-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LATnzs/QqWz0eNc8Gnmdx9k/+UY44G92s5GXgg4vcH2ejwlNEeWDMcLKlaAHkhde oiUPWHPb271Z9UlWViupOg== 0000100790-97-000010.txt : 19970321 0000100790-97-000010.hdr.sgml : 19970321 ACCESSION NUMBER: 0000100790-97-000010 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970320 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION CARBIDE CORP /NEW/ CENTRAL INDEX KEY: 0000100790 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 131421730 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01463 FILM NUMBER: 97560209 BUSINESS ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06817-0001 BUSINESS PHONE: 2037942000 MAIL ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06817-0001 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE CORP DATE OF NAME CHANGE: 19890806 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE & CARBON CORP DATE OF NAME CHANGE: 19710317 10-K 1 Securities and Exchange Commission, Washington, D.C. 20549 Annual Report on Form 10-K for the year ended December 31, 1996. Filed pursuant to Section 13 of the Securities Exchange Act of 1934. Commission file number 1-1463 Union Carbide Corporation 1996 10-K Union Carbide Corporation Tel. (203) 794-2000 39 Old Ridgebury Road State of incorporation: New York Danbury, Connecticut 06817-0001 IRS identification number: 13-1421730 Securities registered pursuant to Section 12(b) of the Act: Class of security: Registered on: Common Stock ($1 par value) New York Stock Exchange Chicago Stock Exchange, Incorporated The Pacific Stock Exchange Incorporated Share Purchase Rights Plan New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 ("the Act") during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. At February 28, 1997, 126,741,112 shares of common stock were outstanding. Non-affiliates held 125,958,321 of those shares, of which the aggregate market value was $5.952 billion. Documents incorporated by reference: Annual report to stockholders for the year ended December 31, 1996 (Parts I and II) Proxy statement for the annual meeting of stockholders to be held on April 23, 1997 (Part III) Table of Contents Part I Item 1: Business ........................................................ 1 Item 2: Properties ...................................................... 3 Item 3: Legal Proceedings ............................................... 4 Item 4: Submission of Matters to a Vote of Security Holders ............. 4 Part II Item 5: Market for Registrant's Common Equity and Related Stockholder Matters ......................................................... 5 Item 6: Selected Financial Data ......................................... 5 Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations ........................................... 5 Item 8: Financial Statements and Supplementary Data ..................... 5 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................................ 5 Part III Item 10: Directors and Executive Officers of the Registrant .............. 6 Item 11: Executive Compensation .......................................... 8 Item 12: Security Ownership of Certain Beneficial Owners and Management .. 8 Item 13: Certain Relationships and Related Transactions .................. 8 Part IV Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K . 9 Signatures ............................................................... 12 Exhibit Index ............................................................ 13 Cautionary statement for the purposes of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995: All statements in this Form 10-K report that do not reflect historical information are forward looking statements. These include statements incorporated herein by reference to the 1996 annual report to stockholders. Important factors that could cause actual results to differ materially from those discussed in such forward looking statements include the supply/demand balance for the corporation's products, customer inventory levels, competitive pricing pressures, feedstock costs, changes in industry production capacities and operating rates, competitive technology positions and failure to achieve the corporation's cost reduction targets or complete construction projects on schedule. Some of these factors are discussed further in Part I, Item 1: Business. Definition of Terms: See the inside back cover page of the 1996 annual report to stockholders. Terms defined there are used herein. Part I Item 1. Business General-Union Carbide operates in two business segments of the chemicals and plastics industry, Specialties & Intermediates and Basic Chemicals & Polymers. Specialties & Intermediates converts basic and intermediate chemicals into a diverse portfolio of chemicals and polymers serving industrial customers in many markets. This segment also provides technology services, including licensing, to the oil and gas and petrochemicals industries. The Basic Chemicals & Polymers segment converts hydrocarbon feedstocks, principally liquefied petroleum gas and naphtha, into polyethylene, polypropylene, ethylene oxide and ethylene glycol for sale to third-party customers, as well as propylene, ethylene, ethylene oxide and ethylene glycol for consumption by the Specialties & Intermediates segment. The profitability of the Basic Chemicals & Polymers segment of the chemicals and plastics industry is highly cyclical, whereas that of the Specialties & Intermediates segment is less cyclical. Consequently, Union Carbide's results are subject to the swings of the business cycle in the Basic Chemicals & Polymers segment. See page 1, pages 6 through 8, and "Summary and Outlook" on pages 10 through 12 of the 1996 annual report to stockholders for further information about Union Carbide's businesses, and Note 5 on pages 30 through 31 of the 1996 annual report to stockholders for financial information about Union Carbide's business segments. Union Carbide does not produce against a backlog of firm orders; production is geared primarily to the level of incoming orders and to projections of future demand. Inventories of finished products, work in process and raw materials are maintained to meet delivery requirements of customers and Union Carbide's production schedules. At year-end 1996, 11,745 people were employed in manufacturing facilities, laboratories and offices around the world. Raw Materials, Products and Markets-See information herein and in the 1996 annual report to stockholders on pages 6 through 8. Unless otherwise indicated, the products of Union Carbide are sold principally by its own sales force, directly to customers. Union Carbide believes it has contracts or commitments for, or readily available sources of, hydrocarbon feedstocks and fuel supplies to meet its anticipated needs in all major product areas. The corporation's operations are dependent upon the availability of hydrocarbon feedstocks and fuels which are purchased from diverse domestic and international sources, including independent oil and gas producers as well as integrated oil companies. The availability and price of hydrocarbon feedstocks, energy and finished products are subject to plant interruptions and outages and to market and political conditions in the U.S. and elsewhere. Operations and products at times may be adversely affected by legislation, government regulations, shortages, or international or domestic events. The business segments of Union Carbide are not dependent to a significant extent upon a single customer or a few customers. Patents; Trademarks; Research and Development-Union Carbide owns a large number of United States and foreign patents that relate to a wide variety of products and processes, has pending a substantial number of patent applications throughout the world, and is licensed under a number of patents. These patents expire at various times over the next 20 years. Such patents and patent applications in the aggregate are material to Union Carbide's competitive position. No one patent is considered to be material; however, the patent portfolio relating to the UNIPOL process technology is, in the aggregate, considered to be material. Union Carbide also has a large number of trademarks. The UNION CARBIDE, UCAR and UNIPOL trademarks are material; no other single trademark is material. Part I (Cont.) Essentially all of Union Carbide's research and development activities are company-sponsored. The principal research and development facilities of Union Carbide are indicated in the discussion of Properties (Item 2) of this Form 10-K report. In addition to the facilities specifically indicated there, product development and process technology laboratories are maintained at some plants. Union Carbide expensed $159 million in 1996, $144 million in 1995, and $136 million in 1994 on company-sponsored research activities to develop new products, processes, or services, or to improve existing ones. Environment-See Costs Relating to Protection of the Environment on pages 14 through 15 of the 1996 annual report to stockholders and Note 15 on pages 39 through 40 thereof. Insurance-Union Carbide's policy is to obtain public liability insurance coverage at terms and conditions and a price that management considers fair and reasonable. Union Carbide's management believes Union Carbide has public liability insurance in an amount sufficient to meet its current needs in light of pending, threatened, and future litigation and claims. There is no assurance, however, that Union Carbide will not incur losses beyond the limits, or outside the coverage, of its insurance. Such insurance is subject to substantial deductibles. Competition-Each of the major product and service areas in which Union Carbide participates is highly competitive. In some instances competition comes from manufacturers of the same products as those produced by Union Carbide and in other cases from manufacturers of different products which may serve the same markets as those served by Union Carbide's products. Some of Union Carbide's competitors, such as companies principally engaged in petroleum operations, have more direct access to hydrocarbon feedstocks, and some have greater financial resources than Union Carbide. The Specialties & Intermediates segment is characterized by differentiated products and is less subject to external changes in supply/demand relationships than the Basic Chemicals & Polymers segment. In this segment, competition is based primarily on product functionality and quality, with the more unique products commanding significant price premiums. The Basic Chemicals & Polymers segment is characterized by large volume commodity products and is subject to external changes in supply/demand relationships, including changes in the strength of the overall economy, customer inventory levels, industry manufacturing capacity and operating rates and raw material feedstock costs. Participants in this segment compete for business primarily on the basis of price and efficient delivery systems. See pages 6 through 8 of the 1996 annual report to stockholders for information about each segment's principal products, competitive position and major competitors. Union Carbide is a major marketer of petrochemical products throughout the world. Products that the corporation markets are largely produced in the United States, while products marketed by the corporation's joint ventures are principally produced outside the United States. Competitive products are produced throughout the world. Union Carbide's international operations face competition from local producers and global competitors and a number of risks inherent in carrying on business outside the United States, including risks of nationalization, expropriation, restrictive action by local governments and changes in currency exchange rates, in addition to the risks stated above. Part I (Cont.) Item 2. Properties In management's opinion, current facilities, together with planned expansions, will provide adequate production capacity to meet Union Carbide's planned business activities. Capital expenditures are discussed on page 18 of the 1996 annual report to stockholders. Listed below are the principal manufacturing facilities operated by Union Carbide worldwide. Research and engineering facilities are noted. Most of the domestic properties are owned in fee. Union Carbide maintains numerous domestic sales offices and warehouses, substantially all of which are leased premises under relatively short-term leases. All principal international manufacturing properties are owned or held under long-term leases. International administrative offices, technical service laboratories, sales offices and warehouses are owned in some instances and held under relatively short-term leases in other instances. The corporation's headquarters are located in Danbury, Connecticut, and are leased. Principal domestic manufacturing facilities and the principal products manufactured there are as follows: Location City Principal Product(s) Specialties & Intermediates Segment California Torrance Latexes Georgia Tucker Latexes Illinois Alsip Latexes Louisiana Greensburg Hydroxyethyl cellulose derivatives Louisiana Taft Acrolein and derivatives, acrylic monomers, caprolactone, UV-cured coatings, cycloaliphatic epoxides, glycol ethers, ethyleneamines, oxo alcohols New Jersey Bound Brook Polyols, polyethylene compounding New Jersey Edison Lanolin derivatives New Jersey Somerset Latexes Puerto Rico Bayamon Latexes Texas Garland Latexes Texas Seadrift Ethanolamines, glycol ethers, surfactants, polyethylene compounding Texas Texas City Organic acids and esters, alcohols, surfactants, vinyl acetate, solution vinyl resins, heat transfer fluids Washington Washougal Crystals West Virginia Institute Caprolactone derivatives, polyethylene glycol, hydroxyethyl cellulose, polyethylene oxide, surfactants, ethylidene norbornene, glutaraldehyde, acetone and derivatives West Virginia South Charleston Alkyl alkanolamines, brake fluids, miscellaneous specialty products, polyalkylene glycols, surfactants, specialty ketones, polyvinyl acetate resins, heat transfer fluids Basic Chemicals & Polymers Segment Louisiana Norco (Cypress Plant) Polypropylene Louisiana Taft Ethylene oxide and glycol, olefins Louisiana Taft (Star Plant) Polyethylene Texas Seadrift Ethylene oxide and glycol, olefins, polyethylene, polypropylene Texas Texas City Olefins Part I (Cont.) Research and development for the Specialties & Intermediates segment is carried on at technical centers in Bound Brook, Edison and Somerset, New Jersey; Tarrytown, New York; Cary, North Carolina; Houston and Texas City, Texas; and South Charleston, West Virginia. Research and development for the Basic Chemicals & Polymers segment is carried on at technical centers in Bound Brook and Somerset, New Jersey; Houston, Texas; and South Charleston, West Virginia. Process and design engineering for both segments is conducted at a technical center in South Charleston, West Virginia, in support of domestic and foreign projects. Principal international manufacturing facilities and the principal products manufactured there are as follows: Country City Principal Product(s) Specialties & Intermediates Segment Belgium Vilvoorde Lanolin derivatives Belgium Zwijndrecht Hydroxyethyl cellulose Brazil Aratu Hydroxyethyl cellulose Brazil Cubatao Polyethylene compounding Brazil Cabo Vinyl acetate Ecuador Guayaquil Latex Indonesia Jakarta Latex Malaysia Seremban Latex People's Republic of China Guangdong Latex Philippines Batangas Latex Sri Lanka Colombo Latex Thailand Nonthaburi Latex United Arab Emirates Dubai Latex United Kingdom Wilton Glycol ethers, ethanolamines Basic Chemicals & Polymers Segment Canada Boucherville Molded polyethylene products Canada Prentiss Ethylene glycol United Kingdom Wilton Ethylene oxide and glycol Research and development for the Specialties & Intermediates segment is carried on at international facilities in Antwerp, Belgium; Cubatao, Brazil; Montreal East, Canada; Jurong, Singapore; Meyrin (Geneva), Switzerland; and Wilton, United Kingdom. Research and development for the Basic Chemicals & Polymers segment is carried on at international facilities in Montreal East, Canada. Item 3. Legal Proceedings See Note 15 of Notes to Financial Statements on pages 39 through 40 of the 1996 annual report to stockholders. Item 4. Submission of Matters to a Vote of Security Holders The corporation did not submit any matters to a stockholder vote during the last quarter of 1996. Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Market and dividend information for the corporation's common stock is contained on pages 20 and 21 of the 1996 annual report to stockholders. Information about the stock exchanges where the stock is traded in the United States is listed on page 43 of the 1996 annual report to stockholders. The declaration of dividends is a business decision made from time to time by the Board of Directors based on the corporation's earnings and financial condition and other factors the Board considers relevant. The number of stockholders of record of the corporation's common stock is contained on page 1 of the 1996 annual report to stockholders. Sales of Unregistered Securities - On December 17, 1996, the corporation issued 479 shares of Union Carbide Corporation common stock to a director under the 1992 Stock Compensation Plan for Non-Employee Directors of Union Carbide Corporation. Since the plan does not provide for any payment or other voluntary contribution, the issuance of the shares of common stock does not involve a "sale" of a security within the meaning of Section 2(3) of the Securities Act of 1933 and, thus, is exempt from the registration requirements of the act. During 1996, put options were sold to institutional investors in a series of private placements exempt from registration under Section 4(2) of the Securities Act of 1933, entitling the holders to sell 3,835,081 shares of Union Carbide Corporation common stock to the corporation, at prices ranging from $36.50 to $45.31 per share. Premiums received for the sales of the options totaled $4,907,913. Item 6. Selected Financial Data Information pertaining to consolidated operations is included under the captions "From the Income Statement," and "From the Balance Sheet", and dividend information is included under the caption "Other Data" in the Selected Financial Data on pages 20 through 21 of the 1996 annual report to stockholders. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations See the information covered in the 1996 annual report to stockholders on pages 10 through 19. Item 8. Financial Statements and Supplementary Data The consolidated balance sheet of Union Carbide Corporation and subsidiaries at December 31, 1996 and 1995, and the consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996, together with the report thereon of KPMG Peat Marwick LLP dated January 17, 1997, are contained on pages 22 through 42 of the 1996 annual report to stockholders. Quarterly income statement data is contained on page 21 of the 1996 annual report to stockholders. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Union Carbide has not had any disagreements covered by this item with KPMG Peat Marwick LLP, its independent auditors. Part III Item 10. Directors and Executive Officers of the Registrant For background information on the Directors of Union Carbide Corporation whose terms are expected to continue after the annual meeting of stockholders and persons nominated to become Directors, see pages 7 through 10 of the proxy statement for the annual meeting of stockholders to be held on April 23, 1997. The principal executive officers of the corporation are as follows. Data is as of March 20, 1997. Name Age Position Year First Elected William H. Joyce 61 Chairman of the Board, President and Chief Executive Officer 1993 Joseph S. Byck 55 Vice-President 1991 James F. Flynn 54 Vice-President 1993 Joseph E. Geoghan 59 Vice-President, General Counsel and Secretary 1987 Malcolm A. Kessinger 53 Vice- President 1991 Lee P. McMaster 54 Vice-President 1993 Joseph C. Soviero 58 Vice-President 1993 Roger B. Staub 62 Vice-President 1993 Ronald Van Mynen 59 Vice-President, Health, Safety and Environment 1992 John K. Wulff 48 Vice-President, Chief Financial Officer and Controller 1988 There are no family relationships between any officers or directors of the corporation. There is no arrangement or understanding between any officer and any other person pursuant to which the officer was elected an officer. An officer is elected by the Board of Directors to serve until the next annual meeting of stockholders and until his successor is elected and qualified. The table on the next page gives a summary of the positions held during at least the past five years by each officer. Each of the officers has been employed by the corporation or a subsidiary of the corporation for the past five years. Part III (Cont.) Name Position Years Held William H. Joyce Chairman of the Board, President and Chief Executive Officer 1996 to present President and Chief Executive Officer 1995 to 1995 President and Chief Operating Officer 1993 to 1995 President, Union Carbide Chemicals and Plastics Company Inc. 1993 to 1994 Executive Vice-President 1991 to 1993 Executive Vice-President, Union Carbide Chemicals and Plastics Company Inc. 1990 to 1993 Joseph S. Byck Vice-President 1991 to present Vice-President, Union Carbide Chemicals and Plastics Company Inc. 1991 to 1994 James F. Flynn Vice-President 1993 to present Vice-President, General Manager Solvents & Coatings Materials Division 1989 to 1993 Joseph E. Geoghan Vice-President, General Counsel and Secretary 1990 to present Malcolm A. Kessinger Vice-President 1991 to present Vice-President, Human Resources, Union Carbide Chemicals and Plastics Company Inc. 1990 to 1994 Lee P. McMaster Vice-President 1993 to present President, Industrial Chemicals Division 1992 to 1993 Joseph C. Soviero Vice-President 1993 to present President, Specialty Chemicals Division 1983 to 1993 Roger B. Staub Vice-President 1993 to present President, Polyolefins Division 1990 to 1993 Ronald Van Mynen Vice-President, Health, Safety and Environment 1992 to present Vice-President, Health, Safety and Environmental Affairs, Union Carbide Chemicals and Plastics Company Inc. 1985 to 1994 John K. Wulff Vice-President, Chief Financial Officer and Controller 1996 to present Vice-President, Controller and Principal Accounting Officer 1989 to 1996 See "Section 16(a) Beneficial Ownership Reporting Compliance" on page 24 of the proxy statement for the annual meeting of stockholders to be held on April 23, 1997. Part III (Cont.) Item 11. Executive Compensation See pages 20 through 22 of the proxy statement for the annual meeting of stockholders to be held on April 23, 1997. Item 12. Security Ownership of Certain Beneficial Owners and Management See pages 23 and 24 of the proxy statement for the annual meeting of stockholders to be held on April 23, 1997. Item 13. Certain Relationships and Related Transactions No reportable transactions in 1996. Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K UNION CARBIDE CORPORATION (a) The following documents are filed as part of this report: 1. The consolidated financial statements set forth on pages 22 through 41 and the Independent Auditors' Report set forth on page 42 of the 1996 annual report to stockholders are incorporated by reference in this Annual Report on Form 10-K. 2. The Report on Schedule of KPMG Peat Marwick LLP appears on page 10 of this Annual Report on Form 10-K. 3. The following schedule should be read in conjunction with the consolidated financial statements incorporated by reference in Item 8 of this Annual Report on Form 10-K. Schedules other than those listed have been omitted because they are not applicable. Page in this Form 10-K Report Valuation and Qualifying Accounts (Schedule II), three years ended December 31, 1996 11 (b) The corporation's Form 8-K dated October 2, 1996 contained the legal opinion of Cahill Gordon & Reindel regarding the issuance of $200 million of 7.75 percent debentures maturing in 2096. The corporation's Form 8-K dated December 3, 1996 reported an amendment to the corporation's existing By-laws and an amendment to the Amended and Restated Rights Agreement. The corporation's Form 8-K dated January 20, 1997 contained the corporation's press release dated January 20, 1997. The corporation's Form 8-K dated January 22, 1997 contained exhibits related to the corporation's Medium Term Notes Program. (c) Exhibits-See Exhibit Index on pages 13 through 16 for exhibits filed with this Annual Report on Form 10-K. Part IV (Cont.) Report of Independent Auditors The Board of Directors Union Carbide Corporation Under date of January 17, 1997, we reported on the consolidated balance sheets of Union Carbide Corporation and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996, as contained on pages 22 through 41 in the 1996 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1996. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedule as listed in Item 14(a)3. This financial statement schedule is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Stamford, Conn. January 17, 1997 Part IV (Cont.) Schedule II-Valuation and Qualifying Accounts Union Carbide Corporation and Consolidated Subsidiaries Deductions Items determined to be uncollectible, Additions less recovery Balance at Charged to of amounts Balance at beginning costs and previously end of of period expenses written off period Millions of dollars, year ended December 31, 1996 Allowance for doubtful accounts $11 $1 $2 $10 Millions of dollars, year ended December 31, 1995 Allowance for doubtful accounts $11 $5 $5 $11 Millions of dollars, year ended December 31, 1994 Allowance for doubtful accounts $12 $2 $3 $11 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Union Carbide Corporation March 20, 1997 /s/ John K. Wulff by: John K. Wulff Vice-President, Chief Financial Officer and Controller Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the corporation and in the capacities indicated on March 20, 1997. /s/William H. Joyce /s/John J. Creedon /s/Robert D. Kennedy William H. Joyce John J. Creedon Robert D. Kennedy Director, Chairman of the Director Director Board, President and Chief Executive Officer /s/Joseph E. Geoghan /s/C. Fred Fetterolf /s/Ronald L. Kuehn, Jr. Joseph E. Geoghan C. Fred Fetterolf Ronald L. Kuehn, Jr. Director, Vice-President, Director Director General Counsel and Secretary /s/John K. Wulff /s/Thomas P. Gerrity /s/Rozanne L. Ridgway John K. Wulff Thomas P. Gerrity Rozanne L. Ridgway Vice-President, Chief Director Director Financial Officer and Controller /s/Rainer E. Gut /s/James M. Ringler Rainer E. Gut James M. Ringler Director Director /s/Vernon E. Jordan, Jr. /s/William S. Sneath Vernon E. Jordan, Jr. William S. Sneath Director Director Exhibit Index Exhibit No. 3.1 Restated Certificate of Incorporation as filed May 2, 1994 (See Exhibit 3.1 of the Corporation's 1994 Form 10-K). 3.2.1 By-Laws of the Corporation, amended as of December 3, 1996. 4.1 Indenture dated as of June 1, 1995, between the Corporation and The Chase Manhattan Bank (formerly Chemical Bank), Trustee (See Exhibit 4.1.2 to the Corporation's Form S-3 effective October 13, 1995, Reg. No. 33-60705). 4.2 The Corporation will furnish to the Commission upon request any other debt instrument referred to in item 601(b)(4)(iii)(A) of Regulation S-K. 4.3.1 Rights Agreement, dated as of July 26, 1989, as amended and restated as of May 27, 1992, between the Corporation and Chemical Bank (successor to Manufacturers Hanover Trust Company), as Rights Agent (See Exhibit 4(a) of the Corporation's Form 8 filed June 1, 1992). 4.3.2 Amendment to Rights Agreement, dated as of December 3, 1996, between the Corporation and Chase Mellon Shareholder Services Inc. as Successor Rights Agent (See Exhibit 99.1 of the Corporation's Form 8-K dated December 3, 1996). 10.1 Indemnity Agreement dated as of July 25, 1986, between the Corporation and Robert D. Kennedy. The Indemnity Agreement filed with the Commission is substantially identical in all material respects, except as to the parties thereto and dates thereof, with Indemnity Agreements between the Corporation and each other person who is a director or officer of the Corporation (See Exhibit 10.2 of the Corporation's 1992 Form 10-K). 10.2.1 1984 Union Carbide Stock Option Plan. 10.2.2 Resolutions adopted by the Board of Directors of the Corporation on January 22, 1986, with respect to the 1984 Union Carbide Stock Option Plan. 10.2.3 Resolutions adopted by the Board of Directors of the Corporation on April 17, 1986, with respect to the 1984 Union Carbide Stock Option Plan. 10.2.4 Amendment to the 1984 Union Carbide Stock Option Plan effective June 1, 1989 (See Exhibit 10.13.4 of the Corporation's 1994 Form 10-K). 10.3.1 1988 Union Carbide Long-Term Incentive Plan (See Exhibit 10.14.1 of the Corporation's 1993 Form 10-K). 10.3.2 Amendment to the 1988 Union Carbide Long-Term Incentive Plan effective June 1, 1989 (See Exhibit 10.14.2 of the Corporation's 1994 Form 10-K). Exhibit Index (Cont.) Exhibit No. 10.3.3 Amendment to the 1988 Union Carbide Long-Term Incentive Plan effective August 1, 1989 (See Exhibit 10.14.3 of the Corporation's 1994 Form 10-K). 10.3.4 Resolutions adopted by the Board of Directors of the Corporation on February 26, 1992, with respect to stock options granted under the 1984 Union Carbide Stock Option Plan and the 1988 Union Carbide Long- Term Incentive Plan (See Exhibit 10.14.4 of the Corporation's 1992 Form 10-K). 10.3.5 Resolutions adopted by the Compensation and Management Development Committee of the Board of Directors of the Corporation on June 30, 1992, with respect to stock options granted under the 1984 Union Carbide Stock Option Plan and the 1988 Union Carbide Long-Term Incentive Plan (See Exhibit 10.14.5 of the Corporation's 1992 Form 10-K). 10.4.1 1983 Union Carbide Bonus Deferral Program. 10.4.2 Amendment to the 1983 Union Carbide Bonus Deferral Program effective January 1, 1992 (See Exhibit 10.15.2 of the Corporation's 1992 Form 10-K). 10.5.1 1984 Union Carbide Cash Bonus Deferral Program. 10.5.2 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program effective January 1, 1986. 10.5.3 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program effective January 1, 1992 (See Exhibit 10.16.3 of the Corporation's 1992 Form 10-K). 10.6.1 Equalization Benefit Plan for Participants of the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies. 10.6.2 Amendment to the Equalization Benefit Plan effective January 1, 1994 (See Exhibit 10.18.2 of the Corporation's 1994 Form 10-K). 10.7.1 Supplemental Retirement Income Plan. 10.7.2 Amendment to the Supplemental Retirement Income Plan effective January 1, 1994 (See Exhibit 10.19.3 of the Corporation's 1994 Form 10-K). 10.7.3 Amendment to the Supplemental Retirement Income Plan effective January 1, 1995 (See Exhibit 10.18.3 of the Corporation's 1995 Form 10-K). 10.8.1 1992 Stock Compensation Plan for Non-Employee Directors of Union Carbide Corporation. 10.8.2 Resolution adopted by the Board of Directors of the Corporation on June 30, 1992, with respect to the 1992 Stock Compensation Plan for Non-Employee Directors of Union Carbide Corporation (See Exhibit 10.20.2 of the Corporation's 1992 Form 10-K). 10.9.1 Severance Compensation Agreement, dated July 21, 1992, between the Corporation and Ronald Van Mynen. The Severance Compensation Agreement filed with the Commission is substantially identical in all material aspects, except as to the parties thereto and dates thereof, with Agreements between the Corporation and other officers and employees of the Corporation (See Exhibit 10.21.1 of the Corporation's 1994 Form 10-K). 10.9.2 Amendment of Severance Compensation Agreement, dated September 24, 1993, between the Corporation and Ronald Van Mynen. Identical amendments, except as to the parties thereto, were entered into between the Corporation and other officers and employees of the Corporation (See Exhibit 10.21.2 of the Corporation's 1994 Form 10-K). Exhibit Index (Cont.) Exhibit No. 10.10 Resolution adopted by the Board of Directors of the Corporation on November 30, 1988, with respect to an executive life insurance program for officers and certain other employees (See Exhibit 10.22 of the Corporation's 1993 Form 10-K). 10.11 1994 Union Carbide Variable Compensation Plan (See Exhibit 10.23.2 of the Corporation's 1993 Form 10-K). 10.12.1 Union Carbide Corporation Benefits Protection Trust (See Exhibit 10.24.1 of the Corporation's 1994 Form 10-K). 10.12.2 Amendment to the Union Carbide Corporation Benefits Protection Trust effective October 23, 1991. 10.12.3 Amendment to the Union Carbide Corporation Benefits Protection Trust effective January 1, 1994 (See Exhibit 10.24.3 of the Corporation's 1994 Form 10-K). 10.13 Resolutions adopted by the Board of Directors of the Corporation on February 24, 1988, with respect to the purchase of annuities to cover liabilities of the Corporation under the Equalization Benefit Plan for Participants of the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies and the Supplemental Retirement Income Plan (See Exhibit 10.25 of the Corporation's 1994 Form 10-K). 10.14 Resolutions adopted by the Board of Directors of the Corporation on June 28, 1989, with respect to the purchase of annuities to cover liabilities of the Corporation under the Supplemental Retirement Income Plan (See Exhibit 10.26 of the Corporation's 1994 Form 10-K). 10.15 Union Carbide Corporation Non-Employee Directors' Retirement Plan (See Exhibit 10.27 of the Corporation's 1994 Form 10-K). 10.16 1994 Union Carbide Long-Term Incentive Plan (See Exhibit 10.28 of the Corporation's 1994 Form 10-K). 10.17.1 Union Carbide Compensation Deferral Program effective January 1, 1995 (See Exhibit 10.28 of the Corporation's 1995 Form 10-K). 10.17.2 Amendment to Union Carbide Compensation Deferral Program effective January 1, 1995. 10.17.3 Amendment to Union Carbide Compensation Deferral Program effective December 31, 1996. 10.18 Excess Long-Term Disability Plan effective January 1, 1994 (See Exhibit 10.30 of the Corporation's 1994 Form 10-K). 10.19 1995 Union Carbide Performance Incentive Plan (See Appendix A of the Corporation's proxy statement for the annual meeting of stockholders held on April 26, 1995). 10.20.1 Completion Guarantee dated September 15, 1996 by the Corporation and its partner, Petrochemical Industries Company K.S.C., for the benefit of certain banks with respect to construction of a petrochemicals complex in Kuwait (See Exhibit 10.1 of the Corporation's Form 10-Q for the quarter ended September 30, 1996). 10.20.2 Definitions Agreement dated September 15, 1996 among the Corporation and various parties relating to Exhibit 10.20.1 (See Exhibit 10.2 of the Corporation's Form 10-Q for the quarter ended September 30, 1996). 11 Computation of Earnings per Share For The Five Years Ended December 31, 1996. 13 The Corporation's 1996 annual report to stockholders (such report, except for those portions which are expressly referred to in this Form 10-K, is furnished for the information of the Commission and is not deemed "filed'' as part of the Form 10-K). Exhibit Index (Cont.) Exhibit No. 21 Subsidiaries of the Corporation. 23 Consent of KPMG Peat Marwick LLP. 27 Financial Data Schedule Wherever an exhibit listed above refers to another exhibit or document (e.g., "See Exhibit 6 of..."), that exhibit or document is incorporated herein by such reference. A copy of any exhibit listed above may be obtained on written request to the Secretary's Department, Union Carbide Corporation, Section E-4, 39 Old Ridgebury Road, Danbury, CT 06817-0001. The charge for furnishing any exhibit is 25 cents per page plus mailing costs. EX-3 2 Exhibit 3.2.1 BY-LAWS OF UNION CARBIDE CORPORATION As Adopted April 26, 1994 Amended December 3, 1996 TABLE OF CONTENTS Page ARTICLE I STOCKHOLDERS Section 1 - Annual Meetings............. 1 2 - Special Meetings............ 1 3 - Time and Place of Meetings.. 1 4 - Notice of Meetings.......... 1 5 - Quorum...................... 1 6 - Required Vote............... 1 7 - Record Date................. 1 8 - Organization................ 2 9 - Procedure................... 2 10 - Adjournments................ 2 11 - Notice of Stockholder Business and Nominations... 2 ARTICLE II BOARD OF DIRECTORS Section 1 - General Powers................. 5 2 - Number of Directors............ 5 3 - Term of Office................. 5 4 - Vacancies...................... 5 5 - Regular Meetings............... 5 6 - Special Meetings............... 5 7 - Notice of Meetings............. 6 8 - Quorum and Manner of Acting..................... 6 9 - Action by Communications Equipment..................... 6 10 - Action by Consent.............. 6 11 - Organization................... 6 12 - Compensation................... 7 ARTICLE III COMMITTEES Section 1 - Executive Committee............ 7 2 - Other Committees............... 7 3 - Quorum and Manner of Acting..................... 7 4 - Procedure...................... 7 5 - Changes in Committees.......... 7 TABLE OF CONTENTS Page ARTICLE IV OFFICERS Section 1 - Number......................... 8 2 - Election and Term of Office........................ 8 3 - Removal and Vacancies.......... 8 4 - Subordinate and Assistant Officers...................... 8 5 - Duties......................... 8 ARTICLE V INDEMNIFICATION...................... 8 ARTICLE VI MISCELLANEOUS PROVISIONS Section 1 - Transfer of Shares............. 10 2 - Regulations as to Stock Certificates.................. 10 3 - Stockholder Inspection Rights........................ 10 4 - Corporate Seal................. 10 5 - Definitions.................... 10 ARTICLE VII AMENDMENTS........................... 11 BY-LAWS of UNION CARBIDE CORPORATION ARTICLE I Stockholders Section 1. Annual Meetings. The annual meeting of stockholders for the election of directors and other purposes shall be held at such place, date and hour as shall be designated in the notice of meeting approved by the Board. Section 2. Special Meetings. A special meeting of stockholders may be called at any time by the Board, the Chairman, a President or a Vice-Chairman. Section 3. Time and Place of Meetings. Each meeting of stockholders shall be held at such time and in such place within or without the State of New York as the Board may determine. Section 4. Notice of Meetings. Not less than 10 or more than 50 days before the date of each meeting of stockholders, notice of the meeting shall be given in the manner prescribed by law to each stockholder entitled to vote thereat. Section 5. Quorum. Except as otherwise required by law, at each meeting of stockholders, holders of at least a majority of the outstanding shares of stock entitled to vote at the meeting shall be present in person or by proxy to constitute a quorum for the transaction of business. Section 6. Required Vote. At each meeting of stockholders for the election of directors at which a quorum is present, the candidates, up to the number of directors to be elected, shall be elected who receive a plurality of the votes cast at the meeting by the holders of shares entitled to vote in the election. Except as otherwise required by law, at each meeting of stockholders at which a quorum is present, all other matters shall be decided by a majority of the votes cast at the meeting by the holders of shares entitled to vote thereon. Section 7. Record Date. The Board may prescribe a day and hour not more than 50 or less than 10 days before the date of a meeting of stockholders for the purpose of determining the stockholders entitled to notice of or to vote at such meeting or any adjournment thereof. Section 8. Organization. At each meeting of stockholders, one of the following shall act as chairman of the meeting and shall preside thereat, in the following order of precedence: (a) the Chairman; (b) any President; (c) any Vice-Chairman or Vice-President designated by the Board; or (d) any person designated by a majority vote of the stockholders present in person or by proxy. Section 9. Procedure. At each meeting of stockholders, the chairman of the meeting shall determine the order of business and all other matters of procedure. He may establish rules to maintain order and for the conduct of the meeting. The Board in advance of every meeting of stockholders shall appoint one or more inspectors of election to act at the meeting. Section 10. Adjournments. A meeting of stockholders may be adjourned from time to time and place to place until a quorum is present or until its business is completed. Section 11. Notice of Stockholder Business and Nominations. (a) Annual Meetings of Stockholders. (i) Nominations of persons for election as directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (A) pursuant to the Corporation's notice of meeting, (B) by or at the direction of the Board or (C) by any stockholder who was a stockholder of record at the time of giving of notice provided for in this By-law, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this By-law. (ii) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of paragraph (a)(i) of this By-law, the stockholder must have given timely notice thereof in writing to the Secretary and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth: (A) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (x) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (y) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this By-law, in the event that the number of directors to be elected to the Board is increased and the public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board occurs less than 100 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this By-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made. (b) Special Meetings of Stockholders. Nominations of persons for election as directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (i) by or at the direction of the Board or (ii) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this By-law, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this By-law. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as are specified in the Corporation's notice of meeting, if the stockholder's notice required by paragraph (a)(ii) of this By-law shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above. (c) General. (i) Only such persons who are nominated in accordance with the procedures set forth in this By-law shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this By-law. The Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this By-law and, if any proposed nomination or business is not in compliance with this By-law, to declare that such defective proposal or nomination shall be disregarded. (ii) For purposes of this By-law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (iii) Notwithstanding the foregoing provisions of this By-law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By-law. Nothing in this By-law shall be deemed to affect any rights (A) of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (B) of the holders of any series of Preferred Stock to elect directors under the circumstances specified by the terms of such Preferred Stock. ARTICLE II Board of Directors Section 1. General Powers. The business of the Corporation shall be managed under the direction of the Board. Section 2. Number of Directors. The number of directors shall be fixed and may from time to time be increased or decreased by vote of a majority of the entire Board, but in no event shall the number of directors be less than three or more than 19. Each director shall be a stockholder. Section 3. Term of Office. Each director shall hold office until the next annual meeting of stockholders and until his successor has been elected and qualified. Section 4. Vacancies. Except as otherwise required by law, any vacancy occurring in the Board, and any newly created directorship resulting from an increase in the number of directors, may be filed by the Board. Section 5. Regular Meetings. Regular meetings of the Board shall be held at such times and places within or without the State of New York as the Board may determine. Section 6. Special Meetings. A special meeting of the Board may be called at any time by the Chairman, a President, a Vice-Chairman or any three directors and shall be held at such time and place as shall be designed in the notice of meeting or waiver thereof. Section 7. Notice of Meetings. A notice shall be effective if (i) it is mailed to each director at least three days before the date of the meeting, (ii) it is sent by telegraph, cable or other form of recorded communications or delivered personally or by telephone on such shorter notice, not less than six hours before the meeting, as the person or persons calling the meeting deem appropriate in the circumstances or (iii) in the case of a meeting held in accordance with Article II, Section 9, the notice is sent by telegraph, cable or other form of recorded communications or delivered personally or by telephone on such shorter notice, not less than three hours before the meeting, as the person or persons calling the meeting deem appropriate in the circumstances. Notices shall be given to each director at the address which he has furnished to the Secretary as the address for such notices. Notice of a regular meeting of the Board need not be given if the Board has previously fixed the time and place of such meeting. Section 8. Quorum and Manner of Acting. Except as otherwise provided by law or in these By-laws, one-third of the entire Board shall be present to constitute a quorum for the transaction of business, and the vote of a majority of the directors present at the time of the vote, if a quorum is present at such time, shall be the act of the Board. Section 9. Action by Communications Equipment. Any one or more members of the Board or any committee thereof may participate in a meeting of the Board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Section 10. Action by Consent. Any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members of the Board or committee consent in writing to the adoption of a resolution authorizing the action. Section 11. Organization. At each meeting of the Board, one of the following shall act as chairman of the meeting and shall preside thereat, in the following order of precedence: (a) the Chairman; (b) any President; (c) any Vice-Chairman; or (d) any other director chosen by a majority of the directors present. Section 12. Compensation. For services as a member of the Board and any committee thereof, every director shall receive such compensation, attendance fees and other allowances as the Board may determine. ARTICLE III Committees Section 1. Executive Committee. The Board, by resolution adopted by a majority of the entire Board, shall designate an Executive Committee, consisting of the Chairman and four or more other directors. The chief executive officer shall serve as chairman of the Executive Committee. Subject to any limitations prescribed by law or by the Board, the Executive Committee shall have and may exercise, when the Board is not in session, all the powers of the Board. Section 2. Other Committees. The Board, by resolution adopted by a majority of the entire Board, may designate from among its members other committees, each consisting of three or more directors. Subject to any limitations prescribed by law, each committee shall have such authority as the Board may determine. Section 3. Quorum and Manner of Acting. Unless the Board otherwise provides, a majority of a committee of the Board shall be present to constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at the time of the vote, if a quorum is present at such time, shall be the act of such committee. Section 4. Procedure. Unless the Board otherwise provides, each committee of the Board may adopt such rules as it may see fit with respect to the calling of its meetings, the procedures to be followed thereat, and its functioning generally. Each committee shall report its actions to the Board. Section 5. Changes in Committees. Except as otherwise provided in these By-laws, the Board at any time may, by resolution adopted by a majority of the entire Board, with or without cause, change or remove the members of, fill vacancies in, and discharge any committee of the Board. ARTICLE IV Officers Section 1. Number. The officers of the Corporation shall be a Chairman, one or more Presidents and Vice- Presidents, a Treasurer, a Secretary, and a Controller and may include one or more Vice-Chairmen. A chief executive officer shall be designated by the Board from among the officers. Section 2. Election and Term of Office. Each officer shall be elected by the Board and shall hold office until the meeting of the Board following the next annual meeting of stockholders and until his successor has been elected and qualified or until his earlier retirement, resignation or removal. The Chairman, and any President or Vice-Chairman shall be chosen from among the directors. Section 3. Removal and Vacancies. Any officer may be removed at any time with or without cause by the Board. A vacancy in any office may be filled for the unexpired portion of the term in the same manner as provided for election or appointment to such office. Section 4. Subordinate and Assistant Officers. The Corporation may have such subordinate and assistant officers as the Board may appoint. Each such officer shall hold office at the pleasure of, and may be removed at any time with or without cause by, the Board. Such officers may include one or more Regional Vice-Presidents, Assistant Vice-Presidents, Assistant Treasurers, Assistant Secretaries, and Assistant Controllers. Section 5. Duties. Each officer shall have such authority and shall perform such duties as may be assigned by the Board, the Chairman, a President or a Vice-Chairman or as shall be conferred or required by law or these By-laws or as shall be incidental to the office. ARTICLE V Indemnification The Corporation shall, to the fullest extent permitted by law, indemnify each of its past, present and future directors, officers and employees and their heirs, executors and administrators (collectively, the "indemnitees") for any and all costs and expenses resulting from or relating to any suit or claim arising out of, or alleged to arise out of, past or future service to the Corporation or to another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise at the Corporation's request. Without limiting the generality of the foregoing, (i) the costs and expenses for which each indemnitee shall, as a matter of right, be entitled to indemnification shall include all costs and expenses incurred by the indemnitee in the defense or settlement of, or in the satisfaction of any order or judgment entered in, any suit or claim (including any suit or claim brought or alleged to be brought in the right of the Corporation to procure a judgment in its favor) arising out of, or alleged to arise out of, any act or failure to act by the indemnitee as a director, officer or employee of, or in any service to, the Corporation or to another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise at the Corporation's request, (ii) the stockholders or the Board of the Corporation are authorized to, by a resolution of the stockholders or the Board, as the case may be, indemnify the indemnitees for costs and expenses, and (iii) the Corporation may, to the extent authorized by resolution of the Board or the stockholders, enter into agreements with indemnitees to indemnify them for costs and expenses; provided, however, that no indemnification may be made to or on behalf of any director, officer, employee or other indemnitee if a judgment or other final adjudication adverse to the director, officer, employee or other indemnitee establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled, and provided further that the foregoing proviso shall prohibit such indemnification only to the extent that such indemnification is prohibited by Sec. 721 of the New York Business Corporation Law. As used in this Article V, (a) "costs and expenses" means any and all costs, expenses and liabilities incurred by an indemnitee, including but not limited to (i) attorney's fees, (ii) amounts paid in settlement of, or in the satisfaction of any order or judgment in, any suit or claim and (iii) fines, penalties and assessments asserted or adjudged in any suit or claim. (b) "suit or claim" means any and all suits, claims, actions, investigations or proceedings, and threats thereof, whether civil, criminal or administrative, heretofore or hereafter instituted or asserted. ARTICLE VI Miscellaneous Provisions Section 1. Transfer of Shares. Shares of stock of the Corporation shall be transferred only on the books of the Corporation by the record holder thereof, in person or by his attorney or legal representative thereunto duly authorized in writing, upon surrender of certificates for a like number or shares, except as otherwise required by law. Section 2. Regulations as to Stock Certificates. The Board, the Chairman, a President, a Vice-Chairman or the Secretary may make all such rules and regulations as it or such officer may deem advisable concerning the issue, transfer, registration or replacement of certificates for shares of stock of the Corporation. Section 3. Stockholder Inspection Rights. A stockholder shall have the right to inspect any book, record or document of the Corporation to the extent that such right is conferred by provisions of the New York Business Corporation Law or is authorized by the Board or the Chairman. Section 4. Corporate Seal. The Corporation shall have a suitable seal, containing the name of the Corporation. The Secretary shall have custody of the seal, but he may authorize others to keep and use a duplicate seal. Section 5. Definitions. As used herein, the following terms have the following meanings: "Board" means the Board of Directors of the Corporation. "Chairman" means the Chairman of the Board of Directors. "Corporation" means Union Carbide Corporation, a New York Corporation. "Entire Board" means the total number of directors the Corporation would have if there were no vacancies. It does not mean the maximum number of directors authorized by these By-laws unless the Board has fixed the number of directors at 19. "Vice-Chairman" means a Vice-Chairman of the Board of Directors. "Vice-President" includes any Executive Vice- President, any Senior Vice-President, and any other officer of the Corporation who is a Vice- President however designated. ARTICLE VII Amendments The By-laws may be adopted, amended or repealed by the stockholders, or by the Board by a vote of a majority of the entire Board. EX-10 3 Exhibit 10.2.1 1984 UNION CARBIDE STOCK OPTION PLAN Effective January 1, 1984, as amended through March 1, 1988 1984 UNION CARBIDE STOCK OPTION PLAN Section 1: Purpose. The purpose of the 1984 Union Carbide Stock Option Plan (hereinafter referred to as the "Plan") is to (a) provide incentives and rewards to those employees who are in a position to contribute to the long-term growth and profitability of the Corporation; (b) assist the Corporation and its subsidiaries in attracting, retaining, and motivating employees with experience and ability; and (c) make the Corporation's compensation program competitive with those of other major employers. Section 2: Administration. This Plan shall be administered by a Committee of the Board of Directors (hereinafter referred to as the "Committee") appointed by the Board. Members of the Committee are not eligible to participate in this Plan and no member may have been eligible within one year prior to serving on the Committee. The Committee shall interpret the Plan, establish administrative regulations to further the purpose of the Plan, authorize awards to eligible participants and take any other action necessary to the proper operation of the Plan. All decisions and acts of the Committee shall be final and binding upon all participants. Section 3: Participation. This Plan is for Union Carbide Corporation and such of its participating subsidiary companies as shall be designated by the Board of Directors. Any employee of Union Carbide Corporation or a participating subsidiary serving in a managerial, administrative, or professional position which is recommended to, and authorized by, the Committee shall be eligible to participate in the Plan. Section 4: Awards. Awards under this Plan may be stock option awards, stock appreciation rights and exercise payment rights. Section 5: Stock Options. 5.1: Each year during the Plan the Corporation may award options to purchase common stock or restricted stock of the Corporation (herein called "stock option awards") to such eligible employees as the Committee in its discretion authorizes and under such terms as it establishes. 5.2: The total number of shares of stock (including restricted stock, if any) optioned under this Plan during the five year period of the Plan shall not exceed 5,000,000 shares (9,564,435 shares for the period commencing March 3, 1986 through December 31, 1988), and no participant shall be granted options in any one year for, in the aggregate, more than 50,000 shares (150,000 shares for the period commencing March 3, 1986 through December 31, 1988) including restricted shares, if any. Solely for the purpose of computing the total number of shares of stock optioned under this Plan, there shall not be counted any shares covered by an option which, prior to such computation, has terminated because the holder exercised a stock appreciation right or the holder ceased for any reason other than death or retirement to be an employee of the Corporation or a participating subsidiary. 5.3: The option price of each share of stock subject to a stock option award shall be the closing price of the common stock of the Corporation on the date the award is authorized by the Committee as reported in the New York Stock Exchange - Composite Transactions. 5.4: A stock option by its terms shall not be transferable by the participant other than by will or the laws of descent and distribution, shall be of no more than 10 years' duration, and shall be exercisable only after the earlier of: (i)(a) in the case of options granted prior to October 28, 1987, two years following the date of grant of such award, or (b) in the case of options granted on or after October 28, 1987, such period of time as the Committee shall determine but in no event less than one year following the date of grant of such award; (ii) the participant's death; (iii) the participant's retirement; or (iv) a change in control of the Corporation, but only to the extent permitted under subsection 5.7. An option shall be exercisable following a participant's termination of employment by the Corporation other than for cause only after such option otherwise becomes exercisable in accordance with the first sentence of this Section 5.4. An option is exercisable during a participant's lifetime only by the participant or the participant's legal guardian or legal representative. An option is only exercisable by a participant while the participant is in active employment with the Corporation except (i) in the case of a participant's death, (ii) in the case of a participant's retirement, (iii) in the case of a participant's termination of employment by the Corporation other than for cause, (iv) during a two-year period commencing on the date of termination, by the participant or the Corporation, of employment after a change in control of the Corporation, unless such termination of employment is for cause, or (v) if the Committee decides that it is in the best interest of the Corporation to permit individual exceptions. In the case of a participant's death, an option may be exercised within nine months after such death and in the case of a participant's termination of employment other than for cause under subclause (iii) of this sentence, an option may be exercised only within three years after such termination. 5.5: An option may be exercised with respect to part or all of the shares subject to the option by giving written notice to the Corporation of the exercise of the option. The option price for the shares for which an option is exercised shall be paid on or within ten business days after the date of exercise in cash, in whole shares of common stock of the Corporation owned by the participant prior to exercising the option, or in a combination of cash and such shares of common stock. The value of any share of common stock delivered in payment of the option price shall be its Market Price on the date the option is exercised. 5.6: In the event of any change in capital, shares of capital stock, or any special distribution to the stockholders, the Board of Directors shall make equitable adjustments in the number of shares and prices per share applicable to options then outstanding and in the number of shares which are available thereafter for stock option awards in total or to any one participant. 5.7: Clauses (iii) and (iv) of the first sentence of Section 5.4 herein, as amended and restated, shall not apply to a stock option held by a "disqualified individual" within the meaning of Section 280G(c) of the Internal Revenue Code who is a party to an employment contract with the Corporation that grants such person severance benefits in the event that the employment is terminated subsequent to a change in control of the Corporation, or who is entitled to receive benefits pursuant to a severance plan in the event that the participant's employment is terminated after a change in control to the extent that the exercise of the option would cause such person to incur the tax prescribed in Section 4999 of the Internal Revenue Code on "excess parachute payments" within the meaning of Section 280G(b) of the Internal Revenue Code. Section 6: Stock Appreciation Rights. 6.1: The Committee may, in its discretion, grant stock appreciation rights to employees who have received a stock option award. The stock appreciation rights may relate to such number of shares, not exceeding the number of shares that the employee may acquire upon exercise of a related stock option, as the Committee determines in its discretion. Upon exercise of a stock option by an employee, the stock appreciation rights relating to the shares covered by such exercise shall terminate. Upon termination of a stock option, any unexercised stock appreciation rights related to that option shall also terminate. Upon exercise of stock appreciation rights, such rights and the related option to the extent of an equal number of shares shall terminate. 6.2: The Committee at its discretion may revoke at any time any unexercised stock appreciation rights granted to an employee under this Plan, without compensation to such employee. Revocation of an employee's stock appreciation rights under this section shall not affect any related stock options granted to the employee under this Plan. 6.3: Upon an employee's exercise of some or all of the employee's stock appreciation rights, the employee shall receive an amount equal to the value of the stock appreciation for the number of rights exercised, payable in cash, common stock, restricted stock, or a combination thereof, at the discretion of the Committee. 6.4: The Committee shall have the discretion either to determine the form in which payment of a stock appreciation right will be made, or to consent to or disapprove the election of the employee to receive cash in full or partial settlement of the right. Such consent or disapproval may be given at any time before or after the election to which it relates. Notwithstanding the foregoing provision, if an employee exercises a stock appreciation right during the 60-day period commencing on the date of a change in control of the Corporation, the form of payment of such stock appreciation right shall be cash provided that such stock appreciation right was granted at least six months prior to the date of exercise, and shall be common stock if such stock appreciation right was granted six months or less prior to the date of exercise. Provided, however, that the previous sentence shall not apply to a "disqualified individual" within the meaning of Section 280G(c) of the Internal Revenue Code who is a party to an employment contract with the Corporation that grants such person severance benefits in the event that his employment is terminated subsequent to a change in control of the Corporation or who is entitled to receive benefits pursuant to a severance plan in the event that his employment is terminated after a change in control, to the extent that the exercise of the stock appreciation right would cause such participant to incur the tax prescribed in Section 4999 of the Internal Revenue Code on "excess parachute payments" within the meaning of Section 280G(b) of the Internal Revenue Code. 6.5: Except in the case of a stock appreciation right that was granted at least six months prior to exercise and that is exercised for cash during the 60-day period commencing on the date of a change in control of the Corporation, any election by the employee to receive cash in full or partial settlement of the stock appreciation right, as well as any exercise by the employee of the employee's stock appreciation right for such cash, shall be made only during the period beginning on the third business day following the date of release of the quarterly or annual summary statements of sales and earnings and ending on the twelfth business day following such date. 6.6: Settlement for exercised stock appreciation rights may be deferred by the Committee in its discretion to such date and under such terms and conditions as the Committee may determine. 6.7: A stock appreciation right is only exercisable during the period when the stock option to which it is related is also exercisable. Section 7: Exercise Payments. 7.1: The Committee may, in its discretion, grant to holders of stock options the right to receive exercise payments relating to such number of shares covered by the holder's stock options as the Committee determines in its discretion; provided, however, that the exercise payment rights granted to each participant under the Plan in any year shall be limited to optioned stock having a total option price not exceeding $100,000 plus any unused carryovers. The "carryover" from any year shall be one half of the amount by which $100,000 exceeds the total option price of the stock which was accompanied by exercise payment rights and for which a participant was granted an option in such year under this Plan or any prior incentive compensation plan of the Corporation. A carryover may be used only in the three calendar years immediately succeeding the year in which it accrued. The amount of options granted in any calendar year under this Plan shall be treated as first using up the $100,000 limitation and then as using up unused carryovers to such year in the order of the calendar years in which the carryovers accrued. A carryover shall not accrue for a participant for any calendar year in which the participant was not granted a stock option award. 7.2: At the discretion of the Committee, the exercise payment may be made in cash, common stock, restricted stock, or a combination thereof; provided, however, exercise payments may be made in cash to participants subject to Section 16(b) of the Securities Exchange Act of 1934 only if they exercise the related stock option during a period beginning on the third business day following the date of release of the quarterly or annual summary statements of sales and earnings and ending on the twelfth business day following such date. Exercise payments shall be paid within 20 business days following the exercise of a related stock option; provided, however, that payment may be deferred by the Committee in its discretion to such date and under such terms and conditions as the Committee may determine. 7.3: Exercise payments shall be paid only upon the exercise of related stock options which are exercised by the holder while an active employee; provided, however, that in the case of an option holder's death or retirement, exercise payments will be paid if such related stock options are exercised within nine months after death or three months after retirement, as the case may be, but before the expiration of the stock option's term. Section 8: General Provisions. 8.1: Any assignment or transfer of any awards without the written consent of the Corporation shall be null and void. 8.2: Nothing contained herein shall require the Corporation to segregate any monies from its general funds, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any participant for any year. 8.3: Participation in this Plan shall not affect the Corporation's right to discharge a participating employee. Section 9: Definitions. 9.1: A 'change in control of the Corporation' shall be deemed to occur in the event that any of the following circumstances have occurred: (i) if a change in control of the Corporation would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), whether or not the Corporation is then subject to such reporting requirement; (ii) any 'person' or 'group' within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act (x) becomes the 'beneficial owner' as defined in Rule 13d-3 under the Exchange Act of more than 35% of the then outstanding voting securities of the Corporation, otherwise than through a transaction or transactions arranged by, or consummated with the prior approval of, the Board or (y) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Corporation or for any other matter or question, more than 35% of the then outstanding voting securities of the Corporation, otherwise than through an arrangement or arrangements consummated with the prior approval of the Board; (iii)if during any period of twenty-four consecutive months (not including any period prior to the adoption of this section), Present Directors and/or New Directors cease for any reason to constitute a majority of the Board. For purposes of this subsection (iii), 'Present Directors' shall mean individuals who at the beginning of such consecutive twenty-four month period were members of the Board and 'New Directors' shall mean any director whose election by the Board or whose nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the Directors then still in office who were Present Directors or New Directors; or (iv) any 'person' or 'group' within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act that is the 'beneficial owner' as defined in Rule 13d-3 under the Exchange Act of 20% or more of the then outstanding vesting securities of the Corporation commences soliciting proxies. 9.2: "Employee" means all employees of the Corporation or of a subsidiary of the Corporation participating in the Plan, including officers of the Corporation, as well as officers of the Corporation who are also Directors of the Corporation. However, an individual who is a member of the Committee shall not be an "employee" for purposes of this Plan. 9.3: "Exercise payment" is a payment upon the exercise of a stock option of an amount determined by the Committee in its discretion, which amount shall not be greater than 60% of the excess of the Market Price (on the date the related stock option is exercised) over the option price of the stock acquired upon the exercise of the option. 9.4: "Market price" is the mean of the high and low prices of the common stock of the Corporation as reported in the New York Stock Exchange - Composite Transactions on the date the option or stock appreciation right is exercised (or on the next preceding day such stock was traded on a stock exchange included in the New York Stock Exchange - Composite Transactions if it was not traded on any such exchange on the date the option or stock appreciation right is exercised), except that in the case of a stock appreciation right that is exercised for cash during the first three days of the ten-day period set forth in Section 6.5, "Market Price" is the highest daily closing price of the common stock of the Corporation as reported in the New York Stock Exchange-Composite Transactions during such ten-day period. Notwithstanding the foregoing provision, if a stock appreciation right is exercised during the 60-day period commencing on the date of a change in control of the Corporation, the Market Price for purposes of determining the stock appreciation shall be the highest of (1) the market price of the common stock of the Corporation, as determined under the preceding sentence on the date of exercise of the stock appreciation right; (2) the highest market price of a share of the common stock of the Corporation during the period commencing on the ninetieth day preceding the date of exercise of the stock appreciation right and ending on the date of exercise of the stock appreciation right; (3) the highest price per share of common stock of the Corporation shown on Schedule 13D or an amendment thereto filed pursuant to Section 13(d) of the Securities Exchange Act of 1934 by any person holding 35% of the combined voting power of the Corporation's then outstanding voting securities; or (4) the highest price paid or to be paid per share of common stock of the Corporation pursuant to a tender or exchange offer as determined by the Committee. Provided, however, that the previous sentence shall not apply to a 'disqualified individual' within the meaning of Section 280G(c) of the Internal Revenue Code who prior to December 1, 1986 is a party to an employment contract with the Corporation that grants such person severance benefits in the event that the employment is terminated subsequent to a change in control of the Corporation, and after that date shall not apply if the exercise of the stock appreciation right would cause such participant to incur the tax prescribed in Section 4999 of the Internal Revenue Code on 'excess parachute payments' within the meaning of Section 280G(b) of the Internal Revenue Code. 9.5: "Retirement" shall mean retirement from employment by the Corporation or a participating subsidiary with the right to receive immediately a non-actuarially reduced pension under the Corporation's Retirement Program. 9.6: "Restricted stock" means stock of the Corporation subject to restrictions on the transfer of such stock, conditions of forfeitability of such stock, or any other limitations or restrictions as determined by the Committee. 9.7: "Stock Appreciation" shall be based on the excess of the Market Price of the common stock over the option price of the related option stock, as determined by the Committee. Section 10: Amendment, Suspension, or Termination. 10.1: The Board of Directors may suspend, terminate, or amend the Plan, but may not, without approval by the holders of a majority of all outstanding shares entitled to vote on the subject at a meeting of stockholders of Union Carbide Corporation, increase the total number of shares of stock that may be optioned under this Plan or that may be optioned to a single participant during the term of this Plan. 10.2: This Plan is intended to comply with the requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as applicable during the term of this Plan. Should the requirements of Rule 16b-3 change, the Board of Directors may amend this Plan to comply with the requirements of that rule or its successor provision or provisions. Section 11: Effective Date and Duration of the Plan. This Plan shall be effective following approval by the stockholders of the Corporation for years beginning on or after January 1, 1984. No award shall be granted under this Plan for any year commencing on or after January 1, 1989. EX-10 4 Exhibit 10.2.2 RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF UNION CARBIDE CORPORATION ON JANUARY 22, 1986, WITH RESPECT TO THE 1984 UNION CARBIDE STOCK OPTION PLAN RESOLVED, that upon the recommendation of management, and in accordance with Section 6.6 of the 1979 Union Carbide Incentive Compensation Plan and Section 5.6 of the 1984 Union Carbide Stock Option Plan (the "Plans"), the Committee approves and recommends that the Board authorize that, in view of the Special Distribution to shareholders of record on February 15, 1986 upon the sale of the Consumer Products Businesses ("Special Distribution") and the 3-for-1 stock split authorized by the Board on January 2, 1986, the following equitable adjustments be made in (i) the number of shares and prices per share applicable to outstanding stock options and for the purposes of stock appreciation rights ("SARs") and exercise payments ("EPs") and (ii) the number of shares which are hereafter available for stock option awards in total or to any participant in the Plans: (a) There shall be no adjustment in the option prices presently in effect (the "Original Option Prices") for any stock options, or for the purpose of SARs or EPs, exercised on or prior to the 10th day of trading on the New York Stock Exchange of the Rights to receive the Special Distribution (the "Special Distribution Rights"). (b) Effective on the 11th day of trading on the New York Stock Exchange of the Special Distribution Rights, the option prices for then outstanding stock options and for the purpose of SARs and EPs shall be reduced by an amount equal to the average of the closing prices of the Special Distribution Rights on the first 10 days of trading of such Rights on the New York Stock Exchange, as reported on the New York Stock Exchange--Composite Transactions, but no option price shall be reduced to less than $3 per share under this paragraph. The option price as adjusted under this paragraph shall continue in effect until further adjusted under paragraph (c), (d) or (f) below. (c) When the entire Special Distribution has been determined and announced by the Board of Directors, the option prices then in effect for the then outstanding stock options and for the purpose of SARs and EPs shall be adjusted to a price equal to the Original Option Prices minus the amount of the Special Distribution, effective on the date of said announcement, but no option price shall be reduced to less than $3 per share under this paragraph. If the Special Distribution is determined and announced by the Board of Directors in parts at different times rather than in whole at one time, no adjustment shall be made in the option prices pursuant to this paragraph (c) until the entire Special Distribution has been determined and announced. (d) From and after aforesaid 3-for-1 stock split, (i) the Original Option Prices if they are still in effect, or the option prices as adjusted pursuant to paragraph (b) or (c) above, as the case may be, shall be divided by three for the then outstanding stock options and for the purpose of the SARs and EPs, and (ii) the number of shares of stock covered by then outstanding stock options, and the number of corresponding SARs and EPs, shall be multiplied by three. (e) Effective as of the date of the 3-for-1 stock split, the total number of shares of stock which are thereafter available for stock option awards shall be increased from 3,188,145 to 9,564,435, and no participant in the Plans shall be granted options in any one year for, in the aggregate, more than 150,000 shares. (f) If any circumstances hereafter become known or develop which, in the judgment of the Board of Directors, cause any adjustment in the option prices to be not equitable to a significant extent, the Board shall have the right to make such further adjustments, in such amounts and at such times, as the Board in its judgment determines are necessary to achieve equity. _________________________ EX-10 5 Exhibit 10.2.3 RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF UNION CARBIDE CORPORATION ON APRIL 17, 1986, WITH RESPECT TO THE 1984 UNION CARBIDE STOCK OPTION PLAN RESOLVED, that, in accordance with Section 6.6 of the 1979 Union Carbide Incentive Compensation Plan and Section 5.6 of the 1984 Union Carbide Stock Option Plan (the "Plans"), and in view of circumstances which have developed since the adjustments authorized by the Board at its January 22, 1986 meeting to the option prices of all outstanding stock options, stock appreciation rights ("SARs") and exercise payments ("EPs") because of the special distribution upon the sale of the consumer products business ("Special Distribution"), the following equitable adjustments be made in the prices per share applicable to outstanding stock options, SARs and EPs: (a) Effective on the date the estimated amount of the Special Distribution is announced by the Corporation, the option prices presently in effect for the then outstanding stock options and for purposes of SARs and EPs shall be readjusted in accordance with the resolutions adopted by the Board on January 22, 1986 using the estimated amount of the Special Distribution as announced by the Board rather than the ten day trading average of the Special Distribution Rights. The option prices adjusted under this paragraph shall continue in effect until further adjusted under paragraph (b) below or in accordance with the resolutions adopted by the Board on January 22, 1986 at the time the actual amount of the Special Distribution is announced by the Corporation. (b) If any circumstances hereafter become known or develop which, in the judgment of the Board of Directors, cause any adjustment in the option prices to be not equitable to a significant extent, the Board shall have the right to make such further adjustments in such amounts and at such times, as the Board in its judgment determines are necessary to achieve equity. EX-10 6 Exhibit 10.4.1 1983 UNION CARBIDE BONUS DEFERRAL PROGRAM Table of Contents Section 1: Purpose 1 Section 2: Definitions 1 2.1: Beneficiary 1 2.2: Committee 1 2.3: Corporation 1 2.4: Employee and Eligible Employee 1 2.5: Disability 1 2.6: Participant 1 2.7: Retirement Date 1 2.8: Date of Deferral 2 Section 3: Administration 2 Section 4: Eligibility To Participate 2 Section 5: Election To Participate 2 Section 6: Payments to Participants and Beneficiaries 2 6.1: Normal Payments 2 6.2: Alternate Payments 3 6.3: Payment Dates of Annual Payments after the Initial Payment 3 6.4: Payments upon Disability 3 6.5: Payments upon Death 4 6.6: Committee's Right To Commute Annual Payments 4 6.7: Payment upon Termination of Employment 4 6.8: Payment upon Showing of Hardship 4 6.9: Payments upon Program Termination 5 A: Program Termination on or before November 30, 1984 5 B: Program Termination after November 30, 1984 5 C: Effective Date 6 D: Meaning of "already become entitled to payment" 6 6.10: Reduction of Payments 6 Section 7: Beneficiary 6 Section 8: General Provisions 7 8.1: Prohibition of Assignment or Transfer 7 8.2: Program Not To Be Funded 7 8.3: Effect of Participation 7 8.4: Communications To Be in Writing 7 8.5: Absence of Liability 7 8.6: New York Law To Govern 7 8.7: Amendment 8 1983 UNION CARBIDE BONUS DEFERRAL PROGRAM Section 1: Purpose Section 5.3 of the 1979 Union Carbide Incentive Compensation Plan (the "1979 Plan") provides that the Committee administering the 1979 Plan may defer payment of some or all annual bonus awards to such date, and upon such terms and conditions, as the Committee may designate. The Committee has not previously deferred payment of any bonus awards or designated terms and conditions for deferrals. The purpose of the 1983 Union Carbide Bonus Deferral Program (the "Program") is to provide a procedure, as authorized by the 1979 Plan, by which certain potential recipients may elect to defer a portion or all of their 1983 bonus awards under the 1979 Plan. Section 2: Definitions 2.1: "Beneficiary" means the person, persons or estate entitled (as determined under Section 7) to receive payment under the Program following a Participant's death. 2.2: "Committee" means the Compensation and Management Development Committee from time to time serving and appointed by the Board of Directors of the Corporation. 2.3: "Corporation" means Union Carbide Corporation, a New York corporation, and any successor thereof by merger, consolidation or otherwise. 2.4: "Employee" means a person who is a common law employee of the Corporation or any of its subsidiary corporations, and "Eligible Employee" means a person who was an Employee on November 23, 1983 or who thereafter became an Employee, and who is offered an opportunity to participate in the Program as provided in Section 4. 2.5: "Disability" means a Participant's total physical or mental inability to perform any work for compensation or profit in any occupation for which the Participant is reasonably qualified by reason of training, education or ability, and which inability is adjudged to be permanent, as determined by the Committee. 2.6: "Participant" means an Eligible Employee who elects under the Program to defer a portion or all of the Employee's 1983 bonus award, if one were to be paid, and who is in fact subsequently awarded a 1983 bonus award. 2.7: "Retirement Date" means the earliest date on which a Participant could have retired with the right to receive immediately a non-actuarially reduced pension under the Corporation's Retirement Program. 2.8: "Date of Deferral" means the date on which the Corporation issues checks for 1983 bonus awards. Section 3: Administration The Committee shall supervise the administration and interpretation of the Program, may establish administrative regulations to further the purpose of the Program and shall take any other action necessary to the proper operation of the Program. All decisions and acts of the Committee shall be final and binding upon all Participants, their Beneficiaries and all other persons. Section 4: Eligibility To Participate All Employees eligible to be awarded bonuses for the 1983 plan year under the 1979 Plan shall be offered an opportunity to participate in the Program ("Eligible Employee"). Section 5: Election To Participate On and after December 5, 1983, Eligible Employees shall be informed of the opportunity to participate in the Program, and the terms and conditions of participation. An Eligible Employee choosing to participate must make an irrevocable election to do so not later than December 31, 1983, and otherwise in accordance with such procedures as may be established. Participation, and the right to receive payment under the Program, shall become effective on and after the Deferral Date. Section 6: Payments to Participants and Beneficiaries 6.1: Normal Payments. A Participant, who remains an Employee at least until the Participant's Retirement Date, shall be entitled to 15 annual Normal Payments, commencing within 120 days following the latest of: (a) the date of actual retirement, (b) the Participant's 65th birthday, or (c) ten years following the Date of Deferral. Payments shall be made in accordance with the following table (unless the Participant has elected the Alternate Payments provided by Section 6.2): Annual 15-Year Approximate Payment for Rate of Return Each $1,000 of Calculated through Age on Bonus Award Total of Receipt of the Last December 31, 1983 Deferred Annual Payments of 15 Annual Payments 35 $3,927 $58,905 12.00% 36 3,560 53,400 12.05 37 3,224 48,360 12.10 38 2,918 43,770 12.15 39 2,638 39,570 12.20 40 2,383 35,745 12.25 41 2,150 32,250 12.30 42 1,939 29,085 12.35 43 1,746 26,190 12.40 44 1,572 23,580 12.45 45 1,413 21,195 12.50 46 1,256 18,840 12.55 47 1,140 17,100 12.60 48 1,022 15,330 12.65 49 916 13,740 12.70 50 820 12,300 12.75 51 733 10,995 12.80 52 655 9,825 12.85 53 585 8,775 12.90 54 522 7,830 12.95 55 or older 465 6,975 13.00 6.2: Alternate Payments. In lieu of the Normal Payments provided by Section 6.1, a Participant, who remains an Employee at least until the Participant's Retirement Date, and who irrevocably so elects at the time the election to participate is made, shall be entitled to 15 annual Alternate Payments, commencing within 120 days following the latest of: (a) the date of actual retirement, (b) the Participant's 62nd birthday, or (c) seven years following the Date of Deferral. Alternate Payments may not commence more than 36 months earlier than Normal Payments would have commenced. If Alternate Payments commence earlier than Normal Payments would have commenced, the Alternate Payments shall be the amount of the applicable Normal Payments reduced by .4167 percent (.004167) for each month of early commencement. 6.3: Payment Dates of Annual Payments after the Initial Payment. All annual Normal or Alternate Payments after the initial payment shall be made on April 1, commencing on the April 1 next following the date the initial payment was due in accordance with Section 6.1 or 6.2. 6.4: Payments upon Disability. A Participant determined by the Committee to have suffered a Disability while an Employee, as defined in Section 2.5, shall be entitled to 15 annual Normal Payments (or 15 annual Alternate Payments if the Participant so elected). Such payments shall commence and continue at the times provided in Sections 6.1, 6.2 or 6.3, as if the Participant had actually retired on the Participant's Retirement Date. 6.5: Payments upon Death. If a Participant already receiving payments under Sections 6.1, 6.2 or 6.4 dies at any time before having received 15 annual (Normal or Alternate) Payments, the remaining payments shall be made, as they become due, to the Participant's Beneficiary. If death occurs before annual payments to the Participant commence, the Participant's Beneficiary shall receive 15 annual Normal Payments (any election to receive Alternate Payments shall be disregarded), commencing within 120 days following the Participant's death. Annual payments after the initial payment shall be made on April 1, commencing on the April 1 next following the date the initial payment was made. 6.6: Committee's Right To Commute Annual Payments. The Committee, in its discretion, may decide to make lump sum payments to all Participants in lieu of the annual (Normal or Alternate) payments provided for in Sections 6.1, 6.2, 6.4 or 6.5. A Participant or Beneficiary who is already receiving Normal or Alternate Payments shall receive a lump sum payment equal to the amount remaining to be paid to the Participant or Beneficiary under the Program, using as a discount factor the rate of return applicable to the Participant's age on December 31, 1983, provided in the table in Section 6.1. Such lump sum payments shall be computed as of a date to be determined by the Committee in its discretion, and shall be paid within 120 days thereafter. A Participant who has not already become entitled to payment as provided by Section 6.9.D, or who has become entitled to payment but has not received the initial payment, shall receive a lump sum payment, discounted as in the case of Participants who are already receiving annual payments, within 120 days after the date the Participant would have received the initial payment. 6.7: Payment upon Termination of Employment. A Participant whose employment by the Corporation terminates, for any reason other than (a) retirement on or after the Participant's Retirement Date, (b) death, (c) Disability, or (d) a reason approved by the Committee, shall receive, within 120 days following the effective date of termination of employment, a lump sum payment, in lieu of any other payment under the Program, equal to the amount of bonus award deferred, plus interest thereon from April 1, 1984 to the date of payment at the rate of six per cent per year, compounded annually. 6.8: Payment upon Showing of Hardship. A Participant who, prior to commencing to receive Normal or Alternate Payments, demonstrates, to the Committee's satisfaction in its sole discretion, severe, substantial and unanticipated financial hardship, shall receive a lump sum payment, in lieu of any other payment under the Program, equal to the amount of bonus award deferred, plus interest thereon from April 1, 1984 to the date of payment at the rate of six per cent per year, compounded annually, payable at such time as the Committee shall determine. 6.9: Payments upon Program Termination. A: Program Termination on or before November 30, 1984. The Corporation may terminate the Program at any time for any reason on or before November 30, 1984. In such event, each Participant or Beneficiary who, in accordance with Sections 6.4, 6.5, 6.7 or 6.8, has, on or before the effective date of Program termination, already become entitled to payment under those Sections, shall receive the payments provided for in those Sections, unless the Committee, in its discretion, upon Program termination or at any time thereafter, decides to make lump sum payments in lieu of annual payments to Participants or Beneficiaries already entitled to annual payments under Sections 6.4 or 6.5, using as discount factors the rates of return, applicable to Participants' ages on December 31, 1983, provided in the table in Section 6.1. Such lump sum payments shall be computed as of a date to be determined by the Committee in its discretion, and shall be paid within 120 days thereafter. Each other Participant or Beneficiary shall receive, within 120 days following the effective date of Program termination, in lieu of any other payment under the Program, a lump sum payment equal to the amount of bonus award deferred, plus interest thereon from April 1, 1984 to the date of payment at the rate of six per cent per year, compounded annually. B: Program Termination after November 30, 1984. The Corporation may terminate the Program at any time after November 30, 1984 if the Committee, in its sole discretion, determines that changes in Federal or state law, changes in general economic conditions or changes in the financial condition of the Corporation render continuation of the Program undesirable. In such event, each Participant or Beneficiary who has, on or before the effective date of Program termination, already become entitled to payment under the Program, shall receive the payments to which such person was entitled under the Program, unless the Committee, in its discretion, upon Program termination or at any time thereafter, decides to make lump sum payments in lieu of annual payments, using as discount factors the rates of return, applicable to Participants' ages on December 31, 1983, provided in the table in Section 6.1. Such lump sum payments shall be computed as of a date to be determined by the Committee in its discretion, and shall be paid within 120 days thereafter. Each other Participant or Beneficiary shall receive, within 120 days following the effective date of Program termination, in lieu of any other payment under the Program, a lump sum payment to be determined by the Committee at least equal to the sum of (i) the amount of bonus deferred and (ii) interest thereon from April 1, 1984 to the date of payment at the rate of six per cent per year, compounded annually. C: Effective Date. The effective date of any Program termination shall be determined by the Committee. D: Meaning of "already become entitled to payment." The phrase "already become entitled to payment" used in Section 6.6 and this Section 6.9 means that (i) A Participant has retired on or after the Participant's Retirement Date, but the annual payments provided for by Sections 6.1 or 6.2 have not all been made, (ii) A Participant has been determined by the Committee to have suffered a Disability, but the payments provided for by Section 6.4 have not all been made, (iii) A Participant has died, but the payments provided for by Section 6.5 have not all been made, (iv) A Participant's employment with the Corporation has terminated, but the payment provided for by Section 6.7 has not been made, or (v) A Participant has demonstrated hardship to the Committee's satisfaction, but the payment provided for by Section 6.8 has not been made. 6.10: Reduction of Payments. All payments under the Program shall be reduced by amounts the Corporation is required to withhold under applicable law. Section 7: Beneficiary A Participant may at any time and from time to time prior to death designate one or more Beneficiaries to receive payments to be made following the Participant's death. If no such designation is on file with the Corporation at the time of a Participant's death, the Participant's Beneficiary shall be the beneficiary or beneficiaries named in the beneficiary designation most recently filed by the Participant with the Corporation under The Savings Plan for Employees of Union Carbide Corporation and Participating Subsidiary Companies. If the Participant has not effectively designated a beneficiary under such Savings Plan, or if no beneficiary so designated has survived the Participant, the Participant's Beneficiary shall be the beneficiary or beneficiaries named in the beneficiary designation most recently filed by the Participant with the Corporation under the 401(k) Opportunity Plan for Salaried Employees of Union Carbide Corporation. If the Participant has not effectively designated a beneficiary under either such Plan, or no beneficiary so designated has survived the Participant, the Participant's Beneficiary shall be the Participant's surviving spouse, or, if no spouse has survived the Participant, the estate of the deceased Participant. If an individual Beneficiary cannot be located for a period of one year following the Participant's death, despite mailing to the Beneficiary's last known address, and if the Beneficiary has not made a written claim for benefits within such period to the Committee, the Beneficiary shall be treated as having predeceased the Participant. The Committee may require such proof of death and such evidence of the right of any person to receive all or part of the benefit of a deceased Participant as the Committee may consider to be appropriate. The Committee may rely upon any direction by the legal representatives of the estate of a deceased Participant, without liability to any other person. Section 8: General Provisions 8.1: Prohibition of Assignment or Transfer. Any assignment, hypothecation, pledge or transfer of a Participant's or Beneficiary's right to receive payments under the Program, without the written consent of the Committee, shall be null and void and shall be disregarded. 8.2: Program Not To Be Funded. The Corporation is not required to, and will not, for the purpose of funding the Program, segregate any monies from its general funds, create any trusts, or make any special deposits. 8.3: Effect of Participation. Neither selection as an Eligible Employee, nor participation in the Program, shall entitle an Eligible Employee to receive a 1983 bonus award, or affect the Corporation's right to discharge an Eligible Employee or a Participant. 8.4: Communications To Be in Writing. All elections, requests and communications to the Corporation from Participants, and all communications to Participants from the Corporation, shall be in writing, and in such form and manner, and within such time, as the Corporation shall determine. 8.5: Absence of Liability. No officer, director or employee of the Corporation shall be personally liable for any act or omission to act, under the Program, of any other person, or, except in circumstances involving bad faith, for such officer's, director's or employee's own act or omission to act. 8.6: New York Law To Govern. All questions pertaining to the construction, regulation, validity and effect of the provisions of the Program shall be determined in accordance with New York law. 8.7: Amendment. The Corporation may at any time amend the Program, as set forth herein, but no amendment may be adopted which alters the payments due Participants, or the times at which payments are due, without the consent of each Participant affected by the amendment and of each Beneficiary (of a then deceased Participant) affected by the amendment. EX-10 7 Exhibit 10.5.1 1984 UNION CARBIDE CASH BONUS DEFERRAL PROGRAM Section 1: Purpose Section 5.3 of the 1984 Union Carbide Cash Bonus Plan (the "1984 Plan") provides that the Committee administering the 1984 Plan may defer payment of some or all cash bonus awards, and upon such terms and conditions, as the Committee in its discretion may determine. The purpose of the 1984 Union Carbide Cash Bonus Deferral Program (the "Program") is to provide a procedure, as authorized by the 1984 Plan, by which potential recipients of bonus awards may annually elect in advance to defer a portion or all of their bonus awards under the 1984 Plan. The Program shall be effective for the five calendar years 1984 through 1988. Section 2: Definitions 2.1: "Beneficiary" means the person, persons or estate entitled (as determined under Section 7) to receive payment under the Program following a Participant's death. 2.2: "Committee" means the Compensation and Management Development Committee from time to time serving and appointed by the Board of Directors of the Corporation. 2.3: "Corporation" means Union Carbide Corporation, a New York corporation, and any successor thereof by merger, consolidation or otherwise. 2.4: "Date of Deferral" means the date on which the Corporation issues checks for bonus awards for a given Service Year. 2.5: "Disability" means a Participant's total physical or mental inability to perform any work for compensation or profit in any occupation for which the Participant is reasonably qualified by reason of training, education or ability, and which inability is adjudged to be permanent, as determined by the Committee. 2.6: "Employee" means a person who is a common law employee of the Corporation or one of its subsidiary corporations and "Eligible Employee" means a person who is an Eligible Employee within the meaning of the 1984 Plan. 2.7: "Participant" means an Eligible Employee who elects in advance under the Program to defer a portion or all of the employee's bonus award for a given Service Year under the 1984 Plan, if one were to be paid to that employee for that year, and who is in fact subsequently awarded a bonus for that year, payable during the following year on the Date of Deferral. 2.8: "Retirement Date" means the earliest date on which a Participant could have retired with the right to receive immediately a non-actuarially reduced pension under the Corporation's Retirement Program. 2.9: "Service Year" means one of the calendar years 1984 through 1988, as to which an election may be made in accordance with Section 5, and in respect of which a bonus may be paid during the following year on the Date of Deferral. Section 3: Administration The Committee shall supervise the administration and interpretation of the Program, may establish administrative regulations to further the purpose of the Program and shall take any other action necessary to the proper operation of the Program. All decisions and acts of the Committee shall be final and binding upon all Participants, their Beneficiaries and all other persons. Section 4: Eligibility To Participate To be eligible to participate in the Program for a given Service Year, a person must have become an Eligible Employee not later than the day on or before which Eligible Employees must make the election provided for in Section 5 for that Service Year, reach the age of 40 on or before the last day of that Service Year and be living on the Date of Deferral for that Service Year. Section 5: Election To Participate 5.1: Participation in Program for Service Year 1984. On and after October 24, 1984, Eligible Employees shall be informed of the opportunity to participate in the Program for the 1984 Service Year, and the terms and conditions of participation. An Eligible Employee choosing to participate for the 1984 Service Year must make an irrevocable election to do so not later than November 21, 1984 and otherwise in accordance with such procedures as may be established. 5.2: Participation in Program for Service Years 1985 through 1988. During each of the years 1984 through 1987, Eligible Employees shall be informed of the opportunity to participate in the Program for the Service Year immediately following, and the terms and conditions of participation. An Eligible Employee choosing to participate must make an irrevocable election to do so on or before the day designated by the Committee and in any event prior to the first day of the Service Year, and otherwise in accordance with such procedures as may be established. 5.3: Effective Date of Participation. While an election shall be irrevocable when made, participation, and the right to receive payment under the Program, shall become effective only on the Date of Deferral and only if, on such date, the Eligible Employee receives a cash bonus under the 1984 Plan (or would have received a cash bonus but for an election to defer under the Program). Section 6: Payments to Participants and Beneficiaries 6.1: Normal Payments. A Participant who remains an Employee at least until the Participant's Retirement Date shall be entitled to 15 annual Normal Payments, commencing within 120 days following the latest of: (a) the date of actual retirement, (b) the Participant's 65th birthday, or (c) 10 years following the Date of Deferral. Unless the Participant elects the Alternate Payments provided for by Section 6.2, payments shall be made in accordance with a payment table established by the Committee for each Service Year and communicated to Eligible Employees at the time they are offered the opportunity to participate in the Program for that year. The payment table attached as Exhibit A shall apply to the deferral of cash bonus awards in respect of the 1984 and 1985 Service Years. 6.2: Alternate Payments. In lieu of the Normal Payments provided for by Section 6.1, a Participant who remains an Employee at least until the Participant's Retirement Date and who irrevocably so elects at the time the applicable election to participate is made, shall be entitled to 15 annual Alternate Payments, commencing within 120 days following the latest of: (a) the date of actual retirement, (b) the Participant's 62nd birthday, or (c) seven years following the Date of Deferral. Alternate Payments may not commence more than 36 months earlier than Normal Payments would have commenced. If Alternate Payments commence earlier than Normal Payments would have commenced, the Alternate Payments shall be the amount of the applicable Normal Payments reduced by .4167 percent (.004167) for each month of early commencement. 6.3: Payment Dates of Annual Payments after the Initial Payment. All annual Normal or Alternate Payments after the initial payment shall be made on April 1, commencing on the April 1 next following the date the initial payment was due in accordance with Section 6.1 or 6.2. 6.4: Payments upon Disability. A Participant determined by the Committee to have suffered a Disability (as defined in Section 2.5) while an Employee shall be entitled to 15 annual Normal Payments (or 15 annual Alternate Payments if the Participant so elected). Such payments shall commence and continue at the times provided in Sections 6.1, 6.2 or 6.3, as if the Participant had actually retired on the Participant's Retirement Date. 6.5: Payments upon Death. If a Participant already receiving payments under Sections 6.1, 6.2 or 6.4 dies at any time before having received 15 annual (Normal or Alternate) Payments, the remaining payments shall be made, as they become due, to the Participant's Beneficiary. If death occurs before annual payments to the Participant commence, the Participant's Beneficiary shall receive 15 annual Normal Payments (any election to receive Alternate Payments shall be disregarded), commencing within 120 days following the Participant's death. Annual payments after the initial payment shall be made on April 1, commencing on the April 1 next following the date the initial payment was made. 6.6: Committee's Right To Commute Annual Payments in respect of One or More Service Years. The Committee, in its discretion, may decide to make lump sum payments to all Participants, in respect of a particular Service Year, in lieu of the annual (Normal or Alternate) payments provided for in Sections 6.1, 6.2, 6.4 or 6.5. In such event, a Participant or Beneficiary who is already receiving Normal or Alternate Payments in respect of that Service Year shall receive a lump sum payment in lieu of annual payments equal to the present value of the amount remaining to be paid to the Participant or Beneficiary under the Program, using as a discount factor the rate of return applicable to the Participant's age on the last day of that Service Year, provided in the payment table applicable to that Service Year. Such lump sum payments shall be computed as of a date to be determined by the Committee in its discretion, and shall be paid within 120 days thereafter. A Participant who has not already become entitled to payment for that Service Year, as described in Section 6.9, or who has become entitled to payment but has not received the initial payment, shall receive, in lieu of any other payment under the Program, a lump sum payment, discounted as in the case of Participants who are already receiving annual payments, within 120 days after the date the Participant would have received the initial payment. 6.7: Payment upon Termination of Employment. A Participant whose employment by the Corporation terminates, for any reason other than (a) retirement on or after the Participant's Retirement Date, (b) death, (c) Disability, (d) the reason set forth in the next sentence, or (e) a reason approved by the Committee, shall receive, within 120 days following the effective date of termination of employment, a lump sum payment, in lieu of any other payment under the Program, equal to the amount of bonus award or awards deferred, plus interest thereon from the April 1 following the applicable Service Year or Service Years to the date of payment at the rate of six per cent per year, compounded annually. A Participant whose employment is terminated by the Corporation for willful failure to perform the normal duties of employment, or for an act of dishonesty in connection with such Participant's employment, shall receive, within 120 days following the effective date of termination of employment, a lump sum payment, in lieu of any other payment under the Program, equal to the amount of bonus award or awards deferred. 6.8: Payments upon Program Termination. The Corporation may terminate the Program at any time if the Committee, in its sole discretion, determines that changes in Federal or state law, changes in general economic conditions or changes in the financial condition of the Corporation render continuation of the Program undesirable. In such event, each Participant or Beneficiary who has, on or before the effective date of Program termination, already become entitled to payment under the Program, as described in Section 6.9, shall receive the payments to which such person was entitled under the Program, unless the Committee, in its discretion, upon Program termination or at any time thereafter, decides to make lump sum payments in lieu of annual payments equal to the present value of such payments, using as discount factors the rates of return, applicable to Participants' ages on the last days of the applicable Service Years, provided in the applicable payment tables. Such lump sum payments shall be computed as of a date to be determined by the Committee in its discretion, and shall be paid within 120 days thereafter. Each other Participant or Beneficiary shall receive, within 120 days following the effective date of Program termination (to be determined by the Committee), in lieu of any other payment under the Program, a lump sum payment to be determined by the Committee and at least equal to the sum of (i) the amount of bonus award or awards deferred and (ii) interest thereon from the April 1 following the applicable Service Year to the date of payment at the rate of six per cent per year, compounded annually. 6.9: Meaning of "already become entitled to payment." The phrase "already become entitled to payment" used in Sections 6.6 and 6.8 means that (i) A Participant has retired on or after the Participant's Retirement Date, but the payments provided for by Sections 6.1 or 6.2 have not all been made, (ii) A Participant has been determined by the Committee to have suffered a Disability, but the payments provided for by Section 6.4 have not all been made, (iii) A Participant has died, but the payments provided for by Section 6.5 have not all been made, or (iv) A Participant's employment with the Corporation has terminated, but the payment provided for by Section 6.7 has not been made. 6.10: Reduction of Payments. All payments under the Program shall be reduced by amounts the Corporation is required to withhold under applicable law. Section 7: Beneficiaries A Participant may at any time and from time to time prior to death designate one or more Beneficiaries to receive payments to be made following the Participant's death. If no such designation is on file with the Corporation at the time of a Participant's death, the Participant's Beneficiary shall be the beneficiary or beneficiaries named in the beneficiary designation most recently filed by the Participant with the Corporation under The Savings Plan for Employees of Union Carbide Corporation and Participating Subsidiary Companies. If the Participant has not effectively designated a beneficiary under such Savings Plan, or if no beneficiary so designated has survived the Participant, the Participant's Beneficiary shall be the beneficiary or beneficiaries named in the beneficiary designation most recently filed by the Participant with the Corporation under the 401(k) Opportunity Plan for Salaried Employees of Union Carbide Corporation. If the Participant has not effectively designated a beneficiary under either such Plan, or no beneficiary so designated has survived the Participant, the Participant's Beneficiary shall be the Participant's surviving spouse, or, if no spouse has survived the Participant, the estate of the deceased Participant. If an individual Beneficiary cannot be located for a period of one year following the Participant's death, despite mail notification to the Beneficiary's last known address, and if the Beneficiary has not made a written claim for benefits within such period to the Committee, the Beneficiary shall be treated as having predeceased the Participant. The Committee may require such proof of death and such evidence of the right of any person to receive all or part of the benefit of a deceased Participant as the Committee may consider to be appropriate. The Committee may rely upon any direction by the legal representatives of the estate of a deceased Participant, without liability to any other person. Section 8: General Provisions 8.1: Prohibition of Assignment or Transfer. Any assignment, hypothecation, pledge or transfer of a Participant's or Beneficiary's right to receive payments under the Program shall be null and void and shall be disregarded. 8.2: Program Not To Be Funded. The Corporation is not required to, and will not, for the purpose of funding the Program, segregate any monies from its general funds, create any trusts, or make any special deposits, and the right of a Participant or Beneficiary to receive a payment under the Program shall be no greater than the right of an unsecured general creditor of the Corporation. 8.3: Effect of Participation. Neither selection as an Eligible Employee, nor an election to participate or participation in the Program, shall entitle an Eligible Employee to receive a bonus award under the 1984 Plan, or affect the Corporation's right to discharge an Eligible Employee or a Participant. 8.4: Medical Examinations. An Eligible Employee making an election under Section 5 may be required, for the Service Year as to which an election has been made, to submit to a physical examination in connection with that election. If an electing Eligible Employee refuses to submit to such an examination, the Committee may, in its discretion, on or before the applicable Date of Deferral, cancel the Employee's participation in the Program for that Service Year. 8.5: Communications To Be in Writing. All elections, requests and communications to the Corporation from Participants and Beneficiaries, and all communications to such persons from the Corporation, shall be in writing, and in such form and manner, and within such time, as the Corporation shall determine. 8.6: Absence of Liability. No officer, director or employee of the Corporation shall be personally liable for any act or omission to act, under the Program, of any other person, or, except in circumstances involving bad faith, for such officer's, director's or employee's own act or omission to act. 8.7: Titles for Reference Only. The titles given herein to Sections and subsections are for reference only and are not to be used to interpret the provisions of the Program. 8.8: New York Law To Govern. All questions pertaining to the construction, regulation, validity and effect of the provisions of the Program shall be determined in accordance with New York law. 8.9: Amendment. The Corporation may at any time amend the Program, as set forth herein, but no amendment may be adopted which alters the payments due Participants or Beneficiaries, or the times at which payments are due, without the consent of each Participant affected by the amendment and of each Beneficiary (of a then deceased Participant) affected by the amendment. EXHIBIT A Payment Table for 1984 and 1985 Service Years Approximate Rate of Return Age on the Annual 15-Year Calculated through Last Day of Payment for Each Receipt of the the Service $1,000 of Bonus Total of Last of 15 Year Award Deferred Annual Payments Annual Payments 40 2,721 40,815 12.75 41 2,445 36,675 12.80 42 2,194 32,910 12.85 43 1,968 29,520 12.90 44 1,763 26,445 12.95 45 1,578 23,670 13.00 46 1,411 21,165 13.05 47 1,261 18,915 13.10 48 1,126 16,890 13.15 49 1,004 15,060 13.20 50 895 13,425 13.25 51 797 11,955 13.30 52 709 10,635 13.35 53 630 9,450 13.40 54 559 8,385 13.45 55 or older 496 7,440 13.50 1984 UNION CARBIDE CASH BONUS DEFERRAL PROGRAM Table of Contents Section 1: Purpose 1 Section 2: Definitions 1 2.1: Beneficiary 1 2.2: Committee 1 2.3: Corporation 1 2.4: Date of Deferral 1 2.5: Disability 1 2.6: Employee and Eligible Employee 1 2.7: Participant 1 2.8: Retirement Date 2 2.9: Service Year 2 Section 3: Administration 2 Section 4: Eligibility To Participate 2 Section 5: Election To Participate 2 5.1: Participation in Program for Service Year 1984 2 5.2: Participation in Program for Service Years 1985 through 1988 2 5.3: Effective Date of Participation 3 Section 6: Payments to Participants and Beneficiaries 3 6.1: Normal Payments 3 6.2: Alternate Payments 3 6.3: Payment Dates of Annual Payments after the Initial Payment 4 6.4: Payments upon Disability 4 6.5: Payments upon Death 4 6.6: Committee's Right To Commute Annual Payments in respect of One or More Service Years 4 6.7: Payment upon Termination of Employment 5 6.8: Payments upon Program Termination 5 6.9: Meaning of "already become entitled to payment" 6 6.10: Reduction of Payments 6 Section 7: Beneficiaries 6 Section 8: General Provisions 7 8.1: Prohibition of Assignment or Transfer 7 8.2: Program Not To Be Funded 7 8.3: Effect of Participation 7 8.4: Medical Examinations 7 8.5: Communications To Be in Writing 7 8.6: Absence of Liability 7 8.7: Titles for Reference Only 8 8.8: New York Law To Govern 8 8.9: Amendment 8 EX-10 8 Exhibit 10.5.2 AMENDMENT TO THE 1984 UNION CARBIDE CASH BONUS DEFERRAL PROGRAM The 1984 Union Carbide Cash Bonus Deferral Program (the "Plan") is hereby amended as follows: 1. The following paragraph is to be added to Section 8 of the Plan: "8.10. At any time prior to the Date of Deferral for a Service Year under the Program, the Committee shall have the right in its sole discretion to determine that no bonus awards for that Service Year shall be deferred in payment, and such determination shall be applicable to all Eligible Employees designated by the Committee whether or not such Eligible Employees have theretofore elected to defer payment of any part of all of any bonus award for that Service Year." 2. The amendment contained herein shall be effective as of January 1, 1986. UNION CARBIDE CORPORATION By:/s/ R.V. Welty Vice President ATTEST:/s/ J. Macdonald ASSISTANT SECRETARY EX-10 9 Exhibit 10.6.1 EQUALIZATION BENEFIT PLAN FOR PARTICIPANTS OF THE RETIREMENT PROGRAM PLAN FOR EMPLOYEES OF UNION CARBIDE CORPORATION AND ITS PARTICIPATING SUBSIDIARY COMPANIES As Amended Through March 27, 1985 EQUALIZATION BENEFIT PLAN FOR PARTICIPANTS OF THE RETIREMENT PROGRAM PLAN FOR EMPLOYEES OF UNION CARBIDE CORPORATION AND ITS PARTICIPATING SUBSIDIARY COMPANIES General This is an Equalization Benefit Plan for the participants of the Retirement Program Plan for Employees of Union Carbide Corporation and Its Participating Subsidiary Companies who retire, or who have retired, under the said Retirement Program Plan and the spouses of such participants. This Plan is completely separate from the Retirement Program Plan for Employees of Union Carbide Corporation and Its Participating Subsidiary Companies and is not funded or qualified for special tax treatment under the Internal Revenue Code. The purpose of this Plan is to restore retirement benefit payments to those participants, and to the spouses of such participants, who retire under the Retirement Program Plan for Employees of Union Carbide Corporation and Its Participating Subsidiary Companies, and whose retirement benefits are, or will be, reduced by the limitations imposed by Section 415 of the Internal Revenue Code, as from time to time amended. ARTICLE I Benefits Any participant in the Retirement Program Plan for Employees of Union Carbide Corporation and Its Participating Subsidiary Companies (the "Retirement Program Plan") who retires or who has retired under the Retirement Program Plan, or such participant's spouse, shall be entitled to a benefit, payable hereunder in accordance with Article II of this Plan, equal to the excess, if any, of (a) the amount of such participant's or surviving spouse's annual benefit under the Retirement Program Plan computed under the provisions of the Retirement Program Plan without regard to the limitations of Section 415 of the Internal Revenue Code over (b) the amount of such participant's or surviving spouse's annual benefit actually payable for each year under the Retirement Program Plan computed under the provisions of the Retirement Program Plan and subject to the above mentioned limitations of Section 415 of the Internal Revenue Code. Benefits payable under this Plan shall be payable to a participant and the participant's spouse in the same manner and subject to all the same options, conditions, privileges and restrictions as are applicable to the benefits payable to a participant or to a spouse of a participant under the Retirement Program Plan. ARTICLE II The benefits under this Plan shall become payable when a participant retires and begins to receive payments or to a retired participant or spouse receiving payments under the Retirement Program Plan, and shall be payable in the same manner and at the same time as the participant's or spouse's benefits under the Retirement Program Plan are paid. The Corporation may amend or terminate this plan at any time, but any such amendment or termination shall not adversely affect the rights of any participant or spouse then receiving benefits, or the spouse of any participant then receiving benefits under this Plan, or the rights of any employee who is eligible to receive a Vested Retirement Benefit under the Retirement Program Plan. EX-10 10 Exhibit 10.7.1 April 1, 1990 SUPPLEMENTAL RETIREMENT INCOME PLAN As Amended Through November 30, 1988 SUPPLEMENTAL RETIREMENT INCOME PLAN General This is a supplemental retirement income plan for participants in the Retirement Program Plan who are also eligible to participate in designated incentive compensation plans of Union Carbide Corporation. This plan has been established primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. Specifically, the purpose of this plan is to provide a retirement benefit, determined without regard to Code Section 415 or Code Section 401(a)(17), equal to the excess of the retirement benefit which would be provided by the Retirement Program Plan if (a) average monthly compensation included deferred cash bonuses awarded under designated incentive compensation plans, and (b) all cash bonuses, whether deferred or not, were averaged separately from base compensation, and the Equalization Benefit Plan, over the retirement benefit actually provided by the Retirement Program Plan and the Equalization Benefit Plan. This plan is completely separate from the Retirement Program Plan and the Equalization Benefit Plan, is unfunded, and is not qualified for special tax treatment under the Internal Revenue Code. ARTICLE I Eligibility Section 1. An employee, or the survivor of an employee who has not declined the coverage of a survivor's benefit, will be eligible to receive Supplemental Retirement Income under this plan, provided that, on or after the date on which this plan is approved by the Board of Directors of the Corporation, such employee: (a) has received (or has been awarded and receipt has been deferred) at least one Bonus, and either (b) dies while in the service of the Corporation or a subsidiary of the Corporation which is then participating in the Retirement Program Plan, provided that such employee's survivor is eligible to receive a survivor's benefit under the Retirement Program Plan, or (c) termination from employment with the Corporation or said subsidiary and is eligible to receive a pension benefit or a disability benefit under the Retirement Program Plan. Section 2. An employee, or the survivor of an employee who has not declined the coverage of a survivor's benefit, will also be eligible to receive Supplemental Retirement Income under this plan if such employee receives compensation in excess of the compensation which may be considered by the Retirement Program Plan under Code Section 401(a)(17). ARTICLE II Amount of Supplemental Retirement Income Section 1. The monthly amount of Supplemental Retirement Income payable to an employee will be the excess, if any, of (1) the employee's monthly retirement income, as determined under section 2, over (2) the employee's monthly pension under the Retirement Program Plan and the Equalization Plan. Section 2. The amount of monthly retirement income payable to an eligible employee shall be computed by using the applicable formula provided in Article V of the Retirement Program Plan except that average monthly compensation shall for this purpose be equal to an amount determined under section 3 of Article II of this plan, and shall be determined without regard to the limitation of Code Section 401(a)(17). Section 3. An employee's average monthly compensation shall be computed in the following manner: (a) For employees who retire or die prior to April 27, 1983, average monthly compensation shall be computed by taking the larger of: (i) 1/36 of base salary and Bonuses related to the three full calendar years in which these combined amounts were largest during the 10 full calendar years next preceding the date of death or retirement or (ii) 1/36 of the sum of (a) the base salary for the 36 full calendar months next preceding the date of death or retirement; provided that for purposes of this calculation the base salary received in any calendar month within the third preceding calendar year shall be the total compensation received in such year divided by the number of months worked in such year and (b) the Bonuses related to the three full calendar years next preceding the date of death or retirement. (b) For employees who retire or die on or after April 27, 1983, but prior to February 22, 1984, average monthly compensation shall be computed by determining the sum of the following amounts: (i) the larger of: (I) 1/36 of base salary related to the three full calendar years in which such salary was largest during the 10 full calendar years next preceding the date of death or retirement or (II) 1/36 of base salary for the 36 full calendar months next preceding the date of death or retirement calculated in the manner described under Section 3(a)(ii) above; and (ii) 1/36 of the employee's Bonuses related to the three full calendar years in which such Bonuses were the largest during the five full calendar years next preceding the date of death or retirement; provided, that if it would produce a larger benefit under the plan, then payments under the plan shall be computed in accordance with subpart (a) of this Section for any participant who received a Bonus related to a year prior to 1983 who dies or retires prior to January 1, 1993. (c) For employees who retire or die on or after February 22, 1984, average monthly compensation shall be computed by determining the sum of the following amounts (or shall be computed in accordance with subpart (a) of this Section if an employee is eligible for such computation and such computation produces a larger benefit under the plan): (i) the larger of: (I) 1/36 of base salary related to the three full calendar years in which such salary was largest during the 10 full calendar years next preceding the date of death or retirement or (II) 1/36 of base salary for the 36 full calendar months next preceding the date of death or retirement calculated in the manner described under Section 3(a)(ii) above; and (ii) 1/36 of the employee's Bonuses related to the three full calendar years in which such Bonuses were the largest during the 10 full calendar years next preceding the date of death or retirement provided, that for an employee retiring on or after January 1, 1988, the calendar years in which the employee was hired or terminates employment shall each be considered a full calendar year for the purposes of this clause (ii). (d) For purposes of the calculations under subparts (a), (b) and (c) of this Section, a Bonus will be related to the calendar year in which an employee performed the services for which the Bonus was paid irrespective of the calendar year in which the Bonus was awarded or paid. For purposes of the calculations under subparts (a), (b) and (c) of this Section, the amount of base salary received in any calendar month will be calculated in the same manner in which average monthly compensation used to compute pension benefits under the Retirement Program Plan is calculated (determined without regard to Incentive Compensation as defined therein). Section 4. If the Supplemental Retirement Income payable to an employee under this plan commences before the award to such employee of a Bonus (whether or not paid) which may be used to determine average monthly compensation under Section 3 of this Article II, the monthly amount of Supplemental Retirement Income payable hereunder shall be recalculated after such Bonus is awarded (whether or not paid). The monthly amount of Supplemental Retirement Income resulting from said recalculation shall be paid commencing in or before the third calendar month after the month in which such Bonus is awarded, provided that the first monthly payment of such recalculated Supplemental Retirement Income shall be increased to reflect any prior underpayment of Supplemental Retirement Income resulting from the failure to include such Bonus in the initial calculation of Supplemental Retirement Income. Section 5. For purposes of calculating the amount of an employee's Supplemental Retirement Income pursuant to Section 1 of this Article II, the amount of an employee's monthly retirement income and monthly pension under the Retirement Program Plan and the Equalization Benefit Plan shall be determined without any adjustment on account of (i) a Survivor's Benefit or (ii) an election to receive level retirement income. Section 6. If an employee does not decline the coverage of a survivor's benefit, the monthly amount of Supplemental Retirement Income which such employee would otherwise have received shall be reduced by applying the same factor used in the Retirement Program Plan in connection with survivor's benefits. Section 7. The monthly amount of Supplemental Retirement Income payable to the eligible survivor of an employee shall be calculated in the same manner that such survivor's benefit is calculated under the Retirement Program Plan. ARTICLE III Vesting Section 1. Subject to Section 4 of Article IV, an employee will be vested in such employee's right to receive Supplemental Retirement Income under the plan in the same manner and to the same extent as provided under the Retirement Program Plan. Once an employee has become vested, all of such employee's rights to receive Supplemental Retirement Income under this Plan shall be nonforfeitable. ARTICLE IV Payments Section 1. Supplemental Retirement Income shall be paid monthly to an employee or his survivor commencing with the month such employee or his survivor commence benefits under the Retirement Program Plan, and shall cease or be suspended at the same time the employee or his survivor cease or have suspended benefits under the Retirement Program Plan. However, Supplemental Retirement Income shall in no event be payable after the death of an employee who has declined the coverage of a survivor's benefit. Section 2. Unless otherwise elected, Supplemental Retirement Income payable under this plan shall include the coverage of a survivor's benefit. A survivor's benefit payable from this plan shall be paid to that person designated to receive a survivor's benefit under the Retirement Program Plan. Section 3. Supplemental Retirement Income shall be received in the same form, and with the same actuarial adjustments, as the participant is receiving distributions from the Retirement Program Plan. Section 4. If the Compensation and Management Development Committee of the Board of Directors determines, after a hearing, that an employee who is eligible to receive or is receiving Supplemental Retirement Income has engaged in any activities which, in the opinion of that Committee, are detrimental to the interests of, or are in competition with, this Corporation or any of its subsidiaries, such Supplemental Retirement Income shall thereupon be terminated. ARTICLE V Miscellaneous Section 1. The Compensation and Management Development Committee of the Board of Directors shall administer this plan. The Committee may adopt such rules as it may deem necessary for the proper administration of this plan and its decision in all matters involving the interpretation and application of the plan shall be final, conclusive, and binding. Section 2. The Corporation may amend or terminate this plan at any time, but any such amendment or termination shall not adversely affect the rights of any participant or spouse then receiving benefits, or the spouse of any participant then receiving benefits under this plan, or the vested rights of any employee whose rights have vested. Section 3. Except to the extent required by law, no assignment of the rights and interests of an employee or survivor under this plan will be permitted nor shall such rights be subject to attachment or other legal processes for debts. Section 4. "Corporation" as used in this plan means Union Carbide Corporation. Section 5. "Retirement Program Plan" as used in this plan means the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies. Section 6. "Equalization Benefit Plan" as used in this Plan means the Equalization Benefit Plan for Participants of the Retirement Program Plan for Employees of Union Carbide Corporation and Its Participating Subsidiary Companies, the purpose of which is to restore retirement benefit payments to those participants, and the spouses of such participants, whose retirement benefits are, or will be, reduced by Section 415 of the Internal Revenue Code, as from time to time amended. Section 7. "Bonus" as used in this plan means those annual cash bonuses paid under the 1984 Union Carbide Cash Bonus Plan, the 1979 Union Carbide Incentive Compensation Plan, the 1974 Union Carbide Incentive Program (exclusive of long term and multi-year bonus awards and bonus awards for a partial year of service) the 1989 Union Carbide Bonus Plan and the Union Carbide Mid-Management Incentive Plan and any cash bonuses awarded (whether or not paid) under any other incentive compensation plan designated by the Board of Directors (or such other plan as the Board may authorize the Compensation and Management Development Committee to designate). Section 8. For purposes of this plan an employee will be considered retired on the first day of the month following the last month in which such employee is employed. Section 9. The Corporation may satisfy all or any part of its obligation to provide benefits hereunder by purchasing, and distributing to a participant or survivor, an annuity from an insurance carrier to provide such benefits. EX-10 11 Exhibit 10.8.1 1992 STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS OF UNION CARBIDE CORPORATION Section 1: Purpose. The Purpose of the 1992 Stock Compensation Plan for Non-Employee Directors of Union Carbide Corporation (hereinafter referred to as the "Plan") is to enable the Corporation to pay part of the compensation of its non-employee Directors in shares of the Corporation's common stock. Section 2: Effective Date. This Plan shall be effective upon the approval of the Plan by the stockholders of the Corporation. Section 3: Administration. This Plan shall be administered by the Nominating Committee of the Board of Directors (hereinafter referred to as the "Committee"). The Committee may interpret the Plan, establish administrative regulations to further the purpose of the Plan and take any other action necessary to the proper operation of the Plan. All decisions and acts of the Committee shall be final and binding upon all Participants. Section 4: Participation. Each non-employee who is a Director of the Corporation on the Effective Date of the Plan or who thereafter becomes a Director of the Corporation shall be a Participant in the Plan (hereinafter referred to as the "Participant"). Section 5: Grant of Shares. On the Effective Date the Corporation will grant to each Participant shares of the Corporation's Common Stock (hereinafter referred to as the "Shares") in an amount equal to 200 times the number of full or partial calendar years that such Participant is eligible to serve as a Director between the Effective Date and December 31, 1996. On the date any other non-employee is elected a Director and becomes a Participant, the Corporation will grant to such Participant, Shares in an amount equal to 200 times the number of full or partial calendar years that such Participant is eligible to serve as a Director between said date of election and December 31, 1996. The grants of Shares, and the Shares granted, under this Plan are subject to the following: 5.1: The Shares granted to each Participant shall be compensation for services performed as a Director in each of the five consecutive calendar years beginning with 1992, such compensation to be at the rate of 200 Shares per calendar year. Subject to Subsections 5.4, 5.4.1 and 5.5, 200 of the total Shares granted to each Participant shall become non-forfeitable on January 1, 1993 and thereafter on each January 1 of the next four consecutive calendar years. For purposes of this Subsection 5.1, the period between the date a Participant becomes a Director and the following December 31 shall be deemed to be a calendar year, regardless of the date on which such Participant becomes a Director. 5.2: Each Participant shall have full rights to vote, and to receive dividends and special distributions on, the total number of the non-forfeitable Shares granted to such Participant. 5.3: Except as otherwise provided in Subsections 5.4, 5.4.1 and 5.5, none of the Shares granted to a Participant may be sold or transferred by the Participant until five years after the date on which such Shares become non-forfeitable. Until the termination of the restrictions on the transferability of the Shares, stock certificates representing the Shares granted to each Participant shall be held by the Corporation. 5.4: If a Participant ceases to be a Director on account of retirement from the Board under the Board's retirement policy for Directors or on account of death or disability, the Shares granted to such Participant which have not theretofore become non- forfeitable shall immediately become non-forfeitable, the restriction on transferability shall terminate and a stock certificate for the total number of Shares granted to such Participant shall be delivered to the Participant, or in the event of the Participant's death, to the Participant's Beneficiary. 5.4.1: In the event of a Change in Control of the Corporation, the Shares granted to each Participant which have not theretofore become non-forfeitable shall immediately become non-forfeitable, the restriction on transferability shall terminate and a stock certificate for the total number of Shares granted to such Participant shall be delivered to the Participant. For purposes of this Subsection 5.4.1, a Change in Control of the Corporation shall be deemed to occur if: (a) a Change in Control of the Corporation would be required to be reported in response to item 1(a) of the current Report of Form 8-K, as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Corporation is then subject to such reporting requirement; (b) there shall be consummated (A) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation's common stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of the Corporation's common stock immediately prior to the merger have the same proportion and ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation, provided, that the divestiture of less than substantially all of the assets of the Corporation in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin-off, sale of the stock or merger of a subsidiary or otherwise, shall not constitute a Change in Control; (c) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act (A) becomes the "beneficial owner" as defined in Rule 13d- 3 under the Exchange Act of more than 20% of the then outstanding voting securities of the Corporation, otherwise than through a transaction or transactions arranged by, or consummated with the prior approval of, the Board of Directors of the Corporation; or (B) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Corporation or for any other matter or question more than 20% of the then outstanding voting securities of the Corporation; or (d) during any period of twenty-four consecutive months (not including any period prior to the adoption of this Agreement), Present Directors and/or New Directors cease for any reason to constitute a majority of the Board of Directors of the Corporation. For purposes of this Subsection 5.4.1, "Present Directors" shall mean individuals who at the beginning of such consecutive twenty-four month period were members of the Board and "New Directors" shall mean any director whose election by the Board of Directors of the Corporation or whose nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the Directors then still in office who were Present Directors or New Directors. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to Subparagraph 5.4.1(c), above, solely because twenty percent (20%) or more of the combined voting power of the Corporation's then outstanding securities is acquired by one or more employee benefits plans maintained by the Corporation. However, a transaction or transactions described in Subparagraphs 5.4.1(a), 5.4.1(b), or 5.4.1(c), arranged by, or consummated with the prior approval of, a majority of the Present Directors and New Directors, shall not be deemed a Change in Control. 5.5: If a Participant ceases to be a Director due to any other reason, the number of Shares of such Participant which theretofore had become non-forfeitable shall be increased by adding thereto one-twelfth of the number of Shares which would have become non-forfeitable on the next January 1 for each complete month that such Participant was a Director in the calendar year in which such Participant ceased to be a Director, the restriction on the transferability of the total of the non- forfeitable Shares of such Participant shall terminate and a stock certificate for the total of the non-forfeitable Shares of such Participant shall be delivered to such Participant. The remaining Shares that had been granted to such Participant shall be forfeited and shall revert to the Corporation. 5.6: On each date that an amount of the Shares granted to a Participant becomes non-forfeitable, a Share Payment shall be made to such Participant (or the Participant's beneficiary in the event of death) in cash in an amount equal to such Participant's federal, foreign or commonwealth income tax liability with respect to the non-forfeitable portion of the Shares and the amount of the Share Payment, based on the maximum applicable federal, foreign or commonwealth ordinary income tax rates for individuals in effect on the date such portion of the Shares granted to such Participant becomes non-forfeitable. Section 6: Beneficiary. A Participant may file with the Committee a written designation of a beneficiary, on such form as may be prescribed by the Committee, to receive any Shares or Share Payments that become deliverable to the Participant pursuant to the Plan as a result of the Participant's death. A Participant may, from time to time, amend or revoke a designation of beneficiary. If no designated beneficiary survives the Participant, the executor or administrator of the Participant's estate shall be deemed to be the Participant's beneficiary. Section 7: Amendment, Suspensions or Termination. The Board of Directors may amend, suspend or terminate the Plan, but no such amendment, suspension or termination shall (i) increase the number of Shares that may be granted to any Participant under this Plan, (ii) increase the rate at which the Shares become non-forfeitable or (iii) alter or impair the rights of a Participant to receive the Shares granted under the Plan; provided, however, that the Plan may not be amended more than once every six months other than to comply with changes in the Internal Revenue Code of 1986, as amended, or any rules or regulations promulgated thereunder. Section 8: Miscellaneous. 8.1: Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any Director for re-election by the Corporation's stockholders. 8.2: Shares granted under the Plan may be newly-issued shares or treasury shares which theretofore have been issued and reacquired by the Corporation. 8.3: Shares granted pursuant to the Plan and payments made under Section 5 of the Plan shall be in addition to any annual retainer, attendance fees or other compensation payable to a Participant. 8.4: In the event of any change in capital, shares of capital stock, or any special distribution to the stockholders, the Board of Directors shall make equitable adjustments in the number of Shares that have been, or thereafter may be, granted to Participants. 8.5: The Plan shall be interpreted in accordance with, and the enforcement of the Plan shall be governed by, the laws of the State of New York. EX-10 12 Exhibit 10.12.2 FIRST AMENDMENT TO THE BENEFITS PROTECTION TRUST AGREEMENT BY AND BETWEEN UNION CARBIDE CORPORATION AND MANUFACTURERS HANOVER TRUST COMPANY The Benefits Protection Trust Agreement dated August 1, 1989 between Union Carbide Corporation and Manufacturers Hanover Trust Company, as Trustee, is hereby amended as follows: 1. Schedule 2 to the Trust Agreement is hereby amended by adding the Union Carbide Corporation Non-Employee Directors' Retirement Plan thereto. 2. The provisions of this First Amendment shall be effective as of October 23, 1991. UNION CARBIDE CORPORATION By: /s/ M.A. Kessinger Title: Vice President Human Resources Date: October 23, 1991 MANUFACTURERS HANOVER TRUST COMPANY, AS TRUSTEE By: /s/ Geoffrey D. Tripp Title: Vice President Date: October 24, 1991 EX-10 13 Exhibit 10.17.2 FIRST AMENDMENT TO THE UNION CARBIDE COMPENSATION DEFERRAL PROGRAM The Union Carbide Compensation Deferral Program (the "Plan") is hereby amended as follows: 1. The last sentence of Section 2.27 of the Plan is amended in its entirety to read as follows: "The value of the Corporation's common stock for purposes of this Section 2.27 with respect to any relevant date of determination shall be determined in the same manner as provided in the Savings Program." 2. The provisions of this First Amendment shall be effective as of January 1, 1995. UNION CARBIDE CORPORATION By: /s/ M.A. Kessinger EX-10 14 Exhibit 10.17.3 THIRD AMENDMENT TO THE UNION CARBIDE COMPENSATION DEFERRAL PROGRAM The Union Carbide Compensation Deferral Program (the "Plan") is hereby amended as follows: 1. Section 6.4: of the Plan is hereby amended in its entirety to read as follows: "6.4: Payment Medium. All payments under this Program with respect to amounts which (i) at the time of such payment were accruing at the Fixed Income Rate, or an Applicable Equity Investment Fund Rate, or (ii) at the time of such payment, if such payment is made before December 31, 1996, were accruing at either the UCC Stock Value Rate or the UCC Discounted Stock Value Rate, shall be made in U.S. dollars. Effective for any payments made to a Participant who is or has been an executive officer within the meaning of the Exchange Act on or after December 31, 1996, with respect to amounts which were accruing under either the UCC Stock Value Rate or the UCC Discounted Stock Value Rate, such payment shall be made in shares of common stock of the Corporation." 2. Section 6.5 of the Plan is hereby amended in its entirety to read as follows: "6.5: Reduction of Payments; Share Withholding. (a) All payments under this Program shall be reduced by any and all amounts that the Corporation is required to withhold pursuant to applicable law. (b) In order to enable the Corporation to meet any applicable federal, state or local tax withholding requirements, a Participant (or Beneficiary) who is receiving payment in shares of common stock of the Corporation, may elect to have the Corporation withhold shares that would otherwise be delivered to such Participant, or by delivering to the Corporation other shares of common stock of the Corporation owned by the Participant. The value of any such shares of common stock to be withheld by the Corporation, or so delivered to the Corporation, shall be the mean of the high and low prices of the common stock of the Corporation as reported in the New York Stock Exchange - Composite Transactions on the date of payment." 3. The provisions of this Third Amendment shall be effective as of December 31, 1996. As hereby amended, the Union Carbide Compensation Deferral Program shall continue in full force and effect. UNION CARBIDE CORPORATION By: /s/ M.A. Kessinger EX-11 15 EXHIBIT 11 UNION CARBIDE CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1996 (In millions of dollars except per share amounts) Year Ended December 31, 1996 1995 Earnings Per Share - Primary Income (loss) from continuing operations $ 593 $ 925 Less: Preferred stock dividend 13 13 Net income (loss) from continuing operations for primary income calculation 580 912 Income from discontinued operations - - Cumulative effect of accounting changes - - Net income (loss) - common stockholders $ 580 $ 912 Weighted average number of common and common equivalent shares applicable to primary earnings per share calculation Weighted average number of shares outstanding 131,029,621 137,219,676 Dilutive effect of stock options 4,492,283 4,443,980 135.521.904 141,663,656 Earnings per share - primary Income (loss) from continuing operations $ 4.28 $ 6.44 Discontinued operations - - Cumulative effect of accounting changes - - Net income (loss) - common stockholders $ 4.28 $ 6.44 Earnings Per Share Assuming Full Dilution Income (loss) from continuing operations $ 593 $ 925 Plus: Interest on convertible debentures (net of taxes) - - Less: Additional ESOP contribution resulting from assumed conversion of preferred stock 1 1 Income (loss) from continuing operations for fully diluted income calculation 592 924 Income from discontinued operations - - Cumulative effect of accounting changes - - Net income (loss) for fully diluted income calculation $ 592 $ 924 Weighted average number of common and common equivalent shares applicable to fully diluted earnings per share calculation Weighted average number of shares outstanding 131,029,621 137,219,676 Dilutive effect of stock options 4,492,283 4,819,502 Shares issuable upon conversion of UCC convertible debentures - - Shares issuable upon conversion of UCC convertible preferred stock 16,120,754 16,341,367 151,642,658 158,380,545 Per share assuming full dilution Income (loss) from continuing operations $ 3.90 $ 5.83 Discontinued operations - - Cumulative effect of accounting changes - - Net income (loss) $ 3.90 $ 5.83 * Fully diluted per share amounts are not presented in the consolidated statements of income where amounts are antidilutive. Fully diluted per share amounts are shown equal to primary per share amounts in the Selected Financial Data on pages 20 through 21 of the 1996 annual report to stockholders where amounts are antidilutive.
UNION CARBIDE CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1996 (In millions of dollars except per share amounts) Year Ended December 31, 1994 1993 Earnings Per Share - Primary Income (loss) from continuing operations $ 389 $ 165 Less: Preferred stock dividend 13 13 Net income (loss) from continuing operations for primary income calculation 376 152 Income from discontinued operations - - Cumulative effect of accounting changes - (97) Net income (loss) - common stockholders $ 376 $ 55 Weighted average number of common and common equivalent shares applicable to primary earnings per share calculation Weighted average number of shares outstanding 149,904,755 147,821,255 Dilutive effect of stock options 4,270,033 3,549,905 154,174,788 151,371,160 Earnings per share - primary Income (loss) from continuing operations $ 2.44 $ 1.00 Discontinued operations - - Cumulative effect of accounting changes - (0.64) Net income (loss) - common stockholders $ 2.44 $ 0.36 Earnings Per Share Assuming Full Dilution Income (loss) from continuing operations $ 389 $ 165 Plus: Interest on convertible debentures (net of taxes) - 4 Less: Additional ESOP contribution resulting from assumed conversion of preferred stock 1 1 Income (loss) from continuing operations for fully diluted income calculation 388 168 Income from discontinued operations - - Cumulative effect of accounting changes - (97) Net income (loss) for fully diluted income calculation $ 388 $ 71 Weighted average number of common and common equivalent shares applicable to fully diluted earnings per share calculation Weighted average number of shares outstanding 149,904,755 147,821,255 Dilutive effect of stock options 4,439,006 4,244,866 Shares issuable upon conversion of UCC convertible debentures - 4,482,931 Shares issuable upon conversion of UCC convertible preferred stock 16,542,644 16,796,109 170,886,405 173,345,161 Per share assuming full dilution Income (loss) from continuing operations $ 2.27 $ 0.97 Discontinued operations - - Cumulative effect of accounting changes - (0.56) Net income (loss) $ 2.27 $ 0.41 * * Fully diluted per share amounts are not presented in the consolidated statements of income where amounts are antidilutive. Fully diluted per share amounts are shown equal to primary per share amounts in the Selected Financial Data on pages 20 through 21 of the 1996 annual report to stockholders where amounts are antidilutive. UNION CARBIDE CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1996 (In millions of dollars except per share amounts) Year Ended December 31, 1992 Earnings Per Share - Primary Income (loss) from continuing operations $ 119 Less: Preferred stock dividend 17 Net income (loss) from continuing operations for primary income calculation 102 Income from discontinued operations 67 Cumulative effect of accounting changes (361) Net income (loss) - common stockholders $ (192) Weighted average number of common and common equivalent shares applicable to primary earnings per share calculation Weighted average number of shares outstanding 129,723,738 Dilutive effect of stock options 2,625,735 132,349,473 Earnings per share - primary Income (loss) from continuing operations $ 0.76 Discontinued operations 0.51 Cumulative effect of accounting changes (2.73) Net income (loss) - common stockholders $(1.46) Earnings Per Share Assuming Full Dilution Income (loss) from continuing operations $ 119 Plus: Interest on convertible debentures (net of taxes) 17 Less: Additional ESOP contribution resulting from assumed conversion of preferred stock 7 Income (loss) from continuing operations for fully diluted income calculation 129 Income from discontinued operations 67 Cumulative effect of accounting changes (361) Net income (loss) for fully diluted income calculation $ (165) Weighted average number of common and common equivalent shares applicable to fully diluted earnings per share calculation Weighted average number of shares outstanding 129,723,738 Dilutive effect of stock options 4,038,716 Shares issuable upon conversion of UCC convertible debentures 15,774,784 Shares issuable upon conversion of UCC convertible preferred stock 14,655,935 164,193,173 Per share assuming full dilution Income (loss) from continuing operations $ 0.78 Discontinued operations 0.41 Cumulative effect of accounting changes (2.20) Net income (loss) $(1.01)* * Fully diluted per share amounts are not presented in the consolidated statements of income where amounts are antidilutive. Fully diluted per share amounts are shown equal to primary per share amounts in the Selected Financial Data on pages 20 through 21 of the 1996 annual report to stockholders where amounts are antidilutive.
EX-13 16 Exhibit 13 UNION CARBIDE CORPORATION 1996 ANNUAL REPORT (The cover depicts two partially overlapping hexagons. One of them is labeled "Specialties & Intermediates" and the other is labeled "Basic Chemicals and Plastics".) Contents Financial Highlights - Summary comparison of 1996 and 1995 results 1 Chairman's Letter - Bill Joyce on 1996 performance, strategic objectives and long-term outlook 2 Principal Products & Services - Description of Specialties & Intermediates and Basic Chemicals & Polymers segments, including competitors 6 - Partnerships and Corporate Joint Ventures 8 Chemical Glossary - Chemicals and polymers central to Carbide's businesses 9 Management's Discussion & Analysis - Results of Operations 10 Liquidity, Capital Resources and Other Financial Data 18 Selected Financial Data 20 Quarterly Data 21 Financial Statements - Consolidated Statement of Income 22 Consolidated Balance Sheet 23 Consolidated Statement of Cash Flows 24 Consolidated Statement of Stockholders' Equity 25 Notes to Financial Statements 26 Management's Statement of Responsibility for Financial Statements 42 Independent Auditors' Report 42 Corporate Information - Important dates, names, addresses, telephone numbers and other information 43 Directors and Corporate Officers - List of directors, corporate officers and other senior management 44 Around the World - Listing of worldwide locations Inside Back Cover Definition of Terms - Definition of nonchemical terms Inside Back Cover Cautionary statement for the purposes of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995: All statements in this annual report that do not reflect historical information are forward looking statements. These include statements about the chemical markets in 1997; cost reduction targets; the corporation's share price; earnings and profitability targets; development, production and acceptance of new products and process technologies; ongoing and planned capacity additions and expansions; joint ventures, and Management's Discussion & Analysis. Important factors that could cause actual results to differ materially from those discussed in such forward looking statements include the supply/demand balance for the corporation's products, customer inventory levels, competitive pricing pressures, feedstock costs, changes in industry production capacities and operating rates, competitive technology positions and failure to achieve the corporation's cost reduction targets or complete construction projects on schedule. Financial Highlights Dollar amounts in millions (except per share figures) 1996 1995 % Change For the Year - Net sales - $ 6,106 $ 5,888 4 Operating profit - 921 1,348 (32) Net income - common stockholders - 583 915 (36) Per common share - primary - 4.28 6.44 (34) Per common share - fully diluted - 3.90 5.83 (33) Cash dividends on common stock - 99 103 (4) Per common share - 0.75 0.75 - Capital expenditures - 721 542 33 At Year-End - Total assets - $ 6,546 $ 6,256 5 Total debt - 1,599 1,323 21 Stockholders' equity - 2,114 2,045 3 Per common share - 16.72 15.14 10 Common shares outstanding (thousands) - 126,440 135,108 (6) Common stockholders of record - 51,023 53,648 (5) Employees - 11,745 11,521 2 At a Glance Union Carbide Corporation is a worldwide chemicals and polymers company. The company possesses many of the industry's most advanced process and catalyst technologies and some of the most cost efficient large-scale production facilities in the world. In addition to its consolidated operations, the corporation participates in partnerships and corporate joint ventures whose combined revenues totaled more than $4.1 billion in 1996. Union Carbide operates two business segments: Specialties & Intermediates, which accounted for 70 percent of revenues and 81 percent of operating profit in 1996, produces a broad range of products, including specialty polyolefins used in wire and cable insulation; surfactants for industrial cleaners; catalysts for the manufacture of polymers; acrolein and derivatives; water soluble polymers; cellulose-, glucose- and lanolin-based materials for personal care products; specialty coatings; acrylic and vinyl acrylic latex used in paints and adhesives; solvents; vinyl acetate monomer, and ethylene oxide derivatives. This segment also licenses olefins-based technologies and offers other specialized technology licensing and services. Basic Chemicals & Polymers converts various hydrocarbon feedstocks, principally liquefied petroleum gases and naphtha, into the basic building- block chemicals ethylene and propylene (also known as olefins) that are in turn converted to polyethylene (the world's most widely used plastic), polypropylene (one of the world's fastest-growing plastics), and ethylene oxide and ethylene glycol (used to make polyester fiber, film and resin, and automotive antifreeze). This segment provides ethylene, propylene, ethylene oxide and ethylene glycol to the Specialties & Intermediates segment. Union Carbide's leading end markets as a percentage of sales are: Paints, coatings and adhesives 22% Packaging and consumer plastics 21% Wire and cable 12% Textile 9% Household and personal care 7% Automotive, including antifreeze 4% Agriculture and food 4% Oil and gas 2% Industrial cleaners 2% Good Progress in a Demanding Year (Contained within this section is a picture of William H. Joyce, Chairman, President and Chief Executive Officer.) I am pleased to report that our company had a good year in 1996, under market conditions that made a good year a real achievement. Had we been operating in similar market conditions just a few years ago, Carbide would almost certainly have lost money. Worldwide sales for 1996 rose 3.7 percent to $6.1 billion. Net income available to common stockholders of $583 million declined 36.3 percent compared to the record $915 million earned in 1995. Soaring raw material costs in 1996, and weak pricing in key products, drove variable margin as a percent of sales below even the very low levels reached at the bottom of the last chemical business cycle in 1993. Carbide's ability to earn $3.90 per fully diluted share in those circumstances confirms that our profit improvement program has been a huge success. We also maintained a strong balance sheet in 1996, and generated sufficient funds to invest for the future and buy back 12.8 million common shares, continuing a practice that has brought the total number of shares repurchased since 1993 to 42.3 million. Carbiders are proud of our profit improvement success, and rightly so, since it was their hard work and innovative thinking, and the work process improvements they engineered, that reduced costs, raised productivity and generated returns on invested capital that rank Carbide among the most profitable companies in our industry. We are nevertheless disappointed that solid performance in a demanding year was not reflected in the price of Carbide stock, which appreciated only 9 percent in 1996, closing the year at $40.88 per share ($47.00 at the close of business on Feb. 26, 1997). But we believe Carbide's value will be recognized once we demonstrate that our company can post superior results through all phases of the chemical cycle: that our Basic Chemicals & Polymers (BC&P) segment will not only be very profitable over the business cycle, but also break even in the worst year of the cycle; and, most important, that our much larger Specialties & Intermediates (S&I) segment can show a longer history of double digit earnings growth. Although the industry outlook is for commodity prices to begin weakening toward the end of 1997 as substantial additional capacity begins to come on line, Carbide will see increasing benefits over the course of the chemical cycle from our continuing, ambitious profit improvement initiatives and from our investments aimed at promoting the profitable growth of our less cyclical S&I segment. For the longer term, we also anticipate a strong contribution from our joint ventures on several continents, and from new businesses based on our chemical process technologies. One new business we think has excellent potential (ethylene propylene rubber) was well into start-up at this writing, while four others we've yet to announce are still in the development stage. We also completed the purchase, at the start of 1996, of the polypropylene business and assets of Shell Oil Company and expanded our polypropylene production facilities at Seadrift, Tex., and Norco, La. Polypropylene is one of the world's fastest-growing, large-volume plastics. Although growth is vitally important to our success, our solid position as a low-cost producer is fundamental. We are mindful that the success of our long-range strategy depends in large part on our ability to keep improving productivity in both our specialties and intermediates and our basic chemicals businesses. We have made considerable progress over the past several years, and we are planning a good deal more. In 1996 we passed the halfway mark - ahead of schedule - toward our announced target of $637 million of profit improvement by year-end 2000 (in then-current dollars) compared to costs in 1993, and we are looking for other opportunities to raise the target. Among the profit improvement projects completed during the year was Pathfinder, a project cutting across nearly all of our businesses. Pathfinder reduced our costs for delivering product to customers by about $85 million, a permanent annual saving that exceeded Pathfinder's target by nearly $5 million. Carbide also has moved aggressively to reduce the cost of energy at two Gulf Coast plants. A new cogeneration (steam and electric power) unit that went on line at our Texas City, Tex., plant in May has cut the plant's energy bill by some $50,000 a day. A $140 million cogeneration unit at our Taft, La., plant, under construction since October 1995 and scheduled to start-up in March 1997, will slash much more from energy costs. Through a combination of new technology and advantageous location, a new butanol unit in our Solvents, Intermediates and Monomers (SIM) business, built for 25 percent less than if prior technology had been used, achieved estimated annual savings of $4 million in operating and logistics costs in its first full year of operation. In commodity operations, a program of our Hydrocarbons group aimed at boosting the efficiency of Carbide's Gulf Coast olefins units is 70 percent of the way toward its $126 million a year profit improvement target. In this latest round of profit improvement initiatives we expect our S&I segment to enlarge its contribution to our target. And we shouldn't have to commit as much of those savings to lower prices as we did initially with the savings in our BC&P segment, since many chemical specialties and intermediates tend to compete less on price than on performance. That means more S&I savings can fall directly to the bottom line. S&I accounted for 70 percent of sales in 1996 and 81 percent of operating profit. Although segment performance fell short of our double digit earnings growth target for the first time in several years, we saw a number of important developments in 1996 that, along with a more determined effort to widen margins, should strengthen the businesses in this segment and create for them an even larger role in Carbide's overall financial performance. Among the developments: - - Industrial Performance Chemicals (IPC) introduced a line of remarkable new TRITON SP surfactants - chemicals used in industrial cleaners and metalworking fluids, and potentially as process aids in paper and textile manufacturing - that permit rapid separation of pollutants from process wastewater. Our new surfactants were the subject of the first industry partnership with the Environmental Protection Agency under its Environmental Technology Initiative for Chemicals, a nonregulatory alternative for managing environmental risk. - - Our plant at Seadrift, Tex., added 45 million pounds of capacity for producing butyl glycol ethers, raising our total worldwide capacity to more than 320 million pounds - the largest of any company. Butyl glycol ethers are used as solvents in industrial coatings and cleaners. - - UNIPOL Systems licensees in South Korea, the Philippines and Saudi Arabia announced major expansions, as well as new UNIPOL Process facilities representing a total of 2.5 billion pounds of polyethylene and 1.2 billion pounds of polypropylene. Ten licensees, including 3 in China, started up UNIPOL polyethylene and polypropylene units during the year with combined capacities of nearly 2.1 billion pounds and 1.5 billion pounds, respectively. - - Our UCAR Emulsions Systems business began construction of a joint venture plant in China to manufacture latex for the growing paint industry in the Shanghai area. - - Amerchol Corporation, a Union Carbide subsidiary, began construction on the site of our plant in Guangdong, China, of a joint venture plant to manufacture cellulosic polymers to help meet the rapidly growing demand there for hair care and other personal care products. Amerchol started up a similar plant at Greensburg, La., to meet the growing worldwide demand for these products. - - IPC also began two major capital projects during the year, both at our Taft plant: a 330 million-pounds-per-year facility for producing our CARBOWAX polyethylene glycols and TERGITOL surfactants, and a 200 million-pounds-per- year facility for producing ethanolamines, used in detergents and personal care products, and in natural gas processing. - - SIM acquired a Brazilian producer of vinyl acetate monomer along with its 175 million-pounds-per-year plant, and started up a 330 million-pounds-per- year vinyl acetate unit in South Korea, part of a joint venture with BP Chemicals and Samsung Fine Chemicals Co. Vinyl acetate is used in the coatings and adhesives industries in the production of emulsion resins. Our BC&P segment also gained competitive strength in 1996. Among developments: - - Operating improvements at our Texas City plant resulted in an increase in refining capacity for higher glycols, along with productivity improvements and inventory reductions worth $7 million. - - We announced a major modernization of the olefins production unit at Taft that will increase ethylene capacity by 665 million pounds per year to 2.2 billion pounds and add new flexibility for switching feedstocks to gain maximum advantage from raw material price changes. We also made good progress in 1996 toward expanding the contribution of partnerships and joint ventures to Carbide's growth and profitability. We announced plans with Nova Corporation of Canada to jointly build and share the output of an expandable 2 billion-pounds-per-year olefins cracker in Alberta, scheduled for start-up in 2000. A new UNIPOL polyethylene plant to be built in Alberta at the same time would use Carbide's share of the olefins plant output for feedstock. In a new Asian venture, we signed a letter of intent with Petronas (the national oil company of Malaysia) to form a joint venture to build a major petrochemical complex in Malaysia scheduled for completion in 2000. The output of the joint venture would include ethylene glycol and a number of chemical specialties and intermediates, such as oxo alcohols and derivatives, ethanolamines and surfactants. The complex, which would have access to advantaged raw materials from nearby natural gas resources, would serve Southeast Asia, the world's fastest growing market for petrochemicals. And in August Carbide and Exxon Chemical announced an agreement to form a 50/50 joint venture to research, develop, market and license leading edge technologies and catalysts for the production of polyethylene. We expect the combination of Carbide's UNIPOL Process technology and Exxon's metallocene catalyst and operating technologies to set the worldwide standard for polyethylene production well into the next century. Construction of the EQUATE petrochemical complex, our Kuwait joint venture, continues on schedule toward midyear 1997 completion, and Polimeri Europa, our joint venture in Italy, made good progress with cost reduction efforts in a year when performance was hurt by very high raw material costs. Summing up, 1996 was a demanding year, but one in which we did well, gaining competitive strength and making substantial progress toward our target of becoming the low-cost, preferred supplier in all of our core businesses. Proud as we are of our progress, Carbiders know that advancing our business agenda must be accompanied by solid, responsible environmental and safety performance, and that is exactly what they delivered again in 1996. We marked our fifth consecutive year without a fatality or major process related accident, and we reduced key spills by 16 percent and reduced lost- workday injuries by 32 percent compared to 1995. We believe this record has a strong connection to the fact that in 1996 we completed implementing all 106 management practices of the industry's Responsible Care initiative, and that employees at all levels have accepted a high degree of personal accountability for meeting our Responsible Care goals. (For more information about our environmental and safety performance, write to Carbide's Public Affairs Department for our Responsible Care progress report.) I would like to note that in addition to our solid business and Responsible Care performance, Carbide, and the chemical industry as a whole, again contributed to the U.S. balance of trade in 1996. Exports accounted for some 17 percent of sales from Carbide's U.S. production. Fair and open trade is important to us, and to the nation, and we hope the Administration and the Congress will keep trade high on their list of economic priorities. I am pleased to report that we have added two highly accomplished individuals to our board of directors, bringing total membership to 12: James M. Ringler, president and CEO of Premark International, Inc. was elected to the board in December, and Dr. Thomas P. Gerrity, dean of the Wharton School at the University of Pennsylvania, became a board member in February 1997. We welcome them and look forward to their contributions. William H. Joyce Feb. 26, 1997 (Within the preceding section, the following three phrases are set in larger type within colored ovals: - - Growth is vitally important, but our low-cost position is fundamental - - We made good progress toward expanding the contribution of partnerships and joint ventures - - Business progress must be accompanied by responsible environmental and safety performance) Principal Products & Services Customer Sales(a) (Dollar amounts in millions) 1996 1995 1994 S&I BC&P S&I BC&P S&I BC&P ($) 4,286 1,820 4,123 1,765 3,636 1,229 (%) 70 30 70 30 75 25 (a) After intersegment eliminations. See Note 5 to the financial statements. Operating Profit (Loss)(a) (Dollar amounts in millions) 1996 1995 1994 S&I BC&P S&I BC&P S&I BC&P ($) 742 162 709 444 634 (22) (%) 82 18 61 39 104 (4) (a) Excludes Other segment. See Note 5 to the financial statements. Specialties & Intermediates Segment Union Carbide's Specialty Polymers and Products group manufactures and markets numerous specialty products. Many of its technologies are targeted for sharply defined market segments. - Specialty Industrial Products produces acrolein and derivatives such as glutaraldehyde, a biocide; ethylidene norbornene (ENB), used in the production of ethylene propylene rubber; and specialty ketones. - Performance Polymers produces POLYOX water-soluble resins, used in personal care products, pharmaceuticals, inks and thermoplastics. It also produces polyvinyl acetate resins, used in chewing-gum resins, low-profile additives, NEULON polyester modifiers, fast-cure additives and pigmentable systems, and UCURE reactive modifiers. - Coating Materials reaches markets for paints, coatings, inks, substrates and other materials for magnetic tape, food and beverage packaging, plastics and orthopedic materials. Its products include CELLOSIZE hydroxyethyl cellulose (HEC); UCAR solution vinyl resins; TONE caprolactone-based materials; cycloaliphatic epoxides, including CYRACURE ultraviolet-curing products, and FLEXOL plasticizers. - Amerchol Corporation, a Union Carbide subsidiary, manufactures and sells a wide variety of cellulose-, glucose- and lanolin-based materials for personal care products. Major Competitors - Union Carbide's competitive position varies widely from one product/market segment to another. Competitors include a number of domestic and foreign companies, both diversified and specialized, including BASF, Hercules, Wacker, Solvay, DeGussa and National Starch & Chemical. UCAR Emulsion Systems products are used in interior and exterior house paints, adhesives and sealants. They include UCAR POLYPHOBE Rheology Modifiers (used to thicken or thin coatings) and UCAR latex products (acrylics and vinyl-acrylics that impart enhanced staining, weather and scrub resistance to paints, and acrylic latexes for caulks and sealants). Major Competitors - Rohm & Haas, Air Products, Reichhold Chemicals Specialty Polyolefins manufactures and markets worldwide a variety of performance polyolefin products. Chief among these are polyolefin-based compounds for sophisticated insulation, semiconductives, and jacketing systems for power distribution, telecommunications and flame-retardant wire and cable. Other Specialty Polyolefins products are used in adhesives, laminating film and flexible tubing. Major Competitors - AT Plastics, Borealis AS, Mitsui Petrochemical, Millennium Chemicals, Ube Industries UNIPOL Systems licenses UNIPOL Process technology, the most cost- efficient and versatile method of manufacturing polyethylene and polypropylene, to producers of these products worldwide. It also develops new process technology for the manufacture of other olefins-based polymers, such as ethylene propylene rubber, and sells catalysts to UNIPOL Process licensees worldwide. Major Competitors - BASF, British Petroleum, Mitsui Petrochemical, Montell Polyolefins, Phillips Chemicals. Industrial Performance Chemicals manufactures and sells a broad range of ethylene oxide derivatives and formulated glycol products for specialty applications. These include CARBOWAX polyethylene glycols, with a wide range of applications in pharmaceutical, personal care, household and industrial markets; ethanolamines, for detergents, personal care products and in natural gas conditioning and refining; ethyleneamines, for many industrial uses; TERGITOL and TRITON specialty and commodity surfactants for institutional and household cleaning products and other industrial applications; UCON fluids and lubricants, and alkyl alkanolamines for water-treating chemicals. Formulated glycol products include UCAR and UCAR ULTRA+ deicing and anti-icing fluids for the aviation industry, UCARTHERM and NORKOOL heat-transfer fluids, and gas- treating products, including UCARSOL and SELEXOL solvents. Major Competitors - BASF, Dow Chemical, Huntsman, Rhone-Poulenc Solvents, Intermediates and Monomers supplies one of the industry's broadest product lines of solvents, intermediates and monomers. Its products include aldehydes, acids and alcohols, including high-quality industrial-grade synthetic and fermentation ethanol; esters; glycol ethers (CARBITOL and CELLOSOLVE solvents); ketones, and monomers (vinyl acetate and acrylics for waterborne coatings). Principal customers are the paints and coatings industries, and many of SIM's products are also used widely in cosmetics and personal care preparations, adhesives, household and institutional products, drugs and pharmaceuticals, fuel and lube oil additives and agricultural products. The UNICARB System is a pollution reducing, supercritical fluid technology that can cut costs and reduce volatile organic compounds (VOCs) in spray-applied coatings by up to 80 percent. Major Competitors - Eastman Chemical, Hoechst Celanese, BASF, Shell Chemical Basic Chemicals & Polymers Segment Union Carbide's Hydrocarbons group manufactures about two thirds of the company's ethylene requirements and almost one third of its propylene requirements. Ethylene and propylene are the key raw materials for many of Union Carbide's businesses. Union Carbide is the world's leading producer of ethylene oxide and ethylene glycol. Ethylene oxide is a chemical intermediate primarily used in the manufacture of ethylene glycol, polyethylene glycol, glycol ethers, ethanolamines, surfactants and other performance chemicals and polymers. Ethylene glycol is used extensively in the production of polyester fiber, resin and film, automotive antifreeze and engine coolants, and aircraft anti- icing and deicing fluids. Other ethylene oxide-based glycol products include di-, tri-, and tetraethylene glycols, used as chemical intermediates and in dehydrating natural gas. Major Competitors - Dow Chemical, Huntsman, Occidental Chemical, Saudi Basic Industries, Shell Chemical Union Carbide is a leading manufacturer of polyethylene, the world's most widely used plastic. UNIPOL Polymers produces and markets linear low-, medium- and high-density polyethylenes, used in high-volume applications such as housewares, milk and water bottles, grocery sacks, trash bags, packaging, water and gas pipe, and FLEXOMER very low-density resins, used as a polymer modifier in other polyolefins and to produce flexible hose and tubing, frozen- food bags and stretch wrap. Major Competitors - Exxon Chemical, Dow Chemical, Mobil Chemical, Nova Chemicals, Phillips Chemicals Carbide's Polypropylene Resins operations manufacture and sell polypropylene, one of the world's large-volume, fastest-growing plastics. End use applications include carpeting and upholstery, apparel, packaging films, food containers, housewares and appliances and automobile interior trim and panels. Major Competitors - Montell Polyolefins, Amoco, Exxon Chemical, Fina, Huntsman For a summary of geographic segment data, see Note 5 to the financial statements. Partnerships and Corporate Joint Ventures The corporation has for many years participated in a number of businesses through partnerships and corporate joint ventures. These affiliations have enabled Union Carbide to combine its competitive strengths in technology, project engineering and operational know-how with complementary strengths of its partners. The most significant partnerships and corporate joint ventures of the Specialties & Intermediates segment include: UOP - this partnership with AlliedSignal Inc. is a leading worldwide supplier of process technology, catalysts, molecular sieves and adsorbents to the petrochemical and gas-processing industries. UOP has facilities in Mobile, Ala.; Anaheim and Eldorado Hills, Calif.; Des Plaines and McCook, Ill.; Shreveport, La.; Tonawanda, N.Y.; Shanghai, China; Reggio di Calabria, Italy, and Brimsdown, U.K. Nippon Unicar Company Limited - Japan-based producer of commodity and specialty polyethylene resins and specialty silicone products. This joint venture with Tonen Corporation has a facility in Kawasaki, Japan. Aspell Polymeres SNC - French producer of specialty polyethylenes. This partnership with Elf Atochem has a facility in Gonfreville, France. World Ethanol Company - this U.S.-based partnership with Archer Daniels Midland Company supplies ethanol worldwide. Asian Acetyls Co., Ltd. - South Korea-based producer of vinyl acetate monomers used in the production of emulsion resins by customers in the coatings and adhesives industries. This joint venture with BP Chemicals and Samsung Fine Chemicals Company has a facility in Ulsan, South Korea. The most significant partnerships and corporate joint ventures of the Basic Chemicals & Polymers segment include: Polimeri Europa S.r.l. - Europe-based producer of ethylene and polyethylene resins. This joint venture with EniChem S.p.A. of Italy has facilities at Dunkirk, France; Oberhausen, Germany; and Brindisi, Ferrara, Gela, Priolo and Ragusa, Italy. EQUATE Petrochemical Company K.S.C. - this joint venture with Petrochemical Industries Company and Boubyan Petrochemical Company, both of Kuwait, is building a world-scale petrochemicals complex in Shuaiba, Kuwait, for the manufacture of polyethylene and ethylene glycol, scheduled for completion at mid-year 1997. Petromont and Company Limited Partnership - Canada-based olefins and polyethylene resins producer owned jointly with Ethylec, a subsidiary of SGF in Quebec, Canada. This partnership has facilities at Montreal and Varennes, Canada. Alberta & Orient Glycol Company Limited - joint venture with Mitsui & Co., Ltd., Japan, and Far Eastern Textile Ltd., Taiwan. This Canada-based producer of ethylene glycol has a facility in Prentiss, Alberta, Canada. For a summary of partnership and corporate joint venture results for the past three years, see page 16 and Note 8 to the financial statements. Chemical Glossary Acrolein - chemical intermediate used mainly to produce glutaraldehyde, animal feed supplements and cycloaliphatic epoxides for coatings. Alcohols - chemicals, such as butanol, ethanol and isopropanol, that serve as solvents and intermediates for the manufacture of personal care products, pharmaceuticals, esters, ketones, monomers for latexes, herbicides, petroleum additives and synthetic lubricants. Biocide - chemical used to control or inhibit the growth of bacteria, algae, fungi and mold. Esters - chemical intermediates, such as ethyl acetate and butyl acrylate, made by reacting alcohols and acids. Esters are used in a wide range of solvent applications and as monomers. Ethanolamines - chemical intermediates made from ethylene oxide and ammonia. They are used in detergents, personal care and agricultural products, and in gas purification for the delivery of consistently high-quality natural gas to homes. Ethylene - reactive chemical made from natural gas or crude oil components. Ethylene is the starting material from which Carbide makes many of the company's chemical and polymer products. Ethyleneamines - chemical intermediates made from ethylene oxide or ethylene dichloride that are used in fuel, lubricants and motor oil additives, adhesives, wet strength paper resins inhibitors and epoxy curing agents. Ethylene glycol - chemical made from ethylene oxide and water. It is used to make polyester fiber, resin and film, and automotive antifreeze and engine coolants. Ethylene oxide - chemical made from ethylene and oxygen. It combines with other chemicals to produce a wide range of products, such as ethylene glycol, water soluble polymers for personal care products and surfactants for detergents and cleaning products. Glutaraldehyde - an acrolein derivative predominantly used as a biocide for applications such as industrial water treatment, the manufacture of paper, secondary oil recovery, and as a disinfectant and a sanitizer. Glycol ethers - solvents used in higher-technology coating applications, such as waterborne industrial finishes for the automotive market, and noncoating applications, such as in hard surface cleaners, military jet fuels and brake fluids. Ketones - chemicals, such as acetone, used as solvents for vinyl resins, industrial lacquers and pharmaceuticals, and as an intermediate for resins, dyes and rubber chemicals. Monomer - reactive chemical that can be converted into a polymer. For example, ethylene is a monomer that is made into polyethylene. Olefins - generic name for ethylene, propylene and other unsaturated hydrocarbons (carbon atoms with double bonds) made from components of crude oil or natural gas. Olefins are the starting material from which most of Union Carbide's chemical and polymer products are made. Oxo alcohols, aldehydes and acids - chemicals Carbide manufactures via its Oxo Process, such as butanol and propionic acid, which are used as chemical intermediates and industrial solvents. Polyethylene - world's most widely used plastic, made by reacting ethylene and other olefins to form polymers. Union Carbide uses its low-pressure UNIPOL Process technology to make most of its polyethylene. Polymer - chain or network made by linking monomer units, such as ethylene. All plastics are polymers. Polypropylene - one of the world's large-volume, fastest-growing plastics, made by reacting propylene and other olefins to form polymers. Union Carbide uses its low-pressure UNIPOL Process technology to make much of its polypropylene. Propylene - basic chemical made from crude oil and natural gas components. It is used as a starting material to produce many of Carbide's chemical and polymer products. Solvent - liquid chemical used to dissolve or absorb other chemicals. For example, ketones, esters, alcohols and glycol ethers are effective solvents commonly used in coatings. Surfactants - chemicals that increase the cleaning and wetting properties of household and industrial cleaners and detergents, textile wet processing and paper-processing products. Surfactants also are present in cosmetics, shampoos and other personal care products. Carbide makes its surfactants primarily from ethylene oxide and alcohols. Management's Discussion & Analysis Results of Operations Millions of dollars for the year ended December 31, (except per share figures) 1996 1995 1994 Net sales - $6,106 $5,888 $4,865 Operating profit(a) - 921 1,348 551 Interest expense - 76 89 80 Pre-tax income - 845 1,259 471 Net income - 593 925 389 Net income - common stockholders - 583 915 379 Per share, primary - $ 4.28 $ 6.44 $ 2.44 Per share, fully diluted - 3.90 5.83 2.27 a) See Note 5 to the financial statements for a discussion of the special items included in operating profit. (Included within this section are seven bar charts which provide the following data: (1) Average Customer Selling Price (Cents/pound) S&I BC&P 1991 56.7 28.2 1992 56.0 22.7 1993 54.0 21.0 1994 51.3 21.6 1995 58.0 30.0 1996 55.3 27.1 (2) Variable Margin (Millions of dollars) S&I BC&P Total 1991 1663 585 2248 1992 1794 425 2219 1993 1754 362 2116 1994 1748 480 2228 1995 1906 965 2871 1996 1910 735 2645 (3) Volume (Millions of pounds) S&I BC&P Total 1991 6144 4958 11102 1992 6458 5510 11968 1993 6454 5502 11956 1994 7093 5680 12773 1995 7112 5878 12990 1996 7743 6706 14449 (4) Unit Variable Margin (Cents/pound) S&I excluding the OrganoSilicon business sold S&I in 1993 BC&P 1991 27.1 24.5 11.8 1992 27.8 25.0 7.7 1993 27.2 25.7 6.6 1994 24.6 24.6 8.5 1995 26.8 26.8 16.4 1996 24.7 24.7 11.0 (5) Fixed Costs (Millions of dollars) S&I BC&P Total 1991 1267 456 1723 1992 1225 424 1649 1993 1130 414 1544 1994 1067 395 1462 1995(a) 1122 423 1545 1996 1140 447 1587 Totals in 1990 constant dollars: 1991-$1,660; 1992-$1,545; 1993-$1,409; 1994-$1,299; 1995-$1,349; 1996-$1,358 (6) Fixed Costs per Pound (Cents/pound) S&I BC&P 1991 20.6 9.2 1992 19.0 7.7 1993 17.5 7.5 1994 15.0 7.0 1995(a) 15.8 7.2 1996 14.7 6.7 Below the preceding two tables appears the following: a) Excludes charge of $68 million for postemployment benefits. (7) Employee Productivity Number of Thousands of pounds Employees per employee 1991 16705 665 1992 15075 794 1993 13051 916 1994 12004 1064 1995 11521 1128 1996 11745 1230 ) Summary and Outlook Union Carbide operates two business segments. Specialties & Intermediates converts basic and intermediate chemicals into a diverse portfolio of chemicals and polymers serving industrial customers in many markets. This segment also provides technology services, including licensing, to the oil and petrochemicals industries. Basic Chemicals & Polymers converts hydrocarbon feedstocks, principally liquefied petroleum gas and naphtha, into ethylene or propylene and then into polyethylene, polypropylene, ethylene oxide and ethylene glycol for sale to third-party customers, as well as ethylene, propylene, ethylene oxide and ethylene glycol for consumption by the Specialties & Intermediates segment. In contrast to those of Specialties & Intermediates, the revenues and operating profit of Basic Chemicals & Polymers tend to be more cyclical and very sensitive to a number of external variables, including overall economic demand, hydrocarbon feedstock costs, industry capacity increases and plant operating rates. In 1996 the corporation's earnings were adversely impacted by declines in selling prices, particularly in ethylene glycol, polyethylene and vinyl acetate monomer, and by high raw material and energy costs. These factors significantly impacted Basic Chemicals & Polymers operating profit, which decreased by 63.5 percent versus 1995, and limited Specialties & Intermediates operating profit growth to only 4.7 percent. Sales volumes increased by 11.2 percent versus the prior year, the largest volume increase in the past decade, while productivity improved by 7.7 percent, as measured by fixed cost per pound of product sold. Partnerships continued to report strong profits, while equity company results declined due to preoperating costs of the Kuwait joint venture and increased raw material costs of Polimeri Europa, the corporation's European polyethylene joint venture. In 1995 the corporation's profitability benefited from improved pricing in virtually all product groups, with particular strength in polyethylene through midyear and in ethylene oxide and ethylene glycol throughout the year, modest volume increases, lower average feedstock costs, continued benefits from ongoing productivity improvement programs and strong partnership earnings. In addition, 1995 net income was enhanced by a nonrecurring after- tax gain associated with the sales of the corporation's investment in UCAR International Inc., partially offset by a number of nonrecurring after-tax losses. Corporate results in 1994 were negatively affected by low margins in ethylene oxide, ethylene glycol and polyethylene, leading, in turn, to an operating loss in the Basic Chemicals & Polymers segment. Specialties & Intermediates reported an increased 1994 operating profit, reflecting the benefits of improved volumes, cost reduction programs and good partnership results. Highlights of 1996 included: - Completion of a new ethylene propylene rubber production facility in Seadrift, Tex., with start-up in early 1997. - Acquisition of Shell Oil Company's polypropylene business. - Acquisition of 95 percent of Companhia Alcoolquimica Nacional, a Brazilian manufacturer of vinyl acetate monomer. - Start-up of a new 330 million-pounds-per-year vinyl acetate monomer production unit in Ulsan, South Korea, by a joint venture with BP Chemicals and Samsung Fine Chemicals Company. - Formation of two joint ventures in the People's Republic of China, one to manufacture and market latex polymer emulsions, and the other to manufacture and market cellulosic polymers for the personal care industry. - Announcement of a planned 50-50 joint venture with Exxon Chemical Company to research, develop, market and license leading-edge technologies and catalysts for the production of polyethylene. - Sale of $200 million of 7.75 percent debentures maturing in the year 2096. - Completion of $1.2 billion of long-term financing by the EQUATE joint venture; construction of the EQUATE facility is on schedule for mid-1997 completion. - Repurchase of 12.8 million common shares, bringing the total number of shares repurchased since the beginning of 1993 to 42.3 million. - Continued progress toward achievement of the annual net savings target of $637 million by year-end 2000. As 1997 progresses, raw material and energy costs are expected to decline from fourth quarter 1996 levels. This trend, coupled with continuation of the improvement in ethylene glycol demand, which commenced in the fourth quarter of 1996, should result in an improvement in the 1997 operating profit of Basic Chemicals & Polymers at least through the first three quarters of the year; thereafter, profits may be impacted by anticipated capacity increases. Specialties & Intermediates operating profit should also improve over 1996 levels reflecting continued strong demand and lower energy costs. Earnings from partnerships should remain strong, while earnings from corporate joint ventures are expected to improve after start-up of the EQUATE facility, scheduled for the second half of 1997. The corporation regularly reviews its assets with the objective of maximizing the deployment of resources in core operations. In this regard, UCC continues to consider strategies and/or transactions with respect to certain noncore assets and other assets not essential to the operation of the business that, if implemented, could result in material nonrecurring gains or losses. Specialties & Intermediates Millions of dollars 1996 1995 1994 Sales - $4,286 $4,123 $3,636 Depreciation and amortization - 188 194 169 Operating profit - 742 709 634 Capital expenditures - 522 392 253 Identifiable assets - 3,892 3,527 3,111 1996 Compared with 1995 Revenues of the Specialties & Intermediates segment increased 4.0 percent, as the result of an 8.9 percent increase in volume partially offset by a 4.7 percent decline in average selling prices. The reduction in average selling prices reflects the combined effect of increases in sales of lower priced products and declines in prices of certain products from unusually high levels experienced in 1995. Variable margin (revenues less variable manufacturing and distribution costs) as a percentage of sales dropped by 1.6 percentage points, from 46.2 percent in 1995 to 44.6 percent in 1996, while gross margin (variable margin less fixed manufacturing and distribution costs) as a percentage of sales declined by 0.8 percentage points, to 27.0 percent in 1996 from 27.8 percent in 1995. Fixed manufacturing and distribution costs were held at 1995 levels. The segment's 1996 selling, administration and other expenses (SA&O) decreased $45 million, or 15.1 percent, because of the inclusion in 1995 SA&O of a nonrecurring $48 million charge for postemployment benefits. Excluding this charge, SA&O increased $3 million, or 1.2 percent. Research and development expenditures increased $14 million to $128 million. Operating profit increased in 1996 to $742 million from $709 million in 1995. 1995 Compared with 1994 The segment's revenues increased 13.4 percent, almost entirely because of increased average selling prices, primarily in the solvents and intermediates area. Volumes increased slightly. Although variable margin increased by 9.0 percent from 1994 to 1995, it declined as a percentage of sales, from 48.1 percent to 46.2 percent, the result of increased raw material costs. Gross margin as a percentage of sales remained stable at 27.8 percent in 1995 compared to 27.9 percent in 1994. Fixed manufacturing and distribution costs rose $23 million, or 3.1 percent, compared to 1994, because of expenses related to new growth projects, start-up costs related to new manufacturing facilities and increased profit sharing. Excluding the 1995 charge of $48 million for postemployment benefits, the segment's SA&O increased by $27 million, or 12.1 percent, reflecting increased profit sharing and the costs of new ventures and currency effects. Research and development expenditures increased by $6 million to $114 million. Operating profit increased in 1995 to $709 million from $634 million in 1994. In addition to the postemployment benefit charge, operating profit in 1995 included an increase in depreciation expense of $12 million, representing the cumulative effect of a reduction in the lives of certain computer equipment. Basic Chemicals & Polymers Millions of dollars 1996 1995 1994 Sales - $2,125 $2,080 $1,411 Depreciation and amortization - 124 112 105 Operating profit (loss) - 162 444 (22) Capital expenditures - 199 150 156 Identifiable assets - 2,328 2,095 1,511 1996 Compared with 1995 Revenues of the Basic Chemicals & Polymers segment increased 2.2 percent, due to a 14.1 percent increase in customer volume, 11.5 percent of which was due to the acquisition of the polypropylene business of Shell Oil Company in January of 1996, offset by a 9.7 percent decrease in selling prices. Variable margin as a percent of sales declined from 46.4 percent in 1995 to 34.6 percent in 1996. Ethylene glycol selling prices declined throughout the first three quarters of 1996. While polyethylene prices began to improve in the second quarter of 1996, they nonetheless averaged below 1995 levels for the full year. Raw material and energy costs rose during 1996, especially in the fourth quarter. Gross margin as a percentage of sales declined to 18.2 percent in 1996 as compared to 30.8 percent in 1995. Fixed manufacturing and distribution costs increased $24 million, or 7.4 percent, from 1995 to 1996, principally due to the acquisition of Shell's polypropylene assets and business. SA&O decreased $20 million, or 23.0 percent, versus 1995. Prior year SA&O included a nonrecurring $20 million charge for postemployment benefits. Research and development expenditures increased $1 million to $31 million. Operating profit declined to $162 million in 1996 from $444 million in 1995. 1995 Compared with 1994 The segment's revenues increased 47.4 percent, primarily due to a 38.9 percent increase in average customer selling prices and 3.5 percent higher volumes. Variable margin as a percentage of sales rose to 46.4 percent in 1995 from 34.0 percent in 1994. Ethylene oxide and ethylene glycol margins improved through the third quarter of 1995 and remained stable thereafter, while polyethylene margins improved in the first half of the year and declined thereafter due to falling prices. Gross margin as a percentage of sales rose to 30.8 percent in 1995, as compared to 12.7 percent in 1994. Fixed manufacturing and distribution costs increased by $24 million, or 8.0 percent, compared to 1994, due to acquired businesses, start-up costs related to new facilities and profit sharing. SA&O included a charge of $20 million for postemployment benefits. Excluding this charge, SA&O increased by 1.7 percent to $67 million from 1994 to 1995 after absorbing the cost of increased profit sharing and acquired businesses. Research and development expenditures remained stable on a year- to-year basis. Operating profit in 1995, including the $20 million postemployment benefit charge, was $444 million, compared to an operating loss of $22 million in 1994. Other Millions of dollars for the year ended December 31, 1996 1995 1994 Operating profit (loss) - $17 $195 $(61) The Other segment includes the operating profit (loss) of noncore activities and financial transactions. The 1995 operating profit included a nonrecurring pre-tax gain of $381 million from the sales of the corporation's remaining interest in UCAR International Inc., partially offset by a $191 million charge for unused office space, principally at the corporation's headquarters. The 1994 operating loss included a $24 million charge on the write-down and sale of the corporation's stockholding in Union Carbide India Limited and a $12 million loss on the sale of interests in a uranium mill and mines. Costs Relating to Protection of the Environment Worldwide costs relating to environmental protection continue to be significant, due primarily to stringent laws and regulations and to the corporation's commitment to industry initiatives such as Responsible Care, as well as to its own internal standards. In 1996 worldwide expenses related to environmental protection for compliance with Federal, state and local laws regulating solid and hazardous wastes and discharge of materials to air and water, as well as for waste site remedial activities, totaled $110 million. Expenses in 1995 and 1994 were $138 million and $153 million, respectively. Such expenses were material to operating results in 1996, 1995 and 1994, and will be material to operating results in future years. In recent years, such environmental expenses have decreased as the corporation has made progress toward completing major remediation projects. In addition, worldwide capital expenditures relating to environmental protection in 1996 totaled $43 million, compared with $49 million and $57 million in 1995 and 1994, respectively. The corporation, like other companies in the U.S., periodically receives notices from the U.S. Environmental Protection Agency and from state environmental agencies, as well as claims from other companies, alleging that the corporation is a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act and equivalent state laws (hereafter referred to collectively as Superfund) for past and future cleanup costs at hazardous waste sites at which the corporation is alleged to have disposed of, or arranged for treatment or disposal of, hazardous substances. The corporation is also undertaking environmental investigation and remediation projects at hazardous waste sites located on property currently and formerly owned by the corporation pursuant to Superfund, as well as to the Resource Conservation and Recovery Act and equivalent state laws. There are approximately 124 hazardous waste sites at which management believes it is probable or reasonably possible that the corporation will incur liability for investigation and/or remediation costs. The corporation has established accruals for those hazardous waste sites where it is probable that a loss has been incurred and the amount of the loss can reasonably be estimated. The reliability and precision of the loss estimates are affected by numerous factors, such as the stage of site evaluation, the allocation of responsibility among PRPs and the assertion of additional claims. The corporation adjusts its accruals as new remediation requirements are defined, as information becomes available permitting reasonable estimates to be made, and to reflect new and changing facts. At Dec. 31, 1996, the corporation's accruals for environmental remediation totaled $310 million ($327 million in 1995). Approximately 58 percent of the accrual (59 percent in 1995) pertains to estimated future expenditures for site investigation and cleanup, and approximately 42 percent (41 percent in 1995) pertains to estimated expenditures for closure and postclosure activities. See Note 15 to the financial statements for a discussion of the environmental sites for which the corporation has remediation responsibility. In addition, the corporation had environmental loss contingencies of $134 million at Dec. 31, 1996. Estimates of future costs of environmental protection are necessarily imprecise, due to numerous uncertainties. These include the impact of new laws and regulations, the availability and application of new and diverse technologies, the identification of new hazardous waste sites at which the corporation may be a PRP and, in the case of Superfund sites, the ultimate allocation of costs among PRPs and the final determination of the remedial requirements. While estimating such future costs is inherently imprecise, taking into consideration the corporation's experience to date regarding environmental matters of a similar nature and facts currently known, the corporation estimates that worldwide expenses related to environmental protection, expressed in 1996 dollars, should average about $125 million annually over the next five years. Worldwide capital expenditures for environmental protection, also expressed in 1996 dollars, are expected to average about $50 million annually over the same period. Management anticipates that future annual costs for environmental protection after 2001 will continue at levels comparable to the five-year average estimates. Subject to the inherent imprecision and uncertainties in estimating and predicting future costs of environmental protection, it is management's opinion that any future annual costs for environmental protection in excess of the five-year average estimates stated here, plus those costs anticipated to continue thereafter, would not have a material adverse effect on the corporation's consolidated financial position. Litigation The corporation and its consolidated subsidiaries are involved in a number of legal proceedings and claims with both private and governmental parties. These cover a wide range of matters, including, but not limited to, product liability; governmental regulatory proceedings; health, safety and environmental matters; employment; patents; contracts, and taxes. In addition, the corporation continues to be named as one of a number of defendants in lawsuits involving silicone breast implants. The corporation supplied bulk silicone materials to certain companies that at various times were involved in the manufacture of breast implants. These cases are discussed in more detail in Note 15 to the financial statements. In some of these legal proceedings and claims, the cost of remedies that may be sought or damages claimed is substantial. While it is impossible at this time to determine with certainty the ultimate outcome of any such legal proceedings and claims, management believes that adequate provisions have been made for probable losses with respect thereto and that such ultimate outcome, after provisions therefor, will not have a material adverse effect on the consolidated financial position of the corporation but could have a material effect on consolidated results of operations in a given quarter or year. Should any losses be sustained in connection with any of such legal proceedings and claims in excess of provisions therefor, they will be charged to income in the future. Partnerships and Corporate Joint Ventures As described on page 8, the corporation's most significant partnerships and corporate joint ventures are UOP, Nippon Unicar, Aspell Polymeres, World Ethanol and Asian Acetyls within the Specialties & Intermediates segment, and Polimeri Europa, EQUATE Petrochemical Company, Petromont and Alberta & Orient Glycol within the Basic Chemicals & Polymers segment. The combined results and net assets of the partnerships and corporate joint ventures in each segment, and the corporation's proportionate share thereof, are presented in the following tables. Specialties & Intermediates Combined UCC's Proportionate Share(a) Millions of dollars 1996 1995 1994 1996 1995 1994 Net sales - $2,238 $2,311 $1,823 $1,082 $1,114 $855 Cost of sales - 1,456 1,486 1,142 680 720 526 Depreciation - 86 67 49 39 35 25 Income from operations - 322 338 302 187 175 133 Interest expense - 31 32 21 12 15 11 Provision for income taxes - 63 54 36 32 27 18 Net Income - $ 227 $ 257 $ 248 $ 143 $ 136 $104 UCC share of dividends and distributions - $ 101 $ 92 $ 84 Total assets - $1,769 $1,707 $ 757 $ 762 Total third party debt - 577 550 212 229 Net Assets - $ 561 $ 567 $ 263 $ 258 Basic Chemicals & Polymers Combined UCC's Proportionate Share(a) Millions of dollars 1996 1995 1994 1996 1995 1994 Net sales - $1,930 $1,512 $ 242 $ 965 $ 756 $121 Cost of sales - 1,575 1,014 151 798 507 76 Depreciation - 126 115 20 51 58 10 Income from operations - 96 209 9 30 105 2 Interest expense - 67 61 12 34 30 6 Provision for income taxes - 20 36 1 11 17 1 Net Income (Loss) - $ 9 $ 114 $ (7) $ (15) $ 58 $ (5) UCC share of dividends and distributions - $ 40 $ 0 $ 0 Total assets - $3,536 $2,413 $1,650 $1,168 Total third party debt - 1,197 294 561 147 Net Assets - $ 972 $ 994 $ 432 $ 481 a) Includes U.S. GAAP adjustments made by the corporation, such as goodwill and related amortization, and adjustments needed to conform the accounting policies of the partnerships and corporate joint ventures to those of UCC. Specialties & Intermediates The corporation's share of the net income of Specialties & Intermediates partnerships and corporate joint ventures increased slightly in 1996 as compared to 1995, as the result of increased earnings from UOP being partially offset by the elimination of earnings of the polypropylene partnership with Shell Oil Company. Earnings from the polypropylene business are now included in consolidated results. The corporation's share of the net income of S&I partnerships and corporate joint ventures in 1995 increased by 31.7 percent over the prior year due to improved UOP results. Basic Chemicals & Polymers The corporation's share of the net income of Basic Chemicals & Polymers partnerships and corporate joint ventures declined $73 million from 1995 to 1996 due to losses from Polimeri Europa and decreased earnings from Petromont, caused by lower polyethylene prices and higher raw material costs, and the recognition of preoperating expenses of EQUATE. The increase of $63 million from 1994 to 1995 was the result of improved results from Petromont and the addition of the Polimeri Europa joint venture. In 1995 the corporation and two Kuwaiti corporations formed a joint venture, EQUATE Petrochemical Company, for development of a world-scale petrochemical complex in Kuwait. The cost of design, construction and initial working capital is expected to approximate $2 billion by the planned start-up date. As of Dec. 31, 1996, the corporation had invested approximately $138 million in EQUATE, representing its 45 percent equity interest. The corporation anticipates making an additional $12 million investment in early 1997. The corporation recognized losses related to EQUATE's preliminary operating expenses of $23 million in 1996 ($3 million in 1995). These expenses are expected to continue until start-up. In September 1996 EQUATE completed its long-term financing arrangements for construction and operating funds. The corporation has severally guaranteed 45 percent (approximately $608 million at Dec. 31, 1996) of EQUATE's debt and working capital needs until certain completion tests are achieved. Thereafter, a $54 million several guarantee will provide ongoing support. The corporation also severally guaranteed certain sales volume targets until EQUATE's sales capabilities are proved. In addition, the corporation has pledged its shares in EQUATE as security for EQUATE's debt. The corporation has political risk insurance coverage for its equity investment and, until the completion tests are concluded, substantially all of its debt guarantee of EQUATE's debt. EQUATE's debt is expected to reach its maximum level by the end of 1997. Other The corporation's remaining interest in UCAR International Inc., a manufacturer of carbon and graphite products, was sold in 1995. Income (loss) from corporate investments carried at equity included $4 million and $54 million in 1995 and 1994, respectively, representing the corporation's share of UCAR's earnings in those years. Additionally, the corporation's share of dividends and distributions from UCAR was $5 million and $44 million in 1995 and 1994, respectively. Interest Expense Interest expense decreased $13 million to $76 million in 1996 as a result of increased capitalized interest. The 1995 increase of $9 million to $89 million was due to increased borrowings, partially offset by increased capitalized interest and lower interest rates. Provision for Income Taxes The effective tax rate was 27.9 percent in 1996 as compared to 30.2 percent and 29.1 percent in 1995 and 1994, respectively. In each of these years, the corporation's effective tax rate was reduced as a result of foreign sales corporation income taxed at a preferential rate and development tax credits. The 1995 effective tax rate was increased as a result of taxes provided on the sale of UCAR International Inc. Accounting Changes In 1996 the corporation adopted Financial Accounting Standard (FAS) 123, "Accounting for Stock-Based Compensation," under which the corporation elected to continue following Accounting Principles Board Opinion 25. In 1995 the corporation adopted FAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." In 1994 the corporation adopted FAS 115, "Accounting for Certain Investments in Debt and Equity Securities." The effects of the adoptions of FAS 121 and FAS 115 were not material. Liquidity, Capital Resources and Other Financial Data (Included within this section are two bar charts which provide the following data: (1) Capital Expenditures (Millions of dollars) S&I BC&P Total 1991 158 242 400 1992 143 216 359 1993 240 155 395 1994 253 156 409 1995 392 150 542 1996 522 199 721 (2) Shares Repurchased (Millions) Net of Reissuances Total 1993 1.4 3.8 1994 6.1 11.6 1995 9.3 14.1 1996 8.7 12.8 ) Cash Flow From Operations Cash flow from operations increased by $99 million to $862 million in 1996, as compared to $763 million in 1995. Decreased earnings for the year were offset by lower tax payments and the improved turnover of accounts receivable and inventory. Net gains on investing transactions decreased from 1995, which included a $381 million gain on the sales of the corporation's interest in UCAR International Inc. Other noncash charges also declined, due to the inclusion in 1995 of a $191 million charge for future lease payments on unused office space. Cash Flow Used for Investing Cash flow used for investing includes capital expenditures, investments and acquisitions, and proceeds from the sale of investments and assets. Capital expenditures increased to $721 million in 1996 from $542 million in 1995 and $409 million in 1994. Major projects in 1996 included an ethylene propylene rubber facility at Seadrift, Tex. (Specialties & Intermediates), expansion of ethylene production units at Taft, La. (Basic Chemicals & Polymers), as well as new cogeneration facilities at Texas City, Tex. and Taft, La., and new information technology infrastructure throughout the company (applicable to both segments). Major Specialties & Intermediates projects in 1995 and 1994 included a new butanol unit at Taft, La., an energy systems upgrade at Texas City, Tex., and new TRITON surfactants production facilities at South Charleston, W.Va. A new UNIPOL II polyethylene production facility was completed in 1995 at Taft, La., in the Basic Chemicals & Polymers segment. Over the past three years 48 percent of capital expenditures was directed to new capacity, 47 percent to cost reduction and replacement, and 5 percent to environmental, safety and health facilities. Of these expenditures, 95 percent was in the U.S. and Puerto Rico. Investments and acquisitions in 1996 included the purchases of Shell's polypropylene assets and business and of 95 percent of the outstanding shares of Companhia Alcoolquimica Nacional, a Brazilian producer of vinyl acetate monomer. Investments and acquisitions during 1995 included the $216 million acquisition of a 50 percent interest in Polimeri Europa, a $134 million investment in the EQUATE joint venture, and the $71 million purchase of certain ethylene oxide derivative businesses in the U.K. Net proceeds from the sale of investments in 1995 included $542 million from the sales of the corporation's remaining interest in UCAR International Inc. In 1994 proceeds from the sale of investments included $86 million from the sale of the corporation's preferred stock investment in the OrganoSilicon business (OSi). Proceeds from the sale of fixed and other assets of $138 million in 1994 included $84 million from the sale of a manufacturing facility and distribution terminal in Hong Kong and $13 million from the divestiture of the corporation's specialty electronic materials business and its interest in a Zimbabwe mining and smelting operation. At Dec. 31, 1996, the cost of completing authorized construction projects was estimated to be $1.074 billion, of which $17 million is covered by firm commitments. Future construction expenditures are anticipated to be sourced through operating cash flows and borrowings. Cash Flow Used for Financing Cash flow used for financing includes stockholder dividends and funds used to buy back common stock and for debt reduction, offset in part by proceeds from long-term debt and sales of common stock pursuant to the corporation's dividend reinvestment plan and its employee savings and investment programs. Cash flow used for financing in 1996 totaled $254 million, compared to $57 million in 1995 and $360 million in 1994. In October 1996 the corporation issued $200 million of 7.75 percent debentures maturing in 2096, the proceeds of which were used to finance ongoing share repurchases and to pay down existing short-term debt. In 1995 the corporation completed a $400 million, two-part public offering of debt securities. During 1996, pursuant to a share repurchase program authorized by the board of directors, the corporation repurchased 12.8 million shares of its common stock for $544 million, at an average effective price of $42.46 per share, bringing the total amount repurchased since the beginning of 1993 to 42.3 million shares for $1.376 billion, at an average effective price of $32.53 per share. At Dec. 31, 1996, there were no outstanding borrowings under the corporation's then-existing $1 billion bank credit agreement. In January 1997 the corporation entered into a new bank credit agreement, which also provides the corporation with $1 billion in credit for the next five years, but with the option, subject to certain conditions, to increase the available credit by $250 million and to extend the maturity date of the agreement by one year on a rolling basis. Several options are available to borrow at floating interest rates. In January 1997 the corporation established a medium term note program that allows for borrowings of up to $500 million. Notes issued under the program will have a maturity of nine months or longer and will bear interest at either a fixed or a floating rate determined by reference to interest rate formulas. Also in January 1997, the corporation formed a real estate investment trust subsidiary that issued $250 million of preferred stock bearing a current dividend yield of 14 percent for 10 years and 1 percent thereafter. Domestic real estate with a fair market value of approximately $500 million will be mortgaged via intercompany debt in conjunction with this transaction. The preferred stock may be redeemed if, as a result of a change in tax laws, rules or regulations, dividends on the preferred stock or interest paid on the mortgage note is not fully deductible for Federal income tax purposes. Debt Ratios Total debt outstanding at year-end for the past three years was: Millions of dollars 1996 1995 1994 Domestic - $1,492 $1,254 $862 International - 107 69 84 Total - $1,599 $1,323 $946 Year-end ratios of total debt to total capital were: 1996 1995 1994 Debt ratio - 42.7% 39.0% 38.2% Total debt consists of short-term debt, long-term debt and the current portion of long-term debt. Total capital consists of total debt plus minority stockholders' equity in consolidated subsidiaries and stockholders' equity. Selected Financial Data Union Carbide Corporation and Subsidiaries
Millions of dollars (except per share figures) 1996 1995 1994 From the Income Statement - Net sales - $ 6,106 $ 5,888 $ 4,865 Cost of sales - 4,568 4,100 3,673 Research and development - 159 144 136 Selling, administration and other expenses - 321 387(a) 290 Depreciation and amortization - 312 306 274 Partnership (income) loss - (144) (152) (98) Other (income) expense - net - (31) (245) 39 Income before interest expense and - provision for income taxes - 921 1,348 551 Interest expense - 76 89 80 Pre-tax income (loss) from continuing operations - 845 1,259 471 Provision (credit) for income taxes - 236 380 137 Income (loss) from corporate investments carried at equity - (16) 46 55 Income (loss) from continuing operations - 593 925 389 Net income (loss) - common stockholders - 583 915 379 Per common share Primary - Income (loss) from continuing operations - $ 4.28 $ 6.44 $ 2.44 - Net income (loss) - 4.28 6.44 2.44 Fully diluted(b) - Income (loss) from continuing operations - 3.90 5.83 2.27 - Net income (loss) - 3.90 5.83 2.27 From the Balance Sheet - Net current assets of continuing operations - $ 595 $ 858 $ 329 Total assets - 6,546 6,256 5,028 Long-term debt - 1,487 1,285 899 Other long-term obligations - 811 834 537 Total capital(c) - 3,742 3,392 2,479 Stockholders' equity - 2,114 2,045 1,509 Stockholders' equity per common share - 16.72 15.14 10.45 Other Data - Cash dividends on common stock - $ 99 $ 103 $ 113 Cash dividends per common share - 0.75 0.75 0.75 Special distribution per common share - - - - Market price per common share - high(d) - 49.88 42.75 35.88 Market price per common share - low(d) - 36.38 25.50 21.50 Common shares outstanding (thousands) - 126,440 135,108 144,412 Capital expenditures - 721 542 409 Employees - continuing operations - 11,745 11,521 12,004 Selected Financial Ratios - Total debt/total capital - 42.7% 39.0% 38.2% Return on capital(c) - 18.6% 39.2% 18.0% Return on equity(f) - 28.5% 60.6% 26.5% Income from continuing operations/ average stockholders' equity - 28.5% 52.1% 26.5% Cash dividends on common stock/income from continuing operations - 16.7% 11.1% 29.0% Millions of dollars (except per share figures) 1993 1992 1991 From the Income Statement - Net sales - $ 4,640 $ 4,872 $ 4,877 Cost of sales - 3,589 3,764 3,787 Research and development - 139 155 157 Selling, administration and other expenses - 340 383 408 Depreciation and amortization - 276 293 287 Partnership (income) loss - (67) (60) 22 Other (income) expense - net - 66 13 135 Income before interest expense and - provision for income taxes - 297 324 81 Interest expense - 70 146 228 Pre-tax income (loss) from continuing operations - 227 178 (147) Provision (credit) for income taxes - 78 45 (50) Income (loss) from corporate investments carried at equity - 16 (14) (21) Income (loss) from continuing operations - 165 119 (116) Net income (loss) - common stockholders - 58 (187) (28) Per common share Primary - Income (loss) from continuing operations - $ 1.00 $ 0.76 $ (1.06) - Net income (loss) - 0.36 (1.46) (0.22) Fully diluted(b) - Income (loss) from continuing operations - 1.00 0.76 (1.06) - Net income (loss) - 0.36 (1.46) (0.22) From the Balance Sheet - Net current assets of continuing operations - $ 233 $ 66 $ 209 Total assets - 4,689 4,941 6,826 Long-term debt - 931 1,113 1,160 Other long-term obligations - 378 277 428 Total capital(c) - 2,395 2,710 4,694 Stockholders' equity - 1,428 1,238 2,239 Stockholders' equity per common share - 9.49 9.32 17.55 Other Data - Cash dividends on common stock - $ 110 $ 114 $ 126 Cash dividends per common share - 0.75 0.875 1.00 Special distribution per common share - - 15.875 - Market price per common share - high(d) - 23.13 17.13(e) 22.63 Market price per common share - low(d) - 16.00 10.88(e) 15.13 Common shares outstanding (thousands) - 150,548 132,865 127,607 Capital expenditures - 395 359 400 Employees - continuing operations - 13,051 15,075 16,705 Selected Financial Ratios - Total debt/total capital - 40.3% 54.3% 52.0% Return on capital(c) - 7.7% 6.9% - Return on equity(f) - 4.7% (8.4)% (1.2)% Income from continuing operations/ average stockholders' equity - 12.4% 6.8% - Cash dividends on common stock/income from continuing operations - 66.7% 95.8% - Millions of dollars (except per share figures) 1990 1989 1988 From the Income Statement - Net sales - $ 5,238 $ 5,613 $ 5,525 Cost of sales - 3,876 3,909 3,696 Research and development - 157 143 124 Selling, administration and other expenses - 466 442 394 Depreciation and amortization - 278 261 255 Partnership (income) loss - (70) (82) (95) Other (income) expense - net - (103) (108) 1 Income before interest expense and - provision for income taxes - 634 1,048 1,150 Interest expense - 269 268 172 Pre-tax income (loss) from continuing operations - 365 780 978 Provision (credit) for income taxes - 130 257 381 Income (loss) from corporate investments carried at equity - (42) 27 33 Income (loss) from continuing operations - 188 530 608 Net income (loss) - common stockholders - 308 573 662 Per common share Primary - Income (loss) from continuing operations - $ 1.34 $ 3.76 $ 4.48 - Net income (loss) - 2.19 4.07 4.88 Fully diluted(b) - Income (loss) from continuing operations - 1.34 3.63 4.29 - Net income (loss) - 2.13 3.92 4.66 From the Balance Sheet - Net current assets of continuing operations - $ 7 $ 22 $ 14 Total assets - 7,389 7,355 7,327 Long-term debt - 2,058 2,060 2,271 Other long-term obligations - 357 572 594 Total capital(c) - 5,338 5,319 4,805 Stockholders' equity - 2,373 2,383 1,836 Stockholders' equity per common share - 18.88 16.83 13.34 Other Data - Cash dividends on common stock - $ 138 $ 140 $ 155 Cash dividends per common share - 1.00 1.00 1.15 Special distribution per common share - - - - Market price per common share - high(d) - 24.88 33.25 28.38 Market price per common share - low(d) - 14.13 22.75 17.00 Common shares outstanding (thousands) - 125,674 141,578 137,602 Capital expenditures - 381 483 380 Employees - continuing operations - 17,722 18,032 17,258 Selected Financial Ratios - Total debt/total capital - 54.0% 49.9% 56.1% Return on capital(c) - 8.4% 21.2% 24.5% Return on equity(f) - 12.9% 31.2% 53.1% Income from continuing operations/ average stockholders' equity - 7.9% 25.1% 39.4% Cash dividends on common stock/income from continuing operations - 73.4% 26.4% 25.5% a) Selling, administration and other expenses in 1995 include a charge of $68 million for postemployment benefits. b) Fully diluted per share amounts are shown equal to primary per share amounts when antidilution occurs. c) Return on capital is computed by dividing income by beginning-of-year capital. Income consists of income from continuing operations, less preferred dividends, plus after-tax interest cost (net of interest income received from Praxair), plus income attributable to minority interests. Capital consists of total debt plus minority stockholders' equity in consolidated subsidiaries and stockholders' equity, adjusted for the corporation's Praxair-related assets and the cumulative effect of changes in accounting principles. Total debt consists of short-term debt, long-term debt and the current portion of long-term debt. d) Prices are based on New York Stock Exchange Composite Transactions. e) In 1992 the corporation spun off Praxair, Inc. The high and low presented in the table for 1992 represent the value of the common stock after the spin-off. The high and low for 1992 before the spin-off were $29.63 and $20.13, respectively. f) Return on equity is computed by dividing net income-common stockholders by beginning-of-year stockholders' equity.
Quarterly Data Union Carbide Corporation and Subsidiaries Millions of dollars 1Q 2Q 3Q 4Q Year 1996 - Net sales - $1,501 $1,559 $1,538 $1,508 $6,106 Cost of sales - 1,099 1,150 1,145 1,174 4,568 Gross profit - 402 409 393 334 1,538 Depreciation and amortization - 75 79 81 77 312 Operating profit - 259 245 242 175 921 Net income - 157 173 161 102 593 Net income - - common stockholders - 155 170 159 99 583 1995 - Net sales - $1,453 $1,541 $1,495 $1,399 $5,888 Cost of sales - 999 1,103 1,038 960 4,100 Gross profit - 454 438 457 439 1,788 Depreciation and amortization - 83 72 72 79 306 Operating profit - 341 308 398 301 1,348 Net income(a) - 230 228 277 190 925 Net income - common stockholders - 228 225 275 187 915 Dollars per common share 1Q 2Q 3Q 4Q Year 1996 - Primary net income - $ 1.11 $ 1.23 $ 1.19 $ 0.74 $ 4.28 Fully diluted net income - 1.01 1.12 1.08 0.68 3.90 Cash dividends - 0.1875 0.1875 0.1875 0.1875 0.75 Market price - high(b) - 49.88 49.63 46.25 47.00 49.88 Market price - low(b) - 36.63 39.00 36.38 39.00 36.38 1995 - Primary net income - $ 1.57 $ 1.59 $ 1.96 $ 1.33 $ 6.44 Fully diluted net income - 1.43 1.44 1.77 1.21 5.83 Cash dividends - 0.1875 0.1875 0.1875 0.1875 0.75 Market price - high(b) - 32.00 33.63 42.75 41.38 42.75 Market price - low(b) - 25.50 28.38 33.00 36.38 25.50 a) Net income for the first quarter of 1995 included an after-tax net gain of $12 million, or $0.07 per share fully diluted, due to a gain on the sale of a portion of the corporation's interest in UCAR International Inc.; a charge for future lease payments on unused office space, primarily at the corporation's headquarters, and an increase in depreciation expense related to a reduction in the depreciable lives of certain computer equipment. Net income for the third quarter of 1995 included an after-tax net gain of $50 million, or $0.32 per share fully diluted, due to a gain on the sale of the corporation's remaining interest in UCAR International Inc. and a charge for postemployment benefits. b) Prices are based on New York Stock Exchange Composite Transactions. Consolidated Statement of Income Union Carbide Corporation and Subsidiaries Millions of dollars (except per share figures), year ended December 31, 1996 1995 1994 Net Sales - $6,106 $5,888 $4,865 Cost of sales, exclusive of depreciation and amortization - 4,568 4,100 3,673 Research and development - 159 144 136 Selling, administration and other expenses - 321 387 290 Depreciation and amortization - 312 306 274 Partnership income - (144) (152) (98) Other (income) expense - net - (31) (245) 39 Income Before Interest Expense and Provision for Income Taxes - 921 1,348 551 Interest expense - 76 89 80 Income Before Provision for Income Taxes - 845 1,259 471 Provision for income taxes - 236 380 137 Income of Consolidated Companies - 609 879 334 Income (loss) from corporate investments carried at equity - (16) 46 55 Net Income - 593 925 389 Preferred stock dividends, net of income taxes - 10 10 10 Net Income - Common Stockholders - $ 583 $ 915 $ 379 Earnings per Common Share Primary - $ 4.28 $ 6.44 $ 2.44 Fully diluted - 3.90 5.83 2.27 Cash Dividends Declared per Common Share - $ 0.75 $ 0.75 $ 0.75 The Notes to Financial Statements on pages 26 through 41 should be read in conjunction with this statement. Consolidated Balance Sheet Union Carbide Corporation and Subsidiaries Millions of dollars at December 31, 1996 1995 Assets - Cash and cash equivalents - $ 94 $ 449 Notes and accounts receivable - 1,047 996 Inventories - 541 544 Other current assets - 191 207 Total Current Assets - 1,873 2,196 Property, plant and equipment - 7,159 6,357 Less: Accumulated depreciation - 3,750 3,549 Net Fixed Assets - 3,409 2,808 Companies carried at equity - 695 739 Other investments and advances - 77 84 Total Investments and Advances - 772 823 Other assets - 492 429 Total Assets - $6,546 $6,256 Liabilities and Stockholders' Equity - Accounts payable - $ 268 $ 316 Short-term debt and current portion of long-term debt - 112 38 Accrued income and other taxes - 133 259 Other accrued liabilities - 765 725 Total Current Liabilities - 1,278 1,338 Long-term debt - 1,487 1,285 Postretirement benefit obligation - 473 480 Other long-term obligations - 811 834 Deferred credits - 301 201 Minority stockholders' equity in consolidated subsidiaries - 29 24 Convertible preferred stock - ESOP - 144 146 Unearned employee compensation - ESOP - (91) (97) Stockholders' equity - Common stock Authorized - 500,000,000 shares Issued - 154,609,669 shares - 155 155 Additional paid-in capital - 370 343 Translation and other equity adjustments - (33) (15) Retained earnings - 2,629 2,145 Less: Treasury stock, at cost - 28,169,324 shares (19,501,701 in 1995) - (1,007) (583) Total Stockholders' Equity - 2,114 2,045 Total Liabilities and Stockholders' Equity - $6,546 $6,256 The Notes to Financial Statements on pages 26 through 41 should be read in conjunction with this statement. Consolidated Statement of Cash Flows Union Carbide Corporation and Subsidiaries Increase (decrease) in cash and cash equivalents Millions of dollars, year ended December 31, 1996 1995 1994 Operations - Net income - $ 593 $ 925 $ 389 Noncash charges (credits) to net income Depreciation and amortization - 312 306 274 Deferred income taxes - 82 (29) 31 Other noncash charges - 16 186 88 Net gains on investing transactions - (3) (379) (100) Increase in working capital(a) - (92) (242) (151) Long-term assets and liabilities - (46) (4) 30 Cash Flow From Operations - 862 763 561 Investing - Capital expenditures - (721) (542) (409) Investments and acquisitions (excluding cash acquired) - (263) (431) (16) Sale of investments - - 552 87 Sale of fixed and other assets - 22 54 138 Cash Flow Used for Investing - (962) (367) (200) Financing - Change in short-term debt (3 months or less) - 96 (11) 8 Proceeds from short-term debt - 21 6 43 Repayment of short-term debt - (37) - (48) Proceeds from long-term debt - 203 402 18 Repayment of long-term debt - (10) (22) (36) Issuance of common stock - 129 116 111 Purchase of common stock - (544) (425) (337) Payment of dividends - (111) (116) (126) Other - (1) (7) 7 Cash Flow Used for Financing - (254) (57) (360) Effect of exchange rate changes on cash and cash equivalents - (1) 1 - Change in cash and cash equivalents - (355) 340 1 Cash and cash equivalents beginning-of-year - 449 109 108 Cash and Cash Equivalents End-of-Year - $ 94 $ 449 $ 109 Cash paid for interest and income taxes Interest (net of amount capitalized) - $ 66 $ 68 $ 89 Income taxes - 169 329 74 a) Net change in certain components of working capital (excluding noncash transactions): (Increase) decrease in current assets Notes and accounts receivable - $ (26) $(111) $(206) Inventories - 43 (144) (22) Other current assets - 25 8 (19) Increase (decrease) in payables and accruals - (134) 5 96 (Increase) in working capital - $ (92) $(242) $(151) The Notes to Financial Statements on pages 26 through 41 should be read in conjunction with this statement. Consolidated Statement of Stockholders' Equity Union Carbide Corporation and Subsidiaries
1996 Shares Millions (in thousands) of dollars Common Stock - Balance at December 31 - 154,610 $ 155 Additional Paid-In Capital - Balance at January 1 - $ 343 Put options, net - 8 Issued: For the Dividend Reinvestment and Stock Purchase Plan - 2 For employee savings and incentive plans - 17 Balance at December 31 - $ 370 Translation and Other Equity Adjustments - Balance at January 1 - $ (15) Translation and other adjustments - (18) Sale of businesses - - Balance at December 31 - $ (33) Retained Earnings - Balance at January 1 - $2,145 Net income - common stockholders - 583 Cash dividends on common stock - (99) Balance at December 31 - $2,629 Treasury Stock - Balance at January 1 - 19,502 $ 583 Common stock repurchase program - 12,821 550 Issued: For the Dividend Reinvestment and Stock Purchase Plan - (212) (7) For employee savings and incentive plans - (3,942) (119) Balance at December 31 - 28,169 $1,007 Total Stockholders' Equity - $2,114 1995 Shares Millions (in thousands) of dollars Common Stock - Balance at December 31 - 154,610 $ 155 Additional Paid-In Capital - Balance at January 1 - $ 369 Put options, net - (19) Issued: For the Dividend Reinvestment and Stock Purchase Plan - 1 For employee savings and incentive plans - (8) Balance at December 31 - $ 343 Translation and Other Equity Adjustments - Balance at January 1 - $ (59) Translation and other adjustments - (11) Sale of businesses - 55 Balance at December 31 - $ (15) Retained Earnings - Balance at January 1 - $1,333 Net income - common stockholders - 915 Cash dividends on common stock - (103) Balance at December 31 - $2,145 Treasury Stock - Balance at January 1 - 10,197 $ 289 Common stock repurchase program - 14,127 426 Issued: For the Dividend Reinvestment and Stock Purchase Plan - (322) (9) For employee savings and incentive plans - (4,500) (123) Balance at December 31 - 19,502 $ 583 Total Stockholders' Equity - $2,045 1994 Shares Millions (in thousands) of dollars Common Stock - Balance at December 31 - 154,610 $ 155 Additional Paid-In Capital - Balance at January 1 - $ 366 Put options, net - - Issued: For the Dividend Reinvestment and Stock Purchase Plan - 1 For employee savings and incentive plans - 2 Balance at December 31 - $ 369 Translation and Other Equity Adjustments - Balance at January 1 - $ (84) Translation and other adjustments - 7 Sale of businesses - 18 Balance at December 31 - $ (59) Retained Earnings - Balance at January 1 - $1,067 Net income - common stockholders - 379 Cash dividends on common stock - (113) Balance at December 31 - $1,333 Treasury Stock - Balance at January 1 - 4,062 $ 76 Common stock repurchase program - 11,624 337 Issued: For the Dividend Reinvestment and Stock Purchase Plan - (275) (6) For employee savings and incentive plans - (5,214) (118) Balance at December 31 - 10,197 $ 289 Total Stockholders' Equity - $1,509 The Notes to Financial Statements on pages 26 through 41 should be read in conjunction with this statement.
Notes to Financial Statements Index The Notes to Financial Statements are found on the following pages: 1. Summary of Significant Accounting Policies.....26 2. Financial Instruments.....28 3. Supplementary Income Statement Detail.....29 4. Supplementary Balance Sheet Detail.....29 5. Business and Geographic Segment Information.....30 6. Acquisitions and Divestitures.....31 7. Income Taxes.....32 8. Partnerships and Corporate Joint Ventures.....33 9. Long-Term Debt.....34 10. Convertible Preferred Stock - ESOP.....34 11. Stockholders' Equity.....35 12. Leases.....35 13. Retirement Programs.....36 14. Incentive Plans.....38 15. Commitments and Contingencies.....39 16. Subsequent Events.....41 1. Summary of Significant Accounting Policies Nature of Operations - Union Carbide Corporation is engaged in two segments of the chemicals and plastics industry, Specialties & Intermediates and Basic Chemicals & Polymers. See Note 5. Principles of Consolidation - The consolidated financial statements include the accounts of all significant subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Investments in 20 percent- to 50 percent-owned companies and partnerships are carried at equity in net assets. Other investments are carried generally at cost. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which require the corporation to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accounting Changes - The corporation adopted Financial Accounting Standard (FAS) 123, "Accounting for Stock-Based Compensation," in 1996, under which the corporation elected to continue following Accounting Principles Board (APB) Opinion 25. The corporation adopted FAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," in 1995, and adopted FAS 115, "Accounting for Certain Investments in Debt and Equity Securities," in 1994. The effects of the adoptions of FAS 121 and FAS 115 were not material. Foreign Currency Translation - Unrealized gains and losses resulting from translating foreign subsidiaries' assets and liabilities into U.S. dollars generally are accumulated in an equity account on the balance sheet until such time as the subsidiary is sold or substantially or completely liquidated. Translation gains and losses relating to operations located in Latin American countries, where hyperinflation exists, and to international operations using the U.S. dollar as their functional currency are included in the income statement. Financial Instruments - Financial instruments are used to hedge financial risk caused by fluctuating interest and currency rates. The amounts to be paid or received on interest rate risk instruments that hedge debt accrue and are recognized over the lives of the instruments. Gains and losses on foreign currency risk instruments used to hedge firm commitments are deferred and recognized as part of the related foreign currency transactions. Foreign currency instruments that are designated to offset earnings fluctuations from anticipated foreign currency cash flows are marked to market and the results recognized immediately as other income or other expense. Cash Equivalents - The corporation considers as cash equivalents all highly liquid investments that are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Inventories - Inventories are stated at cost or market, whichever is lower. These amounts do not include depreciation and amortization, the impact of which is not significant to the financial statements. Approximately 63 percent of inventory amounts before application of the LIFO method at Dec. 31, 1996 (59 percent at Dec. 31, 1995) have been valued on the LIFO basis; the "average cost" method is used for the balance. It is estimated that if inventories had been valued at current costs, they would have been approximately $329 million and $340 million higher than reported at Dec. 31, 1996 and 1995, respectively. Fixed Assets - Fixed assets are carried at cost. Expenditures for replacements are capitalized, and the replaced items are retired. Gains and losses from the sale of property are included in income. Depreciation is calculated on a straight-line basis. The corporation and its subsidiaries generally use accelerated depreciation methods for tax purposes where appropriate. Patents, Trademarks and Goodwill - Amounts paid for purchased patents and newly acquired businesses in excess of the fair value of the net assets of such businesses have been charged to patents, trademarks and goodwill. The portion of such amounts determined to be attributable to patents is amortized over their remaining lives, while trademarks and goodwill are amortized over the estimated period of benefit, generally 5 to 20 years. Research and Development - Research and development costs are charged to expense as incurred. Depreciation expense applicable to research and development facilities and equipment is included in Depreciation and amortization in the Consolidated Statement of Income ($11 million in 1996, $14 million in 1995 and $13 million in 1994). Income Taxes - Provisions have been made for deferred income taxes based on differences between financial statement and tax bases of assets and liabilities using currently enacted tax rates and regulations. Environmental Costs - Environmental expenditures are expensed or capitalized as appropriate, depending on their future economic benefit. Expenditures relating to an existing condition caused by past operations and having no future economic benefits are expensed. Environmental expenditures include site investigation, physical remediation, operation and maintenance, and legal and administrative costs. Environmental accruals are established for sites where it is probable that a loss has been incurred and the amount of the loss can reasonably be estimated. Where the estimate is a range and no amount within the range is a better estimate than any other amount, the corporation accrues the minimum amount in the range and includes the balance of the range in its reported contingencies. Retirement Programs - The cost of pension benefits under the U.S. Retirement Program is determined by an independent actuarial firm using the projected unit credit actuarial cost method, with an unrecognized net asset at Jan. 1, 1986, amortized over 15 years. Contributions to this program are made in accordance with the regulations of the Employee Retirement Income Security Act of 1974. The cost of postretirement benefits is recognized on the accrual basis over the period in which employees become eligible for benefits. Incentive Plans - The corporation applies APB Opinion 25 in accounting for the stock option portion of its employee compensation and stock purchase plans. Compensation expense is recognized for other stock-based incentives issued under the long-term incentive plan. Earnings per Common Share - Primary earnings per common share is computed by dividing Net income - common stockholders, excluding tax benefits related to unallocated preferred stock dividends, by the weighted average number of common shares outstanding during the year and common stock equivalents related to dilutive stock options. Fully diluted earnings per common share is computed by dividing Net income by the weighted average number of common shares outstanding, common stock equivalents related to dilutive stock options and convertible preferred stock. The number of common shares used to compute earnings per share amounts was: 1996 1995 1994 Primary - 135,521,904 141,663,656 154,174,788 Fully diluted - 151,642,658 158,380,545 170,886,405 2. Financial Instruments Fair values of financial instruments are estimated by using a method that indicates the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The fair values of the financial instruments included on the Consolidated Balance Sheet were estimated as follows: Cash, Short-Term Receivables and Accounts Payable - At Dec. 31, 1996 and 1995, the carrying amounts approximate fair value because of the short maturity of these instruments. The corporation had foreign currency forward contracts of $38 million at Dec. 31, 1996 ($32 million at Dec. 31, 1995), to hedge fluctuations in the dollar value of short-term foreign currency receivables and payables. Deferred gains or losses on these contracts were not material. Other outstanding foreign currency forward contracts and options used as a means of offsetting fluctuations in the dollar value of other foreign currency accounts receivable and payable and earnings fluctuations from anticipated foreign currency cash flows totaled $188 million at Dec. 31, 1996 ($173 million at Dec. 31, 1995). During 1996 and 1995 the average fair values of, and the resultant losses and gains associated with, these contracts were nominal. Investments - The corporation's investments in equity companies, partnerships and other businesses generally involve joint ventures for which it is not practicable to determine fair values. Long-Term Receivables - The fair values of long-term and insurance recovery receivables are calculated using current interest rates and consideration of underlying collateral where appropriate. The fair values approximate the carrying values of $186 million and $200 million included in Other assets in the Consolidated Balance Sheet at Dec. 31, 1996 and 1995, respectively. Debt - The corporation uses various types of financial instruments, including interest rate swaps and forward rate agreements, to manage exposure to financial market risk caused by interest rate fluctuations. An interest rate swap held at Dec. 31, 1996 and 1995, had a nominal carrying amount and fair value. Carrying and Fair Values - The carrying values and fair values of the corporation's investments, receivables and debt financial instruments at Dec. 31, 1996 and 1995, are summarized in the table below. Fair values are based on quoted market values, where available, or discounted cash flows (principally long-term debt). Millions of dollars at December 31, 1996 1995 Carrying Fair Carrying Fair Assets (Liabilities) Amount Value Amount Value Investments and receivables - $ 263 $ 263 $ 284 $ 286 Short- and long-term debt - (1,599) (1,619) (1,323) (1,389) 3. Supplementary Income Statement Detail Millions of dollars for the year ended December 31, 1996 1995 1994 Selling, Administration and Other Expenses - Selling - $130 $128 $126 Administration(a) - 121 186 99 Other expenses - 70 73 65 $321 $387 $290 Other (Income) Expense - Net - Gains on sales and disposals of businesses and other assets(b) - $ - $(387) $(67) Investment and interest income - (32) (19) (11) Foreign currency adjustments - 7 6 16 Unused space charge(c) - - 191 - Other(d) - (6) (36) 101 $(31) $(245) $ 39 Interest Expense - Interest incurred(e) - $121 $119 $ 93 Less: Interest capitalized and other adjustments - 45 30 13 $ 76 $ 89 $ 80 a) Includes a charge of $68 million for postemployment benefits in 1995. b) Includes for 1995 a $381 million gain from the sales of the corporation's remaining interest in UCAR International Inc. Includes for 1994 an $81 million gain on the sale of a manufacturing facility and distribution terminal in Hong Kong; a $24 million gain on the sale of a preferred stock investment in OSi; a $24 million charge from the write-down and sale of the corporation's stockholding in Union Carbide India Limited, and a $12 million loss on the sale of the corporation's interest in a uranium mill and mines. c) See Note 12. d) Includes for 1994 $68 million for litigation costs and other costs related to divested operations. Includes income of $5 million in 1995 and charges of $7 million in 1994 related to discontinued and noncore businesses. e) Includes $12 million, $12 million and $17 million in 1996, 1995 and 1994, respectively, representing the interest component of certain leases. 4. Supplementary Balance Sheet Detail Millions of dollars at December 31, 1996 1995 Notes and Accounts Receivable - Trade - $ 846 $ 824 Other - 211 183 1,057 1,007 Less: Allowance for doubtful accounts - 10 11 $1,047 $ 996 Inventories - Raw materials and supplies - $ 114 $ 117 Work in process - 54 46 Finished goods - 373 381 $ 541 $ 544 Property, Plant and Equipment - Land and improvements - $ 326 $ 307 Buildings - 393 380 Machinery and equipment - 5,795 5,221 Construction in progress and other - 645 449 $7,159 $6,357 Other Assets - Deferred charges - $ 193 $ 163 Insurance recovery receivables - 135 145 Long-term receivables - 51 55 Patents, trademarks and goodwill - 113 66 $ 492 $ 429 Other Accrued Liabilities - Accrued accounts payable - $ 335 $ 241 Payrolls - 56 53 Environmental remediation costs - 58 65 Postretirement benefit obligation - 33 28 Employee profit sharing - 51 85 Other - 232 253 $ 765 $ 725 Other Long-Term Obligations - Environmental remediation costs - $ 252 $ 262 Product liability costs - 170 180 Impairment of unused office space - 151 158 Postemployment benefits - 83 87 Other - 155 147 $ 811 $ 834 Translation and Other Equity Adjustments - Canada - $ (44) $ (43) Europe - 18 15 Far East & Other - (7) 13 $ (33) $ (15) 5. Business and Geographic Segment Information The company's operations are classified into two business segments. The Specialties & Intermediates segment includes the corporation's specialty chemicals and polymers product lines, licensing, and solvents and chemical intermediates. The Basic Chemicals & Polymers segment includes the corporation's ethylene and propylene manufacturing operations as well as the production of first-level ethylene and propylene derivatives - polyethylene, polypropylene, ethylene oxide and ethylene glycol. The corporation's noncore operations and financial transactions are included in the Other segment. Millions of dollars 1996 1995 1994 Net Sales - Specialties & Intermediates - $4,286 $4,123 $3,636 Basic Chemicals & Polymers - 2,125 2,080 1,411 Intersegment eliminations - (305) (315) (182) Total - $6,106 $5,888 $4,865 Partnership Income (Loss) - Specialties & Intermediates - $ 134 $ 130 $ 102 Basic Chemicals & Polymers - 10 22 (4) Total - $ 144 $ 152 $ 98 Depreciation and Amortization - Specialties & Intermediates - $ 188 $ 194 $ 169 Basic Chemicals & Polymers - 124 112 105 Total - $ 312 $ 306 $ 274 Operating Profit (Loss) - Specialties & Intermediates - $ 742 $ 709 $ 634 Basic Chemicals & Polymers - 162 444 (22) Other - 17 195 (61) Total - $ 921 $1,348 $ 551 Capital Expenditures - Specialties & Intermediates - $ 522 $ 392 $ 253 Basic Chemicals & Polymers - 199 150 156 Total - $ 721 $ 542 $ 409 Identifiable Assets - Specialties & Intermediates - $3,892 $3,527 $3,111 Basic Chemicals & Polymers - 2,328 2,095 1,511 Other - 326 634 406 Total - $6,546 $6,256 $5,028 Sales of the Basic Chemicals & Polymers segment include intersegment sales, principally ethylene oxide, which are made at the estimated market value of the products transferred. Operating profit is Income before interest expense and provision for income taxes. The operating profit of the Specialties & Intermediates segment for 1995 includes a $48 million charge for postemployment benefits and an increase of $12 million in depreciation expense related to a reduction in the depreciable lives of certain computer equipment. The operating profit of the Basic Chemicals & Polymers segment for 1995 includes a $20 million charge for postemployment benefits. Other operating profit for 1995 includes a gain of $381 million on the sales of the corporation's interest in UCAR International Inc. and a charge of $191 million for future lease costs on unused office space, primarily at the corporation's headquarters. The 1994 operating profit of the Specialties & Intermediates segment includes an $81 million gain on the sale of a manufacturing facility and distribution terminal in Hong Kong, a $68 million charge for litigation costs and other costs primarily related to divested operations and a $24 million gain on the sale of a preferred stock investment in the OrganoSilicon business (OSi). Other 1994 operating profit includes a $24 million charge from the write-down and sale of the corporation's stockholding in Union Carbide India Limited and a $12 million loss on the sale of the corporation's interest in a uranium mill and mines. Net sales, operating profit (loss) and identifiable assets by geographic area were as follows: Millions of dollars 1996 1995 1994 Net Sales - United States & Puerto Rico(a) - $4,336 $4,071 $3,535 Canada - 147 142 136 Europe - 664 719 474 Latin America - 228 227 218 Far East & Other - 731 729 502 International operations - 1,770 1,817 1,330 Total - $6,106 $5,888 $4,865 a) Includes export sales of $743 million in 1996 ($732 million in 1995 and $532 million in 1994). Operating Profit (Loss) - United States & Puerto Rico - $ 820 $1,228 $ 433 Canada - 28 36 14 Europe - 41 50 12 Latin America - (11) 12 16 Far East & Other - 37 29 74 International operations - 95 127 116 Intersegment eliminations - 6 (7) 2 Total - $ 921 $1,348 $ 551 Identifiable Assets - United States & Puerto Rico - $4,977 $4,433 $3,670 Canada - 305 277 244 Europe - 408 404 281 Latin America - 224 191 190 Far East & Other - 312 322 244 International operations - 1,249 1,194 959 Intersegment eliminations - (6) (5) (7) Other - 326 634 406 Total - $6,546 $6,256 $5,028 6. Acquisitions and Divestitures On Jan. 18, 1996, the corporation purchased the polypropylene assets and business of Shell Oil Company. The purchased assets, located in the U.S., consist of Shell's polypropylene technology and manufacturing facilities and polypropylene assets previously held jointly by both companies. On Feb. 29, 1996, the corporation purchased 95 percent of the outstanding shares of Companhia Alcoolquimica Nacional, a Brazilian producer of vinyl acetate monomer. In July 1995 the corporation and two Kuwaiti corporations, Petrochemical Industries Company and Boubyan Petrochemical Company, formed EQUATE Petrochemical Company, a joint venture for development of a world-scale petrochemical complex in Kuwait. The cost of design, construction and initial working capital is expected to approximate $2 billion by the planned start-up date in 1997. At Dec. 31, 1996, the corporation had invested approximately $138 million in EQUATE, representing its 45 percent equity investment in EQUATE. The corporation anticipates making an additional investment of $12 million in early 1997. The corporation has political risk insurance coverage for its equity investment. In March 1995 the corporation acquired 50 percent of the equity of Polimeri Europa S.r.l., from EniChem S.p.A. for $216 million. EniChem retained the other 50 percent. In anticipation of the corporation's acquisition, EniChem had transferred to Polimeri Europa all of its polyethylene business, excluding its wire and cable compounds business. In February 1995 the corporation purchased certain ethylene oxide derivative businesses from Imperial Chemical Industries of London for $71 million. In January 1995 the corporation and Mitsubishi Corporation concluded the sale of newly issued common stock of UCAR International Inc. to a new company formed by Blackstone Capital Partners II Merchant Banking Fund L.P. and a repurchase of certain shares by UCAR that resulted in Blackstone acquiring a 75 percent interest in UCAR. The corporation received $343 million in net cash proceeds and retained a 25 percent equity interest in UCAR. This transaction resulted in a gain of $220 million ($154 million after-tax). In August 1995 the corporation joined in UCAR's initial public offering to sell its remaining equity interest in UCAR for net cash proceeds of $199 million. This sale resulted in a gain of $161 million ($99 million after-tax). 7. Income Taxes The following is a summary of the U.S. and non-U.S. components of Income before provision for income taxes: Millions of dollars for the year ended December 31, 1996 1995 1994 U.S. - $ 766 $1,137 $ 362 Non-U.S. - 79 122 109 $ 845 $1,259 $ 471 The following is an analysis of income tax expense: Millions of dollars 1996 1995 for the year ended December 31, Current Deferred Current Deferred U.S. Federal income taxes - $107 $ 79 $332 $(24) U.S. business and research and experimentation tax credits - (8) - (17) - U.S. state and local taxes based on income - 1 2 47 (7) Non-U.S. income taxes - 54 1 47 2 154 82 409 (29) Provision for Income Taxes - $236 $380 Millions of dollars 1994 for the year ended December 31, Current Deferred U.S. Federal income taxes - $77 $46 U.S. business and research and experimentation tax credits - (10) - U.S. state and local taxes based on income - 4 (2) Non-U.S. income taxes - 35 (13) 106 31 Provision for Income Taxes - $137 The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: 1996 Deferred Deferred Millions of dollars at December 31, Assets Liabilities Depreciation and amortization - $ - $435 Postretirement and postemployment benefits - 229 - Environmental and litigation costs - 133 - Sale/leaseback and related deferrals - 103 - Other - 199 246 Gross deferred tax assets and liabilities - 664 681 Net Deferred Tax (Liability) Asset - $(17) 1995 Deferred Deferred Millions of dollars at December 31, Assets Liabilities Depreciation and amortization - $ - $392 Postretirement and postemployment benefits - 249 - Environmental and litigation costs - 147 - Sale/leaseback and related deferrals - 109 - Other - 153 191 Gross deferred tax assets and liabilities - 658 583 Net Deferred Tax (Liability) Asset - $75 Net noncurrent deferred tax liabilities of $142 million ($62 million in 1995) are included in Deferred credits in the Consolidated Balance Sheet. Net current deferred tax assets of $118 million ($132 million in 1995) are included in Other current assets. Net noncurrent deferred tax assets of $7 million ($5 million in 1995) are included in Other assets. In 1996 there were $2 million in non-U.S. net operating loss carryforwards included in the deferred tax assets above ($6 million in 1995). Undistributed earnings of affiliates intended to be reinvested indefinitely amounted to approximately $403 million at Dec. 31, 1996 ($393 million at Dec. 31, 1995). Determination of deferred taxes related to these earnings is not practicable. An analysis of the difference between Provision for income taxes and the amount computed by applying the statutory Federal income tax rate to Income before provision for income taxes is as follows: Percentage of Pre-Tax Income Year ended December 31, 1996 1995 1994 Tax at statutory Federal rate - 35.0% 35.0% 35.0% Taxes related to operations outside the U.S. - (1.0) 0.1 - U.S. state and local taxes based on income - 0.3 1.0 0.2 Foreign sales corporation - (3.0) (1.4) (2.8) Business credits - (0.9) (1.4) (2.1) Other, net - (2.5) (3.1) (1.2) Consolidated effective income tax rate - 27.9% 30.2% 29.1% 8. Partnerships and Corporate Joint Ventures The following are financial summaries of partnerships and 20 percent- to 50 percent-owned corporate investments carried at equity. The corporation's most significant partnerships include UOP, Petromont and Company Limited Partnership, Aspell Polymeres SNC, and World Ethanol Company. The corporation purchased the balance of the Union Carbide/Shell polypropylene partnership in January 1996 (see Note 6). Partnerships Millions of dollars 1996 1995 1994 Net sales(a) - $2,109 $2,146 $1,616 Cost of sales - 1,338 1,312 954 Depreciation - 83 66 51 Partnership income - 242 283 229 UCC Share of Partnership Income - $ 144 $ 152 $ 98 Current assets - $ 704 $ 599 Noncurrent assets - 806 824 Total assets - 1,510 1,423 Current liabilities - 608 483 Noncurrent liabilities - 385 441 Total liabilities - 993 924 Net assets - 517 499 UCC Equity - $ 251 $ 243 a) Includes $159 million net sales to the corporation in 1996 ($177 million in 1995 and $209 million in 1994). Corporate investments carried at equity include Polimeri Europa S.r.l., EQUATE Petrochemical Company K.S.C., Nippon Unicar Company Limited, Alberta & Orient Glycol Company Limited, Asian Acetyls Co., Ltd. and several smaller entities and, in 1995 and 1994, UCAR International Inc. 20%- to 50%-Owned Corporate Investments Millions of dollars 1996 1995 1994 Net sales(a) - $2,059 $1,731 $1,206 Cost of sales - 1,693 1,221 817 Depreciation - 129 119 58 Net income (loss) - (6) 96 109 UCC Share of Net Income (Loss) - $ (16) $ 46 $ 55 Current assets - $ 877 $ 811 Noncurrent assets - 2,918 1,886 Total assets - 3,795 2,697 Current liabilities - 888 713 Noncurrent liabilities - 1,891 922 Total liabilities - 2,779 1,635 Net assets - 1,016 1,062 UCC Equity - $ 444 $ 496 a) Includes $153 million net sales to the corporation in 1996 ($167 million in 1995 and $73 million in 1994). Dividends and distributions received from partnerships and corporate joint ventures aggregated $141 million in 1996 ($97 million in 1995 and $128 million in 1994). 9. Long-Term Debt Millions of dollars at December 31, 1996 1995 6.75% Notes due 2003 - $ 125 $ 125 6.79% Debentures due 2025 - 250 250 7.00% Notes due 1999 - 175 175 7.50% Debentures due 2025 - 150 150 7.75% Debentures due 2096 - 200 - 7.875% Debentures due 2023 - 175 175 8.75% Debentures due 2022 - 125 125 Pollution control and other facility obligations - 243 246 Other debt - various maturities and interest rates - 54 53 1,497 1,299 Less: Payments to be made within 1 year - 10 14 $1,487 $1,285 On Oct. 2, 1996, the corporation issued $200 million of 7.75 percent debentures maturing in 2096. The maturity of the debentures may be shortened under certain circumstances to preserve the deductibility of interest payments for Federal income tax purposes. At Dec. 31, 1996, there were no outstanding borrowings under the corporation's then existing $1 billion credit agreement. On Jan. 20, 1997, the corporation entered into a replacement credit agreement. See Note 16. The indentures under which the corporation's notes and debentures are issued contain convenants, normal for these types of instruments, that place certain limits on the corporation's ability to merge with another entity or encumber assets. Pollution control and other facility obligations represent state, commonwealth and local governmental bond financing of pollution control and other facilities, and are treated for accounting and tax purposes as debt of the corporation. These tax-exempt obligations mature at various dates from 1998 through 2023 and have an average annual effective rate of 7.3 percent. The average and effective interest rates in 1996 on the corporation's fixed-rate debt, other than pollution control and other facility obligations, were 7.4 percent. The corporation's weighted average interest rate on short- term borrowings outstanding as of Dec. 31, 1996, was 5.7 percent (4.0 percent as of Dec. 31, 1995). Payments due on long-term debt in the four years following 1997 are: 1998, $14 million; 1999, $184 million; 2000, $21 million, and 2001, $23 million. 10. Convertible Preferred Stock - ESOP The Union Carbide Corporation Employee Stock Ownership Plan (ESOP) is an integral part of the Savings and Investment Program for employees. Each share of ESOP stock is convertible into and has the same voting rights as one share of the corporation's common stock, and is protected from dilution. The annual preferred dividend is $0.794 per share. Substantially all full-time employees in the U.S. are eligible to participate in the ESOP through the corporation's matching contribution of 75 percent (50 percent in 1994) on eligible employee contributions. At the corporation's option, ESOP shares may be redeemed either in cash or the corporation's common stock when employees make withdrawals from their accounts. It has been the corporation's policy to redeem ESOP shares with cash. The cost of the ESOP is recognized as incurred and was $2 million in 1996 ($4 million in 1995 and $6 million in 1994). Reductions in ESOP costs in 1996 and 1995 were due primarily to appreciation in the corporation's common stock. At Dec. 31, 1996, 16.0 million preferred shares were outstanding, 5.8 million of which were credited to employees' accounts, including 0.6 million credited during 1996. 11. Stockholders' Equity Each outstanding share of common stock bears one Right entitling its holder, under certain circumstances, to buy a share of common stock at a purchase price of $37.67 (subject to adjustment). The Rights may not be exercised until 10 days after a person or group acquires 20 percent or more of UCC's common stock, or until a date determined by the board of directors following announcement of a tender offer that, if consummated, would result in 20 percent or more ownership of the common stock. Until then, separate Rights certificates will not be issued, nor will the Rights be traded separately from the stock. Should an acquirer become the beneficial owner of 20 percent of the common stock, and under certain additional circumstances, the corporation's stockholders (other than the acquirer) would have the right to buy common stock in Union Carbide Corporation, or in the surviving enterprise if the corporation is acquired, having a value equal to two times the purchase price of the Right then in effect. The Rights will expire on Aug. 31, 1999, unless redeemed prior to that date. The redemption price is $0.01 per Right. On July 24, 1996, the board of directors of the corporation increased the number of shares that may be repurchased under the existing common stock repurchase program to 50 million shares. Through Dec. 31, 1996, the corporation had repurchased 42.3 million shares since inception of the program in 1993 (12.8 million during 1996) at an average effective price of $32.53 per share. The corporation will continue to acquire additional shares from time to time at prevailing market prices, at a rate consistent with the combination of corporate cash flow and market conditions. In conjunction with the corporation's common stock buyback program, put options were sold in a series of private placements entitling the holders to sell 10.2 million shares of common stock to UCC, at specified prices upon exercise of the options. Since inception of this program through Dec. 31, 1996, options representing 7.6 million common shares have expired unexercised, while options representing 2.1 million shares were exercised for $79 million, or an average price of $37.05 per share. Options representing 0.5 million shares remain outstanding at Dec. 31, 1996. Premiums received since inception of the program, which are recorded as Additional paid-in capital, have reduced the average price of repurchased shares to $32.53 per share from $32.77. 12. Leases Leases that meet the criteria for capitalization have been classified and accounted for as capital leases. For operating leases, primarily involving facilities and distribution equipment, the future minimum rental payments under leases with remaining noncancelable terms in excess of one year are: Millions of dollars, year ending December 31, 1997 - $ 74 1998 - 61 1999 - 56 2000 - 52 2001 - 50 Subsequent to 2001 - 246 Total minimum payments 539 Future sublease rentals - 94 Net Minimum Rental Commitments - $445 The present value of the net minimum rental payments amounts to $319 million, of which $220 million pertains to the corporation's headquarters lease. Total lease and rental payments (net of sublease rental of $20 million in 1996, 1995 and 1994) were $53 million, $67 million and $65 million for 1996, 1995 and 1994, respectively. During 1995 the corporation recognized a nonrecurring, noncash charge of $191 million ($134 million after-tax) for future minimum lease payments on unused office space, primarily at the corporation's headquarters. The headquarters charge reflects the pro rata costs of unused office space over the remaining term of the lease, which runs to 2006, less anticipated net sublease income. Neither the expected future costs nor expected net sublease revenues were discounted. 13. Retirement Programs Pension Benefits The noncontributory defined benefit retirement program of Union Carbide Corporation ("U.S. Retirement Program") covers substantially all U.S. employees and certain employees in other countries. Pension benefits are based primarily on years of service and compensation levels prior to retirement. Pension coverage for employees of the corporation's non-U.S. consolidated subsidiaries is provided through separate plans, to the extent deemed appropriate. Obligations under such plans are principally provided for by depositing funds with trustees. The components of net periodic pension cost for the plans combined are as follows: Millions of dollars for the year ended December 31, 1996 1995 1994 (Gain) loss on plan assets - Actual - $(190) $(904) $ 154 Deferred - (31) 692 (355) (221) (212) (201) Service cost - benefits earned during the period - 54 44 51 Interest cost on projected benefit obligation - 196 197 180 Amortization - (3) (6) (9) Net Periodic Pension Cost - $ 26 $ 23 $ 21 The funded status of the plans combined is as follows: Millions of dollars at December 31, 1996 1995 Actuarial present value of plan benefits - Accumulated benefit obligation Vested - $2,599 $2,596 Nonvested - 132 127 2,731 2,723 Projected benefit obligation - 3,001 2,986 Fair value of plan assets, primarily invested in common stocks and fixed-income securities - 3,180 3,173 Plan assets in excess of projected benefit obligation - 179 187 Unamortized net asset at transition - (64) (77) Unamortized prior service cost - 19 22 Unrecognized gains - net - (127) (103) Prepaid Pension Cost - $ 7 $ 29 Pension obligations are valued using the 1983 Group Annuity Mortality Table. The actuarial assumptions used were as follows: At December 31, 1996 1995 Discount rate for determining projected benefit obligation - 7.25% 6.75% Rate of increase in compensation levels - 4.50% 4.00% Expected long-term rate of return on plan assets - 8.50% 8.25% Postretirement Benefits Other Than Pensions The corporation provides health care and life insurance benefits for eligible retired employees and their eligible dependents. These benefits are provided through various insurance companies and health care providers. The obligation is determined by application of the terms of health and life insurance plans, together with relevant actuarial assumptions and health care cost trends projected to increase annually at rates of 9.25 percent in 1997 and 8.75 percent in 1998, falling incrementally to a 5.75 percent annual increase in 2004 and thereafter. The effect of a 1 percent annual increase in the assumed health care cost trend rates would increase the accumulated postretirement benefits obligation at Dec. 31, 1996 by $29 million, and the aggregate of service and interest cost components of net periodic postretirement benefit costs by $3 million. Measurement of the accumulated postretirement benefit obligation was based on the same actuarial assumptions used in the pension calculations. The corporation has funded postretirement benefits for certain retirees who retired prior to Dec. 31, 1988. The funds are invested primarily in common stocks. The components of net periodic postretirement benefit cost are as follows: Millions of dollars for the year ended December 31, 1996 1995 1994 (Gain) loss on plan assets - Actual - $ (4) $ (8) $ 1 Deferred - 2 6 (3) (2) (2) (2) Service cost - benefits earned during the period - 13 11 12 Interest cost - 31 35 32 Amortization - (21) (21) (21) Net Periodic Postretirement Benefit Cost - $ 21 $ 23 $ 21 The funded status of the postretirement benefit obligation is as follows: Millions of dollars at December 31, 1996 1995 Accumulated postretirement benefit obligations - Retirees - $366 $361 Fully eligible active plan participants - 79 75 Other active plan participants - 27 26 472 462 Fair value of plan assets - 17 21 Accumulated postretirement benefits in excess of plan assets - 455 441 Unrecognized gains - net - 51 67 Accrued Unfunded Postretirement Benefit Obligations - $506 $508 The accumulated postretirement benefit obligation for retirees is net of $130 million at Dec. 31, 1996 ($134 million at Dec. 31, 1995), which is reimbursed to the corporation in part by previously owned businesses under ongoing benefit-sharing agreements. Deferred Compensation Plan Since Jan. 1, 1995, the corporation has provided an unfunded, nonqualified deferred compensation plan to certain key employees, offering them an election to defer a portion of their gross pay. The corporation's obligation to employees is adjusted to reflect changes in the market values of employees' investment choices. With limited exceptions, participants' deferred account balances are scheduled for payment at or after full retirement. Postemployment Benefits During 1995 the corporation recorded a charge of $68 million ($49 million after-tax) for postemployment benefits. The charge includes severance costs relating to future staff reductions associated with work process simplification efforts and changes in the corporation's severance benefits. 14. Incentive Plans The 1994 Union Carbide Long-Term Incentive Plan for key employees, which is effective until the 1997 shareholders' meeting, provides for granting incentive and nonqualified stock options; stock appreciation rights; exercise payment rights; grants of stock, including restricted stock, and performance awards. Holders of options may be granted the right to receive payments of amounts equal to the regular cash dividends paid to holders of the corporation's common stock during the period an option is outstanding. The number of shares granted or subject to options cannot exceed 7.5 million under the plan. Option prices are equal to the closing price of the corporation's common stock on the date of the grant, as listed on the New York Stock Exchange Composite Transactions. Options generally become exercisable two years after such date. Options may not have a duration of more than 10 years. Restricted stock award shares are entitled to vote and dividends are credited to the holder's account, but these shares are generally nontransferable for three years after the grant date. These restricted stock awards and accumulated dividends are generally subject to forfeiture if matching employee-owned stock on deposit with the corporation is withdrawn or if other conditions are not met. Performance awards may be paid in common stock, cash or any other form of property. No stock appreciation rights or performance awards were granted in 1996. No further awards can be made under previous plans, which still have options outstanding whose terms are similar to nonqualified stock options under the 1994 plan. Changes in outstanding fixed price options were as follows: 1996 1995 Weighted Weighted Average Average Shares in thousands Shares Exercise Price Shares Exercise Price Outstanding at January 1 - 13,350 $18.54 13,807 $15.70 Granted - 1,166 45.55 1,270 40.38 Exercised - (1,569) 13.05 (1,667) 11.37 Canceled or expired - (165) 36.00 (60) 27.25 Outstanding at December 31 - 12,782 $21.45 13,350 $18.54 Options exercisable at December 31 - 10,460 10,200 1994 Weighted Average Shares in thousands Shares Exercise Price Outstanding at January 1 - 14,112 $12.94 Granted - 1,930 28.63 Exercised - (2,213) 9.33 Canceled or expired - (22) 19.94 Outstanding at December 31 - 13,807 $15.70 Options exercisable at December 31 - 6,488 Options were exercised during 1996 at prices ranging from $6.70 to $28.63 per share ($1.00 to $21.63 per share during 1995 and $1.00 to $16.75 per share during 1994). The following table summarizes information about fixed price option shares outstanding at Dec. 31, 1996: Weighted Average Shares Remaining Weighted Average Shares in thousands Outstanding Contractual Life Exercise Price Range of Exercise Prices - $ 6.70 to $ 9.69 - 3,363 4.0 years $ 8.31 $11.27 to $16.75 - 3,074 4.8 years $15.21 $21.63 to $28.63 - 4,023 7.4 years $24.78 $39.88 to $45.63 - 2,322(a) 9.4 years $42.97 12,782 a) Not exercisable at Dec. 31, 1996. Had compensation cost related to the fixed price option and certain employee plans been recorded at fair value on the date of grant in accordance with FAS 123, the effect on the corporation's net income and earnings per share amounts would have been immaterial. 15. Commitments and Contingencies Purchase Agreements - The corporation has three major agreements for the purchase of ethylene-related products and two other purchase agreements in the U.S. and Canada. Total purchases under these agreements were $233 million, $251 million and $187 million in 1996, 1995 and 1994, respectively. The net present value of the fixed and determinable portion of obligations under these purchase commitments at Dec. 31, 1996 (at current exchange rates, where applicable), is presented in the following table. Millions of dollars, year ending December 31, 1997 - $ 75 1998 - 65 1999 - 56 2000 - 30 2001 - 22 2002 to expiration of contracts - 103 Total - $351 Environmental - The corporation is subject to loss contingencies resulting from environmental laws and regulations, which include obligations to remove or remediate the effects on the environment of the disposal or release of certain wastes and substances at various sites. The corporation has established accruals in current dollars for those hazardous waste sites where it is probable that a loss has been incurred and the amount of the loss can reasonably be estimated. The reliability and precision of the loss estimates are affected by numerous factors, such as different stages of site evaluation, the allocation of responsibility among potentially responsible parties and the assertion of additional claims. The corporation adjusts its accruals as new remediation requirements are defined, as information becomes available permitting reasonable estimates to be made, and to reflect new and changing facts. At Dec. 31, 1996, the corporation had established environmental remediation accruals in the amount of $310 million ($327 million in 1995), of which $252 million is classified as Other long-term obligations ($262 million in 1995). These accruals have two components, estimated future expenditures for site investigation and cleanup and estimated future expenditures for closure and postclosure activities. In addition, the corporation had environmental loss contingencies of $134 million at Dec. 31, 1996. The corporation has sole responsibility for the remediation of approximately 40 percent of its environmental sites for which accruals have been established. These sites are well advanced in the investigation and cleanup stage. The corporation's environmental accruals at Dec. 31, 1996, included $222 million for these sites ($245 million at Dec. 31, 1995), of which $92 million ($109 million at Dec. 31, 1995) was for estimated future expenditures for site investigation and cleanup and $130 million ($136 million at Dec. 31, 1995) was for estimated future expenditures for closure and postclosure activities. In addition, $67 million of the corporation's environmental loss contingencies at Dec. 31, 1996, related to these sites. The site with the largest total potential cost to the corporation is a nonoperating site. Of the above accruals, this site accounted for $32 million ($47 million at Dec. 31, 1995), of which $18 million ($26 million at Dec. 31, 1995) was for estimated future expenditures for site investigation and cleanup and $14 million ($21 million at Dec. 31, 1995) was for estimated future expenditures for closure and postclosure activities. In addition, $24 million of the above environmental loss contingencies related to this site. The corporation does not have sole responsibility at the remainder of its environmental sites for which accruals have been established. All of these sites are in the investigation and cleanup stage. The corporation's environmental accruals at Dec. 31, 1996, included $88 million for estimated future expenditures for site investigation and cleanup at these sites ($82 million at Dec. 31, 1995). In addition, $67 million of the corporation's environmental loss contingencies related to these sites. The largest two of these sites are also nonoperating sites. Of the above accruals, these sites accounted for $37 million ($24 million at Dec. 31, 1995) for estimated future expenditures for site investigation and cleanup. In addition, $12 million of the above environmental loss contingencies related to these sites. Worldwide expenses related to environmental protection for compliance with Federal, state and local laws regulating solid and hazardous wastes and discharge of materials to air and water, as well as for waste site remedial activities, totaled $110 million in 1996, $138 million in 1995 and $153 million in 1994. Other - The corporation has severally guaranteed 45 percent (approximately $608 million at Dec. 31, 1996) of EQUATE Petrochemical Company's debt and working capital financing needs until certain completion tests are achieved; thereafter, a $54 million guarantee will provide ongoing support. The corporation also severally guaranteed certain sales volume targets until EQUATE's sales capabilities are proved. In addition, the corporation has pledged its shares in EQUATE as security for EQUATE's debt. The corporation has political risk insurance coverage for its equity investment and, until the completion tests are concluded, substantially all of its guarantee of EQUATE's debt. The corporation and its consolidated subsidiaries had additional contingent obligations at Dec. 31, 1996, totaling $64 million, of which $36 million related to guarantees of debt. Litigation - The corporation is one of a number of defendants named in approximately 4,500 lawsuits, some of which have more than one plaintiff, involving silicone breast implants. The corporation was not a manufacturer of breast implants but did supply generic bulk silicone materials to certain manufacturers. Also, the corporation in 1990 acquired and in 1992 divested the stock of a small specialty silicones company that, among other things, supplied silicone gel intermediates and silicone dispersions for breast implants. In 1993 most of the suits that were brought in Federal courts were consolidated for pretrial purposes in the United States District Court, Northern District of Alabama. In 1994 the corporation provisionally joined a multibillion-dollar settlement of the claims consolidated in that court. The District Court later determined that the total amount of current claims likely to be approved for payment under the original settlement schedule would substantially exceed the funds available. Consequently, the defendants and the Plaintiffs' Negotiating Committee, at the request of the court, initiated negotiations to reconsider the structure and funding of the settlement. Subsequently, certain defendants, including the corporation, proposed, and the court approved, a revised settlement program. While the corporation cannot predict the number of claimants who will participate in the settlement, based on sample data prepared under supervision of the court, the corporation estimates that its maximum expenditures under the revised agreement should not exceed $100 million prior to insurance recovery. Although insurance coverage is subject to issues as to scope and application of policies, retention limits, exclusions and policy limits, and the insurers have reserved their right to deny coverage, the corporation believes that after probable insurance recoveries neither the settlement nor litigation outside the settlement will have a material adverse effect on the consolidated financial position of the corporation. In addition to the above, the corporation and its consolidated subsidiaries are involved in a number of legal proceedings and claims with both private and governmental parties. These cover a wide range of matters, including, but not limited to, product liability; governmental regulatory proceedings; health, safety and environmental matters; employment; patents; contracts, and taxes. In some of these legal proceedings and claims, the cost of remedies that may be sought or damages claimed is substantial. The corporation has recorded nonenvironmental litigation accruals of $194 million, and related insurance recovery receivables of $135 million. At Dec. 31, 1996, the corporation had nonenvironmental litigation loss contingencies of $53 million. While it is impossible at this time to determine with certainty the ultimate outcome of any legal proceedings and claims referred to in this note, management believes that adequate provisions have been made for probable losses with respect thereto and that such ultimate outcome, after provisions therefor, will not have a material adverse effect on the consolidated financial position of the corporation, but could have a material effect on consolidated results of operations in a given quarter or year. Should any losses be sustained in connection with any of such legal proceedings and claims in excess of provisions therefor, they will be charged to income in the future. 16. Subsequent Events On Jan. 20, 1997, the corporation entered into a new credit agreement with a group of banks, replacing an existing $1 billion credit agreement. The new agreement also provides the corporation with $1 billion in credit for the next five years, but with the option, subject to certain conditions, to increase the available credit by $250 million and to extend the maturity date of the agreement by one year on a rolling basis. Several options are available to borrow at floating interest rates based on LIBOR (London Interbank Offered Rate) or CD (Certificate of Deposit Rate) on a revolving basis. The credit agreement contains covenants that place certain limits on the corporation's ability to merge with another entity, incur debt or create liens on assets. In addition, the credit agreement requires the corporation to meet leverage and interest coverage tests. On Jan. 22, 1997, the corporation established a medium term note program that allows for borrowings of up to $500 million. Notes issued under the program will have a maturity of nine months or longer and will bear interest at either a fixed or floating rate determined by reference to interest rate formulas. The notes will be subject to covenants that place certain limits on the corporation's ability to create liens on assets, engage in sale-leaseback transactions, and incur secured debt. On Jan. 30, 1997, a newly formed real estate investment trust subsidiary issued $250 million of preferred stock bearing a current dividend yield of 14 percent for 10 years and 1 percent thereafter. Domestic real estate with a fair market value of approximately $500 million will be mortgaged via intercompany debt in conjunction with this transaction. The preferred stock may be redeemed if, as a result of a change in tax laws, rules or regulations, dividends on the preferred stock or interest paid on the mortgage note is not fully deductible for Federal income tax purposes. Management's Statement of Responsibility for Financial Statements Union Carbide Corporation's financial statements are prepared by management, which is responsible for their fairness, integrity and objectivity. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles and, accordingly, include amounts that are estimates and judgments. All historical financial information in this annual report is consistent with the accompanying financial statements. The corporation maintains accounting systems, including internal accounting controls monitored by a staff of internal auditors, that are designed to provide reasonable assurance of the reliability of financial records and the protection of assets. The concept of reasonable assurance is based on recognition that the cost of a system must not exceed the related benefits. The effectiveness of those systems depends primarily upon the careful selection of financial and other managers, clear delegation of authority and assignment of accountability, inculcation of high business ethics and conflict-of-interest standards, policies and procedures for coordinating the management of corporate resources and the leadership and commitment of top management. The corporation's financial statements are audited by KPMG Peat Marwick LLP, independent certified public accountants, in accordance with generally accepted auditing standards. These standards provide for the auditors to consider the corporation's internal control structure to the extent they deem necessary in order to issue their opinion on the financial statements. The Audit Committee of the board of directors, which consists solely of nonemployee directors, is responsible for overseeing the functioning of the accounting system and related controls and the preparation of annual financial statements. The Audit Committee recommends to the board of directors the selection of the independent auditors, subject to the approval of stockholders. The Audit Committee periodically meets with the independent auditors, management and internal auditors to review and evaluate their accounting, auditing and financial reporting activities and responsibilities. The independent and internal auditors have full and free access to the Audit Committee and meet with the committee, with and without management present. /s/William H. Joyce /s/John K. Wulff William H. Joyce John K. Wulff Chairman, President and Vice-President, Chief Financial Chief Executive Officer Officer and Controller Danbury, Conn. Jan. 17, 1997 Independent Auditors' Report KPMG Peat Marwick LLP To the Stockholders and Board of Directors of Union Carbide Corporation: We have audited the accompanying consolidated balance sheet of Union Carbide Corporation and subsidiaries as of Dec. 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended Dec. 31, 1996. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Union Carbide Corporation and subsidiaries at Dec. 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended Dec. 31, 1996, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Stamford, Conn. Jan. 17, 1997 Corporate Information 1997 Annual Meeting The 1997 annual meeting of stockholders will be held on Wednesday, April 23, at the John C. Creasy Health Education Center, 24 Hospital Ave., Danbury, CT 06810, beginning at 10 a.m. A notice of the annual meeting, a proxy statement and a proxy voting card are mailed to each stockholder in March, together with a copy of the current annual report. General Offices The general offices of Union Carbide Corporation are located at 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794-2000). Inquiries from the public about Union Carbide and its products and services should be directed to the Corporate Information Center, Union Carbide Corporation, Section N-0, 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794-5300). Stock Exchanges Union Carbide stock is traded primarily on the New York Stock Exchange (ticker symbol: UK). The stock is also listed on the Chicago and Pacific Stock Exchanges in the U.S. Stockholder Inquiries Inquiries about stockholder accounts and dividend reinvestment should be directed to Union Carbide Corporation, William H. Smith, manager, Shareholder Services Department, Section G-1328, 39 Old Ridgebury Road, Danbury, CT 06817- 0001 (Telephone: 203-794-3350). Stock Records and Transfer The corporation acts as its own stock transfer agent through Shareholder Services, which also maintains stockholder records, transfers stock and answers questions regarding stockholders' accounts, including dividend reinvestment accounts. Stockholders wishing to transfer stock to someone else or to change the name on a stock certificate should contact Shareholder Services for assistance. The Registrar is Chase Mellon Shareholder Service. Dividend Reinvestment Stockholders of record may purchase shares directly through Union Carbide's Dividend Reinvestment and Stock Purchase Plan. Under the plan, shares may be purchased from Union Carbide free of commissions and service charges. Requests for a prospectus that explains the plan in detail should be directed to Shareholder Services (Telephone: 800-934-3350). Form 10-K A Form 10-K report for the year ended Dec. 31, 1996, will be available in April 1997. A copy without exhibits may be obtained without charge by writing to Union Carbide Corporation, Joseph E. Geoghan, secretary, 39 Old Ridgebury Road, Danbury, CT 06817-0001. Charitable Contributions Booklet Union Carbide annually publishes a booklet that lists organizations receiving charitable, educational, cultural or similar grants of $250 or more from the corporation. The booklet is available on written request to the secretary. Responsible Care Progress Report This reports covers health, safety and environmental progress at Union Carbide. Information includes performance data for U.S. and other worldwide locations, Responsible Care goals and progress Carbide made in 1996 as it completed full implementation of Responsible Care management practices in the U.S. To obtain a copy, write to Union Carbide Corporation, Public Affairs Department, Section L-4505, 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 800-552-5272). Inquiries Institutional investors, financial analysts and portfolio managers should direct questions about Union Carbide to Union Carbide Corporation, D. Nicholas Thold, director of investor relations, Investor Relations Department, Section E-4286, 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794- 6440). Financial journalists should direct questions to Union Carbide Corporation, David N. Kernis, assistant director, communications, Public Affairs Department, Section L-4502, 39 Old Ridgebury Road, Danbury, CT 06817- 0001 (Telephone: 203-794-6929). Information on Union Carbide also may be found on the company's home page on the Internet at www.unioncarbide.com. Union Carbide's site provides information in five categories: general, financial, business, Responsible Care and recruitment. Directors and Corporate Officers Directors John J. Creedon is retired president and chief executive officer of Metropolitan Life Insurance Company. A Carbide director since 1984, he chairs the Audit Committee and serves on the Compensation & Management Development, Executive and Health, Safety & Environmental Affairs (HS&EA) Committees. C. Fred Fetterolf is a retired director, president and chief operating officer of Aluminum Company of America. A UCC director since 1987, he chairs the HS&EA Committee and serves on the Audit, Compensation & Management Development and Nominating Committees. Joseph E. Geoghan is vice-president, general counsel and secretary of Union Carbide, and has been a director since 1990. He serves on the Executive and Public Policy Committees. Thomas P. Gerrity has been dean at the Wharton School of the University of Pennsylvania since 1990. He became a board member in February 1997 and is a member of the Audit Committee. Rainer E. Gut is chairman of Credit Suisse Group, Zurich, Switzerland, and Credit Suisse First Boston. A UCC board member since 1994, he is a member of the Compensation & Management Development, Finance & Pension and Nominating Committees. Vernon E. Jordan, Jr. is a partner with Akin, Gump, Strauss, Hauer & Feld. He is chairman of the Nominating Committee and a member of the Executive, Finance & Pension and Public Policy Committees. He has been a board member since 1987. William H. Joyce is chairman, president and chief executive officer of Union Carbide Corporation. A director since 1992, he is chairman of the Executive Committee. Robert D. Kennedy is retired chairman and chief executive officer of Union Carbide Corporation and has been a director since 1985. He serves on the Audit, Executive, Nominating and Public Policy Committees. Ronald L. Kuehn, Jr. is a director and chairman, president and chief executive officer of Sonat, Inc. A UCC board member since 1984, he chairs the Compensation & Management Development Committee and serves on the Finance & Pension and HS&EA Committees. Rozanne L. Ridgway is former assistant secretary of state for Europe and Canada. A director since 1990, she chairs the Public Policy Committee and is a member of the Audit, HS&EA and Nominating Committees. James M. Ringler is a director, president and chief executive officer of Premark International, Inc. Elected a director in 1996, he is a member of the Finance & Pension Committee. William S. Sneath is a director of various corporations and retired chairman and chief executive officer of Union Carbide Corporation. He chairs the Finance & Pension Committee and serves on the Executive, HS&EA and Nominating Committees. He has been a director since 1969. Corporate Officers William H. Joyce Chairman of the Board, President and Chief Executive Officer Joseph S. Byck Vice-President, Strategic Planning, Investor Relations and Public Affairs James F. Flynn Vice-President, General Manager, Solvents, Intermediates and Monomers Joseph E. Geoghan Vice-President, General Counsel and Secretary Malcolm A. Kessinger Vice-President, Human Resources Lee P. McMaster Vice-President, General Manager, Ethylene Oxide/Glycol Joseph C. Soviero Vice-President, Corporate Ventures and Purchasing Roger B. Staub Vice-President, General Manager, UNIPOL Systems Ronald Van Mynen Vice-President, Health, Safety and Environment John K. Wulff Vice-President, Chief Financial Officer and Controller Other Senior Management Eugene J. Boros Vice-President, General Manager, Specialty Polymers and Products, UCAR Emulsion Systems David L. Brucker Vice-President, Engineering and Operations John L. Gigerich Vice-President, Information Systems W. William Lindner Vice-President, Purchasing Kevin P. Lynch Vice-President, General Manager, UNIPOL Polymers Philip F. McGovern Vice-President, Tax Gordon D. Mounts Vice-President, General Manager, Industrial Performance Chemicals F. Don Ryan Vice-President, General Manager, Specialty Polyolefins Lee C. Stewart Vice-President and Treasurer Vince F. Villani Vice-President, General Manager, Olefins Donald R. Wood Vice-President, Polypropylene Resins John P. Yimoyines Vice-President, Venture Management Union Carbide Around the World (Excluding partnership or corporate joint venture locations) United States & Puerto Rico California Costa Mesa Torrance Colorado Grand Junction Connecticut Danbury (headquarters) District of Columbia Washington Georgia Atlanta Tucker Illinois Alsip Lisle Louisiana Greensburg Napoleonville Norco Taft New Jersey Bound Brook Carteret Edison Somerset New York Tarrytown North Carolina Cary Texas Clear Lake Dallas Garland Houston Markham Seadrift Texas City Vermont Morrisville Washington Washougal West Virginia Charleston Institute South Charleston Puerto Rico Bayamon Ponce San Juan Canada Alberta Calgary Prentiss Quebec Anjou Boucherville Montreal Ontario Toronto Willowdale Europe Austria Vienna Belgium Antwerp Vilvoorde Zwijndrecht France Rungis Germany Dusseldorf Italy Milan Russia Moscow Spain Barcelona Sweden Stockholm Switzerland Geneva United Kingdom Wilton Latin America Argentina Avellaneda Buenos Aires Brazil Aratu Cabo Cubatao Sao Paulo Chile Santiago Colombia Barranquilla Bogota Medellin Costa Rica San Jose Ecuador Guayaquil Quito Guatemala Guatemala City Mexico Mexico City Monterrey Tultitlan Peru Lima Venezuela Caracas Valencia Far East & Other Australia Gladesville Melbourne Sydney China Beijing Guangdong Shanghai Egypt Cairo Hong Kong Tsimshatsui Indonesia Cimanggis Jakarta Japan Shibuya-ku Jordan Amman Malaysia Petaling Jaya Morocco Casablanca Philippines Batangas Manila Singapore Jurong South Africa Durban Johannesburg South Korea Seoul Sri Lanka Colombo Taiwan Taipei Thailand Bangkok Nonthaburi Turkey Istanbul United Arab Emirates Dubai Definition of Terms Unless the context otherwise requires, the terms below refer to the following: Union Carbide Corporation, Union Carbide Corporation, Union Carbide, Carbide, the parent company, and its the corporation, we, our, consolidated subsidiaries the company, UCC Domestic United States and Puerto Rico Domestic operations Operations of Union Carbide in this area, including exports International operations Operations of Union Carbide in areas of the world other than the United States and Puerto Rico The use of these terms is for convenience of reference only. The consolidated subsidiaries are separate legal entities that are managed by, and accountable to, their respective boards of directors. CARBITOL, CARBOWAX, CELLOSIZE, CELLOSOLVE, CYRACURE, FLEXOL, FLEXOMER, NEULON, NORKOOL, POLYOX, POLYPHOBE, SELEXOL, TERGITOL, TONE, TRITON, TUFLIN, UCAR, UCARSOL, UCARTHERM, UCON, UCURE, UCAR ULTRA+, UNICARB, UNIPOL and UNION CARBIDE are registered trademarks of Union Carbide Corporation. RESPONSIBLE CARE is a registered service mark of the Canadian Chemical Producers Association and the Chemical Manufacturers Association. EQUATE is a trademark of the EQUATE Petrochemical Company K.S.C. of Kuwait. Printed on Recycled, Recyclable Paper. (The back cover depicts a hexagon containing the words "Union Carbide".) UNION CARBIDE CORPORATION 39 Old Ridgebury Road Danbury, CT. 06817-0001 UC-1564 EX-21 17 Exhibit 21 SUBSIDIARIES OF THE CORPORATION Percentage of Voting State or Securities Sovereign Owned By Power of Immediate Name of Company Incorporation Parent Union Carbide Corporation (the "Corporation") New York - % Subsidiaries included in the Consolidated Financial Statements except where noted otherwise: Amerchol Corporation Delaware 100.00 Benefit Capital Management Corporation Delaware 100.00 Calidria Corporation Delaware 100.00 Catalysts, Adsorbents & Process Systems, Inc. Maryland 100.00 KTI Chemicals, Inc. Delaware 100.00 P.T. Union Carbide Indonesia Indonesia 100.00 Prentiss Glycol Company Delaware 100.00 Seadrift Pipeline Corporation Delaware 100.00 South Charleston Sewage Treatment Co. West Virginia 100.00 UCAR Emulsion Systems International, Inc. Delaware 100.00 UCAR Interm, Inc. Delaware 100.00 UCAR Louisiana Pipeline Company Delaware 100.00 UCAR Pipeline Inc. Delaware 100.00 UCAR, Polimeros y Quimicos C.A. Ecuador 100.00 UCAR Vanor (Proprietary) Limited South Africa 100.00 Ucex (U.K.) Limited England 100.00 Umetco Minerals Corporation Delaware 100.00 Union Carbide Argentina S.A.I.C.S. Argentina 100.00 Union Carbide Asia Limited Hong Kong 100.00 Union Carbide Asia Pacific, Inc. Delaware 100.00 Union Carbide Benelux N.V. Belgium (1) Union Carbide do Brasil S/A Brazil 100.00 Union Carbide Caribe Inc. Delaware 100.00 Union Carbide Canada Inc. Canada 100.00 Union Carbide Chemicals and Plastics Technology Corporation Delaware 100.00 Union Carbide Chemicals (Australia) Pty. Ltd. Australia 100.00 Union Carbide Chemicals Korea Limited Korea 100.00 Union Carbide Chemicals (Malaysia) Sdn. Bhd. Malaysia 100.00 Union Carbide Comercial, C.A. Venezuela 100.00 Union Carbide Customer Services Pte. Ltd. Singapore 100.00 Union Carbide Engineering and Hydrocarbons Service Company, Inc. Delaware 100.00 Union Carbide Ethylene Oxide/Glycol Company Delaware 100.00 Union Carbide Eurofinance B.V. Netherlands 100.00 Union Carbide (Europe) S.A. Switzerland 100.00 Union Carbide Foreign Sales Corporation US Virgin Is. 100.00 (1) 99.83% of the voting securities of Union Carbide Benelux N.V. is owned by Union Carbide Corporation; and 00.17% by Union Carbide (Europe) S.A. Percentage of Voting State or Securities Sovereign Owned By Power of Immediate Name of Company Incorporation Parent Union Carbide Corporation. (Continued) Union Carbide Formosa Co., Ltd. Taiwan 100.00 Union Carbide Imaging Systems, Inc. Delaware 100.00 Union Carbide Inter-America Inc. Delaware 100.00 Union Carbide Inter-America Inc. New Jersey 100.00 Union Carbide Investimentos e Participacoes S/C Ltda. Brazil 100.00 Union Carbide Japan K.K. Japan 100.00 Union Carbide Limited England 100.00 Union Carbide Pan America, Inc. Delaware 100.00 Union Carbide Philippines (Far East) Inc. Philippines 100.00 Union Carbide Quimicos y Plasticos, S.A. de C.V. Mexico 100.00 Union Carbide South Africa (Proprietary) Limited South Africa 100.00 Union Carbide Subsidiary L, Inc. Delaware 100.00 Union Carbide Thailand Limited Thailand 100.00 Union Polymers Sdn. Bhd. Malaysia 60.00 Westbridge Insurance Ltd. Bermuda 100.00 Companies reported in the Consolidated Financial Statements on an Equity in Net Assets Basis included: Asian Acetyls Rep. of Korea 33.00 Alberta & Orient Glycol Company Limited Canada 50.00 ASPELL Polymeres SNC France 50.00 Commercial Alcohols Limited Canada 50.00 Equate Petrochemical Company K.S.C. Kuwait 45.00 Nippon Unicar Company Limited Japan 50.00 Petromont and Company, Limited Partnership Canada 49.95 Petromont Inc. Canada 50.00 Polimeri Europa S.r.l. Italy 50.00 Seadrift Polypropylene Company Texas 50.00 Shawinigan Pipeline Reg'd. Canada 50.00 Union Carbide Lanka Limited Sri Lanka 49.00 UOP New York 50.00 Union Showa K.K. Japan 50.00 World Ethanol Company Illinois 50.00 * * * * * * * * * * * * The names of the Corporation's other consolidated subsidiaries and companies carried on an equity in net assets basis are not listed. These subsidiaries and companies, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. In addition, the Corporation has investments in other subsidiaries and 20-to-50%-owned companies for which financial statements are not submitted because all such subsidiaries and companies, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. EX-23 18 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Union Carbide Corporation We consent to the incorporation by reference in each of the Registration Statements of Union Carbide Corporation on Form S-3 (Nos. 33-26185, 33-60705 and 333-17309), and on Form S-8 (Nos. 2-90419, 33-22125, 33-38714, 33-53573, 33-58931 and 333-02829) of our reports dated January 17, 1997, relating to the consolidated balance sheets of Union Carbide Corporation and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows and related schedule for each of the years in the three-year period ended December 31, 1996, appearing and incorporated by reference in the Annual Report on Form 10-K of Union Carbide Corporation for the year ended December 31, 1996. /s/ KPMG Peat Marwick LLP KPMG PEAT MARWICK LLP Stamford, Connecticut March 20, 1997 EX-27 19
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNION CARBIDE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000100790 UNION CARBIDE CORPORATION 1,000,000 12-MOS DEC-31-1996 DEC-31-1996 94 0 1047 0 541 1873 7159 3750 6546 1278 1487 144 0 155 1959 6546 6106 6106 4568 4568 471 0 76 845 236 593 0 0 0 593 4.28 3.90 Other Expenses are equal to Research and Development of 159 and Depreciation and Amortization of 312.
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