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

                                    FORM 10-K

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

                     FOR THE FISCAL YEAR ENDED JUNE 30, 2002

                                       OR

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

          FOR THE TRANSITION PERIOD FROM ........... TO ...............

                        COMMISSION FILE NUMBER 333-11569

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

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

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

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

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

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes [X] No [ ]

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]




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                             TEXAS PETROCHEMICALS LP

                                TABLE OF CONTENTS

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                                      PART I

Item 1.  Business                                                                                            1

Item 2.  Properties                                                                                         11

Item 3.  Legal Proceedings                                                                                  11

Item 4.  Submission of Matters to a Vote of Security Holders                                                11

                                      PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters                              12

Item 6.  Selected Financial Data                                                                            12

Item 7.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                                                     13

Item 7A. Quantitative and Qualitative Disclosures About Market Risks                                        22

Item 8.  Financial Statements and Supplementary Data                                                        24

Item 9.  Changes in and Disagreements With Accountants on Accounting                                        44
              and Financial Disclosure

                                     PART III

Item 10.  Directors and Executive Officers of the Registrant                                                45

Item 11.  Executive Compensation                                                                            47

Item 12.  Security Ownership of Certain Beneficial Owners and Management                                    48

Item 13.  Certain Relationships and Related Transactions                                                    48

                                      PART IV

Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K                                  49

          Signatures                                                                                        51

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                                    PART I

ITEM 1.  BUSINESS

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

      The Company's manufacturing facility, located approximately one mile from
the Houston Ship Channel, provides convenient access to other Gulf Coast
petrochemical producers and is connected to several of its customers and raw
material suppliers through an extensive pipeline network. In addition, the
Company's facility is serviced by rail, tank truck and barge.

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

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

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

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

PRODUCTS

     Butadiene is the most widely used feedstock for synthetic rubber products
and is also used in the manufacture of engineered plastics, nylon fibers and
other products. The Company sells

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butadiene to a stable customer base. As one of the largest producers of
butadiene in North America, the Company believes that many of its customers
place significant value on its ability to provide a reliable domestic supply of
butadiene and as a result have entered into long-term sales contracts with the
Company.

     The Company extracts butadiene from crude butadiene, which is generated
from the production of ethylene and is comprised of a number of valuable
components, including butadiene, isobutylene, n-butylenes, isobutane and
n-butane. Many U.S. ethylene producers rely on third parties such as the Company
to process their crude butadiene streams, because the crude butadiene volumes
they produce are not sufficient to justify the construction of on-site butadiene
recovery facilities. During 2001, the Company completed modifications that
increased its butadiene extraction capacity by 300 million pounds per year to a
total annual capacity of 1.2 billion pounds. Included in the project were
changes that expanded the Company's logistical capabilities to support the
increased throughput. The Company is the largest non-integrated crude butadiene
processor in North America and as a result of its strategic importance to
ethylene producers, the Company has been able to secure long-term supply
contracts covering the majority of its crude butadiene requirements. Such
contracts provide for a formula based profit margin thereby reducing the
exposure to fluctuations in market price and adding a measure of stability to
the Company's butadiene operations. The Company attempts to meet its butadiene
sales commitments by processing crude butadiene purchased under contractual
arrangements supplemented by spot purchase of crude butadiene. The availability
of spot purchases is, at times, limited, restricting the ability of the Company
to meet its butadiene sales commitments. In addition, most of the Company's
crude butadiene purchase contracts limit the Company's control over the volume
of crude butadiene it purchases under those agreements. This could result in the
Company having insufficient crude butadiene or having purchase commitments for
crude butadiene in excess of its need for the production of finished butadiene,
as was the case at times during fiscal year 2002. The Company attempts to
balance its commitments for contractual purchases and sales and the spot market.
In addition, the Company is the only North American operator capable of
producing butadiene "on purpose" from other chemicals. This capability can be
used to help balance supply and demand; however, the capacity to produce
"on-purpose" butadiene is limited.

      MTBE is a motor gasoline blending stock, that reduces carbon monoxide and
volatile organic compound emissions and enhances the octane content of gasoline.
MTBE is produced by reacting methanol and isobutylene. MTBE use and demand is
seasonal based on the demand for motor fuels and driving patterns. The U.S.
Clean Air Act ("CAA") of 1990 requires the use of an "oxygenate" in gasoline
sold in certain regions that are not in compliance with air quality standards.
MTBE is the predominate oxygenate used in gasoline. However, as a result of
incidents in which MTBE from gasoline has been found in drinking water, the
federal government and certain state governments are considering actions that
could reduce or even eventually eliminate the use of MTBE in gasoline. Several
major gasoline marketers have announced their intent to eliminate or reduce
their usage of MTBE in California during calendar year 2003. There can be no
assurance that these activities will not impact the Company's market for MTBE. A
significant reduction in the demand for MTBE could have a material adverse
effect on the Company's financial condition and results of operations. See "MTBE
Environmental and Market Issues" for a further discussion of MTBE.

      The Company is the leading producer of chemical grade butene-1 and
specialty isobutylenes in North America. Butene-1 is used as a comonomer in the
production of high-density polyethylene ("HDPE") and linear low-density
polyethylene ("LLDPE"). Both HDPE and LLDPE are raw materials for the production
of trash bags, film wrap, pipe and plastic containers. Butene-1 is also used to
produce butylene oxide, a key component of detergent additive packages used in
many gasoline formulations.

      High purity isobutylene is used in the production of fuel and lubricant
additives, butyl rubber, which is used to produce tires, and in specialty
chemical applications such as the production of resins, antioxidants, paints and
coatings, synthetic lubricant oils and rubber chemicals. Isobutylene

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concentrate is similar to high purity isobutylene in composition, although its
purity is 88% isobutylene compared to 99.9% in high purity isobutylene. The
Company markets isobutylene concentrate for use in the lubricant additives
business as well as for use in the production of butyl rubber. The Company is
the sole U.S. producer of isobutylene concentrate. Diisobutylene is used
primarily as an intermediate in the manufacturing of alkylphenols for the
surfactant and phenolic resins markets. Other uses include the production of
tackifier and ink resins, dispersants and lubricant oil additives, and rubber
and processing chemicals. The Company is the sole U.S. producer of
diisobutylene.

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

      The Company's principal raw material feedstocks are crude butadiene,
isobutane and methanol. The Company's sources of isobutane and methanol are
readily available from several suppliers. The inability of any one of these
suppliers to continue as a source of raw materials is not expected to have a
material impact on the Company's ability to continue normal operations. The
Company's crude butadiene supply is purchased generally under contract terms
from several major ethylene producers. The loss of any one of the Company's
largest crude butadiene suppliers could have a material impact on the Company's
financial performance. One of the Company's intermediate products, isobutylene,
is used in the manufacture of MTBE and specialty isobutylenes.

CERTAIN RISK FACTORS

      Set forth below are important risks and uncertainties that could cause the
Company's actual results to differ materially from those expressed in
forward-looking statements made by management that could negatively impact the
Company's future results or operations. This list is not intended to represent
all risk and uncertainties that could impact the Company.

OPERATING RESULTS COULD BE HARMED DURING ECONOMIC OR INDUSTRY DOWNTURNS.

      The businesses of most of the Company's customers are, to varying degrees,
cyclical and have historically experienced periodic downturns. Profitability in
those industries is highly sensitive to supply and demand cycles and volatile
product prices. Therefore, any significant downturn in the end market for the
Company's products or in general economic conditions could result in a reduction
in demand for the Company's products and could harm our business. In addition,
because the Company only competes in some segments of the chemical industry, a
downturn in the specific segments we serve may affect us more severely than our
competitors who compete in the industry as a whole. For example, as discussed in
more detail herein, the Company's MTBE business is facing the possibility that
sales of this product may be banned in one or more states, or replaced by
ethanol, a competing product. The loss of MTBE sales could significantly
decrease our profits.

THE LOSS OF A LARGE CUSTOMER, OR FAILURE TO RETAIN CONTRACTS FROM AN EXISTING
CUSTOMER, COULD SIGNIFICANTLY REDUCE CASH FLOW, MARKET SHARE AND PROFITS.

      Some of the Company's customers contribute a substantial amount to
revenues. For the year ended June 30, 2002, the Company's largest customer
represented approximately 16% of total revenues, and the top ten customers
collectively represented approximately 70% of total revenues. The loss of any of
these customers or class of customers could reduce cash flow, market share and
profits. The Company could lose a large customer as a result of a merger or
consolidation. In addition, these customers are increasingly pursuing
arrangements with suppliers that can meet a larger portion of

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their needs on a more global basis. The loss of a customer, or the award of a
contract to a competitor, could significantly reduce cash flow, market share and
profits.

HIGHLY COMPETITIVE INDUSTRY

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

 BUSINESS MAY BE ADVERSELY AFFECTED BY THE LOSS OF SENIOR MANAGEMENT.

      The success of the Company's business is largely dependent on the senior
managers of the Company, as well as on the ability to attract and retain other
qualified personnel. The Company has no assurance that it will be able to
attract and retain the personnel necessary for the development of the business.
The loss of the services of key personnel or the failure to attract additional
personnel as required could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company currently
does not maintain "key person" life insurance on any of its key employees.

ENVIRONMENTAL REGULATION

      The Company's operations are subject to extensive federal, state and local
laws, regulations and decrees governing, among other things, emissions to air,
discharges to waters and the generation, handling, storage, transportation,
treatment and disposal of waste materials. The Company's production facilities
require operating permits that are subject to revocation, modification and
renewal. Violations of these permits may provide for substantial fines and civil
or criminal sanctions. The operation of any chemical manufacturing plant entails
risk of adverse environmental events, including exposure to chemical products
and by-products from the Company's operations, and there can be no assurance
that material costs or liabilities will not be incurred to rectify any such
damage. In addition, potentially significant expenditures could be required in
order to comply with environmental, health and safety laws and regulations that
may be adopted or imposed in the future. To meet changing licensing and
regulatory standards, the Company may be required to make additional significant
site or operational modifications, potentially involving substantial
expenditures or the reduction or suspension of certain operations. Specifically,
the Company is subject to a new State Implementation Plan ("SIP") affecting the
Company's region of Texas that will require significant reductions in the output
of nitrogen oxides and volatile organic compounds starting in 2004. Compliance
with these regulations is expected to add significant capital cost requirements.
See - "Environmental Regulation."

Price Volatility of Raw materIAL Feedstocks

      The Company uses large amounts of raw material feedstocks in the
manufacturing of its chemical products. While the Company tries to match cost
increases with corresponding price increases, there may be periods of time
during which increases in feedstock prices are not recovered by the Company due
to an inability to increase the selling prices of its products because of
weakness in demand for, or oversupply of, such products.

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      The principal raw material feedstocks purchased by the Company are crude
butadiene, isobutane and methanol. A number of the Company's raw material
suppliers provide the Company with a significant amount of its raw materials,
and if one significant supplier or a number of significant suppliers, were
unable to meet their obligations under present supply arrangements or if such
arrangements could not be renewed upon expiration, the Company could be required
to incur increased costs for its raw materials. The ability to pass on increases
in raw material prices to the Company's customers is, to a large extent,
dependent on market conditions. There may be periods of time in which increases
in feedstock prices are not recovered by the Company due to an inability to
increase the selling prices of its products because of weakness in demand for,
or oversupply of, such products, and therefore, certain increases in raw
materials prices may have a material adverse effect on the operations of the
Company.

DEPENDENCE ON SINGLE FACILITY

      The Company has one major operating facility located approximately one
mile from the Houston Ship Channel. The loss or shutdown of operations over an
extended period of time at such facility would have a material adverse effect on
the Company. The Company's operations are subject to the usual hazards
associated with chemical manufacturing and the related storage and
transportation of feedstocks, products and wastes, including explosions, fires,
inclement weather and natural disasters (see discussion of flood damage
sustained by the plant in June 2001 in the "Management's Discussion and Analysis
of Financial Condition and Results of Operations"), mechanical failure,
unscheduled downtime, transportation interruptions, chemical spills, discharges
or releases of toxic or hazardous substances or gases and other environmental
risks, such as required remediation of contamination. These hazards can cause
personal injury and loss of life, severe damage to or destruction of property
and equipment and environmental damage, and may result in suspension of
operations and the imposition of civil or criminal penalties. The Company
maintains property, business interruption and casualty insurance at levels which
it believes are in accordance with customary industry practice, but there can be
no assurance that the Company will not incur losses beyond the limits or outside
the coverage of its insurance.

HISTORICAL FINANCIAL INFORMATION MAY NOT BE INDICATIVE OF FUTURE RESULTS.

      The historical financial information included herein may not necessarily
reflect the results of operations, financial position and cash flows in the
future.

WE MAY BE FACED WITH UNEXPECTED PRODUCT CLAIMS OR REGULATIONS.

      Because some of the Company's products are used in customer products that
are sold in public markets, exposure exists to claims of product liability.

SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT FINANCIAL CONDITION.

      The Company is highly leveraged. As of June 30, 2002, the Company had
$263.5 million of outstanding long-term debt and $16.1 million of future
operating lease commitments. This level of indebtedness and commitment could
have important consequences, including the following: -- it may limit the
Company's ability to borrow money or sell stock to fund working capital, capital
expenditures and debt service requirements; -- it may limit flexibility in
planning for, or reacting to, changes in the business; -- the Company may be
more highly leveraged than some competitors, which may place the Company at a
competitive disadvantage; -- it may make the Company more vulnerable to a
downturn in the business or the economy; -- a substantial portion of the
Company's cash flow from operations could be dedicated to the repayment of
existing long-term debt and would not be available for other purposes; and --
there would be a material adverse effect on the Company's business and financial
condition (including the need to restructure its capital structure, voluntarily
or in a bankruptcy proceeding) if the Company is unable to service its long-term
debt or

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obtain additional financing, as needed, including refinancing the $225 million
Senior Subordinated Notes due 2006. Furthermore, despite the Company's
substantial indebtedness, we may still incur significantly more long-term debt.
This could increase the risks described above.

RESTRICTIVE COVENANTS IN THE CREDIT FACILITY AND THE INDENTURE MAY RESTRICT THE
ABILITY TO PURSUE BUSINESS STRATEGIES.

      The Bank Credit Facility and the Senior Subordinates Notes Indenture
limits the Company's ability, among other things, to: -- incur additional
indebtedness or contingent obligations; -- pay dividends or make distributions
to stockholders; -- repurchase or redeem stock; -- make investments; -- grant
liens; -- make capital expenditures; -- enter into transactions with our
stockholders and affiliates; -- sell assets; and -- acquire the assets of, or
merge or consolidate with, other companies. In addition, the credit facility
requires the Company to maintain these financial ratios. The Company may not be
able to maintain these financial ratios. Covenants in the credit facility may
also impair the Company's ability to finance future operations or capital needs
or to enter into acquisitions or joint ventures or engage in other favorable
business activities. The Company has in the past needed to, and may in the
future, need to obtain waivers or amendments of these covenants in order to
remain in compliance with its lending agreements. There can be no assurance
that, if needed, the Company will be able to obtain such waivers or to refinance
such long-term debt in the future.

SERVICING LONG-TERM DEBT WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. CASH FLOW
GENERATION IS DEPENDENDT ON MANY OUTSIDE FACTORS.

      The Company's ability to make payments on long-term debt, to refinance
such long-term debt as it expires, to fund planned capital expenditures and to
fund research and development efforts will depend on the Company's ability to
generate cash in the future. This, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond the Company's control. There are no assurances that the business will
generate sufficient cash flow from operations, that currently anticipated cost
savings and operating improvements will be realized on schedule or that future
borrowings will be available under the credit facility in an amount sufficient
to enable payments on long-term debt or to fund other liquidity needs. If the
Company were to consummate an acquisition, debt service requirements could
increase. The Company may need to refinance all or a portion of our long-term
debt on or before maturity. There are no assurances that the Company will be
able to refinance any of the long-term debt on commercially reasonable terms or
at all. Failure to refinance such long-term debt could force the Company to
restructure its debt pursuant to a voluntary agreement with its lenders or
pursuant to applicable bankruptcy laws.

OTHER OPERATIONS

      The Company operates a cogeneration power plant that supplies electricity
and steam to the facility's chemical processing operations. Steam and
electricity are currently sold to a neighboring facility under contracts at a
price equal to the cost of fuel plus a formula based profit. In addition, the
Company generates revenues from its terminals in Baytown, Texas and Lake
Charles, Louisiana and from chemical by-product sales to third parties.

CUSTOMER CONCENTRATION

      Certain of the Company's largest customers account for a significant
percentage of the Company's sales of particular products. PMI Trading LTD
represented 16% of sales during fiscal year 2002, Goodyear Tire and Rubber
Company represented 11% of sales during the years ended June 30, 2001 and 2000.
Although the Company believes its relationships with PMI Trading LTD and
Goodyear Tire and Rubber Company are good, the loss of these customers could
have a material adverse effect on the Company's financial condition, results of
operations and cash flows.

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COMPETITION

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

      Given the nature of the markets in which it competes, the Company believes
it has two primary competitive advantages over its competitors. First, the
Company's position as the largest merchant crude butadiene processor in the
world has allowed it to secure supply arrangements for crude butadiene that
provide for a formula based profit margin. The Company believes that this
partially limits its exposure to fluctuations in raw materials prices. Second,
the Company's flexible production processes enable it to optimize production
output to meet variations in customer demand. Also, the Company's flexible
production processes enable the Company to conduct maintenance work on its plant
equipment with minimal loss of production.

      MTBE is one of several components used as gasoline blending stock. MTBE is
primarily used to meet oxygenate requirements under the CAA. The primary
competing oxygenate is ethanol. While MTBE usage as an oxygenate in gasoline has
historically significantly exceeded ethanol usage, ethanol production capacity
has been increasing. Ethanol used in gasoline benefits from significant tax
subsidies. Congress is considering legislation that would extend an existing tax
subsidy and mandate the use of significantly more ethanol in gasoline.
Substantial increases in the use of ethanol in gasoline could have a material
adverse affect on the Company.

PATENTS AND LICENSES

      The Company presently owns, controls or holds rights to 10 patents and
seeks patent protection for its proprietary processes where feasible to do so.
Specifically, the Company has applied for patents in the United States and in
certain foreign countries on its proprietary process for the manufacture of
highly reactive polyisobutylene, and has received a notice of allowance from the
United States Patent Office with respect to the first of such applications.

MTBE ENVIRONMENTAL AND MARKET ISSUES

      There is concern in a number of states that MTBE may enter drinking water
supplies as a result of leaks in underground gasoline storage tanks. As a result
of this concern, California's Governor, Gray Davis, issued an Executive Order
banning MTBE from gasoline sold in California as of December 31, 2002. On March
14, 2002, Governor Davis issued Executive Order D-52-02 extending the
commencement of the ban to December 31, 2003, based on his finding that it would
not be practical to replace MTBE with ethanol by the date of the original ban.
Several other states, including New York, have enacted laws to eliminate the use
of MTBE in gasoline. The California and New York bans have been challenged in
federal court. However, if the ban in California goes into effect as scheduled,
it would be expected to materially reduce MTBE demand and to have a material
adverse effect on the Company's financial results. Not withstanding the delay in
banning MTBE in California, several gasoline marketers have announced their
intent to eliminate or reduce

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their usage of MTBE in the state. Such reductions in usage could have a material
adverse affect on the Company.

      There continues to be action in Congress that may impact the use of MTBE
in gasoline. Included are legislative proposals that would ban MTBE, eliminate
the oxygen requirement of the CAA and require the use of ethanol as a
gasoline-blending component. The Company is not able to predict whether such
legislation will be adopted. If adopted, however, such legislation would be
expected to materially reduce MTBE demand and to have a material adverse effect
on the Company's financial results.

      MTBE is one of several components used as gasoline blending stock. MTBE is
primarily used to meet oxygenate requirements under the CAA. The primary
competing oxygenate is ethanol. While MTBE usage as an oxygenate in gasoline has
historically significantly exceeded ethanol usage, ethanol production capacity
has been increasing. Ethanol used in gasoline benefits from significant tax
subsidies. Congress is considering legislation that would extend an existing tax
subsidy and mandate the use of significantly more ethanol in gasoline.
Substantial increases in the use of ethanol in gasoline could have a material
adverse affect on the Company.

      Certain states have established maximum contaminant levels ("MCLs") for
MTBE in drinking water supplies ranging from 10 to 17 ppb. The U.S.
Environmental Protection Agency (the "EPA") has not yet established MCLs but has
an advisory of 20 to 40 ppb, based on aesthetics. If MTBE is found at levels
exceeding the MCLs, the water will have to be treated to reduce MTBE
concentration to a level at or below the applicable MCLs.

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

      As a result of contamination or threatened contamination of public water
wells in Santa Monica and South Lake Tahoe, complaints were filed against
certain gasoline refiners and MTBE manufacturers. These suits have now been
settled. In addition, in July 2002 a New York district court denied class
certification for complaints of water well contamination by gasoline containing
MTBE from four states against a group of twenty oil companies. The Company was
not a party to these actions.

ENVIRONMENTAL REGULATION

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

                                       8
<PAGE>

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

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

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

      The Company's Houston facility is located in Harris County, Texas, which
has been designated as a severe non-attainment area for ozone under the CAA.
Accordingly, the State of Texas is in the process of developing a revised State
Implementation Plan ("SIP") which will require significant reductions in
emissions of ozone precursors, including oxides of nitrogen and volatile organic
compounds and from the plants in an eight county area including Harris County.
The revised SIP will require certain additional emission reductions from the
Company's facilities. Such reductions will require the Company to modify
existing controls, install additional controls for air emissions, or install new
equipment. The current rules would require most area plants, including the
Company's Houston plant, to reduce emissions of NOx by approximately 90%.
However, a negotiated plan agreed to by TCEQ and the affected plants would
reduce the amount of the required reductions to 80%, if certain scientific data
supports such reduction. Approval by EPA of the SIP is anticipated to occur in
December 2002. The Company is unable at this time to predict the cost of
modifying its facilities to comply with the requirements of the SIP. The Company
estimates that such costs could range from $30 million to $60 million.
Specifically, the Company is subject to a new SIP affecting the Company's region
of Texas that will require significant reductions in the output of nitrogen
oxides and volatile organic compounds starting in 2004. These expenditures are
expected to be spread over the fiscal 2003 to 2007 timeframe.

      The Company has elected to participate in the Voluntary Emissions
Reduction Program ("VERP") sponsored by the TCEQ under which the Company will
voluntarily obtain permits for certain air emission sources that had
historically been "grandfathered" from certain permit requirements. A VERP
application was submitted to the TCEQ in November 2000. The anticipated VERP
permit is likely to require the Company to commit to certain emission
reductions. The Company is pursuing available options with respect to its
grandfathered emissions sources that allow the Company to meet applicable air
emissions requirements in a cost-effective manner. Measures likely to be
required under the anticipated permit are not anticipated to have a materially
adverse impact on the Company or its operations.

           Regulations under Title V of the CAA require a facility-wide
inventory of emissions, sources and the air pollution control requirements
applicable to those sources. The Company filed its Title

                                       9
<PAGE>

V application with the TCEQ in July 2000. In connection with the Title V
program, the Company may be required to upgrade its on-going monitoring program
once it has received its operating permit. It is also possible that the Company
may be required to make modifications to some of its equipment in order to
comply with requirements identified through the facility-wide Title V permit
process. These anticipated commitments are not expected to have a material
adverse impact on the Company's operations.

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

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

      The Company received a Notice of Violation ("NOV") on March 10, 2000 from
the EPA relating to certain discrepancies alleged to have been found during
routine inspections conducted by EPA in 1995 and 1997. The NOV led to the filing
of a judicial complaint against the Company. The complaint was dismissed in
April 2002 as a result of a settlement agreement entered into between the
Company and EPA. Under the settlement agreement, the Company paid $0.1 million
and committed to modify certain storage tanks.

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

        The Company is participating with a number of other companies in a
voluntary program (the "HPV Program") with EPA for assessing the safety of the
Company's products. Testing is currently scheduled for butadiene and testing on
other products is expected in the future. The final reports are anticipated by
the end of calendar year 2002.

PHYSICAL SECURITY ISSUES

     As a result of the tragedy of September 11, 2001, the Company has taken
various steps to increase the level of security of its operations and its
vigilance for possible terrorist threats. As a chemical manufacturer, it is
possible that the Company could be a target of terrorist activity. The Company
has incurred approximately $0.3 million for a number of activities, including,
but not limited to, hiring additional security guards, enhancing perimeter
protection, and blocking access to key plant facilities.

EMPLOYEES

     As of June 30, 2002 the Company had approximately 323 full-time employees,
all of whom were salaried employees. In addition, the Company contracts with a
third party to provide approximately 127 contract employees to perform routine
maintenance on and around its Houston facility.


                                       10
<PAGE>

ITEM 2.  PROPERTIES
      The Company's plant is located on a 257-acre tract approximately one mile
from the Houston Ship Channel and near one of the chemical industry's largest
domestic processing facilities. Approximately 230 acres is owned by the Company
and 25% of the remaining 27 acres is owned by a third party. The Company leases
from the Port of Houston two ship docks, which accommodate barge and ocean-going
vessels, and has facilities to accommodate rail and truck service. In addition,
the facility is connected by pipeline to customers and suppliers of raw
materials, directly and through other major pipelines in the immediate area as
well as in Texas City, and with salt dome storage facilities of other companies
located at both Mont Belvieu and Pierce Junction, Texas. The Company's facility
also has a laboratory for sampling and testing. The Company owns and operates
storage and terminal facilities at Baytown, Texas and Lake Charles, Louisiana
and the Company leases storage capacity at terminal facilities in Galena Park,
Texas, Pearland, Texas, Texas City, Texas, Albany, New York, Hammond, Indiana,
and Linden, New Jersey. The Company also leases office space in Three Riverway
Plaza, Houston, Texas as its principal executive offices. The Company believes
that it has adequate facilities for the conduct of its current and planned
operations.

ITEM 3.  LEGAL PROCEEDINGS

      In addition to the matters disclosed under "Environmental Regulation," the
Company is a party to various claims and litigation arising in the ordinary
course of its business. Management recognizes the uncertainties of litigation
and the possibility that one or more adverse rulings could materially impact
operating results. However, based on management's understanding of the current
facts and circumstances of such claims and litigation, the ultimate resolution
of such matters is not expected to have a material adverse effect on the
Company's financial position or results of operations.

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

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

     There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended June 30, 2002.



                                       11
<PAGE>




                                     PART II

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

     Not applicable

ITEM 6.  SELECTED FINANCIAL DATA

     The selected financial data for the Company set forth below for the five
years ended June 30, 2002 should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements, including the related notes.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED JUNE 30,
                                                 ---------------------------------------------------------
                                                 2002          2001(2)     2000         1999(1)      1998
                                                 ----          ----        ----         ----         ----
                                                          (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                                            <C>          <C>          <C>          <C>         <C>
STATEMENT OF OPERATIONS DATA:

Revenues                                       $ 599.6      $ 858.7      $ 744.7      $  448.2    $  514.8

Income from operations                            25.4         41.1         68.0          38.7        37.4

Interest expense                                  29.5         31.7         33.5          34.0        35.7

Net income (loss)                                  0.3          6.1         16.5           1.4        (1.4)

Income (Loss) per common share                                           $  3.97      $   0.34    $  (0.34)

BALANCE SHEET DATA (AT PERIOD END):

Total assets                                   $ 483.7      $ 510.8      $ 523.9      $  482.4    $  496.8

Long-term debt                                   264.9        272.1        285.4         293.5       310.8

</TABLE>

--------------------

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

(2) Net income for the year ended June 30, 2001 includes a cumulative effect of
accounting change of $(0.4) million related to the implementation of SFAS No.
133 and 138, Accounting for Derivative Instruments and Certain Hedging
Activities. Income (loss) per common share is not disclosed for the year ended
June 30, 2002 and 2001 due to the conversion of the Company to a limited
partnership structure.



                                       12
<PAGE>

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

        This discussion should be read in conjunction with the information
contained in the Consolidated Financial Statements and related notes.

OVERVIEW

      The Company's revenues are derived primarily from merchant market sales of
butadiene, fuel products (MTBE, butene-2 and alkylate) and specialty products
(butene-1, isobutylene concentrate, high purity isobutylene, diisobutylene and
polyisobutylene). During the first quarter of the fiscal year ending June 30,
2002, the Company's financial performance was negatively impacted by continued
disruptions to its business caused by a fire in one of its operating units in
May 2001 and severe flooding in June 2001. The Company's financial performance
improved during the second half of the fiscal year due to lower raw material and
energy cost as compared to the prior year period.

MTBE ENVIRONMENTAL AND MARKET ISSUES

      There is concern in a number of states that MTBE may enter drinking water
supplies as a result of leaks in underground gasoline storage tanks. As a result
of this concern, California's Governor, Gray Davis, issued an Executive Order
banning MTBE from gasoline sold in California as of December 31, 2002. On March
14, 2002, Governor Davis issued Executive Order D-52-02 extending the
commencement of the ban to December 31, 2003, based on his finding that it would
not be practical to replace MTBE with ethanol by the date of the original ban.
Several other states, including New York, have enacted laws to eliminate the use
of MTBE in gasoline. The California and New York bans have been challenged in
federal court. However, if the ban in California goes into effect as scheduled
it would be expected to materially reduce MTBE demand and to have a material
adverse effect on the Company's financial results. Not withstanding the delay in
banning MTBE in California, several gasoline marketers have announced their
intent to eliminate or reduce their usage of MTBE in the state. Such reductions
in usage could have a material adverse affect on the Company.

      MTBE is one of several components used as gasoline blending stock. MTBE is
primarily used to meet oxygenate requirements under the CAA. The primary
competing oxygenate is ethanol. While MTBE usage as an oxygenate in gasoline has
historically significantly exceeded ethanol usage, ethanol production capacity
has been increasing. Ethanol used in gasoline benefits from significant tax
subsidies. Congress is considering legislation that would extend an existing tax
subsidy and mandate the use of significantly more ethanol in gasoline.
Substantial increases in the use of ethanol in gasoline could have a material
adverse affect on the Company.

      In addition, certain states have established maximum contaminant levels
("MCLs") for MTBE in drinking water supplies ranging from 10 to 17 ppb. The U.S.
Environmental Protection Agency has not yet established MCLs but has an advisory
of 20 to 40 ppb, based on aesthetics. If MTBE is found at levels exceeding the
MCLs, the water will have to be treated to reduce MTBE concentration to a level
at or below the applicable MCLs.

      There continues to be action in Congress to impact the use of MTBE in
gasoline. Included are legislative proposals that would ban MTBE, eliminate the
oxygen requirement of the Clean Air Act or require the use of ethanol as a
gasoline-blending component. The Company is not able to predict whether such
legislation will be adopted. If adopted, however, such legislation would be
expected to materially reduce MTBE demand and, to have a material adverse effect
on the Company's financial results.


                                       13
<PAGE>

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

      As a result of contamination or threatened contamination of public water
wells in Santa Monica and South Lake Tahoe, complaints were filed against
certain gasoline refiners and MTBE manufacturers. These suits have now been
settled. In addition, in July 2002 a New York district court denied class
certification for complaints of water well contamination by gasoline containing
MTBE from four states against a group of twenty oil companies. The Company was
not a party to these actions.


REVENUES

      The following tables set forth the Company's historical revenues and the
percentages of historical revenues by product and volume of products sold.

Revenues

<TABLE>
<CAPTION>
                                                                   YEAR ENDED JUNE 30,
                                            ------------------------------------------------------------
                                                  2002                   2001                  2000
                                            -----------------     -----------------     ----------------
                                                                   (DOLLARS IN MILLIONS)

<S>                                         <C>         <C>       <C>         <C>       <C>         <C>
Butadiene                                   $  117.5    20%       $  167.9    20%       $  134.2    18%
Fuel Products(1)                               338.2    56           507.6    59           451.9    61
Specialty Products(2)                          134.2    22           163.3    19           144.1    19
Other(3)                                         9.7     2            19.9     2            14.5     2
                                            --------   ----       --------   ----       --------   ---
Total                                       $  599.6   100%       $  858.7   100%       $  744.7   100%
                                            ========   ===        ========   ===        ========   ===
</TABLE>

----------

(1)  Includes revenues from sales of MTBE, butene-2 and alkylate.

(2)  Includes revenues from sales of butene-1, isobutylene concentrate,
     high-purity isobutylene, diisobutylene and polyisobutylene.

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

Sales Volumes

<TABLE>
<CAPTION>
                                                              YEAR ENDED JUNE 30,
                                                  ------------------------------------------
                                                  2002               2001              2000
                                                  -----              -----             -----
                                                   (MILLIONS OF POUNDS, EXCEPT WHERE NOTED)
<S>                                               <C>                <C>               <C>
Butadiene                                         829.5              785.6             844.6
Fuel Products(1)                                  425.6              438.1             487.7
Specialty Products                                601.6              601.6             642.0
</TABLE>


----------
(1)  Volumes in millions of gallons. Includes 449.9 million, 358.2 million and
     326.9 million gallons of MTBE sales and 125.1 million, and 110.0 million
     and 48.4 million gallons of finished MTBE purchased for resale for the
     three years ended June 30, 2002.




                                       14
<PAGE>
RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                 YEAR ENDED JUNE 30,
                                            ---------------------------------------------------------
                                                  2002                 2001                 2000
                                            ----------------     ----------------     ---------------
                                                                 (DOLLARS IN MILLIONS)
<S>                                         <C>       <C>        <C>       <C>        <C>       <C>
Revenues                                    $  599.6  100%       $  858.7  100%       $  744.7  100%
Cost of goods sold                             542.0   90           782.0   91           643.2   87
Non-cash ESOP compensation                       0.2   -              1.0   -              0.6   -
Depreciation and amortization                   21.5    4            24.6    3            23.8    3
                                            --------  ----       --------  ---        --------  ---
      Gross profit                              35.9    6           51.1     6            77.1   10
Selling, general and administrative             10.5    2           10.0     1             9.1    1
                                            --------  ----       --------  ---        --------  ---
      Income from operations                $   25.4    4%       $   41.1    5%       $   68.0    9%
                                            ========  ===        ========  ===        ========  ===

</TABLE>

YEAR ENDED JUNE 30, 2002 COMPARED TO THE YEAR ENDED JUNE 30, 2001

Revenues

      The Company's revenues decreased by approximately 30%, or $259.1 million,
to $599.6 million for the year ended June 30, 2002 from $858.7 million for the
year ended June 30, 2001. The decrease was primarily attributable to lower
product sales prices. Sales volumes remained flat or increased slightly for the
most of the Company's products.

      Butadiene revenues decreased by approximately 30%, or $50.4 million, to
$117.5 million for the year ended June 30, 2002 from $167.9 million for the year
ended June 30, 2001. The decrease was due to lower butadiene sales prices.
Butadiene sales volume for the year increased 5.6% from the prior year. The
Company's ability to grow its butadiene business during fiscal year 2002 was
limited by reduced domestic demand for butadiene and by limited availability of
crude butadiene raw material. The Company sources crude butadiene from numerous
ethylene producers. As a result of weak demand for ethylene and the selection of
ethylene plant feedstocks, the availability of crude butadiene co-product was
limited. The Company was unable to source sufficient crude butadiene to operate
at capacity on a consistent basis, but was able to increase production compared
to the prior year.

      Fuel products revenues decreased by approximately 33%, or $169.4 million,
to $338.2 million for the year ended June 30, 2002 from $507.6 million for the
year ended June 30, 2001. The decrease was caused by lower MTBE sales prices and
sales volumes. MTBE prices were lower as a result of decreases in gasoline and
crude oil prices. MTBE sales volumes declined due to lower volumes of MTBE
purchased for resale. MTBE sales from the Company's own production increased
12.2% compared to the prior year.

      Specialty products revenues decreased by approximately 18% or $29.1
million to $134.2 million for the year ended June 30, 2002 from $163.3 million
for the year ended June 30, 2001. The decrease was principally due to lower
sales prices driven by reduced feedstock and energy costs. Sales volume of
specialty products was unchanged.

Gross Profit

      Gross profit decreased by approximately 30%, or $15.2 million to $35.9
million for the year ended June 30, 2002 from $51.1 million for the year ended
June 30, 2001. Gross profit declined

                                       15
<PAGE>

primarily due to operating problems associated with a plant fire in May 2001,
and flood damage sustained by the plant from Tropical Storm Allison in June
2001. Repairs that continued in June, July and August 2001 resulted in a
substantial reduction in MTBE production. The repairs during the fiscal year
2002 included a turnaround to change damaged catalyst in one of the Company's
dehydro units that is used to produce MTBE. In addition, raw material inventory
levels on June 30, 2001 were higher than planned due to the operational outages
sustained at the end of fiscal year 2001. These raw materials subsequently
declined in value due to a significant decline in market prices during the first
quarter of the fiscal year. The resulting higher cost of raw materials combined
with lower product sales prices had a negative effect on unit margins. The
Company estimates that these operating problems and higher levels of inventory
related to the fire and flood impacted gross profit by approximately $13 million
in the first quarter of the fiscal year ending June 30, 2002 (in addition to the
loss incurred in the fourth quarter of fiscal year 2001). This $13 million
negative impact was partially offset by the collection of $4 million in business
interruption insurance claims related to the fire outage. Gross profit was
further negatively by lower MTBE sales prices and increased in fixed costs
during the year. Fixed costs increased primarily due to higher maintenance
expenses and insurance premiums. The decline in gross profit was partially
offset by the elimination of goodwill amortization expense upon the adoption of
SFAS No. 142 starting in July 2001. Goodwill amortization expense of $4.6
million was recorded for the year ended June 30, 2001.

Income from Operations

      Income from operations decreased by approximately 38%, or $15.7 million,
to $25.4 million for the year ended June 30, 2002 from $41.1 million for the
year ended June 30, 2001. Operating margin during this period decreased to 4.2%
from 4.8%. The decrease in income from operations was primarily caused by the
same factors contributing to the decrease in gross profit described above. The
increase in selling, general and administrative costs was principally due to
higher consulting costs. In addition, in the fourth quarter the Company recorded
a one-time gain of $0.9 million as a result of insurance proceeds from a
casualty loss (related to the May 2001 fire) in excess of the book value of the
asset associated with the claim. This gain has been reflected in other income
during the fiscal year ended June 30, 2002.

YEAR ENDED JUNE 30, 2001 COMPARED TO THE YEAR ENDED JUNE 30, 2000

Revenues

      The Company's revenues increased by approximately 15%, or $114.0 million,
to $858.7 million for the year ended June 30, 2001 from $744.7 million for the
year ended June 30, 2000. The increase was due to higher product sales prices.

      Butadiene revenues increased by approximately 25%, or $33.7 million, to
$167.9 million for the year ended June 30, 2001 from $134.2 million for the year
ended June 30, 2000. The increase was attributable to higher sales prices, which
were partly offset by lower sales volumes. Higher sales prices were experienced
during fiscal year 2001 as a result of increased hydrocarbon values. Sales
volumes were down in the second half of fiscal year 2001 due to limited
availability of crude butadiene and reduced demand from customers.

      Fuel products revenues increased by approximately 12%, or $55.7 million,
to $507.6 million for the year ended June 30, 2001 from $451.9 million for the
year ended June 30, 2000. The increase was caused by higher MTBE sales prices,
higher butene-2 sales volumes and the introduction of alkylate sales. MTBE
prices were higher during fiscal year 2001 as a result of increases in gasoline
and crude oil prices. Butene-2 sales volumes increased due to higher production
rates.

      Specialty products revenues increased by approximately 13 %, or $19.2
million to $163.3 million for the year ended June 30, 2001 from $144.1 million
for the year ended June 30, 2000. The

                                       16
<PAGE>

increase was principally due to higher isobutylene concentrate sales prices
caused by increased raw material and energy costs. Sales volumes of specialty
products remained relatively unchanged.

Gross Profit

      Gross profit decreased by approximately 34%, or $26.0 million to $51.1
million for the year ended June 30, 2001 from $77.1 million for the year ended
June 30, 2000. Gross margin during fiscal year 2001 declined by 4.5%. Gross
profit decreased during fiscal 2001 because of lower butadiene sales volumes and
lower margin contributed from certain specialty isobutylene products. High raw
material and energy costs attributed to the lower margin contributed from
certain specialty products. MTBE and specialty products production volumes and
margin contribution were negatively impacted by operational outages that were
experienced during the fourth quarter of the year. These outages resulted from
two separate events involving a plant fire and flooding from Tropical Storm
Allison. The Company approximates the impact of these operational outages at
$13.0 million for fiscal year 2001.

Income from Operations

      Income from operations decreased by approximately 40%, or $26.9 million,
to $41.1 million for the year ended June 30, 2001 from $68.0 million for the
year ended June 30, 2000. Operating margin during this period decreased to 4.8%
from 9.1%. The decrease in income from operations was primarily caused by the
same factors contributing to the decrease in gross profit described above. The
increase in selling, general and administrative costs was principally due to
higher MTBE advocacy and consulting costs, and an increase in employee
headcount.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

YEAR ENDED JUNE 30, 2002 COMPARED TO THE YEAR ENDED JUNE 30, 2001

      Net cash provided by operating activities was $26.6 million for the year
ended June 30, 2002 compared to $30.4 million for the year ended June 30, 2001.
The decrease of $3.8 million was primarily attributable to lower net income
during the current year. Inventories were reduced by $11.4 million during the
year. Inventory levels were higher at the beginning of the year as a result of
operational disruptions created by Tropical Storm Allison and higher product
values. Net cash used in investing activities was $9.8 million for the year
ended June 30, 2002 compared to $13.2 million for the year ended June 30, 2001.
The decrease of $3.4 million was caused by lower capital expenditures during the
current year. Net cash used in financing activities was $24.4 million for the
year ended June 30, 2002 compared to $12.7 million for the year ended June 30,
2001. The increase of $11.7 million was due primarily to a cash payment of $9.3
million to the parent to fund scheduled interest payments and payments related
to the ESOP as described below.

YEAR ENDED JUNE 30, 2001 COMPARED TO THE YEAR ENDED JUNE 30, 2000

      Net cash provided by operating activities was $30.4 million for the year
ended June 30, 2001 compared to $42.9 million for the year ended June 30, 2000.
The decrease of $12.5 million was primarily attributable to lower net income
during the fiscal year ended June 30, 2001. Net cash used in investing
activities was $13.2 million for the fiscal year ended June 30, 2001 compared to
$18.8 million for the year ended June 30, 2000. The decrease of $5.6 million was
caused by lower capital expenditures during the fiscal year ended June 30, 2001.
Net cash used in financing activities was $12.7 million for the year ended June
30, 2001 compared to $9.3 million for the year ended June 30, 2000. The increase
of $3.4 million is primarily due to a $5.7 million prepayment made during the
fiscal year ended June 30, 2001 towards the term loans under the Bank Credit
Agreement.

                                       17
<PAGE>
LIQUIDITY

     The Company currently has long-term debt commitments consisting of the $225
million 11 1/8th percent Senior Subordinated Notes and $36.6 million of term
debt under the Bank Credit Agreement. The Company's liquidity needs arise
primarily from principal and interest payments under the Bank Credit Agreement
and the Subordinated Notes in addition to funding capital expenditures and
income taxes. Additionally, beginning in January 2002, semiannual cash interest
payments of $3.9 million were required under the $57.7 million 13 1/2 percent
Discount Notes issued by the Parent. The Parent does not maintain continuing
operations that generate cash flows to meet these interest payments. The
Company's ability to fund interest on the Discount Notes held by the Parent is
limited by the terms of the Company's Subordinated Notes. On August 10, 2001,
the Company funded a cash payment of $9.3 million to the Parent for scheduled
interest payments on the Discount Notes. Although the Company expects to
continue funding cash payments to the Parent to meet additional future interest
requirements, there is no assurance that the Company will have the available
cash to make such funding.

     In January 2002, a semiannual interest payment of $3.9 million was made on
the Discount Notes thus reducing Texas Petrochemical Holdings, Inc.'s cash
balance to $5.4 million at June 30, 2002. In July 2002 the second interest
payment of $3.9 million was made on the Discount Notes, leaving a remaining cash
balance of $1.5 million at Texas Petrochemical Holdings, Inc. to fund future
semiannual interest payments. Unless the Company provides funding to Texas
Petrochemical Holdings, Inc. or additional capital is raised at Texas
Petrochemical Holdings, Inc. there will not be sufficient cash balances at Texas
Petrochemical Holdings, Inc. to fund the entire semiannual interest payment due
January 2, 2003. While the intention of the cash advance is to fund future
interest requirements on the Discount Notes, there is no requirement or
commitment that these funds be used solely or explicitly for that purpose. A
failure to make an interest payment on the Discount Notes qualifies as an event
of default under the indenture of the Discount Notes. The holder of the Discount
Notes would be entitled to seek remedies permitted under the provisions of the
indenture. No assets of the Company secure the obligations of Texas
Petrochemical Holdings, Inc.; however, under the circumstances where a default
under the Discount Notes is not waived or cured by some other accommodation
agreed to with the holders of the Discount Notes, and bankruptcy proceedings for
Texas Petrochemicals Holdings, Inc. occurs, such bankruptcy would trigger a
cross default provision in the Company's Bank Credit Agreement and Senior
Subordinated Notes indentures. Under the cross default provisions the
outstanding debt under the Bank Credit Agreement would be automatically
accelerated. No automatic acceleration exists under the cross default provisions
of the Senior Subordinated Notes. If such a cross default occurs and is not
waived or an accommodation is not reached with the affected lenders, the Company
may have to resort to bankruptcy proceedings.

     The Company's Senior Subordinated Notes contain provisions that limit the
Company's ability to make restricted payments and advance funds from Texas
Petrochemicals LP to the Parent. These provisions require the Company to
maintain a 2.25 to 1.0 coverage of EBITDA to interest expense in order to make
restricted payments to the Parent. Based on the financial performance the last
twelve months, the Company does not currently meet this required coverage ratio
test to make restricted payments. However, certain other provisions in the
Senior Subordinated Notes allow for certain types of restricted payments to be
made outside of the requirements of the ratio coverage test. These provisions
allow for restricted payments for certain capital stock transactions limited to
$2 million, ESOP payments and payments pursuant to the Company's Tax Sharing
Agreement even if the Company does not meet the coverage ratio test. The
Company, through the provisions of its Tax Sharing Agreement has the ability to
make payments from Texas Petrochemicals LP to the Parent. Under the provisions
of the Tax Sharing agreement the tax benefit of the interest expense under the
Discount Notes accrues to Texas Petrochemical Holdings, Inc and can be settled
in cash. If the Company is unable to meet the required coverage ratio in the
future, it has determined that the

                                       18
<PAGE>

tax benefit from the interest expense on the Discount Notes will provide
sufficient ability to make future interest payments on the Discount Notes until
January 2005.

      In August 2001, the TPC Holding Corp. Employee Stock Ownership Trust
("Trust") purchased 69,000 shares of common stock of Texas Petrochemical
Holdings, Inc. from existing shareholders in exchange for cash and
seller-financing. The cash portion of the offer, to selling shareholders, was
funded by a loan made by the Company to the Trust. The loan of $2.5 million is
financed over a 10-year period at a 6% interest rate. The unallocated shares
related to the loan have been recorded as a contra account in partners' equity.
As shares are allocated to employees a portion of the loan to the Trust is
reduced and recognized as compensation expense. The seller-financing portion of
the offer was financed with a $5.3 million non-recourse note issued from the
Trust to a selling shareholder. This note is to be financed over a 10-year
period at a 6% interest rate. TPC Holding Corp., the sponsor of the Employee
Stock Ownership Plan ("ESOP") has reflected the seller-financed note on its
balance sheet. Currently, the Trust does not have sufficient funds to pay the
future principal and interest payment requirements under the seller-finance
note. The Company anticipates that it will fund these principal and interest
payments of $0.8 million on an annual basis; however, there is no commitment or
requirement to make such funding. The holder of the non-recourse note holds a
security interest in the common stock, but has no recourse against the Company,
the sponsor or the Trust for non-payment of the note. The Company's contribution
to the Trust for the twelve months ended June 30, 2002 was $0.8 million, which
was reported as compensation expense.

     Until a public market has been developed for the Company's common stock,
the participants of the ESOP have the option to put their allocated shares back
to the plan sponsor at the current fair value of the stock. Under normal
circumstances the put option is triggered by retirement or termination of the
employee and generally provides an option period up to two years. Prior to the
end of fiscal year 2001, no put options were exercisable. The put option is
reflected on the financial statements of the Parent. Beginning in fiscal year
2002, qualifying employees were allowed to exercise their put option. In April
2002, the Company paid $1.7 million to qualifying former employees who exercised
their put option. This amount was reflected as a capital distribution to the
Parent. The future funding for the exercise of the put options is expected to
come from the Company and is allowed under the provisions of its debt
agreements. At June 30, 2002 the put option is valued at $13.9 million, based on
the number of shares allocated and the current appraised share value of $146 per
share. The put option is reflected on the financial statements of the plan
sponsor. The appraised value of the shares will change on an annual basis with
the issuance of a new appraisal report. The Company estimates that it will fund
approximately $1 million of put option in fiscal year 2003.

      The Company's primary source of funds to meet debt service requirements is
net cash flows provided by operating activities. Operating cash flows are
significantly impacted by raw materials cost as well as the selling price and
volume of finished goods. Additionally, the Company has a $40 million Revolving
Credit Facility of which $2.0 million was used at June 30, 2002, to provide
funds for ongoing operations, working capital and planned capital expenditures.
The Company's outstanding balance on the Revolving Credit Facility ranged from
zero to $32 million during the twelve-month period of fiscal year 2002. The
Company typically draws down larger balances on the facility during the winter
months when profitability is typically lower due to seasonality of the fuel
products business. The Company's liquidity during the twelve months ended June
30, 2002 compared to the prior year corresponding period has been impacted by a
decline in operating results, changes in working capital, funding of $9.3
million to the Parent and funding of $4.2 million to the ESOP. While the Company
currently has availability of funds under the Revolving Credit Facility, there
can be no guarantee that such availability will be sufficient in the future. In
order to improve liquidity, the Company has taken steps to reduce capital
expenditures and working capital. In addition to reductions of inventory
quantities on hand, declines in product prices in the current fiscal year have
contributed to the Company's ability to reduce working capital. Potential future

                                       19
<PAGE>

increases in product prices may impact the Company's ability to maintain low
levels of working capital and, in the event of significant product price
increases, would have a substantial impact on the Company's liquidity position.
The Company's ability to borrow is limited by the terms of the Bank Credit
Agreement and the Subordinated Notes. The Bank Credit Agreement and the
Subordinated Notes include certain restrictive covenants, which include, but are
not limited to, the maintenance of certain financial ratios and limitations on
capital expenditures, indebtedness, investments and sales of assets and
subsidiary stock. The Company's availability under the Revolving Credit Facility
is tied to, among other things, the ratio of Debt to EBITDA as defined in the
Bank Credit Agreement. Future reductions in the Company's EBITDA could result in
a decline in the amount of available capacity in the Revolving Credit Facility,
if an amendment to the Bank Credit Agreement were not obtained. Additionally,
the Company's Revolving Credit Facility is scheduled to expire on December 31,
2002. The Company is currently pursuing alternatives to replace its current Bank
Credit Agreement.

       The Company obtained an amendment to the Bank Credit Agreement in
September 2002, to waive the ratio of total debt to EBITDA through October 31,
2002 and allow the Company $33 million of availability under the Revolving
Credit Facility. This waiver effectively gives the Company until October 31,
2002 to complete the refinancing of its bank debt. If the refinancing is not
completed by October 31, 2002 then the Company anticipates that it would seek
additional relief from the ratio covenants contained in the current Bank Credit
Agreement. The failure to obtain additional relief under the Bank Credit
Agreement or failure to complete the refinancing of the existing debt by
December 31, 2002 would create a significant reduction in the Company's
liquidity and could have a substantial negative impact on the Company's business
operations and financial condition. Additionally, if the Company were unable to
complete the refinancing by December 31, 2002 or extend the current Bank Credit
Agreement beyond such date, the Company would be forced to take appropriate
steps to seek protection from its creditors, including potential bankruptcy
proceedings. Previously, the Company obtained an amendment to the Bank Credit
Agreement in July 2001 that amended the definition of EBITDA to allow for an
exclusion of losses associated with the fire and flood damage sustained during
the fourth quarter of fiscal year 2001 and the first quarter of fiscal year
2002.

CASH BONUS PLAN

      In connection with the Acquisition, the Predecessor established a $35
million Cash Bonus Plan covering substantially all employees of the Predecessor
(or certain affiliates of the Predecessor) and covering certain third-party
contractors who had contributed to the past success of the Predecessor. For the
two years ended June 30, 2001 and 2000, $0.2 million and $9.6 million of this
amount was paid to eligible participants. In July 2000, the debt was paid in
full.

CAPITAL EXPENDITURES

      At June 30, 2002, the Company's capital expenditures for fiscal 2002
related principally to the completion of an incremental capacity expansion for
butadiene and improving plant operating efficiencies. Capital expenditures for
year ended June 30, 2002 were $11.3 million, compared to $14.0 million for the
year ended June 30, 2001. The Company expenses approximately $20.0 million
annually for plant maintenance. These maintenance costs are not treated as
capital expenditures. The Company currently plans to spend between $10 and $15
million in capital expenditures in fiscal year 2003. This includes anticipated
capital expenditures related to compliance with the SIP requirements (See
"Environmental Regulation").


                                       20
<PAGE>
CONTRACTUAL OBLIGATIONS

      At June 30, 2002, the Company has obligations and commitments to make
future payments under contracts, as shown in the table below.

                             Payments Due by Period
(in thousands of dollars)

<TABLE>
<CAPTION>

                                  Total        2003       2004       2005       2006        2007    Thereafter
                              -----------  ----------  ---------  ---------  ----------  ---------  ----------
<S>                           <C>          <C>         <C>        <C>        <C>         <C>        <C>
Long-Term Debt                $   263,582  $   16,968  $  21,614             $  225,000
Operating Leases                   16,106       4,823      3,593  $   3,009       2,007  $   1,305  $    1,369
                              -----------  ----------  ---------  ---------  ----------  ---------  ----------

Total Contractual Obligation  $   279,688  $   21,791  $  25,207  $   3,009  $  227,007  $   1,305  $    1,369
                              ===========  ==========  =========  =========  ==========  =========  ==========
</TABLE>

CRITICAL ACCOUNTING POLICIES

      The Company has applied accounting policies that management believes best
reflects the underlying business and economic events, consistent with generally
accepted accounting principles. The Company's more significant accounting
policies include those related to long-lived assets. Inherent in such policies
are certain key assumptions and estimates made by management. The Company's
significant accounting policies are summarized in Note 2 to the Consolidated
Financial Statements.

      With respect to long-lived assets, key assumptions include the estimate of
useful lives and the recoverability of the carrying value of goodwill and
deferred turnaround costs. Such estimates could be significantly modified and
the carrying value of the long-lived assets could be impaired by economic
uncertainties and the cyclical nature of the chemical and refining industries.

      The Company capitalizes the costs of major turnarounds and amortizes such
costs over the period until the next turnaround, which is generally eighteen
months.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

      SFAS 143, "Accounting for Obligations Associated with the Retirement of
Long-Lived Assets" was issued in 2002 and will be effective for the Company's
first quarter of fiscal 2003. SFAS 143 requires the recognition and measurement
of an asset retirement obligation (ARO) and its associated asset retirement
cost. Specifically SFAS 143 requires that (1) an existing legal obligation
associated with the retirement of a tangible long-lived asset be recognized as a
liability when incurred and the amount of liability be initially measured at
fair value; (2) an entity recognize subsequent changes in the liability that
result from (a) the passage of time and (b) revisions in either the timing or
amount of estimated cash flows; and (3) upon initially recognizing a liability
for an ARO, an entity capitalize the cost by recognizing an increase in the
carrying amount of the related long-lived asset. Management believes that the
adoption of this pronouncement will not have an impact on the Company's
consolidated financial statements.

      SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
was issued in October 2001. The objectives of SFAS 144 are to address
significant issues relating to the implementation of SFAS 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", and to develop a single accounting model, based on the framework
established in SFAS 121, for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. The provisions of SFAS 144
are effective for the Company's first quarter of 2003. Management of the Company
believes adoption of this pronouncement is not expected to have an impact on the
Company's consolidated financial statements.


                                       21
<PAGE>

      SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
was issued in October 2001. The objectives of SFAS 144 are to address
significant issues relating to the implementation of SFAS 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", and to develop a single accounting model, based on the framework
established in SFAS 121, for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. The provisions of SFAS 144
are effective for the Company's first quarter of 2003. Management of the Company
believes adoption of this pronouncement is not expected to have an impact on the
Company's consolidated financial statements.

      SFAS 145 "Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13, and
Technical Corrections" was issued in April 2002. Under Statement 4, all gains
and losses from extinguishment of debt were required to be aggregated and, if
material, classified as an extraordinary item, net of related income tax effect.
This Statement eliminates Statement 4 and, thus, gains and losses from
extinguishment of debt should be classified as extraordinary items only if they
meet the criteria in APB Opinion No. 30, "Reporting the Results of Operations,
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". Applying the
provisions of Opinion 30 will distinguish transactions that are part of an
entity's recurring operations from those that are unusual or infrequent or that
meet the criteria for classification as an extraordinary item. The provisions of
SFAS 145 are effective for the Company's first quarter of 2003. The adoption of
this pronouncement may impact the classification of debt extinguishment in the
Company's future consolidated financial statements.

      SFAS 146, "Accounting for Costs Associated with Exit or Disposal
Activities" was issued in June 2002. SFAS 146 addresses significant issues
relating to the recognition, measurement, and reporting of costs associated with
exit and disposal activities, including restructuring activities. The provisions
of FAS 146 are effective for exit or disposal activities initiated after
December 31, 2002. Management believes the adoption of this pronouncement will
not have a material impact on the Company's consolidated financial statements.

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

      This filing includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are identified as any
statement that does not relate strictly to historical or current facts. They use
words such as "anticipate," "believe," "intend," "plan," "projection,"
"forecast," "strategy," "position," "continue," "estimate," "expect," "may,"
"will," or the negative of those terms or other variations of them or by
comparable terminology. In particular, statements expressed or implied,
concerning future operating results or the ability to generate sales, income or
cash flow are forward-looking statements. Forward-looking statements are not
guarantees of performance. They involve risks, uncertainties and assumptions.
The future results of our operations may differ materially from those expressed
in these forward-looking statements. Many of the factors that will determine
these results are beyond our ability to control or predict. Specific factors
that could cause actual results to differ from those in the forward-looking
statements include but are not limited to those factors disclosed in conjunction
with the forward looking statements included herein ("Cautionary Disclosures").
Subsequent written or oral forward looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Disclosures.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

COMMODITY PRICES

      The Company manages its exposure to commodity price fluctuations by
entering into contracts on raw material purchases and product sales with third
parties. In addition, the Company periodically enters into commodity price swap
agreements and future contracts to reduce price risk by either purchasing or
selling raw materials or other products in the market. At June 30, 2002, the
Company had outstanding future contracts for unleaded gasoline with notional
volumes totaling 80,000 barrels. The fair value of these outstanding derivative
instruments at June 30, 2002 was recorded as a $0.1 million liability on the
balance sheet and the change in the fair value of these derivatives was recorded
in current year earnings. A hypothetical 10% unfavorable change in the price of
unleaded gasoline from that in effect at year end would not have a material
adverse effect

                                       22
<PAGE>

on the consolidated financial statements. During fiscal year 2002 the Company
settled its natural gas swap contracts, that were outstanding at June 30, 2001
with notional volumes totaling 1.3 mmbtus and recognized $1.5 million as an
increase in cost of goods sold.

INTEREST RATE RISK

      The Company maintains an overall interest rate risk-management strategy
that incorporates the use of derivative instruments to minimize its exposure to
changes in the fair value of its fixed rate debt and to volatility in LIBOR
rates associated with its floating rate debt. The Company's interest rate
risk-management strategy includes the use of interest rate swaps and cap
contracts. During fiscal year 2001, the Company settled all of its outstanding
interest rate swaps and caps, which resulted in $ 0.2 million of reduced
interest expense during fiscal year 2001. There were no such derivative
instruments outstanding during fiscal year 2002.







                                       23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF
                             TEXAS PETROCHEMICALS LP
                   (FORMERLY TEXAS PETROCHEMICALS CORPORATION)

<TABLE>
<CAPTION>
                                                                                                PAGE
                                                                                                ----
<S>                                                                                             <C>
Reports of Independent Accountants                                                               25

Financial Statements

      Consolidated Balance Sheet                                                                 27

      Consolidated Statement of Operations                                                       28

      Consolidated Statement of Partners' Equity                                                 29

      Consolidated Statement of Cash Flows                                                       30

      Notes to Consolidated Financial Statements                                                 31
</TABLE>





                                       24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors
and Partners of Texas Petrochemicals LP:


In our opinion, the accompanying consolidated balance sheets as of June 30, 2002
and 2001 and the related consolidated statements of income, partners' equity and
cash flows present fairly, in all material respects, the financial position of
Texas Petrochemicals LP and its subsidiaries (collectively, "the Company") at
June 30, 2002 and 2001, and the results of their operations and their cash flows
for each of the two years in the period ended June 30, 2002 in conformity with
accounting principles generally accepted in the United States of America. 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
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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 our opinion.

As discussed in Note 8 to the consolidated financial statements, during the year
ended June 30, 2002, the Company changed its method of accounting for goodwill.
During the year ended June 30, 2001, the Company changed its method of
accounting for derivative instruments and certain hedging activities.



PricewaterhouseCoopers LLP
Houston, Texas
August 23, 2002



                                       25
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Texas Petrochemicals Corporation:


     We have audited the accompanying consolidated statements of operations,
stockholder's equity, and cash flows of Texas Petrochemicals Corporation and
subsidiary (the "Company") for the year ended June 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

     We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

     In our opinion, such financial statements present fairly, in all material
respects, the results of its operations and its cash flows for the year ended
June 30, 2000, in conformity with accounting principles generally accepted in
the United States of America.



                                                      DELOITTE & TOUCHE LLP


Houston, Texas
August 4, 2000




                                       26
<PAGE>
                             TEXAS PETROCHEMICALS LP

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

<TABLE>
<CAPTION>
                                                                                          JUNE 30,
                                                                              ------------------------------
                                                                                   2002              2001
                                                                              ------------       -----------
                      ASSETS
<S>                                                                           <C>                <C>
Current assets:
      Cash and cash equivalents                                               $    11,765        $    19,407
      Accounts receivable - trade                                                  55,698             54,479
      Inventories                                                                  24,162             35,574
      Other current assets                                                         16,965             14,258
                                                                              -----------        -----------
          Total current assets                                                    108,590            123,718

Property, plant and equipment, net                                                203,356            213,475
Investment in land held for sale                                                    -                    990
Investment in limited partnership                                                   2,364              2,652
Goodwill, net of accumulated amortization of $24,091 and $24,091                  160,395            160,395
Other assets, net                                                                   9,041              9,564
                                                                              -----------        -----------
          Total assets                                                        $   483,746        $   510,794
                                                                              ===========        ===========

      LIABILITIES AND PARTNERS' EQUITY

Current liabilities:
      Bank overdraft                                                          $     5,185        $     5,829
      Accounts payable - trade                                                     63,169             67,171
      Payable to Parent                                                               677                213
      Accrued expenses                                                             17,408             17,348
      Current portion of long-term debt                                            14,968              6,196
      Revolving Credit Facility                                                     2,000               -
                                                                              -----------        -----------
          Total current liabilities                                               103,407             96,757

Revolving Credit Facility                                                                              2,000
Long-term debt                                                                    247,899            263,943
Deferred income taxes                                                              57,553             60,446

Commitments and contingencies (Note 7)

Partners' equity:
      Limited partner                                                              85,573             86,772
      General partner                                                                 864                876
      Note receivable from ESOP                                                    (1,788)              -
      Note receivable from Parent                                                  (9,762)              -
                                                                              -----------        -----------
          Total partners' equity                                                   74,887             87,648
                                                                              -----------        -----------
              Total liabilities and partners' equity                          $   483,746        $   510,794
                                                                              ===========        ===========
</TABLE>



          See accompanying notes to consolidated financial statements.



                                       27
<PAGE>
                             TEXAS PETROCHEMICALS LP

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

<TABLE>
<CAPTION>

                                                                         YEAR ENDED JUNE 30,
                                                           ---------------------------------------------
                                                              2002              2001             2000
                                                           -----------      -----------       ----------
<S>                                                        <C>              <C>               <C>
Revenues                                                   $   599,591      $   858,718       $  744,725
Cost of goods sold                                             542,007          782,004          643,195
Non-cash ESOP compensation                                         240              950              570
Depreciation and amortization                                   21,450           24,598           23,800
                                                           -----------      -----------       ----------
   Gross profit                                                 35,894           51,166           77,160

Selling, general and administrative expenses                    10,538           10,001            9,139
                                                           -----------      -----------       ----------
        Income from operations                                  25,356           41,165           68,021

Interest expense                                                29,467           31,664           33,524

Other income (expense)
   Non-cash change in fair value of derivatives                  1,115             (561)           -
   Loss on disposal of assets                                     (349)            (327)           -
   Other, net                                                    1,511              564              (38)
                                                           -----------      -----------       ----------
                                                                 2,277             (324)             (38)
                                                           -----------      -----------       ----------

          Income (loss) before income taxes and
          cumulative effect of accounting change                (1,834)           9,177           34,459

Provision (benefit) for income taxes                            (2,087)           2,660           17,956

Cumulative effect of accounting change
   (net of $221 income tax benefit)                             -                  (410)           -
                                                           -----------      -----------       ----------

        Net income                                         $       253      $     6,107       $   16,503
                                                           ===========      ===========       ==========


Basic and diluted income per common share:                                                     $    3.97
                                                                                               =========


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




          See accompanying notes to consolidated financial statements.



                                       28
<PAGE>



                             TEXAS PETROCHEMICALS LP

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


<TABLE>
<CAPTION>
                                        COMMON STOCK      ADDITIONAL                                  NOTE        NOTE
                                     -------------------   PAID IN     ACCUMULATED      PARTNERS'  RECEIVABLE   RECEIVABLE
                                     SHARES        VALUE   CAPITAL   EARNINGS (DEFICIT)  EQUITY     FROM ESOP  FROM PARENT   TOTAL
                                     ------        -----  ---------  ------------------ ---------  ----------  -----------   -----

<S>                                <C>         <C>         <C>        <C>               <C>        <C>         <C>         <C>
Balance, June 30, 1999 .......     4,162,000   $    4,162  $ 72,050   $  (12,694)                  $ (4,000)               $ 59,518
Net income ...................                                            16,503                                             16,503
Non-cash ESOP compensation ...                                  570                                                             570
Reduction in ESOP Note .......                                                                        2,000                   2,000
                                   ---------   ----------  --------   ----------        --------   --------    --------    --------
Balance, June 30, 2000 .......     4,162,000        4,162    72,620        3,809                     (2,000)                 78,591
                                   ---------   ----------  --------   ----------        --------   --------    --------    --------
Transfer to partners' equity .    (4,162,000)      (4,162)  (72,620)      (3,809)       $ 80,591
Net income ...................                                                             6,107                              6,107
Non-cash ESOP compensation ...                                                               950                                950
Reduction in ESOP Note .......                                                                        2,000                   2,000
                                   ---------   ----------  --------   ----------        --------   --------    --------    --------
Balance, June 30, 2001 .......                                                            87,648                             87,648
                                   ---------   ----------  --------   ----------        --------   --------    --------    --------
Net income ...................                                                               253                                253
Note receivable from ESOP ....                                                                       (2,483)                 (2,483)
Non-cash ESOP compensation ...                                                               240                                240
Reduction in ESOP Note .......                                                                          695                     695
Capital distribution to Parent                                                            (1,704)                            (1,704)
Advance to Parent ............                                                                                  $ (9,762)  $ (9,762)
                                   ---------   ----------  --------   ----------        --------   --------    --------    --------
Balance, June 30, 2002 .......   $                         $          $                 $ 86,437   $ (1,788)    $ (9,762)  $ 74,887
                                   =========   ==========  ========   ==========        ========   ========    ========    ========
</TABLE>





          See accompanying notes to consolidated financial statements.




                                       29
<PAGE>
                             TEXAS PETROCHEMICALS LP

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                            (IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
                                                                                  YEAR ENDED JUNE 30,
                                                                  -------------------------------------------------
                                                                      2002              2001               2000
                                                                  -----------        -----------        -----------
<S>                                                               <C>                <C>                <C>
Cash flows from operating activities:
    Net income (loss)                                             $       253        $     6,107        $    16,503
    Adjustments to reconcile net income
      to cash flows from operating activities:
    Depreciation of fixed assets                                       21,374             20,015             18,985
    Amortization of intangibles                                            76              4,583              4,815
    Amortization of debt issue costs and deferred premium               1,201              1,207              1,173
    Deferred income taxes                                              (2,504)            (1,656)             3,628
    Earnings from limited partnership                                    (349)              (558)              (324)
    (Gain) loss on sale of asset                                         (547)               327                  -
    Non-cash ESOP compensation                                            240                950                570
    Non-cash change in fair value of derivatives                       (1,115)             1,192                  -
    Change in:
       Accounts receivable                                             (1,219)             9,756            (24,015)
       Inventories                                                     11,412                383            (15,984)
       Other assets                                                       990             (3,283)             4,741
       Accounts payable, accrued and other                             (3,867)            (9,256)            32,397
    Distribution received from partnership                                637                675                375
                                                                  -----------        -----------        -----------
         Net cash provided by operating activities                     26,582             30,442             42,864

Cash flows from investing activities:
    Capital expenditures                                              (11,331)           (13,973)           (18,796)
    Proceeds from asset sales and involuntary conversions               1,537                741                  -
                                                                  -----------        -----------        -----------
         Net cash used in investing activities                         (9,794)           (13,232)           (18,796)

Cash flows from financing activities:
    Bank overdraft                                                       (644)            (1,317)             6,272
    Net borrowings (repayments) on Revolving Credit Facility                                 350               (350)
    Payments on long-term debt                                        (10,532)           (13,295)            (7,465)
    Cash bonus plan payments                                                                (213)            (9,557)
    Debt issuance and organizational costs                                                  (247)              (152)
    Issuance of note receivable to ESOP                                (2,483)                 -                  -
    Reduction in note receivable from ESOP                                695              2,000              2,000
    Advance to Parent                                                  (9,762)                 -                  -
    Capital distribution to Parent                                     (1,704)                 -                  -
                                                                  -----------        -----------        -----------
         Net cash used in financing activities                        (24,430)           (12,722)            (9,252)
                                                                  ------------       -----------        -----------

Net increase (decrease) in cash and cash equivalents                   (7,642)             4,488             14,816

Cash and cash equivalents, beginning                                   19,407             14,919                103
                                                                  -----------        -----------        -----------

Cash and cash equivalents, ending                                 $    11,765        $    19,407        $    14,919
                                                                  ===========        ===========        ===========
</TABLE>





          See accompanying notes to consolidated financial statements.



                                       30
<PAGE>
                             TEXAS PETROCHEMICALS LP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  THE COMPANY

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

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

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


2.  SIGNIFICANT ACCOUNTING POLICIES

   Principles of Consolidation

      The consolidated financial statements include the accounts of Texas
Petrochemicals LP and its wholly owned subsidiary, Texas Butylene Chemical
Company, (collectively referred to as the "Company"). Intercompany accounts and
transactions have been eliminated in consolidation.

Cash and Cash Equivalents

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






                                       31
<PAGE>
                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


Inventories

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

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

Investment in Limited Partnership

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

Long-Lived Assets

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

      Depreciation of property, plant and equipment is computed using the
straight-line method over their estimated useful lives ranging from 3 to 30
years.

      Goodwill represents the excess of purchase price paid over the value
assigned to the net tangible and identifiable intangible assets of a business
acquired. Goodwill has been amortized over 40 years using the straight-line
method. However, effective July 2001, the Company adopted SFAS No. 142,
"Goodwill and Other Intangible Assets" and goodwill will no longer be amortized.
Instead goodwill will be tested for impairment at least annually.

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

      The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable, in accordance with SFAS No. 121 "Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." If the
undiscounted future cash flows of such assets are less than the carrying amount,
the

                                       32
<PAGE>

                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


carrying amount is reduced to fair value and an impairment loss is recognized.
Assets held for sale are carried at the lower of cost or fair value less cost to
sell.

Revenue Recognition

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

Environmental Remediation Costs

      Anticipated expenditures related to investigation and remediation of
contaminated sites, which include operating facilities and waste disposal sites,
are accrued when it is probable a liability has been incurred and the amount of
the liability can reasonably be estimated. Estimates have not been discounted to
present value.

Income Taxes

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

Employee Stock Ownership Plan

      The balance of the note receivable from the Employee Stock Ownership Plan
(See "ESOP" Note 9), has been reported as a contra account in the partners'
equity section of the balance sheet. The Company has recognized as non-cash ESOP
compensation in the difference between the fair value of the common stock and
its cost to the ESOP for shares allocated to participants' accounts with the
corresponding offset credited to the partners' equity section.

Financial Derivative Instruments

      Outstanding financial derivative instruments are recorded on the balance
sheet at their fair value. Changes in the fair value of financial derivative
instruments are recognized immediately in earnings as these instruments are not
designated as part of hedged transactions.

Management Estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.



                                       33
<PAGE>
                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


Reclassifications

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

Recently Issued Accounting Pronouncements

      SFAS 143, "Accounting for Obligations Associated with the Retirement of
Long-Lived Assets" was issued in 2002 and will be effective for Company's first
quarter of 2003. SFAS 143 requires the recognition and measurement of an asset
retirement obligation (ARO) and its associated asset retirement cost.
Specifically SFAS 143 requires (1) an existing legal obligation associated with
the retirement of a tangible long-lived asset be recognized as a liability when
incurred and the amount of liability be initially measured at fair value; (2) an
entity recognize subsequent changes in the liability that result from (a) the
passage of time and (b) revisions in either the timing or amount of estimated
cash flows; and (3) upon initially recognizing a liability for an ARO, an entity
capitalize the cost by recognizing an increase in the carrying amount of the
related long-lived asset. The adoption of this pronouncement is not expected to
have an impact on the Company's consolidated financial statements.

      SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
was issued in October 2001. The objectives of SFAS 144 are to address
significant issues relating to the implementation of SFAS 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", and to develop a single accounting model, based on the framework
established in SFAS 121, for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. The provisions of SFAS 144
are effective for the Company's first quarter of 2003. Management believes the
adoption of this pronouncement will not have an impact on the Company's
consolidated financial statements.

      SFAS 145 "Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13, and
Technical Corrections" was issued in April 2002. Under Statement 4, all gains
and losses from extinguishment of debt were required to be aggregated and, if
material, classified as an extraordinary item, net of related income tax effect.
This Statement eliminates Statement 4 and, thus, gains and losses from
extinguishment of debt should be classified as extraordinary items only if they
meet the criteria in APB Opinion No. 30, "Reporting the Results of Operations,
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". Applying the
provisions of Opinion 30 will distinguish transactions that are part of an
entity's recurring operations from those that are unusual or infrequent or that
meet the criteria for classification as an extraordinary item. The provisions of
SFAS 145 are effective for the Company's first quarter of 2003. The adoption of
this pronouncement will not have an impact on the Company's consolidated
financial statements.

      SFAS 146, "Accounting for Costs Associated with Exit or Disposal
Activities" was issued in June 2002. SFAS 146 addresses significant issues
relating to the recognition, measurement, and reporting of costs associated with
exit and disposal activities, including restructuring activities. The provisions
of FAS 146 are effective for exit or disposal activities initiated after
December 31, 2002. Management believes the adoption of this pronouncement will
not have an impact on the Company's consolidated financial statements.


                                       34
<PAGE>
                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


3.  DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS (IN THOUSANDS OF DOLLARS)

INVENTORIES:

<TABLE>
<CAPTION>
                                                                                        JUNE 30,
                                                                            --------------------------------
                                                                                 2002                2001
                                                                            -------------       ------------
<S>                                                                          <C>                <C>
         Finished goods                                                      $     13,444       $     13,583
         Raw materials                                                              8,944             20,497
         Chemicals and supplies                                                     1,774              1,494
                                                                             ------------       ------------
                                                                             $     24,162       $     35,574
                                                                             ============       ============
</TABLE>


OTHER CURRENT ASSETS:

<TABLE>
<CAPTION>
                                                                                        JUNE 30,
                                                                            --------------------------------
                                                                                  2002               2001
                                                                             ------------       ------------
<S>                                                                          <C>                <C>
         Catalyst inventory                                                  $      6,581       $      5,389
         Other receivables                                                          4,220              4,929
         Prepaid and other                                                          6,164              3,940
                                                                             ------------       ------------
                                                                             $     16,965       $     14,258
                                                                             ============       ============
</TABLE>


PROPERTY, PLANT AND EQUIPMENT:

<TABLE>
<CAPTION>

                                                                                         JUNE 30,
                                                                            --------------------------------
                                                                                  2002               2001
                                                                             ------------       ------------
<S>                                                                          <C>                <C>
         Chemical plant                                                      $    322,676       $    300,379
         Construction in progress                                                   5,520             17,704
         Other                                                                      6,982              5,839
                                                                             ------------       ------------
                                                                                  335,178            323,922
         Less accumulated depreciation                                            131,822            110,447
                                                                             ------------       ------------
                                                                             $    203,356       $    213,475
                                                                             ============       ============
</TABLE>


ACCRUED EXPENSES:
<TABLE>
<CAPTION>
                                                                                         JUNE 30,
                                                                            --------------------------------
                                                                                  2002               2001
                                                                             ------------       ------------
<S>                                                                          <C>                <C>
         Accrued interest                                                    $     12,583       $     12,439
         Property and sales taxes                                                   1,641              2,320
         Other                                                                      3,184              2,589
                                                                             ------------       ------------
                                                                             $     17,408       $     17,348
                                                                             ============       ============
</TABLE>



                                       35
<PAGE>
                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


4.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                                         JUNE 30,
                                                                                  2002               2001
                                                                             ------------       ------------
<S>                                                                          <C>                <C>
       Bank Credit Agreement:
         Term A Loan                                                         $      2,864       $      8,237
         Term B Loan                                                               33,718             35,295
         Revolving Credit Facility                                                  2,000              2,000
       Senior Subordinated Notes                                                  225,000            225,000
       Deferred premium on Senior Subordinated Notes                                1,285              1,607
                                                                             ------------       ------------
                                                                                  264,867            272,139
         Less current maturities                                                   16,968              6,196
                                                                             ------------       ------------
         Long-term debt                                                      $    247,899       $    265,943
                                                                             ============       ============
</TABLE>


      The Bank Credit Agreement originally provided for term loans in the amount
of $130 million, an ESOP loan of $10 million, and a Revolving Credit Facility of
up to $40 million. Quarterly principal and interest payments are made under the
Bank Credit Agreement. The final payments under the Term A Loan and Term B Loan
are due on December 31, 2002 and June 30, 2004, respectively. The Revolving
Credit Facility is currently scheduled to expire on December 31, 2002. The debt
under the Bank Credit Agreement bears interest, at the option of the borrower,
based on the LIBOR rate plus a margin (2.0% at June 30, 2002 and June 30, 2001)
or the greater of the prime rate and the federal funds rate plus 1/2% plus a
margin (1.0% and .75% at June 30, 2002 and June 30, 2001 respectively).
Substantially all assets of the Company are pledged as collateral under the Bank
Credit Agreement. The Senior Subordinated Notes are due 2006 and bear interest
at 11 1/8% payable semiannually on January 1 and July 1. The Bank Credit
Agreement and the Senior Subordinated Notes include certain restrictive
covenants, which include but are not limited to, limitations on capital
expenditures, indebtedness, investments and sales of assets and subsidiary
stock. The Company obtained an amendment to the Bank Credit Agreement in July
2001 that amended the definition of EBITDA to allow for an exclusion of losses
associated with the fire and flood damage sustained during the fourth quarter of
fiscal year 2001 and first quarter of fiscal year 2002.

      The fair value of the Senior Subordinated Notes, based on quoted market
prices, was approximately $185 million and $200 million as of June 30, 2002 and
2001, respectively. The long-term debt under the Bank Credit Agreement carries a
floating interest rate, therefore, the Company estimates that the carrying
amount of such debt was not materially different from its fair value as of June
30, 2002 and 2001.

      In February 1998 the Company entered into a three-year swap agreement for
$125 million of its Senior Subordinated Notes. The swap agreement effectively
converted a portion of the 11 1/8% fixed rate Senior Subordinated Notes to a
floating debt with a structured collar. In addition, in June 1998 the Company
entered into a three-year interest rate cap for $ 64 million of its senior debt
under the Bank Credit Agreement. The cap effectively converted a portion of the
Company's floating rate bank debt to a fixed rate of 6.75% plus the margin if
LIBOR rates are set above 6.75%. During fiscal year 2001, both of the preceding
interest rate swap agreements were settled, resulting in $ 0.2 million of
reduced interest expense during 2001.

                                       36
<PAGE>
                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


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

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S>                                   <C>
   2003                               $  16,968
   2004                                  21,614
   2005                                     -
   2006                                 225,000
   2007                                     -
</TABLE>

5.  FEDERAL AND STATE INCOME TAXES

      Significant components of the Company's deferred tax assets and
liabilities at June 30, 2002 and June 30, 2001 are as follows (in thousands of
dollars):

<TABLE>
<CAPTION>

                                                                                         JUNE 30,
                                                                                  2002               2001
                                                                             ------------       ------------
<S>                                                                          <C>                <C>
      Deferred tax liability - current:
          Property taxes                                                     $       (815)      $       (742)

      Deferred tax asset (liability) - noncurrent:
          Capital loss carryforward                                          $      4,809       $      3,986
          Investment in land                                                        -                    701
          Turnaround costs                                                         (1,650)            (1,029)
          Property, plant and equipment                                           (58,595)           (61,829)
          Other                                                                       (45)              (203)
                                                                             ------------       ------------
                                                                                  (55,481)           (58,374)
          Valuation allowance                                                      (2,072)            (2,072)
                                                                             ------------       ------------
               Total noncurrent                                              $    (57,553)      $    (60,446)
                                                                             ============       ============
</TABLE>


      The Company recognized a $2.1 million valuation allowance in fiscal year
2000 for uncertainties in realizing the benefits of a portion of the capital
loss carryforward, which expires by fiscal year 2003. The Company expects to
utilize the remaining portion of the capital loss carryforward, of which $ 1.8
million expires in fiscal year 2004 and $0.9 million expires in fiscal year
2007.






                                       37
<PAGE>
                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


      The provision (benefit) for federal and state income taxes is comprised of
the following (in thousands of dollars):

<TABLE>
<CAPTION>
                                                               YEAR ENDED JUNE 30,
                                              ------------------------------------------------------
                                                   2002                 2001                 2000
                                               ------------        -------------        ------------
<S>                                            <C>                 <C>                  <C>
Current:
      Federal                                  $        417        $       6,112        $     12,308
      State                                          -                    (1,796)              2,020
                                               ------------        -------------        ------------
                                                        417                4,316              14,328
                                               ------------        -------------        ------------
Deferred:
      Federal                                        (2,504)              (1,656)              3,628
      State                                          -                    -                    -
                                               ------------        -------------       -------------
                                                     (2,504)              (1,656)              3,628
                                               ------------        -------------        ------------
          Total provision (benefit)
              for income taxes                 $     (2,087)       $       2,660        $     17,956
                                               ============        =============        ============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                  YEAR ENDED JUNE 30,
                                                 -----------------------------------------------
                                                      2002             2001               2000
                                                 ------------  ----------------   --------------
<S>                                                <C>           <C>                <C>
Statutory federal income tax rate                     35%                 35%                35%
Computed "expected" federal income tax           $  (642)        $     3,212        $    12,061
Increase in tax resulting from:
      State income taxes, net of
         federal benefit                                                                  1,313
      Extraterritorial income tax regime          (1,629)
      Valuation allowance                                                                 2,072
      State income tax refund receivable                              (2,324)
      Other, net                                     100                (164)               707
      Amortization of goodwill and other              84               1,936              1,803
                                                 -------        ------------         ----------
Provision (benefit) for income taxes             $(2,087)       $      2,660         $   17,956
                                                 =======        ============         ==========
</TABLE>



6.  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

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

<TABLE>
<CAPTION>
                                                                YEAR ENDED JUNE 30,
                                               ----------------------------------------------------
                                                  2002                 2001                 2000
                                               -----------        ------------          -----------
<S>                                            <C>                <C>                   <C>
      Interest                                 $    28,235        $     33,005          $    32,479
      Income taxes                                     100               2,865               16,407

</TABLE>

                                       38
<PAGE>
                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


7.  COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

      The Company leases tank cars under noncancelable operating leases. Under
the terms of the lease agreements, the Company was reimbursed by customers at a
fixed rate per mile, based on the distance the tank cars travel. Reimbursements
were approximately $0.1 million, $0.5 million and $0.7 million for the years
ended June 30, 2002, 2001 and 2000.


       Total rent expense was approximately $4.7 million, $4.6 million and $4.4
million, net of reimbursements described above, for the years ended June 30,
2002, 2001 and 2000, respectively. Future minimum lease payments under
noncancelable operating leases consist of the following at June 30, 2002 (in
thousands of dollars):


       FISCAL YEAR
       -----------
          2003                                          $        4,823
          2004                                                   3,593
          2005                                                   3,009
          2006                                                   2,007
          2007                                                   1,305
          Thereafter                                             1,369
                                                        --------------
     Total minimum lease payments                       $       16,106
                                                        ==============

PURCHASE COMMITMENTS

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

LITIGATION

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

      The Company received a Notice of Violation ("NOV") on March 10, 2000 from
the EPA relating to certain discrepancies alleged to have been found during
routine inspections conducted by EPA in 1995 and 1997. The NOV led to the filing
of a judicial complaint against the Company. The complaint was dismissed in
April 2002 as a result of a settlement agreement entered into between the
Company and EPA. Under the settlement agreement, the Company paid $0.1 million
and committed to modify certain storage tanks.

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


                                       39
<PAGE>


                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


ENVIRONMENTAL REGULATION

      The Company's operations are subject to federal, state and local laws and
regulations administered by the EPA, the U.S. Coast Guard, the Army Corps of
Engineers, the Texas Commission on Environmental Quality, the Texas General Land
Office, the Texas Department of Health and various local regulatory agencies.
The Company holds all required permits and registrations necessary to comply
substantially with all applicable environmental laws and regulations, including
permits and registrations for wastewater discharges, solid and hazardous waste
disposal and air emissions, and management believes that the Company is in
substantial compliance with all such laws and regulations. While management does
not expect the cost of compliance with existing environmental laws will have a
material adverse effect on the Company's financial condition, results of
operations or cash flows, there can be no assurance that future legislation,
regulation or judicial or administrative decisions will not have such an effect.

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

      There continues to be action in Congress to impact the use of MTBE in
gasoline. The most prevalent legislative proposals would ban MTBE, eliminate the
oxygen requirement of the CAA and require the use of ethanol as a
gasoline-blending component. The Company is not able to predict whether such
legislation will be adopted. If adopted, however, such legislation would be
expected to materially reduce MTBE and adversely effect the Company's financial
results.

8.    ACCOUNTING CHANGES

         In July 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which
addresses financial reporting and accounting for goodwill and other intangible
assets. The pronouncement stipulates that goodwill should no longer be amortized
but rather periodically assessed for impairment. The Company has applied the
provisions in SFAS No. 142 and concluded that goodwill was not impaired. The
Company will continue to assess goodwill for impairment at least annually.
Goodwill amortization expense of $4.6 million and $4.6 million was recorded for
the two years ending June 30, 2002.

         In July 2000, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Certain Hedging Activities" and SFAS No. 138,
"Accounting for Derivative Instruments and Certain Hedging Activity, an
Amendment of SFAS No. 133". Accordingly, upon adoption of these pronouncements
the Company recorded all derivative instruments on the balance sheet at their
respective fair values with an offsetting entry as a cumulative change in
accounting principle, net of tax. The cumulative effect on earnings was a
pre-tax charge of $0.6 million less a tax benefit of $0.2 million.



                                       40
<PAGE>
                             TEXAS PETROCHEMICALS LP

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


9.  EMPLOYEE BENEFITS

PROFIT SHARING PLAN

      The Company has a profit sharing plan that covers all full-time employees
that have completed 90 days or more of service. Employees can contribute up to
15% of their base compensation to a tax-deferred fund. The Company matches at
the rate of $.25 per one dollar contributed by the employee up to 6% of the
employee's base compensation. The Company's expense to match employee
contributions was approximately $0.2 million for each of the proceeding three
years, respectively. Additionally, the Company made additional discretionary
contributions to the plan, which amounted to approximately $1.0 million, $2.3
million and $2.3 million, for the three years ended June 30, 2002, respectively.
The Company's contributions vest with the employee at a rate of 20% per year.

EMPLOYEE STOCK OWNERSHIP PLAN

      In connection with the Acquisition, the Parent established an Employee
Stock Ownership Plan ("ESOP"), covering substantially all full-time employees of
the Company. The ESOP borrowed $10 million under the Bank Credit Agreement to
purchase 100,000 shares of the Parent's Common Stock at the closing of the
Acquisition. The shares of Common Stock purchased by the ESOP were pledged as
security for the ESOP Loan, and such shares were released and allocated to ESOP
participants' accounts as the ESOP Loan was discharged. For employees whose
employment commenced prior to October 1, 1996 and who have attained 21 years,
participation began as of the Acquisition date or the date of commencement of
the participant's employment. A participant's ESOP account vests at the rate of
20% per year. The Company's contributions to the ESOP, which are used to retire
principal and pay interest on the loan was reported as compensation expense.
Principal and interest payments made for the two years ended June 30, 2001
amounted to $2.1 million and $2.2 million, respectively. As of June 30, 2001,
the ESOP Loan was paid in full and all 100,000 shares have been allocated to
employees.

      In August 2001, the TPC Holding Corp. Employee Stock Ownership Trust
("Trust") purchased 69,000 shares of common stock of Texas Petrochemical
Holdings, Inc. from existing shareholders in exchange for cash and
seller-financing. The cash portion of the offer was funded by a loan made by the
Company to the Trust. The loan of $2.5 million is financed over a 10-year period
at a 6% interest rate. The unallocated shares related to the loan have been
recorded as a contra account in partners' equity. As shares are allocated to
employees a portion of the loan to the Trust is reduced and recognized as
compensation expense. The seller-financing portion of the offer was financed
with a $5.3 million non-recourse note issued from the Trust to a selling
shareholder. This note is to be financed over a 10-year period at a 6% interest
rate. TPC Holding Corp., the sponsor of the Plan, has reflected the
seller-financed note on its balance sheet. Currently, the Trust does not have
sufficient funds to pay the future principal and interest payment requirements
under the seller-financed note. The Company anticipates that it will fund these
principal and interest payments of $0.8 million on an annual basis; however,
there is no commitment or requirement to make such funding. The holder of the
non-recourse note holds a security interest in the common stock, but has no
recourse against the Company, the sponsor or the Trust for non-payment of the
note. The Company's contribution to the Trust for the twelve months ended June
30, 2002 was $0.8 million, which was reported as compensation expense. As of
June 30, 2002, 6,900 of these shares have been allocated. Based on the most
recent appraised value of Texas Petrochemical Holdings, Inc.'s shares, the fair
value of the unearned ESOP shares at June 30, 2002 was $9.1 million.


                                       41
<PAGE>
                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


     Until a public market has been developed for the Company's common stock,
the participants of the ESOP have the option to put their allocated shares back
to the plan sponsor at the current fair value of the stock. Under normal
circumstances the put option is triggered by retirement or termination of the
employee, and generally provides an option period up to two years. Prior to the
end of fiscal year 2001, no put options were exercisable. Beginning fiscal year
2002, qualifying employees were allowed to exercise their put option. In April
2002, the Company paid $1.7 million to qualifying former employees who exercised
their put option. The amount is reflected as a capital distribution to the
parent. The future funding for the exercise of the put options is expected to
come from the Company and is allowed under the provisions of its debt
agreements. At June 30, 2002 the put option is valued at $13.9 million based on
the number of shares allocated and the current appraised share value of $146 per
share. The put option is reflected on the financial statements of the plan
sponsor. The appraised value of the shares will change on an annual basis with
the issuance of a new appraisal report. The Company estimated that it will fund
approximately $1 million of put options in fiscal year 2003.

CASH BONUS PLAN

      In connection with the Acquisition, the Predecessor established a $35
million Cash Bonus Plan covering substantially all employees of the Predecessor
(or certain affiliates of the Predecessor) and covering certain third-party
contractors who had contributed to the past success of the Predecessor. For the
two years ended June 30, 2001 and 2000, $0.2 million and $9.6 million of this
amount was paid to eligible participants. In July 2000 the remaining balance was
paid in full.

10.   ADVANCE TO PARENT

     On August 10, 2001, the Company funded a cash payment of $9.3 million to
Texas Petrochemical Holdings, Inc., the parent company of TPC Holding Corp., for
future scheduled interest payments on the Discount Notes. The payment has been
recorded as a note receivable from the Parent and reflected as a contra account
in partners' equity. The note is due on August 10, 2010 and bears an interest
rate of 6% per annum payable at maturity. The note, including principal and
interest, is subject to mandatory prepayments in amounts otherwise due by the
Parent to the Company under an existing tax sharing agreement.

     In January 2002, a semiannual interest payments $3.9 million was made on
the Discount Notes thus reducing Texas Petrochemical Holdings, Inc.'s cash
balance to $5.4 million at June 30, 2002. In July 2002 the second interest
payment of $3.9 million was made on the Discount Notes, leaving a remaining cash
balance of $1.5 million at Texas Petrochemical Holdings, Inc. to fund future
semiannual interest payments. Unless the Company provides funding to Texas
Petrochemical Holdings, Inc. or additional capital is raised at Texas
Petrochemical Holdings, Inc. there will not be sufficient cash balances at Texas
Petrochemical Holdings, Inc. to fund the entire semiannual interest payment due
January 2, 2003. While the intention of the cash advance is to fund future
interest requirements on the Discount Notes, there is no requirement or
commitment that these funds be used solely or explicitly for that purpose. A
failure to make an interest payment on the Discount Notes qualifies as an event
of default under the indenture of the Discount Notes. The holder of the Discount
Notes would be entitled to seek remedies permitted under the provisions of the
indenture. No assets of the Company secure the obligations of Texas
Petrochemical Holdings, Inc.; however, under certain circumstances a default
under the Discount Notes could trigger a cross default in the

                                       42
<PAGE>
                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

Company Bank Credit Agreement and Senior Subordinated Notes indentures, thus
giving the holders of these securities the remedies allowed under the
indentures.

11.   RELATED PARTY TRANSACTIONS

      In March 2001 the Company renegotiated a loan to its Director of Research
in the amount of $0.2 million of which $0.2 million remained outstanding as of
June 30, 2002 and 2001. The loan carries an interest rate of 8% and is due in
December 2003.

      The Chairman of the Company receives annual compensation of $0.2 million
for consulting services provided to the Company and reimbursements of
approximately $40,000 per year for office expenses.

12.   CONCENTRATION OF CREDIT RISK

      The Company sells its products primarily to chemical and petroleum based
companies in North America. For the three years ended June 30, 2002
approximately 38%, 38% and 34% of the Company's sales were to four customers.
The Company had one customer who represented 16% of sales during the year ended
June 30, 2002, a second customer who represented 11% of sales during the years
ended June 30, 2001 and 2000, and a third customer who represented 14% of the
sales during the year ended June 30, 2000. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral for
accounts receivable. The Company's credit losses have been minimal.

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

13.   FINANCIAL INSTRUMENTS

      At June 30, 2002 the Company estimated that the carrying value and fair
value of its financial instruments, other than long-term debt (See Note 4), were
approximately equal due to the short-term nature of the instruments. Such
instruments include cash and cash equivalents, accounts receivable and accounts
payable.

      The Company enters into certain derivative financial instruments as part
of its interest rate risk management and commodity price risk management. At
June 30, 2002 the Company had outstanding future contracts for unleaded gasoline
with notional volumes totaling 80,000 barrels. The fair value of these
outstanding derivative instruments at June 30, 2002 was recorded as a $0.1
million liability on the balance sheet and the change in fair value of these
derivatives was recorded in current year earnings. During fiscal year 2002, the
Company settled its natural gas swap contracts, that were outstanding at June
30, 2001, with notional volumes totaling 1.3 mmbtus and recognized $1.5 million
as an increase in cost of goods sold.

     The fair value of financial derivative instruments are the amounts at which
they could be settled based on estimates from dealers. All interest rate
derivative instruments were settled during 2001 fiscal year. There were no
interest rate derivative transactions during fiscal year 2002.


                                       43
<PAGE>

                             TEXAS PETROCHEMICALS LP

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


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

      On September 13, 2000 the Audit Committee of the Board of Directors of the
Company recommended and approved, and the Company's Board of Directors approved,
the engagement of PricewaterhouseCoopers LLP ("PwC") to audit the consolidated
financial statements of the Company for the fiscal year ending June 30, 2001.
Accordingly, the engagement of Deloitte & Touche LLP ("D&T") as the Company's
auditors was discontinued. D&T's reports on the Company's consolidated financial
statements for the year ended June 30, 2000 did not contain an adverse opinion
or disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles. In connection with the audit of the
Company's consolidated financial statements for the year ended June 30, 2000,
and during the subsequent interim period preceding such dismissal, (i) the
Company had no disagreements with D&T on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, (ii)
D&T did not advise the company of any "reportable events" as defined in Item
304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, and
(iii) the Company did not consult with D&T on any accounting, auditing or
financial reporting matters.

      In connection with the audits of the Company's consolidated financial
statements for the two years ended June 30, 2002, (i) the Company had no
disagreements with PwC on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which, if not
resolved to the satisfaction of PwC, would have caused PwC to make reference to
the matter in their reports; and (ii) there were no "reportable events" as
defined in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act
of 1934.

      The Company engaged PricewaterhouseCoopers LLP during fiscal year 2002 to
perform audit and tax services. The fees for such services were approximately
$0.2 million for the year ended June 30, 2002.






                                       44
<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

<TABLE>
<CAPTION>
                                                                                           Years of
                                                                                       service with the
                                                                                          Company
                                                                                            or its
Name                         Age   Position                                              predecessors
----                         ---   --------                                            ----------------
<S>                          <C>   <C>                                                        <C>
Hunter W. Henry Jr.          74    Director                                                     4
William A. McMinn            72    Director and Chairman                                       18
Steve A. Nordaker            55    Director                                                     5
Susan O. Rheney              43    Director                                                     6
Gary L. Rosenthal            53    Director                                                     4
Guy  E. Sutherland           66    Director                                                     3
B. W. Waycaster              63    Director, President and Chief Executive Officer             10
Carl S. Stutts               55    Executive Vice President, Chief Financial Officer            4
Stephen R. Wright            54    Sr. Vice President, Secretary and General Counsel            6
John Yoars                   59    Vice President, Operations                                   -
</TABLE>

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

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

         Mr. Nordaker was a Managing Director of J.P. Morgan Securities Inc. or
predecessor merged entities from 1995 until 2002. From 1982 to 1995, he was a
Group Manager at Texas Commerce Bank National Association and, in addition,
served in several capacities at Texas Commerce Bank in the Energy Group,
including Section Manager and Division Manager. From May 1977 to March 1982, Mr.
Nordaker was a Manager of Projects for The Frantz Company, an engineering
consulting firm servicing the oil refinery and petrochemical industry. Prior
thereto, he was a chemical engineer with Universal Oil Products. Mr. Nordaker
serves on the Board of Directors as the Designee of J.P. Morgan Partners, an
affiliate of J.P. Morgan Securities.



                                       45
<PAGE>
         Ms. Rheney is an independent investor. Ms. Rheney was a principal of
The Sterling Group, Inc., an investment banking firm specializing in leveraged
buyouts from 1992 to 2000. Ms. Rheney is also a director of American Plumbing &
Mechanical, Inc. and Genesis Energy, Inc.

         Mr. Rosenthal has served as President of Heaney Rosenthal, Inc. From
1998 to 2000, Mr. Rosenthal served as Chairman of the Board, President and CEO
of AXIA Incorporated and previously served as Chairman of the Board (1990-1994)
and CEO (1994) of Wheatly TXT Corp.

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

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

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

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

         Mr. Yoars, Vice President Operations, joined Texas Petrochemicals, LP
in October 2001. Mr. Yoars has 35 years of experience in the Chemical and
Refining Industry. He has held positions in Operations, Technical, Maintenance
and Business Management. Prior to joining the Company, he was the Senior Vice
President of Olefins with the Westlake Group. There he was responsible for
feedstock management, Olefins manufacturing, and product sales for the Olefins
Business Unit. Mr. Yoars has held positions with Hercules, Sinclair
Petrochemicals, Cabot Corporation, Atlantic Richfield, Lyondell Petrochemical
and Lyondell-Citgo Refining.


                                       46
<PAGE>
COMPENSATION OF DIRECTORS

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

ITEM 11.  EXECUTIVE COMPENSATION

     The following table sets forth the total value of compensation received by
the Chief Executive Officer and the three most highly compensated executive
officers, other than the Chief Executive Officer, who served as executive
officers of the Company for the three years ended June 30, 2002.


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

Name and Principal Position                         Year(1)        Salary               Bonus
---------------------------                         ------       ------------        -----------
<S>                                                 <C>          <C>                 <C>
B. W. Waycaster, President and
Chief Executive Officer                             2002         $    420,000        $   164,684
                                                    2001              420,000            588,325
                                                    2000              300,000            575,436

Carl S. Stutts, Executive Vice President,
   Chief Financial Officer                          2002         $    228,000        $    89,398
                                                    2001              228,000            319,683
                                                    2000              175,000            335,671

William F. Howard, Senior
Vice President of Operations                        2002(3)      $     50,750         $   34,130
                                                    2001              174,000            253,976
                                                    2000              150,000            223,762

John Yoars, Vice President
  Operations                                        2002(2)      $    142,436        $    80,334

Stephen R. Wright, Senior Vice
  President, Secretary and
  General Counsel                                   2002         $    192,000        $    75,286
                                                    2001              192,000            283,683
                                                    2000              180,000            345,272
</TABLE>

The bonus program is directly related to the Company's level of EBITDA. Bonuses
are shown for the year paid, not the year earned. Bonuses shown for the year
ending June 30, 2002 were paid in July, 2001 based upon the Company's earnings
for the year ending June 30, 2001.
--------------

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

(2)  Joined the Company as Vice President of Operations in October 2001.

(3)  Resigned from the Company in October 2001 and received severance pay of
     $160,000 in fiscal year 2002.



                                       47
<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      Texas Petrochemicals LP is a limited partnership wholly owned by
Petrochemical Partnership Holdings, Inc., as the limited partner and TPC Holding
Corp., as the general partner. Petrochemical Partnership Holdings, Inc. is a
wholly owned subsidiary of TPC Holding Corp. which is owned by Texas
Petrochemical Holdings, Inc.

      The following information is given respect to partner's interest in Texas
Petrochemicals LP as of June 30, 2002.

<TABLE>
<CAPTION>
           Name and Address of                              Nature of
           Beneficial Owner                              Beneficial Owner                 Beneficial Interest
      ---------------------------                   --------------------------        -------------------------
<S>                                                     <C>                                   <C>

      Petrochemical Partnership Holdings, Inc.            Limited Partner                         99%
      300 Delaware Ave. Suite 900
      Wilmington, Delaware 19801

      TPC Holding Corp.                                   General Partner                         1%
      Three Riverway, Suite 1500
      Houston, TX  77056
</TABLE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATED PARTY TRANSACTIONS

      In March 2001 the Company renegotiated a loan to its Director of Research
in the amount of $ 0.2 million of which $ 0.2 million remained outstanding as of
June 30, 2002 and 2001. The loan carries an interest rate of 8% and is due in
December 2003.

      The Chairman of the Company, William A. McMinn, receives annual
compensation of $0.2 million for consulting services provided to the Company and
reimbursements of approximately $40,000 per year for office expenses.





                                       48
<PAGE>
                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Exhibits

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

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

3.3      Certificate of Limited partnership of Texas Petrochemicals LP
         (incorporated by reference to Exhibit 3.3 of Form 10Q, File No.
         333-11569).

3.4      Agreement of Limited partnership of Texas Petrochemicals LP
         (incorporated by reference to Exhibit 3.4 of Form 10Q, File No.
         333-11569).

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

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

4.3      First Supplemental Indenture dated June 28, 2000 amending and
         supplementing Senior Discount Notes due 2007 (incorporated by reference
         to Exhibit 4.3 of Form 10K, File No. 333-11569.

99.1     CEO Section 906 Certification

99.2     CFO Section 906 Certification

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

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

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

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

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

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

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

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

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

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

                                       49
<PAGE>

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

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

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

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

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

10.16    Amended and Restated Credit Agreement among TPC Holding Corp., Texas
         Petrochemicals LP, Chase Bank of Texas-National Association, ABN AMRO
         North America, Inc. and The Bank of Nova Scotia (incorporated by
         reference to Exhibit 10.16 of Form 10K, File No. 333-11569).

10.17    Note Modification Agreement dated June 30, 2000 between Texas
         Petrochemicals LP (incorporated by reference to Exhibit 10.17 of Form
         10Q, File No. 333-11569).

10.18    First Amendment to Amended and Restated Credit Agreement (incorporated
         by reference to Exhibit 10.18 of Form 10Q, File no. 333-11569).

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

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

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

(b)  Financial Statement Schedules

     Not applicable

(c)  Reports on Form 8-K

      There were no reports on Form 8-K filed during the three months ended June
30, 2002.




                                       50
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed on behalf of the registrant by the
undersigned, thereunto duly authorized, September 30, 2002.


                   TEXAS PETROCHEMICALS LP
                         (Registrant)

                    By:   TPC Holding Corp.
                          as General Partner

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of TPC Holding Corp. in
the indicated capacities on September 30, 2002.

     /s/ WILLIAM A. McMINN       Director and Chairman
-------------------------------
        William A. McMinn


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


   /s/ HUNTER W. HENRY JR.       Director
-------------------------------
       Hunter W. Henry Jr.


 /s/ STEVE A. NORDAKER           Director
-------------------------------
        Steve A. Nordaker


      /s/ SUSAN O. RHENEY        Director
-------------------------------
         Susan O. Rheney


   /s/ GARY L. ROSENTHAL         Director
-------------------------------
        Gary L. Rosenthal


   /s/ GUY E. SUTHERLAND         Director
-------------------------------
        Guy E. Sutherland


       /s/ CARL S. STUTTS        Executive Vice President,
-------------------------------
         Carl S. Stutts          Chief Financial Officer



                                       51
<PAGE>
                                 CERTIFICATIONS


I, B.W. Waycaster, certify that:

      (1) I have reviewed this annual report on Form 10K of Texas Petrochemicals
LP;

      (2) based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and

      (3) based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.


                                   /s/ B.W. WAYCASTER
                                   --------------------------------------------
                                   B.W. Waycaster
                                   President and Chief Executive Officer







I, Carl S. Stutts, certify that:

      (1) I have reviewed this annual report on Form 10-K of Texas
Petrochemicals LP;

      (2) based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report and

      (3) based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Company as of, and for, the periods presented in this annual report.

September 30, 2002


                                   /s/ CARL S. STUTTS
                                   --------------------------------------------
                                   Carl S. Stutts
                                   Executive Vice President and
                                   Chief Financial Officer





                                       52
<PAGE>
                                 EXHIBIT INDEX


Exhibits

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

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

3.3      Certificate of Limited partnership of Texas Petrochemicals LP
         (incorporated by reference to Exhibit 3.3 of Form 10Q, File No.
         333-11569).

3.4      Agreement of Limited partnership of Texas Petrochemicals LP
         (incorporated by reference to Exhibit 3.4 of Form 10Q, File No.
         333-11569).

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

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

4.3      First Supplemental Indenture dated June 28, 2000 amending and
         supplementing Senior Discount Notes due 2007 (incorporated by reference
         to Exhibit 4.3 of Form 10K, File No. 333-11569.

99.1     CEO Section 906 Certification

99.2     CFO Section 906 Certification

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

10.16    Amended and Restated Credit Agreement among TPC Holding Corp., Texas
         Petrochemicals LP, Chase Bank of Texas-National Association, ABN AMRO
         North America, Inc. and The Bank of Nova Scotia (incorporated by
         reference to Exhibit 10.16 of Form 10K, File No. 333-11569).

10.17    Note Modification Agreement dated June 30, 2000 between Texas
         Petrochemicals LP (incorporated by reference to Exhibit 10.17 of Form
         10Q, File No. 333-11569).

10.18    First Amendment to Amended and Restated Credit Agreement (incorporated
         by reference to Exhibit 10.18 of Form 10Q, File no. 333-11569).

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

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

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