<PAGE>
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           --------------------------
                                   FORM 10-K
                                ---------------
 
<TABLE>
<S>           <C>                                                                                 <C>
(Mark One)
    [X]                         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                                    OF THE SECURITIES EXCHANGE ACT OF 1934
                      [FEE REQUIRED]         FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
              OR
    [ ]                       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                                    OF THE SECURITIES EXCHANGE ACT OF 1934
                [NO FEE REQUIRED]     FOR THE TRANSITION PERIOD FROM ---------- TO ----------
</TABLE>
 
                         COMMISSION FILE NUMBER: 1-9988
                               REXENE CORPORATION
             (Exact name of Registrant as Specified in its Charter)
 
<TABLE>
<S>                                           <C>
                  DELAWARE                                     75-2104131
      (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                     Identification No.)
              5005 LBJ FREEWAY
               DALLAS, TEXAS                                     75244
  (Address of principal executive offices)                     (Zip Code)
</TABLE>
 
                                 (214) 450-9000
              (Registrant's telephone number, including area code)
 
          Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<CAPTION>
                                                                 NAME OF EACH EXCHANGE
               TITLE OF EACH CLASS                                ON WHICH REGISTERED
-------------------------------------------------  -------------------------------------------------
<S>                                                <C>
          Common Stock, $0.01 par value                         New York Stock Exchange
          Common Stock Purchase Rights                          New York Stock Exchange
          11 3/4% Senior Notes due 2004                         New York Stock Exchange
</TABLE>
 
          Securities registered pursuant to Section 12(g) of the Act:
 
                                 TITLE OF CLASS
                                      None
 
    Indicate  by check  mark whether the  Registrant: (1) has  filed all reports
required to be filed by  Section 13 or 15(d) of  the Securities Exchange Act  of
1934  during  the preceding  12  months (or  for  such shorter  period  that the
Registrant was required to file such reports), and (2) has been subject to  such
filing 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.  [  ]
 
    The  aggregate market value of the 18,685,777 shares of common stock held by
non-affiliates of the Registrant was $205,543,547 as of March 5, 1996.
 
             APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
 
    Indicate by check mark  whether the Registrant has  filed all documents  and
reports  required  to be  filed by  Section 12,  13 or  15(d) of  the Securities
Exchange Act of 1934 subsequent to  the distribution of securities under a  plan
confirmed by a court.     Yes __X__    No ______
 
    Indicate  the  number  of shares  outstanding  of each  of  the Registrant's
classes of common stock, as of the latest practicable date.
 
<TABLE>
<CAPTION>
                                                             NUMBER OF SHARES OUTSTANDING
               TITLE OF EACH CLASS                                 AT MARCH 5, 1996
-------------------------------------------------  -------------------------------------------------
<S>                                                <C>
          Common Stock, $0.01 par value                               18,766,118
</TABLE>
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Part  III  incorporates  information  by  reference  from  the  Registrant's
definitive  proxy statement to  be filed for its  annual meeting of stockholders
scheduled to be held on April 30, 1996.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                               REXENE CORPORATION
 
                        1995 ANNUAL REPORT ON FORM 10-K
                                     PART I
 
ITEM 1.  BUSINESS
 
INTRODUCTION
 
    The  Company is the result of a  combination of three businesses operated by
predecessor entities. In 1958, a subsidiary  of The El Paso Company ("El  Paso")
constructed a styrene plant in Odessa, Texas. In 1960, El Paso and a predecessor
of  Dart Industries  Inc. ("Dart") formed  a joint venture  to produce ethylene,
propylene, polyethylene and polypropylene in Odessa, Texas. El Paso subsequently
acquired the plastic film business of Dart  in 1979 and full ownership of  these
businesses  by 1983.  In 1983,  El Paso  sold its  petrochemical, polyolefin and
plastic film business to a  management-led group of investors, who  consolidated
the  businesses  under a  Delaware  corporation named  Rexene  Corporation ("Old
Rexene"). In 1988,  Old Rexene was  sold to  an investor group  organized by  an
investment banking firm.
 
    In  October 1991, Old  Rexene filed a petition  for reorganization under the
federal bankruptcy  laws.  On  September  18,  1992,  Old  Rexene  emerged  from
bankruptcy   in   accordance  with   a   plan  of   reorganization   (the  "1992
Reorganization") providing for the  merger of Old  Rexene into its  wholly-owned
operating   subsidiary,  Rexene   Products  Company   ("Products"),  a  Delaware
corporation, which subsequently changed its  name to Rexene Corporation.  Unless
otherwise  indicated,  Old Rexene,  Products  and Rexene  Corporation  and their
consolidated subsidiaries are sometimes  collectively or separately referred  to
as "Rexene" or the "Company".
 
    In the fourth quarter of 1994, the Company completed a recapitalization plan
(the  "Recapitalization")  designed  to  increase  stockholders'  equity, reduce
indebtedness and interest expense and improve the Company's strategic, operating
and financial flexibility. The Recapitalization resulted in (i) the issuance  of
8  million shares  of common  stock at  $11.00 per  share, (ii)  the issuance of
11 3/4% Senior  Notes due  2004 (the  "11 3/4%  Senior Notes")  in an  aggregate
principal  amount  of $175  million,  (iii) the  establishment  of a  new credit
facility (the "Credit Agreement"), providing a $100 million term loan (the "Term
Loan") and  an $80  million  revolving line  of  credit (the  "Revolving  Credit
Facility"),  (iv) the redemption and defeasance of the Company's increasing rate
first priority  and  second  priority  notes (the  "Old  Notes"),  and  (v)  the
repayment in full of the outstanding indebtedness under the then existing credit
agreement  (the "Old Credit Agreement"). No  borrowings have been made under the
Revolving Credit Facility. In the first six months of 1995, the Company  prepaid
all of the Term Loan.
 
    On  March 15, 1996,  the Board of  Directors approved a  financing plan (the
"Financing"), and  the Company  executed  a commitment  letter  with a  bank  to
replace  the existing Revolving  Credit Facility. The  Financing would provide a
new credit facility (the "New Credit  Facility") in an initial principal  amount
of  $150 million. The primary use of  proceeds from the New Credit Facility will
be to provide  funds to finance  portions of the  Company's capital  expenditure
program  at its  Odessa, Texas  plant over the  next three  years, including the
construction of the flexible polyolefin polymer ("FPO") plant, the modernization
and expansion of  its olefins plant  and the  construction of a  new linear  low
density polyethylene ("LLDPE") plant. The Financing is contingent on a number of
factors,  including  the negotiation  of the  New  Credit Facility.  The Company
anticipates consummation of the Financing during the second quarter of 1996.
 
    The corporate headquarters of the Company  are located at 5005 LBJ  Freeway,
Dallas, Texas 75244, and its telephone number is 214-450-9000.
 
PRINCIPAL PRODUCTS
 
    The  Company manufactures and markets a wide variety of products through its
two operating divisions,  Rexene Products Company  division ("Rexene  Products")
and Consolidated Thermoplastics
 
                                       1
<PAGE>
Company  division ("CT  Film"). The  products range  from value  added specialty
products, such as customized plastic films, to commodity petrochemicals, such as
styrene.  These  products  are  used  in  a  wide  variety  of  industrial   and
consumer-related  applications.  The  Company's principal  products  are plastic
film, polyethylene,  polypropylene, and  REXTAC-Registered Trademark-  amorphous
polyalphaolefin   ("APAO")  resins   and  styrene.  In   addition,  the  Company
manufactures, primarily for its own consumption, ethylene and propylene, the two
basic chemical building blocks of the Company's principal products. The  Company
manufactures  plastic  film at  five  plants located  in  the United  States and
England and polymers  and petrochemicals  at an integrated  facility in  Odessa,
Texas  (the "Odessa Facility") which is located near supplies of most of its raw
materials.
 
    Plastic film, polyethylene, polypropylene, APAO and styrene are used by  the
Company's  customers to manufacture many diverse finished goods. These principal
end market products are set forth below:
 
                                [CHART]
 
                                       2
<PAGE>
    The following chart  presents the net  sales, excluding intercompany  sales,
contributed  by  the Company's  products  for the  years  ended December  31 (in
thousands):
 
<TABLE>
<CAPTION>
                                                                      1995         1994         1993
                                                                   -----------  -----------  -----------
<S>                                                                <C>          <C>          <C>
Plastic film.....................................................  $   170,525  $   172,618  $   147,468
Polyethylene.....................................................      167,873      145,362      120,060
Polypropylene....................................................       90,568       77,544       64,459
APAO.............................................................       24,217       18,571       15,084
Styrene..........................................................      120,084       89,818       61,372
Other............................................................       41,971       34,044       20,910
                                                                   -----------  -----------  -----------
                                                                   $   615,238  $   537,957  $   429,353
                                                                   -----------  -----------  -----------
                                                                   -----------  -----------  -----------
</TABLE>
 
    No customer accounted for more than 10%  of the Company's net sales for  the
years ended December 31, 1995, 1994 and 1993.
 
PLASTIC FILM
 
THE PRODUCT
 
    The  Company, through CT  Film, is a major  participant in specialty markets
for plastic  films.  Product applications  for  these films  include  disposable
diapers, feminine hygiene products, tapes, packaging, lamination and unsupported
overwraps  and greenhouse and agricultural  applications. CT Film's products are
manufactured principally with its own proprietary processes.
 
    CT  Film  develops  specialty  formulations   of  films  to  meet   customer
specifications  for  various  highly  specific  and  value  added  applications.
Examples include  low  gel  films developed  for  photo-resistant  applications,
MAXILENE-Registered Trademark- lamination films and thin gauge barrier films for
feminine  hygiene products and medical applications.  CT Film produces films for
co-extruded  forming  webs,  composite   laminations,  linear  tear  films   and
elastomeric films for surgical products.
 
    A  general trend by  disposable diaper manufacturers  towards thinner diaper
backsheet materials reduced the volume of film products sold into this market in
1995. Since the disposable diaper market is the largest customer segment in  the
film division, this trend significantly affected its sales volumes and operating
results  in 1995. However, CT Film is developing a number of strategies intended
to increase its sales and profits, including developing a new generation of film
products for the disposable  diaper market, broadening production  capabilities,
globalizing sales and marketing efforts and developing new film products for the
medical and packaging markets.
 
MARKETING
 
    Domestically,  CT  Film  ships  film  from  its  plants  in  Chippewa Falls,
Wisconsin;  Clearfield,  Utah;  Dalton,   Georgia;  and  Harrington,   Delaware.
Internationally,  plastic film is shipped through CT Film's European subsidiary,
Rexene Corporation  Limited,  located  in  Scunthorpe,  England.  The  Company's
customers include a number of Fortune 500 companies. Products are sold primarily
through the Company's plastic film sales and marketing staff.
 
COMPETITION
 
    The  United  States  film  industry  is  highly  fragmented,  with  over 450
producers ranging from a few large national producers, such as CT Film, to  many
small,  regional  producers. CT  Film's  principal competitors  include Tredegar
Industries, Exxon  Chemical  Company,  Clopay  Corporation,  Blessings  Company,
Deerfield  Plastics Company, Inc., DuPont of Canada and James River Corporation.
The plastic  film business  is based  on custom  formulations to  meet  customer
needs. Competition is based on the quality and properties of the film as well as
price.  CT Film seeks to develop innovative  products to meet customer needs and
seeks to compete by segmenting market niches and being responsive to  customers'
specific requirements.
 
                                       3
<PAGE>
POLYETHYLENE
 
THE PRODUCT
 
    Polyethylene  represents by  volume the  most widely  produced thermoplastic
resin in the world. The majority  of polyethylene produced in the United  States
is  low density polyethylene ("LDPE") resin.  In 1995, approximately 56% of LDPE
capacity in  the  United States  was  used to  make  high pressure  low  density
polyethylene  ("HPLDPE")  resin  and  the balance  to  make  LLDPE.  The Company
currently only participates in the HPLDPE market, but intends to participate  in
the LLDPE market commencing in the fourth quarter of 1998 with the completion of
construction of the LLDPE plant at the Odessa Facility.
 
    The Company produces a variety of grades of HPLDPE. Many of these resins are
designed  to  meet  specific  customer requirements,  such  as  for  medical and
electronics applications. Examples of the Company's differentiated  polyethylene
are  ethylene-vinyl acetate resins  used in film  applications that require high
clarity, toughness  and  sealability,  and  specialty  low-gel  resins  used  in
computer  circuit  board production.  The Company  focuses on  providing polymer
solutions to specific customer needs.
 
MARKETING
 
    The Company participates in every principal market for HPLDPE resin, selling
its HPLDPE resins under the REXENE-Registered Trademark- trademark. Prime  grade
products  are sold  domestically and in  Canada directly  to customers primarily
through the Company's sales staff. Most wide specification products are sold  to
dealers  for resale. Export sales,  other than to Canada,  are made directly and
through trading companies and agents.
 
COMPETITION
 
    There are currently  14 domestic  producers of  LDPE resins,  some of  which
produce  both  HPLDPE  and LLDPE.  In  1995,  these producers  had  an estimated
combined, rated annual production capacity of approximately 14.6 billion pounds.
The largest manufacturer of LDPE is Quantum Chemical Corporation. The other five
largest domestic  producers of  LDPE  are Dow  Chemical Company,  Union  Carbide
Corporation, Chevron Chemical Company, Exxon Chemical Company and Mobil Chemical
Company.  In 1995,  Rexene accounted for  approximately 3% of  the United States
capacity for LDPE and approximately 5% of the United States capacity for HPLDPE.
Competition for sales is generally based on price for less specialized  products
and  on product performance, customer service and, to a lesser extent, price for
more specialized products. The  Company competes in  the polyethylene market  by
providing  a high level of technical support and customer service and developing
resins which are responsive to customers' specific requirements.
 
POLYPROPYLENE
 
THE PRODUCT
 
    The Company currently  produces a  wide variety of  grades of  polypropylene
resins.  These  include  several  types of  random  and  impact  copolymers with
properties specifically tailored for  specialty markets. The Company  emphasizes
the  manufacturing  of  polypropylene  resins  for  specialty  segments  of  the
polypropylene market such  as medical, electrical  and automotive  applications.
The  Company is  one of only  two domestic producers  of a super  clean grade of
polypropylene utilized for medical  applications and electrical capacitor  film.
The  Company's line of impact copolymer polypropylene products is used primarily
for automotive components and rigid packaging. Other products include  radiation
resistant  resins and  high quality  blow-molding resins.  The Company  has been
active  in  making  process  technology  improvements  and  works  closely  with
customers in developing new products to meet their specific needs.
 
MARKETING
 
    The  Company sells  its polypropylene  products under  the REXENE-Registered
Trademark- trademark. Domestic and Canadian sales of products are sold primarily
through the Company's sales staff. Most wide-specification products are sold  to
brokers  for resale. Export sales,  other than to Canada,  are made directly and
through trading companies.
 
                                       4
<PAGE>
COMPETITION
 
    In 1995, there  were 14 domestic  producers of polypropylene  in the  United
States.  The industry's estimated combined, rated annual production capacity was
approximately 10.8 billion pounds in  1995. The four largest domestic  producers
of  polypropylene were Montell U.S.A.,  Inc., Amoco Chemicals Corporation, Fina,
Inc. and  Exxon Chemical  Company. Competition  for sales  is dependent  upon  a
variety  of  factors, including  product price,  technical support  and customer
service, and the degree  of specialization of  various grades of  polypropylene.
General  purpose polypropylene ordinarily  competes principally on  the basis of
price, while more differentiated polypropylene competes principally on the basis
of product quality, performance specifications  and, to a lesser extent,  price.
In  1995,  Rexene accounted  for approximately  2%  of United  States production
capacity for polypropylene. The Company competes in the polypropylene market  by
providing  a high  level of  technical support  and customer  service focused on
niche markets with specialty products.
 
APAO
 
THE PRODUCT
 
    The Company is one of only  two United States on-purpose producers of  APAO.
APAO is a special purpose, high quality polymer used primarily in the production
of modified bitumen roofing materials, lamination, wire and cable, adhesives and
sealants.   These  applications  include  hot   melt  adhesives  for  nonwovens,
packaging, pressure sensitive  and assembly  applications and as  a modifier  of
other polymers.
 
MARKETING
 
    The  Company sells  APAO under  the REXTAC-Registered  Trademark- trademark.
APAO is sold  domestically through the  Company's sales staff.  The Company  has
from  time to time supplemented its sales of APAO with purchases from Ube Rexene
Corporation, a joint venture company located in Japan in which the Company holds
a 50% equity interest.
 
COMPETITION
 
    The Company and  Eastman Chemical  Company are currently  the only  domestic
on-purpose producers of APAO. In addition, a few producers of polypropylene also
produce  atactic polypropylene ("APP"),  which competes with  APAO for some less
performance driven uses. Based on management estimates, in 1995 Rexene accounted
for approximately  30% of  the United  States  capacity for  APAO and  APP.  The
Company  competes by providing  a high level of  customer service and developing
products which are responsive to customers' specific requirements.
 
STYRENE
 
THE PRODUCT
 
    Styrene is a  petrochemical intermediate  commodity made  from ethylene  and
benzene    and   used   principally   in    the   production   of   polystyrene,
acrylonitrile-butadiene-styrene resins, styrene-butadiene latex, and rubbers and
unsaturated polyester resins. Through  these products, styrene  can be found  in
consumer  products, including  disposable cups and  trays, consumer electronics,
automotive trim, tires and building materials such as carpeting and insulation.
 
MARKETING
 
    The Company sells  its styrene directly,  using a specialized  petrochemical
sales  team.  In  1995,  the  Company  entered  into  several  long-term styrene
contracts which it believes will reduce its exposure to future price volatility.
Export sales, on a contractual and spot basis, are handled directly and  through
international trading companies.
 
COMPETITION
 
    In  1995,  there were  10 domestic  producers of  styrene with  an estimated
combined, rated annual production capacity of approximately 11.9 billion pounds.
More than 50% of this capacity  is consumed internally by the styrene  producers
for   the  production  of   derivatives  such  as   polystyrene.  In  1995,  the
 
                                       5
<PAGE>
six largest domestic producers of  styrene were Arco Chemical Company,  Huntsman
Chemicals  Corporation, Amoco  Chemicals Corporation,  Sterling Chemicals, Inc.,
Dow  Chemical  Company  and  Chevron  Chemical  Company.  Rexene  accounted  for
approximately  3% of domestic production capacity  for styrene, with a 5% market
share for non-integrated consumers. Competition for sales is generally based  on
price.
 
EXPORT SALES
 
    The   following  chart  summarizes  revenues  from  export  sales,  and  the
percentages of net sales  represented by export sales,  for the indicated  years
ended December 31 (in thousands):
 
<TABLE>
<CAPTION>
                                                                         1995       1994       1993
                                                                       ---------  ---------  ---------
<S>                                                                    <C>        <C>        <C>
Export sales.........................................................  $  77,508  $  52,382  $  31,617
Percentage of net sales..............................................         13%        10%         7%
</TABLE>
 
    Export  sales increased  from 1994 to  1995 principally due  to increases in
average sales prices and volumes for styrene and polymer products. The  majority
of  the  Company's export  sales were  to foreign  companies through  agents and
international trading companies.
 
NEW PRODUCT DEVELOPMENT
 
    The Company  continually  seeks  to  enhance and  expand  its  portfolio  of
specialty  polymers  through  sustained in-house  research  and  development and
licensing  arrangements.  For  example,  the   Company  has  developed  FPO,   a
propylene-based product, which the Company believes has the potential for use in
a  wide  variety  of  markets  including  automotive,  personal  care  products,
industrial and medical devices. In 1995, the Company began construction of a FPO
plant at its Odessa  Facility, which is scheduled  for completion in the  fourth
quarter  of  1996. Commercial  production of  FPO is  subject to  the successful
implementation of  the technology,  the  completion of  a commercial  plant  and
necessary governmental approvals.
 
    In  addition,  in late  1995  the Company  licensed  LLDPE and  high density
polyethylene technology from  Stamicarbon, a licensing  subsidiary of DSM.  When
planned production commences in the fourth quarter of 1998, Rexene's LLDPE plant
in  Odessa, Texas will be  the first North American  production facility to make
LLDPE using the DSM "Compact" process. This process refers to the plant's  small
physical size, which is well suited to efficiently produce high quality products
in  small  lot  sizes.  The  octene  copolymers  produced  by  this  process are
consistent with the Company's strategy of producing higher quality,  value-added
products.
 
    The  Company has spent  between $6.6 million  and $9.5 million  per year for
research and  development  during  each  of the  last  three  fiscal  years  and
anticipates  spending approximately $9.0 million for research and development in
1996.
 
RAW MATERIALS FOR PRINCIPAL PRODUCTS
 
    Principal raw  materials purchased  by  the Company  consist of  ethane  and
propane  extracted from natural gas liquids,  propylene and benzene (all four of
which are referred to  as "feedstocks") for the  polymer and styrene  businesses
and  polyethylene  resins  for  the  film  business.  The  prices  of feedstocks
fluctuate widely based  upon the  prices of natural  gas and  oil. During  1995,
feedstocks accounted for approximately 27% of the Company's total cost of sales.
As a result, the Company's ability to pass on increases in raw material costs to
customers has a significant impact on operating results.
 
    The  Odessa  Facility obtains  a combination  of pure  and mixed  streams of
natural gas liquids ("NGL") from NGL pipelines and NGL extraction plants located
in west Texas and uses such streams to obtain ethane and propane feedstocks  for
the Company's olefins plant. In 1995, the Odessa Facility consumed approximately
530  million and 511 million pounds of  ethane and propane, respectively, and in
1994, the  Odessa Facility  consumed  ethane and  propane of  approximately  558
million  and 485 million pounds, respectively. In 1995, the Company produced all
of its ethylene and 50% of its propylene
 
                                       6
<PAGE>
requirements for the Odessa Facility. The feedstock supplies available in Odessa
are currently adequate for the  Company's requirements. The Company has  storage
capacity for an approximately fifteen-day supply of feedstocks.
 
    The  Odessa Facility uses benzene and  ethylene to produce styrene. In 1995,
virtually all of the Company's benzene purchases were under contracts from  Gulf
Coast  and Midwest producers at prevailing  contract prices, with the balance of
its needs being filled with purchases on the spot market.
 
    The principal feedstocks  for the Company's  captive ethylene and  propylene
production  of the  Odessa Facility are  ethane and propane.  Ethane and propane
prices are  established  in  Mont  Belvieu,  Texas  (Gulf  Coast)  according  to
prevailing market conditions, but the Company is able to purchase NGL containing
ethane  and  propane in  west  Texas at  prices  discounted from  the prevailing
reported  average  Mont  Belvieu,  Texas  prices.  These  discounts  reflect   a
significant  portion of the  cost for the producers  to transport NGL containing
ethane and propane  to Mont  Belvieu, Texas and  to fractionate  them into  pure
ethane  and propane. In 1995, the Company  acquired all of the Odessa Facility's
requirements for ethane and propane under such arrangements.
 
    CT Film  raw  materials  consist  principally  of  polyethylene  resins  and
additives.  CT  Film  obtains  its  raw  materials  from  a  variety  of sources
(including the Odessa Facility)  and has been able  to order these materials  in
advance  as its needs dictate. CT Film has adequate storage capabilities for its
raw materials.
 
EMPLOYEES
 
    On February  1,  1996, the  Company  employed approximately  1,275  persons,
approximately  115 of whom  are unionized, at  the CT Film  facility in Chippewa
Falls, Wisconsin.  The  Company  and  the union  are  parties  to  a  collective
bargaining agreement through February 28, 1997.
 
TRADEMARKS AND PATENTS
 
    The  Company is the owner of many United States and foreign patents and uses
trade secrets, including substantial know-how, which relate to its polyethylene,
polypropylene, APAO  and  plastic  film products.  Although  patents  and  trade
secrets  are important to the Company, permitting it to retain ownership and use
of its technological advances, the Company does not believe that the loss of any
patent would have  a material  adverse effect  on its  financial condition.  The
Company  also uses the technology of  others under license agreements in certain
of its manufacturing operations.
 
    REXENE-Registered Trademark- and REXTAC-Registered Trademark- are  important
trademarks  for the  Company's resins and  are widely known  among purchasers of
these products. The  Company is  the owner  of other  trademarks used  on or  in
connection with its products.
 
    The  Company  has  been  sued  by  Phillips  Petroleum  Company  for alleged
infringement of its crystalline and block co-polymer polypropylene patents.  See
"Item 3 -- Legal Proceedings".
 
ENVIRONMENTAL AND RELATED REGULATION
 
GENERAL
 
    The  Company, and the industry in which it competes, is subject to extensive
environmental laws and regulations and is  also subject to other federal,  state
and  local laws and regulations regarding health and safety matters. The Company
believes that its business,  operations and facilities  generally have been  and
are  being  operated  in compliance  in  all material  respects  with applicable
environmental and health and safety laws and regulations, many of which  provide
for substantial fines, criminal sanctions, and in certain extreme circumstances,
temporary or permanent plant closures for violations. Nevertheless, from time to
time,  the  Company  has  received  notices  of  alleged  violations  of certain
environmental  laws  and  has  endeavored  to  remedy  such  alleged  violations
promptly.  The ongoing operations of  chemical manufacturing plants entail risks
in these areas and there can be no assurance that material costs or  liabilities
will not be incurred in the future.
 
                                       7
<PAGE>
    In  addition, future developments, such  as increasingly strict requirements
of environmental  and health  and safety  laws and  regulations and  enforcement
policies  thereunder  could  bring  into  question  the  handling,  manufacture,
storage, use, emission or disposal of substances or pollutants at the  Company's
facilities.  Changes to or  reinterpretations of existing  laws could materially
and adversely affect the Company's business and results of operations.
 
    The  Company's   operating  expenditures   for  environmental   remediation,
compliance  and waste disposal were approximately  $8.3 million and $6.6 million
in 1995 and  1994, respectively.  In 1995 and  1994, the  Company also  expended
approximately   $1.2  million  and  $2.0   million,  respectively,  relating  to
environmental capital expenditures.  In 1996, the  Company anticipates  spending
approximately  $7 million  for environmental  remediation, compliance  and waste
disposal. Of that amount, expenditures relating to remediation are projected  to
be  approximately $2  million in 1996.  For the foreseeable  future, the Company
expects to incur  approximately $2  million to $4  million per  year in  capital
spending to address the requirements of environmental laws. Annual amounts could
vary depending on a variety of factors, such as the control measures or remedial
technologies ultimately required and the time allowed to meet such requirements.
 
    The  Company  believes that,  in light  of  its historical  expenditures and
expected future  results  of operations,  it  will have  adequate  resources  to
conduct its operations in compliance with currently applicable environmental and
health  and  safety  laws and  regulations.  However,  in order  to  comply with
changing facility  permitting  and  regulatory standards,  the  Company  may  be
required  to make additional significant  site or operational modifications that
are not currently contemplated. Further, the Company has incurred and may in the
future incur liability to investigate and clean up waste or contamination at its
current or former  facilities, or which  it may have  disposed of at  facilities
operated  by third parties. The Company  has approximately $20.3 million accrued
in the December 31, 1995  balance sheet as a  preliminary estimate of its  total
potential  environmental liability with respect to investigating and remediating
known and  assessed  site contamination.  The  Company continually  reviews  its
estimates  of potential environmental liabilities.  However, no assurance can be
given that all  potential liabilities arising  out of the  Company's present  or
past  operations have been identified or fully assessed or that the amounts that
might be  required to  investigate and  remediate such  conditions will  not  be
significant to the Company.
 
    The  Company  does not  currently  carry environmental  impairment liability
insurance to protect it against such contingencies because the Company has found
such coverage available only at great cost and with broad exclusions. As part of
its  financial  assurance  requirements  under  the  Resource  Conservation  and
Recovery  Act  ("RCRA")  and equivalent  Texas  law, the  Company  has deposited
approximately $3.5 million in trust to cover closure and post-closure costs  and
plugging  and abandonment  costs at certain  of the  Odessa Facility's hazardous
waste management units.  Based on  the Company's  improved financial  condition,
management  believes it will be able to meet the regulatory requirements to have
the Texas Natural Resource Conservation  Commission ("TNRCC") release the  funds
in the trust during 1996.
 
WASTEWATER
 
    The  Company  currently  disposes  of wastewater  from  the  Odessa Facility
through injection wells operated under permits from TNRCC. TNRCC has stated that
it does not  intend to renew  the permits  after they expire  in December  1997.
Further,  TNRCC may order the Company to cease using one or more of the wells if
certain periodic testing  results indicate  that continued  injection cannot  be
conducted  safely. For  contingency planning  purposes, the  Company also  has a
permit from TNRCC to drill and operate  a deeper well to provide for  wastewater
disposal.  Company consultants have estimated this cost of installing a new deep
well injection system at approximately $6 million. The Company has entered  into
an agreement with the City of Odessa and a quasi-governmental authority pursuant
to  which the latter will acquire, modify and operate a publicly-owned treatment
works ("POTW")  to  dispose  of  the  Company's and  a  portion  of  the  City's
wastewater.  The parties have  completed their technical  review of the project,
and detailed engineering work is in progress with a
 
                                       8
<PAGE>
view to having the  POTW operational by  mid-1997. If the  Company is forced  to
cease  using its  injection wells  before the  POTW plant  is operational, there
could be a material adverse effect on the Company's financial position,  results
of operations or cash flows.
 
SOLID WASTES
 
    In March 1994, TNRCC granted the Company a permit to operate three hazardous
waste  management  units at  the  Odessa Facility  as treatment/storage/disposal
facilities under RCRA. This permit is accompanied by a compliance plan requiring
the Company to take corrective action  with regard to existing contamination  at
the Odessa Facility. Pursuant to this compliance plan, the Company has installed
a groundwater recovery system and must complete an investigation into the extent
of on-site contamination, conduct a soils risk assessment to determine the level
of  risk it presents to  human health and the  environment, develop a corrective
measures study  on the  ways to  remediate the  contamination, and  implement  a
remediation  plan approved by TNRCC. Low  levels of contaminants were discovered
in an intermittently flowing stream which traverses the western-most portion  of
the  Odessa  Facility.  Based  upon  subsequent  sampling  and  analysis  of the
components in the stream,  no remediation of the  property is being required  at
this time.
 
    Based   upon  the  results  of  its  continuing  investigations  of  on-site
contamination, the Company believes that implementation of any corrective action
plan will  not  have a  material  adverse  effect on  its  financial  condition.
However,  no  assurance  can  be  given that  all  conditions  that  may require
corrective action  have been  identified,  or that  the  amounts that  might  be
required to implement that plan will not be significant to the Company.
 
AIR EMISSIONS
 
    In  1990, Congress amended the  federal Clean Air Act  to require control of
certain emissions not  previously regulated, some  of which are  emitted by  the
Company's  facilities. This legislation will require  the Company (and others in
the industry  with such  emissions) to  implement additional  pollution  control
measures.  Some of the  regulations detailing these  additional control measures
have not yet been promulgated.  The Company expects that modifications  required
by  the currently published regulations can be accomplished within the projected
capital budget, but  it can give  no assurance that  the costs it  may incur  to
comply with regulations that have not yet been issued will not be significant.
 
    The  Company operates its styrene  plant under an air  permit that was first
issued in 1979.  The permit  has been amended  several times,  most recently  in
1995,  and it currently  covers both the  styrene plant and  the styrene loading
facilities.
 
ADDITIONAL ENVIRONMENTAL ISSUES
 
    The federal Comprehensive Environmental Response Compensation and  Liability
Act,  as amended,  and similar  laws in  many states,  impose liability  for the
clean-up of  certain  waste sites  and  for related  natural  resource  damages,
without  regard to fault or  the legality of the  waste disposal. Liable persons
generally include the  site owner or  operator, former site  owners and  persons
that  disposed or  arranged for  the disposal  of hazardous  substances found at
those sites.  The  Company  has  sent wastes  from  its  operations  to  various
third-party waste disposal sites. From time to time the Company receives notices
from  representatives of  governmental agencies  and private  parties contending
that the Company is  potentially liable for a  portion of the investigation  and
remediation at such third-party and currently and formerly-owned sites. Although
there can be no assurance, the Company does not believe that its liabilities for
the  investigation and remediation of such  sites, either individually or in the
aggregate, will have a material adverse effect on the Company.
 
                                       9
<PAGE>
EXECUTIVE OFFICERS
 
    The table set forth below provides certain information with respect to those
persons who are currently serving as executive officers of the Company.
 
<TABLE>
<CAPTION>
          NAME                 AGE                                    POSITION
-------------------------      ---      --------------------------------------------------------------------
<S>                        <C>          <C>
Andrew J. Smith                    54   Director and Chief Executive Officer
Lavon N. Anderson                  60   Director, President and Chief Operating Officer
Kevin W. McAleer                   45   Executive Vice President and Chief Financial Officer
Jack E. Knott                      41   Executive Vice President and President -- Rexene Products
Jonathan R. Wheeler                44   Executive Vice President and President -- CT Film
James M. Ruberto                   49   Executive Vice President -- Administration
Bernard J. McNamee                 60   Executive Vice President, Secretary and General Counsel
Geff Perera                        42   Vice President and Controller
</TABLE>
 
    Mr. Smith has  been Chief Executive  Officer and a  director of the  Company
since March 1992. From December 1991 to March 1992, he was a private consultant.
From June 1991 to December 1991, he was President and Chief Operating Officer of
Itex  Enterprises, Inc.,  an environmental  remediation company.  Mr. Smith also
served as  a  consultant  to  the  Company  from  January  1991  to  June  1991.
Immediately  prior thereto, he had been a director of the Company since May 1988
and the President and Chief Executive Officer of the Company since June 1988.
 
    Dr. Anderson has been President and  Chief Operating Officer of the  Company
since  January 1991 and a director since February 1990. From May 1988 to January
1991 Dr. Anderson was Executive Vice President -- Manufacturing and Technical of
the Company.
 
    Mr. McAleer has been Executive Vice President and Chief Financial Officer of
the Company since July 1990.
 
    Mr. Knott has been Executive Vice President of the Company and President  of
Rexene  Products since March  1995. Prior thereto, Mr.  Knott had been Executive
Vice President -- Sales and Market Development of the Company since March  1992.
Prior  thereto, Mr. Knott was  an Executive Vice President  of the Company since
January 1991 and President of CT Film since February 1989.
 
    Mr. Wheeler has been Executive Vice  President of the Company and  President
of  CT Film since  January 1996. Prior  thereto, Mr. Wheeler  was Executive Vice
President -- Administration  since April  1995. Prior thereto,  Mr. Wheeler  had
been Senior Vice President -- Administration of the Company since December 1990.
 
    Mr.  Ruberto  has  been  Executive Vice  President  --  Administration since
January 1996. Prior thereto,  Mr. Ruberto had been  Executive Vice President  of
the  Company  and President  of CT  Film  since March  1992. Prior  thereto, Mr.
Ruberto had been Executive Vice President -- Sales and Market Development of the
Company since January  1991. From April  1989 to January  1991, Mr. Ruberto  was
Executive Vice President -- Marketing and Business Planning of Rexene Products.
 
    Mr. McNamee has been Executive Vice President, Secretary and General Counsel
of  the  Company since  April 1995.  Prior  thereto, Mr.  McNamee had  been Vice
President, Secretary and  General Counsel of  the Company since  May 1993.  From
September  1989 to  November 1992,  Mr. McNamee  was Vice  President and General
Counsel  of  Ferro  Corporation,  a  multinational  manufacturer  of   specialty
materials.
 
    Mr.  Perera has been  Vice President of  the Company since  January 1991 and
Controller since February 1989.
 
                                       10
<PAGE>
ITEM 2.  PROPERTIES
 
    The Company  operates manufacturing  facilities at  six locations,  five  of
which are in the United States and one in England.
 
    CT  Film  has four  domestic manufacturing  facilities located  in Delaware,
Georgia, Utah and Wisconsin,  with a total rated  annual production capacity  of
approximately  225 million  pounds. From  January 1,  1993 through  December 31,
1995, these plants, which  produce blown and cast  plastic film, operated at  an
average  weighted average utilization rate of  approximately 79%. See "Item 7 --
Management's Discussion  and  Analysis of  Financial  Condition and  Results  of
Operations".  The  fifth CT  Film  manufacturing facility,  located  in England,
commenced commercial  production in  September 1994  and currently  has a  total
rated  annual  production capacity  of  30 million  pounds.  These five  CT Film
plants, which commenced operations between 1948 and 1994, are in good  operating
condition.
 
    The polyethylene plant in Odessa, Texas has been in operation since 1961 and
has  a  total  rated annual  production  capacity of  approximately  420 million
pounds.
 
    The polypropylene plant in  Odessa, Texas has been  in operation since  1964
and  has a total  rated annual production capacity  of approximately 180 million
pounds. APAO is produced in a  former polypropylene plant that was converted  in
1986  and  has a  total  rated annual  production  capacity of  approximately 60
million pounds.
 
    The styrene plant in Odessa, Texas has been in operation since 1958 and  has
a total rated annual production capacity of approximately 320 million pounds.
 
    The  olefins plant in Odessa, Texas has been in operation since 1961 and has
a total  rated annual  production  capacity for  ethylene of  approximately  540
million pounds and for propylene of approximately 210 million pounds.
 
    From  January  1, 1993  through December  31,  1995, each  of the  plants in
Odessa, Texas operated at  rates in excess  of 94% of  their total rated  annual
production  capacity, except for the APAO plant, which operated in excess of 88%
of total  rated annual  production capacity.  Although several  of these  plants
first  began production more  than thirty years ago,  the Company believes these
plants are in good operating condition.
 
    The Company owns all of its manufacturing facilities, except for the CT Film
plant in Utah, which is held under  a long-term lease. All of the United  States
film plants are subject to encumbrances which secure borrowings under the Credit
Agreement.  The styrene plant  in Odessa, Texas is  also subject to encumbrances
which secure the obligation to repay an advance payment from a styrene customer.
See Notes  9 and  10 to  the Consolidated  Financial Statements  in Item  8  for
further discussion.
 
    The  Company also owns off-site warehouses in Odessa, Texas, leases off-site
warehouses near  its manufacturing  facilities in  Delaware and  Wisconsin,  and
leases its executive offices in Dallas, Texas.
 
ITEM 3.  LEGAL PROCEEDINGS
 
PHILLIPS BLOCK COPOLYMER LITIGATION
 
    In  March  1984, Phillips  Petroleum  Company ("Phillips")  filed  a lawsuit
against the  Company  in the  United  States  District Court  for  the  Northern
District   of  Illinois,   Eastern  Division,  seeking   injunctive  relief,  an
unspecified amount of  compensatory damages  and treble  damages. The  complaint
alleged  that  the  Company's  copolymer  process  for  polypropylene  infringed
Phillips' two "block" copolymer patents, the last of which expired in 1994. This
action has been transferred to the United States District Court for the Southern
District of Texas,  Houston Division.  Discovery proceedings in  this case  have
been  completed. The Company  has filed a motion  for summary judgment. Phillips
has filed a motion for partial summary judgment. Pursuant to an agreement  among
the  parties, the court  appointed a special  master who conducted  a hearing on
these motions and thereafter recommended to the court that the Company's  motion
be granted and Phillips' motion be denied. Thereafter, Phillips filed motions to
disqualify  the  special master,  to reject  the  recommendation of  the special
master and
 
                                       11
<PAGE>
to enter partial summary judgment for  Phillips. The court has entered an  order
denying  Phillips' motion to disqualify the special master. The summary judgment
motions are  still pending.  In  the Company's  bankruptcy proceeding  in  1992,
Phillips filed a proof of claim seeking in excess of $108 million based upon the
allegations in this litigation. The Company objected to the claim and elected to
leave the legal, equitable and contractual rights of Phillips unaltered, thereby
allowing this litigation to proceed without regard to the bankruptcy proceeding.
 
PHILLIPS CRYSTALLINE LICENSE LITIGATION
 
    In  May 1990,  Phillips filed  a lawsuit against  the Company  in the United
States District Court for the District of Delaware seeking injunctive relief, an
unspecified amount of compensatory damages, treble damages and attorneys'  fees,
costs  and  expenses.  The complaint  alleged  that the  Company  was infringing
Phillips'  Patent  No.   4,376,851  (the   "  '851   Patent")  for   crystalline
polypropylene.  Pursuant to  a License  Agreement dated as  of May  15, 1983, as
amended (the "License Agreement"), Phillips granted the Company a  non-exclusive
license  to make,  use and  sell crystalline  polypropylene covered  by the '851
Patent. The complaint alleged that effective April 21, 1990, Phillips terminated
the License Agreement  because it  believed that, by  the terms  of the  License
Agreement,  all  conditions  precedent  to such  termination  had  occurred. The
complaint further  alleged that,  without an  effective License  Agreement,  the
Company's  continuing use of  the '851 Patent constitutes  an infringing use. An
amended complaint filed  in May  1990 further alleged  that the  Company made  a
material  misrepresentation  that induced  Phillips  to enter  into  the License
Agreement and that Phillips entered into the License Agreement as a  consequence
of a mutual mistake of the parties. The amended complaint therefore alleged that
the  License Agreement was void AB INITIO. The Company filed a motion to dismiss
Phillips' amended complaint for failure to state a claim. On December 30,  1993,
the court entered an order dismissing Phillips' claim that the License Agreement
was  void AB  INITIO, and  ordered that  the 1990  license termination  issue be
resolved at trial. A trial was conducted before the United States District Court
in October  1994.  At trial,  Phillips  sought damages  of  approximately  $15.5
million, plus interest and fees, for alleged infringement for the period between
April  21, 1990 and  trial. On June  19, 1995, the  United States District Court
entered judgment in favor  of the Company on  the license termination issue  and
concluded that Phillips had not properly terminated the License Agreement. Thus,
the  License Agreement remains in effect, and  the Company is not infringing the
'851  Patent.  Phillips  has  appealed  the  court's  judgment  on  the  license
termination  issue only. The appeal was argued on March 6, 1996 before the Court
of Appeals for the Federal Circuit. No decision has been entered by the Court of
Appeals. Although the Company believes that it has meritorious defenses to  this
lawsuit,  in the event of an unfavorable ruling, the Company will be required to
renegotiate a new  license agreement at  a substantially higher  rate than  paid
under the current license.
 
ODESSA RESIDENTS' TORT LITIGATION
 
    On  April  15,  1994, the  national  and  state chapters  of  the  NAACP and
approximately 770 residents of a  neighborhood approximately one mile  northwest
of  the Shell Oil  Company ("Shell"), the Company  and Dynagen, Inc. ("Dynagen")
plants in Odessa, Texas petitioned the State District Court in Odessa, Texas  to
intervene  in  a  previously existing  lawsuit  against  Dynagen to  (a)  add as
additional defendants  the  Company, Shell  and  General Tire  Corporation  (the
parent  company of  Dynagen) and  (b) have the  litigation certified  as a class
action. The plaintiffs' petition  seeks an unspecified  amount of money  damages
for  past, present  and future injuries  to plaintiffs'  health, wrongful death,
loss of consortium and reduction in property values; the conduct and payment  of
property  clean up,  remediation and relocation  costs; payment  of expenses for
medical testing  and  monitoring;  funding  of  pollution  and  health  studies;
attorney's  fees; punitive  damages and injunctive  relief. Plaintiffs' petition
specified alleged pollution from air emissions from the three plants as a  basis
for  their  claims. The  trial court  has allowed  intervention and  severed the
action from  the original  lawsuit against  Dynagen. Plaintiffs  have  withdrawn
their  motion to  have the  litigation certified as  a class  claim. In November
1994, the  plaintiffs filed  an amended  petition which  substituted the  Odessa
branch of the NAACP as
 
                                       12
<PAGE>
plaintiff  in place of the national and state chapters of the NAACP. The amended
complaint also  added approximately  100 additional  plaintiffs. Defendants  are
challenging  the  NAACP's  standing  to  participate  in  the  lawsuit. Pretrial
discovery is ongoing.
 
                            ------------------------
 
    Although there can be no assurance of  the final resolution of any of  these
matters,  the Company  believes that,  based upon  its current  knowledge of the
facts of each case, it has meritorious  defenses to the various claims made  and
intends  to defend each suit  vigorously, and the Company  does not believe that
the outcome of any of these lawsuits will have a material adverse effect on  the
Company's financial position, results of operations or cash flows.
 
    With  respect  to certain  pending or  threatened proceedings  involving the
discharge of materials  into or protection  of the environment,  see "Item 1  --
Environmental  and Related Regulation".  The Company is also  a party to various
lawsuits arising in the  ordinary course of business  and does not believe  that
the  outcome of any of these lawsuits will have a material adverse effect on the
Company's financial position, results of operations or cash flows.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matter was submitted to a  vote of the Company's security holders  during
the fourth quarter of 1995.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
    The  Registrant's common stock  trades on the New  York Stock Exchange under
the symbol "RXN". As of March 5,  1996, there were 756 record holders of  common
stock.  The following  table sets  forth the  high and  low sales  prices of the
common stock as reported by the New York Stock Exchange for the last two  fiscal
years.
 
<TABLE>
<CAPTION>
                                                                           HIGH      LOW
                                                                          -------  -------
<S>                                                                       <C>      <C>
1995:
  Fourth Quarter.........................................................  12 1/4    8 7/8
  Third Quarter..........................................................  15 5/8   11 1/4
  Second Quarter.........................................................  14 1/4   10 1/4
  First Quarter..........................................................  13 3/8    9
 
1994:
  Fourth Quarter.........................................................  18        9 1/8
  Third Quarter..........................................................  17 1/8    8 3/8
  Second Quarter.........................................................  11        3 5/8
  First Quarter..........................................................   4 3/4    2 7/8
</TABLE>
 
    The  Company did not declare or pay any cash dividends in 1994 or during the
first three quarters of 1995. In December 1995, the Board of Directors  declared
a $0.04 per share dividend which was paid in January 1996, and on March 7, 1996,
the  Board of Directors declared a dividend  of $0.04 per share payable on April
4, 1996. Although the Credit Agreement  and the indenture governing the 11  3/4%
Senior  Notes  (the "11  3/4%  Indenture") limit  the  Company's ability  to pay
dividends on the common  stock, the Credit Agreement  was amended to allow,  and
the  Company satisfied the requirements under  the 11 3/4% Indenture to declare,
the dividends. Although  the Company has  not established a  formal policy  with
respect  to  the  declaration  of  dividends,  the  Company  will  evaluate  the
advisability of  declaring future  dividends on  a quarterly  basis based  on  a
number  of factors, including  the Company's financial  condition and results of
operations. See "Item  7 --  Management's Discussion and  Analysis of  Financial
Condition and Results of Operations -- Liquidity and Capital Resources".
 
                                       13
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA
 
    The  following table sets forth selected  financial data for the Company for
the periods  indicated.  Information should  be  read in  conjunction  with  the
Company's  Consolidated Financial Statements  and Notes thereto  included on the
pages immediately  following  the  Index to  Consolidated  Financial  Statements
appearing  on page F-1. See  "Item 7 -- Management's  Discussion and Analysis of
Financial  Condition  and   Results  of  Operations".   In  connection  with   a
reorganization  under  Chapter  11 of  the  United States  Bankruptcy  Code, the
Company adopted as of  September 30, 1992, the  American Institute of  Certified
Public  Accountants'  Statement of  Position No.  90-7, "Financial  Reporting by
Entities in  Reorganization  Under  the Bankruptcy  Code"  (the  "Reorganization
SOP").  The  Company's  basis  of accounting  for  financial  reporting purposes
changed as a result of adopting the Reorganization SOP. Accordingly, the results
of operations  after  September  30,  1992 are  not  comparable  to  results  of
operations prior to such date, and the results of operations for the nine months
ended  September 30, 1992 and the three  months ended December 31, 1992 have not
been aggregated.
 
<TABLE>
<CAPTION>
                                                     POST-EMERGENCE                         PRE-EMERGENCE
                                      ---------------------------------------------  ---------------------------
                                                                       THREE MONTHS   NINE MONTHS
                                         YEARS ENDED DECEMBER 31,         ENDED          ENDED       YEAR ENDED
                                      -------------------------------  DECEMBER 31,  SEPTEMBER 30,  DECEMBER 31,
                                        1995       1994       1993         1992          1992           1991
                                      ---------  ---------  ---------  ------------  -------------  ------------
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                   <C>        <C>        <C>        <C>           <C>            <C>
Consolidated Statements of
 Operations Data:
  Net sales.........................  $ 615,238  $ 537,957  $ 429,353   $   98,854    $ 316,106      $  449,728
  Operating income..................    125,146     75,085     14,504        1,418        9,392          12,028
  Income (loss) before extraordinary
   gain (loss)......................     65,443     21,504    (25,243)      (6,528)     (31,476)        (42,747)
  Extraordinary gain (loss), net of
   income taxes.....................     --        (25,831)    --           --          123,672          --
                                      ---------  ---------  ---------  ------------  -------------  ------------
  Net income (loss).................  $  65,443  $  (4,327) $ (25,243)  $   (6,528)   $  92,196      $  (42,747)
                                      ---------  ---------  ---------  ------------  -------------  ------------
                                      ---------  ---------  ---------  ------------  -------------  ------------
Weighted average shares
 outstanding........................     19,126     11,663     10,501       10,501
                                      ---------  ---------  ---------  ------------
                                      ---------  ---------  ---------  ------------
Income (loss) per share(1):
  Income (loss) before extraordinary
   loss.............................  $    3.42  $    1.84  $   (2.40)  $     (.62)
  Extraordinary loss................     --          (2.21)    --           --
                                      ---------  ---------  ---------  ------------
  Net income (loss) per share.......  $    3.42  $    (.37) $   (2.40)  $     (.62)
                                      ---------  ---------  ---------  ------------
                                      ---------  ---------  ---------  ------------
Dividends per share.................  $     .04  $  --      $  --       $   --
                                      ---------  ---------  ---------  ------------
                                      ---------  ---------  ---------  ------------
</TABLE>
 
<TABLE>
<CAPTION>
                                                          AT DECEMBER 31,
                                      -------------------------------------------------------
                                        1995       1994       1993       1992        1991
                                      ---------  ---------  ---------  ---------  -----------
<S>                                   <C>        <C>        <C>        <C>        <C>          <C>
Consolidated Balance Sheets Data:
  Working capital...................  $ 108,416  $ 140,039  $ 109,381  $ 104,824  $ 109,777
  Total assets......................    520,591    506,954    434,307    423,591    440,665
  Long-term debt and other noncur-
   rent liabilities.................    296,080    366,766    397,091    367,327     57,410
  Liabilities subject to
   compromise.......................     --         --         --         --        428,297(2)
  Stockholders' equity (deficit)....    140,151     74,876     (5,137)    20,106    (94,813)
</TABLE>
 
------------------------
(1) Per share data for the pre-emergence  periods is not presented because  such
    information   is  not  comparable   to  the  similar   information  for  the
    post-emergence periods.
 
(2) Represents increasing rate notes held  prior to the reorganization  referred
    to above, and interest thereon.
 
                                       14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
OVERVIEW
 
    The  polyethylene, polypropylene  and styrene  markets in  which the Company
competes are cyclical markets that are  sensitive to relative changes in  supply
and  demand,  which are  in turn  affected by  general economic  conditions. The
Company's plastic film and APAO businesses  are generally less sensitive to  the
economic   cycles.   Historically,  the   cyclical  segments   have  experienced
alternating periods  of  tight supply  and  rising prices  and  profit  margins,
followed  by periods  of large  capacity additions  resulting in  oversupply and
declining prices and profit margins.
 
    Following a significant  improvement in domestic  economic growth since  the
second  half  of  1993, these  markets  experienced increased  levels  of demand
through  the  second  quarter  of  1995  which  resulted  in  greater   capacity
utilization  and  higher domestic  and export  prices.  This increase  in demand
enabled the  Company and  the industry  in general  to increase  selling  prices
significantly  beginning in the second quarter of 1994 through the first half of
1995 even though feedstock costs  were relatively stable. These price  increases
were further impacted by temporary reductions in industry capacity in the second
half  of 1994 due  to plant outages resulting  from accidents, natural disasters
and other  unscheduled  interruptions.  During  the second  half  of  1995,  the
domestic  petrochemical and polymer markets experienced a decrease in demand and
selling prices  due  to  several  factors,  including  inventory  reductions  by
customers,  the slowdown in economic growth in  the United States and a decrease
in exports, particularly to  the Chinese market. In  addition, prices for  these
products were influenced by industry capacity additions in 1995.
 
    In  addition,  a general  trend by  disposable diaper  manufacturers towards
thinner diaper backsheet materials reduced the volume of film products sold into
this market in 1995. Since the disposable diaper market is the largest  customer
segment  in CT  Film, this  trend significantly  affected its  sales volumes and
operating results in 1995. However, CT Film is developing a number of strategies
intended  to  increase  its  sales  and  profits,  including  developing  a  new
generation  of  film  products  for  the  disposable  diaper  market, broadening
production capabilities, globalizing sales and marketing efforts and  developing
new film products for the medical and packaging markets.
 
    The prices of feedstocks fluctuate widely based on the prices of natural gas
and  oil.  During  1995,  feedstocks  accounted  for  approximately  27%  of the
Company's total cost of  sales. As a  result, the Company's  ability to pass  on
increases  in  raw  material costs  to  customers  has a  significant  impact on
operating results.  The  feedstock  supplies  available  in  Odessa,  Texas  are
currently adequate for the Company's requirements.
 
RESULTS OF OPERATIONS
 
1995 COMPARED TO 1994
 
    The Company's overall sales and profitability were higher in 1995 than 1994.
As  discussed above, the petrochemical and  polymer markets in which the Company
participates were stronger in the first half  of 1995 as compared to the  second
half  of 1995.  Net sales  increased $77.3  million (or  14%) from  1994 to 1995
principally due to an increase in average sales prices of styrene,  polyethylene
and  polypropylene,  offset by  a decrease  in sales  volumes for  plastic film.
Styrene sales increased $30.3 million (or 34%) principally due to an increase in
average sales prices of  9 cents per pound.  Polyethylene sales increased  $22.5
million  (or 15%) principally  due to an  increase in average  sales prices of 9
cents per pound, partially offset by a decrease in sales volumes of 21.7 million
pounds. Polypropylene sales increased $13.0 million (or 17%) principally due  to
an  increase in average  sales prices of  7 cents per  pound. Plastic film sales
decreased $2.1 million (or 1%) principally due to a decrease in sales volumes of
20.3 million pounds principally from the lost sales volumes of the film sold  to
the disposable diaper market for reasons discussed above, partially offset by an
increase  in average sales  prices of 10  cents per pound.  APAO sales increased
$5.6 million (or 30%) principally  due to an increase  in sales volumes of  12.1
million  pounds. Other sales increased $7.9 million  in 1995 as compared to 1994
principally due to an increase in excess feedstock sales.
 
                                       15
<PAGE>
    The Company's gross profit percentage increased  from 22% in 1994 to 29%  in
1995  principally due to  the increase in average  sales prices of polyethylene,
polypropylene and styrene.
 
    Marketing, general and  administrative expenses increased  $5.2 million  (or
14%)  from 1994 to  1995 principally due  to higher information  system costs to
support improvements to on-going operations,  sales and marketing costs  related
to  the CT Film plant in England  and higher employee compensation and benefits.
Research and development  expenses increased $2.4  million (or 34%)  principally
due to new product development at CT Film.
 
    Due  primarily to  the factors  discussed above,  operating income increased
$50.1 million (or 67%) from 1994 to 1995.
 
    Interest expense decreased $25.6 million  (or 51%) principally due to  lower
long-term  debt as a result of the  completion of a recapitalization plan in the
fourth quarter of 1994 and the repayment of bank debt in the first half of 1995.
 
    Other, net decreased $7.7 million from  1994 to 1995 principally due to  the
reversal  in  1994 of  a  $7.4 million  lawsuit  accrual for  which  the Company
ultimately prevailed on appeal and due  to the receipt in 1994 of  approximately
$1.0  million of insurance proceeds received in settlement of a claim related to
a prior lawsuit.
 
    Income tax expense increased $24.9 million from 1994 to 1995 principally due
to increased operating results.
 
    In 1994, the Company recorded an extraordinary loss of $25.8 million, net of
income taxes of $15.8 million, as a  result of the redemption of the Old  Notes.
Due  primarily to  the factors  discussed above, the  Company had  net income of
$65.4 million in 1995 compared with a net loss of $4.3 million in 1994.
 
1994 COMPARED TO 1993
 
    Growth in the  United States economy  resulted in the  strengthening of  the
petrochemical  and polymer markets during the year ended December 31, 1994. As a
result, sales volumes and average sales  prices for the Company's major  product
lines  increased during 1994. Total net  sales increased $108.6 million (or 25%)
from 1993 to 1994. Styrene sales increased  $28.4 million (or 46%) from 1993  to
1994 principally due to a volume increase of approximately 49 million pounds and
an  increase in average  sales prices of  6 cents per  pound. Polyethylene sales
increased $25.3 million (or 21%) from 1993  to 1994 due to a volume increase  of
approximately  37 million pounds  and an increase  in average sales  prices of 3
cents per pound. Plastic film sales increased $25.2 million (or 17%) principally
due to a volume increase of approximately 28 million pounds. Polypropylene sales
increased $13.1 million (or 20%) from 1993  to 1994 due to a volume increase  of
approximately  16 million pounds  and an increase  in average sales  prices of 4
cents per pound. APAO sales increased $3.5 million (or 23%) principally due to a
volume increase of approximately 7  million pounds. Excess feedstock sales  also
contributed to the increase in sales.
 
    The  Company's gross profit percentage increased from  13% in 1993 to 22% in
1994 principally due to the increase in average sales prices discussed above and
lower unit manufacturing costs due to higher production volumes.
 
    Marketing, general and  administrative expenses increased  $5.1 million  (or
16%)  from 1993  to 1994  principally due to  higher employee  benefits that are
related to the Company's improved operating performance. In addition, sales  and
marketing  costs increased due to the increase in sales volumes discussed above.
Research and development costs increased $0.5 million (or 7%) principally due to
an increase in new product development.
 
    Due primarily to  the factors  discussed above,  operating income  increased
$60.6 million (or 418%) from 1993 to 1994.
 
                                       16
<PAGE>
    Cash interest expense increased and non-cash interest expense decreased $6.0
million  principally due to the decision not to exercise the pay-in-kind feature
on the then existing increasing rate subordinated notes for the interest payment
made on November 15, 1994.
 
    Interest income increased  $0.9 million  principally due to  an increase  in
cash  and  cash  equivalents  and  the increase  in  general  interest  rates of
investments. Other, net increased $7.8 million from 1993 to 1994 principally due
to the reversal of  a $7.4 million  accrual for a lawsuit  in which the  Company
ultimately prevailed on appeal.
 
    The  income tax  expense of  $13.6 million  in 1994  reflects current income
taxes payable of $16.1 million, partially offset by deferred income tax benefits
of $2.5 million, excluding  the tax effect of  the extraordinary loss  discussed
below.  The income tax benefit  of $8.9 million in  1993 reflects current income
tax benefits of $4.8 million from the  carryback of 1993 pretax losses in  prior
years and deferred income tax benefits of $4.1 million.
 
    In  1994, the Company had income  before extraordinary loss of $21.5 million
compared with a loss of $25.2 million in 1993. In 1994, the Company recorded  an
extraordinary  loss of $25.8 million, net of income taxes of $15.8 million, as a
result of the  redemption of  the Old  Notes. The  income tax  benefit from  the
extraordinary  loss  reflects a  current income  tax  benefit of  $16.2 million,
partially offset by deferred income tax expense of $0.4 million.
 
    Due primarily  to  the  factors  discussed above,  the  Company's  net  loss
decreased $20.9 million (or 83%) from 1993 to 1994.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    During  the year  ended December  31, 1995,  net cash  provided by operating
activities increased  $79.7  million as  compared  to 1994.  This  increase  was
principally  due  to  improved  operating  performance  and  changes  in working
capital, primarily income taxes payable.  The Company's 1995 federal income  tax
liability of approximately $30 million was paid in March 1996.
 
    In  November 1994, as part of the Recapitalization, the Company entered into
(i) the 11 3/4% Indenture  under which it borrowed the  11 3/4% Senior Notes  of
$175  million, and  (ii) the Credit  Agreement under which  the Company borrowed
$100 million under the  Term Loan and secured  the $80 million Revolving  Credit
Facility.  In addition  to cash generated  from operations, in  1995 the Company
received a  $25  million advance  payment  from a  customer  as a  result  of  a
multi-year  agreement to  supply a portion  of annual  styrene production. Using
cash generated from operations, this advance payment and existing cash balances,
the Company repaid $100  million of long-term  debt under the  Term Loan in  the
first half of 1995. The 11 3/4% Senior Notes will mature on December 1, 2004.
 
    On  March 15, 1996, the  Board of Directors approved  the Financing, and the
Company executed  a  commitment letter  with  a  bank to  replace  the  existing
Revolving  Credit Facility. The Financing would  provide the New Credit Facility
in an initial principal amount of $150 million. The primary use of proceeds from
the New Credit  Facility will be  to provide  funds to finance  portions of  the
Company's  capital expenditure program at its  Odessa, Texas plant over the next
three years, including the construction of the FPO plant, the modernization  and
expansion  of its olefins plant  and the construction of  a new LLDPE plant. The
Financing is contingent on a number of factors, including the negotiation of the
New Credit  Facility.  The Company  anticipates  consummation of  the  Financing
during the second quarter of 1996.
 
    The  Company  believes  that,  based on  current  levels  of  operations and
anticipated growth, its cash flow from operations, together with other available
sources of liquidity, including the proceeds from the New Credit Facility,  will
be  adequate to make scheduled payments of  interest on the 11 3/4% Senior Notes
and the New Credit Facility, to  permit anticipated capital expenditures and  to
fund working
 
                                       17
<PAGE>
capital  requirements.  However, the  ability of  the  Company to  satisfy these
obligations depends on a  number of significant  assumptions, including but  not
limited  to, the demand for the Company's products, raw material costs and other
factors.
 
    The 11 3/4% Indenture contains  certain covenants that, among other  things,
limit  the  ability  of the  Company  to  incur additional  indebtedness  and to
repurchase subordinated indebtedness,  incur or suffer  to exist certain  liens,
pay  dividends,  make certain  investments,  sell significant  fixed  assets and
engage in mergers and consolidations.
 
    The Credit Agreement contains covenants which limit, among other things, the
incurrence of additional indebtedness by the Company, the payment of  dividends,
the creation of liens on the Company's assets, the making of certain investments
by  the  Company,  certain  mergers,  sales  of  certain  fixed  assets  and the
prepayment of  the 11  3/4% Senior  Notes. The  Credit Agreement  also  contains
certain  financial covenants relating to the financial condition of the Company,
including covenants  relating to  the  ratio of  its  earnings to  its  interest
expense,  the ratio of its  earnings to its fixed  charges and a leverage ratio.
The amount of  borrowings under the  Revolving Credit Facility  is based upon  a
formula related to inventory and accounts receivable.
 
    During  1995 and  1994, the Company  expended approximately  $54.6 and $30.9
million, respectively,  for  capital expenditures.  For  1996, the  Company  has
budgeted approximately $100 million for proposed capital expenditures, including
approximately   $52  million  towards  the  completion  of  the  FPO  plant  and
approximately $23 million towards the modernization of the olefins plant at  the
Odessa Facility.
 
    A  number  of  potential  environmental liabilities  exist  which  relate to
certain contaminated property. In addition, a number of potential  environmental
costs  relate to pending or proposed environmental regulations. No assurance can
be given that  all of  the potential liabilities  arising out  of the  Company's
present  or past operations have been identified  or that the amounts that might
be required to investigate  and remediate such sites  or comply with pending  or
proposed  environmental regulations can be accurately estimated. The Company has
approximately $20.3 million accrued in the December 31, 1995 balance sheet as an
estimate  of  its  total  potential  environmental  liability  with  respect  to
investigating  and  remediating  known  and  assessed  site  contamination.  If,
however, additional liabilities with respect to environmental contamination  are
identified, there is no assurance that additional amounts that might be required
to  investigate and  remediate such  potential sites  would not  have a material
adverse effect on the financial position, results of operations or cash flows of
the Company.  In  addition, future  regulatory  developments could  restrict  or
possibly  prohibit existing methods  of environmental compliance.  At this time,
the Company  is unable  to determine  the potential  consequences such  possible
future regulatory developments would have on its financial condition. Management
continually  reviews its  estimates of potential  environmental liabilities. The
Company does not currently carry environmental impairment liability insurance to
protect it  against  such  contingencies  because the  Company  has  found  such
coverage  is available only at great cost  and with broad exclusions. As part of
its financial assurance requirements  under RCRA and  equivalent Texas law,  the
Company  has deposited approximately $3.5 million  in trust to cover closure and
post-closure costs and plugging and abandonment  costs at certain of the  Odessa
Facility's  hazardous waste  management units.  Based on  the Company's improved
financial condition, management believes it will be able to meet the  regulatory
requirements to have TNRCC release the funds in the trust during 1996.
 
    The   Company's  operating   expenditures  for   environmental  remediation,
compliance and waste disposal were  approximately $8.3 million and $6.6  million
in  1995  and  1994, respectively.  In  1996, the  Company  anticipates spending
approximately $7  million for  environmental remediation,  compliance and  waste
disposal.  Of that amount, expenditures relating to remediation are projected to
be approximately $2  million in 1996.  Compliance and waste  disposal costs  are
expected  to  increase slightly  over  the next  several  years as  a  result of
increasingly stringent regulations that affect waste handling
 
                                       18
<PAGE>
alternatives. In 1995  and 1994,  the Company also  expended approximately  $1.2
million  and  $2.0  million,  respectively,  relating  to  environmental capital
expenditures.  For  the  foreseeable  future,  the  Company  expects  to   incur
approximately  $2 million to $4 million per  year in capital spending to address
the requirements of environmental laws. Annual amounts could vary depending on a
variety of  factors,  such as  the  control measures  or  remedial  technologies
ultimately required and the time allowed to meet such requirements.
 
ITEM 8.  FINANCIAL STATEMENTS
 
    The  Company's Consolidated Financial  Statements required by  this item are
included on the pages immediately following the Index to Consolidated  Financial
Statements appearing on page F-1.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
    None.
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    The  information required by  this item will be  contained in the definitive
proxy statement (the "Proxy Statement") of the Company to be filed in connection
with its  forthcoming annual  meeting of  stockholders scheduled  for April  30,
1996,  except for  the information regarding  executive officers  of the Company
contained in Part I of this Annual Report on Form 10-K. The information required
by this item to be  contained in the Proxy  Statement is incorporated herein  by
reference.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
    The  information  required  by this  item  will  be contained  in  the Proxy
Statement. Such information is incorporated herein by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The information  required  by this  item  will  be contained  in  the  Proxy
Statement. Such information is incorporated herein by reference.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    The  information  required  by this  item  will  be contained  in  the Proxy
Statement. Such information is incorporated herein by reference.
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
    (a)  1.  Consolidated Financial Statements:
           See Index to Consolidated Financial Statements on page F-1.
 
        2.  Financial Statement Schedules:
           See Index to Consolidated Financial Statements on page F-1.
 
        3.  Exhibits:
 
<TABLE>
<C>        <C>        <S>
      2.1         --  First Amended Plan  of Reorganization  of Rexene  Products Company,  et
                      al., dated April 29, 1992 (filed as Exhibit 2.1 to Rexene Corporation's
                      Form  8-K Current Report dated July  7, 1992 and incorporated herein by
                      reference).
      2.2         --  Order Confirming First Amended Plan of Reorganization, dated April  29,
                      1992  (filed as  Exhibit 2.2 to  Rexene Corporation's  Annual Report on
                      Form 10-K for the fiscal year ended December 31, 1992 and  incorporated
                      herein by reference).
</TABLE>
 
                                       19
<PAGE>
<TABLE>
<C>        <C>        <S>
      2.3         --  Plan  and Agreement  of Merger,  between Rexene  Corporation and Rexene
                      Products Company, dated as of September 11, 1992 (filed as Exhibit  2.3
                      to  Rexene Corporation's Annual Report on Form 10-K for the fiscal year
                      ended December 31, 1992 and incorporated herein by reference).
    3.1.1         --  Restated Certificate of Incorporation of Rexene Products Company (a/k/a
                      Rexene Corporation), dated September 11, 1992 (filed as Exhibit 3.1  to
                      Rexene  Corporation's Annual  Report on Form  10-K for  the fiscal year
                      ended December 31, 1992 and incorporated herein by reference).
    3.1.2         --  Amendment to Certificate of Incorporation, dated June 9, 1993 (filed as
                      Exhibit 3.1.2 to Rexene  Corporation's Annual Report  on Form 10-K  for
                      the year ended December 31, 1993 and incorporated herein by reference).
      3.2         --  Amendments   to  By-Laws,  adopted  May   24,  1994,  together  with  a
                      restatement  of   Rexene   Corporation's  By-Laws   incorporating   all
                      amendments  through  May 24,  1994 (filed  as  Exhibit 3.2.3  to Rexene
                      Corporation's Form 10-Q  Quarterly Report  for the  three months  ended
                      June 30, 1994 and incorporated herein by reference).
      4.1         --  Indenture,  dated as of November  29, 1994, between Rexene Corporation,
                      as Issuer,  and Bank  One, Texas,  N.A., as  Trustee, for  $175,000,000
                      11  3/4%  Senior  Notes  due  2004  (filed  as  Exhibit  4.1  to Rexene
                      Corporation's Annual  Report on  Form 10-K  for the  fiscal year  ended
                      December 31, 1994 and incorporated herein by reference).
    4.2.1         --  Stockholder  Rights Agreement, between  Rexene Corporation and American
                      Stock Transfer & Trust  Company, as Rights Agent,  dated as of  January
                      26,  1993 (filed as Exhibit 4.20  to Rexene Corporation's Annual Report
                      on  Form  10-K  for  the  fiscal  year  ended  December  31,  1992  and
                      incorporated herein by reference).
    4.2.2         --  Amendment  No. 1 to Stockholder Rights Agreement (filed as Exhibit 1 to
                      Rexene  Corporation's  Form  8-A/A  filed  on  October  21,  1994   and
                      incorporated herein by reference).
     10.1         --  Rexene  Corporation 1988 Stock Incentive Plan (filed as Exhibit 10.5 to
                      Rexene Corporation's  Registration  Statement  on  Form  S-1  (SEC  No.
                      33-22723) and incorporated herein by reference).
     10.2         --  Rexene  Corporation  1993  Non-Qualified Stock  Option  Plan  (filed as
                      Exhibit 10.2 to Rexene Corporation's Annual Report on Form 10-K for the
                      fiscal  year  ended  December  31,  1992  and  incorporated  herein  by
                      reference).
     10.3         --  Rexene Corporation 1994 Long-Term Incentive Plan (filed as Exhibit 10.2
                      to  Amendment No. 1  to Rexene Corporation's  Registration Statement on
                      Form S-3  (SEC File  No. 33-55507)  as filed  on October  21, 1994  and
                      incorporated herein by reference).
     10.4         --  Non-Qualified  Stock  Option  Plan  for  Outside  Directors  of  Rexene
                      Corporation (filed  as  Exhibit  10.3 to  Rexene  Corporation's  Annual
                      Report  on Form 10-K  for the fiscal  year ended December  31, 1992 and
                      incorporated herein by reference).
     10.5         --  1995 Stock Option Plan for Outside Directors (filed as Exhibit 10.19 to
                      Rexene Corporation's Form  10-Q Quarterly Report  for the three  months
                      ended June 30, 1995 and incorporated herein by reference).
</TABLE>
 
                                       20
<PAGE>
<TABLE>
<C>        <C>        <S>
     10.6         --  Rexene  Corporation  Supplemental Executive  Retirement Plan  (filed as
                      Exhibit 10.3 to  Amendment No. 1  to Rexene Corporation's  Registration
                      Statement  on Form S-3 (SEC File No.  33-55507) as filed on October 21,
                      1994 and incorporated herein by reference).
     10.7         --  Rexene Corporation 1995 Annual Incentive  Bonus Plan (filed as  Exhibit
                      10.6.3  to Rexene Corporation's Annual Report  Form 10-K for the fiscal
                      year ended December 31, 1994 and incorporated herein by reference).
   10.8.1         --  Rexene Corporation  Executive  Management  Committee  Severance  Policy
                      (filed  as Exhibit 10.5  to Rexene Corporation's  Annual Report on Form
                      10-K for  the fiscal  year  ended December  31, 1992  and  incorporated
                      herein by reference).
   10.8.2         --  Form  of Letter Agreement between Rexene Corporation and each member of
                      its Executive Management Committee.
   10.9.1         --  Executive Security Plan  of Rexene Products  Company (filed as  Exhibit
                      10.8  to Rexene Corporation's  Registration Statement on  Form S-1 (SEC
                      No. 33-22723) and incorporated herein by reference).
   10.9.2         --  Form of Letter Agreement between  Rexene Corporation and L.N.  Anderson
                      and  J.E. Knott dated as of March 1, 1995 relating to waiver of certain
                      rights under the Executive Security Plan.
    10.10         --  Letter  Agreement,  dated  as  of   March  16,  1992,  between   Rexene
                      Corporation  and Arthur L.  Goeschel (filed as  Exhibit 10.13 to Rexene
                      Corporation's Annual Report on  Form 10-K for  the year ended  December
                      31, 1991 and incorporated herein by reference).
    10.11         --  Indemnity  Agreement, dated  as of  May 25,  1990, by  and among Rexene
                      Corporation, Rexene  Products Company  and Andrew  J. Smith  (filed  as
                      Exhibit  10.8.2 to Rexene Corporation's Annual  Report on Form 10-K for
                      the fiscal  year ended  December 31,  1992 and  incorporated herein  by
                      reference).
  10.12.1         --  Non-Qualified  Stock  Option  Agreement,  dated as  of  June  15, 1988,
                      between Rexene  Corporation and  Lavon N.  Anderson (filed  as  Exhibit
                      10.29.2 to Rexene Corporation's Registration Statement on Form S-1 (SEC
                      No. 33-22723) and incorporated herein by reference).
  10.12.2         --  Indemnity  Agreement, dated  as of  May 25,  1990, by  and among Rexene
                      Corporation, Rexene Products  Company and Lavon  N. Anderson (filed  as
                      Exhibit  10.9.3 to Rexene Corporation's Annual  Report on Form 10-K for
                      the fiscal  year ended  December 31,  1992 and  incorporated herein  by
                      reference).
    10.13         --  Employment  Agreement,  dated  as  of  July  23,  1990,  between Rexene
                      Products Company and Kevin W. McAleer (filed as Exhibit 10.13 to Rexene
                      Corporation's Annual Report on  Form 10-K for  the year ended  December
                      31, 1990, and incorporated herein by reference).
    10.14         --  Employment Agreement, dated as of May 29, 1990, between Rexene Products
                      Company   and  Jack  E.  Knott  (filed   as  Exhibit  10.15  to  Rexene
                      Corporation's Annual Report on  Form 10-K for  the year ended  December
                      31, 1990 and incorporated herein by reference).
  10.15.1         --  Credit   Agreement,  dated  as  of  November  29,  1994,  among  Rexene
                      Corporation, as Borrower, The  Bank of Nova Scotia,  as Agent, and  the
                      Lenders   Signatory  thereto   (filed  as   Exhibit  10.16   to  Rexene
                      Corporation's Annual Report on  Form 10-K for  the year ended  December
                      31, 1994, and incorporated herein by reference).
</TABLE>
 
                                       21
<PAGE>
<TABLE>
<C>        <C>        <S>
  10.15.2         --  First  Amendment and Supplement  to Credit Agreement,  dated as of July
                      17, 1995,  among Rexene  Corporation,  as Borrower,  The Bank  of  Nova
                      Scotia, as Agent, and the Lenders Signatory thereto.
    10.16         --  Indemnity  Agreement, dated  as of  May 25,  1990, by  and among Rexene
                      Corporation, Rexene Products  Company and William  B. Hewitt (filed  as
                      Exhibit  10.22 to Rexene  Corporation's Annual Report  on Form 10-K for
                      the  year  ended  December  31,   1992,  and  incorporated  herein   by
                      reference).
     21.1         --  Subsidiaries of Rexene Corporation.
     23.1         --  Consent of Price Waterhouse LLP.
</TABLE>
 
    (b)  No Form 8-K was filed in the fourth quarter of 1995.
 
                                       22
<PAGE>
                                   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, as of March 15, 1996.
 
                                          REXENE CORPORATION
                                          Registrant
 
                                          By:        /s/  ANDREW J. SMITH
 
                                             -----------------------------------
                                                       Andrew J. Smith
                                                   CHIEF EXECUTIVE OFFICER
 
    Pursuant to the requirements  of the Securities Exchange  Act of 1934,  this
report  has been signed below  as of March 15, 1996  by the following persons on
behalf of the registrant and in the capacities indicated.
 
<TABLE>
<S>                                            <C>
           /s/  ARTHUR L. GOESCHEL                         /s/  ANDREW J. SMITH
--------------------------------------------   --------------------------------------------
             Arthur L. Goeschel                               Andrew J. Smith
            CHAIRMAN OF THE BOARD                  CHIEF EXECUTIVE OFFICER AND DIRECTOR
 
           /s/  LAVON N. ANDERSON                       /s/  HARRY B. BARTLEY, JR.
--------------------------------------------   --------------------------------------------
              Lavon N. Anderson                            Harry B. Bartley, Jr.
        PRESIDENT AND CHIEF OPERATING                            DIRECTOR
            OFFICER AND DIRECTOR
 
            /s/  R. JAMES COMEAUX                         /s/  WILLIAM B. HEWITT
--------------------------------------------   --------------------------------------------
              R. James Comeaux                               William B. Hewitt
                  DIRECTOR                                       DIRECTOR
 
             /s/  ILAN KAUFTHAL                           /s/  CHARLES O'CONNELL
--------------------------------------------   --------------------------------------------
                Ilan Kaufthal                                Charles O'Connell
                  DIRECTOR                                       DIRECTOR
 
            /s/  HEINN TOMFOHRDE                           /s/  KEVIN W. MCALEER
--------------------------------------------   --------------------------------------------
               Heinn Tomfohrde                               Kevin W. McAleer
                  DIRECTOR                               EXECUTIVE VICE PRESIDENT
                                                        AND CHIEF FINANCIAL OFFICER
 
              /s/  GEFF PERERA
--------------------------------------------
                 Geff Perera
        VICE PRESIDENT AND CONTROLLER
</TABLE>
 
                                       23
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
                               ITEMS 8 AND 14(A)
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                       AND FINANCIAL STATEMENT SCHEDULES
 
<TABLE>
<CAPTION>
                                                                                                            PAGE
                                                                                                          ---------
<S>                                                                                                       <C>
Responsibility for the Consolidated Financial Statements................................................        F-2
 
Report of Independent Accountants.......................................................................        F-2
 
Consolidated Financial Statements:
 
  Consolidated Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993............        F-3
 
  Consolidated Balance Sheets as of December 31, 1995 and 1994..........................................        F-4
 
  Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Years Ended December 31,
   1995, 1994 and 1993..................................................................................        F-5
 
  Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993............        F-6
 
  Notes to Consolidated Financial Statements............................................................     F-7-21
</TABLE>
 
All  Financial Statement  Schedules have been  omitted because  (i) the required
information is not present  in amounts sufficient to  require submission of  the
schedule,  (ii)  the  information  required  is  included  in  the  Consolidated
Financial Statements or the Notes thereto, or (iii) the information required  in
the schedules is not applicable to the Company.
 
                                      F-1
<PAGE>
             RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL REPORTS
 
    Company   management  is  responsible  for  the  preparation,  accuracy  and
integrity  of  the  consolidated   financial  statements  and  other   financial
information  included  in  this  Annual  Report.  This  responsibility  includes
preparing the  statements  in  accordance  with  generally  accepted  accounting
principles  and necessarily  includes estimates  that are  based on management's
best judgements.
 
    To help  ensure  the  accuracy  and integrity  of  Company  financial  data,
management  maintains internal controls which are designed to provide reasonable
assurance that transactions are executed as authorized, that they are accurately
recorded and that assets are properly safeguarded. These controls are  monitored
by  an  ongoing program  of internal  audits.  It is  essential for  all Company
employees to conduct their business affairs in keeping with the highest  ethical
standards  as  outlined  in our  code  of  conduct policy,  "Conduct  of Company
Employees."  Careful  selection  of  employees,  and  appropriate  divisions  of
responsibility, also help us to achieve our control objectives.
 
    The  financial  statements have  been audited  by the  Company's independent
public accountants, Price  Waterhouse LLP. Their  report is also  shown on  this
page.
 
    The Board of Directors, acting through its Audit Committee composed entirely
of   outside  directors,  oversees   the  adequacy  of   the  Company's  control
environment. The  Audit Committee  meets  periodically with  representatives  of
Price Waterhouse LLP, internal financial management and the internal auditors to
review  accounting,  control,  auditing  and  financial  reporting  matters. The
independent auditors and the internal auditors also have full and free access to
meet privately with the Audit Committee.
 
             Andrew J. Smith                        Kevin W. McAleer
         Chief Executive Officer                 Chief Financial Officer
 
                            ------------------------
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of
 Rexene Corporation
 
    In our opinion, the accompanying consolidated financial statements listed on
page F-1 present  fairly, in all  material respects, the  financial position  of
Rexene  Corporation and its subsidiaries (the  Company) at December 31, 1995 and
1994, and the results of their operations  and their cash flows for each of  the
three  years in the period ended December 31, 1995, in conformity with generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility  of the Company's management; our responsibility is to express an
opinion on these  financial statements  based on  our audits.  We conducted  our
audits  of  these  statements  in accordance  with  generally  accepted auditing
standards which require that we plan and perform the audits 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,  assessing   the
accounting  principles used  and significant  estimates made  by management, and
evaluating the overall  financial statement  presentation. We  believe that  our
audits provide a reasonable basis for the opinion expressed above.
 
PRICE WATERHOUSE LLP
 
Dallas, Texas
February 7, 1996, except as to Note 20,
 for which the date is March 15, 1996
 
                                      F-2
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                             -------------------------------------
                                                                                1995         1994         1993
                                                                             -----------  -----------  -----------
<S>                                                                          <C>          <C>          <C>
Net sales..................................................................  $   615,238  $   537,957  $   429,353
                                                                             -----------  -----------  -----------
Operating expenses:
  Cost of sales............................................................      437,640      418,048      375,609
  Marketing, general and administrative....................................       42,962       37,764       32,641
  Research and development.................................................        9,490        7,060        6,599
                                                                             -----------  -----------  -----------
                                                                                 490,092      462,872      414,849
                                                                             -----------  -----------  -----------
Operating income...........................................................      125,146       75,085       14,504
Interest expense...........................................................      (24,343)     (49,885)     (49,834)
Interest income............................................................        3,250        2,337        1,392
Other, net.................................................................         (174)       7,524         (245)
                                                                             -----------  -----------  -----------
Income (loss) before income taxes and extraordinary loss...................      103,879       35,061      (34,183)
Income tax (expense) benefit...............................................      (38,436)     (13,557)       8,940
                                                                             -----------  -----------  -----------
Income (loss) before extraordinary loss....................................       65,443       21,504      (25,243)
Extraordinary loss.........................................................      --           (25,831)     --
                                                                             -----------  -----------  -----------
Net income (loss)..........................................................  $    65,443  $    (4,327) $   (25,243)
                                                                             -----------  -----------  -----------
                                                                             -----------  -----------  -----------
Weighted average shares outstanding........................................       19,126       11,663       10,501
                                                                             -----------  -----------  -----------
                                                                             -----------  -----------  -----------
Income (loss) per share:
  Income (loss) before extraordinary loss..................................  $      3.42  $      1.84  $     (2.40)
  Extraordinary loss.......................................................      --             (2.21)     --
                                                                             -----------  -----------  -----------
  Net income (loss)........................................................  $      3.42  $     (0.37) $     (2.40)
                                                                             -----------  -----------  -----------
                                                                             -----------  -----------  -----------
</TABLE>
 
                See notes to consolidated financial statements.
 
                                      F-3
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                                DECEMBER 31,
                                                                                          ------------------------
                                                                                             1995         1994
                                                                                          -----------  -----------
<S>                                                                                       <C>          <C>
Cash and cash equivalents...............................................................  $    47,258  $    45,822
Deposit held in trust...................................................................        3,547        8,000
Accounts receivable, net................................................................       73,520       77,433
Inventories.............................................................................       62,257       62,726
Deferred income taxes...................................................................        5,663        8,625
Prepaid expenses and other..............................................................          531        2,745
                                                                                          -----------  -----------
    Total current assets................................................................      192,776      205,351
                                                                                          -----------  -----------
Property, plant and equipment, net......................................................      291,675      258,119
Intangible assets, net..................................................................       11,811       16,062
Other noncurrent assets.................................................................       24,329       27,422
                                                                                          -----------  -----------
                                                                                          $   520,591  $   506,954
                                                                                          -----------  -----------
                                                                                          -----------  -----------
 
                                       LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable........................................................................  $    29,768  $    38,019
Income taxes payable....................................................................       30,778      --
Current portion of long-term debt.......................................................      --            10,000
Accrued liabilities.....................................................................       14,319        9,488
Accrued interest........................................................................        1,714        1,894
Employee benefits payable...............................................................        7,781        5,911
                                                                                          -----------  -----------
    Total current liabilities...........................................................       84,360       65,312
                                                                                          -----------  -----------
Long-term debt..........................................................................      175,000      265,000
Other noncurrent liabilities............................................................       67,107       49,999
Deferred income taxes...................................................................       53,973       51,767
Commitments and contingencies...........................................................      --           --
Stockholders' equity:
  Preferred stock, par value $.01 per share; 1 million shares authorized; none issued
   and outstanding......................................................................      --           --
  Common stock, par value $.01 per share; 100 million shares authorized; 18.7 and 18.6
   million shares issued and outstanding, respectively..................................          187          186
  Paid-in capital.......................................................................      111,247      110,355
  Retained earnings (deficit)...........................................................       28,595      (36,098)
  Foreign currency translation adjustment...............................................          122          433
                                                                                          -----------  -----------
    Total stockholders' equity..........................................................      140,151       74,876
                                                                                          -----------  -----------
                                                                                          $   520,591  $   506,954
                                                                                          -----------  -----------
                                                                                          -----------  -----------
</TABLE>
 
                See notes to consolidated financial statements.
 
                                      F-4
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                               FOREIGN
                                                 COMMON STOCK                     RETAINED    CURRENCY
                                            ----------------------    PAID-IN     EARNINGS   TRANSLATION
                                             SHARES      AMOUNT       CAPITAL    (DEFICIT)   ADJUSTMENT      TOTAL
                                            ---------  -----------  -----------  ----------  -----------  -----------
<S>                                         <C>        <C>          <C>          <C>         <C>          <C>
Balance, December 31, 1992................     10,501   $     105   $    26,529  $   (6,528)  $           $    20,106
Net loss..................................     --          --           --          (25,243)     --           (25,243)
                                            ---------       -----   -----------  ----------  -----------  -----------
Balance, December 31, 1993................     10,501         105        26,529     (31,771)     --            (5,137)
 
Issuance of common stock..................      8,124          81        83,826      --          --            83,907
Foreign currency translation adjustment...     --          --           --           --             433           433
Net loss..................................     --          --           --           (4,327)     --            (4,327)
                                            ---------       -----   -----------  ----------  -----------  -----------
Balance, December 31, 1994................     18,625         186       110,355     (36,098)        433        74,876
Issuance of common stock..................        120           1           365      --          --               366
Tax benefit of directors' and employees'
 compensation deduction...................     --          --               527      --          --               527
Foreign currency translation adjustment...     --          --           --           --            (311)         (311)
Dividends on common stock
 ($.04 per share).........................     --          --           --             (750)     --              (750)
Net income................................     --          --           --           65,443      --            65,443
                                            ---------       -----   -----------  ----------  -----------  -----------
Balance, December 31, 1995................     18,745   $     187   $   111,247  $   28,595   $     122   $   140,151
                                            ---------       -----   -----------  ----------  -----------  -----------
                                            ---------       -----   -----------  ----------  -----------  -----------
</TABLE>
 
                See notes to consolidated financial statements.
 
                                      F-5
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                           --------------------------------------
                                                                               1995          1994         1993
                                                                           ------------  ------------  ----------
<S>                                                                        <C>           <C>           <C>
Cash flows from operating activities:
  Net income (loss)......................................................  $     65,443  $     (4,327) $  (25,243)
  Adjustments to reconcile net income (loss) to net cash provided by
   operating activities:
    Depreciation and amortization........................................        21,475        18,959      17,446
    Deferred income taxes................................................         5,168        (2,476)     (4,160)
    Amortization of debt issuance costs..................................         2,876       --           --
    Extraordinary loss, net of income taxes..............................       --             25,831      --
    Reversal of lawsuit judgment.........................................       --             (7,400)     --
    Non-cash interest expense............................................       --             19,441      25,388
    Change in:
      Deposits held in trust.............................................         4,453       --           --
      Accounts receivable................................................         3,872       (19,588)     (6,049)
      Inventories........................................................         5,943       (10,111)      1,071
      Prepaid expenses and other.........................................           567           413        (276)
      Income taxes.......................................................        32,952        19,550      (4,894)
      Accounts payable...................................................        (8,254)       10,621       6,999
      Accrued interest...................................................          (180)       (1,203)        (48)
      Employee benefits payable and accrued liabilities..................         2,369         3,528        (756)
      Other noncurrent liabilities.......................................        (2,492)        3,189       1,006
    Other................................................................        (1,716)       (3,643)        857
                                                                           ------------  ------------  ----------
        Total adjustments................................................        67,033        57,111      36,584
                                                                           ------------  ------------  ----------
Net cash provided by operating activities................................       132,476        52,784      11,341
                                                                           ------------  ------------  ----------
Cash flows used for investing activities -- capital
 expenditures............................................................       (54,606)      (30,876)    (17,008)
                                                                           ------------  ------------  ----------
Cash flows from financing activities:
  Repayment of debt......................................................      (100,000)     (352,629)     --
  Advance payment from customer, net of repayments.......................        23,200       --           --
  Proceeds from issuance of common stock, net............................           366        83,907      --
  Proceeds from issuance of debt.........................................       --            275,000      --
  Bank borrowings........................................................       --              7,000       2,000
  Repayment of bank borrowings...........................................       --             (9,000)     --
  Debt issuance costs and other..........................................       --            (10,899)     --
                                                                           ------------  ------------  ----------
Net cash provided by (used for) financing activities.....................       (76,434)       (6,621)      2,000
                                                                           ------------  ------------  ----------
Net increase (decrease) in cash and cash equivalents.....................         1,436        15,287      (3,667)
Cash and cash equivalents at beginning of year...........................        45,822        30,535      34,202
                                                                           ------------  ------------  ----------
Cash and cash equivalents at end of year.................................  $     47,258  $     45,822  $   30,535
                                                                           ------------  ------------  ----------
                                                                           ------------  ------------  ----------
Supplemental cash flow information:
  Cash paid for interest.................................................  $     23,740  $     30,915  $   24,039
  Cash paid for income taxes.............................................  $      1,933  $      2,451  $      114
</TABLE>
 
                See notes to consolidated financial statements.
 
                                      F-6
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
THE COMPANY
 
    Rexene  Corporation (the "Company") manufactures  and markets a wide variety
of products through two operating divisions. The products range from value added
specialty  products,   such   as   customized  plastic   films,   to   commodity
petrochemicals,  such as styrene. These  products are used in  a wide variety of
industrial and consumer-related applications.  The Company's principal  products
are  plastic  film,  polyethylene,  polypropylene,  Rextac-Registered Trademark-
amorphous polyalphaolefin ("APAO") and styrene. The markets in which the Company
competes are cyclical markets that are  sensitive to relative changes in  supply
and  demand,  which in  turn are  affected by  general economic  conditions. The
Company's plastic film and APAO businesses  are generally less sensitive to  the
economic cycles.
 
MANAGEMENT ASSUMPTIONS
 
    The preparation of the consolidated financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  and disclosure of contingent assets and liabilities at December 31,
1995 and 1994 and the reported amounts of revenues and expenses during the years
ended December 31, 1995, 1994 and  1993. Actual results could differ from  these
estimates.
 
PRINCIPLES OF CONSOLIDATION
 
    The   consolidated  financial   statements  of   the  Company   include  its
wholly-owned subsidiaries.  Significant intercompany  transactions and  balances
are eliminated.
 
CASH AND CASH EQUIVALENTS
 
    Cash  equivalents represent short-term  investments with original maturities
of three months or less.
 
INVENTORIES
 
    Inventories are stated at  the lower of cost  or market using the  first-in,
first-out method.
 
PROPERTY, PLANT AND EQUIPMENT
 
    Property,  plant and equipment  is stated at  cost. Depreciation is provided
utilizing the  straight-line  method over  the  estimated useful  lives  of  the
assets,  ranging from 3 to 20  years. Improvements are capitalized, while repair
and maintenance costs are charged to operations as incurred. Interest costs  are
capitalized as part of major construction projects. Upon disposal of assets, the
cost  and related accumulated depreciation are removed from the accounts and the
resulting gain or loss is included in income.
 
INTANGIBLE ASSETS
 
    Debt issuance costs are amortized on a straight-line basis, over the term of
the related debt, ranging from five to ten years. Reorganization value in excess
of amounts  allocable to  identifiable assets  is amortized  on a  straight-line
basis over fifteen years. Other intangible assets are stated at cost and consist
primarily  of  licensing  agreements  and  patents,  which  are  amortized  on a
straight-line basis over five years.
 
INCOME TAXES
 
    The Company  accounts for  income  taxes following  an asset  and  liability
approach to financial accounting and reporting of income taxes.
 
                                      F-7
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
 
    Operations  of the foreign subsidiary use  the local currency of the country
of operation as the functional currency. The financial statements of the foreign
subsidiary are  translated  at current  and  average exchange  rates,  with  any
resulting  translation adjustments included in  the foreign currency translation
adjustment account in stockholders' equity.
 
INCOME (LOSS) PER SHARE
 
    Income (loss) per share is based on the weighted average number of shares of
common stock and, if dilutive, common stock equivalents outstanding.
 
RECLASSIFICATIONS
 
    Certain amounts in the consolidated  financial statements for periods  prior
to 1995 have been reclassified to conform with the 1995 presentation.
 
NEW ACCOUNTING STANDARDS
 
    In  October 1995, the Financial  Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS")  No. 123, "Accounting for  Stock-Based
Compensation",  which generally  establishes financial  accounting and reporting
standards  for  stock-based  employee  compensation  plans.  This  statement  is
effective  for fiscal years beginning after  December 15, 1995. The Company will
adopt this  new statement  effective  January 1,  1996,  and as  permitted,  the
Company  will measure and record compensation expense in accordance with current
practices  as  prescribed  by  Accounting  Principles  Board  Opinion  No.   25,
"Accounting  for Stock  Issued to  Employees" and  will also  provide disclosure
about pro forma compensation expense. Such adoption will not result in a  charge
to earnings in the Company's consolidated financial statements.
 
    During  1995, the  Company adopted SFAS  No. 121,  "Impairment of Long-Lived
Assets." There was no adjustment recorded as a result of adopting this standard.
The Company periodically compares the  carrying value of its long-lived  assets,
principally  property, plant and equipment, to undiscounted cash flows generated
by the  long-lived assets.  The  Company's undiscounted  cash flows  exceed  the
carrying value of its long-lived assets.
 
2.  RECAPITALIZATION
    In the fourth quarter of 1994, the Company completed a recapitalization plan
(the  "Recapitalization") consisting of (i) the  issuance of 8 million shares of
common stock at $11.00 per share, (ii) the issuance of 11 3/4% Senior Notes  due
2004  (the "11  3/4% Senior  Notes") in  an aggregate  principal amount  of $175
million,  (iii)  the  establishment  of  a  new  credit  facility  (the  "Credit
Agreement"),  providing the  Company with  a $100  million term  loan (the "Term
Loan") and  an $80  million  revolving line  of  credit (the  "Revolving  Credit
Facility"),  (iv)  the  redemption  and  defeasance  of  the  Company's existing
increasing rate senior notes (the "Old Notes"), (v) the repayment in full of the
outstanding indebtedness  under  the  Company's existing  credit  agreement.  No
amount  has been borrowed under the Revolving  Credit Facility. In the first six
months of 1995, the Company prepaid all of the Term Loan. In connection with the
redemption of the Old Notes, the Company recorded an extraordinary loss of $25.8
million (net of income tax benefits of $15.8 million).
 
                                      F-8
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
3.  ACCOUNTS RECEIVABLE
    Accounts receivable consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                                   --------------------
                                                                                     1995       1994
                                                                                   ---------  ---------
<S>                                                                                <C>        <C>
Trade............................................................................  $  65,719  $  74,026
Other............................................................................     11,175      7,376
                                                                                   ---------  ---------
                                                                                      76,894     81,402
Less allowances..................................................................     (3,374)    (3,969)
                                                                                   ---------  ---------
                                                                                   $  73,520  $  77,433
                                                                                   ---------  ---------
                                                                                   ---------  ---------
</TABLE>
 
    No bad debt expense  was recorded during the  years ended December 31,  1995
and  1994. Bad debt expense  for the year ended  December 31, 1993 was $223,000.
During the year ended December 31, 1994, there was a net recovery of  previously
written-off accounts of $162,000. Uncollectible accounts written off against the
allowance for bad debts, net of recoveries for the years ended December 31, 1995
and 1993 were $595,000 and $925,000, respectively.
 
4.  INVENTORIES
    Inventories consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                                   --------------------
                                                                                     1995       1994
                                                                                   ---------  ---------
<S>                                                                                <C>        <C>
Raw materials....................................................................  $  20,144  $  21,363
Work in progress.................................................................      5,356      8,014
Finished goods...................................................................     36,757     33,349
                                                                                   ---------  ---------
                                                                                   $  62,257  $  62,726
                                                                                   ---------  ---------
                                                                                   ---------  ---------
</TABLE>
 
5.  PROPERTY, PLANT AND EQUIPMENT
    Property, plant and equipment consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                                ------------------------
                                                                                   1995         1994
                                                                                -----------  -----------
<S>                                                                             <C>          <C>
Land..........................................................................  $     5,823  $     5,819
Buildings.....................................................................       22,697       20,720
Plant and equipment...........................................................      284,749      252,817
Construction in progress......................................................       34,258       15,895
                                                                                -----------  -----------
                                                                                    347,527      295,251
Less accumulated depreciation.................................................      (55,852)     (37,132)
                                                                                -----------  -----------
                                                                                $   291,675  $   258,119
                                                                                -----------  -----------
                                                                                -----------  -----------
</TABLE>
 
    Depreciation expense for the years ended December 31, 1995, 1994 and 1993 is
$19,123,000,  $17,426,000 and $16,059,000, respectively.  During the years ended
December 31,  1995,  1994  and  1993,  $2,577,000,  $1,412,000  and  $1,259,000,
respectively,  of  interest  was  capitalized  in  connection  with construction
projects.
 
                                      F-9
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6.  INTANGIBLE ASSETS
    Intangible assets, net of accumulated amortization are (in thousands):
 
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                                   --------------------
                                                                                     1995       1994
                                                                                   ---------  ---------
<S>                                                                                <C>        <C>
Debt issuance costs..............................................................  $   9,735  $   9,735
Less accumulated amortization....................................................     (2,991)      (116)
                                                                                   ---------  ---------
                                                                                       6,744      9,619
                                                                                   ---------  ---------
Reorganization value in excess of amounts allocable to identifiable assets.......      4,298      4,298
Less accumulated amortization....................................................     (1,171)      (904)
                                                                                   ---------  ---------
                                                                                       3,127      3,394
                                                                                   ---------  ---------
Other intangible assets..........................................................      5,544      5,544
Less accumulated amortization....................................................     (3,604)    (2,495)
                                                                                   ---------  ---------
                                                                                       1,940      3,049
                                                                                   ---------  ---------
                                                                                   $  11,811  $  16,062
                                                                                   ---------  ---------
                                                                                   ---------  ---------
</TABLE>
 
7.  OTHER NONCURRENT ASSETS
    Other noncurrent assets consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                                   --------------------
                                                                                     1995       1994
                                                                                   ---------  ---------
<S>                                                                                <C>        <C>
Spare parts inventories..........................................................  $  15,760  $  18,380
Unrecognized prior service cost, net of accumulated amortization of $389 in
 1995............................................................................      2,763      3,152
Deposit in rabbi trust...........................................................      2,766     --
Long-term note receivable........................................................      1,550     --
Deposits held in trusts..........................................................      3,547     10,651
Other............................................................................      1,490      3,239
                                                                                   ---------  ---------
                                                                                      27,876     35,422
Less: current portion of deposits held in trust..................................     (3,547)    (8,000)
                                                                                   ---------  ---------
                                                                                   $  24,329  $  27,422
                                                                                   ---------  ---------
                                                                                   ---------  ---------
</TABLE>
 
    In 1995, the Company deposited $2.8 million in a rabbi trust account to fund
a Supplemental Executive  Retirement Plan (see  note 15). The  deposits held  in
trusts  for the  benefit of the  Texas Natural  Resource Conservation Commission
("TNRCC") were established  and funded  to comply with  the financial  assurance
requirements  of  the  Resource  Conservation and  Recovery  Act.  Based  on the
Company's improved financial condition, management  believes it will be able  to
meet  the regulatory requirements to  have TNRCC release the  funds in the trust
during 1996.
 
                                      F-10
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
8.  ACCRUED LIABILITIES
    Accrued liabilities consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                                    --------------------
                                                                                      1995       1994
                                                                                    ---------  ---------
<S>                                                                                 <C>        <C>
Accrued taxes, other than income..................................................  $   2,811  $   2,836
Current portion of advance payment from customer (see note 10)....................      3,600     --
Other accrued expenses............................................................      7,908      6,652
                                                                                    ---------  ---------
                                                                                    $  14,319  $   9,488
                                                                                    ---------  ---------
                                                                                    ---------  ---------
</TABLE>
 
9.  LONG-TERM DEBT
    Long-term debt consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                                ------------------------
                                                                                   1995         1994
                                                                                -----------  -----------
<S>                                                                             <C>          <C>
Senior Notes due November 2004................................................  $   175,000  $   175,000
                                                                                -----------  -----------
Bank borrowings under the Credit Agreement....................................      --           100,000
Less: current portion.........................................................      --           (10,000)
                                                                                -----------  -----------
                                                                                    --            90,000
                                                                                -----------  -----------
                                                                                $   175,000  $   265,000
                                                                                -----------  -----------
                                                                                -----------  -----------
</TABLE>
 
SENIOR NOTES
 
    At December 31, 1995 and 1994, the  fair market value of the 11 3/4%  Senior
Notes  approximated $187 million and $178 million, respectively, based on quoted
market rates. The 11 3/4%  Senior Notes rank senior in  right of payment to  any
subordinated  indebtedness of  the Company. The  11 3/4% Senior  Notes rank PARI
PASSU in right of payment with all senior borrowings, including borrowings under
the  Credit  Agreement.  The  Company  has  no  such  outstanding   subordinated
indebtedness at December 31, 1995 and 1994.
 
    Interest  is payable on the 11 3/4%  Senior Notes semiannually on June 1 and
December 1 at an annual interest rate of 11 3/4%.
 
    The 11 3/4% Senior Notes are not  redeemable, in whole or in part, prior  to
December  1,  1999, except  that, at  any time  prior to  December 1,  1997, the
Company may  redeem up  to an  aggregate of  $58.3 million  principal amount  of
11  3/4% Senior Notes, at a price equal to 110% of the principal amount thereof,
plus accrued and unpaid interest,  if any, to the  redemption date with the  net
cash  proceeds of any future offerings of common stock of the Company; provided,
however, that at least $100 million aggregate principal amount of 11 3/4% Senior
Notes is outstanding  immediately following each  such redemption; and  provided
further  that each  such redemption  occurs within  60 days  of the  date of the
closing of the applicable offering.  On or after December  1, 1999, the 11  3/4%
Senior  Notes are redeemable, at  the Company's option, in  whole or in part, at
the redemption prices (expressed as  percentages of principal amount) set  forth
below plus accrued and unpaid interest, if any, to the date of redemption.
 
<TABLE>
<CAPTION>
YEAR                                                                     PERCENTAGE
-----------------------------------------------------------------------  -----------
<S>                                                                      <C>
1999...................................................................    105.875%
2000...................................................................    103.917%
2001...................................................................    101.958%
2002 and thereafter....................................................    100.000%
</TABLE>
 
                                      F-11
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
9.  LONG-TERM DEBT (CONTINUED)
    The  Company is  not required to  make mandatory redemption  or sinking fund
payments with respect to the 11 3/4% Senior Notes.
 
    The indenture governing the 11 3/4% Senior Notes contains certain  covenants
that,  among other things, limit the ability  of the Company to incur additional
indebtedness and to  repurchase subordinated  indebtedness, incur  or suffer  to
exist  certain liens, pay dividends,  make certain investments, sell significant
fixed assets and engage in mergers and consolidations.
 
CREDIT AGREEMENT
 
    Borrowings under the Credit Agreement bear interest at a floating rate based
on the prime rate  or, at the Company's  option, on the reserve-adjusted  London
Interbank  offered rate and is secured by the pledge of substantially all of the
assets of  the Company,  including  inventory and  accounts receivable  and  the
proceeds  thereof, but excluding the property,  plant and equipment at the plant
in  Odessa,  Texas  and  the  plant  in  Scunthorpe,  England.  Availability  of
borrowings  under the Revolving Credit Facility  is based upon a formula related
to inventory and accounts receivable.  At December 31, 1995, approximately  $3.4
million  of  stand-by  letters  of  credit  were  outstanding  under  the Credit
Agreement.
 
    The Credit Agreement contains covenants which limit, among other things, the
incurrence of additional indebtedness by the Company, the payment of  dividends,
the creation of liens on the Company's assets, the making of certain investments
by  the  Company,  certain  mergers,  sales  of  certain  fixed  assets  and the
prepayment of  the 11  3/4% Senior  Notes. The  Credit Agreement  also  contains
certain  financial covenants relating to the financial condition of the Company,
including covenants  relating to  the  ratio of  its  earnings to  its  interest
expense, the ratio of its earnings to its fixed charges and a leverage ratio.
 
10. OTHER NONCURRENT LIABILITIES
    Other noncurrent liabilities consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                                   --------------------
                                                                                     1995       1994
                                                                                   ---------  ---------
<S>                                                                                <C>        <C>
Accrued environmental remediation costs..........................................  $  20,331  $  22,742
Advance payment from customer....................................................     19,600     --
Accumulated postretirement benefit obligation (note 15)..........................     15,841     15,259
Pension liabilities (note 15)....................................................      6,730      6,355
Other............................................................................      4,605      5,643
                                                                                   ---------  ---------
                                                                                   $  67,107  $  49,999
                                                                                   ---------  ---------
                                                                                   ---------  ---------
</TABLE>
 
    In  July 1995,  the Company  received a $25  million advance  payment from a
customer as a result  of a multi-year  agreement to supply  a portion of  annual
styrene  production. The unamortized portion of this advance payment, net of the
current portion,  is included  as  a noncurrent  liability above.  This  advance
payment is secured by a lien on the styrene plant in Odessa, Texas.
 
                                      F-12
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
11. COMMITMENTS
    The future payments of rentals on buildings, computers, office equipment and
transportation  equipment  under  the terms  of  noncancellable  operating lease
agreements are as follows (in thousands):
 
<TABLE>
<S>                                                         <C>
For the years ending December 31,
1996......................................................  $   7,481
1997......................................................      5,311
1998......................................................      4,148
1999......................................................      3,417
2000......................................................      2,233
2001 and thereafter.......................................      4,279
                                                            ---------
Total minimum lease payments..............................  $  26,869
                                                            ---------
                                                            ---------
</TABLE>
 
    Rental expense under operating leases for the years ended December 31, 1995,
1994 and 1993 approximated $8,902,000, $7,616,000 and $7,630,000, respectively.
 
12. INCOME TAXES
    Income  tax  (expense)  benefit  on  the  Company's  income  (loss)   before
extraordinary loss consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                          YEARS ENDED DECEMBER 31,
                                                                      ---------------------------------
                                                                         1995        1994       1993
                                                                      ----------  ----------  ---------
<S>                                                                   <C>         <C>         <C>
Current:
  Federal...........................................................  $  (30,376) $  (13,883) $   5,390
  State.............................................................      (2,892)     (2,150)      (610)
Deferred............................................................      (5,168)      2,476      4,160
                                                                      ----------  ----------  ---------
                                                                      $  (38,436) $  (13,557) $   8,940
                                                                      ----------  ----------  ---------
                                                                      ----------  ----------  ---------
</TABLE>
 
    In  addition, for the year ended December  31, 1994, the Company recorded an
income tax benefit of $15.8 million as  a result of the extraordinary loss  from
the Recapitalization.
 
    The  statutory federal income tax rate was  35% for the years ended December
31, 1995, 1994 and 1993. The effective  income tax rate differs from the  amount
computed  by applying  the statutory  federal income  tax rate  to the Company's
income before  income  taxes  and  extraordinary loss.  The  reasons  for  these
differences are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                         YEARS ENDED DECEMBER 31,
                                                                     ---------------------------------
                                                                        1995        1994       1993
                                                                     ----------  ----------  ---------
<S>                                                                  <C>         <C>         <C>
Income tax (expense) benefit computed at statutory federal tax
 rate..............................................................  $  (36,358) $  (12,271) $  11,964
State income taxes.................................................      (1,880)       (554)      (397)
Non-deductible amortization and expenses...........................        (544)       (245)      (493)
Non-cash interest..................................................      --          (1,771)    (1,883)
Effect of change in statutory federal income tax rate..............      --          --         (1,333)
Effect of Foreign Sales Corporation................................       1,013      --         --
Other, net.........................................................        (667)      1,284      1,082
                                                                     ----------  ----------  ---------
Income tax (expense) benefit.......................................  $  (38,436) $  (13,557) $   8,940
                                                                     ----------  ----------  ---------
                                                                     ----------  ----------  ---------
</TABLE>
 
                                      F-13
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
12. INCOME TAXES (CONTINUED)
    The  net  deferred  income  tax  liability  consists  of  the  following (in
thousands):
 
<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                                 ----------------------
                                                                                    1995        1994
                                                                                 ----------  ----------
<S>                                                                              <C>         <C>
Property, plant and equipment..................................................  $   71,452  $   70,193
Intangible assets..............................................................         737       1,111
                                                                                 ----------  ----------
  Gross deferred tax liabilities...............................................      72,189      71,304
                                                                                 ----------  ----------
Accounts receivable............................................................      (2,311)     (1,718)
Inventories....................................................................        (659)       (766)
Tax losses and credits carried forward.........................................      (1,358)     (4,238)
Other noncurrent assets........................................................      (1,321)     (2,816)
Other noncurrent liabilities...................................................     (16,895)    (16,721)
Other..........................................................................      (1,335)     (1,903)
                                                                                 ----------  ----------
  Gross deferred tax assets....................................................     (23,879)    (28,162)
                                                                                 ----------  ----------
                                                                                 $   48,310  $   43,142
                                                                                 ----------  ----------
                                                                                 ----------  ----------
</TABLE>
 
    The Company has  an unused  alternative minimum tax  credit carryforward  of
approximately  $0.4 million, which  does not expire. The  Company has unused net
operating loss carryforwards of $2.5 million in the United Kingdom, which do not
expire. In 1994, the Company received $5.5 million in income tax refunds related
to the carryback of  the 1993 and  1992 net operating losses  to the year  ended
December 31, 1990.
 
13. INTEREST EXPENSE
    For  the  year ended  December 31,  1995, interest  expense consists  of (i)
interest on the  11 3/4% Senior  Notes, (ii)  interest on the  Term Loan,  (iii)
amortization  of  debt  issuance  costs, and  (iv)  an  allocation  for interest
capitalized in connection with construction projects (see note 5). For the years
ended December 31, 1994 and 1993,  interest expense consists of (i) interest  on
the Old Notes, (ii) accretion on the Old Notes, (iii) an adjustment for Emerging
Issues Task Force Issue No. 86-15 "Increasing Rate Debt", and (iv) an allocation
for interest capitalized in connection with construction projects.
 
14. OTHER INFORMATION
    Export  sales of the  Company were $77,508,000,  $52,382,000 and $31,617,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
 
    Other income for the year ended December 31, 1994 includes the reversal of a
$7.4 million  lawsuit accrual  for  which the  Company ultimately  prevailed  on
appeal.
 
    Maintenance   and   repair  expenses   were  $28,606,000,   $27,335,000  and
$27,017,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
 
15. EMPLOYEE BENEFITS
 
SAVINGS PLAN
 
    The Company  sponsors an  employee savings  plan (the  "Savings Plan")  that
provides   participating  employees  with  additional  income  upon  retirement.
Employees may contribute between 1% and 10% of their base salary up to a maximum
of $9,240 annually to the Savings Plan. The Company matches a minimum of 25%  of
the  employee's  aggregate  contributions  up  to  6%  of  the  employee's  base
 
                                      F-14
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
15. EMPLOYEE BENEFITS (CONTINUED)
salary. Employee  contributions are  fully  vested. Employer  contributions  are
fully  vested upon retirement or after five years of service. For 1995, 1994 and
1993, the Company matched 25% of the employee contributions up to the 6%  limit,
contributing  approximately $388,000, $395,000 and $351,000 to the Savings Plan,
respectively.
 
PENSION AND RETIREMENT PLANS
 
    The Company  has two  noncontributory defined  benefit plans  (the  "Pension
Plans")  covering substantially all full time employees. Benefits provided under
the Pension Plans  are primarily based  on years of  service and the  employee's
final  average earnings. The Company's funding  policy is to contribute annually
an amount  based upon  actuarial and  economic assumptions  designed to  achieve
adequate funding of projected benefit obligations.
 
    In  October 1994,  the Company  adopted a  Supplemental Executive Retirement
Plan (the "SERP") to provide  supplemental retirement and survivor benefits  for
certain  key employees who complete a  specified period of service and otherwise
become eligible under the SERP. In 1995, the Company deposited $2.8 million in a
rabbi trust account  to fund the  SERP. In 1994,  no amount was  funded for  the
SERP.
 
    The  Company  provides retirement  and death  benefits to  certain employees
through an Executive Security Plan (the  "Security Plan"). The Company does  not
fund  the Security Plan, and no amount was  funded for the Security Plan in 1995
and 1994. No new employees have been added to this plan, and it is not  expected
that any additional employees will participate in the Security Plan.
 
    Net pension expense consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                           YEARS ENDED DECEMBER 31,
                                                                        -------------------------------
                                                                          1995       1994       1993
                                                                        ---------  ---------  ---------
<S>                                                                     <C>        <C>        <C>
Service cost..........................................................  $   2,050  $   1,792  $   1,279
Interest cost.........................................................      1,850      1,503        976
Actual return on plan assets..........................................     (2,704)       462     (1,278)
Net amortization and deferral.........................................      1,929     (1,410)       162
                                                                        ---------  ---------  ---------
Net pension expense...................................................  $   3,125  $   2,347  $   1,139
                                                                        ---------  ---------  ---------
                                                                        ---------  ---------  ---------
</TABLE>
 
    The  following  table  sets  forth  the funded  status  of  the  pension and
retirement plans at December 31 (in thousands):
 
<TABLE>
<CAPTION>
                                                                                    1995        1994
                                                                                 ----------  ----------
<S>                                                                              <C>         <C>
Actuarial present value of benefit obligations:
  Vested benefits..............................................................  $   16,888  $   12,505
  Non-vested benefits..........................................................       8,601       6,734
                                                                                 ----------  ----------
Accumulated benefit obligation.................................................  $   25,489  $   19,239
                                                                                 ----------  ----------
                                                                                 ----------  ----------
Projected benefit obligation...................................................  $   29,425  $   23,152
Plan assets at fair value......................................................     (19,143)    (14,387)
                                                                                 ----------  ----------
Excess of projected benefit obligations over plan assets.......................      10,282       8,765
Unrecognized net loss..........................................................      (1,816)       (193)
Unrecognized prior service cost................................................      (4,824)     (5,388)
Additional liability...........................................................       3,088       3,171
                                                                                 ----------  ----------
Pension liabilities included in other noncurrent liabilities...................  $    6,730  $    6,355
                                                                                 ----------  ----------
                                                                                 ----------  ----------
</TABLE>
 
                                      F-15
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
15. EMPLOYEE BENEFITS (CONTINUED)
    At December 31, 1995 and 1994,  in determining the present value of  benefit
obligations,  a  discount  rate of  7.25%  and  8% was  used,  respectively. The
assumption for the increase in future  compensation levels was 4.5% at  December
31, 1995 and 1994. At December 31, 1995 and 1994, the expected long-term rate of
return on assets used in determining future service costs was 9%.
 
POSTEMPLOYMENT BENEFITS
 
    The  Company's obligation for  postemployment benefits at  December 31, 1995
and 1994  approximated  $.9  million  and $1.1  million,  respectively,  and  is
included in other noncurrent liabilities.
 
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
 
    The  Company sponsors postretirement benefits  other than the Pension Plans,
such as health care  and medical benefits. The  Company reimburses retirees  for
these   benefits  but   does  not  provide   any  additional   funding  for  the
postretirement benefits.
 
    Net postretirement benefit cost consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                YEARS ENDED DECEMBER 31,
                                                                             -------------------------------
                                                                               1995       1994       1993
                                                                             ---------  ---------  ---------
<S>                                                                          <C>        <C>        <C>
Service cost...............................................................  $     374  $     394  $     760
Interest cost..............................................................        766        682      1,070
Net amortization and deferral..............................................       (339)      (284)    --
                                                                             ---------  ---------  ---------
                                                                             $     801  $     792  $   1,830
                                                                             ---------  ---------  ---------
                                                                             ---------  ---------  ---------
</TABLE>
 
    The following  table sets  forth  the funded  status of  the  postretirement
benefits at December 31 (in thousands):
 
<TABLE>
<CAPTION>
                                                                                     1995       1994
                                                                                   ---------  ---------
<S>                                                                                <C>        <C>
Actuarial present value of benefit obligations:
  Active participants eligible for retirement....................................  $   3,583  $   3,003
  Active participants not yet eligible for retirement............................      3,553      3,889
  Retired participants...........................................................      2,906      2,858
                                                                                   ---------  ---------
Accumulated postretirement benefit obligation....................................     10,042      9,750
Plan assets at fair value........................................................     --         --
                                                                                   ---------  ---------
Excess of benefit obligation over plan assets....................................     10,042      9,750
Unrecognized prior service cost..................................................        760        837
Unrecognized net gain............................................................      5,039      4,672
                                                                                   ---------  ---------
Postretirement benefits included in other noncurrent liabilities.................  $  15,841  $  15,259
                                                                                   ---------  ---------
                                                                                   ---------  ---------
</TABLE>
 
    In  1995  and  1994,  in determining  the  value  of  postretirement benefit
obligations, a discount rate of 7.25%  and 8.0%, respectively, was used, and  in
1995 the health care trend rate used to measure the expected increase in cost of
benefits  was assumed  to be 9.0%  in 1996, and  descending to 5.5%  in 2003 and
thereafter. A  one percentage-point  increase in  the assumed  health care  cost
trend  rate for each year would  increase the accumulated postretirement benefit
obligation as of December 31, 1995 by approximately $339,000 and would  increase
the  service and interest cost components of the net postretirement benefit cost
for the year ended December 31, 1995 by approximately $43,000.
 
EMPLOYEE STOCK OPTION PLANS
 
    In 1988, the Company  adopted a stock incentive  plan (the "Stock  Incentive
Plan")   providing  for  the  granting  of   87,500  stock  options  for,  stock
appreciation rights in, and the sale  of restricted shares of, common stock  for
certain  employees.  In  1993, the  Company  adopted  a stock  option  plan (the
 
                                      F-16
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
15. EMPLOYEE BENEFITS (CONTINUED)
"Employee Plan") providing for the granting of 700,000 stock options for  common
stock  to key employees of the Company. In 1994, the Company adopted a long-term
incentive plan  (the "Incentive  Plan") providing  for the  granting of  882,000
stock  options for common stock  to key employees of  the Company. The Incentive
Plan is intended to replace the Stock Incentive Plan and the Employee Plan.  The
Company  has granted non-qualified stock options  under the Stock Incentive Plan
and the Employee Plan. No grants had been made as of December 31, 1995 under the
Incentive Plan.  Changes in  stock options  during the  years indicated  are  as
follows:
 
<TABLE>
<CAPTION>
                                                                      OPTIONS         PRICE RANGE
                                                                    OUTSTANDING        PER SHARE
                                                                    -----------  ----------------------
<S>                                                                 <C>          <C>
Balance at December 31, 1992......................................      32,000   $     10.00 -- $304.00
Granted...........................................................     207,000                     3.43
Cancelled.........................................................     (18,700)        93.60 --  304.00
                                                                    -----------
Balance at December 31, 1993......................................     220,300          3.43 --  304.00
Granted...........................................................     498,000          3.71 --   14.63
Exercised.........................................................      (4,496)                    3.43
Cancelled.........................................................      (8,175)                  304.00
                                                                    -----------
Balance at December 31, 1994......................................     705,629          3.43 --   95.20
Exercised.........................................................     (16,157)         3.43 --    3.71
Cancelled.........................................................      (9,561)         3.43 --   95.20
                                                                    -----------
Balance at December 31, 1995......................................     679,911   $      3.43 -- $ 14.63
                                                                    -----------
                                                                    -----------
</TABLE>
 
    At  December  31,  1995, 285,799  options  are exercisable  under  the Stock
Incentive Plan and  the Employee  Plan, and  882,000 options  are available  for
grant under the Incentive Plan.
 
OUTSIDE DIRECTOR STOCK OPTION PLANS
 
    In  1993, the Company adopted a  non-qualified stock option plan for outside
directors providing for the granting of 225,000 stock options for common  stock.
In  1995,  the Company  adopted a  non-qualified stock  option plan  for outside
directors providing for the granting of  60,000 stock options for common  stock.
Changes in stock options during the years indicated are as follows:
 
<TABLE>
<CAPTION>
                                                                           OPTIONS       PRICE RANGE
                                                                         OUTSTANDING      PER SHARE
                                                                         -----------  -----------------
<S>                                                                      <C>          <C>
Balance at December 31, 1992...........................................      --       $              --
Granted................................................................     104,167                0.63
                                                                         -----------
Balance at December 31, 1993...........................................     104,167                0.63
Granted................................................................     104,167                0.43
Exercised..............................................................     (14,583)               0.63
Cancelled..............................................................     (18,750)      0.43 --  0.63
                                                                         -----------
Balance at December 31, 1994...........................................     175,001       0.43 --  0.63
Granted................................................................      14,500                2.09
Exercised..............................................................    (104,167)      0.43 --  0.63
                                                                         -----------
Balance at December 31, 1995...........................................      85,334   $   0.43 -- $2.09
                                                                         -----------
                                                                         -----------
</TABLE>
 
    At December 31, 1995, 25,000 options are exercisable, and 45,500 options are
available for grant.
 
STOCK OPTION FOR FORMER OFFICER
 
    In  1994, a stock  option to purchase  105,031 shares of  common stock at an
aggregate exercise price of $901,120 was exercised.
 
                                      F-17
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
15. EMPLOYEE BENEFITS (CONTINUED)
STOCK BONUS PLAN
 
    In 1985, the Company  established an employee stock  bonus plan (the  "Stock
Bonus  Plan") for the benefit  of its employees. Contributions  were made at the
discretion of  the Company.  Effective  January 1,  1992, all  participants  (as
defined)  became  100% vested,  and participation  in the  Stock Bonus  Plan was
frozen. The Company intends to terminate the Stock Bonus Plan and distribute all
funds in 1996.
 
16.  COMMON STOCK PURCHASE RIGHTS
 
    In 1993, the Company  declared a dividend distribution  of one Common  Stock
Purchase  Right  (a "Right")  for each  outstanding share  of common  stock. The
Rights are exercisable only if a person or group acquires 15% or more of  common
stock  or announces a  tender offer, the  consummation of which  would result in
ownership by a person or  group of 15% or more  of the common stock. Each  Right
entitles  stockholders to purchase such  number of shares of  common stock at an
exercise price of $60.00  (as amended) as determined  under formulas set out  in
the  agreement providing for the Rights. The  existence of the Rights may, under
certain circumstances, render more difficult  or discourage attempts to  acquire
the Company.
 
    The  Company  can terminate  the Rights  at no  cost any  time prior  to the
acquisition of a  15% position. The  termination period can  be extended by  the
Board of Directors. The rights expire February 8, 2003.
 
17. RELATED PARTY TRANSACTIONS
    Pursuant  to a letter agreement between the  Company and its Chairman of the
Board, Arthur L. Goeschel, the Company  agreed to pay Mr. Goeschel, in  addition
to  his normal director fees, a sum of $2,750 per day plus expenses for each day
over five days per quarter that he spends on Company matters. Under this  letter
agreement,  the Company paid Mr. Goeschel  approximately $50,000 and $107,000 in
additional fees for the years ended December 31, 1994 and 1993, respectively. No
amount of additional fees were paid in 1995.
 
    Mr. Kevin Clowe, a  former director of  the Company in 1994  and 1993, is  a
corporate  officer  of  The  American International  Group,  Inc.  ("AIG") which
provides various types of insurance for  the Company. During 1994 and 1993,  the
Company  paid  approximately $3.1  million  and $2.8  million,  respectively, in
premiums and fees to subsidiaries of AIG in the ordinary course of business.
 
    Mr. Ilan Kaufthal,  a director  of the Company,  is a  managing director  of
Schroder  Wertheim  &  Co.  Incorporated ("Schroder").  In  connection  with the
Recapitalization  in  1994,  the  Company  paid  Schroder  underwriter  fees  of
approximately $2.9 million.
 
    A  son of Mr. Andrew J. Smith, the Chief Executive Officer and a director of
the Company, became a Vice President in 1990 and a stockholder in 1993 of  Orion
Pacific,  Inc. ("Orion"). In  August 1993, the  son of Mr.  Smith resigned as an
officer and employee of Orion. Pursuant to contractual arrangements entered into
in 1988, (i) the Company sells to Orion certain (a) discarded by-products  which
Orion  extracts from  Company landfills and  (b) scrap products,  and (ii) Orion
packages and processes  a portion  of APAO manufactured  by the  Company at  its
plant  in Odessa, Texas.  During the year  ended December 31,  1993, the Company
sold approximately $.3 million, of such  by-product and scrap products to  Orion
in the ordinary course of business, and the Company purchased approximately $1.6
million  of APAO processing  and packaging services  and miscellaneous materials
from Orion.
 
                                      F-18
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
18. CONTINGENCIES
 
ENVIRONMENTAL REGULATION
 
    The Company  is  subject to  extensive  environmental laws  and  regulations
concerning,  for  example,  emissions  to the  air,  discharges  to  surface and
subsurface  waters  and  the  generation,  handling,  storage,   transportation,
treatment  and disposal of waste and other materials. The Company believes that,
in light of  its historical  expenditures, it  will have  adequate resources  to
conduct its operations in compliance with currently applicable environmental and
health  and  safety  laws and  regulations.  However,  in order  to  comply with
changing facility  permitting  and  regulatory standards,  the  Company  may  be
required  to  make  additional significant  site  or  operational modifications.
Further, the  Company has  incurred and  may in  the future  incur liability  to
investigate  and  clean  up waste  or  contamination  at its  current  or former
facilities, or which  it may have  disposed of at  facilities operated by  third
parties.  On  the basis  of  reasonable investigation  and  analysis, management
believes that the approximately $20.3 million  accrued in the December 31,  1995
balance sheet is adequate for the total potential environmental liability of the
Company  with respect to contaminated sites.  However, no assurance can be given
that all potential  liabilities arising  out of  the Company's  present or  past
operations have been identified or fully assessed or that the amounts that might
be  required to investigate and remediate such  sites will not be significant to
the  Company.  The  Company  continually  reviews  its  estimates  of  potential
environmental liabilities.
 
PHILLIPS BLOCK COPOLYMER LITIGATION
 
    In  March  1984, Phillips  Petroleum  Company ("Phillips")  filed  a lawsuit
against the  Company  in the  United  States  District Court  for  the  Northern
District   of  Illinois,   Eastern  Division,  seeking   injunctive  relief,  an
unspecified amount of  compensatory damages  and treble  damages. The  complaint
alleged  that  the  Company's  copolymer  process  for  polypropylene  infringed
Phillips' two "block" copolymer patents, the last of which expired in 1994. This
action has been transferred to the United States District Court for the Southern
District of Texas,  Houston Division.  Discovery proceedings in  this case  have
been  completed. The Company  has filed a motion  for summary judgment. Phillips
has filed a motion for partial summary judgment. Pursuant to an agreement  among
the  parties, the court  appointed a special  master who conducted  a hearing on
these motions and thereafter recommended to the court that the Company's  motion
be granted and Phillips' motion be denied. Thereafter, Phillips filed motions to
disqualify  the  special master,  to reject  the  recommendation of  the special
master and to enter partial summary judgment for Phillips. The court has entered
an order denying Phillips' motion to disqualify the special master. The  summary
judgment  motions are still  pending. In the  Company's bankruptcy proceeding in
1992, Phillips filed a proof  of claim seeking in  excess of $108 million  based
upon  the allegations in this litigation. The  Company objected to the claim and
elected to  leave  the  legal,  equitable and  contractual  rights  of  Phillips
unaltered,  thereby allowing  this litigation to  proceed without  regard to the
bankruptcy proceeding.
 
PHILLIPS CRYSTALLINE LICENSE LITIGATION
 
    In May 1990,  Phillips filed  a lawsuit against  the Company  in the  United
States District Court for the District of Delaware seeking injunctive relief, an
unspecified  amount of compensatory damages, treble damages and attorneys' fees,
costs and  expenses.  The complaint  alleged  that the  Company  was  infringing
Phillips'   Patent  No.   4,376,851  (the   "  '851   Patent")  for  crystalline
polypropylene. Pursuant to  a License  Agreement dated as  of May  15, 1983,  as
amended, (the "License Agreement"), Phillips granted the Company a non-exclusive
license  to make,  use and  sell crystalline  polypropylene covered  by the '851
Patent. The complaint alleged that effective April 21, 1990, Phillips terminated
the License Agreement  because it  believed that, by  the terms  of the  License
Agreement,  all  conditions  precedent  to such  termination  had  occurred. The
complaint further  alleged that,  without an  effective License  Agreement,  the
Company's  continuing  use of  the '851  Patent  constitutes an  infringing use.
 
                                      F-19
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
18. CONTINGENCIES (CONTINUED)
An amended complaint filed in May 1990  further alleged that the Company made  a
material  misrepresentation  that induced  Phillips  to enter  into  the License
Agreement and that Phillips entered into the License Agreement as a  consequence
of a mutual mistake of the parties. The amended complaint therefore alleged that
the  License Agreement was void AB INITIO. The Company filed a motion to dismiss
Phillips' amended complaint for failure to state a claim. On December 30,  1993,
the Court entered an order dismissing Phillips' claim that the License Agreement
was  void AB  INITIO, and  ordered that  the 1990  license termination  issue be
resolved at trial. A trial was conducted before the United States District Court
in October  1994.  At trial,  Phillips  sought damages  of  approximately  $15.5
million, plus interest and fees, for alleged infringement for the period between
April  21, 1990 and  trial. On June  19, 1995, the  United States District Court
entered judgment in favor  of the Company on  the license termination issue  and
concluded that Phillips had not properly terminated the License Agreement. Thus,
the  License Agreement remains in effect, and  the Company is not infringing the
'851  Patent.  Phillips  has  appealed  the  court's  judgment  on  the  license
termination  issue only. The appeal was argued on March 6, 1996 before the Court
of Appeals for the Federal Circuit. No decision has been entered by the Court of
Appeals. Although the Company believes that it has meritorious defenses to  this
lawsuit,  in the event of an unfavorable ruling, the Company will be required to
renegotiate a new  license agreement at  a substantially higher  rate than  paid
under the current license.
 
ODESSA RESIDENTS' TORT LITIGATION
 
    On  April  15,  1994, the  national  and  state chapters  of  the  NAACP and
approximately 770 residents of a  neighborhood approximately one mile  northwest
of  the Shell Oil  Company ("Shell"), the Company  and Dynagen, Inc. ("Dynagen")
plants in Odessa, Texas petitioned the State District Court in Odessa, Texas  to
intervene  in  a  previously existing  lawsuit  against  Dynagen to  (a)  add as
additional defendants  the  Company, Shell  and  General Tire  Corporation  (the
parent  company of  Dynagen) and  (b) have the  litigation certified  as a class
action. The plaintiffs' petition  seeks an unspecified  amount of money  damages
for  past, present  and future injuries  to plaintiffs'  health, wrongful death,
loss of consortium and reduction in property values; the conduct and payment  of
property  clean up,  remediation and relocation  costs; payment  of expenses for
medical testing  and  monitoring;  funding  of  pollution  and  health  studies;
attorney's  fees; punitive  damages and injunctive  relief. Plaintiffs' petition
specified alleged pollution from air emissions from the three plants as a  basis
for  their  claims. The  trial court  has allowed  intervention and  severed the
action from  the original  lawsuit against  Dynagen. Plaintiffs  have  withdrawn
their  motion to  have the  litigation certified as  a class  claim. In November
1994, the  plaintiffs filed  an amended  petition which  substituted the  Odessa
branch  of the NAACP as plaintiff in place of the national and state chapters of
the NAACP.  The  amended  complaint  also  added  approximately  100  additional
plaintiffs.  Defendants are challenging  the NAACP's standing  to participate in
the lawsuit. Pretrial discovery is ongoing.
 
                            ------------------------
 
    Although there can be no assurance of  the final resolution of any of  these
matters,  the Company  believes that,  based upon  its current  knowledge of the
facts of each case, it has meritorious  defenses to the various claims made  and
intends  to defend each suit  vigorously, and the Company  does not believe that
the outcome of any of these lawsuits will have a material adverse effect on  the
Company's financial position, results of operations or cash flows.
 
    The  Company is  also a  party to various  lawsuits arising  in the ordinary
course of  business and  does  not believe  that the  outcome  of any  of  these
lawsuits  will  have  a  material  adverse  effect  on  the  Company's financial
position, results of operations or cash flows.
 
                                      F-20
<PAGE>
                      REXENE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
    Summarized quarterly financial information for the years ended December  31,
1995 and 1994 is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                  FOR THE QUARTERS ENDED
                         --------------------------------------------------------------------------------------------------------
                         DECEMBER 31,  SEPTEMBER 30,  JUNE 30,    MARCH 31,   DECEMBER 31,  SEPTEMBER 30,  JUNE 30,    MARCH 31,
                             1995          1995         1995        1995          1994          1994         1994        1994
                         ------------  -------------  ---------  -----------  ------------  -------------  ---------  -----------
<S>                      <C>           <C>            <C>        <C>          <C>           <C>            <C>        <C>
Net sales..............   $  132,145     $ 154,113    $ 159,452   $ 169,528    $  151,804     $ 142,937    $ 124,140   $ 119,076
Gross profit...........       29,163        40,154       52,284      55,997        42,717        33,529       23,991      19,672
Income (loss) before
 extraordinary loss....        8,102        13,960       20,532      22,849        15,351         6,814        1,064      (1,725)
Extraordinary loss.....       --            --           --          --           (25,831)       --           --          --
Net income (loss)......        8,102        13,960       20,532      22,849       (10,480)        6,814        1,064      (1,725)
Weighted average shares
 outstanding...........       19,112        19,143       19,125      19,104        13,992        11,063       10,898      10,501
Income (loss) per
 share:
Income (loss) before
 extraordinary loss....          .42           .73         1.07        1.20          1.10           .62          .10        (.16)
Extraordinary loss.....       --            --           --          --             (1.85)       --           --          --
Net income (loss)......          .42           .73         1.07        1.20          (.75)          .62          .10        (.16)
Dividends per share....          .04        --           --          --            --            --           --          --
</TABLE>
 
20. SUBSEQUENT EVENT
    On  March 15, 1996,  the Board of  Directors approved a  financing plan (the
"Financing"), and  the Company  executed  a commitment  letter  with a  bank  to
replace  the existing Revolving  Credit Facility. The  Financing would provide a
new credit facility (the "New Credit  Facility") in an initial principal  amount
of  $150 million. The Financing  is contingent on a  number of factors including
the negotiation of the New Credit Facility. The Company anticipates consummation
of the Financing during the second quarter of 1996.
 
                                      F-21