and between
the Company and Texas Commerce Bank, National Association
(incorporated by reference to Exhibit 10.9 of Form S-4, File
No. 333-11569).

10.10 Pledge Agreement date as of July 1, 1996 by and between the
Company and Texas Commerce Bank, National Association
(incorporated by reference to Exhibit 10.10 of Form S-4,
File No. 333-11569).

10.11 Letter Agreement dated May 6, 1996 by and among The Sterling
Group, Inc., Texas Petrochemical Holdings, Inc., TPC
Holding, and the Company (incorporated by reference 10.11 of
Form S-4, File No. 333-11569).

10.12 Form of Indemnity Agreement between the Company and each of
its officers and directors (incorporated by reference to
Exhibit 10.12 of Form S-4, File No. 333-11569).

10.13 Form of Tax Sharing Agreement among Texas Petrochemical
Holdings, Inc., TPC Holding, the Company and Texas Butylene
Chemical Corporation (incorporated by reference to Exhibit
10.13 of Form S-4, File No. 333-11569).

10.14 Employment Agreement with Bill W. Waycaster (incorporated by
reference to Exhibit 10.14 of Form S-4, File No. 333-11569).

10.15 Amendment to Credit Agreement dated as of June 30, 1999 by
and among the Company, Chase Bank of Texas, National
Association, ABN AMRO North America, Inc., the Bank of Nova
Scotia and other financial institutions listed on the
signature pages attached. (incorporated by reference to
Exhibit 10.15 of Form 10-K, File No. 333-11569).

10.16 Amended and Restated Credit Agreement among TPC Holding
Corp., Texas Petrochemicals LP, Chase Bank of Texas-National
Association, ABN AMRO North America, Inc. and The Bank of
Nova Scotia.

10.17 Note Modification Agreement dated June 30, 2000 between
Texas Petrochemicals LP.

21 Subsidiaries of the Company (incorporated to Exhibit 21 of
Form S-4, File No. 333-11569).

25.1 Statement of Eligibility and Qualification on Form T-1 of
Fleet National Bank as Trustee under the Indenture dated as
of July 1, 1996 (incorporated by reference to Exhibit 25.1
of Form S-4, File No. 333-11569).

25.2 Statement of Eligibility and Qualification on Form T-1 of
Fleet National Bank as Trustee under the Indenture dated as
of March 1, 1997 (incorporated by reference to Exhibit 25.2
of Form S-4, File No. 333-24589).

27 Financial Data Schedule

(b) Financial Statement Schedules

Not applicable

There were no reports on Form 8-K filed during the three months ended
June 30, 2000.

37
<PAGE> 40

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, September 25, 2000.

TEXAS PETROCHEMICALS LP
(Registrant)

By:
--------------------------------------
B.W. Waycaster
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
to be signed below by the following persons on behalf of the registrant in the
indicated capacities on September 25, 2000.

Chairman
------------------------------------------
William A. McMinn

Director, President and Chief Executive Officer
------------------------------------------
B.W. Waycaster

Director
------------------------------------------
Hunter W. Henry Jr.

Director
------------------------------------------
William R. Huff

Director
------------------------------------------
Steve A. Nordaker

Director
------------------------------------------
Susan O. Rheney

Director
------------------------------------------
Gary L. Rosenthal

Director
------------------------------------------
John T. Shelton

Director
------------------------------------------
Guy E. Sutherland

Executive Vice President,
------------------------------------------ Chief Financial Officer
Carl S. Stutts
</TABLE>

38
<PAGE> 41

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Certificate of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 of Form S-4, File No.
333-11569).

3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2
of Form S-4, File No. 333-11569).

3.3 Certificate of Limited partnership of Texas Petrochemicals LP.

3.4 Agreement of Limited partnership of Texas Petrochemicals LP.

4.1 Indenture dated as of July 1, 1996 by and between the Company and
Fleet National Bank, as Trustee, with respect to the 11 1/8%
Senior Subordinated Notes due 2006, including the form of the
Note (incorporated by reference to Exhibit 4.1 of Form S-4, File
No. 333-11569).

4.2 Indenture dated as of March 1, 1997 by and between the Company
and Fleet National Bank, as Trustee, with respect to the 11 1/8%
Series B Senior Subordinated Notes due 2006, including the form
of Note (incorporated by reference to Exhibit 4.2 of Form S-4,
File No. 333-24589).

4.3 First Supplemental Indenture dated June 28, 2000 amending and
supplementing Senior Discount Notes due 2007.

5.1 Opinion of Bracewell & Patterson as to the validity of the
11 1/8% Senior Subordinated Notes die 2006 and the validity of
the 11 1/8% Series B Senior Subordinated Notes due 2006
(incorporated by reference to Exhibit 5.1 of Form S-4, File
No. 333-11569).

10.1 Holdings' 1996 Stock Option Plan (incorporated by reference to
Exhibit 10.1 of Form S-4, File No. 333-11569).

10.2 TPC Employee Stock Ownership Plan (incorporated by reference to
Exhibit 10.2 of Form S-4, file No. 333-11569).

10.3 TPC Employee Stock Ownership Plan Trust Agreement (incorporated
by reference to Exhibit 10.3 of Form S-4, File No. 333-11569).

10.4 TPC Cash Bonus Plan (incorporated by reference to Exhibit 10.4 of
Form S-4, File No. 333-11569).

10.5 Security Agreement by and between Boatmen's Trust Company of
Texas and the Company (incorporated by reference to Exhibit 10.5
of Form S-4, File No. 333-11569).
</TABLE>

<PAGE> 42

<TABLE>
<S> <C>
10.6 TPC Profit Sharing Plan (incorporated by reference to
Exhibit 10.6 of Form S-4, File No. 333-11569).