0000950130-95-001580.txt : 19950815 0000950130-95-001580.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950130-95-001580 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BORDEN CHEMICALS & PLASTICS LIMITED PARTNERSHIP /DE/ CENTRAL INDEX KEY: 0000821202 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 311269627 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09699 FILM NUMBER: 95562332 BUSINESS ADDRESS: STREET 1: HIGHWAY 73 CITY: GEISMAR STATE: LA ZIP: 70734 BUSINESS PHONE: 5046736121 MAIL ADDRESS: STREET 1: HIGHWAY 73 STREET 2: 180 EAST BROAD STREET 25TH FLOOR CITY: COLUMBUS STATE: OH ZIP: 43215 FORMER COMPANY: FORMER CONFORMED NAME: BORDEN CHEMICALS & PLASTICS LIMITED PARTNERSHIP DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 Commission File No. 1-9699 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP Delaware 31-1269627 (State of organization) (I.R.S. Employer Identification No.) Highway 73, Geismar, Louisiana 70734 504-673-6121 (Address of principal executive offices) (Registrant's telephone number) --------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X No . --- --- Number of Common Units outstanding as of the close of business on August 10, 1995: 36,750,000. ================================================================================ BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Three Months Ended Ended (In thousands except per Unit data) June 30, 1995 June 24, 1994 ------------- ------------- Revenues Net trade sales $157,043 $119,661 Net affiliated sales 30,620 30,010 -------- -------- Total revenues 187,663 149,671 -------- -------- Expenses Cost of goods sold Trade 106,867 88,831 Affiliated 22,612 22,906 Marketing, general and administrative expenses 5,588 5,059 Interest expense 4,716 4,108 Incentive distribution to General Partner 9,818 2,654 Other (income) and expense, including minority interest 1,308 849 -------- -------- Total expenses 150,909 124,407 -------- -------- Income before extraordinary item 36,754 25,264 Extraordinary loss on early extinguishment of debt (6,912) 0 -------- -------- Net income $ 29,842 $ 25,264 ======== ======== PER UNIT DATA, NET OF 1% GENERAL PARTNER INTEREST: Income per Unit before extraordinary loss $ 0.99 $ 0.68 Extraordinary loss per Unit (0.19) 0.00 -------- -------- Net income per Unit $ 0.80 $ 0.68 ======== ======== Average # of Units outstanding during the period 36,750 36,750 ======== ======== Cash distributions declared per Unit $ 1.42 $ 0.65 ======== ========
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Six Months Six Months Ended Ended (In thousands except per Unit data) June 30, 1995 June 24, 1994 ------------- ------------- Revenues Net trade sales $319,531 $214,482 Net affiliated sales 82,938 54,170 -------- -------- Total revenues 402,469 268,652 -------- -------- Expenses Cost of goods sold Trade 189,035 175,321 Affiliated 48,935 43,321 Marketing, general and administrative expenses 11,119 9,565 Interest expense 8,801 7,902 Incentive distribution to General Partner 22,893 2,654 Other (income) and expense, including minority interest 1,445 997 -------- -------- Total expenses 282,228 239,760 -------- -------- Income before extraordinary item 120,241 28,892 Extraordinary loss on early extinguishment of debt (6,912) 0 -------- -------- Net income $113,329 $ 28,892 ======== ======== PER UNIT DATA, NET OF 1% GENERAL PARTNER INTEREST: Income per Unit before extraordinary loss $ 3.24 $ 0.78 Extraordinary loss per Unit (0.19) 0.00 -------- -------- Net income per Unit $ 3.05 $ 0.78 ======== ======== Average # of Units outstanding during the period 36,750 36,750 ======== ======== Cash distributions declared per Unit $ 3.19 $ 0.86 ======== ========
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Six Months Ended Ended (In thousands) June 30, 1995 June 24, 1994 ------------- ------------- CASH FLOWS FROM OPERATIONS Net Income $113,329 $ 28,892 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary loss on early extinguishment of debt 6,912 0 Depreciation 23,447 21,845 Decrease (increase) in receivables 10,660 (17,989) (Increase) decrease in inventories, net of effect from acquired business (14,406) 2,122 Increase in payables 1,125 4,059 (Decrease) increase in incentive distribution payable (2,047) 2,654 Increase (decrease) in accrued interest 1,322 (270) Other, net 878 2,804 -------- -------- 141,220 44,117 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for acquisition (100,376) 0 Capital expenditures (5,822) (9,451) -------- -------- (106,198) (9,451) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of long-term debt 200,000 0 Proceeds from short-term borrowings 65,000 0 Payment of debt issuance costs (7,466) 0 Repayment of long-term debt, including prepayment penalty (156,912) 0 Cash distributions paid (126,835) (14,478) -------- -------- (26,213) (14,478) -------- -------- Increase in cash and equivalents 8,809 20,188 Cash and equivalents at beginning of period 74,126 9,054 -------- -------- Cash and equivalents at end of period $ 82,935 $ 29,242 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid during the period $ 7,479 $ 8,172 ======== ========
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, December 31 (In thousands) 1995 1995 ------------- ------------- ASSETS Cash and equivalents $ 82,935 $ 74,126 Accounts receivable Trade 90,016 84,330 Affiliated 20,955 37,301 Inventories Finished goods 37,669 19,591 Raw materials 9,197 8,540 Other current assets 1,783 2,831 -------- -------- Total current assets $242,555 $226,719 -------- -------- Investments in and advances to affiliated companies 4,074 3,772 Other assets 37,624 29,094 -------- -------- 41,698 32,866 -------- -------- Land 16,370 12,051 Buildings 45,894 37,931 Machinery and equipment 608,942 523,517 -------- -------- 671,206 573,499 Less accumulated depreciation (311,874) (290,180) -------- -------- 359,332 283,319 -------- -------- $643,585 $542,904 ======== ======== LIABILITIES AND PARTNERS' CAPITAL Accounts and drafts payable $ 51,831 $ 50,706 Cash distributions payable 52,811 60,999 Short-term borrowing 65,000 0 Current portion of long-term debt 0 30,000 Incentive distribution payable to General Partner 9,818 11,865 Accrued interest 3,167 1,845 Other accrued liabilities 12,973 14,330 -------- -------- Total current liabilities 195,600 169,745 -------- -------- Long-term debt 200,000 120,000 Minority interest in consolidated subsidiary 1,899 1,953 Other long-term liabilities 5,669 5,471 -------- -------- 207,568 127,424 -------- -------- Partners' capital Common Unitholders 239,407 244,443 General Partner 1,010 1,292 -------- -------- Total partner's capital 240,417 245,735 -------- -------- $643,585 $542,904 ======== ========
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (Unaudited)
(In thousands) LIMITED GENERAL PARTNERS PARTNER TOTAL -------- ------- --------- Balances December 31, 1993 $ 228,862 $ 1,343 $ 230,205 Net income 28,603 289 28,892 Cash distributions declared (31,605) (346) (31,951) --------- -------- --------- Balances June 24, 1994 $ 225,860 $ 1,286 $ 227,146 ========= ======== ========= Balances December 31, 1994 $ 244,443 $ 1,292 $ 245,735 Net income 112,196 1,133 113,329 Cash distributions declared (117,232) (1,415) (118,647) --------- -------- --------- Balances June 30, 1995 $ 239,407 $ 1,010 $ 240,417 ========= ======== =========
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands except Unit and per Unit data) 1. Interim Financial Statements The accompanying unaudited interim consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, which in the opinion of Borden Chemicals and Plastics Management, Inc. (the "General Partner") are necessary for a fair statement of the results for the interim periods. Results for the interim periods are not necessarily indicative of the results for the full year. Per Unit data in the accompanying financial statements is derived by subtracting the General Partner's 1% interest from the income captions and dividing the results by the Average Units Outstanding. 2. Acquisition and Financing On May 2, 1995, the Partnership, through its subsidiary operating partnership ("the Operating Partnership"), completed the purchase of Occidental Chemical Corporation's ("OxyChem") Addis, Louisiana PVC manufacturing facility and related assets. The Addis Facility has an annual proven production capacity of 450 million pounds per year, which will increase the Operating Partnership's stated annual capacity for PVC resin production by approximately 50%. The cash purchase price for the Addis assets was $100,376, subject to certain customary post closing adjustments. On May 1, 1995 the Operating Partnership issued $200,000 aggregate principal amount of senior unsecured notes (the Senior Notes). The net proceeds from this offering were used to prepay the previously outstanding $150,000 aggregate principal amount of existing notes plus related prepayment premium of $6,912 reflected as an extraordinary loss in the second quarter of 1995, and accrued interest. The remaining proceeds were used to fund a portion of the purchase price of the Addis Facility. A $100 million revolving credit facility was obtained during the quarter. Borrowings under this facility were $65 million at June 30, 1995. The following pro forma financial information gives effect to the transactions discussed above on the results of operations for the six months ended June 30, 1995 and June 24, 1994 as if the transactions occurred on January 1, 1994.
Six Months Ended ------------------------------- June 30, 1995 June 24, 1994 ------------- ------------- Total Revenues $457,275 $333,316 Income before extraordinary item: Income $124,602 $ 28,940 Income per Unit $ 3.36 $ 0.78
3. Environmental and Legal Proceedings On October 27, 1994, the U.S. Department of Justice (DOJ), at the request of the U.S. Environmental Protection Agency (the EPA), filed an action against the Partnership and the General Partner in the U.S. District Court for the Middle District of Louisiana. The complaint seeks facility-wide corrective action and civil penalties for alleged violations of the federal Resource, Conservation and Recovery Act (RCRA), the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), and the Clean Air Act at the Geismar complex. If the Partnership is unsuccessful in this proceeding, or otherwise subject to RCRA permit requirements, it may be subject to three types of costs: (i) corrective action; (ii) penalties; and (iii) costs needed to obtain a RCRA permit. Portions of such costs could be subject to the Environmental Indemnity Agreement (EIA) discussed below. The Partnership is subject to extensive federal, state and local environmental laws and regulations which impose limitations on the discharge of pollutants into the air and water, establish standards for the treatment, storage, transportation and disposal of solid and hazardous wastes, and impose obligations to investigate and remediate contamination in certain circumstances. The Partnership has expended substantial resources, both financial and managerial, and it anticipates that it will continue to do so in the future. Failure to comply with the extensive federal, state and local environmental laws and regulations could result in significant civil or criminal penalties, and remedation costs. Under the EIA, Borden has agreed, subject to certain specified limitations, to indemnify the Partnership in respect of environmental liabilities arising from facts or circumstances that existed and requirements in effect prior to November 30, 1987, the date of the initial sale of the Geismar and Illiopolis plants to the Partnership. The Partnership is responsible for environmental liabilities arising from facts or circumstances that existed and requirements that become effective on or after such date. With respect to certain environmental liabilities that may arise from facts or circumstances that existed and requirements in effect both prior to and after such date, Borden and the Partnership will share liabilities on an equitable basis considering all of the facts and circumstances including, but not limited to, the relative contribution of each of the matter and the amount of time each has operated the assets in question (to the extent relevant). No claims can be made under the EIA after November 30, 2002, and no claim can, with certain exceptions, be made with respect to the first $500 of liabilities which Borden would otherwise be responsible for thereunder in any year, but such excluded amounts shall not exceed $3,500 in the aggregate. Excluded amounts under the EIA have aggregated approximately $2,700 through June 30, 1995. In connection with potential environmental matters, a $4,000 provision was included in the Partnership's third quarter 1994 operating results. Because of various factors (including the nature of any settlement with appropriate regulatory authorities or the outcome of any proceeding, actual environmental conditions, the scope of the application of the EIA and the timing of actions, if any, required to be taken by the Partnership), the Partnership cannot reasonably estimate the full range of costs it might incur with respect to the environmental matters discussed herein. The costs incurred in any quarter or year could be material to the Partnership's results of operations for such quarter or year, although, on the basis of the relevant facts and circumstances, management believes this to be unlikely. However, management believes that such costs should not have a material adverse effect on the Partnership's financial position. In addition, the Partnership is subject to various other legal proceedings and claims which arise in the ordinary course of business. In the opinion of the management of the Partnership, based upon the information it presently possesses, the amount of the ultimate liability for these proceedings and claims taking into account its insurance coverage, including its risk retention program and the EIA with Borden, would not materially affect the financial position or results of operations of the Partnership. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ------------------------------------------------------------------------------- OF OPERATIONS ------------- RESULTS OF OPERATIONS QUARTER ENDED JUNE 30, 1995 COMPARED TO QUARTER ENDED JUNE 24, 1994 Total Revenues Total revenues during the second quarter of 1995 increased $38.0 million or 25.4% to $187.7 million from $149.7 million in the second quarter of 1994. This increase was the net result of a $41.5 million increase in PVC Polymers Products revenues, an $8.3 million decrease in Methanol and Derivatives and a $4.8 million increase in Nitrogen Products revenues. Total revenues for PVC Polymers increased 49.5% as a result of a 19% increase in selling prices and a 26% increase in sales volumes. These increases were due to the purchase of the Addis facility and the increased demand for PVC resins resulting from strength in the construction and automotive industries, as well as other industries. Total revenues for Methanol and Derivatives decreased 17.6% as a result of a 12% decrease in selling prices and a 7% decrease in sales volumes. The decreases in price and volume were due to a significant drop in demand for MTBE, a downstream application of methanol as a gasoline additive. Total revenues for Nitrogen Products increased 25% as a result of a 39% increase in selling prices offset by a 10% decrease in sales volumes. Ammonia selling prices increased significantly fueled primarily by strong domestic demand and the worldwide tightness in the ammonia market. Urea volumes declined due to reduced domestic demand as a fertilizer caused by poor weather; however, selling prices remained well over 1994 levels. Costs of Goods Sold Total cost of goods sold increased 16.9% to $129.5 million in the current period from $111.7 million in the year-ago period. The increase was a result of the increased volumes discussed above with raw material costs remaining constant as unit cost decreases for chlorine and natural gas were offset by increased ethylene costs. Expressed as a percentage of total revenues, cost of goods sold decreased to 69% of total revenues in 1995 from 75% in 1994, resulting in improved gross margins and net income for the Partnership. Gross margins for PVC Polymers Products increased 124% as a result of the improved selling prices and volumes discussed above, partially offset by a net increase in raw material costs. Gross margins for Methanol and Derivatives decreased 14% as a result of the decreased volumes and selling prices discussed above, offset by reduced natural gas costs. Gross margins for Nitrogen Products increased 26% on the strength of significantly improved urea and ammonia selling prices and reduced natural gas costs. Incentive Distribution to General Partner An incentive distribution to the General Partner of $9.8 million was generated in the second quarter of 1995 as a result of cash distribution to Unitholders of $1.42 per Unit exceeding $0.3647 per Unit ("the Target Distribution"). The distributions generated in the second quarter of 1994 of $0.65 per Unit resulted in an incentive distribution of $2.7 million to the General Partner. Extraordinary Loss on Early Extinguishment of Debt The Partnership incurred a loss of $6.9 million, or 19 cents per Unit, in the second quarter of 1995 as a result of a prepayment premium on $150 million in debt retired in the quarter. See Acquisition and Financing. Net Income Net income was $29.8 million compared to $25.3 million in 1994. As discussed above, the primary reasons for the improved operating performance were significant selling price increases and volume improvements in PVC resins and nitrogen products, offset partially by declines in methanol and derivatives, increased incentive distribution of the General Partner, and the extraordinary loss. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS ENDED JUNE 24, 1994 Total Revenues Total revenues during the first six months of 1995 increased $133.8 million or 49.8% to $402.5 million from $268.7 million in the first six months of 1994. This increase was the result of a $76.4 million increase in PVC Polymers Products revenues, a $37.8 million increase in Methanol and Derivatives revenues and a $19.7 million increase in Nitrogen Products revenues. Total revenues for PVC Polymers Products increased 50.0% as a result of a 23% increase in selling prices and a 22% increase in sales volumes. These increases were due to the purchase of the Addis facility and the increased demand for PVC resins resulting from strength in the construction and automotive industries, as well as other industries. Total revenues for Methanol and Derivatives increased 45.1% as a net result of a 48% increase in selling prices and a 2% decline in sales volumes. These results reflect the historically high selling prices of the first quarter of 1995 that decreased dramatically during the second quarter as demand for MTBE declined. Total revenues for Nitrogen Products increased 61.7% as a result of a 50% increase in selling prices and an 8% increase in sales volumes. Ammonia selling prices increased significantly fueled primarily by strong domestic demand and the worldwide tightness in the ammonia market. Urea selling prices also showed significant improvements. Cost of Goods Sold Total cost of goods sold increased 8.9% to $238.0 million in the current period from $218.6 million in the year ago period. The increase was a result of the increased volumes discussed above substantially offset by an aggregate raw material cost decrease of approximately 4% comprised of unit cost decreases for chlorine and natural gas offset by increased ethylene costs. Expressed as a percentage of total revenues, cost of goods sold decreased to 59% of total revenues in 1995 from 81% in 1994, resulting in greatly improved gross margins and net income for the Partnership. Gross margins for PVC Polymers Products increased 262% as a result of the improved selling prices and volumes discussed above, partially offset by a net increase in raw material costs. Gross margins for Methanol and Derivatives increased 164% as a result of the increased volumes and significantly higher selling prices discussed above, combined with reduced natural gas costs. Gross margins for Nitrogen Products improved from a near break-even position in 1994 to a profitable position in 1995 on the strength of significantly improved urea and ammonia selling prices, improved volumes and reduced natural gas costs. Incentive Distribution to General Partner The incentive distribution to the General Partner of $22.9 million was generated in the first two quarters of 1995 as a result of the respective quarters cash distributions to Unitholders exceeding the Target Distribution. The distributions generated in the first quarter of 1994 did not exceed the Target Distribution, resulting in no incentive distribution to the General Partner; however, the second quarter distribution did exceed the Target Distribution resulting in an incentive distribution of $2.7 million. Extraordinary Loss on Early Extinguishment of Debt The Partnership incurred a loss of $6.9 million, or 19 cents per Unit, in the second quarter of 1995 as a result of a prepayment premium on $150 million in debt retired in the quarter. See Acquisition and Financing. Net Income Net income was $113.3 million compared to $28.9 million in 1994. As discussed above, the primary reasons for the improved operating performance were significant selling price increased in all product lines and volume improvements in PVC resins and nitrogen products, and a net decrease in raw material costs. Partially offsetting these improvements were the significant increase in the incentive distribution to the General Partner and the extraordinary loss incurred in the second quarter of 1995. Liquidity and Capital Resources Cash Flows from Operations. Cash provided by operations increased to $141.2 million for the first half of 1995, as compared to $44.1 million for the first half of 1994. The increase was primarily attributable to the improved operating performance discussed above. Cash Flows from Investing Activities. The Partnership paid $100.4 million for the acquisition of a PVC manufacturing facility in the second quarter of 1995. See Acquisition and Financing. 1994 capital expenditures reflect the completion of the urea granulation and expansion project. Cash Flows from Financing Activities. The Partnership makes quarterly distributions to Unitholders and the General Partner of 100% of its Available Cash. Available Cash means generally, with respect to any quarter, the sum of all cash receipts of the Partnership plus net reductions to reserves established in prior quarters, less all of its cash disbursements and net additions to reserves in such quarter. The General Partner may establish reserves to provide for the proper conduct of the Partnership's business, to stabilize distributions of cash to Unitholders and the General Partner and as necessary to comply with the terms of any agreement or obligation of the Partnership. Cash distributions of $126.8 million were made during the first half 1995 compared to $14.5 million in the year-ago period. These amounts reflect the payment of cash distributions declared for the two immediately proceeding quarters. Cash distributions with respect to interim periods are not necessarily indicative of cash distributions with respect to a full year. Moreover, due to the cyclical nature of the Partnership's business, past cash distributions are not necessarily indicative of future cash distributions. There are various seasonality factors affecting results of operations and, therefore, cash distributions. In addition, the amount of Available Cash constituting Cash from Operations for any period does not necessarily correlate directly with net income for such period because various items and transactions affect net income and Available Cash constituting Cash from Operations differently. For example, depreciation reduces net income but does not affect Available Cash constituting Cash from Operations, while changes in working capital items (including receivables, inventories, accounts payable and other items) generally do not affect net income but do affect such Available Cash. Moreover, as provided for in the Partnership Agreements with respect to the Partnership and the Operating Partnership, certain reserves may be established which affect Available Cash constituting Cash from Operations but do not affect cash balances in financial statements. Such reserves have generally been used to set cash aside for debt service, capital expenditures and other accrued items. Acquisition and Financing On May 2, 1995, the Partnership, through the Operating Partnership, completed the purchase of Occidental Chemical Corporation's Addis, Louisiana PVC manufacturing facility and related assets. The Addis Facility has an annual proven production capacity of 450 million pounds per year, which will increase the Operating Partnership's stated annual capacity for PVC resin production by approximately 50%. The cash purchase price for the Addis assets was $100.4 million. On May 1, 1995, the Operating Partnership issued $200,000 aggregate principal amount of senior unsecured notes (the Senior Notes). The proceeds from this offering, net of $7.5 million of debt issuance costs, were used to prepay the previously outstanding $150,000 aggregate principal amount of existing notes plus a related $6.9 million prepayment premium. The remaining proceeds were used to fund a portion of the purchase price of the Addis Facility. Liquidity The Partnership expects to satisfy its cash requirements, including the requirements of the Addis Facility, through internally generated cash and borrowings. In connection with the acquisition of the Addis Facility, the Partnership entered into a Revolving Credit Facility which provides a $100.0 million line of credit for capital expenditures (including the acquisition), working capital and general partnership purposes. Borrowings under the Revolving Credit Facility were $65.0 million at June 30, 1995. The amount available under the facility reduces to $75.0 million on January 1, 1996, $50.0 million on January 1, 1997 and terminates December 31, 1997. The facility may be extended for one year with the consent of the lenders. The Partnership has terminated its previous $20.0 million credit facility. PART II. OTHER INFORMATION Item 1. Legal Proceedings ------------------------- Louisiana Groundwater Remediation Settlement Agreement ------------------------------------------------------ In 1985, LDEQ and Borden, Inc. ("Borden") entered into a settlement agreement (the "Settlement Agreement") that called for the implementation of a long term groundwater and soil remediation program at the Geismar complex to address contaminants, including ethylene dichloride ("EDC"). Also during this time frame, Borden commenced closure of various units identified to have been contributors to the EDC contamination underlying the Geismar complex. Borden and the Partnership have implemented the Settlement Agreement, and have worked in cooperation with the LDEQ to remediate the groundwater and soil contamination. The Settlement Agreement contemplated, among other things, that Borden would install a series of groundwater monitoring and recovery wells, and recovery trench systems. The Partnership believes that it already has sufficiently identified the extent of the groundwater plume. Nevertheless, the Partnership intends to do additional drilling and testing for the purpose of addressing issues raised by LDEQ concerning whether the extent of the groundwater contamination has been identified. Borden has paid substantially all of the costs to date of the Settlement Agreement. It is unknown how long the remediation program will continue or whether the LDEQ will require the Partnership to incur costs to take further remedial measures in response to data generated by the planned additional testing. If the LDEQ requires the Partnership to take further remedial measures, the Partnership anticipates that a portion of such costs would be covered by an Environmental Indemnity Agreement. The extent to which any costs for further remedial measures required by LDEQ will be covered by the Environmental Indemnity Agreement will depend, in large part, on whether such remedial measures respond to facts or circumstances that existed and requirements in effect prior to November 30, 1987, the date of the initial sale by Borden of the Geismar and Illiopolis plants to the Partnership. Federal Environmental Enforcement Proceeding -------------------------------------------- On October 27, 1994, the U.S. DOJ acting at the request of the EPA filed an action against the Operating Partnership, the Partnership, and the General Partner in the United States District Court for the Middle District of Louisiana ("Geismar enforcement proceeding"). The complaint seeks civil penalties for alleged violations of RCRA, CERCLA and the Clean Air Act at the Geismar facility, as well as corrective action at that facility. Prior to the filing of the complaint, the Partnership and DOJ had engaged in settlement discussions, and the Partnership expects that such discussions will continue. The federal government's primary allegations for which it seeks penalties include claims that (i) the Partnership's export to South Africa of a partially depleted mercuric chloride catalyst for recycling violated RCRA; (ii) the Partnership should have applied for RCRA permit for operation of its valorization of chlorinated residual ("VCR") unit and related tanks before August 1991; and (iii) the Partnership should have applied for a RCRA permit for the north trench sump at the Geismar complex because such sump allegedly stored, or disposed of, hazardous waste. The government's allegations include other claims related to these and other alleged RCRA violations, as well as claims of alleged violations of immediate release reporting requirements under CERCLA and requirements governing particulate matter emissions under the Clean Air Act. The Partnership plans to vigorously defend all of the above allegations. During the early 1990's, the Partnership sent partially depleted mercuric chloride catalyst to a facility in South Africa for recovery of the mercury. See the following "Export of Partially Depleted Mercuric Chloride ---------------------------------------------- Catalyst." In 1993, LDEQ had determined that the catalyst was to a hazardous -------- waste. However, because of a belief by the EPA that the partially depleted catalyst could be a hazardous waste and a reversal of LDEQ's 1993 determination, and pending the outcome of the Geismar enforcement proceeding, the Partnership has ceased exporting the partially depleted mercuric chloride catalyst for recycling and is currently handling it as if it were a hazardous waste. Accordingly, even if a court should determine that the partially depleted catalyst was a hazardous waste when it was exported, the Partnership does not anticipate that it would incur material additional expenditures to continue to manage the partially depleted catalyst as a hazardous waste. In 1991, as a protective filing, the Partnership applied for a hazardous waste permit for the VCR unit and related tanks. In January 1994, in response to a petition from the Partnership to LDEQ for a determination that the VCR unit does not require a RCRA permit, LDEQ determined that the VCR unit is subject to RCRA. The Partnership continues to maintain that the VCR unit is not subject to RCRA and has filed appeals of LDEQ's determination in Louisiana State Courts. In May 1994, the Partnership filed a Complaint for Declaratory Judgment in the U.S. District Court in Baton Rouge seeking a determination that (i) the partially depleted mercuric chloride catalyst was not a hazardous waste when it was exported for recycling, (ii) the materials entering the VCR unit and related tanks are not hazardous waste and (iii) the north trench sump does not require a RCRA permit. In May 1995, certain adjoining landowners at the Geismar complex filed a motion to intervene in the Geismar enforcement proceedings claiming rights under CERCLA and RCRA to protect their property interests. The Partnership plans to vigorously defend against this intervention. If the Partnership is unsuccessful in prosecuting its Declaratory Judgment Action, or in defending itself against the Geismar enforcement proceeding, it could be subject to three types of costs: (i) penalties, (ii) corrective action, and (iii) costs needed to obtain a RCRA permit. As to penalties, although the maximum statutory penalties that would apply in a successful enforcement action by the United States would be in excess of $150.0 million, the Partnership believes that, assuming the Partnership is unsuccessful and based on information currently available to it and an analysis of relevant case law and administrative decisions, the more likely amount of any liability for civil penalties would not exceed several million dollars. If the Partnership is unsuccessful in either the Declaratory Judgment Action or the Geismar enforcement proceedings, it may also be subject to costs for corrective action. The federal government also can require corrective action for a facility subject to RCRA permit requirements. Corrective action could require the Partnership to conduct investigatory and remedial activities at the Geismar complex concurrently with the groundwater monitoring and remedial program that the Partnership is currently conducting under the Settlement Agreement with LDEQ. The DOJ has advised the Partnership that it intends to seek facility-wide corrective action to address potential contamination at the Geismar complex. EPA has indicated that it intends to evaluate the adequacy of the existing groundwater remediation project performed under the Settlement Agreement with LDEQ, and to determine the potential for other areas of contamination on or near the Geismar complex. The cost of any corrective action could be material, depending on the scope of such corrective action. However, the actual cost of a facility-wide corrective action cannot be identified until the EPA provides substantially more information to the Partnership. If the Partnership is unsuccessful in either proceeding concerning its challenge to the applicability of the RCRA permit requirements to the VCR unit and related tanks, or the north trench sump, it will have to incur additional permitting costs. The Partnership estimates that its costs to complete the permitting process for the VCR unit and related tanks would be approximately $1.0 million. The Partnership believes that the costs for amending its pending RCRA permit application to include the north trench sump would not be material. Because of the complex nature of environmental insurance coverage and the rapidly developing case law concerning such coverage, no assurance can be given concerning the extent to which insurance may cover environmental claims against the Partnership. However, insurance generally does not cover penalties or the costs of obtaining permits. Export of Partially Depleted Mercuric Chloride Catalyst -------------------------------------------------------- During the early 1990's, the Partnership shipped partially depleted mercuric chloride catalyst to the facility of Thor Chemicals S.A. (PTY) Limited ("Thor") in Cato Ridge, South Africa for recovery of mercury. In 1993 the LDEQ determined that the partially depleted catalyst was not a hazardous waste, although LDEQ reversed this position in 1994. The Partnership disagrees with this reversal. The Partnership did not send mercury-containing sludge to the Thor facility. The Partnership believes that Thor's operations have included the production of mercuric chloride catalyst and the recovery of mercury from partially depleted catalyst. Recovery of mercury at Thor's facility was discontinued in March 1994 when the Department of Health in South Africa refused to renew a temporary license that had been granted to Thor. At such time, there were drums of partially depleted catalyst at the facility which had been shipped by the Partnership to Thor. In addition, in the spring of 1994 there were drums of other materials at the Thor facility which the Partnership had not sent there. According to Thor, less than 25% of the drums of material at the Thor facility, had been shipped by the Partnership to Thor. In February 1995, Thor and three of its management personnel were tried by South Africa for the common law crime of culpable homicide and a number of alleged violations of the Machinery Occupational Safety Act of 1983 ("MOSA"), because of the deaths of two Thor employees. The prosecution alleged that the deaths were the result of mercury poisoning. In exchange of a plea by Thor that it had violated provisions of MOSA, the prosecution dropped the homicide charges against Thor and all the charges against Thor's management personnel. The court has sentenced Thor to a fine of R13,500.00, which is equivalent to approximately $3,800. The Partnership is aware that relatives of two deceased Thor employees, and a Thor employee allegedly suffering from mercury poisoning, have filed suit in the United Kingdom against Thor's parent company for negligence. On March 24, 1995, the President of South Africa appointed a Commission of Inquiry and published the following terms of reference for the Commission: (1) to investigate the history and background of the acquisition of mercury catalyst stockpiled by Thor as well as additional mercury-containing sludge on the premises and to report on the further utilization or disposal thereof; (2) to recommend the best practical environmental option to address the problem of mercury-containing catalyst and/or waste currently on Thor's premises; and (3) to report the results of the Commission's inquiry to the President of the Republic of South Africa as soon as conveniently possible. In addition, the Minister of Water Affairs and Forestry has instructed his department's regional office to investigate alleged water pollution at and near the Thor facility. The Government of South Africa has not made any allegations or asserted any claims against the Partnership. The contract between the Partnership and Thor provides that title to, risk of loss, and all other incidents of ownership of the partially depleted catalyst would pass from the Partnership to Thor when the catalyst reached South Africa. The Partnership does not believe that it is liable for disposing of the drums of partially depleted catalyst remaining at the Thor facility that were shipped by the Partnership. Nonetheless, in the event that the Partnership should be required to dispose of the remaining drums at the facility shipped by the Partnership, the Partnership estimates that such cost would not be in excess of $4 million. With regard to the environmental condition of the Thor facility, the Partnership has not been notified by the Government of South Africa that the Partnership would be liable for any contamination or other conditions at that facility, although it is impossible to determine what, if any, allegations any party may make in connection with the Thor facility in the future. It is unclear under current South African environmental law as to whether any such allegations, if made, would be sustained against the Partnership, and the Partnership would vigorously defend against any such allegations. Emergency Planning and Community Right-to-Know Act Proceeding ------------------------------------------------------------- In February 1993, an EPA Administrative Law Judge held that the Illiopolis facility had violated CERCLA and the Emergency Planning and Community Right to Know Act ("EPCRA") by failing to report certain relief valve releases, which occurred between February 1987 and July 1989, that the Partnership believes are exempt from CERCLA and EPCRA reporting. The Partnership's petition for reconsideration was denied, a penalty hearing will be scheduled, and further appeals are possible. Management does not believe that any ultimate penalty arising from this proceeding would have a material adverse effect on the Partnership. The proposed penalty in EPA's administrative complaint initiating this proceeding in 1991 was $1.0 million. Borden Environmental Indemnity ------------------------------ Under the Environmental Indemnity Agreement, subject to certain conditions, Borden has agreed to indemnify the Partnership in respect of environmental liabilities arising from facts or circumstances that existed and requirements in effect prior to November 30, 1987, the date of the initial sale of the Geismar and Illiopolis plants to the Partnership (the "Transfer Date"). The Partnership is responsible for environmental liabilities arising from facts or circumstances that existed and requirements in effect on or after the Transfer Date. With respect to certain environmental liabilities that may arise from facts or circumstances that existed and requirements in effect both prior to and after the Transfer Date, Borden and the Partnership will share liabilities on an equitable basis considering all of the facts and circumstances including, but not limited to, the relative contribution of each to the matter and the amount of time each has operated the asset in question (to the extent relevant). No claims can be made under the Environmental Indemnity Agreement after November 30, 2002, and no claim can, with certain exceptions, be made with respect to the first $500,000 of liabilities which Borden would otherwise be responsible for thereunder in any year, but such excluded amounts shall not exceed $3.5 million in the aggregate. Excluded amounts under the Environmental Indemnity Agreement have aggregated approximately $2.7 million through June 30, 1995. If the United States is successful in requiring the Partnership to perform corrective action at the Geismar facility or the LDEQ requires the Partnership to take further remedial measures in connection with the Settlement Agreement, the Partnership anticipates that a portion of its corrective action costs would be covered by the Environmental Indemnity Agreement. The extent to which any penalties or permit costs that the Partnership may incur as a result of pending environmental proceedings will be subject to the Environmental Indemnity Agreement will depend, in large part, on whether such penalties or costs are attributable to facts or circumstances that existed and requirements in effect prior to the Transfer Date. Federal Wastewater Permit ------------------------- The Geismar facility has a permit for each of its two wastewater outfalls. The Partnership is challenging conditions in one of those permits. As a result of the government's delay in responding to this challenge, the challenged permit has expired and, prior to the expiration, the Partnership applied for a new permit. Depending on the result of that permit application, the Partnership's current permit challenge may be irrelevant. Other Legal Proceedings ----------------------- The Partnership manufactures, distributes and uses many different chemicals in its business. As a result of its chemical operations, the Partnership is subject to various lawsuits and claims, such as product liability and toxic tort claims, arising in the ordinary course of business and which seek compensation for physical injury, pain and suffering, costs of medical monitoring, property damage, and other alleged harm. New or different claims arising from the Partnership's various chemical operations may be made in the future. In addition, the Partnership is subject to various other legal proceedings and claims which arise in the ordinary course of business. The management of the Partnership believes, based upon the information it presently possesses, that the realistic range of liability of these other matters, taking into account its insurance coverage, including its risk retention program and the Environmental Indemnity Agreement with Borden, would not have a material adverse affect on the financial position and results of operations of the Partnership. ITEM 6, EXHIBITS AND REPORTS OF FORM 8-K ---------------------------------------- (a) Exhibits -------- 3.0 Restated to Certificate of Incorporation, dated May 3, 1995 10.0 1995 long term long incentive plan SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP By BCP Management, Inc. General Partner By /s/ JAMES O. STEVNING ------------------------------- James O. Stevning Controller and Principal Accounting Officer Date: August 11, 1995 EX-3.0 2 RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.0 RESTATED CERTIFICATE OF INCORPORATION OF BCP MANAGEMENT, INC. BCP Management, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The name of the Corporation is BCP Management, Inc. BCP Management, Inc. was originally incorporated under the same name, and the original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on August 6, 1987. 2. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation restates and integrates and further amends the provisions of the Certificate of Incorporation of the Corporation. 3. The text of the Restated Certificate of Incorporation as heretofore amended or supplemented is hereby restated and further amended to read in its entirety as follows: FIRST: The name of the Corporation is BCP Management, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD: The purposes of the Corporation are to (i) act as the general partner of Borden Chemicals and Plastics Limited partnership, a Delaware limited partnership, and Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited Partnership, and any successors to such limited partnerships, (ii) conduct, direct and exercise full control over all activities of such limited partnerships and successors and (iii) do anything necessary or incidental to the foregoing. FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 10,000 shares of common stock with a par value of one dollar ($1.00) per share. FIFTH: The name and mailing address of the incorporator of the Corporation are as follows: Name Address ---- ------- Steven Sutherland One First National Plaza Suite 4200 Chicago, Illinois 60603 SIXTH: The name and mailing address of the person who is to serve as director until the first annual meeting of stockholders or until his successor is elected and qualified is as follows: Name Address ---- ------- Lawrence O. Doza c/o Borden, Inc. 277 Park Avenue New York, New York 10172 SEVENTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-Laws of the Corporation, subject to any specific limitation on such power provided by any By-Laws adopted by the stockholders. EIGHTH: Elections of directors need not be by written ballot unless the By-Laws of the Corporation so provide. NINTH: The Corporation is to have perpetual existence. TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this reservation. ELEVENTH: A. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. Any repeal or modification of this Section A by the stockholders -2- of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. B. (1) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except -------- ------- as provided in paragraph (2) of this Section B with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section B shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, -------- however, that if the General Corporation Law of the State of Delaware requires, ------- the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section B or otherwise. -3- (2) If a claim under paragraph (1) of this Section B is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (3) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section B shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Law, agreement, vote of stockholders or disinterested directors or otherwise. (4) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. (5) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any agent of the Corporation to the fullest extent of the provisions of this Section B with respect to the indemnification and advancement of expenses of directors, officers and employees of the Corporation. -4- (6) Without limiting the foregoing, to the extent that the General Corporation Law of the State of Delaware is amended or supplemented from time to time after the date hereof to provide for additional rights of indemnification to directors, officers or employees of the Corporation, the Corporation shall, to the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all such directors, officers and employees from and against any and all of the expenses, liabilities, or other matters referred to in or covered by the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Corporation has caused this Certificate to be signed by Lawrence L. Dieker, its Secretary, this 3rd day of May, 1995. /s/ Lawrence L. Dieker ---------------------- Lawrence L. Dieker Its: Secretary -5- EX-10.0 3 UNIT APPRECIATION RIGHTS PLAN EXHIBIT 10.0 BCP MANAGEMENT, INC. 1995 LONG-TERM INCENTIVE PLAN I. INTRODUCTION 1.1 Purposes. The purposes of the 1995 Long-Term Incentive Plan (the "Plan") -------- ---- of BCP Management Inc., a Delaware corporation (the "General Partner"), are (i) --------------- to align the interests of the unitholders of Borden Chemicals and Plastics Limited Partnership, a Delaware limited partnership (the "Partnership"), and the ----------- recipients of awards under this Plan by increasing the proprietary interest of such recipients in the Partnership's growth and success, (ii) to advance the interests of the Partnership by attracting and retaining well-qualified persons who are not officers or employees of the General Partner for service as directors of the General Partner ("Non-Employee Directors"), directors, officers, and employees of the General Partner, and those officers and other employees of Borden, Inc., a New Jersey corporation and the sole stockholder of the General Partner ("Borden"), who render services on behalf of the General ------ Partner, the Partnership and Borden Chemicals and Plastics Operating Limited Partnership, a Delaware limited partnership (the "Operating Partnership"), and --------------------- (iii) to motivate such officers and other employees and non-employee directors to act in the long-term best interests of the Partnership's unitholders. For purposes of this Plan, references to employment with the General Partner shall also mean employment with Borden. 1.2 Certain Definitions. ------------------- "Agreement" shall mean the written agreement between the General Partner --------- and the recipient of an award under this Plan evidencing unit appreciation rights ("UARs") and any Phantom Units credited to the recipient of such UARs ---- pursuant to Section 2.2 of this Plan. "Base Price" shall mean the amount associated with a UAR that is ---------- determined by the Committee at the time of grant in accordance with Section 2.1. "Board" shall mean the Board of Directors of the General Partner. ----- "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- "Committee" shall mean the Independent Committee of the Board. --------- "Common Units" shall mean the depositary units representing common ------------ limited partner interests in the Partnership. "Disability" shall mean the inability of the holder of an award to ---------- perform substantially such holder's duties and responsibilities for a continuous period of at least six months, as determined solely by the Committee. "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended. 1 "Exercise Window Period" shall mean "window periods" established by the ---------------------- General Partner for trading in the Securities of the Partnership, each of which window periods shall be an Exercise Window Period under the Plan. The General Partner will inform participants in the Plan of any change in the announced window periods. "Fair Market Value" shall mean the average of the high and low ----------------- transaction prices of Common Unit as reported on the New York Stock Exchange Composite Transactions on the date as of which such value is being determined, or, if there shall be no reported transactions for such date, on the next preceding date for which transactions were reported; provided, however, that if Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion shall at such time deem appropriate. "Non-Employee Director" shall mean any director of the General Partner --------------------- who is not an officer or employee of the General Partner, Borden, the Partnership, the Operating Partnership or any subsidiary of the foregoing. "Performance Measures" shall mean the criteria and objectives, -------------------- established by the Committee, which shall be satisfied or met as a condition to the grant of a UAR or the crediting of a Phantom Unit or to the exercisability of all or a portion of an award evidencing UARs and/or Phantom Units. Such criteria and objectives may include, but are not limited to, the attainment by a Common Unit of a specified Fair Market Value for a specified period of time, earnings per share, return on equity, earnings, revenues, market share, cash flows or cost reduction goals, or any combination of the foregoing and any other criteria and objectives established by the Committee. In the sole discretion of the Committee, the Committee may amend or adjust the Performance Measures or other terms and conditions of an outstanding award in recognition of unusual or nonrecurring events affecting the Partnership or its financial statements or changes in law or accounting principles. "Phantom Unit" shall mean a right which entitles the holder thereof to ------------ receive, upon exercise of such Phantom Unit, cash in an amount equal to the Fair Market Value of one Common Unit on the date of exercise. "Retirement" shall mean, as applicable, retirement from employment with, ---------- or for, the General Partner on or after age 65, or on or after age 60 with the consent of the General Partner or retirement from service as a director of the General Partner on or after age 60. "UAR" shall mean a unit appreciation right which (i) in the event the --- Fair Market Value of one common Unit equals or exceeds the Base Price of such UAR at the time of exercise of such UAR, entitles the holder thereof to receive, upon exercise of such UAR, cash in an amount equal to the excess of the Fair Market Value of one Common Unit on the date of exercise over the Base Price of such UAR, and (ii) in the event the Fair Market Value of one Common Unit is less than the Base Price of such UAR at the time of exercise of such UAR, results (in accordance with Section 2.3(b) and 4.3(b)), upon exercise of such UAR, in a reduction of the cash payable, by the difference between such Fair Market Value and such Base Price, due to the exercise of Phantom Units in connection with the exercise of such UAR. 2 1.3 Administration. This Plan shall be administered by the Committee. UARs may be awarded under this Plan to eligible officers and other employees of the General Partner and Borden, and shall be awarded to Non-Employee Directors in accordance with Article IV. The Committee shall, subject to the terms of this Plan, select eligible officers and other employees for participation in this Plan and determine the form, amount and timing of each award to such persons and the number of UARs subject to such an award, the Base Price associated with a UAR, the time and conditions of exercise of the award and all other terms and conditions of the award, including, without limitation, the form of the Agreement evidencing the award. The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof, establish rules and regulations it deems necessary or desireable for the administration of this Plan and may impose, incidental to the grant of an award, conditions with respect to the award, such as limiting competitive employment or other activities. All such interpretations, rules, regulations and conditions shall be conclusive and binding on all parties. The Committee may delegate some or all of its power and authority hereunder to the President and Chief Executive Officer or other executive officer of the General Partner as the Committee deems appropriate; provided, however, that the Committee may not delegate its power and authority with regard to the selection for participation in this Plan of an officer or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an award to such an officer or other person. A majority of the Committee shall constitute a quorum. The acts of the Committee shall be either (i) acts of a majority of the members of the Committee present at any meeting at which a quorum is presented or (ii) acts approved in writing by a majority of the members of the Committee without a meeting. 1.4 Eligibility. Participants in this Plan shall consist of such officers or ----------- other employees of the General Partner and Borden as the Committee in its sole discretion may select from time to time. The Committee's selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. Non-Employee Directors shall be eligible to participate in this Plan in accordance with Article IV. 1.5 UARs and Phantom Units Available. Subject to adjustment as provided in Section 5.6. an annual aggregate of 1.5% of the number of outstanding BCP Common Units as of January 1 of each calendar year beginning January 1, 1995 shall be available to be granted as UARs and Phantom Units under this Plan, reduced by the sum of the aggregate number of UARs and Phantom Units which become subject to outstanding awards during such calendar year. UARs and Phantom Units which are not exercised by reason of the expiration, termination, cancellation or forfeiture of an award shall again be available under this Plan. II. UNIT APPRECIATION RIGHTS AND PHANTOM UNITS Awards evidencing UARs and Phantom Units shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable: 3 2.1 Unit Appreciation Rights. The Committee may, in its discretion, grant ------------------------ UARs to such eligible persons as may be selected by the Committee. The number of UARs subject to an award shall be determined by the Committee. The Base Price of a UAR shall be determined by the Committee; provided, however, that such Base Price shall not be less than 100% of the Fair Market Value of a Common Unit on the date of grant of such UAR. 2.2 Phantom Units. On the date a cash distribution is made by the ------------- Partnership to the unitholders of the Partnership, a credit of Phantom Units shall be made to each participant's account under this Plan. The number of Phantom Units credited to a participant's account shall be the number determined by dividing (i) the product of (A) the aggregate number of UARs and Phantom Units held in such participant's account immediately prior to the cash distribution, multiplied by (B) the amount of the cash distribution per Common Unit by (ii) the Fair Market Value of a Common Unit on the date of the cash distribution. 2.3 Exercise Provisions. ------------------- (a) Exercisability. Subject to Article III and unless otherwise --------------- specified in the Agreement relating to such award, one-half (50%) of the UARs and any Phantom Units related thereto subject to such award shall become exercisable on the date which is two years after the date of grant of such UARs, and on the date which is three years after the date of grant of such UARs, all UARs and any Phantom Units related thereto which are then unexercisable shall become exercisable. (b) Exercise Period and Exercisability. An award under this Plan shall --------------------------------- be settled solely in cash. The period during which an award may be exercised shall be determined by the Committee; provided, however, that, unless otherwise specified in the Agreement relating to an award, an award may be exercised only during an Exercise Window Period, an election to exercise may be subject to the approval of the Company and no award shall be exercised later than seven years after its date of grant. Unless otherwise specified in the Agreement relating to an award, Phantom Units may only be exercised in connection with an exercise of UARs (although in order to exercise the Phantom Units related to a UAR, a participant may exercise a UAR even if at the time of such exercise, the Fair Market Value of one Common Unit is less than the Base Price of such UAR, in which event the amount payable due to the exercise of such Phantom Units shall be reduced by the difference between such Fair Market Value and such Base Price). The number of Phantom Units to be exercised shall be equal to the product of (i) the number of Phantom Units subject to the award then being exercised by such participant and held in the participant's account immediately prior to such exercise, multiplied by (ii) a fraction, the numerator of which is the number of UARs subject to such award then being exercised by such participant and the denominator of which is the total number of UARs subject to such award held in such participant's account immediately prior to such exercise. In the event of multiple awards to a single participant, the foregoing calculation shall be made separately with respect to the UARs and the Phantom Units issued pursuant to each award. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of a UAR or the crediting of a Phantom Unit or to the exercisability of all or a portion of an award evidencing UARs and/or Phantom Units. The Committee shall determine whether an award may be exercised in cumulative or non-cumulative installments and in part or in full at any time. 4 (c) Notice of Exercise. An award may be exercised by giving written ------------------ notice to the Corporate Secretary of the General Partner specifying the number of UARs to be exercised. III. TERMINATION OF EMPLOYMENT 3.1 Disability, Retirement or Death. Unless otherwise specified in the ------------------------------- Agreement relating to an award, if the employment with, or for, the General Partner of a participant terminates by reason of Disability, Retirement or death, each award held by such participant shall be exercisable only to the extent that the UARs and Phantom Units subject to such award are exercisable on the effective date of such participant's termination of employment or date of death, as the case may be, and may thereafter be exercised by such participant or such participant's executor, administrator, legal representative or similar person, as the case may be until and including the earliest to occur of (i) the date which is three years (or such other period as set forth in the Agreement relating to such award) after the effective date of such participant's termination of employment or date of death, as the case may be, and (ii) the expiration date of the term of such award. 3.2 Other Termination. Unless otherwise specified in the Agreement relating ----------------- to an award or at the discretion of the Committee exercised at any time after the grant of an award, if the employment with, or for, the General Partner of a participant terminates for any reason other than Disability, Retirement or death, each award held by such participant shall terminate automatically on the effective date of such participant's termination of employment. 3.3 Death Following Termination of Employment. Unless otherwise specified in ----------------------------------------- the Agreement relating to an award, if a participant dies during the three-year period following termination of employment by reason of Disability or Retirement (or such other period as set forth in the Agreement relating to such award), each award held by such participant shall be exercisable only to the extent that the UARs and Phantom Units subject to such award are exercisable on the date of such participant's death and may thereafter be exercised by the participant's executor, administrator, legal representative, beneficiary or similar person, as the case may be, until and including the earliest to occur of (i) the date which is one year (or such other period as set forth in the Agreement relating to an award) after the date of death and (ii) the expiration date of the term of such award. IV. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS 4.1 Eligibility. Each Non-Employee Director shall be granted UARs in ----------- accordance with this Article IV. 4.2 Grants of UARs. Each Non-Employee Director shall be granted UARs and -------------- Phantom Units as follows: (a) Time of Grant. Annually, on the third Tuesday of each April ------------- beginning in 1995, each person who is a Non-Employee Director on such date shall be granted 1,500 UARs. 5 (b) UARs. The Base Price of a UAR granted to a Non-Employee Director ---- shall be 100% of the Fair Market Value of a Common Unit on the date of grant of such UAR. (c) Phantom Units. Phantom Units shall be credited to the account of ------------- each Non-Employee Director in accordance with the provisions of Section 2.2. 4.3 Exercise Provisions. Each award granted under this Article IV shall be ------------------- subject to the following exercise provisions. (a) Exercisability. Subject to Section 4.4, one-half (50%) of the UARs -------------- and any Phantom Units related thereto subject to an award shall become exercisable on the date which is two years after the date of grant of such UARs and on the date which is three years after the date of grant of such UARs, all UARs and any Phantom Units related thereto which are then unexercisable shall become exercisable. (b) Exercise Period and Exercisability. An award under this Plan shall ---------------------------------- be settled solely in cash. An award may be exercised only during an Exercise Window Period or on the expiration date of the term of such award, an election to exercise shall be subject to approval of the Company and no award shall be exercised later than seven years after its date of grant. Phantom Units may only be exercised in connection with an exercise of UARs (although in order to exercise the Phantom Units related to a UAR, a Non-Employee Director may exercise a UAR even if at the time of such exercise, the Fair Market Value of one Common Unit is less than the Base Price of such UAR, in which event the amount payable due to the exercise of such Phantom Units shall be reduced by the difference between such Fair Market Value and such Base Price). The number of Phantom Units to be exercised shall be determined automatically and shall be equal to the product of (i) the number of Phantom Units subject to the award then being exercised by such Non-Employee director and held in the Non-Employee Director's account immediately prior to such exercise, multiplied by (ii) a fraction, the numerator of which is the number of UARs subject to such award then being exercised by such Non-Employee Director and the denominator of which is the total number of UARs subject to such award held in such Non-Employee Director's account immediately prior to exercise. In the event of multiple awards to a single Non-Employee Director, the foregoing calculation shall be made separately with respect to the UARs and Phantom Units issued pursuant to an award. (c) Notice of Exercise. An award may be exercised by giving written ----------------- notice to the Corporate Secretary of the General Partner specifying the number of UARs to be exercised. 4.4 Termination of Service as a Director. Each award granted under this ------------------------------------ Article IV shall be subject to the following termination provisions: (a) Disability, Retirement or Death. If the service as a director of the ------------------------------- General Partner of a Non-Employee Director terminates by reason of Disability, Retirement or death, each award held by such Non-Employee shall be exercisable only to the extent that the UARs and Phantom Units subject to such award are exercisable on the effective date of such Non-Employee Director's termination of service or date of death, as the case may be, and may thereafter be exercised by such Non-Employee Director or such Non-Employee Director's executor, administrator, legal representation or similar person, as the case may be, until and including the earliest to occur of (i) the date which is three years after the effective date of such Non-Employee 6 Director's termination of service or date of death, as the case may be, and (ii) the expiration date of the term of such award. (b) Other Termination. If the service as a director of the General ----------------- Partner of a Non-Employee Director terminates for any reason other than Disability, Retirement or death, each award held by such Non-Employee Director shall terminate automatically on the effective date of such Non-Employee Director's termination of service. (c) Death Following Termination of Service. If a Non-Employee Director -------------------------------------- dies during the three-year period following termination of service by reason of Disability or Retirement, each award held by such Non-Employee Director shall be exercisable only to the extent that the UARs and Phantom Units subject to such award are exercisable on the date of such Non-Employee Director's death and may thereafter be exercised by the Non-Employee Director's executor, administrator, legal representative, beneficiary or similar person, as the case may be, until and including the earliest to occur of (i) the date which is one year after the date of death and (ii) the expiration date of the term of such award. V. GENERAL 5.1 Effective Date and Term of Plan. This Plan shall become effective as of ------------------------------- April 18, 1995. This Plan shall terminate ten years after its effective date unless terminated earlier by the Board. Termination of this Plan shall not affect the terms or conditions of any award granted prior to termination. 5.2 Amendments. The Board may amend this Plan as it shall deem advisable, ---------- provided, however, that no amendment may impair the rights of a holder of an outstanding award without the consent of such holder; and provided further that, subject to Section 5.6, the number of UARs granted to Non-Employee Directors pursuant to Article IV, the date of grant of any such UARs, the termination provisions relating to such UARs and the category of persons eligible to be granted such UARs shall not be amended more than once every six months, other than to comply with changes in the Code or ERISA, or the rules and regulations thereunder. No amendment may impair the rights of a holder of an outstanding award without the consent of such holder. 5.3 Agreement. Each award under this Plan shall be evidenced by an Agreement --------- setting forth the terms and conditions applicable to such award. No such award shall be valid until an Agreement is executed by the General Partner and the recipient of such award and upon execution by each party and delivery of the Agreement to the General Partner, such award shall be effective as of the effective date set forth in the Agreement. 5.4 Non-Transferability. No UARs or Phantom Units shall be transferable ------------------- other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the General Partner. Except as permitted by the foregoing sentence, each UAR or Phantom Unit may be exercised during a participant's lifetime only by the participant or the participant's legal representative or other person acting in a similar capacity. Except as permitted by the second preceding sentence, no UAR or Phantom Unit may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) to be subject to execution, attachment or similar process. Upon any attempt to sell, 7 transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any UAR or Phantom Unit, such award and all rights thereunder shall immediately become null and void. 5.5 Tax Withholding. The General Partner shall have the right to require, prior --------------- to any cash payment pursuant to an award made hereunder, payment by the holder of such award of any Federal, state, local or other taxes which may be required to be withheld or paid in connection with such award or withhold an amount of cash which would otherwise be payable to a holder, in the amount necessary to satisfy any such obligation. 5.6 Adjustment. In the event of any unit split, unit dividend, recapitalization, ---------- reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Units other than a regular cash distribution, the number and types of awards available under this Plan, the number and types of awards subject to each outstanding award, including the number of UARs granted to Non-Employee Directors pursuant to Article IV, the Base Price per UAR and the terms of each outstanding award shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding UARs without an increase in the aggregate Base Price. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 5.7 No Right of Participation or Employment. No person shall have any right to --------------------------------------- participate in this Plan. Neither this Plan nor any award made hereunder shall confer upon any person any right to continued employment with, or service as a director or, the General Partner, Borden or any affiliate or affect in any manner the right of the General Partner or Borden to terminate the employment of any person at any time without liability hereunder. 5.8 Rights as Unitholder. No person shall have any right as a unitholder of the -------------------- Partnership with respect to any UARs or Phantom Units of the Partnership which are subject to an award hereunder at any time. 5.9 Governing Law. The Plan, each award hereunder and the related Agreement, and ------------- all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws. As approved as of April 18, 1995 /s/ J. M. Saggese ------------------------------------- J. M. Saggese, Chairman of the Board, President and Chief Executive Officer BCP Management, Inc. EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1995 JUN-30-1995 82,935 0 111,529 588 46,866 242,555 671,206 311,874 643,585 195,600 200,000 0 0 0 240,417 643,585 402,469 402,469 237,970 237,970 35,457 0 8,801 120,241 0 120,241 0 6,912 0 113,329 3.05 0