-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WgE6k/ZBTXhITIfNQoaaxWXcugsE6gigbZC0Xo5BSZL/72n3dCHvi8ENLNMvwyP3 hHvlE8ZEazUS3taGC//6+A== 0000950131-98-001790.txt : 19980319 0000950131-98-001790.hdr.sgml : 19980319 ACCESSION NUMBER: 0000950131-98-001790 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980318 SROS: CSX SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FMC CORP CENTRAL INDEX KEY: 0000037785 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 940479804 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-02376 FILM NUMBER: 98568291 BUSINESS ADDRESS: STREET 1: 200 E RANDOLPH DR CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3128616000 FORMER COMPANY: FORMER CONFORMED NAME: BEAN SPRAY PUMP CO DATE OF NAME CHANGE: 19670706 FORMER COMPANY: FORMER CONFORMED NAME: FOOD MACHINERY & CHEMICAL CORP DATE OF NAME CHANGE: 19670706 10-K 1 ANNUAL REPORT ON FORM 10-K =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ____________________ to __________________ Commission file number 1-2376 FMC CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-0479804 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 East Randolph Drive, Chicago, Illinois 60601 - ------------------------------------------ ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 312/861-6000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ------------------- ---------------------- Common Stock, $0.10 par value New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [_] INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [_] THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF MARCH 6, 1998, WAS $2,483,388,496. THE NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK, $0.10 PAR VALUE, OUTSTANDING AS OF THAT DATE WAS 34,702,372. DOCUMENTS INCORPORATED BY REFERENCE DOCUMENT FORM 10-K REFERENCE - -------- ------------------- Portions of 1997 Annual Report to Part I, Item 1; Part II; and Part IV, Stockholders Items 14(a)(1) and (2) Portions of Proxy Statement for 1998 Part III Annual Meeting of Stockholders _____________________________________________________________________ PART I FMC Corporation was incorporated in 1928 under Delaware law and has its principal executive offices at 200 East Randolph Drive, Chicago, Illinois 60601. As used in this report, except where otherwise stated or indicated by the context, "FMC", "the Company" or "the Registrant" means FMC Corporation and its consolidated subsidiaries and their predecessors. The Company is one of the world's leading producers of chemicals and machinery for industry and agriculture. The Company employs 16,805 people at 104 manufacturing facilities and mines in 25 countries. The Company divides its businesses into three main segments: Machinery and Equipment, Industrial Chemicals, and Performance Chemicals. Machinery and Equipment businesses provide specialized machinery to the food, petroleum, transportation and material handling industries. Industrial Chemicals businesses manufacture a wide variety of chemicals including soda ash, phosphates and hydrogen peroxide. Major customers include detergent, glass and paper producers, as well as other chemical companies. Performance Chemicals develops, manufactures and markets proprietary specialty chemicals for the agricultural, food and pharmaceutical industries. ITEM 1. BUSINESS Incorporated by Reference From: ------------------------------ (a) General Development of Business - Annual Report to Stockholders, pages 2-4 and 57, and Notes 2, 3 and 4 to the consolidated financial statements on pages 39-42 (b) Financial Information About - Annual Report to Stockholders, page 5 Industry Segments (c) Narrative Description of Business - Annual Report to Stockholders, pages 6-9 Source and availability of raw materials ---------------------------------------- FMC's natural resource requirements are primarily mineral-oriented. Substantial portions of requirements for ores and other raw materials, especially trona and phosphate rock, are produced from mines in the United States on property held by FMC under long-term leases which are subject to periodic adjustments of royalty rates. The Company also owns land, including mineral rights, relating to an Argentine salar from which it produces lithium. Machinery operations obtain raw materials, principally steel and castings, from many foreign and domestic sources. No one source is considered essential to any of the machinery operations. The Company uses oil, gas, coal, coke, hydroelectric power and nuclear power to meet its energy needs. Patents ------- Although FMC's patents, trademarks and licenses are cumulatively important to its business, FMC does not believe that the loss of any one or group of related patents, trademarks or licenses would have a material adverse effect on the overall business of FMC or on any of its business segments. Seasonality ----------- FMC's businesses are not generally considered to be seasonal, although there has been a bias in the Performance Chemicals segment towards lower profitability in the fourth quarter primarily due to seasonality in the markets served by the agricultural products businesses. Competitive Conditions ---------------------- FMC competes on the basis of price and product performance and is among the market leaders in most products it manufactures. FMC is the world's largest producer of natural soda ash, a leading North American producer of hydrogen peroxide, a leading North American producer of industrial phosphorus chemicals and a world leader in the mining and processing of lithium products. FMC manufactures Furadan, one of the largest selling insecticides in the world. FMC is also the largest worldwide producer of carrageenan, microcrystalline cellulose, and phosphate ester flame retardants. FMC also participates in many machinery businesses, including food processing, material handling and energy equipment, where FMC has a significant market share. Products are sold in highly competitive markets worldwide. Research and Development Expenses ---------------------------------
Year Ended December 31 ---------------------------------- In Millions 1997 1996 1995 ---- ---- ---- Machinery and Equipment $ 46.7 $ 41.5 $ 49.0 Industrial Chemicals 18.2 20.4 16.2 Performance Chemicals 109.1 113.1 109.2 Corporate -- 1.5 1.0 ------ ------ ------ Total $174.0 $176.5 $175.4 ====== ====== ======
Expenses increased in Machinery & Equipment primarily as a result of the inclusion of a full year of operating results of Frigoscandia Equipment, which was acquired on June 30, 1996, as well as increased spending in the Company's energy transportation and measurement, and petroleum equipment and systems businesses. Decreased expenses in Industrial Chemicals primarily reflect process improvements implemented in 1996 in conjunction with the completion of the expansion of the Company's Bayport, Texas hydrogen peroxide plant. Expenses also decreased in Performance Chemicals, due primarily to the absence of costs associated with the development of several new herbicides which were introduced in 1997. Not included in these amounts are costs associated with discontinued operations, primarily the Company's Defense Systems operations which were divested in October 1997. Environmental ------------- Incorporated by Reference From: ------------------------------ Compliance with environmental laws - Annual Report to Stockholders, and regulations Note 15 to the consolidated financial statements on pages 50-51 Employees --------- FMC employs 16,805 people in its domestic and foreign operations. Approximately 2,540 such employees are represented by collective bargaining agreements in the United States. In 1998, eight of the Company's 17 contracts will expire. Certain of those contracts are under negotiation at the present time. FMC maintains good employee relations and has successfully concluded virtually all of its recent negotiations without a work stoppage. In those rare instances where a work stoppage has occurred, there has been no material effect on consolidated sales and earnings. However, FMC cannot predict the outcome of future contract negotiations. Incorporated by Reference From: ------------------------------ (d) Financial Information About Foreign - Annual Report to Stockholders, and Domestic Operations and page 34 Export Sales Forward Looking Statements - Safe Harbor Provisions --------------------------------------------------- The Company and its representatives may from time to time make written or oral forward-looking statements with respect to long-term objectives or expectations of the Company, including statements contained in the Company's filings with the Securities and Exchange Commission and in its reports to stockholders. The words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "is predicted", "forecast", "estimate", "project", or similar expressions identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company is hereby identifying important factors that could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. Among the factors that could have an impact on the Company's ability to achieve its operating results and growth plan goals are: . significant price competition, particularly among the Company's competitors in chemical businesses . the impact of unforeseen economic and political changes in the international markets where the Company competes including currency exchange rates, inflation rates, recessions, foreign ownership restrictions, and other external factors over which the Company has no control . the impact of significant changes in domestic interest rates or taxation rates . high ingredient or raw material prices compared to historical levels, or shortages of ingredients or raw materials . the inherent risks in the marketplace associated with new product introductions and technologies, particularly in agricultural and specialty chemicals . the risks associated with developing new manufacturing processes, particularly with respect to complex chemical products . the ability of the Company to integrate possible future acquisitions into its existing operations . the impact of freight transportation delays beyond the control of the Company . the inability of the Company or its suppliers or customers to remedy potential problems with information systems related to the arrival of the year 2000 . risks associated with joint venture, partnership or limited endeavors in which the Company may be responsible at least in part for the acts or omissions of its partners . risks derived from unforeseen developments in industries served by the Company such as weather patterns in the agricultural sector, political or economic changes in the energy industries, and other external factors over which the Company has no control . environmental liabilities which may arise in the future and which are not covered by insurance or indemnity The Company cautions that the foregoing list of important factors may not be all inclusive and it specifically declines to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. ITEM 2. PROPERTIES FMC leases executive offices in Chicago and administrative offices in Philadelphia. The Company operates 104 manufacturing facilities and mines in 25 countries. The major research facility is in Princeton, NJ. FMC holds mining leases on shale and ore deposits in Idaho to supply its phosphorus plant in Pocatello, and owns substantial phosphatic ore deposits in Rich County, Utah. Trona ore, used for soda ash production in Green River, WY, is mined primarily from property held under long-term lease. FMC owns the land and mineral rights to the Salar del Hombre Muerto lithium reserves in Argentina. Many of FMC's chemical plants require the basic raw materials which are provided by these FMC- owned or -leased mines, without which other sources would have to be obtained. With regard to FMC's mining properties operated under long-term leases, no single lease or related group of leases is material to the businesses of the Company as a whole. Most of FMC's plant sites are owned, with an immaterial number of them being leased. FMC believes its properties and facilities meet present requirements and are in good operating condition and that each of its significant manufacturing facilities is operating at a level consistent with the industry in which it operates. FMC's production properties for continuing operations are:
Latin America United and Western States Canada Europe Other Total - ------------------------------------------------------------------------------- Machinery and Equipment 21 5 15 6 47 Industrial Chemicals 12 2 14 1 29 Performance Chemicals 13 5 6 4 28
ITEM 3. LEGAL PROCEEDINGS Environmental Proceedings - ------------------------- An environmental inspection was conducted in July 1993 at FMC's Phosphorus Chemicals Division ("PCD") plant in Pocatello, Idaho. In August 1994, the United States Environmental Protection Agency (Region 10) ("EPA") formally notified FMC of a number of alleged violations of the Resource Conservation and Recovery Act and related environmental regulations governing the management of hazardous waste generated by the plant, including the operations of hazardous waste storage and treatment units without interim status, the failure to submit timely closure plans, the failure to comply with related reporting requirements and the existence of several other improper treatment and disposal practices. Although there are no legal proceedings pending at this time, FMC has been advised that the matter has been referred to the United States Department of Justice for an evaluation of whether to file a civil enforcement action. If such a civil action is filed, the government is likely to demand both injunctive relief and civil penalties. FMC has had extensive discussions with the Department of Justice and the EPA concerning substantial proposed environmental projects involving pond closure and remediation, changes to waste handling practices and additional air control in an effort to settle this matter in advance of litigation. See Note 4 to the 1997 consolidated financial statements (pages 41-42 of the 1997 Annual Report to Stockholders) for a discussion of an expected increase in capital costs for environmental compliance, which contributed to an impairment in the value of PCD's assets during the fourth quarter of 1997. In a separate matter, the EPA issued a draft Risk Assessment on August 17, 1995 for the Eastern Michaud Flats Superfund site, which includes FMC's Pocatello phosphorus facility, identifying potential risks from contamination potentially associated with FMC. Release of the Risk Assessment allowed FMC to complete a draft of the Remedial Investigation documenting the nature and extent of contamination from the site. The company submitted its draft Remedial Investigation to the EPA on September 28, 1995. On April 21, 1997, the EPA issued for public comment its proposed remediation plan for the site. The EPA's preferred remediation alternative is a combination of capping, surface runoff controls and institutional controls for soils, and extraction and recycling for hydraulic control of groundwater. While the company is still reviewing the EPA's proposed plans, FMC believes its reserve at December 31, 1997 of $66.1 million for future environmental costs at the Eastern Michaud Flats site adequately provides for the estimated costs of the proposed Superfund remediation plan for the site. See Note 15 to the 1997 consolidated financial statements (pages 50-51 of the 1997 Annual Report to Stockholders) for a discussion of legal proceedings against other Potentially Responsible Parties and insurers for contribution and/or coverage with respect to environmental remediation costs. Other - ----- A former employee of FMC brought a qui tam lawsuit in 1986 in federal district court in San Jose, California, claiming that FMC had not produced the Bradley Fighting Vehicle in accordance with Government specifications. The Department of Justice declined to intervene in the case, in which the plaintiff has alleged substantial monetary damages. FMC management believes that the claims in this case are without merit and the Company continues to defend this matter vigorously. The trial in this case began in January 1998. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT The Executive Officers of FMC Corporation, together with the offices in FMC Corporation presently held by them, their business experience since January 1, 1993, and their ages as of March 1, 1998, are as follows:
Age Office, year of election and Name 3/1/98 other information for past 5 years - ---- ------ ----------------------------------- Robert N. Burt 60 Chairman of the Board and Chief Executive Officer (91); President (90-93) Larry D. Brady 55 President (93) and Director (89); Executive Vice President (89-93) William F. Beck 59 Executive Vice President (94); Vice President (86) and General Manager-Chemical Products Group (86)
Michael J. Callahan 59 Executive Vice President and Chief Financial Officer (94); Executive Vice President and Chief Financial Officer, Whirlpool Corporation (91-94) William J. Kirby 60 Senior Vice President (94); Vice President-Administration (85) J. Paul McGrath 57 Senior Vice President (96), General Counsel (96) and Corporate Secretary (97); Associate General Counsel-Litigation, Allied Signal Inc. (92-96) Charles H. Cannon, Jr. 45 Vice President and General Manager-FMC Food Tech (formerly Food Machinery Group) (94); Manager, Food Processing Systems Division (92-94) W. Reginald Hall 61 Vice President (91) and President, FMC Asia-Pacific (97); General Manager-Specialty Chemicals Group (92) Robert I. Harries 54 Vice President (92) and General Manager-Chemical Products Group (94) Henry Kahn 51 Vice President and Treasurer (96); Assistant Treasurer (93) and Corporate Finance Director (89), The Dow Chemical Company Ronald D. Mambu 48 Vice President and Controller (95); Director, Financial Planning (94-95); Director, Strategic Planning (93-94); Director, Financial Control (87-93) James A. McClung 60 Vice President-Worldwide Marketing (91) Joseph H. Netherland 51 Vice President (87) and General Manager-Energy and Transportation Equipment Group (93)
William H. Schumann 47 Vice President and General Manager-Agricultural Products Group (95); Director, North American Operations, Agricultural Products Group (93-95); Executive Director, Corporate Development (91-93) William J. Wheeler 55 Vice President-Chemical Development (91)
Each of the Company's executive officers has been employed by the Company in a managerial capacity for the past five years except for Messrs. Callahan, McGrath and Kahn. No family relationships exist among any of the above-listed officers and there are no arrangements or understandings between any of them and any other person pursuant to which they are selected as an officer. All officers are elected to hold office for one year and until their successors are elected and qualified. PART II
Incorporated by Reference From: ------------------------------- ITEM 5. MARKET FOR REGISTRANT'S COMMON Annual Report to Stockholders, EQUITY AND RELATED STOCKHOLDER pages 28, 35 and 57, and Notes 11 MATTERS and 12 to the consolidated financial statements on pages 46-48 ITEM 6. SELECTED FINANCIAL DATA Annual Report to Stockholders, pages 54-55 ITEM 7. MANAGEMENT'S DISCUSSION AND Annual Report to Stockholders, ANALYSIS OF FINANCIAL CONDITION pages 15, 19 and 24-29 AND RESULTS OF OPERATIONS ITEM 7A. QUANTITATIVE AND QUALITATIVE Annual Report to Stockholders, page DISCLOSURES ABOUT MARKET RISK 29 ITEM 8. FINANCIAL STATEMENTS AND Annual Report to Stockholders, SUPPLEMENTARY DATA (INCLUDING ALL pages 5 and 30-52 SCHEDULES REQUIRED UNDER ITEM 14 OF PART IV)
ITEM 9. CHANGES IN AND DISAGREEMENTS None WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
Incorporated by Reference From: ------------------------------ ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS Part I; Proxy Statement for 1998 OF THE REGISTRANT Annual Meeting of Stockholders, pages 2-9 ITEM 11. EXECUTIVE COMPENSATION Proxy Statement for 1998 Annual Meeting of Stockholders, pages 16-23 ITEM 12. SECURITY OWNERSHIP OF CERTAIN Proxy Statement for 1998 Annual BENEFICIAL OWNERS AND MANAGEMENT Meeting of Stockholders, pages 13-14 ITEM 13. CERTAIN RELATIONSHIPS AND Proxy Statement for 1998 Annual RELATED TRANSACTIONS Meeting of Stockholders, pages 12-13
PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed with this Report 1. Consolidated financial statements of FMC Corporation and its subsidiaries are incorporated under Item 8 of this Form 10-K. 2. All required financial statement schedules are included in the consolidated financial statements or notes thereto as incorporated under Item 8 of this Form 10-K. 3. Exhibits: See attached Index of Exhibits (b) Reports on Form 8-K During the quarter ended December 31, 1997, Registrant filed reports on Form 8-K or Form 8-K/A as follows: Date Subject ---- ------- October 8, 1997 Announcement of completion of sale of defense operations October 16, 1997 Inclusion of additional information, exhibits and pro forma financial information related to sale of defense operations December 11, 1997 Announcement of lower earnings expectations for fourth quarter of 1997, gain on sale of defense operations and recording of asset impairments and other charges December 23, 1997 Inclusion of full text of two exhibits related to sale of defense operations (c) Exhibits See Index of Exhibits. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FMC CORPORATION (Registrant) By: /s/ Michael J. Callahan ----------------------- Michael J. Callahan Executive Vice President and Chief Financial Officer Date: March 17, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
Signature Title - --------- ----- Michael J. Callahan Executive Vice President and /s/ Michael J. Callahan ----------------------- Chief Financial Officer Michael J. Callahan March 17, 1998 -------------- Ronald D. Mambu Vice President, Controller and ) Principal Accounting Officer ) Robert N. Burt Chairman of the Board and ) Chief Executive Officer ) Larry D. Brady Director ) B.A. Bridgewater, Jr. Director ) By: /s/ Michael J. Callahan ----------------------- Patricia A. Buffler Director ) Michael J. Callahan Albert J. Costello Director ) March 17, 1998 -------------- Paul L. Davies, Jr. Director ) Jean A. Francois-Poncet Director ) Edward C. Meyer Director ) Edward J. Mooney Director ) William F. Reilly Director ) James R. Thompson Director ) Clayton Yeutter Director )
PAGE 1 INDEX OF EXHIBITS FILED WITH OR INCORPORATED BY REFERENCE INTO FORM 10-K OF FMC CORPORATION FOR YEAR ENDED DECEMBER 31, 1997 Exhibit No. This 10-K Exhibit Description - ---- ------------------- 2.1 Purchase Agreement, dated as of August 25, 1997, by and among FMC Corporation, Harsco Corporation, Harsco UDLP Corporation and Iron Horse Acquisition Corp. (incorporated by reference from Exhibit 2.1 to the Form 8-K/A filed on October 16, 1997) 3.1 Restated Certificate of Incorporation, as filed on July 1, 1986 (incorporated by reference from Exhibit 3.1 to the Form SE filed on March 25, 1993) 3.2 Amendment to Restated Certificate of Incorporation filed on April 30, 1987 (incorporated by reference from Exhibit 3.2 to the Form SE filed on March 25, 1993) 3.3 Restated By-Laws of the Company, amended as of February 20, 1998 4.1 Amended and Restated Rights Agreement, dated as of February 19, 1988, between Registrant and Harris Trust and Savings Bank (incorporated by reference from Exhibit 4 to the Form SE filed on March 25, 1993) 4.2 Amendment to Amended and Restated Rights Agreement, dated February 9, 1996 (incorporated by reference from Exhibit 1 to the Form 8-K filed on February 9, 1996) 4(iii)(A) Registrant undertakes to furnish to the Commission upon request, a copy of any instrument defining the rights of holders of long-term debt of the Registrant and its consolidated subsidiaries and for any of its unconsolidated subsidiaries for which financial statements are required to be filed 10.1* FMC 1997 Compensation Plan for Non-Employee Directors, as amended April 18, 1997 (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed May 15, 1997) 10.2* FMC 1981 Incentive Share Plan, as amended, effective May 28, 1986 (incorporated by reference from Exhibit 10.1 to the Form SE filed on March 25, 1993) 10.3* FMC 1990 Incentive Share Plan (incorporated by reference from Exhibit 10.1 to the Form SE filed on March 26, 1991) 10.3.a* Amendment dated April 18, 1997 to FMC 1990 Incentive Share Plan (incorporated by reference from Exhibit 10.3.a to the Quarterly Report on Form 10-Q filed on May 15, 1997) 10.4* FMC Corporation Salaried Employees' Retirement Plan, as amended and restated effective January 1, 1995 (incorporated by reference from Exhibit 10.4 to the Annual Report on Form 10-K for 1994) 10.4.a* Amendment dated March 3, 1998 to FMC Corporation Salaried Employees' Retirement Plan 10.4.b* Amendment dated March 28, 1996 to FMC Corporation Salaried Employees' Retirement Plan 10.5* FMC Employees' Thrift and Stock Purchase Plan, as revised and restated as of April 1, 1991 (incorporated by reference from Exhibit 10.3 to the Form SE filed on March 27, 1992) 10.6* Amendments to the FMC Employees' Thrift and Stock Purchase Plan through December 31, 1994 (incorporated by reference from Exhibit 10.6 to the Annual Report on Form 10-K for 1994) 10.6.a* Amendment dated March 28, 1996 to FMC Employees' Thrift and Stock Purchase Plan 10.6.b* Amendments effective April 1 and June 1, 1995 to FMC Employees' Thrift and Stock Purchase Plan 10.6.c* Amendment dated October 1, 1997 to the FMC Employees' Thrift and Stock Purchase Plan 10.7* FMC Salaried Employees' Equivalent Retirement Plan (incorporated by reference from Exhibit 10.4 to the Form SE filed on March 27, 1992) 10.8* FMC Corporation Non-Qualified Retirement and Thrift Plan 10.9* FMC 1995 Management Incentive Plan, as amended as of October 17, 1997 10.10* FMC 1995 Stock Option Plan, as amended April 18, 1997 (incorporated by reference from Exhibit 10.10 to the Form 10-Q filed on May 15, 1997) 10.11* FMC Corporation Executive Severance Plan, as amended as of April 18, 1997 10.12* Master Trust Agreement Between FMC Corporation and Fidelity Management Trust Company, dated June 1, 1997 10.14* FMC Master Trust Agreement between FMC and Bankers Trust Company (incorporated by reference from Exhibit 10.9 to the Form SE filed on March 27, 1992) 10.15 Fiscal Agency Agreement between FMC Corporation and Union Bank of Switzerland, Fiscal Agent, dated as of January 16, 1990 (incorporated by reference from Exhibit 10.4 to the Form SE filed on March 28, 1990) 10.17* Consulting Agreement dated as of September 1, 1990 between the Company and Edward C. Meyer (incorporated by reference from Exhibit 10.16 to Form 10-K-A filed on April 5, 1994) 10.18 Supplemental Agreement No. 1 to Purchase Agreement, dated as of August 25, 1997, by and among FMC Corporation, Harsco Corporation, Harsco UDLP Corporation and Iron Horse Acquisition Corp. (incorporated by reference from Exhibit 10.1 to the Form 8-K/A filed on December 23, 1997) 10.19 Allocation and Contribution Agreement, by and among FMC Corporation, Harsco Corporation and Harsco UDLP Corporation (incorporated by reference from Exhibit 10.1 to the Form 8-K/A filed on December 23, 1997) 12 Statement re Computation of Ratios of Earnings to Fixed Charges 13 Annual Report to Stockholders for the year ended December 31, 1997, is included as an Exhibit to this report for the information of the Securities and Exchange Commission and, except for those portions thereof specifically incorporated by reference elsewhere herein, such Annual Report should not be deemed filed as a part of this report. 21 List of Significant Subsidiaries of Registrant 23 Consent of Auditors 24 Powers of Attorney 27 Financial Data Schedule - ------------------------------- * Indicates a management contract or compensatory plan or arrangement. EX-3.3 2 RESTATED BY-LAWS OF THE COMPANY Exhibit 3.3 RESTATED BY-LAWS OF FMC CORPORATION (as of February 20, 1998) ARTICLE I LOCATION OF OFFICES Section 1. Principal Delaware Office. The principal office of the Corporation ------------------------- in the State of Delaware shall be in the City of Wilmington, County of New Castle, and the name and address of the Resident Agent in charge thereof shall be the Corporation Trust Company, 100 West Tenth Street, Wilmington, Delaware. Section 2. Principal Illinois Office. The Corporation shall also have and ------------------------- maintain an office or principal place of business in the State of Illinois at 200 East Randolph Drive, Chicago, Illinois, the location of such office to be subject to change by resolution of the Board of Directors. Section 3. Other Offices. The Corporation may also have offices in such other ------------- places, both within and without the State of Delaware, as the Board of Directors from time to time may designate or the business of the Corporation require. ARTICLE II CORPORATE SEAL The corporate seal shall be circular in form and have inscribed thereon the following: "FMC Corporation, Incorporated Delaware 1928." ARTICLE III STOCKHOLDERS Section 1. Meetings of Stockholders. ------------------------ (a) Annual Meetings. The annual meeting of the stockholders of the Corporation shall be held on such date and at such time as may be fixed by resolution of the Board of Directors. At the annual meeting stockholders shall elect Directors and transact such other business as properly may be brought before the meeting. (b) Special Meetings. Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. (c) Place of Meetings. Unless otherwise directed by the Board of Directors, all meetings of stockholders shall be held at the office of the Corporation at 200 East Randolph Drive, Chicago, Illinois. (d) Notice of Meetings. Unless otherwise provided by statute, written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation. Any previously scheduled meeting of the stockholders may be postponed, and any special meeting of the stockholders may be cancelled, by resolution of the Board of Directors upon public notice given prior to the date previously scheduled for such meeting of stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors. Section 2. Quorum of Stockholders. The holders of a majority of the total ---------------------- number or shares issued and outstanding, and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by law, by the certificate of incorporation, or by these By-Laws. The presiding officer of the meeting or a majority of the shares so represented may adjourn the meeting from time to time, whether or not there is such a quorum, without notice other than by announcement at the meeting, until the requisite number of shares of stock entitled to vote shall be present. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally noticed. When a quorum is present at any meeting of stockholders, a majority of the number of shares of the stock entitled to vote which is represented thereat shall decide any question brought before such meeting, unless the question is one upon which by express provision of law or the certificate of incorporation or of these By-Laws a larger or different vote is required, in which case such express provision shall govern and control the decision of such question. Section 3. Voting by Stockholders. Each stockholder of record entitled to vote ---------------------- at any meeting may do so in person or by proxy appointed by instrument in writing, subscribed by such stockholder or his duly authorized attorney, and filed with the Secretary. Section 4. [RESERVED] Section 5. Business Brought Before a Meeting. At an annual meeting of the --------------------------------- stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than sixty days nor more than ninety days prior to the meeting; provided, however, that in the event that less than seventy days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the date on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section. The presiding officer of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section; and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 6. Inspectors of Elections; Opening and Closing the Polls. The Board ------------------------------------------------------ of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of stockholders and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders, the presiding officer of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector shall have the duties prescribed by law. The presiding officer of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting. ARTICLE IV DIRECTORS Section 1. Election, Number and Term of Office. Directors shall be chosen by ----------------------------------- ballot at the annual meeting of the stockholders. The number of Directors of this Corporation which shall constitute the whole Board shall be fixed by resolution adopted by affirmative vote of a majority of the whole Board except that such number shall not be less than three (3) nor more than fifteen (15), the exact number to be eleven (11) until otherwise determined by resolution adopted by affirmative vote of a majority of the whole Board. Each director shall hold office until his respective successor is elected and qualified or until his earlier resignation or removal. Section 2. Nomination of Directors. Subject to the rights of holders of any ----------------------- class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of Directors generally. However, any stockholder entitled to vote in the election of Directors generally may nominate one or more persons for election as Directors at a meeting only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, ninety days prior to the anniversary date of the immediately preceding annual meeting, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of Directors, the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (e) the consent of each nominee to serve as a Director of the Corporation if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. Section 3. Removal of Directors. Subject to the rights of any class or series -------------------- of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office with or without cause and only by the affirmative vote of the holders of 80% of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class. Section 4. Vacancies on Board. Vacancies on the Board of Directors may be ------------------ filled by a majority of the Directors then in office, although less than a quorum, or by a sole remaining Director. At any special meeting of stockholders called for the purpose of removing Directors pursuant to Section 3 of this ARTICLE, the vacancy or vacancies on the Board caused by such removal may be filled by the stockholders. Any Director elected to fill a vacancy resulting from an increase in the number of Directors shall hold office for a term that shall coincide with the remaining term of the class of Directors to which he is elected. A Director elected to fill a vacancy not resulting from an increase in the number of Directors shall have the same remaining term as that of his predecessor. Section 5. Powers of Directors. ------------------- (a) General Powers. The Board of Directors shall have the entire management of the business of this Corporation. In addition to such powers as are herein and in the certificate of incorporation expressly conferred upon it, the Board of Directors shall have and may exercise all the powers of the Corporation, subject to the provisions of the laws of Delaware, the certificate of incorporation and these By-Laws. (b) Appointment of Committees. The Board of Directors may designate two or more of their number to constitute an Executive Committee, which Committee shall have and may exercise, when the Board is not in session, all of the powers of the Board in the management of the business and affairs of the Corporation, including the power to appoint Assistant Secretaries and Assistant Treasurers, and to authorize the seal of the Corporation to be affixed to all papers which may require it. The Executive Committee may make rules for the calling, holding and conduct of its meetings and the keeping of records thereof. The Board of Directors may also appoint other committees from their own number, the number (not less than two) composing such committees, and the powers conferred upon them, to be determined by such resolution or resolutions. In the absence or disqualification of any member of the Executive Committee or any other committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Meetings of any Committee designated by the Board of Directors may be called by the Board of Directors or by the Chairman of the Committee at any time or place upon at least twenty-four (24) hours notice. One third of the members of a Committee, but not less than two members, shall constitute a quorum of a Committee for the transaction of business. (c) Delegation of Duties of Directors. The Board of Directors may delegate for the time being the powers or duties of any officer of the Corporation, in case of his absence, disability, death or removal, or for any other reason, to any other officer or to any Director. Section 6. Meeting of Directors. -------------------- (a) Regular Meetings. Regular meetings of the Board of Directors shall be held at such place within or without the State of Delaware, and at such times, as the Board by vote may determine from time to time, and if so determined no notice thereof need be given. After each election of Directors the newly constituted Board shall meet without notice for the purpose of electing officers and transacting such other business as lawfully may come before it. (b) Special Meetings. Special meetings of the Board of Directors may be held at any time or place, within or without the State of Delaware, whenever called by the Chairman of the Board, the President, the Chief Financial Officer, the Secretary or a majority of the whole Board of Directors. (c) Notice of Meetings. Notice of any special meeting of directors shall be given to each director at his or her business or residence in writing by hand delivery, first- class or overnight mail or courier service, telegram or facsimile transmission, or orally by telephone. If mailed by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by telegram, overnight mail or courier service, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company or the notice is delivered to the overnight mail or courier service company at least twenty-four (24) hours before such meeting. If by facsimile transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least twelve (12) hours before such meeting. If by telephone or by hand delivery, the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Such notice need not state the purposes of such meeting. Section 7. Quorum of Directors. Subject to Section 4 of this Article, a ------------------- whole number of directors equal to a majority of the whole Board of Directors shall constitute a quorum of the Board for the transaction of business, but a majority of directors present may adjourn the meeting from time to time until a quorum is present. When a quorum is present at any meeting of Directors, a majority of the members present thereat shall decide any question brought before such meeting, except as otherwise provided by law, the certificate of incorporation or these By-Laws. Section 8. Compensation of Directors. Directors other than those who are full- ------------------------- time salaried officers or other employees of the Corporation may be paid compensation for their services as Directors and may also be paid additional compensation for their services as members of any committee appointed by the Board of Directors, in such amounts as the Board of Directors by resolution shall from time to time determine to be appropriate. Directors may be paid their expenses, if any, incurred for attendance at each meeting of the Board of Directors or of any committee of which they may be members. No Director shall be precluded from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE V BOOKS AND RECORDS Unless otherwise required by the laws of Delaware, the books and records of the Corporation may be kept at the office of the Corporation in the City of Chicago, State of Illinois, or at any other place or places outside the State of Delaware, as the Board of Directors from time to time may designate. ARTICLE VI OFFICERS Section 1. Number and Titles. The officers of the Corporation shall be a ----------------- Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary, a Treasurer, and a Controller, all of whom shall be elected by the Board of Directors. The Board of Directors or the Chief Executive Officer may appoint such other officers, including one or more Assistant Secretaries, Assistant Treasurers and Assistant Controllers as either of them shall deem necessary, who shall have such authority and perform such duties as may be prescribed in such appointment. The Chairman of the Board, the Vice Chairman of the Board and the President shall be members of the Board of Directors, but the other officers need not be members of such Board. Any two or more offices, other than the offices of President and Secretary, may be held by the same person. Section 2. Tenure of Office. Officers of the Corporation shall hold their ---------------- respective offices at the pleasure of the Board of Directors and, in the case of officers who were appointed by the Executive Committee or by the Chief Executive Officer, also at the pleasure of such appointing authority. Section 3. Duties of Officers. ------------------ (a) Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors, of the Executive Committee and of the stockholders of the Corporation. He shall perform such other duties as may from time-to-time be assigned to him by the Board of Directors. (b) Chief Executive Officer. The Chief Executive Officer of the Corporation shall be in general charge and supervision of the affairs of the Corporation. (c) President. The President shall perform such duties as from time-to-time may be assigned to him by the Board of Directors or the Chief Executive Officer of the Corporation. (d) Vice Presidents. Each Vice President shall have such powers and shall perform such duties as may be assigned to him by the senior officers of the Corporation or by the Board of Directors. The Board of Directors may designate one or more Vice Presidents as Executive Vice Presidents or Senior Vice Presidents, or make such other designations of Vice Presidents as it may deem appropriate. (e) Secretary. The Secretary shall attend and record all proceedings of the meetings of the Board of Directors, the stockholders, and the Executive Committee; shall be custodian of the corporate seal and affix such seal to all documents requiring the same; shall cause to be maintained a stock transfer book, and a stock ledger, and such other books as the Board of Directors may direct; shall serve all notices required by law, or by these By-Laws, or by resolution of the Board of Directors; and shall perform such other duties as pertain to the office of Secretary, subject to the control of the Board of Directors. (f) Assistant Secretaries. The Assistant Secretaries shall assist the Secretary in the performance of his duties, and shall perform such other duties as the Board of Directors or the Chief Executive Officer from time to time may prescribe. If at any time the Secretary shall be unable to act, an Assistant Secretary may perform his duties. (g) Treasurer. The Treasurer shall perform all duties commonly incident to that office (including, but without limitation, the care and custody of the funds and securities of the Corporation which from time to time may come into his hands and the deposit of the funds of the Corporation in such banks or trust companies as the Board of Directors may authorize or direct) and, in addition, such other duties as the Board of Directors from time to time may prescribe. (h) Assistant Treasurers. Assistant Treasurers shall assist the Treasurer in the performance of his duties, and shall discharge such other duties as the Board of Directors or the Chief Executive Officer from time to time may prescribe. (i) Controller. The Controller shall be the principal accounting officer of the Corporation, and shall maintain adequate records of all assets, liabilities and transactions of the Corporation; and shall cause adequate audits of the Corporation's accounting records to be currently and regularly made; and shall perform such other duties as the Board of Directors from time to time may prescribe. (j) Assistant Controllers. Assistant Controllers shall assist the Controller in performance of his duties, and shall discharge such other duties as the Board of Directors or the Chief Executive Officer from time to time may prescribe. ARTICLE VII STOCK CERTIFICATES Section 1. Stock Certificates. Every holder of stock shall be entitled to have ------------------ a certificate or certificates duly numbered, certifying the number and class of shares in the Corporation owned by him, in such form as may be prescribed by the Board of Directors. Each such certificate shall be signed in the name of the Corporation by the Chairman of the Board, the President or a Vice President, and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. If any such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates shall be countersigned and registered in such manner as the Board of Directors may from time to time prescribe and there shall be impressed thereon the seal of the Corporation or imprinted thereon a facsimile of such seal. Any transfer agent may countersign by facsimile signature. No registrar of any stock of the Corporation appointed pursuant to this Section 1 shall be the Corporation or its employee. Section 2. Lost Certificates. In the case of the loss, mutilation or ----------------- destruction of a stock certificate, a duplicate certificate may be issued upon such terms and conditions as the Board of Directors from time to time may prescribe. Section 3. Transfers of Stock. Transfer of shares of stock of the Corporation ------------------ shall be made on the books of the Corporation only by the person named in the certificate evidencing such stock or by any attorney lawfully constituted in writing, and upon surrender and cancellation of such certificate, with duly executed assignment and power of transfer endorsed thereon or attached thereto, and with such proof of authenticity of the signatures and authority of the signatories as the Corporation or its agents may reasonably require, except that a new certificate may be issued in the name of an appropriate state officer or office, without the surrender of the former certificate for shares presumed abandoned under the provisions of applicable state escheat or abandoned property laws. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly is not bound to recognize any equitable or other claim or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly otherwise provided by the laws of the State of Delaware. ARTICLE VIII DEPOSITARIES AND CHECKS Depositaries of the funds of the Corporation shall be designated by the Board of Directors; and all checks on such funds shall be signed by such officers or other employees of the Corporation as the Board from time to time may designate. ARTICLE IX WAIVER OF NOTICE Any notice required to be given by law, by the certificate of incorporation, or by these By-Laws, may be waived by the person entitled thereto, either before or after the time stated in such notice. ARTICLE X AMENDMENT OF BY-LAWS Subject to Section (c) of ARTICLE EIGHTH and Section (a) of ARTICLE TENTH of the Certificate of Incorporation of the Corporation these By-Laws may be amended, repealed or added to at any regular or special meeting of the Board of Directors or of the stockholders, by the affirmative vote of a majority of the whole Board of Directors, or by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote, as the case may be. ARTICLE XI INDEMNIFICATION OF OFFICERS, DIRECTORS AND EMPLOYEES (a) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit, or proceedings, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Corporation, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in paragraph (c) of this Article XI, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the whole Board of Directors. The right to indemnification conferred in this Article XI shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition, such advances to be paid by the Corporation within 20 days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided, however, that if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article XI or otherwise. (b) To obtain indemnification under this Article XI, a claimant shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Upon written request by a claimant for indemnification pursuant to the first sentence of this Paragraph (b), a determination, if required by applicable law, with respect to the claimant's entitlement thereto shall be made as follows: (1) if requested by the claimant, by Independent Counsel (as hereinafter defined), or (2) if no request is made by the claimant for a determination by Independent Counsel, (i) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (ii) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (iii) if a quorum of Disinterested Directors so directs, by the stockholders of the Corporation. In the event the determination of entitlement to indemnification is to be made by Independent Counsel at the request of the claimant, the Independent Counsel shall be selected by the Board of Directors unless there shall have occurred within two years prior to the date of the commencement of the action, suit or proceeding for which indemnification is claimed a "Change of Control" as defined in the Executive Severance Plan of FMC Corporation (as amended as of April 18, 1997), in which case the Independent Counsel shall be selected by the claimant unless the claimant shall request that such selection be made by the Board of Directors. If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within 10 days after such determination. (c) If a claim under Paragraph (a) of this Article XI is not paid in full by the Corporation within thirty days after a written claim pursuant to Paragraph (b) of this Article XI has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition whether the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, Independent Counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of Directors, Independent Counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (d) If a determination shall have been made pursuant to Paragraph (b) of this Article XI that the claimant is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to Paragraph (c) of this Article XI. (e) The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to Paragraph (c) of this Article XI that the procedures and presumptions of this Article XI are not valid, binding and enforceable and shall stipulate in such proceeding that the Corporation is bound by all the provisions of this Article XI. (f) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article XI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Laws, agreement, vote of stockholders or Disinterested Directors or otherwise. No repeal or modification of this Article XI shall in any way diminish or adversely affect the rights of any director, officer, employee or agent of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification. (g) The Corporation may, but shall not be obligated to, purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation against any liability, cost or expense. (h) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent or class of employees or agents of the Corporation (including the heirs, executors, administrators or estate of each such person) to the fullest extent of the provisions of this Article XI with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. (i) If any provisions or provision of this Article XI shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article XI (including, without limitation, each provision of any paragraph of this Article XI containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article XI including, without limitation, each such portion of any paragraph of this Article XI containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. (j) For purposes of this Article XI: (1) "Disinterested Director" means a director of the Corporation who is not and was not a party to the matter in respect of which indemnification is sought by the claimant. (2) "Independent Counsel" means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of Corporation law and shall include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Corporation or the claimant in an action to determine the claimant's rights under this Article XI. (k) Any notice, request or other communication required or permitted to be given to the Corporation under this Article XI shall be in writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary. ARTICLE XII EMERGENCY BY-LAWS The Emergency By-Laws provided in this Article XII shall be operative during any emergency in the conduct of the business of the Corporation resulting from an attack on the United States or on a locality in which the Corporation does business or customarily holds meetings of its board of directors or stockholders or during any nuclear or atomic disaster or during the existence of any catastrophe or other similar emergency condition as a result of which a quorum of the board of directors or a standing committee thereof cannot readily be convened for action notwithstanding any different provision in the preceding Articles of these By-Laws or in the Certificate of Incorporation of the Corporation or in the General Corporation Law of the State of Delaware. To the extent not inconsistent with the provisions of this Article, the By-Laws provided in the preceding Articles shall remain in effect during such emergency and upon its termination the Emergency By-Laws shall cease to be operative. During any such emergency: (a) A meeting of the Board of Directors or a committee thereof may be called by any officer or director of the Corporation. Notice of the time and place of the meeting shall be given by the person calling the meeting to such of the directors as it may be feasible to reach by any available means of communication. Such notice shall be given at such time in advance of the meeting as circumstances permit in the judgment of the person calling the meeting. (b) At any such meeting of the Board of Directors, a quorum shall consist of the director or directors in attendance at the meeting. (c) The Board of Directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during such an emergency any or all officers or agents of the Corporation shall for any reason be rendered incapable of discharging their duties. (d) To the extent required to constitute a quorum at any meeting of the Board of Directors during such an emergency, the officers of the Corporation who are present shall, unless otherwise provided in Emergency By-Laws, be deemed, in order of rank and within the same rank in order of seniority, directors for such meeting. (e) The Board of Directors, either before or during any such emergency, may, effective in the emergency, change the head office or designate several alternative head offices or regional offices or authorize the officers so to do. No officer, director or employee acting in accordance with these Emergency By- Laws shall be liable except for willful misconduct. These Emergency By-Laws shall be subject to repeal or change by further action of the Board of Directors or by action of the stockholders, but no such repeal or change shall modify the provisions of the next preceding paragraph with regard to action taken prior to the time of such repeal or change. Any amendment of these Emergency By-Laws may make any further or different provision that may be practical and necessary for the circumstances of the emergency. EX-10.4.A 3 FMC SALARIED EMPLOYEES' RETIREMENT PLAN AMENDMENT EXHIBIT 10.4.a AMENDMENT The FMC Corporation Salaried Employees' Retirement Plan is amended effective January 1, 1991, as follows: Section 6(b). Revise to read: - ------------ (b) Calculation of Normal Retirement Benefit. Subject to Section 6(c), a ---------------------------------------- Participant's monthly Normal Retirement Benefit shall be equal to the product of (i) multiplied by (ii) below: (i) One-twelfth (1/12) of the sum of (A) and (B) below: (A) The sum of (I) one percent (1%) of the Participant's Final Average Yearly Earnings up to the Social Security Covered Compensation Base and (II) one and one-half percent (1-1/2%) of the Participant's Final Average Yearly Earnings in excess of the Social Security Covered Compensation Base multiplied by the Participant's expected Years of Credited Service at age 65 (up to 35). (B) One and one-half percent (1-1/2%) of the Participant's Final Average Yearly Earnings multiplied by the Participant's expected Years of Credited Service at age 65 in excess of 35. (ii) The ratio of actual Years of Credited Service to expected Years of Credited Service. Dated: 3/3/98 FMC CORPORATION By: /s/ David J. Kostelansky --------------------------------- , Employee Welfare Benefits Plan Committee EX-10.4.B 4 FMC SALARIED EMPLOYEES' RETIREMENT PLAN AMENDMENT EXHIBIT 10.4.b AMENDMENT OF THE FMC CORPORATION SALARIED EMPLOYEES' RETIREMENT PLAN WHEREAS, FMC and Snap-On Incorporated ("Snap-On") will be parties to an Acquisition Agreement under which FMC will sell and assign the assets and liabilities of its Automotive Service Equipment Division (the "Business") to Snap-On, and employees of the Business will be offered employment by Snap-On; and WHEREAS, the Acquisition Agreement provides that FMC will amend the FMC Employees' Thrift and Stock Purchase Plan (the "Thrift Plan") and the FMC Corporation Salaried Employees' Retirement Plan (the "Salaried Plan") with respect to employees who accept offers of employment with Snap-On (the "Transferred Employees" as defined in the Acquisition Agreement; NOW, THEREFORE, IT IS RESOLVED, effective as of the "Closing Date" as defined in the Acquisition Agreement, the Salaried Plan is amended as follows: 1. Each Transferred Employee's eligible wages with Snap-On and its subsidiaries shall be recognized in determining the Transferred Employee's Final Average Monthly Earnings under this Plan so that each Transferred Employee's benefit under the Plan shall be determined, to the extent applicable, using eligible wages received from the Company, Snap-On, and its subsidiaries. 2. A Transferred Employee will not be considered to have terminated employment with the Company until employment is terminated with Snap-On and its subsidiaries, but such employment with Snap-On and its subsidiaries shall not otherwise be taken into account for purposes of accrual of benefits under the Plan. Dated: March 28, 1996 FMC CORPORATION By /s/ Michael J. Callahan ------------------------------ Member, FMC Employee Welfare Benefits Plan Committee EX-10.6.A 5 FMC EMPLOYEES' THRIFT & STOCK PURCHASE PLAN AMEND. EXHIBIT 10.6.a AMENDMENT OF THE FMC EMPLOYEES' THRIFT AND STOCK PURCHASE PLAN WHEREAS, FMC and Snap-On Incorporated ("Snap-On") will be parties to an Acquisition Agreement under which FMC will sell and assign the assets and liabilities of its Automotive Service Equipment Division (the "Business") to Snap-On, and employees of the Business will be offered employment by Snap-On; and WHEREAS, the Acquisition Agreement provides that FMC will amend the FMC Employees' Thrift and Stock Purchase Plan (the "Thrift Plan") and the FMC Corporation Salaried Employees' Retirement Plan (the "Salaried Plan") with respect to employees who accept offers of employment with Snap-On (the "Transferred Employees" as defined in the Acquisition Agreement; NOW, THEREFORE, IT IS RESOLVED, effective as of the "Closing Date" as defined in the Acquisition Agreement, the Thrift Plan is amended as follows: 1. Each Transferred Employee is fully vested in his or her entire Plan Benefit. 2. Any outstanding loan from the Plan to a Transferred Employee shall remain outstanding pursuant to the terms of the applicable loan agreement, but not beyond the date of the Transferred Employee's termination of employment with Snap-On Incorporated, notwithstanding such Transferred Employee's termination of employment with FMC; provided, however, that such loans shall remain outstanding only for such period as Snap-On Incorporated facilitates loan repayments by payroll deduction. Dated: March 28, 1996 FMC CORPORATION By /s/ Michael J. Callahan ---------------------------- Member, FMC Employee Welfare Benefits Plan Committee EX-10.6.B 6 FMC EMPLOYEES' THRIFT & STOCK PURCHASE PLAN AMEND. EXHIBIT 10.6.b AMENDMENT The FMC Employees' Thrift and Stock Purchase Plan is amended as follows: A. Effective as of April 1, 1995: Section 9(b)(ii). Revise to read: - ----------------- (ii) Installments. A Participant entitled to elect to defer ------------ distribution of his Plan Benefit under Subsection 9(b)(i) may elect to have the distribution paid in cash over an installment period of not more than 10 years, over a period equal to the life expectancy of the Participant as of the date distribution commences, or a period equal to the joint life expectancy of the Participant and the Participant's Beneficiary as of such date. Such election must be filed with FMC on the prescribed form before the date employment terminates, before the Participant dies, or before FMC determines that the Participant is permanently and totally disabled, as the case may be, and shall, except as provided in Subsection 9(f), be irrevocable. The election shall specify the number of annual installments or whether the Participant's or joint life expectancy is to be used, which life expectancy will be determined by FMC. If an installment election is made, the Plan Benefit shall be distributed in annual installments as follows: The amount of each annual installment shall be paid during the first month of the year. The value of Stock and/or cash to be distributed in each installment shall be determined by dividing the amount of Stock and/or cash credited to the Participant's Plan Benefit account as of the date the installment is being paid by the total number of annual installments elected or determined minus the number of annual installments which have previously been paid. The amount payable with respect to the Stock portion of the installment shall be determined as of the Valuation Date immediately preceding the date payment is made. B. Effective as of June 1, 1995: Section 3(d). Revise to read: - ------------- (d) Investment of Employee-Elected Company Contributions. A ---------------------------------------------------- Participant's Employee-Elected Company Contributions included in his Basic Contributions shall be invested (i) entirely in the Stock Fund, the Fixed Income Fund, or the Equity Fund, or (ii) in two or more of those Funds in multiples of 25%, as he shall elect by filing the prescribed application form. A Participant's Employee-Elected Company Contributions not included in his Basic Contributions shall be invested (i) entirely in the Stock Fund, the Fixed Income Fund, or the Equity Fund, or (ii) in two or more of those Funds in multiples of 25%, as he shall separately elect on the prescribed application form. A Participant may change either of such elections prospectively by filing the prescribed form prior to the month in which the change is to become effective. Section 3(g)(v). Revise to read: - ---------------- (v) Investment of Special Employee Contributions. The portion of a -------------------------------------------- Participant's Special Employee Contributions included in Basic Contributions shall be invested in the same manner as his Employee-Elected Company Contributions included in Basic Contributions (if any) as elected under Subsection 3(d). If the Participant has no currently effective election of Employee-Elected Company Contributions, or to the extent of his Special Employee Contributions not included in Basic Contributions, he may separately elect to invest his Special Employee Contributions in the manner provided in Section 3(d). Section 6(d). Revise the third sentence to read: - ------------- Monthly loan payments of principal and interest will be credited to the accounts of a Participant from which deducted in reverse of the order provided in Subsection 6(a), but allocated among investment funds in proportion to the amounts originally deducted from those funds. Dated: FMC CORPORATION -------------------------- By: ----------------------------- EX-10.6.C 7 FMC EMPLOYEES' THRIFT & STOCK PURCHASE PLAN AMEND. Exhibit 10.6.c AMENDMENT TO THE FMC EMPLOYEES' THRIFT AND STOCK PURCHASE PLAN WHEREAS, FMC Corporation (the "Company") sponsors and maintains the FMC Employees' Thrift and Stock Purchase Plan (the "Plan") for the benefit of its employees, and WHEREAS, the Company deems it desirable to amend the Plan to provide for multiple investment fund options under the Plan and to make certain other administrative changes. NOW, THEREFORE, pursuant to the power of amendment contained in Section 15(a) of the Plan, the Company hereby amends the Plan, effective the 7th day of July, 1997, by amending the Plan in the following particulars: 1. By substituting the phrase "Investment Funds (as defined herein in Section 13(e) of the Plan)" for the phrase "Stock, Equity Fund or Fixed Income Fund" where such latter phrase appears in Section 2(b) of the Plan. 2. By substituting the following for the second sentence in Section 3(a)(ii) of the Plan: "The Active Participation of any Participant who makes such an election shall be suspended. Active Participation shall be resumed as soon as administratively feasible following the Participant's election to resume Employee-Elected Company Contribution is received by FMC in the local Human Resources office on the prescribed application form." 3. By substituting the following for Section 3(d) of the Plan: "(d) Investment of Employee-Elected Company Contributions. At such time as FMC establishes Investment Funds in accordance with Section 13(e), FMC shall establish uniform rules concerning Participants' investment elections. In general, as of the date an employee becomes a Participant and as of any change date thereafter, each Participant may elect, by giving written notice to FMC at least 30 days (or such other period as FMC may establish) in advance, in accordance with uniform rules established by FMC and on a form provided by it for this purpose, or by authorized telephonic voice response, to have future contributions made by such Participant or on the Participant's behalf (prior to any subsequent election such Participant may make), other than Company Contributions, invested in accordance with such Participant's election entirely in one of the Investment Funds or partially in each of two or more of the Investment Funds." 4. By substituting the following for Section 3(e) of the Plan: "(e) Transfer of Funds. As of any change date, each Participant may elect, by giving written notice to FMC at least 30 days (or such other periods as FMC may establish on a uniform and nondiscriminatory basis) in advance, in accordance with uniform rules established by FMC and on a form provided by it for this purpose, or by authorized telephonic voice response, to have such Participant's account balances, other than his Company Contributions Account as of that date (after all adjustments as of that date have been made) invested in accordance with such Participant's election entirely in one of the Investment Funds or partially in each of two or more of the Investment Funds, provided, however, that any such transfer must be in an amount at least equal to the lesser of the aggregate balance of such accounts or $250. Any investment election made by a Participant shall be deemed to be a continuing election until changed. During any period for which a Participant has not made either or both of the above elections, such Participant will be considered to have elected to have the Participant's account balances or future contributions, or both, as the case may be, invested entirely in such fund as is prescribed by FMC. FMC shall from time to time notify each trustee or insurance company with custody of an Investment Fund of the aggregate amounts to be invested in each Investment Fund in accordance with Participants' elections. Notwithstanding anything to the contrary, (i) Company Contributions shall be invested in the Stock Fund and no amount of Company Contributions shall be invested in any other Investment Fund and (ii) only Participants who are at least age 55 may transfer funds out of the Stock Fund and such Participants may only do so annually." 5. By substituting the phrase "an Investment Fund selected by FMC" for the phrase "Fixed Income Fund" where such latter phrase appears in Sections 3(f) and 6(a) of the Plan. 6. By substituting the phrase "Investment Funds other than the Stock Fund" for the phrase "Fixed Income Fund and Equity Fund" where such latter phrase appears in Sections 4(a) and 9(a)(i) of the Plan. 7. By substituting the word "week" for the phrase "calendar month" and the word "month" whereby such phrase or word appears in Section 4(a) and 4(b) of the Plan. 8. By substituting the following for the last sentence in Section 4(b) of the Plan. "All Company Contributions allocated to Company Contributions Accounts shall be invested in FMC stock as part of the FMC Stock Fund. Forfeitures shall be invested in an Investment Fund selected by FMC. 9. By substituting the phrase "all or part of" for the words "his entire" where it appears in the first sentence of Section 5(e) of the Plan. 10. By substituting the phrase "Investment Funds" for the phrase "Stock Equity, or Fixed Income Funds" where such latter phrase (or a similar phrase referring to all such investment funds) appears in Sections 5(h), 9(a)(ii), 14(a), 14(b) of the Plan. 11. By substituting the following sentence for the fifth sentence of Section 6(a) of the Plan: "The period of repayment for any loan shall be from one (1) five (5) years in six-month increments." 12. By substituting the phrase "Investment Funds other than the Stock Fund" for the phrase "Fixed Income Fund and Equity Fund" where such latter phrase appears in Section 9(a)(i) of the Plan. 13. By substituting the following sentence for the second sentence in Section 13(d). "The trustee shall pay all expenses of the Plan out of the Trust Fund, except that Participants shall be charged a participation fee in the amount of $25.00 per year per Participant and a loan processing fee in the amount of $75.00 per loan application, and FMC shall pay expenses not covered by the participation fee and that cannot be charged to the Trust under applicable law." 14. By substituting the following for Section 13(e) of the Plan: "(e) Investment Funds. From time to time, FMC may cause one or more investment funds ("Investment Funds") to be established within the Trust for the investment of Participants' accounts, including a fund consisting of qualifying employer securities (as defined in Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). FMC may, in its discretion, establish pass through voting procedure regarding the voting and tendering of qualifying employer securities with respect to a fund of qualifying employer securities. The Plan may invest in qualifying employer securities to the maximum extent permitted by ERISA (or to 100% in common stock in the case of a profit sharing plan). The continued availability of any Investment Fund is necessarily conditioned upon the terms and conditions of the applicable investment management agreements, and the continued availability of Investment Funds established cannot be assured on the same terms and conditions as may apply from time to time. Participants will be informed from time to time of the availability of Investment Funds as they are established or superseded. Any Investment Fund may be partially or entirely invested in any common, commingled or collective trust fund, pooled investment from or mutual fund which is invested in property of the kind specified for that Investment Fund." 15. By substituting the phrase "Stock Fund Units" for the phrase "Stock Credits" or "shares of Stock" and for the words "Stock" or "shares" standing alone where any such phrases or words appear in Section 14(c)(i and (ii). 16. By deleting Sections 19(v) and 19(x) and redesignating Section 19(w) as Section 19(v), Section 19(y) through 19(bb) as Sections 19(w) through 19(z). 17. By inserting the following new section as Section 19(aa) and by redesignating Sections 19(cc) through 19(tt) as Section 19(bb) through (ss): "(aa). An "Investment Fund" means an investment fund established and maintained by the Trustee as part of the Trust Fund. Any contributions to the Plan placed in Investment Funds shall be invested and reinvested in property of the kind specified for that investment Fund, including in any common, commingled or collective trust fund, pooled investment fund or mutual fund which is invested in property of the kind specified for that Investment Fund." 18. By substituting the following as Section 19(ff): "(ff) "Plan Year" means the period of nine consecutive months beginning on April 1, 1997 and ending on December 31, 1997 and each period of 12 consecutive months beginning on January 1 thereafter." 19. By substituting the following for Section 19(qq) of the Plan: "(qq) "Valuation Date" means any business day or any Valuation Date otherwise prescribed for specific purposes in the Plan." * * * IN WITNESS WHEREOF, the Company has caused this Amendment to be executed as of the effective date herein. FMC CORPORATION By: -------------------------- Title: -------------------------- EX-10.8 8 FMC NON-QUALIFIED RETIREMENT & THRIFT PLAN EXHIBIT 10.8 FMC CORPORATION NON-QUALIFIED RETIREMENT AND THRIFT PLAN ---------------------------------------- (Amended and Restated Effective as of September 1, 1997) CERTIFICATE ----------- I, _______________________, the_____________________ of FMC Corporation, do hereby certify that the attached is a true and correct copy of the FMC Corporation Non-Qualified Retirement and Thrift Plan (As Amended and Restated Effective as of September 1, 1997). By:___________________________________ Title:________________________________ Dated this ____ day of _______________, 1997. FMC CORPORATION NON-QUALIFIED RETIREMENT AND THRIFT PLAN ---------------------------------------- (Amended and Restated Effective as of September 1, 1997)
Table of Contents ----------------- ARTICLE I 1 Introduction 1 Section 1.1. Name; Purpose 1 Section 1.2. Administration of the Plan 1 ARTICLE II 2 Definitions 2 Section 2.1. "Account" 2 Section 2.2. "Account Balance" 2 Section 2.3. "Accounting Date" 2 Section 2.4. "Adopting Affiliate" 2 Section 2.5. "Affiliated Group" 2 Section 2.6. "Board" 2 Section 2.7. "Code" 2 Section 2.8. "Committee" 2 Section 2.9. "Company" 2 Section 2.10. "Company Stock" 3 Section 2.11. "Compensation" 3 Section 2.12. "Deferral Contributions" 3 Section 2.13. "Deferral Contributions Account" 3 Section 2.14. "Effective Date" 3 Section 2.15. "Employer" 3 Section 2.16. "ERISA" 3 Section 2.17. "Excess Compensation" 3 Section 2.18. "Matching Contributions" 3
i FMC CORPORATION NON-QUALIFIED RETIREMENT AND THRIFT PLAN (Amended and Restated Effective as of September 1, 1997) Table of Contents ARTICLE I 1 Introduction 1 Section 1.1. Name; Purpose 1 Section 1.2. Administration of the Plan 1 ARTICLE II 2 Definitions 2 Section 2.1. "Account" 2 Section 2.2. "Account Balance" 2 Section 2.3. "Accounting Date" 2 Section 2.4. "Adopting Affiliate" 2 Section 2.5. "Affiliated Group" 2 Section 2.6. "Board" 2 Section 2.7. "Code" 2 Section 2.8. "Committee" 2 Section 2.9. "Company" 2 Section 2.10. "Company Stock" 3 Section 2.11. "Compensation" 3 Section 2.12. "Deferral Contributions" 3 Section 2.13. "Deferral Contributions Account" 3 Section 2.14. "Effective Date" 3 Section 2.15. "Employer" 3 Section 2.16. "ERISA" 3 Section 2.17. "Excess Compensation" 3 Section 2.18. "Matching Contributions" 3 Section 2.19. "Matching Contributions Account" 3 Section 2.20. "Participant" 4 Section 2.21. "Permitted Investment" 4 Section 2.22. "Plan" 4 Section 2.23. "Plan Year" 4 Section 2.24. "Supplemental Retirement Benefit" 4 Section 2.25. "Tax-Qualified Plans" 4 Section 2.26. "Tax-Qualified Retirement Plan" 4 Section 2.27. "Tax-Qualified Thrift Plan" 4 Section 2.28. "Year of Service" 4 ARTICLE III 4 Plan Participation 4 Section 3.1. Eligibility 4 Section 3.2. Participation 5 ARTICLE IV 6 Deferral Plan Contributions 5 Section 4.1. Deferral Contributions 5 Section 4.2. Deferral Contributions Account 5 ARTICLE V 6 Matching Contributions 6 Section 5.1. Matching Contributions 6 Section 5.2. Matching Contributions Account 6
ii ARTICLE VI 6 Deemed Earnings on Account Balances 6 Section 6.1. 6 (a) Permitted Investments 6 (b) Receipts 7 (c) Disposition 7 (d) Elections 7 (e) Actual Investment Not Required 7 Section 6.2. Crediting of Deferrals 7 Section 6.3. Statement of Accounts 8 ARTICLE VII 8 Supplemental Retirement Benefits 8 Section 7.1. Amount of Benefits 8 Section 7.2. No Supplemental Retirement Benefit Account. 8 ARTICLE VIII 9 Establishment of Trust 9 Section 8.1. Establishment of Trust 9 Section 8.2. Status of Trust 9 ARTICLE IX 9 Distribution of Account Balances 9 Section 9.1. Distribution of Accounts 9 Section 9.2. Emergency Payments 10 Section 9.3. Distribution of Supplemental Retirement Benefits 11 Section 9.4. Distribution of Accounts of Certain Former Employees 11 Section 9.5. Involuntary Distributions 11 Section 9.6. Forfeitures 12 Section 9.7. Designation of Beneficiaries 12
iii ARTICLE X 13 Amendment and Termination 13 Section 10.1. Amendment 13 Section 10.2. Plan Termination 13 ARTICLE XI 13 General Provisions 13 Section 11.1. Non-Alienation of Benefits 13 Section 11.2. Withholding for Taxes 13 Section 11.3. Immunity of Committee Members 14 Section 11.4. Plan Not to Affect Employment Relationship 14 Section 11.5. Action by the Employers 14 Section 11.6. Effect on Other Employee Benefit Plans 14 Section 11.7. Assumption of Employer Liability 14 Section 11.8. Notices 15 Section 11.9. Gender and Number; Headings 15 Section 11.10. Controlling Law 15 Section 11.11. Successors 15 Section 11.12. Severability 15
iv FMC CORPORATION NON-QUALIFIED RETIREMENT AND THRIFT PLAN ---------------------------------------- (Amended and Restated Effective as of September 1, 1997) ARTICLE I Introduction ------------ Section 1.1. Name; Purpose. The Company established the FMC Deferred ------------- Compensation Equivalent Retirement and Thrift Plan effective as of January 1, 1977. This document constitutes an amendment and restatement of such plan, which is renamed the "FMC Corporation Non-Qualified Retirement and Thrift Plan," effective as of September 1, 1997. Unless otherwise expressly provided herein, the capitalized terms used in the Plan shall have the meanings set forth in Article II. This Plan shall constitute an unfunded non-qualified deferred compensation arrangement established for the purpose of providing deferred compensation to a select group of management or highly compensated employees (as defined for purposes of Title I of ERISA) of the Company. The Plan is intended to be maintained and administered in connection with the Tax-Qualified Retirement Plan and the Tax-Qualified Thrift Plan for the benefit of selected employees of the Company whose employee pre-tax contributions and benefits that would have been provided to such employees under the terms of the Tax-Qualified Plans but for the exclusion of deferred compensation from creditable compensation thereunder for purposes of computing benefits and contributions, the limitations of Section 401(a)(17) of the Code and, effective as of January 1, 1998, the limitations of Section 402(g) of the Code. Section 1.2. Administration of the Plan. The Plan shall be administered ------------------------- by the Committee. The duties and authority of the Committee under the Plan shall include (i) the interpretation of the provisions of the Plan, (ii) the adoption of any rules and regulations which may become necessary or advisable in the operation of the Plan, (iii) the making of such determinations as may be permitted or required pursuant to the Plan, and (iv) the taking of such other actions as may be required for the proper administration of the Plan in accordance with its terms. Any decision of the Committee with respect to any matter within the authority of the Committee shall be final, binding and conclusive upon the Company and each Participant, former Participant, designated beneficiary, and each person claiming under or through any Participant or designated beneficiary; and no additional authorization or ratification by the Board shall be required. Any action taken by the Committee with respect to any one or more Participants shall not be binding on the Committee as to any action to be taken with respect to any other Participant. A member of the Committee may be a Participant, but no member of 1 the Committee may participate in any decision directly affecting his rights or the computation of his benefits under the Plan. Each determination required or permitted under the Plan shall be made by the Committee in the sole and absolute discretion of the Committee. ARTICLE II Definitions ----------- Section 2.1. "Account" means a bookkeeping account maintained by the Company for a Participant under the Plan, including the Deferral Contributions Account and the Matching Contributions Account of a Participant. Section 2.2. "Account Balance" means the value, as of a specified date, of any of the Accounts of a Participant. Section 2.3. "Accounting Date" means the last day of each Plan Year, or such other date or dates as the Committee may establish under the Plan. Section 2.4. "Adopting Affiliate" means an entity that, together with the Company, is considered as a single employer for purposes of Sections 414(b), (c) or (m) of the Code and that has adopted the Tax-Qualified Plans pursuant to the applicable provisions of such plans. Section 2.5. "Affiliated Group" has the same meaning as under the Tax- Qualified Plans. Section 2.6. "Board" means the Board of Directors of the Company. Section 2.7. "Code" means the Internal Revenue Code of 1986, as amended. Section 2.8. "Committee" means the Employee Welfare Benefits Plan Committee of the Company or its delegate. Section 2.9. "Company" means FMC Corporation. Section 2.10. "Company Stock" means common stock of the Company. Section 2.11. "Compensation" has the same meaning as the term "Earnings" 2 under the Tax-Qualified Thrift Plan; provided that any amounts contributed on -------- behalf of a Participant under this Plan or a salary reduction arrangement under Sections 125 or 401(k) of the Code shall be included in Compensation. Any Compensation paid or payable to a Participant which is in excess of $150,000 (or such other amount as may then be in effect under Section 401(a)(17) of the Code) shall be referred to herein as "Excess Compensation" and shall not be considered for any purpose under this Plan except as specifically provided in Section 4.1 hereof. Section 2.12. "Deferral Contributions" means the contributions made on behalf of a Participant pursuant to Section 4.1 of the Plan. Section 2.13. "Deferral Contributions Account" means the account maintained on behalf of each Participant which will represent the amount of the Deferral Contributions made on behalf of such Participant pursuant to Section 4.1 of the Plan. Section 2.14. "Effective Date" means September 1, 1997. Section 2.15. "Employer" means, both collectively and individually as determined by the context of the applicable provision, the Company and any Adopting Affiliate. Section 2.16. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. Section 2.17. "Excess Compensation" has the meaning set forth in Section 2.11 of the Plan. Section 2.18. "Matching Contributions" means the contributions made on behalf of a Participant pursuant to Section 5.1 of the Plan. Section 2.19. "Matching Contributions Account" means the account maintained on behalf of each Participant which will represent the amount of the Matching Contributions made on behalf of such Participant pursuant to Section 5.1 of the Plan. Section 2.20. "Participant" means any eligible employee of the Company who is participating under the Plan pursuant to Article III. Section 2.21. "Permitted Investment" means such fund or type of investment as may be approved by the Committee from time to time for purposes of the Plan. 3 Section 2.22. "Plan" means this "FMC Corporation Non-Qualified Retirement and Thrift Plan," as amended from time to time. Section 2.23. "Plan Year" means the calendar year. Section 2.24. "Supplemental Retirement Benefit" has the meaning set forth in Section 7.1 of the Plan. Section 2.25. "Tax-Qualified Plans" means the Tax Qualified Retirement Plan and the Tax-Qualified Thrift Plan, as amended from time to time. Section 2.26. "Tax-Qualified Retirement Plan" means the FMC Corporation Salaried Employees' Retirement Plan, as amended from time to time. Section 2.27. "Tax-Qualified Thrift Plan" means the FMC Employees' Thrift and Stock Purchase Plan, as amended from time to time. Section 2.28. "Year of Service" means, with respect to a Participant, the Participant's number of calendar months of employment by the Affiliated Group (including any interruption of employment up to 12 months) divided by 12. A partial month shall be counted as a whole month, and any fractional year of service shall be ignored. "Year of Service" shall not include (i) any period in excess of 12 months for which the Participant does not receive Compensation, including (without limitation) any leave of absence without pay or (ii) any other interruption if employment in excess of 12 months. ARTICLE III Plan Participation ------------------ Section 3.1. Eligibility. The Committee shall designate each employee ----------- of the Company who is eligible to participate in this Plan; provided, that only -------- those employees of the Company who are in a select group of management or are highly compensated (within the meaning of Title I of ERISA) may be designated as eligible to participate in this Plan. The Committee shall not designate any employee of the Company as eligible to participate in the Plan for a Plan Year unless such employee: (i) is eligible to participate in one or both of the Tax- Qualified Plans for such Plan Year; and (ii) is expected to receive Compensation for such Plan Year under such Tax-Qualified Plan (or Tax-Qualified Plans, 4 as the case may be) in an amount that equals or exceeds the amount determinable under Section 401(a)(17) of the Code for such Plan Year. Section 3.2. Participation. Each employee of the Company who has been ------------- designated by the Committee as eligible to participate in this Plan for a Plan Year shall become a Participant hereunder by timely executing and filing with the Committee a deferral election form in accordance with the requirements of Article IV. ARTICLE IV Deferral Contributions ---------------------- Section 4.1. Deferral Contributions. Each Participant who has made an ---------------------- election under the Tax-Qualified Thrift Plan to defer a portion of his Compensation for a Plan Year may elect to defer hereunder an additional amount for such Plan Year. Such additional amount shall be an amount that could not be deferred under the Tax-Qualified Thrift Plan because the following exclusion and limitations would prevent such amounts from being contributed to the Tax- Qualified Thrift Plan: (i) the exclusion of deferred compensation from creditable compensation for purposes of computing contributions, (ii) the limitations set forth in Section 401(a)(17) of the Code and (iii) effective as of January 1, 1998, the limitations set forth in Section 402(g) of the Code. Any amounts deferred by a Participant pursuant to this Section 4.1 shall be credited to such Participant's Deferral Contributions Account within a reasonable period following the date such amounts would have been contributed to the Tax-Qualified Thrift Plan if such amounts would have been otherwise allowed thereunder. Section 4.2. Deferral Contributions Account. The Committee shall ------------------------------ establish and maintain an account (the "Deferral Contributions Account") with respect to each Participant who has elected to make Deferral Contributions under this Article IV. The Participant's Deferral Contributions Account shall be a bookkeeping account maintained by the Company and shall reflect the amount of Compensation the Participant has elected to defer under the Plan. The amount of any deemed investment earnings and losses on the amounts reflected in a Participant's Deferral Contributions Account shall be credited or charged to his Deferral Contributions Account in accordance with Article VI. 5 ARTICLE V Matching Contributions ---------------------- Section 5.1. Matching Contributions. For each Plan Year, a matching ---------------------- contribution shall be credited to the Participant's Matching Contributions Account in an amount equal to the matching contributions that would have been made with respect to the Deferral Contributions of such Participant if such Deferral Contributions had been made under the Tax-Qualified Thrift Plan. The amount of such matching contributions shall be credited to this Plan on such Participants' behalf as a "Matching Contribution." Section 5.2. Matching Contributions Account. The Committee shall ------------------------------ establish and maintain an account (the "Matching Contributions Account") with respect to each Participant who is entitled to receive Matching Contributions under this Article V. The Participant's Matching Contributions Account shall be a bookkeeping account maintained by the Company and shall reflect the amount of the Matching Contributions credited hereunder on behalf of the Participant. The amount of any deemed investment earnings and losses on the amounts reflected in a Participant's Matching Contributions Account shall be credited or charged to his Matching Contributions Account in accordance with Article VI. ARTICLE VI Deemed Earnings on Account Balances ----------------------------------- Section 6.1. (a) Permitted Investments. Each Participant may designate from time to --------------------- time, in such manner as may be satisfactory to the Committee, that all or a portion of his Deferral Contributions Account be deemed to be invested in one or more Permitted Investments. Such amounts shall be deemed to be invested as specified by the Participant either (i) on the day following the later of (A) the date such Participant makes such designation, or (B) the date such amounts are credited to the Participant's Accounts, or (ii) on such other dates as may be reasonably determined by the Committee. All amounts credited to Participants' Matching Contributions Accounts shall be deemed to be invested in Company Stock. (b) Receipts. Each Account shall be deemed to receive all interest, -------- dividends, earnings and other property which would have been received with respect to a Permitted Investment (or Company Stock as the case may be) deemed to be held in such Account if the Company actually owned such Permitted Investment (or Company Stock as the case may be). Cash deemed received with respect to a Permitted Investment (or 6 Company Stock) shall be credited to the Account as of the date it would have been available for reinvestment if the Company actually owned the Permitted Investment (or Company Stock). (c) Disposition. Each Participant may elect from time to time, at such ----------- time and in such manner as may be satisfactory to the Committee, to dispose of any one or more Permitted Investments deemed to be held in his Account. Such election shall be exercised in accordance with guidelines established by the Committee. (d) Elections. All elections to be made by a Participant pursuant to this --------- Article VI shall be made only by such Participant; provided, that if such -------- Participant dies before his entire Account Balance is distributed pursuant to the terms of the Plan, or if the Committee determines that such Participant is legally incompetent or otherwise incapable of managing his own affairs, the Committee shall have the authority to itself make the elections pursuant to this Section 6.1 on behalf of such Participant, or designate such Participant's designated beneficiary, legal representative or some near relative of such Participant to make the elections pursuant to this Section 6.1 on behalf of such Participant. (e) Actual Investment Not Required. The Company need not actually make ------------------------------ any Permitted Investment. If the Company should from time to time make any investment similar to a Permitted Investment, such investment shall be solely for the Company's own account and the Participant shall have no right, title or interest therein. Accordingly, each Participant is solely an unsecured creditor of the Company with respect to any amount distributable to him under the Plan. Section 6.2. Crediting of Deferrals. The Company shall credit all ---------------------- Deferral Contributions to a Participant's Deferral Contributions Account within a reasonable period following the date such deferred amounts would have been paid to the Participant if the Participant had not made a deferral election under Article IV. The Company shall credit all Matching Contributions made on behalf of a Participant pursuant to Article V to such Participant's Matching Contributions Account within a reasonable period following the date such amounts would have been contributed to the Tax-Qualified Thrift Plan if such amounts would have been otherwise permitted to be contributed thereunder. Section 6.3. Statement of Accounts. At the end of each Plan Year, each --------------------- Participant will be furnished a statement showing the value of his Accounts. 7 ARTICLE VII Supplemental Retirement Benefits. -------------------------------- Section 7.1. Amount of Benefits. If a Participant becomes entitled to ------------------ receive a retirement benefit under the Tax-Qualified Retirement Plan, and such retirement benefit has been limited because of the exclusion of deferred compensation from creditable compensation under the Tax-Qualified Retirement Plan or limited as a result of the maximum compensation limitation imposed by Section 401(a)(17)(as such exclusion and limitations are incorporated in the Tax-Qualified Retirement Plan), such Participant shall be entitled to receive under this Plan the portion of his retirement benefit under the Tax-Qualified Retirement Plan, determined without regard to the exclusion of deferred compensation from the definition of creditable compensation thereunder and without regard to the maximum compensation limitation thereunder, which exceeds the benefit payable to him under the Tax-Qualified Retirement Plan after applying such exclusion and maximum compensation limitations. Such benefit under this Plan shall be referred to hereinafter as a Participant's "Supplemental Retirement Benefit." Section 7.2. No Supplemental Retirement Benefit Account. ------------------------------------------ The amount of a Participant's Supplemental Retirement Benefit, if any, shall be determined at the time such Participant becomes entitled to receive a retirement benefit under the Tax-Qualified Retirement Plan, or such other time as the Committee shall determine in its sole discretion. The Company shall not be required to segregate on its books or otherwise any amount to be used for payment of Supplemental Retirement Benefits under this Plan and Supplemental Retirement Benefits shall not be credited to any Participant's Accounts, or otherwise deemed invested or credited with deemed earnings. ARTICLE VIII Establishment of Trust ---------------------- Section 8.1. Establishment of Trust. The Company may, in its sole ---------------------- discretion, establish a grantor trust (as described in Section 671 of the Code) for the purpose of accumulating assets to provide for the obligations hereunder. The assets and income of such trust shall be subject to the claims of the general creditors of an Employer hereunder, but only to the extent that such assets and income are attributable to the contributions of that individual Employer. The establishment of such a trust shall not affect the Employers' liability to pay benefits hereunder except that any such liability shall be offset by any payments actually made to a Participant under such a trust. In the event such a trust is established, the amount to be contributed thereto shall be determined by the Company and the investment of such assets shall be made in accordance with the trust document. 8 Section 8.2. Status of Trust. Participants shall have no direct or secured --------------- claim in any asset of the trust or in specific assets of their Employer and will have the status of general unsecured creditors of their Employer for any amounts due under this Plan. The assets and income of the trust will be subject to the claims of an Employer's creditors, but only to the extent that such assets and income are attributable to the contributions of that individual Employer. ARTICLE IX Distribution of Account Balances -------------------------------- Section 9.1. Distribution of Accounts. Each Participant shall at all ------------------------ times have a one hundred percent (100%) vested and nonforfeitable interest in his Deferral Contributions Account and shall have a vested and nonforfeitable interest in his Matching Contributions Account on the first day following completion of a given Year of Service in accordance with the following schedule: Years of Service Percentage of Matching Contributions ------------- Account Vested -------------- Less than 2 0% 2 but less than 3 20% 3 but less than 4 40% 4 but less than 5 60% 5 100% With respect to each Participant who, as of the Effective date, is an employee of the Company or an Adopting Affiliate, such Participant's Accounts shall be paid to him (or in the event of his death, to his beneficiary) in cash in a single lump sum on the last day of the sixth (6th) calendar month following the calendar month in which occurs such Participant's termination of employment with the Company and all Adopting Affiliates. Notwithstanding the immediately preceding sentence, such a Participant may make an irrevocable election, subject to the Committee's approval, to have his Accounts paid to him (or in the event of his death, to his beneficiary) in any distribution form permitted under the Tax-Qualified Thrift Plan at any time after the last day of the sixth (6th) calendar month following the 9 calendar month in which occurs the Participant's termination of employment, but not later than ninety (90) days after the date of his death. Such election must be made no later than the last day of the first calendar month following the calendar month in which occurs such Participant's termination of employment with the Company and all Adopting Affiliates. Notwithstanding anything in this Article IX to the contrary, the Committee may establish a minimum amount of any installment payment to be made under the Plan. Section 9.2. Emergency Payments. A Participant may from time to time ------------------ request, in such manner as may be satisfactory to the Committee, that the Committee authorize an emergency payment to such Participant of amounts credited to his Accounts. Any such distribution shall be for the sole purpose of enabling such Participant to meet his immediate and heavy financial needs arising as a result of personal injury, sickness, disability, substantial damage to real or personal property, or other unforeseen and extraordinary emergency of such Participant or a member of his immediate family. Children's educational expenses and the purchase and improvement of a residence are specifically excluded as events deemed to constitute an emergency for purposes of this Section 9.2. If an emergency payment is authorized, the Committee shall distribute to such Participant, within a reasonable time, an amount determined by the Committee to be sufficient to alleviate the financial hardship, but not in excess of the Participant's Account Balance as of such date. In determining the amount to be distributed, the Committee may take into account amounts reasonably available from other resources of the Participant. Section 9.3. Distribution of Supplemental Retirement Benefits. A ------------------------------------------------ Participant's Supplemental Retirement Benefit shall be paid to him (or in the event of his death, to his beneficiary) at the same time and in the same manner as payment of his retirement benefit under the Tax-Qualified Retirement Plan is made. Section 9.4. Distribution of Accounts of Certain Former Employees. The ---------------------------------------------------- Accounts of each Participant who terminated employment with the Company and all Adopting Affiliates prior to the Effective Date shall be paid to him (or in the event of his death, to his beneficiary) in cash in a single lump sum on April 1, 1998. Notwithstanding the immediately preceding sentence, each such Participant who terminated employment prior to the Effective Date may make an irrevocable election prior to January 1, 1998, to have his Accounts paid to him (or in the event of his death, to his beneficiary) in any distribution form permitted under the Tax-Qualified Thrift Plan at any time after April 1, 1998, but no later than ninety (90) days after the date of his death; 10 provided, that to the extent any such Participant filed an approved irrevocable - -------- election with the Committee prior to the Effective Date to have his Accounts paid to him (or in the event of his death, to his beneficiary) at a time or in a manner other than as provided in this Section 9.4, his Accounts shall be distributed in accordance with such election. Notwithstanding anything in this Article IX to the contrary, the Committee may establish a minimum amount of any installment payment to be made under the Plan. Section 9.5. Involuntary Distributions. Notwithstanding the foregoing ------------------------- provisions of this Article IX, the Committee may on its own initiative authorize the Company to distribute to any Participant (or to a designated beneficiary in the event of the Participant's death) all or any portion of the Participant's Account Balance or Supplemental Retirement Benefit if there is a change in tax law, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury, a decision by a court of competent jurisdiction involving a Participant or a beneficiary, or a closing agreement made under Section 7121 of the Code that is approved by the Internal Revenue Service and involves a Participant, and the Committee determines that a Participant has or will recognize income for federal income tax purposes with respect to amounts deferred under this Plan prior to the time such amounts are paid to the Participant. Section 9.6. Forfeitures. The extent to which a Participant's Matching ----------- Contributions Account is not fully vested pursuant to Section 9.1 above shall be a "forfeiture." Except as provided below, a forfeiture shall be treated in the same manner as the Participant's other Accounts under the Plan until the earlier of (i) the Accounting Date on which the Participant with respect to whom the forfeiture arose incurs a one (1) year break in service (as defined in the Tax- Qualified Thrift Plan), or (ii) the Accounting Date as of which the Participant receives a total distribution of his Accounts under the Plan. Forfeitures shall be applied to reduce the obligations of the Participant's Employer to this Plan for the Plan Year coincident with or next following the date the forfeiture arose. Section 9.7. Designation of Beneficiaries. Each Participant may name any ---------------------------- person (who may be named concurrently, contingently or successively) to whom the Participant's Account Balance under the Plan is to be paid if the Participant dies before such Account Balance is fully distributed. Each such beneficiary designation will revoke all prior designations by the Participant, shall not require the consent of any previously named beneficiary, shall be in a form either prescribed by or acceptable to the Committee and will be effective only when filed with the Committee during the Participant's lifetime. If a Participant fails to designate a beneficiary before his death, as provided above, or if the 11 beneficiary designated by a Participant dies before the date of the Participant's death or before complete payment of the Participant's Account Balance, the Committee, in its discretion, may pay the Participant's Account Balance to either (i) one or more of the Participant's relatives by blood, adoption or marriage and in such proportions as the Committee determines, or (ii) the legal representative or representatives of the estate of the last to die of the Participant and his designated beneficiary. A Participant's beneficiary for purposes of the Tax-Qualified Retirement Plan shall be the beneficiary of his Supplemental Retirement Benefit. ARTICLE X Amendment and Termination ------------------------- Section 10.1. Amendment. The Company shall have the right to amend the --------- Plan by action of the Board (or a duly appointed delegate thereof) from time to time, except that no such amendment shall, without the consent of the Participant to whom deferred compensation has been credited to any Account under this Plan, adversely affect the right of the Participant (or his beneficiary) to receive payments of such deferred compensation under the terms of this Plan. Section 10.2. Plan Termination. The Plan may be terminated with respect to ---------------- the Company or any Employer at any time by action in its sole discretion. The Plan shall be automatically terminated (i) with respect to any Employer upon the termination of the Tax-Qualified Plans with respect to such Employer pursuant to the applicable provisions of the Tax-Qualified Plans; and (ii) with respect to any Adopting Affiliate upon such Adopting Affiliate's withdrawal from participation in the Tax-Qualified Plans pursuant to the applicable provisions of the Tax-Qualified Plans. Notwithstanding the foregoing, no termination of this Plan shall alter the right of a Participant (or his beneficiary) to payments of deferred compensation previously credited to such Participant's Accounts or to payments of Supplemental Retirement Benefits accrued under the Plan. 12 ARTICLE XI General Provisions ------------------ Section 11.1. Non-Alienation of Benefits. A Participant's rights to the -------------------------- amounts credited to his Accounts and to any Supplemental Retirement Benefit under the Plan shall not be grantable, transferable, pledgeable or otherwise assignable, in whole or in part, by the voluntary or involuntary acts of any person, or by operation of law, and shall not be liable or taken for any obligation of such person. Any such attempted grant, transfer, pledge or assignment shall be null and void and without any legal effect. Section 11.2. Withholding for Taxes. Notwithstanding anything contained --------------------- in this Plan to the contrary, each Employer shall withhold from any distribution made under the Plan such amount or amounts as may be required for purposes of complying with the tax withholding provisions of the Code or any State income tax act for purposes of paying any estate, inheritance or other tax attributable to any amounts distributable or creditable under the Plan. Section 11.3. Immunity of Committee Members. The members of the ----------------------------- Committee may rely upon any information, report or opinion supplied to them by any officer of an Employer or any legal counsel, independent public accountant or actuary, and shall be fully protected in relying upon any such information, report or opinion. No member of the Committee shall have any liability to the Company or any Participant, former Participant, designated beneficiary, person claiming under or through any Participant or designated beneficiary or other person interested or concerned in connection with any decision made by such member of the Committee pursuant to the Plan which was based upon any such information, report or opinion if such member of the Committee relied thereon in good faith. Section 11.4. Plan Not to Affect Employment Relationship. Neither the ------------------------------------------ adoption of the Plan nor its operation shall in any way affect the right and power of an Employer to dismiss or otherwise terminate the employment or change the terms of the employment or amount of compensation of any Participant at any time for any reason or without cause. By accepting any payment under this Plan, each Participant, former Participant, designated beneficiary and each person claiming under or through such person, shall be conclusively bound by any action or decision taken or made under the Plan by the Committee. Section 11.5. Action by the Employers. ----------------------- 13 Any action required or permitted of an Employer under the Plan shall be by resolution of its Board of Directors or by a duly authorized committee of its Board of Directors, or by a person or persons authorized by resolution of its Board of Directors or such Committee. Section 11.6. Effect on Other Employee Benefit Plans. Any compensation -------------------------------------- deferred or accrued under this Plan (including any Supplemental Retirement Benefit), and any amount credited to a Participant's Accounts under this Plan, shall not be included in the Participant's compensation or earnings for purposes of computing benefits under any other employee benefit plan maintained or contributed to by the Employer except as may otherwise be required under the terms of such employee benefit plans or applicable law. Section 11.7. Assumption of Employer Liability. The obligations of an -------------------------------- Employer under the Plan may be assumed by any other Employer with the consent of the board of directors of the Company (or a duly appointed delegate thereof), in which case such Employer shall be obligated to satisfy all of the previous Employer's obligations under the Plan and the previous Employer shall be released from any continuing obligation under the Plan. At the Company's request, a Participant or designated beneficiary shall sign such documents as the Company may require in order to effectuate the purposes of this Section. Section 11.8. Notices. Any notice required to be given by the Company or ------- the Committee hereunder shall be in writing and shall be delivered in person or by registered mail, return receipt requested. Any notice given by registered mail shall be deemed to have been given upon the date of delivery, correctly addressed to the last known address of the person to whom such notice is to be given. Section 11.9. Gender and Number; Headings. Wherever any words are used --------------------------- herein in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply; and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply. Headings of sections and subsections of the Plan are inserted for convenience of reference and are not part of the Plan and are not to be considered in the construction thereof. Section 11.10. Controlling Law. The Plan shall be construed with respect --------------- to each Employer in accordance with the internal laws of the State where the principal place of business of such Employer is located, to the extent not preempted by any applicable federal law. 14 Section 11.11. Successors. The Plan is binding on all persons entitled ---------- to benefits hereunder and their respective heirs and legal representatives, on the Committee and its successor and on any Employer and its successor, whether by way of merger, consolidation, purchase or otherwise. Section 11.12. Severability. If any provision of the Plan shall be held ------------ held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be enforced as if the invalid provisions had never been set forth therein. 15 EX-10.9 9 FMC 1995 MANAGEMENT INCENTIVE PLAN Exhibit 10.9 FMC 1995 MANAGEMENT INCENTIVE PLAN ---------------------------------- 1. PURPOSE OF THE PLAN The purpose of the FMC 1995 Management Incentive Plan is to promote the long- term performance of FMC by (i) providing long-term incentives in cash and common stock of FMC to key management employees of FMC and its subsidiaries, (ii) assisting in attracting and retaining as employees persons whose abilities, experience and judgment have contributed and will continue to contribute to the financial success and progress of FMC, and (iii) aligning the identity of interests of those employees and FMC's shareholders. 2. DEFINITIONS (a) "Award" means a Stated Year Incentive Award or an Incentive Benefit. (b) "Board of Directors" means the Board of Directors of FMC as it may be constituted from time to time. (c) "CEO" means the Chief Executive Officer of FMC. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Committee" means the Compensation and Organization Committee of the Board of Directors. (f) "Common Stock" means the common stock of FMC. (g) "Date of Grant" means the date which is designated by the Committee as the date of grant of an Award. (h) "Disability" means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed when such disability commenced. (i) "Employee" means any person employed by the FMC Companies. (j) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (k) "Fair Market Value" means the closing price of a share of Common Stock on a specified date as reported in the New York Stock Exchange Composite Page 1 Transactions for such date, or such other measurement of value as may be specified by the Committee from time to time. (l) "Financial Objective" means Net Contribution. (m) "FMC" means FMC Corporation. (n) "FMC Company" or "FMC Companies" means FMC and each Subsidiary Company. (o) "Incentive Benefit" means an Award granted pursuant to Section 8. (p) "Net Contribution" means for a business unit, operating profit after tax less the product of 11.5% (the capital charge) and the unit's Capital Employed (operating working capital plus net property, plant and equipment). (q) "Option" means an Incentive Stock Option or a Nonqualified Stock Option. (r) "Parent Corporation" means a corporation which, with respect to another corporation, is a parent corporation within the meaning of Section 424(e) of the Code. (s) "Participant" means an Employee who has received an Award which has not been exercised, paid, cancelled or forfeited and which has not expired. (t) "Plan" means the FMC 1995 Management Incentive Plan. (u) "Plan Year" means each calendar year commencing on or after January 1, 1995. (v) "Restricted Stock" means Common Stock payable as part of an Award which is subject to a restriction period before it is paid to a Participant, and such other restrictions as may be specified by the Committee at the time the Award is granted. (w) "Stated-Year Incentive Award" means an award payable in cash and either Common Stock or Restricted Stock based on achievement of a Participant's unit's Financial Objectives over a Stated-Year Period. (x) "Stated-Year Incentive Target Bonus" means the target bonus established for each Participant which is the basis for the Participant's Stated-Year Incentive Award. Page 2 (y) "Stated-Year Period" means a period of the number of years in the Incentive Award period determined by the Committee and commencing on January 1 of each Plan Year. (z) "Subsidiary Company" means (i) any corporation the majority of the voting power of all classes of stock entitled to vote or the majority of the total value of shares of all classes of stock of which is owned, directly or indirectly, by FMC, or (ii) any trade or business other than a corporation the majority of the profits interest, capital interest or actuarial interest of which is owned, directly or indirectly, by FMC. (aa) "Subsidiary Corporation" means a corporation or other entity that, with respect to another corporation, is a subsidiary corporation within the meaning of Section 424(f) of the Code. 3. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee. Except as limited by the express provisions of the Plan or by resolutions adopted by the Board of Directors, the Committee shall have the authority and discretion to interpret the Plan, to establish and revise rules and regulations relating to the Plan, and to make any other determinations that it believes necessary or advisable for the administration of the Plan. Decisions and determinations by the Committee shall be final and binding on all persons. Notwithstanding anything to the contrary contained in the Plan, the Board of Directors shall also have all power and authority to perform any act granted to the Committee pursuant to the Plan. 4. PARTICIPATION Participants shall be determined by the Committee, in its sole discretion, from Employees who, in the Committee's judgment, have a significant opportunity to influence the growth of FMC or whose outstanding performance or potential merit further incentive and reward for continued employment and accomplishment. 5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN Subject to adjustment pursuant to Section 9, at no time may the sum of (a) the number of shares of Common Stock issued in payment of Awards and subject to outstanding Awards under this Plan and (b) the number of shares of Common Stock issued or subject to outstanding options under the FMC 1995 Stock Option Plan exceed 3.0 million. In the event that any outstanding Award for any Page 3 reason expires, terminates, is cancelled or forfeited, without having been exercised or otherwise realized in full, the shares of Common Stock allocable to the expired, terminated, cancelled or forfeited portion of such Award shall (unless the Plan shall have been terminated) become available for subsequent grants of Awards. 6. STATED-YEAR INCENTIVE AWARDS (a) Financial Objectives. The Committee shall determine the number of years in each Incentive Award period. The Committee, after consultation with the CEO, shall establish the Financial Objective for each unit for each Stated- Year Period. A Stated Year Incentive Target Bonus shall be established by the CEO for each Participant. (b) Individual Awards. Following the close of each Stated-Year Period, the Committee shall evaluate the performance of each unit against the unit's Financial Objective for the Stated-Year Period, and certify a rating of zero to three for the unit. A Participant's Stated-Year Incentive Award shall be the product of the rating for the Participant's unit and Stated- Year Incentive Target Bonus. (c) Form and Time of Payment (i) Form. Each Stated-Year Incentive Award will be paid partly in cash and partly in either Common Stock that is not Restricted Stock or Restricted Stock, as elected by the Participant; provided, however, that if a Participant is covered by FMC's Stock Ownership Policy and such Participant does not own a sufficient amount of Common Stock under the Stock Ownership Policy guidelines, such Participant shall receive the stock portion of the Stated-Year Incentive Award in Restricted Stock. The number of shares of stock payable shall be equal to (A) the quotient of the stock portion of the Participant's Stated-Year Incentive Award divided by the Fair Market Value on the last day of the Stated- Year Period to which the award relates plus (B) 20 percent of the quotient in (A) provided that, if the Participant receives Common Stock that is not restricted, the number of shares payable shall be reduced by one-sixth. The portion of the Stated-Year Incentive Award to be paid in cash and in stock shall be as determined by the Committee at the date of grant of the Award. (ii) Timing. Payment of the portion of each Stated-Year Incentive Award payable in cash or Common Stock that is not Restricted Stock shall be made, without interest, as soon as practicable after the close of the Stated-Year Period to which such award relates. Payment of any portion of a Stated-Year Incentive Award payable in Restricted Stock will be made as soon as practicable Page 4 following the close of the restricted period for that Restricted Stock and the ending, or fulfillment, of other restrictions applicable to the Restricted Stock. (d) Special Rules for Transition Period. Each Participant in the 1995 and/or 1996 Plan Years shall receive a draw against the Stated-Year Incentive Award otherwise payable for the Stated-Year Periods beginning January 1, 1995 and/or January 1, 1996. The amount of such draw shall be paid in cash and shall equal the target bonus amount under the BPF portion of the prior plan. Such Participant's Stated-Year Incentive Award, if any, for the Stated-Year Periods beginning in 1995 and/or in 1996 shall be reduced (but not below zero) by the amount of such draw. (e) Transfers Between Units. If a Participant transfers employment from one unit to another during a Stated-Year Period, the Participant's Stated-Year Incentive Award shall be prorated based on the proportion of time spent in each unit in which the Participant has spent at least six months. 7. TERMINATION OF EMPLOYMENT (a) During Award Period. Subject to meeting the performance goals, a Participant shall be entitled to receive payment of a Stated-Year Incentive Award only if employment with the FMC Companies continues uninterrupted from the first day of participation in the Award to the earlier of: (i) the last day of the applicable Stated-Year Period, (ii) retirement under the terms of any formal retirement plan of any FMC Company, (iii) death, or (iv) Disability; provided that if termination occurs before the last day of the applicable Stated-Year Period for any of the reasons contained in (ii), (iii) or (iv) the Award shall be prorated. Termination of employment before the last day of the applicable Stated-Year Period for any reason other than the reasons contained in (ii), (iii) or (iv) will result in automatic cancellation and forfeiture of the Award, provided that the Committee may, if it believes circumstances warrant such action, authorize payment of all or any portion of any Award that otherwise would be forfeited pursuant to this section. (b) During Restriction Period for Restricted Stock. Notwithstanding paragraph (a) of this section, if a Participant receives Restricted Stock and employment with the FMC Companies is terminated for any reason contained in (ii), (iii) or (iv) of paragraph (a) or involuntary termination prior to the conclusion of the restriction period for Restricted Stock, the Participant shall receive a number of shares equal to the sum of (A) five-sixths of the number of shares of Restricted Stock payable under Section 6(c)(i) and (B) the product of one-sixth of the number of shares of Restricted Stock payable under Section 6(c)(i) and a fraction, the numerator of which is the number of days between the commencement of the restriction period for the Restricted Stock and the Page 5 termination of employment and the denominator of which is 365 times the number of years in the restriction period for the Restricted Stock, and the balance of the stock portion of the Award shall be forfeited. If, prior to the conclusion of the restriction period for Restricted Stock, the Participant otherwise voluntarily terminates employment with the FMC Companies, any of the FMC Companies terminates the Participant's employment for good cause (as defined in Section 12(e)), or the Committee determines, in its sole discretion, that the Participant has engaged or may engage in employment or activities competitive with, or contrary to the best interests of, the FMC Companies, the Participant shall receive a number of shares equal to five-sixths of the number of shares of Restricted Stock payable under Section (c)(1). 8. INCENTIVE BENEFITS In addition to Stated-Year Incentive Awards, the Committee may, at its discretion, create and grant such Incentive Benefits as it believes are desirable (including by way of illustration and not by way of limitation, stock appreciation rights, stock bonus and restricted stock awards), provided that: (a) any Incentive Benefits shall be governed by the terms of the Plan as in effect on the Date of Grant of such Incentive Benefits, and for such purpose, notwithstanding the provisions of Section 15, the Committee may amend the Plan to create and describe Incentive Benefits and the governing terms thereof; (b) the creation of Incentive Benefits may not, without stockholder approval, (i) increase the total number of shares of Common Stock issuable under the Plan, or (ii) materially modify the requirements as to eligibility for participation in the Plan; (c) the Committee shall not have the power to create and grant Incentive Benefits that would result in the grant of a prohibited tandem stock option or other prohibited tandem arrangement, with respect to any Incentive Stock Options, as described in applicable regulations under Section 422 of the Code, and (d) with respect to grants and awards to persons subject to Section 16(b) of the Exchange Act, Incentive Benefits granted or awarded shall have such terms and conditions as will comply with Rule 16b-3 or other similar rules. 9. DILUTION AND OTHER ADJUSTMENTS In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, Page 6 spinoff, reorganization, combination or exchange of shares or other similar corporate change, the Committee shall make such adjustments, if any, as it in its sole discretion deems equitable (a) in the number of shares of Common Stock that may be issued under the Plan in payment of any Award, or (b) in the Financial Objectives during any Stated-Year Period from which the requisite performance levels are calculated, such adjustments to be conclusive and binding upon all parties concerned. The Committee may also make adjustments, to the extent it deems appropriate, in a unit's performance goals during and after any Stated-Year Period to compensate for or reflect any significant changes that may have occurred during such Stated-Year Period in accounting practices, tax laws or other laws or regulations which alter or affect the unit's performance, actual economic conditions, such as inflation, when contrasted with the assumptions underlying the unit's performance goals or changes resulting from corporate restructuring including without limitation, acquisitions and divestitures. 10. CHANGE OF CONTROL If a Change of Control of the Company occurs while any Awards remain outstanding under the Plan, then from and after the date of such Change of Control, the full value of each outstanding Award shall become exercisable and/or fully vested and shall be paid in full to the Participant as soon as practicable following the date of such Change. A "Change of Control" of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions is satisfied: (a) The "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than 20 percent (20%) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities") is acquired by a Person (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an affiliate thereof, any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company); provided, however, that any acquisition from the Company or any acquisition pursuant to a transaction that complies with clauses (i), (ii) and (iii) of paragraph (c) of this Section 10 shall not be a Change of Control under this paragraph (a); or (b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Page 7 Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (c) Consummation by the Company of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock of another entity (a "Business Combination"), in each case, unless immediately following such Business Combination: (i) more than 60% of the combined voting power of then outstanding voting securities entitled to vote generally in the election of directors of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries (the "Parent Corporation"), is represented, directly or indirectly by Company Voting Securities outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Company Voting Securities, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) except to the extent that such ownership of the Company existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. However, in no event shall a Change of Control be deemed to have occurred, with respect to the Executive, if the Executive is part of a purchasing group which consummates the Change of Control transaction. The Executive shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Executive is an equity participant in the purchasing company or group (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company, or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined Page 8 prior to the Change of Control by a majority of the nonemployee continuing Directors). 11. CANCELLATION OF AWARDS The Committee may cancel all or any part of an Award with the written consent of the Participant holding such Award. In the event of any cancellation, all rights of the former Participant in respect of such cancelled Award shall terminate. 12. MISCELLANEOUS PROVISIONS (a) Assignment and Transfer. Awards shall not be transferable other than by will or the laws of descent and distribution and Awards may be exercised or otherwise realized, during the lifetime of the grantee, only by the grantee or by his or her guardian or legal representative. (b) No Right to Awards or Employment. No Employee or other person shall have any claim or right to be granted an Award, nor shall any Participant have a right to receive payment of an Award in any form other than as the Committee shall approve. Neither the Plan nor any action taken hereunder shall be construed as giving any Employee or Participant any right to be retained in the employ of any FMC Company. (c) Taxes. The FMC Companies shall have the right to deduct from payment of an Award any taxes required by law to be withheld from an Employee with respect to such payment and, in the case of Awards paid in Common Stock the Employee or other person receiving such stock shall be required to pay to the FMC Companies the amount of any taxes required to be withheld from an Employee with respect to such stock. (d) Securities Laws. Each Award shall be subject to the condition that such Award may not be exercised or paid if the Committee determines that the sale of securities upon exercise or payment of such Award may violate the Securities Act of 1933 or any other law or requirement of any governmental authority. FMC shall not be deemed by any reason of the granting of any Award to have any obligation to register the shares subject to such Award under the Securities Act of 1933 or to maintain in effect any registration of such shares which may be made at any time under the Securities Act of 1933. (e) Good Cause. For purposes of this Plan, "good cause" means: (i) the Employee's willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from Disability), after a written demand for substantial performance is delivered to the Employee that specifically identifies the manner in which the Company believes that the Page 9 Employee has willfully failed to substantially perform his duties, and after the Employee has failed to resume substantial performance of his duties on a continuous basis within thirty (30) calendar days of receiving such demand; (ii) the Employee's willfully engaging in conduct (other than conduct covered under (i) above) that is demonstrably and materially injurious to the Company, monetarily or otherwise, or (iii) the Employee's having been convicted of, or plead guilty or nolo contendere to, a felony. For purposes of this paragraph, no act, or failure to act, on the Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Employee not in good faith and without reasonable belief that the action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors or upon the instructions of the chief executive officer or a senior officer of the Company or based upon the advice of counsel for the company shall be conclusively presumed to be done, or omitted to be done, by the employee in good faith and in the best interests of the Company. (f) Severability. Whenever possible, each provision in the Plan and in every Award shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Plan or any Award shall be held to be prohibited by or invalid under applicable law then (i) such provision shall be deemed amended to, and to have contained from the outset such language shall be necessary to, accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (ii) all other provisions of the Plan and every Award shall remain in full force and effect. (g) No Strict Construction. No rule of strict construction shall be applied against FMC, the Committee or any other person in the interpretation of any of the terms of the Plan, any Award or any rule or procedure established by the Committee. (h) Stockholder Rights. A Participant shall not have any dividend, voting or other stockholder rights by reason of an Award prior to the issuance of any Common Stock pursuant to such Award. (i) Governing Law. The Plan shall be governed by and construed in accordance with the laws of the United States of America and, to the extent not inconsistent therewith, by the laws of the State of Illinois. Page 10 13. AMENDMENT AND TERMINATION (a) Amendment. The Board of Directors may at any time amend, suspend or terminate the Plan, provided that no such action shall adversely affect any rights under any Award theretofore granted or change the objectives or other measure of performance applicable to an Award in a manner adverse to Participants in accordance with Section 9. No amendment may, without stockholder approval in accordance with Section 14, increase the total number of shares of Common Stock issuable under the Plan. (b) Termination. The right to grant further Awards shall terminate automatically upon the granting of such Awards which, together with shares of Common Stock previously issued and/or subject to outstanding Awards, equals the maximum authorized under the Plan, subject to additional shares of Common Stock becoming available for Awards by reason of forfeitures or cancellations of earlier Awards. 14. EFFECTIVE DATE OF THE PLAN The Plan shall become effective as of January 1, 1995, subject to approval by the affirmative vote of the holders of a majority of the securities of FMC present, or represented, and entitled to vote at the next annual meeting of the stockholders of FMC. Page 11 EX-10.11 10 FMC CORPORATION EXECUTIVE SEVERANCE PLAN Exhibit 10.11 FMC CORPORATION EXECUTIVE SEVERANCE PLAN ------------------------ (As Amended and Restated Effective April 18, 1997) 1. Statement of Purpose. The purpose of the FMC Corporation Executive Severance Plan ("Plan") is to assure FMC Corporation ("Company") that it will have the continued dedication and the availability of objective advice and counsel from key executives of the Company notwithstanding the possibility, threat or occurrence of a bid to take over control of the Company. In the event the Company receives any proposals from a third person concerning a possible business combination with the Company, or acquisition of the Company's equity securities, the Board of Directors believes it imperative that the Company and the Board of Directors be able to rely upon key executives to continue in their positions and be available for advice without concern that those individuals might be distracted by their own personal financial situation and risks created by such a proposal. Should the Company receive any such proposal, key executives will be called upon to assist in the assessment of the proposal, advise management and the Board of Directors as to whether the proposal would be in the best interest of the Company and its stockholders and to take such other actions as the Board of Directors might determine appropriate. 2. Eligible Executives. Participants under this Plan shall consist of the Chairman of the Board, the President, the Executive and Senior Vice Presidents, Group and Regional Managers, other officers (except Assistant Secretaries and Assistant Treasurers) and Division Managers of the Company and those other key executives of the Company and its Subsidiaries who are from time to time designated to be included within this Plan by the Committee in its sole discretion. A Participant shall cease to be a Participant in the Plan upon the determination of the Committee. No determination that a Participant has ceased to be a Participant shall be made, and if made shall have no effect, during any period of time when the Company has knowledge that any Person, as that term is defined in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of Page 1 1934, as amended ("Exchange Act"), has taken steps reasonably calculated to effect a Change In Control of the Company (as defined below) until, in the opinion of the Board of Directors, the Person has abandoned or terminated its efforts to effect a Change In Control. Any decision by the Board of Directors that the Person has abandoned or terminated its efforts to effect a Change In Control shall be conclusive and binding on the Participants. 3. Terms of the Plan. The terms of the Plan are as set forth in the forms of agreement attached to this Plan, with: . Form IA applicable to Tier IA Participants; . Form I applicable to Tier I Participants; . Form II applicable to Tier II Participants; and . Form III applicable to Tier III Participants. The Company shall enter into Executive Severance Agreements (the "Agreements") with each Participant containing the terms set forth in the applicable form. Even though the Company or a Participant has not executed an Agreement, the Participant shall be entitled to participate in the Plan on the terms and conditions set forth in the form of agreement applicable to the Participant. 4. Certain Definitions. Capitalized terms used in this Plan but not defined above shall have the meaning set forth below: a. Board of Directors means the duly elected Board of Directors of FMC Corporation as it is constituted from time to time. b. Change In Control of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions is satisfied: (1) The "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than 20 percent (20%) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities") is acquired by a Person (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an affiliate thereof, any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Page 2 Company); provided, however, that any acquisition from the Company or any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (3) of this section shall not be a Change in Control under this paragraph; or (2) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock of another entity (a "Business Combination"), in each case, unless immediately following such Business Combination: (i) more than 60% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries (the "Parent Corporation"), is represented, directly or indirectly by Company Voting Securities outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Company Voting Securities, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of Page 3 the then outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) except to the extent that such ownership of the Company existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (4) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. However, in no event shall a Change in Control be deemed to have occurred, with respect to a Participant, if the Participant is part of a purchasing group which consummates the Change-in-Control transaction. The Participant shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Participant is an equity participant in the purchasing Company or group (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which in otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing Directors). c. Committee shall mean the Compensation and Organization Committee of the Board of Directors or such other Committee of the Board of Directors as on the Date of Termination has the duties and responsibilities presently delegated to the Compensation and Organization Committee. d. Participant means one of the Tier IA Participants, Tier I Participants, Tier II Participants, or Tier III Participants. e. Subsidiary means any domestic or foreign corporation, a majority of whose voting shares is owned directly or indirectly by the Company or by one or more other Subsidiaries or by a combination thereof. f. Tier IA Participants means the Chairman of the Board and Chief Executive Officer and the President. g. Tier I Participants means the Executive Vice Presidents, Senior Vice Presidents, Group Managers, International Regional Managers and such other employees of Page 4 the Company or a Subsidiary as are designated by the Committee to be Participants. h. Tier II Participants means all officers of the Company (other than Assistant Secretaries and Assistant Treasurers) and such other employees of the Company or a Subsidiary as are designated by the Committee to be Participants. i. Tier III Participants means Division Managers and such other employees of the Company or a Subsidiary as are designated by the Committee to be Participants. 5. Trust. As soon as practical, the Company shall create a trust in accordance with the terms of the forms of Agreement. The trust shall have such assets as the forms of Agreement provide. Any assets contained in the trust shall, at all times, be specifically subject to the claims of the Company's general creditors in the event of bankruptcy or insolvency; such terms to be specifically defined within the provisions of the trust, along with the required procedure for notifying the Trustee of any bankruptcy or insolvency. 6. Termination and Amendment of this Plan. The Board of Directors or the Committee shall have power at any time, in their discretion, to amend, abandon or terminate this Plan, in whole or in part; except that, no amendment, abandonment or termination shall modify, waive or discharge any provisions of the Agreements unless such modification, waiver or discharge is agreed in writing and signed by the Executive and by an authorized member of the Committee or a person to whom the Committee has delegated signature authority or by the respective parties' legal representatives and successors. 7. Governing Law. The validity, interpretation, construction and enforcement of this Plan shall be governed by the laws of the State of Illinois, without giving effect to the principles of conflicts of laws thereof, to the extent not pre-empted by the laws of the United States. To the extent so pre-empted, the laws of the United States shall control. 8. Administration by the Committee. The Committee shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof. The Committee shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan. The Committee shall interpret the Plan and shall determine all questions arising in the administration, interpretation, and application of the Plan, Page 5 including but not limited to, questions of eligibility and the status and rights of employees, Participants and other persons. Any such determination by the Committee shall presumptively be conclusive and binding on all persons. The regularly kept records of the Company and any Subsidiary shall be conclusive and binding upon all persons with respect to a Participant's date and length of service, amount of compensation and the manner of payment thereof, type and length of any absence from work and all other matters contained therein relating to Participants. All rules and determinations of the Committee shall be uniformly and consistently applied to all persons in similar circumstances. 9. Incapacity of Recipient. If any person entitled to a distribution under the Plan is deemed by the Company or its designee to be incapable of personally receiving and giving a valid receipt for such payment, then, unless and until claim therefor shall have been made by a duly appointed guardian or other legal representative of such person, the Company or its designee may provide for such payment or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Company, its designee and the Plan therefor. 10. Indemnification. The Company and each Subsidiary shall indemnify and hold harmless each member of the Committee, or any employee of the Company or any Subsidiary (to the extent not indemnified or saved harmless under any liability insurance or any other indemnification arrangement) from any and all claims, losses, liabilities, costs and expenses (including attorneys' fees) arising out of any actual or alleged act or failure to act made in good faith pursuant to the provisions of the Plan or the trust, including expenses reasonably incurred in the defense of any claim relating thereto with respect to the administration of the Plan or the trust, except that no indemnification or defense shall be provided to any person with respect to any conduct that has been judicially determined, or agreed by the parties, to have constituted willful misconduct on the part of such person, or to have resulted in his or her receipt of personal profit or advantage to which he or she is not entitled. 11. Limitations on Liability. Notwithstanding any of the preceding provisions of the Plan, neither the Company nor any individual acting as employee or agent of the Company shall be liable to any Participant, former Participant, or Page 6 other person for any claim, loss, liability or expense incurred in connection with the Plan. 12. Unclaimed Benefit. In the event that all, or any portion, of the distribution payable to a Participant hereunder shall, at the expiration of five years after it shall become payable, remain unpaid solely by reason of the inability of the Committee, after sending a registered letter, return receipt requested, to the last known address, and after further diligent effort, to ascertain the whereabouts of such Participant, the amount so distributable shall be treated as a forfeiture and shall be retained by the Company as part of its general assets. 13. Effective Date. The Company previously adopted an Executive Severance Plan effective as of February 19, 1982 and last Amended and Restated effective as of February 16, 1990. This Plan shall be an amendment and restatement of that previous plan, effective as of April 18, 1997. Page 7 Form IA Executive Severance Agreement for FMC Corporation
Contents - ------------------------------------------------------- Page Article 1. Establishment, Term, and Purpose 3 Article 2. Definitions 3 Article 3. Severance Benefits 8 Article 4. Form and Timing of Severance Benefits 11 Article 5. Excise Tax Equalization Payment 11 Article 6. Establishment of Trust 13 Article 7. The Company's Payment Obligation 13 Article 8. Legal Remedies 14 Article 9. Outplacement Assistance 14 Article 10. Successors and Assignment 14 Article 11. Miscellaneous 15
Page 1 FMC Corporation Executive Severance Agreement THIS AGREEMENT is made and entered into as of the ___ day of ______, ____, by and between FMC Corporation (hereinafter referred to as the "Company") and ________________ (hereinafter referred to as the "Executive"). WHEREAS, the Board of Directors of the Company has approved the Company entering into severance agreements with certain key executives of the Company; WHEREAS, the Executive is a key executive of the Company; WHEREAS, should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board should be able to rely upon the Executive to continue in his position, and that the Company should be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; WHEREAS, should the possibility of a Change in Control arise, in addition to his regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its shareholders, and to take such other actions as the Board might determine to be appropriate; and WHEREAS, the Executive and the Company desire that the terms of this Agreement shall completely replace and supersede the provisions set forth in the FMC Corporation Executive Severance Plan [and the Executive Severance Agreement, entered into by and between the Company and the Executive on ____________], setting forth the terms and provisions with respect to the Executive's entitlement to payments and benefits following a Change in Control of the Company. NOW THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Executive agree as follows: Page 2 Article 1. Establishment, Term, and Purpose This Agreement will commence on the Effective Date and shall continue in effect for three (3) full years. However, at the end of such three (3) year period and, if extended, at the end of each additional year thereafter, the term of this Agreement shall be extended automatically for one (1) additional year, unless the Committee delivers written notice six (6) months prior to the end of such term, or extended term, to each Executive, that the Agreement will not be extended. In such case, the Agreement will terminate at the end of the term, or extended term, then in progress. However, in the event a Change in Control occurs during the original or any extended term, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; or (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. Article 2. Definitions Whenever used in this Agreement, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized. 2.1 "Base Salary" means the salary of record paid to an Executive as annual salary, excluding amounts received under incentive or other bonus plans, whether or not deferred. 2.2 "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. 2.3 "Beneficiary" means the persons or entities designated or deemed designated by the Executive pursuant to Section 11.2 herein. 2.4 "Board" means the Board of Directors of the Company. 2.5 "Cause" means: (a) the Executive's willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from Disability or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes that the Executive has willfully failed to substantially perform his duties, and after the Executive has failed to resume substantial performance of his duties on a continuous basis within thirty (30) calendar days of receiving such demand; (b) the Executive's willfully engaging in conduct (other than conduct covered under (a) above) which is demonstrably and materially injurious to the Company, monetarily or otherwise; or (c) the Page 3 Executive's having been convicted of, or plead guilty or nolo contendere to, a felony. For purposes of this subparagraph, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the chief executive officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose, (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (a) or (b) above, and specifying the particulars thereof in detail. The Executive shall not be precluded from contesting such resolution pursuant to an arbitration proceeding under Section 8.2 of this Agreement. 2.6 "Change in Control" of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions is satisfied: (a) The "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than 20 percent (20%) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities") is acquired by a Person (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an affiliate thereof, any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company); provided, however that any acquisition from the Company or any acquisition pursuant to a transaction which complies with clauses (i), (ii), and (iii) of paragraph (c) of this Section 2.6 shall not be a Change in Control under this paragraph (a); or (b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at Page 4 least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation by the Company of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock or another entity (a "Business Combination"), in each case, unless immediately following such Business Combination: (i) more than 60% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries (the "Parent Corporation"), is represented, directly or indirectly by Company Voting Securities outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Company Voting Securities, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) except to the extent that such ownership of the Company existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. However, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive, if the Executive is part of a purchasing group which consummates the Change-in-Control transaction. The Executive shall be Page 5 deemed "part of a purchasing group" for purposes of the preceding sentence if the Executive is an equity participant in the purchasing company or group (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing Directors). 2.7 "Code" means the United States Internal Revenue Code of 1986, as amended, and any successors thereto. 2.8 "Committee" means the Compensation and Organization Committee of the Board or any other committee appointed by the Board to perform the functions of the Compensation and Organization Committee. 2.9 "Company" means FMC Corporation, a Delaware corporation, or any successor thereto as provided in Article 10 herein. 2.10 "Disability" means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which the Executive was employed when such disability commenced. 2.11 "Effective Date" means the date of this Agreement set forth above. 2.12 "Effective Date of Termination" means the date on which a Qualifying Termination occurs which triggers the payment of Severance Benefits hereunder. 2.13 "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. 2.14 "Good Reason" shall mean, without the Executive's express written consent, the occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including offices and reporting requirements) as an employee of the Company, or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from those in effect immediately preceding the Change in Control; (b) The Company's requiring the Executive to (i) be based at a location which is at least twenty-five (25) miles from the office where the Executive is located at the time of the Change in Control, (not including Page 6 for this clause (i) required travel on the Company's business to an extent substantially consistent with the Executive's business immediately prior to the Change in Control) or (ii) travel on Company business to an extent substantially greater than the travel obligations of the Executive immediately prior to the Change in Control; (c) A reduction by the Company in the Executive's Base Salary as in effect immediately prior to the Change in Control or as the same shall be increased from time to time; (d) The failure of the Company to (i) continue in effect any employee benefit plan, compensation plan, welfare benefit plan or material fringe benefit plan in which the Executive is participating immediately prior to such Change in Control or the taking of any action by the Company which would adversely affect the Executive's participation in or reduce the Executive's benefits under any such plan, unless the Executive is permitted to participate in other plans providing Executive with at least substantially equivalent benefits in the aggregate (at substantially equivalent cost with respect to welfare benefit plans), or (ii) provide the Executive with paid vacation in accordance with the most favorable vacation policies of the Company and its affiliated companies as in effect for the Executive immediately prior to such Change in Control, including the crediting of all service for which the Executive had been credited under such vacation policies prior to the Change in Control; (e) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Article 10 herein; or (f) Any termination of Executive's employment by the Company that is not effected pursuant to a Notice of Termination. The existence of Good Reason shall not be affected by the Executive's temporary incapacity due to physical or mental illness not constituting a Disability. The Executive's Retirement shall constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. The Executive's continued employment shall not constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. 2.15 "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Page 7 2.16 "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as provided in Section 13(d). 2.17 "Qualifying Termination" means any of the events described in Section 3.2 herein, the occurrence of which triggers the payment of Severance Benefits hereunder. 2.18 "Retirement" means the Executive's voluntary termination of employment in a manner which qualifies the Executive to receive immediately payable retirement benefits under the Company's tax-qualified retirement plan or under the successor or replacement of such retirement plan if it is then no longer in effect; provided, that a termination for Good Reason which otherwise constitutes Retirement shall be treated as Good Reason for purposes of being a Qualifying Termination under this Agreement. 2.19 "Severance Benefits" means the payment of severance compensation as provided in Section 3.3 herein. 2.20 "Trust" means the Company grantor trust to be created pursuant to Article 6 of this Agreement. Article 3. Severance Benefits 3.1 Right to Severance Benefits. The Executive shall be entitled to receive from the Company Severance Benefits, as described in Section 3.3 herein, if there has been a Change in Control of the Company and if, within twenty-four (24) calendar months following the Change in Control, a Qualifying Termination of the Executive has occurred. The Executive shall not be entitled to receive Severance Benefits if he is terminated for Cause, or if his employment with the Company ends due to death, Disability, or Retirement or due to a voluntary termination of employment by the Executive without Good Reason other than during the thirteenth (13th) calendar month following the month in which a Change in Control occurs. 3.2 Qualifying Termination. The occurrence of any one or more of the following events shall trigger the payment of Severance Benefits to the Executive under this Agreement: (a) An involuntary termination of the Executive's employment by the Company for reasons other than Cause within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs; Page 8 (b) A voluntary termination by the Executive for Good Reason within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs pursuant to a Notice of Termination delivered to the Company by the Executive; (c) A voluntary termination by the Executive during the thirteenth (13/th) calendar month following the month in which a Change in Control occurs pursuant to a Notice of Termination delivered to the Company by the Executive; or (d) The Company or any successor company breaches any of the provisions of this Agreement following a Change in Control. 3.3 Description of Severance Benefits. In the event the Executive becomes entitled to receive Severance Benefits, as provided in Sections 3.1 and 3.2 herein, the Company shall pay to the Executive and provide him with the following: (a) An amount equal to three (3) times the highest rate of the Executive's annualized Base Salary in effect at any time [during the 36-month period immediately] prior to the Effective Date of Termination. (b) An amount equal to three (3) times the highest of the Executive's target annual [Total] Management Incentive Award established [for any plan year] [the three (3) plan years] up to and including the plan year in which the Executive's Effective Date of Termination occurs. (c) An amount equal to the Executive's unpaid Base Salary, and unused and accrued vacation pay, through the Effective Date of Termination. (d) A continuation of the welfare benefits of health care, life and accidental death and dismemberment, and disability insurance coverage for three (3) full years after the Effective Date of Termination. These benefits shall be provided to the Executive (and to the Executive's covered spouse and dependents) at the same premium cost, and at the same coverage level, as in effect as of the Executive's Effective Date of Termination. The continuation of these welfare benefits shall be discontinued prior to the end of the three (3) year period in the event the Executive has available substantially similar benefits at a comparable cost from a subsequent employer, as determined by the Committee. Incentive awards granted under the FMC 1995 Management Incentive Plan, FMC 1995 Stock Option Plan, and other incentive arrangements adopted by the Company shall be treated pursuant to the terms of the applicable plan. Page 9 The aggregate benefits accrued by the Executive as of the Effective Date of Termination under the FMC Corporation Salaried Employees' Retirement Plan, the FMC Employees' Thrift and Stock Purchase Plan, the FMC Salaried Employees' Equivalent Retirement Plan, and other savings and retirement plans sponsored by the Company shall be distributed pursuant to the terms of the applicable plan. For purposes of the Company's nonqualified retirement plans, such benefits shall be calculated under the assumption that the Executive's employment continued following the Effective Date of Termination for three (3) full years (i.e., three (3) additional years of age and service credits shall be added); provided, however, that for purposes of determining "final average pay" under such programs, the Executive's actual pay history as of the Effective Date of Termination shall be used. Compensation which has been deferred under the Deferred Compensation Plan of FMC, FMC Deferred Compensation Equivalent Retirement and Thrift Plan or other plans sponsored by the Company, as applicable, together with all interest that has been credited with respect to any such deferred compensation balances, shall be distributed pursuant to the terms of the applicable plan. 3.4 Termination for Disability. Following a Change in Control of the Company, if an Executive's employment is terminated due to Disability, the Executive shall receive his Base Salary through the Effective Date of Termination, at which point in time the Executive's benefits shall be determined in accordance with the Company's disability, retirement, insurance, and other applicable plans and programs then in effect. In the event the Executive's employment is terminated due to Disability, the Executive shall not be entitled to the Severance Benefits described in Section 3.3. 3.5 Termination for Retirement or Death. Following a Change in Control of the Company, if the Executive's employment is terminated by reason of his Retirement or death, the Executive's benefits shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable programs of the Company then in effect. In the event the Executive's employment is terminated by reason of his Retirement or death, the Executive shall not be entitled to the Severance Benefits described in Section 3.3. 3.6 Termination for Cause, or Other Than for Good Reason or Retirement. Following a Change in Control of the Company, if the Executive's employment is terminated either: (a) by the Company for Cause; or (b) by the Executive (other than for Retirement, Good Reason, or under circumstances giving rise to a Qualifying Termination described in Section 3.2(c) herein), the Company shall pay the Executive his full Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other Page 10 amounts to which the Executive is entitled under any compensation plans of the Company, at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement. 3.7 Notice of Termination. Any termination of employment by the Company or by the Executive for Good Reason or during the thirteenth (13th) calendar month following the month in which a Change in Control occurs shall be communicated by a Notice of Termination. Article 4. Form and Timing of Severance Benefits 4.1 Form and Timing of Severance Benefits. The Severance Benefits described in Sections 3.3(a), 3.3(b), and 3.3(c) herein shall be paid in cash to the Executive in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 4.2 Withholding of Taxes. The Company shall be entitled to withhold from any amounts payable under this Agreement all taxes as legally shall be required (including, without limitation, any United States federal taxes and any other state, city, or local taxes). Article 5. Excise Tax Equalization Payment 5.1 Excise Tax Equalization Payment. In the event that the Executive becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), if all or any part of the Total Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to the Executive in cash an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax upon the Total Payments and any federal, state, and local income tax, penalties, interest, and Excise Tax upon the Gross-Up Payment provided for by this Section 5.1 (including FICA and FUTA), shall be equal to the Total Payments. Such payment shall be made by the Company to the Executive as soon as practical following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 5.2 Tax Computation. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amounts of such Excise Tax: (a) Any other payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Page 11 Company, or with any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Persons) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel as supported by the Company's independent auditors and acceptable to the Executive, such other payments or benefits (in whole or in part) do not constitute parachute payments, or unless such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of: (i) the total amount of the Total Payments; or (ii) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (a) above); and (c) The value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Effective Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. 5.3 Subsequent Recalculation. In the event the Internal Revenue Service adjusts the computation of the Company under Section 5.2 herein so that the Executive did not receive the greatest net benefit, the Company shall reimburse the Executive for the full amount necessary to make the Executive whole, plus a market rate of interest, as determined by the Committee. Page 12 Article 6. Establishment of Trust As soon as practicable following the Effective Date hereof, the Company shall create a Trust (which shall be a grantor trust within the meaning of Sections 671-678 of the Internal Revenue Code) for the benefit of the Executive and Beneficiaries, as appropriate. The Trust shall have a Trustee as selected by the Company, and shall have certain restrictions as to the Company's ability to amend the Trust or cancel benefits provided thereunder. Any assets contained in the Trust shall, at all times, be specifically subject to the claims of the Company's general creditors in the event of bankruptcy or insolvency; such terms to be specifically defined within the provisions of the Trust, along with the required procedure for notifying the Trustee of any bankruptcy or insolvency. At any time following the Effective Date hereof, the Company may, but is not obligated to, deposit assets in the Trust in an amount equal to or less than the aggregate Severance Benefits which may become due to the Executive under Sections 3.3(a), (b), and (c), and 5.1 of this Agreement. Upon a Change in Control, the Company shall deposit assets in such Trust in an amount equal to the estimated aggregate Severance Benefits which may become due to the Executive under Sections 3.3(a), (b), and (c), 5.1, and 8.1 of this Agreement. Such deposited amounts shall be reviewed and increased, if necessary, every six (6) months following a Change in Control to reflect the Executive's estimated aggregate Severance Benefits at such time. Article 7. The Company's Payment Obligation The Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 3.3(d) herein. Page 13 Article 8. Legal Remedies 8.1 Payment of Legal Fees. To the extent permitted by law, the Company shall pay all legal fees, costs of litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the Severance Benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict (including conflicts related to the calculation of parachute payments) between the parties pertaining to this Agreement. 8.2 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of his employment with the Company, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel for the Executive, shall be borne by the Company. Article 9. Outplacement Assistance Following a Qualifying Termination, other than a voluntary termination by the Executive during the thirteenth (13th) calendar month following the month in which a Change in Control occurs (as described in Section 3.2 herein), the Executive shall be reimbursed by the Company for the costs of all outplacement services obtained by the Executive within the two (2) year period after the Effective Date of Termination; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Executive's Base Salary as of the Effective Date of Termination. Article 10. Successors and Assignment 10.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. The date on which any such succession becomes effective shall be deemed to be the date of the Change in Control. 10.2 Assignment by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be Page 14 payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's Beneficiary. If the Executive has not named a Beneficiary, then such amounts shall be paid to the Executive's devisee, legatee, or other designee, or if there is no such designee, to the Executive's estate. Article 11. Miscellaneous 11.1 Employment Status. Except as may be provided under any other agreement between the Executive and the Company, the employment of the Executive by the Company is "at will," and may be terminated by either the Executive or the Company at any time, subject to applicable law. 11.2 Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Executive under this Agreement. Such designation must be in the form of a signed writing acceptable to the Committee. The Executive may make or change such designations at any time. 11.3 Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and shall have no force and effect. 11.4 Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. Page 15 11.5 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the state of Illinois shall be the controlling law in all matters relating to this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on this ________ day of ___________, 1997. FMC Corporation Executive: By: ____________________________ _____________________________________ Its: ___________________________ Attest: ________________________ Page 16 FORM I Executive Severance Agreement for -------------------- FMC Corporation Contents - -------------------------------------------------------------------------------- Page Article 1. Establishment, Term, and Purpose 2 Article 2. Definitions 2 Article 3. Severance Benefits 7 Article 4. Form and Timing of Severance Benefits 10 Article 5. Excise Tax Equalization Payment 10 Article 6. Establishment of Trust 11 Article 7. The Company's Payment Obligation 12 Article 8. Legal Remedies 12 Article 9. Outplacement Assistance 13 Article 10. Successors and Assignment 13 Article 11. Miscellaneous 14 FMC Corporation Executive Severance Agreement THIS AGREEMENT is made and entered into as of the _____ day of _________, ____, by and between FMC Corporation (hereinafter referred to as the "Company") and ____________________ (hereinafter referred to as the "Executive"). WHEREAS, the Board of Directors of the Company has approved the Company entering into severance agreements with certain key executives of the Company; WHEREAS, the Executive is a key executive of the Company; WHEREAS, should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board should be able to rely upon the Executive to continue in his position, and that the Company should be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; WHEREAS, should the possibility of a Change in Control arise, in addition to his regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its shareholders, and to take such other actions as the Board might determine to be appropriate; and WHEREAS, the Executive and the Company desire that the terms of this Agreement shall completely replace and supersede the provisions set forth in the FMC Corporation Executive Severance Plan, [and the Executive Agreement entered into by and between the Company and the Executive on ____________], setting forth the terms and provisions with respect to the Executive's entitlement to payments and benefits following a Change in Control of the Company. NOW THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Executive agree as follows: Page 1 Article 1. Establishment, Term, and Purpose This Agreement will commence on the Effective Date and shall continue in effect for three (3) full years. However, at the end of such three (3) year period and, if extended, at the end of each additional year thereafter, the term of this Agreement shall be extended automatically for one (1) additional year, unless the Committee delivers written notice six (6) months prior to the end of such term, or extended term, to each Executive, that the Agreement will not be extended. In such case, the Agreement will terminate at the end of the term, or extended term, then in progress. However, in the event a Change in Control occurs during the original or any extended term, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; or (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. Article 2. Definitions Whenever used in this Agreement, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized. 2.1 "Base Salary" means the salary of record paid to an Executive as annual salary, excluding amounts received under incentive or other bonus plans, whether or not deferred. 2.2 "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. 2.3 "Beneficiary" means the persons or entities designated or deemed designated by the Executive pursuant to Section 11.2 herein. 2.4 "Board" means the Board of Directors of the Company. 2.5 "Cause" means: (a) the Executive's willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from Disability or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes that the Executive has willfully failed to substantially perform his duties, and after the Executive has failed to resume substantial performance of his duties on a continuous basis within thirty (30) calendar days of receiving such demand; (b) the Executive's willfully engaging in conduct (other than conduct covered under (a) above) which is demonstrably and materially injurious to the Company, monetarily or otherwise; or (c) the Executive's having been convicted of, or plead guilty or nolo contendere to, a Page 2 felony. For purposes of this subparagraph, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the chief executive officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose, (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (a) or (b) above, and specifying the particulars thereof in detail. The Executive shall not be precluded from contesting such resolution pursuant to an arbitration proceeding under Section 8.2 of this Agreement. 2.6 "Change in Control" of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions is satisfied: (a) The "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than 20 percent (20%) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities") is acquired by a Person (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an affiliate thereof, any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company); provided, however that any acquisition from the Company or any acquisition pursuant to a transaction which complies with clauses (i), (ii), and (iii) of paragraph (c) of this Section 2.6 shall not be a Change in Control under this paragraph (a); or (b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Page 3 Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation by the Company of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock or another entity (a "Business Combination"), in each case, unless immediately following such Business Combination: (i) more than 60% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries (the "Parent Corporation"), is represented, directly or indirectly by Company Voting Securities outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Company Voting Securities, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) except to the extent that such ownership of the Company existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. However, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive, if the Executive is part of a purchasing group which consummates the Change-in-Control transaction. The Executive shall be deemed "part of a purchasing group" for purposes of the preceding Page 4 sentence if the Executive is an equity participant in the purchasing company or group (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing Directors). 2.7 "Code" means the United States Internal Revenue Code of 1986, as amended, and any successors thereto. 2.8 "Committee" means the Compensation and Organization Committee of the Board or any other committee appointed by the Board to perform the functions of the Compensation and Organization Committee. 2.9 "Company" means FMC Corporation, a Delaware corporation, or any successor thereto as provided in Article 10 herein. 2.10 "Disability" means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which the Executive was employed when such disability commenced. 2.11 "Effective Date" means the date of this Agreement set forth above. 2.12 "Effective Date of Termination" means the date on which a Qualifying Termination occurs which triggers the payment of Severance Benefits hereunder. 2.13 "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. 2.14 "Good Reason" shall mean, without the Executive's express written consent, the occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including offices and reporting requirements) as an employee of the Company, or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from those in effect immediately preceding the Change in Control; (b) The Company's requiring the Executive to (i) be based at a location which is at least twenty-five (25) miles from the office where the Executive is located at the time of the Change in Control, (not including for this clause (i) required travel on the Company's business to an extent substantially consistent with the Executive's business Page 5 immediately prior to the Change in Control) or (ii) travel on Company business to an extent substantially greater than the travel obligations of the Executive immediately prior to the Change in Control; (c) A reduction by the Company in the Executive's Base Salary as in effect immediately prior to the Change in Control or as the same shall be increased from time to time; (d) The failure of the Company to (i) continue in effect any employee benefit plan, compensation plan, welfare benefit plan or material fringe benefit plan in which the Executive is participating immediately prior to such Change in Control or the taking of any action by the Company which would adversely affect the Executive's participation in or reduce the Executive's benefits under any such plan, unless the Executive is permitted to participate in other plans providing Executive with at least substantially equivalent benefits in the aggregate (at substantially equivalent cost with respect to welfare benefit plans), or (ii) provide the Executive with paid vacation in accordance with the most favorable vacation policies of the Company and its affiliated companies as in effect for the Executive immediately prior to such Change in Control, including the crediting of all service for which the Executive had been credited under such vacation policies prior to the Change in Control; (e) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Article 10 herein; or (f) Any termination of Executive's employment by the Company that is not effected pursuant to a Notice of Termination. The existence of Good Reason shall not be affected by the Executive's temporary incapacity due to physical or mental illness not constituting a Disability. The Executive's Retirement shall constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. The Executive's continued employment shall not constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. 2.15 "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Page 6 2.16 "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as provided in Section 13(d). 2.17 "Qualifying Termination" means any of the events described in Section 3.2 herein, the occurrence of which triggers the payment of Severance Benefits hereunder. 2.18 "Retirement" means the Executive's voluntary termination of employment in a manner which qualifies the Executive to receive immediately payable retirement benefits under the Company's tax-qualified retirement plan or under the successor or replacement of such retirement plan if it is then no longer in effect; provided, that a termination for Good Reason which otherwise constitutes Retirement shall be treated as Good Reason for purposes of being a Qualifying Termination under this Agreement. 2.19 "Severance Benefits" means the payment of severance compensation as provided in Section 3.3 herein. 2.20 "Trust" means the Company grantor trust to be created pursuant to Article 6 of this Agreement. Article 3. Severance Benefits 3.1 Right to Severance Benefits. The Executive shall be entitled to receive from the Company Severance Benefits, as described in Section 3.3 herein, if there has been a Change in Control of the Company and if, within twenty-four (24) calendar months following the Change in Control, a Qualifying Termination of the Executive has occurred. The Executive shall not be entitled to receive Severance Benefits if he is terminated for Cause, or if his employment with the Company ends due to death, Disability, or Retirement or due to a voluntary termination of employment by the Executive without Good Reason. 3.2 Qualifying Termination. The occurrence of any one or more of the following events shall trigger the payment of Severance Benefits to the Executive under this Agreement: (a) An involuntary termination of the Executive's employment by the Company for reasons other than Cause within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs; (b) A voluntary termination by the Executive for Good Reason within twenty-four (24) calendar months following the month in which a Page 7 Change in Control of the Company occurs pursuant to a Notice of Termination delivered to the Company by the Executive; or (c) The Company or any successor company breaches any of the provisions of this Agreement following a Change in Control. 3.3 Description of Severance Benefits. In the event the Executive becomes entitled to receive Severance Benefits, as provided in Sections 3.1 and 3.2 herein, the Company shall pay to the Executive and provide him with the following: (a) An amount equal to three (3) times the highest rate of the Executive's annualized Base Salary in effect at any time [during the 36-month period immediately] prior to the Effective Date of Termination. (b) An amount equal to three (3) times the highest of the Executive's target annual [Total] Management Incentive Award established [for any plan year] [the three (3) plan years] up to and including the plan year in which the Executive's Effective Date of Termination occurs. (c) An amount equal to the Executive's unpaid Base Salary, and unused and accrued vacation pay, through the Effective Date of Termination. (d) A continuation of the welfare benefits of health care, life and accidental death and dismemberment, and disability insurance coverage for three (3) full years after the Effective Date of Termination. These benefits shall be provided to the Executive (and to the Executive's covered spouse and dependents) at the same premium cost, and at the same coverage level, as in effect as of the Executive's Effective Date of Termination. The continuation of these welfare benefits shall be discontinued prior to the end of the three (3) year period in the event the Executive has available substantially similar benefits at a comparable cost from a subsequent employer, as determined by the Committee. Incentive awards granted under the FMC 1995 Management Incentive Plan, FMC 1995 Stock Option Plan, and other incentive arrangements adopted by the Company shall be treated pursuant to the terms of the applicable plan. The aggregate benefits accrued by the Executive as of the Effective Date of Termination under the FMC Corporation Salaried Employees' Retirement Plan, the FMC Employees' Thrift and Stock Purchase Plan, the FMC Salaried Employees' Equivalent Retirement Plan, and other savings and retirement plans sponsored by the Company shall be distributed pursuant to the terms of Page 8 the applicable plan. For purposes of the Company's nonqualified retirement plans, such benefits shall be calculated under the assumption that the Executive's employment continued following the Effective Date of Termination for three (3) full years (i.e., three (3) additional years of age and service credits shall be added); provided, however, that for purposes of determining "final average pay" under such programs, the Executive's actual pay history as of the Effective Date of Termination shall be used. Compensation which has been deferred under the Deferred Compensation Plan of FMC, FMC Deferred Compensation Equivalent Retirement and Thrift Plan or other plans sponsored by the Company, as applicable, together with all interest that has been credited with respect to any such deferred compensation balances, shall be distributed pursuant to the terms of the applicable plan. 3.4 Termination for Disability. Following a Change in Control of the Company, if an Executive's employment is terminated due to Disability, the Executive shall receive his Base Salary through the Effective Date of Termination, at which point in time the Executive's benefits shall be determined in accordance with the Company's disability, retirement, insurance, and other applicable plans and programs then in effect. In the event the Executive's employment is terminated due to Disability, the Executive shall not be entitled to the Severance Benefits described in Section 3.3. 3.5 Termination for Retirement or Death. Following a Change in Control of the Company, if the Executive's employment is terminated by reason of his Retirement or death, the Executive's benefits shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable programs of the Company then in effect. In the event the Executive's employment is terminated by reason of his Retirement or death, the Executive shall not be entitled to the Severance Benefits described in Section 3.3. 3.6 Termination for Cause, or Other Than for Good Reason or Retirement. Following a Change in Control of the Company, if the Executive's employment is terminated either: (a) by the Company for Cause; or (b) by the Executive (other than for Retirement, Good Reason, or under circumstances giving rise to a Qualifying Termination described in Section 3.2(c) herein), the Company shall pay the Executive his full Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other amounts to which the Executive is entitled under any compensation plans of the Company, at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement. Page 9 3.7 Notice of Termination. Any termination of employment by the Company or by the Executive for Good Reason shall be communicated by a Notice of Termination. Article 4. Form and Timing of Severance Benefits 4.1 Form and Timing of Severance Benefits. The Severance Benefits described in Sections 3.3(a), 3.3(b), and 3.3(c) herein shall be paid in cash to the Executive in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 4.2 Withholding of Taxes. The Company shall be entitled to withhold from any amounts payable under this Agreement all taxes as legally shall be required (including, without limitation, any United States federal taxes and any other state, city, or local taxes). Article 5. Excise Tax Equalization Payment 5.1 Excise Tax Equalization Payment. In the event that the Executive becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), if all or any part of the Total Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to the Executive in cash an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax upon the Total Payments and any federal, state, and local income tax, penalties, interest, and Excise Tax upon the Gross-Up Payment provided for by this Section 5.1 (including FICA and FUTA), shall be equal to the Total Payments. Such payment shall be made by the Company to the Executive as soon as practical following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 5.2 Tax Computation. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amounts of such Excise Tax: (a) Any other payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company, or with any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Persons) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as Page 10 subject to the Excise Tax, unless in the opinion of tax counsel as supported by the Company's independent auditors and acceptable to the Executive, such other payments or benefits (in whole or in part) do not constitute parachute payments, or unless such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of: (i) the total amount of the Total Payments; or (ii) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (a) above); and (c) The value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Effective Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. 5.3 Subsequent Recalculation. In the event the Internal Revenue Service adjusts the computation of the Company under Section 5.2 herein so that the Executive did not receive the greatest net benefit, the Company shall reimburse the Executive for the full amount necessary to make the Executive whole, plus a market rate of interest, as determined by the Committee. Article 6. Establishment of Trust As soon as practicable following the Effective Date hereof, the Company shall create a Trust (which shall be a grantor trust within the meaning of Sections 671-678 of the Internal Revenue Code) for the benefit of the Executive and Beneficiaries, as appropriate. The Trust shall have a Trustee as selected by the Company, and shall have certain restrictions as to the Company's ability to amend the Trust or cancel benefits provided thereunder. Any assets contained in the Trust shall, at all times, be specifically subject to the claims of the Company's general creditors in the event of bankruptcy or Page 11 insolvency; such terms to be specifically defined within the provisions of the Trust, along with the required procedure for notifying the Trustee of any bankruptcy or insolvency. At any time following the Effective Date hereof, the Company may, but is not obligated to, deposit assets in the Trust in an amount equal to or less than the aggregate Severance Benefits which may become due to the Executive under Sections 3.3(a), (b), and (c), and 5.1 of this Agreement. Upon a Change in Control, the Company shall deposit assets in such Trust in an amount equal to the estimated aggregate Severance Benefits which may become due to the Executive under Sections 3.3(a), (b), and (c), 5.1, and 8.1 of this Agreement. Such deposited amounts shall be reviewed and increased, if necessary, every six (6) months following a Change in Control to reflect the Executive's estimated aggregate Severance Benefits at such time. Article 7. The Company's Payment Obligation The Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 3.3(d) herein. Article 8. Legal Remedies 8.1 Payment of Legal Fees. To the extent permitted by law, the Company shall pay all legal fees, costs of litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the Severance Benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict (including conflicts related to the calculation of parachute payments) between the parties pertaining to this Agreement. Page 12 8.2 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of his employment with the Company, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel for the Executive, shall be borne by the Company. Article 9. Outplacement Assistance Following a Qualifying Termination (as described in Section 3.2 herein), the Executive shall be reimbursed by the Company for the costs of all outplacement services obtained by the Executive within the two (2) year period after the Effective Date of Termination; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Executive's Base Salary as of the Effective Date of Termination. Article 10. Successors and Assignment 10.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. The date on which any such succession becomes effective shall be deemed to be the date of the Change in Control. 10.2 Assignment by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's Beneficiary. If the Executive has not named a Beneficiary, then such amounts shall be paid to the Executive's devisee, legatee, or other designee, or if there is no such designee, to the Executive's estate. Page 13 Article 11. Miscellaneous 1.1 Employment Status. Except as may be provided under any other agreement between the Executive and the Company, the employment of the Executive by the Company is "at will," and may be terminated by either the Executive or the Company at any time, subject to applicable law. 11.2 Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Executive under this Agreement. Such designation must be in the form of a signed writing acceptable to the Committee. The Executive may make or change such designations at any time. 11.3 Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and shall have no force and effect. 11.4 Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. 11.5 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the state of Illinois shall be the controlling law in all matters relating to this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on this __________ day of ____________________, 1997. FMC Corporation Executive: By:_________________________ ___________________________ Its:________________________ ___________________________ Attest:_____________________ ___________________________ Page 14 FORM II EXECUTIVE SEVERANCE AGREEMENT FOR _____________ FMC Corporation
Contents - -------------------------------------------------------- Page Article 1. Establishment, Term, and Purpose 2 Article 2. Definitions 2 Article 3. Severance Benefits 7 Article 4. Form and Timing of Severance Benefits 10 Article 5. Excise Tax Equalization Payment 10 Article 6. Establishment of Trust 11 Article 7. The Company's Payment Obligation 12 Article 8. Legal Remedies 12 Article 9. Outplacement Assistance 13 Article 10. Successors and Assignment 13 Article 11. Miscellaneous 13
FMC Corporation Executive Severance Agreement THIS AGREEMENT is made and entered into as of the ____ day of _____________, 19__, by and between FMC Corporation (hereinafter referred to as the "Company") and _________________ (hereinafter referred to as the "Executive"). WHEREAS, the Board of Directors of the Company has approved the Company entering into severance agreements with certain key executives of the Company; WHEREAS, the Executive is a key executive of the Company; WHEREAS, should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board should be able to rely upon the Executive to continue in his position, and that the Company should be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; WHEREAS, should the possibility of a Change in Control arise, in addition to his regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its shareholders, and to take such other actions as the Board might determine to be appropriate; and WHEREAS, the Executive and the Company desire that the terms of this Agreement shall completely replace and supersede the provisions set forth in the FMC Corporation Executive Severance Plan, setting forth the terms and provisions with respect to the Executive's entitlement to payments and benefits following a Change in Control of the Company. NOW THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Executive agree as follows: -1- Article 1. Establishment, Term, and Purpose This Agreement will commence on the Effective Date and shall continue in effect for three (3) full years. However, at the end of such three (3) year period and, if extended, at the end of each additional year thereafter, the term of this Agreement shall be extended automatically for one (1) additional year, unless the Committee delivers written notice six (6) months prior to the end of such term, or extended term, to each Executive, that the Agreement will not be extended. In such case, the Agreement will terminate at the end of the term, or extended term, then in progress. However, in the event a Change in Control occurs during the original or any extended term, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; or (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. Article 2. Definitions Whenever used in this Agreement, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized. 2.1 "Base Salary" means the salary of record paid to an Executive as annual salary, excluding amounts received under incentive or other bonus plans, whether or not deferred. 2.2 "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. 2.3 "Beneficiary" means the persons or entities designated or deemed designated by the Executive pursuant to Section 11.2 herein. 2.4 "Board" means the Board of Directors of the Company. 2.5 "Cause" means: (a) the Executive's willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from Disability or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes that the Executive has willfully failed to substantially perform his duties, and after the Executive has failed to resume substantial performance of his duties on a continuous basis within thirty (30) calendar days of receiving such demand; (b) the Executive's willfully engaging in conduct (other than conduct covered under (a) above) which is demonstrably and materially injurious to the Company, monetarily or otherwise; or (c) the Executive's having been convicted of, or plead guilty or nolo contendere to, a -2- felony. For purposes of this subparagraph, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the chief executive officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose, (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (a) or (b) above, and specifying the particulars thereof in detail. The Executive shall not be precluded from contesting such resolution pursuant to an arbitration proceeding under Section 8.2 of this Agreement. 2.6 "Change in Control" of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions is satisfied: (a) The "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than 20 percent (20%) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities") is acquired by a Person (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an affiliate thereof, any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company); provided, however that any acquisition from the Company or any acquisition pursuant to a transaction which complies with clauses (i), (ii), and (iii) of paragraph (c) of this Section 2.6 shall not be a Change in Control under this paragraph (a); or (b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a -3- member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation by the Company of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock or another entity (a "Business Combination"), in each case, unless immediately following such Business Combination: (i) more than 60% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries (the "Parent Corporation"), is represented, directly or indirectly by Company Voting Securities outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Company Voting Securities, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) except to the extent that such ownership of the Company existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. However, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive, if the Executive is part of a purchasing group which consummates the Change-in-Control transaction. The Executive shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Executive is an equity participant in the purchasing company or group (except for: (i) passive ownership of less than three percent (3%) of the -4- stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing Directors). 2.7 "Code" means the United States Internal Revenue Code of 1986, as amended, and any successors thereto. 2.8 "Committee" means the Compensation and Organization Committee of the Board or any other committee appointed by the Board to perform the functions of the Compensation and Organization Committee. 2.9 "Company" means FMC Corporation, a Delaware corporation, or any successor thereto as provided in Article 10 herein. 2.10 "Disability" means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which the Executive was employed when such disability commenced. 2.11 "Effective Date" means the date of this Agreement set forth above. 2.12 "Effective Date of Termination" means the date on which a Qualifying Termination occurs which triggers the payment of Severance Benefits hereunder. 2.13 "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. 2.14 "Good Reason" shall mean, without the Executive's express written consent, the occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including offices and reporting requirements) as an employee of the Company, or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from those in effect immediately preceding the Change in Control; (b) The Company's requiring the Executive to (i) be based at a location which is at least twenty-five (25) miles from the office where the Executive is located at the time of the Change in Control, (not including for this clause (i) required travel on the Company's business to an extent substantially consistent with the Executive's business immediately prior to the Change in Control) or (ii) travel on Company business to an extent substantially greater than the travel obligations of -5- the Executive immediately prior to the Change in Control; (c) A reduction by the Company in the Executive's Base Salary as in effect immediately prior to the Change in Control or as the same shall be increased from time to time; (d) The failure of the Company to (i) continue in effect any employee benefit plan, compensation plan, welfare benefit plan or material fringe benefit plan in which the Executive is participating immediately prior to such Change in Control or the taking of any action by the Company which would adversely affect the Executive's participation in or reduce the Executive's benefits under any such plan, unless the Executive is permitted to participate in other plans providing Executive with at least substantially equivalent benefits in the aggregate (at substantially equivalent cost with respect to welfare benefit plans), or (ii) provide the Executive with paid vacation in accordance with the most favorable vacation policies of the Company and its affiliated companies as in effect for the Executive immediately prior to such Change in Control, including the crediting of all service for which the Executive had been credited under such vacation policies prior to the Change in Control; (e) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Article 10 herein; or (f) Any termination of Executive's employment by the Company that is not effected pursuant to a Notice of Termination. The existence of Good Reason shall not be affected by the Executive's temporary incapacity due to physical or mental illness not constituting a Disability. The Executive's Retirement shall constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. The Executive's continued employment shall not constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. 2.15 "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.16 "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as provided in Section 13(d). -6- 2.17 "Qualifying Termination" means any of the events described in Section 3.2 herein, the occurrence of which triggers the payment of Severance Benefits hereunder. 2.18 "Retirement" means the Executive's voluntary termination of employment in a manner which qualifies the Executive to receive immediately payable retirement benefits under the Company's tax-qualified retirement plan or under the successor or replacement of such retirement plan if it is then no longer in effect; provided, that a termination for Good Reason which otherwise constitutes Retirement shall be treated as Good Reason for purposes of being a Qualifying Termination under this Agreement. 2.19 "Severance Benefits" means the payment of severance compensation as provided in Section 3.3 herein. 2.20 "Trust" means the Company grantor trust to be created pursuant to Article 6 of this Agreement. Article 3. Severance Benefits 3.1 Right to Severance Benefits. The Executive shall be entitled to receive from the Company Severance Benefits, as described in Section 3.3 herein, if there has been a Change in Control of the Company and if, within twenty-four (24) calendar months following the Change in Control, a Qualifying Termination of the Executive has occurred. The Executive shall not be entitled to receive Severance Benefits if he is terminated for Cause, or if his employment with the Company ends due to death, Disability, or Retirement or due to a voluntary termination of employment by the Executive without Good Reason. 3.2 Qualifying Termination. The occurrence of any one or more of the following events shall trigger the payment of Severance Benefits to the Executive under this Agreement: (a) An involuntary termination of the Executive's employment by the Company for reasons other than Cause within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs; (b) A voluntary termination by the Executive for Good Reason within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs pursuant to a Notice of Termination delivered to the Company by the Executive; or (c) The Company or any successor company breaches any of the provisions of this Agreement following a Change in Control. -7- 3.3 Description of Severance Benefits. In the event the Executive becomes entitled to receive Severance Benefits, as provided in Sections 3.1 and 3.2 herein, the Company shall pay to the Executive and provide him with the following: (a) An amount equal to three (3) times the highest rate of the Executive's annualized Base Salary in effect at any time during the [36-month period immediately] prior to the Effective Date of Termination. (b) An amount equal to three (3) times the highest of the Executive's target annual [Total] Management Incentive Award established [for any plan year][the three (3) plan years] up to and including the plan year in which the Executive's Effective Date of Termination occurs. (c) An amount equal to the Executive's unpaid Base Salary, and unused and accrued vacation pay, through the Effective Date of Termination. (d) A continuation of the welfare benefits of health care, life and accidental death and dismemberment, and disability insurance coverage for three (3) full years after the Effective Date of Termination. These benefits shall be provided to the Executive (and to the Executive's covered spouse and dependents) at the same premium cost, and at the same coverage level, as in effect as of the Executive's Effective Date of Termination. The continuation of these welfare benefits shall be discontinued prior to the end of the three (3) year period in the event the Executive has available substantially similar benefits at a comparable cost from a subsequent employer, as determined by the Committee. Incentive awards granted under the FMC 1995 Management Incentive Plan, FMC 1995 Stock Option Plan, and other incentive arrangements adopted by the Company shall be treated pursuant to the terms of the applicable plan. The aggregate benefits accrued by the Executive as of the Effective Date of Termination under the FMC Corporation Salaried Employees' Retirement Plan, the FMC Employees' Thrift and Stock Purchase Plan, the FMC Salaried Employees' Equivalent Retirement Plan, and other savings and retirement plans sponsored by the Company shall be distributed pursuant to the terms of the applicable plan. For purposes of the Company's nonqualified retirement plans, such benefits shall be calculated under the assumption that the Executive's employment continued following the Effective Date of Termination for three (3) full years (i.e., three (3) additional years of age and service credits shall be added); provided, however, that for purposes of determining "final average pay" under such programs, the Executive's actual pay history as of the Effective Date of Termination shall be used. -8- Compensation which has been deferred under the Deferred Compensation Plan of FMC, FMC Deferred Compensation Equivalent Retirement and Thrift Plan or other plans sponsored by the Company, as applicable, together with all interest that has been credited with respect to any such deferred compensation balances, shall be distributed pursuant to the terms of the applicable plan. 3.4 Termination for Disability. Following a Change in Control of the Company, if an Executive's employment is terminated due to Disability, the Executive shall receive his Base Salary through the Effective Date of Termination, at which point in time the Executive's benefits shall be determined in accordance with the Company's disability, retirement, insurance, and other applicable plans and programs then in effect. In the event the Executive's employment is terminated due to Disability, the Executive shall not be entitled to the Severance Benefits described in Section 3.3. 3.5 Termination for Retirement or Death. Following a Change in Control of the Company, if the Executive's employment is terminated by reason of his Retirement or death, the Executive's benefits shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable programs of the Company then in effect. In the event the Executive's employment is terminated by reason of his Retirement or death, the Executive shall not be entitled to the Severance Benefits described in Section 3.3. 3.6 Termination for Cause, or Other Than for Good Reason or Retirement. Following a Change in Control of the Company, if the Executive's employment is terminated either: (a) by the Company for Cause; or (b) by the Executive (other than for Retirement, Good Reason, or under circumstances giving rise to a Qualifying Termination described in Section 3.2(c) herein), the Company shall pay the Executive his full Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other amounts to which the Executive is entitled under any compensation plans of the Company, at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement. 3.7 Notice of Termination. Any termination of employment by the Company or by the Executive for Good Reason shall be communicated by a Notice of Termination. -9- Article 4. Form and Timing of Severance Benefits 4.1 Form and Timing of Severance Benefits. The Severance Benefits described in Sections 3.3(a), 3.3(b), and 3.3(c) herein shall be paid in cash to the Executive in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 4.2 Withholding of Taxes. The Company shall be entitled to withhold from any amounts payable under this Agreement all taxes as legally shall be required (including, without limitation, any United States federal taxes and any other state, city, or local taxes). Article 5. Excise Tax Equalization Payment 5.1 Excise Tax Equalization Payment. In the event that the Executive becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), if all or any part of the Total Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to the Executive in cash an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax upon the Total Payments and any federal, state, and local income tax, penalties, interest, and Excise Tax upon the Gross-Up Payment provided for by this Section 5.1 (including FICA and FUTA), shall be equal to the Total Payments. Such payment shall be made by the Company to the Executive as soon as practical following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 5.2 Tax Computation. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amounts of such Excise Tax: (a) Any other payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company, or with any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Persons) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel as supported by the Company's independent auditors and acceptable to the Executive, such other payments or benefits (in whole or in part) do not constitute parachute payments, or unless such excess parachute payments (in whole or in part) represent reasonable compensation for -10- services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; (b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of: (i) the total amount of the Total Payments; or (ii) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (a) above); and (c) The value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Effective Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. 5.3 Subsequent Recalculation. In the event the Internal Revenue Service adjusts the computation of the Company under Section 5.2 herein so that the Executive did not receive the greatest net benefit, the Company shall reimburse the Executive for the full amount necessary to make the Executive whole, plus a market rate of interest, as determined by the Committee. Article 6. Establishment of Trust As soon as practicable following the Effective Date hereof, the Company shall create a Trust (which shall be a grantor trust within the meaning of Sections 671-678 of the Internal Revenue Code) for the benefit of the Executive and Beneficiaries, as appropriate. The Trust shall have a Trustee as selected by the Company, and shall have certain restrictions as to the Company's ability to amend the Trust or cancel benefits provided thereunder. Any assets contained in the Trust shall, at all times, be specifically subject to the claims of the Company's general creditors in the event of bankruptcy or insolvency; such terms to be specifically defined within the provisions of the Trust, along with the required procedure for notifying the Trustee of any bankruptcy or insolvency. At any time following the Effective Date hereof, the Company may, but is not obligated to, deposit assets in the Trust in an amount equal to or less than -11- the aggregate Severance Benefits which may become due to the Executive under Sections 3.3(a), (b), and (c), 5.1 of this Agreement. Upon a Change in Control, the Company shall deposit assets in such Trust in an amount equal to the estimated aggregate Severance Benefits which may become due to the Executive under Sections 3.3(a), (b), and (c), and 5.1, and 8.1 of this Agreement. Such deposited amounts shall be reviewed and increased, if necessary, every six (6) months following a Change in Control to reflect the Executive's estimated aggregate Severance Benefits at such time. Article 7. The Company's Payment Obligation The Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 3.3(d) herein. Article 8. Legal Remedies 8.1 Payment of Legal Fees. To the extent permitted by law, the Company shall pay all legal fees, costs of litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the Severance Benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict (including conflicts related to the calculation of parachute payments) between the parties pertaining to this Agreement. 8.2 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of his employment with the Company, in accordance with the rules of the American Arbitration Association then in effect. -12- Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel for the Executive, shall be borne by the Company. Article 9. Outplacement Assistance Following a Qualifying Termination (as described in Section 3.2 herein), the Executive shall be reimbursed by the Company for the costs of all outplacement services obtained by the Executive within the two (2) year period after the Effective Date of Termination; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Executive's Base Salary as of the Effective Date of Termination. Article 10. Successors and Assignment 10.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. The date on which any such succession becomes effective shall be deemed to be the date of the Change in Control. 10.2 Assignment by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's Beneficiary. If the Executive has not named a Beneficiary, then such amounts shall be paid to the Executive's devisee, legatee, or other designee, or if there is no such designee, to the Executive's estate. Article 11. Miscellaneous 1.1 Employment Status. Except as may be provided under any other agreement between the Executive and the Company, the employment of the Executive by the Company is "at will," and may be terminated by either the Executive or the Company at any time, subject to applicable law. 11.2 Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Executive under this Agreement. Such designation must be in the form of a signed writing acceptable to the Committee. The Executive may make or change such designations at any time. -13- 11.3 Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and shall have no force and effect. 11.4 Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. 11.5 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the state of Illinois shall be the controlling law in all matters relating to this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on this __________ day of ____________________, 1997. FMC Corporation Executive: By: ---------------------------- --------------------------- Its: --------------------------- Attest: ------------------------ -14- FORM III Executive Severance Agreement for ------- FMC Corporation Contents - -------------------------------------------------------------------------------- Page Article 1. Establishment, Term, and Purpose 2 Article 2. Definitions 2 Article 3. Severance Benefits 7 Article 4. Form and Timing of Severance Benefits 9 Article 5. Excise Tax Equalization Payment 10 Article 6. Establishment of Trust 11 Article 7. The Company's Payment Obligation 12 Article 8. Legal Remedies 12 Article 9. Outplacement Assistance 13 Article 10. Successors and Assignment 13 Article 11. Miscellaneous 13 FMC Corporation Executive Severance Agreement THIS AGREEMENT is made and entered into as of the ____ day of ____________, ____, by and between FMC Corporation (hereinafter referred to as the "Company") and (ename) (hereinafter referred to as the "Executive"). WHEREAS, the Board of Directors of the Company has approved the Company entering into severance agreements with certain key executives of the Company; WHEREAS, the Executive is a key executive of the Company; WHEREAS, should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board should be able to rely upon the Executive to continue in his position, and that the Company should be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; WHEREAS, should the possibility of a Change in Control arise, in addition to his regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its shareholders, and to take such other actions as the Board might determine to be appropriate; and WHEREAS, the Executive and the Company desire that the terms of this Agreement shall completely replace and supersede the provisions set forth in the FMC Corporation Executive Severance Plan, setting forth the terms and provisions with respect to the Executive's entitlement to payments and benefits following a Change in Control of the Company. NOW THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Executive agree as follows: -1- Article 1. Establishment, Term, and Purpose This Agreement will commence on the Effective Date and shall continue in effect for three (3) full years. However, at the end of such three (3) year period and, if extended, at the end of each additional year thereafter, the term of this Agreement shall be extended automatically for one (1) additional year, unless the Committee delivers written notice six (6) months prior to the end of such term, or extended term, to each Executive, that the Agreement will not be extended. In such case, the Agreement will terminate at the end of the term, or extended term, then in progress. However, in the event a Change in Control occurs during the original or any extended term, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; or (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. Article 2. Definitions Whenever used in this Agreement, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized. 2.1 "Base Salary" means the salary of record paid to an Executive as annual salary, excluding amounts received under incentive or other bonus plans, whether or not deferred. 2.2 "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. 2.3 "Beneficiary" means the persons or entities designated or deemed designated by the Executive pursuant to Section 11.2 herein. 2.4 "Board" means the Board of Directors of the Company. 2.5 "Cause" means: (a) the Executive's willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from Disability or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes that the Executive has willfully failed to substantially perform his duties, and after the Executive has failed to resume substantial performance of his duties on a continuous basis within thirty (30) calendar days of receiving such demand; (b) the Executive's willfully engaging in conduct (other than conduct covered under (a) above) which is demonstrably and materially injurious to the Company, monetarily or otherwise; or (c) the Executive's having been convicted of, or plead guilty or nolo contendere to, a -2- felony. For purposes of this subparagraph, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the chief executive officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose, (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (a) or (b) above, and specifying the particulars thereof in detail. The Executive shall not be precluded from contesting such resolution pursuant to an arbitration proceeding under Section 8.2 of this Agreement. 2.6 "Change in Control" of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions is satisfied: (a) The "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than 20 percent (20%) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities") is acquired by a Person (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an affiliate thereof, any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company); provided, however that any acquisition from the Company or any acquisition pursuant to a transaction which complies with clauses (i), (ii), and (iii) of paragraph (c) of this Section 2.6 shall not be a Change in Control under this paragraph (a); or (b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a -3- member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation by the Company of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock or another entity (a "Business Combination"), in each case, unless immediately following such Business Combination: (i) more than 60% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries (the "Parent Corporation"), is represented, directly or indirectly by Company Voting Securities outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Company Voting Securities, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) except to the extent that such ownership of the Company existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. However, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive, if the Executive is part of a purchasing group which consummates the Change-in-Control transaction. The Executive shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Executive is an equity participant in the purchasing company or -4- group (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing Directors). 2.7 "Code" means the United States Internal Revenue Code of 1986, as amended, and any successors thereto. 2.8 "Committee" means the Compensation and Organization Committee of the Board or any other committee appointed by the Board to perform the functions of the Compensation and Organization Committee. 2.9 "Company" means FMC Corporation, a Delaware corporation, or any successor thereto as provided in Article 10 herein. 2.10 "Disability" means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which the Executive was employed when such disability commenced. 2.11 "Effective Date" means the date of this Agreement set forth above. 2.12 "Effective Date of Termination" means the date on which a Qualifying Termination occurs which triggers the payment of Severance Benefits hereunder. 2.13 "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. 2.14 "Good Reason" shall mean, without the Executive's express written consent, the occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including offices and reporting requirements) as an employee of the Company, or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from those in effect immediately preceding the Change in Control; (b) The Company's requiring the Executive to (i) be based at a location which is at least twenty-five (25) miles from the office where the Executive is located at the time of the Change in Control, (not including for this clause (i) required travel on the Company's business to an extent substantially consistent with the Executive's business immediately prior to the Change in Control) or (ii) travel on Company business to an extent substantially greater than the travel obligations of -5- the Executive immediately prior to the Change in Control; (c) A reduction by the Company in the Executive's Base Salary as in effect immediately prior to the Change in Control or as the same shall be increased from time to time; (d) The failure of the Company to (i) continue in effect any employee benefit plan, compensation plan, welfare benefit plan or material fringe benefit plan in which the Executive is participating immediately prior to such Change in Control or the taking of any action by the Company which would adversely affect the Executive's participation in or reduce the Executive's benefits under any such plan, unless the Executive is permitted to participate in other plans providing Executive with at least substantially equivalent benefits in the aggregate (at substantially equivalent cost with respect to welfare benefit plans), or (ii) provide the Executive with paid vacation in accordance with the most favorable vacation policies of the Company and its affiliated companies as in effect for the Executive immediately prior to such Change in Control, including the crediting of all service for which the Executive had been credited under such vacation policies prior to the Change in Control; (e) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Article 10 herein; or (f) Any termination of Executive's employment by the Company that is not effected pursuant to a Notice of Termination. The existence of Good Reason shall not be affected by the Executive's temporary incapacity due to physical or mental illness not constituting a Disability. The Executive's Retirement shall constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. The Executive's continued employment shall not constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. 2.15 "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.16 "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as provided in Section 13(d). -6- 2.17 "Qualifying Termination" means any of the events described in Section 3.2 herein, the occurrence of which triggers the payment of Severance Benefits hereunder. 2.18 "Retirement" means the Executive's voluntary termination of employment in a manner which qualifies the Executive to receive immediately payable retirement benefits under the Company's tax-qualified retirement plan or under the successor or replacement of such retirement plan if it is then no longer in effect; provided, that a termination for Good Reason which otherwise constitutes Retirement shall be treated as Good Reason for purposes of being a Qualifying Termination under this Agreement. 2.19 "Severance Benefits" means the payment of severance compensation as provided in Section 3.3 herein. 2.20 "Trust" means the Company grantor trust to be created pursuant to Article 6 of this Agreement. Article 3. Severance Benefits 3.1 Right to Severance Benefits. The Executive shall be entitled to receive from the Company Severance Benefits, as described in Section 3.3 herein, if there has been a Change in Control of the Company and if, within twenty-four (24) calendar months following the Change in Control, a Qualifying Termination of the Executive has occurred. The Executive shall not be entitled to receive Severance Benefits if he is terminated for Cause, or if his employment with the Company ends due to death, Disability, or Retirement or due to a voluntary termination of employment by the Executive without Good Reason. 3.2 Qualifying Termination. The occurrence of any one or more of the following events shall trigger the payment of Severance Benefits to the Executive under this Agreement: (a) An involuntary termination of the Executive's employment by the Company for reasons other than Cause within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs; (b) A voluntary termination by the Executive for Good Reason within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs pursuant to a Notice of Termination delivered to the Company by the Executive; or (c) The Company or any successor company breaches any of the provisions of this Agreement following a Change in Control. -7- 3.3 Description of Severance Benefits. In the event the Executive becomes entitled to receive Severance Benefits, as provided in Sections 3.1 and 3.2 herein, the Company shall pay to the Executive and provide him with the following: (a) An amount equal to the highest rate of the Executive's annualized Base Salary in effect at any time [during the 36-month period immediately] prior to the Effective Date of Termination. (b) An amount equal to the highest of the Executive's target annual [Total] Management Incentive Award established for [any plan year] [the three (3) plan years] up to and including the plan year in which the Executive's Effective Date of Termination occurs. (c) An amount equal to the Executive's unpaid Base Salary, and unused and accrued vacation pay, through the Effective Date of Termination. (d) A continuation of the welfare benefits of health care, life and accidental death and dismemberment, and disability insurance coverage for three (3) full years after the Effective Date of Termination. These benefits shall be provided to the Executive (and to the Executive's covered spouse and dependents) at the same premium cost, and at the same coverage level, as in effect as of the Executive's Effective Date of Termination. The continuation of these welfare benefits shall be discontinued prior to the end of the three (3) year period in the event the Executive has available substantially similar benefits at a comparable cost from a subsequent employer, as determined by the Committee. Incentive awards granted under the FMC 1995 Management Incentive Plan, FMC 1995 Stock Option Plan, and other incentive arrangements adopted by the Company shall be treated pursuant to the terms of the applicable plan. The aggregate benefits accrued by the Executive as of the Effective Date of Termination under the FMC Corporation Salaried Employees' Retirement Plan, the FMC Employees' Thrift and Stock Purchase Plan, the FMC Salaried Employees' Equivalent Retirement Plan, and other savings and retirement plans sponsored by the Company shall be distributed pursuant to the terms of the applicable plan. For purposes of the Company's nonqualified retirement plans, such benefits shall be calculated under the assumption that the Executive's employment continued following the Effective Date of Termination for three (3) full years (i.e., three (3) additional years of age and service credits shall be added); provided, however, that for purposes of determining "final average pay" under such programs, the Executive's actual pay history as of the -8- Effective Date of Termination shall be used. Compensation which has been deferred under the Deferred Compensation Plan of FMC, FMC Deferred Compensation Equivalent Retirement and Thrift Plan or other plans sponsored by the Company, as applicable, together with all interest that has been credited with respect to any such deferred compensation balances, shall be distributed pursuant to the terms of the applicable plan. 3.4 Termination for Disability. Following a Change in Control of the Company, if an Executive's employment is terminated due to Disability, the Executive shall receive his Base Salary through the Effective Date of Termination, at which point in time the Executive's benefits shall be determined in accordance with the Company's disability, retirement, insurance, and other applicable plans and programs then in effect. In the event the Executive's employment is terminated due to Disability, the Executive shall not be entitled to the Severance Benefits described in Section 3.3. 3.5 Termination for Retirement or Death. Following a Change in Control of the Company, if the Executive's employment is terminated by reason of his Retirement or death, the Executive's benefits shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable programs of the Company then in effect. In the event the Executive's employment is terminated by reason of his Retirement or death, the Executive shall not be entitled to the Severance Benefits described in Section 3.3. 3.6 Termination for Cause, or Other Than for Good Reason or Retirement. Following a Change in Control of the Company, if the Executive's employment is terminated either: (a) by the Company for Cause; or (b) by the Executive (other than for Retirement, Good Reason, or under circumstances giving rise to a Qualifying Termination described in Section 3.2(c) herein), the Company shall pay the Executive his full Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other amounts to which the Executive is entitled under any compensation plans of the Company, at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement. 3.7 Notice of Termination. Any termination of employment by the Company or by the Executive for Good Reason shall be communicated by a Notice of Termination. Article 4. Form and Timing of Severance Benefits 4.1 Form and Timing of Severance Benefits. The Severance Benefits described in Sections 3.3(a), 3.3(b), and 3.3(c) herein shall be paid in cash to the Executive in a single lump sum as soon as practicable following the -9- Effective Date of Termination, but in no event beyond thirty (30) days from such date. 4.2 Withholding of Taxes. The Company shall be entitled to withhold from any amounts payable under this Agreement all taxes as legally shall be required (including, without limitation, any United States federal taxes and any other state, city, or local taxes). Article 5. Excise Tax Equalization Payment 5.1 Excise Tax Equalization Payment. In the event that the Executive becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), if all or any part of the Total Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to the Executive in cash an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax upon the Total Payments and any federal, state, and local income tax, penalties, interest, and Excise Tax upon the Gross-Up Payment provided for by this Section 5.1 (including FICA and FUTA), shall be equal to the Total Payments. Such payment shall be made by the Company to the Executive as soon as practical following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 5.2 Tax Computation. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amounts of such Excise Tax: (a) Any other payments or benefits received or to be received by the Executive in connection with a Change in Control of the Company or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company, or with any Person whose actions result in a Change in Control of the Company or any Person affiliated with the Company or such Persons) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel as supported by the Company's independent auditors and acceptable to the Executive, such other payments or benefits (in whole or in part) do not constitute parachute payments, or unless such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax; -10- (b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of: (i) the total amount of the Total Payments; or (ii) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (a) above); and (c) The value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Effective Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. 5.3 Subsequent Recalculation. In the event the Internal Revenue Service adjusts the computation of the Company under Section 5.2 herein so that the Executive did not receive the greatest net benefit, the Company shall reimburse the Executive for the full amount necessary to make the Executive whole, plus a market rate of interest, as determined by the Committee. Article 6. Establishment of Trust As soon as practicable following the Effective Date hereof, the Company shall create a Trust (which shall be a grantor trust within the meaning of Sections 671-678 of the Internal Revenue Code) for the benefit of the Executive and Beneficiaries, as appropriate. The Trust shall have a Trustee as selected by the Company, and shall have certain restrictions as to the Company's ability to amend the Trust or cancel benefits provided thereunder. Any assets contained in the Trust shall, at all times, be specifically subject to the claims of the Company's general creditors in the event of bankruptcy or insolvency; such terms to be specifically defined within the provisions of the Trust, along with the required procedure for notifying the Trustee of any bankruptcy or insolvency. At any time following the Effective Date hereof, the Company may, but is not obligated to, deposit assets in the Trust in an amount equal to or less than the aggregate Severance Benefits which may become due to the Executive under Sections 3.3(a), (b), and (c), and 5.1 of this Agreement. Upon a Change in Control, the Company shall deposit assets in such Trust -11- in an amount equal to the estimated aggregate Severance Benefits which may become due to the Executive under Sections 3.3(a), (b), and (c), 5.1, and 8.1 of this Agreement. Such deposited amounts shall be reviewed and increased, if necessary, every six (6) months following a Change in Control to reflect the Executive's estimated aggregate Severance Benefits at such time. Article 7. The Company's Payment Obligation The Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 3.3(d) herein. Article 8. Legal Remedies 8.1 Payment of Legal Fees. To the extent permitted by law, the Company shall pay all legal fees, costs of litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the Severance Benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict (including conflicts related to the calculation of parachute payments) between the parties pertaining to this Agreement. 8.2 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by the Executive within fifty (50) miles from the location of his employment with the Company, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel for the Executive, shall be borne by the Company. -12- Article 9. Outplacement Assistance Following a Qualifying Termination (as described in Section 3.2 herein), the Executive shall be reimbursed by the Company for the costs of all outplacement services obtained by the Executive within the two (2) year period after the Effective Date of Termination; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Executive's Base Salary as of the Effective Date of Termination. Article 10. Successors and Assignment 10.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. The date on which any such succession becomes effective shall be deemed to be the date of the Change in Control. 10.2 Assignment by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's Beneficiary. If the Executive has not named a Beneficiary, then such amounts shall be paid to the Executive's devisee, legatee, or other designee, or if there is no such designee, to the Executive's estate. Article 11. Miscellaneous 1.1 Employment Status. Except as may be provided under any other agreement between the Executive and the Company, the employment of the Executive by the Company is "at will," and may be terminated by either the Executive or the Company at any time, subject to applicable law. 11.2 Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Executive under this Agreement. Such designation must be in the form of a signed writing acceptable to the Committee. The Executive may make or change such designations at any time. 11.3 Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, and the Agreement shall be construed -13- and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and shall have no force and effect. 11.4 Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. 11.5 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the state of Illinois shall be the controlling law in all matters relating to this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on this ____ day of ______________, 1997. FMC Corporation Executive: By: ------------ ---------------------- Its: ------------ Attest: ------------ -14- EX-10.12 11 MASTER TRUST AGREEMENT, FIDELITY MANAGEMENT TRUST Exhibit 10.12 MASTER TRUST AGREEMENT Between - -------------------------------------------------------------------------------- FMC CORPORATION And FIDELITY MANAGEMENT TRUST COMPANY - -------------------------------------------------------------------------------- FMC CORPORATION MASTER TRUST Dated as of June 1, 1997 TABLE OF CONTENTS -----------------
Section Page - ------- ---- 1 Definitions 2 2 Trust 3 3 Exclusive Benefit and Reversion of Sponsor Contributions 4 4 Disbursements 4 (a) Administrator Directed Disbursements (b) Participant Withdrawal Requests (c) Limitations 5 Investment of Trust 5 (a) Selection of Investment Options (b) Available Investment Options (c) Participant Direction (d) Mutual Funds (e) Sponsor Stock (f) Harsco Stock (g) Notes (h) Guaranteed Investment Contracts (i) Participation in Commingled Pools (j) Reliance of Trustee Directions (k) Trustee Powers 6 Recordkeeping and Administrative Services to Be Performed 25 (a) General (b) Accounts (c) Inspection and Audit (d) Effect of Plan Amendment (e) Returns, Reports and Information (f) Allocation of Plan Interests 7 Compensation and Expenses 27 8 Directions and Indemnification 23 (a) Identity of Administrator and Named Fiduciary (b) Directions from Sponsor or Administrator (c) Directions from Named Fiduciaries (d) Co-Fiduciary Liability (e) Indemnification (f) Survival 9 Resignation or Removal of Trustee 29 (a) Resignation (b) Removal 10 Successor Trustee 29 (a) Appointment (b) Acceptance (c) Corporate Action
ii
TABLE OF CONTENTS ----------------- (Continued) Section Page - ------- ---- 11 Termination 30 12 Resignation, Removal, and Termination Notices 30 13 Duration 31 14 Amendment or Modification 31 15 General 31 (a) Performance by Trustee, its Agents or Affiliates (b) Delegation by Employer (c) Entire Agreement (d) Waiver (e) Successors and Assigns (f) Partial Invalidity (g) Section Headings 16 Governing Law 33 (a) Massachusetts Law Controls (b) Trust Agreement Controls 17 Plan Qualification 33 Schedules - --------- A. Administrative Services B. Fee Schedule C. Investment Options D. Administrator's Authorization Letter E. Named Fiduciary's Authorization Letter F. IRS Determination Letter or Opinion of Counsel G. Existing GICs H. Telephone Exchange Guidelines I. Investment Guidelines for GIC Management J. Plan Designation Form K. Operational Guidelines for Non-Fidelity Mutual Funds
iii TRUST AGREEMENT, dated as of the first day of June, 1997, between FMC CORPORATION, a Delaware corporation, having an office at 200 East Randolph Drive, Chicago, Illinois 60601 (the "Sponsor"), and FIDELITY MANAGEMENT TRUST COMPANY, a Massachusetts trust company, having an office at 82 Devonshire Street, Boston, Massachusetts 02109 (the "Trustee "). WITNESSETH: WHEREAS, the Sponsor, or one of its affiliates, is the sponsor of the FMC Corporation Employees' Thrift and Stock Purchase Plan, the United Defense Limited Partnership Salaried Employees' Plan, the FMC Corporation 401(k) Plan for Employees Covered by a Collective Bargaining Agreement, the United Defense Limited Partnership Louisville Union Employees' Thrift Plan and the United Defense Limited Partnership York Plan (individually and collectively, the "Plan") and other Plans which may be added by mutual agreement of the Sponsor and Trustee; and WHEREAS, certain affiliates and subsidiaries of the Sponsor maintain, or may in the future maintain, qualified defined contribution plans for the benefit of their eligible employees; and WHEREAS, the Sponsor desires to establish a master trust to hold all of the assets of the Plan and/or such other tax-qualified defined contribution plans maintained by the Sponsor, or any of its subsidiaries or affiliates, as are designated by the Sponsor as being eligible to participate therein; and WHEREAS, the Trustee is willing to hold and invest the aforesaid plan assets in trust pursuant to the provisions of this Trust Agreement, which trust shall constitute a continuation, by means of an amendment and restatement, of each of the prior trusts from which plan assets are transferred to the Trustee; and WHEREAS, the Trustee is willing to hold and invest the aforesaid plan assets in trust among several investment options selected by the Named Fiduciary; and WHEREAS, the Trustee is willing to perform recordkeeping and administrative services for the Plan if the services are purely ministerial in nature and are provided within a framework of plan provisions, guidelines and interpretations conveyed in writing to the Trustee by the Administrator. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements set forth below, the Sponsor and the Trustee agree as follows: Section 1. Definitions. The following terms as used in this Trust Agreement have the meaning indicated unless the context clearly requires otherwise: (a) "Administrator" shall mean, with respect to the Plan, the person or entity which is the "administrator" of such Plan within the meaning of section 3(16)(A) of ERISA. (b) "Agreement" shall mean this Trust Agreement, as the same may be amended and in effect from time to time. (c) "Code" shall mean the Internal Revenue Code of 1986, as it has been or may be amended from time to time. (d) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it has been or may be amended from time to time. (e) "FBSI" shall mean Fidelity Brokerage Services, Inc., an affiliate of the Trustee. (f) "GICs" shall mean guaranteed investment contracts. (g) "Existing GICs" shall mean each guaranteed annuity contract heretofore entered into by the Sponsor, any other Employer or any predecessor trustee and specifically identified on Schedule "G" attached hereto. (h) "Mutual Fund" shall mean securities issued by the investment companies advised by Fidelity Management & Research Company and certain securities issued by investment companies not advised by Fidelity Management & Research Company. (i) "Named Fiduciary" shall mean, with respect to the application of any provision of this Agreement to any Plan, the person or entity which is the relevant fiduciary under such Plan with respect to such matter (within the meaning of section 402(a) of the Employee Retirement Income Security Act of 1974, as amended); and 2 (j) "Participant" shall mean, with respect to the Plan, any employee (or former employee) with an account under the Plan, which has not yet been fully distributed and/or forfeited, and shall include the designated beneficiary(ies) with respect to the account of any deceased employee (or deceased former employee) until such account has been fully distributed and/or forfeited. (k) "Participant Recordkeeping Reconciliation Period" shall mean the period beginning on the date of the initial transfer of assets to the Trust and ending on the date of the completion of the reconciliation of participant records. (l) "Plan" shall mean the FMC Corporation Employees' Thrift and Stock Purchase Plan, the United Defense Limited Partnership Salaried Employees' Plan, the FMC Corporation 401(k) Plan for Employees Covered by a Collective Bargaining Agreement, the United Defense Limited Partnership Louisville Union Plan, the United Defense Limited Partnership York Union Plan and such other tax-qualified, defined contribution plans which are maintained by the Sponsor or any of its subsidiaries or affiliates for the benefit of their eligible employees as may be designated by the Sponsor in writing to the Trustee as a Plan hereunder, such writing to be in the form of the Plan Designation Form attached hereto as Schedule "J". Each reference to "a Plan" or "the Plan" in this Agreement shall mean and include the Plan or Plans to which the particular provision of this Agreement is being applied or all Plans, as the context may require. (m) "Reporting Date" shall mean the last day of each calendar quarter, the date as of which the Trustee resigns or is removed pursuant to Section 9 hereof and the date as of which this Agreement terminates pursuant to Section 11 hereof. (n) "Sponsor Stock" shall mean the Common Stock of the Sponsor, or such other publicly-traded stock of the Sponsor, or such other publicly-traded stock of the Sponsor's affiliates as meets the requirements of section 407(d)(5) of ERISA with respect to the Plan. (o) "Sponsor" shall mean FMC Corporation, a Delaware corporation, or any successor to all or substantially all of its businesses which, by agreement, operation of law or otherwise, assumes the responsibility of the Sponsor under this Agreement. (p) "Trust" shall mean the FMC Corporation Master Trust, being the trust established by the Sponsor and the Trustee pursuant to the provisions of this Agreement. (q) "Trustee" shall mean Fidelity Management Trust Company, a Massachusetts trust company and any successor to all or substantially all of its trust business as described in Section lO(c). The term Trustee shall also include any successor trustee appointed pursuant to Section 10 to the extent such successor agrees to serve as Trustee under this Agreement. (r) "Trustee's fiduciary duty" shall mean: the Trustee shall discharge its duties with respect to the Plans solely in the interest of the participants and beneficiaries and with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Section 2. Trust. The Sponsor hereby establishes the Trust with the Trustee. The Trust shall consist of an initial contribution of money or other property acceptable to the Trustee in its sole discretion, made by the Sponsor or transferred from a previous trustee under the Plan, such additional sums of money and Sponsor Stock as shall from time to time be delivered to the Trustee under a Plan, all investments made 3 therewith and proceeds thereof, and all earnings and profits thereon, less the payments that are made by the Trustee as provided herein, without distinction between principal and income. The Trustee hereby accepts the Trust on the terms and conditions set forth in this Agreement. In accepting this Trust, the Trustee shall be accountable for the assets received by it, subject to the terms and conditions of this Agreement. Section 3. Exclusive Benefit and Reversion of Sponsor Contributions. Except as provided under applicable law, no part of the Trust allocable to a Plan may be used for, or diverted to, purposes other than the exclusive benefit of the participants in the Plan or their beneficiaries prior to the satisfaction of all liabilities with respect to the participants and their beneficiaries. Disbursements from the forfeiture account may be made, as directed by the Sponsor, to offset contributions or legitimate Plan expenses. Section 4. Disbursements. (a) Administrator Directed Disbursements. The Trustee shall make disbursements in the amounts and in the manner that the Administrator directs from time to time in writing. The Trustee shall have no responsibility to ascertain such direction's compliance with the terms of the Plan or of any applicable law or the direction's effect for tax purposes or otherwise; nor shall the Trustee have any responsibility to see to the application of any disbursement. (b) Participant Withdrawal Requests. The Sponsor hereby directs that, pursuant to the Plan, a participant withdrawal request (in-service or full withdrawal) may be made by the participant by telephone, and the Trustee shall process such request only after the identity of the participant is verified by use of a personal identification number ("PIN") and social security number. The Trustee shall process such withdrawal in accordance with written guidelines provided by the Sponsor and documented in the Plan Administrative Manual. For withdrawals which require spousal consent, the Trustee shall forward the withdrawal document to the participant for execution and submission to the Trustee. The Trustee shall have the responsibility for approving 4 the withdrawal in accordance with written guidelines provided by the Sponsor and documented in the Plan Administrative Manual. (c) Limitations. The Trustee shall not be required to make any disbursement in excess of the net realizable value of the assets of the Trust at the time of the disbursement. The Trustee shall be required to make all disbursements in cash in accordance with the hierarchy of investments to be converted to cash as detailed in the Plan Administrative Manual unless the Administrator has provided written directions to the contrary. Section 5. Investment of Trust. (a) Selection of Investment Options. The Trustee shall have no responsibility for the selection of investment options under the Trust and shall not render investment advice to any participant in connection with the selection of such options. (b) Available Investment Options. The Named Fiduciary with respect to a Plan shall direct the Trustee as to what investment options: the Trust shall be invested during the Participant Recordkeeping Reconciliation Period, and the investment options in which Plan participants may invest in, subject to the following limitations. The Named Fiduciary may determine to offer as investment options only (i) Mutual Funds, (ii) Sponsor Stock, (iii) Harsco Stock, (iv) notes evidencing loans to Participants in accordance with the terms of the Plan, (v) Stable Value Investments chosen by the Trustee as set forth in the Investment Guidelines attached hereto, (vi) Existing GICs, and (vii) collective investment funds maintained by the Trustee for qualified plans; provided, however, that the Named Fiduciary hereby directs the Trustee to continue to hold such Existing GICs as set forth in Section A of Schedule "G" until the Named Fiduciary directs otherwise, it being expressly understood that such direction is given in accordance with Section 403(a) of ERISA; and provided, further, that the Trustee shall be considered a fiduciary with investment discretion only with respect to Plan assets that are invested in existing GICs set forth in Section B of Schedule "G" chosen by the Trustee or in collective investment funds maintained by the Trustee for qualified plans. The investment options initially selected by the Named Fiduciary are identified on Schedules "A" and "C" attached hereto. The Named Fiduciary may add additional investment options with the consent of the Trustee and upon mutual amendment of this Trust Agreement and the Schedules thereto to reflect such additions. (c) Participant Direction. Each Participant shall direct the Trustee in which investment option(s) to invest the assets in the participant's individual accounts. Such directions may be made by Participants by use of the telephone exchange system maintained for such purposes by the Trustee or its agent, in accordance with written Telephone Exchange Guidelines attached hereto as Schedule "H". In the event that the Trustee fails to receive a proper direction, the assets shall be invested in the securities of the investment option set forth for such purpose on Schedule "C", until the Trustee receives a proper direction. (d) Mutual Funds. The Sponsor hereby acknowledges that it has received from the Trustee a copy of the prospectus for each Mutual Fund selected by the Named Fiduciary as a Plan investment option. All transactions involving Mutual Funds not advised by Fidelity Management & Research Company (Non-Fidelity Mutual Funds) shall be done in accordance with the Operational Guidelines attached hereto as Schedule "K". Trust investments in Mutual Funds shall be subject to the following limitations: (i) Execution of Purchases and Sales. Purchases and sales of Mutual Funds (other than for exchanges) shall be made on the date on which the Trustee receives from the Sponsor in good order all information and documentation necessary to accurately effect such purchases and sales (or in the case of a purchase, the subsequent date on which the Trustee has received a wire transfer of funds necessary to make such purchase). Exchanges of Mutual Funds shall be made in accordance with the Telephone Exchange Guidelines attached hereto as Schedule "H". 6 (ii) Voting. At the time of mailing of notice of each annual or special stockholders' meeting of any Mutual Fund, the Trustee shall send a copy of the notice and all proxy solicitation materials to each Participant who has shares of the Mutual Fund credited to the Participant's accounts, together with a voting direction form for return to the Trustee or its designee. The Sponsor shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the mutual fund shares held in any short-term investment fund or liquidity reserve. The Participant shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the shares credited to the Participant's accounts (both vested and unvested). The Trustee shall vote the shares as directed by the Participant. The Trustee shall not vote shares for which it has received no directions from the Participant. During the participant recordkeeping reconciliation period, the Sponsor shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the shares of the Mutual Funds in the Trust including Mutual Fund shares held in any short-term investment fund for liquidity reserve. With respect to all rights other than the right to vote, the Trustee shall follow the directions of the Participant and if no such directions are received, the directions of the Named Fiduciary. The Trustee shall have no duty to solicit directions from Participants or the Sponsor. (e) Sponsor Stock. Trust investments in Sponsor Stock shall be made via the FMC Stock Fund (the "FMC Stock Fund"). Investments in the FMC Stock Fund shall consist primarily of shares of Sponsor Stock. In order to satisfy daily participant exchange or withdrawal requests for transfers and payments, the FMC Stock Fund shall also include cash or short-term liquid investments in accordance with this paragraph. Such holdings will include Fidelity Institutional Cash Portfolios: Money Market Portfolio: Class I or such other Mutual Fund or commingled money market pool as agreed to by the Sponsor and Trustee. The Named Fiduciary shall, after consultation with the Trustee, establish and communicate to the Trustee in writing a target percentage and drift allowance for such short-term liquid investments. The Trustee shall be responsible for ensuring that the actual cash held in the FMC Stock Fund falls within the agreed upon range over time. Each participant's proportional interest in the FMC Stock Fund shall be measured in units of participation, rather than shares of Sponsor Stock. Such units shall represent a proportionate interest in all of the assets of the FMC Stock Fund, which includes shares of Sponsor Stock, short-term investments and at times, receivables for dividends and/or Sponsor 7 Stock sold and payables for Sponsor Stock purchased. The Trustee shall determine a daily net asset value ("NAV") for each unit outstanding of the FMC Stock Fund. Valuation of the FMC Stock Fund shall be based upon the 4:00 p.m. New York Stock Exchange ("NYSE") closing price of the stock, or if unavailable, the latest available price as reported by the principal national securities exchange on which the Sponsor Stock is traded. The NAV shall be adjusted by dividends paid on the shares of Sponsor Stock held by the FMC Stock Fund, gains or losses realized on sales of Sponsor Stock, appreciation or depreciation in the market price of those shares owned, and interest on the short-term investments held by the FMC Stock Fund, expenses that, pursuant to Sponsor direction, the Trustee accrues from the FMC Stock Fund, and commissions on purchases and sales of Sponsor Stock. Investments in Sponsor Stock shall be subject to the following limitations: (i) Fiduciary Duty of Named Fiduciary. The Trustee shall have no responsibility for monitoring the suitability under the fiduciary duty rules of section 404(a)(1) of ERISA (as modified by section 404(a)(2) of ERISA) of the Sponsor acquiring and holding Sponsor Stock. The Trustee shall not be liable for any loss, or by reason of any breach, which arises from the directions of the Named Fiduciary with respect to the acquisition and holding of Sponsor Stock, unless it is clear on their face that the actions to be taken under those directions would be prohibited by the foregoing fiduciary duty rules or would be contrary to the terms of this Agreement. (ii) Purchase and sales of Sponsor Stock shall be made on the open market as necessary to maintain the target cash percentage and drift allowance for the FMC Stock Fund, provided that: (1) If the Trustee is unable to purchase or sell the total number of shares required to be purchased or sold on such day as a result of market conditions; or (2) If the Trustee is prohibited by the Securities and Exchange Commission, the New York Stock Exchange, or any other regulatory body from purchasing or selling any or all of the shares required to be purchased or sold on such day, then the Trustee shall purchase or sell such shares as soon as possible thereafter. The 8 Trustee may follow directions from the Administrator or Named Fiduciary to deviate from the above purchase and sale procedures provided that such direction is made in writing by the Administrator or Named Fiduciary. (iii) Execution of Purchases and Sales. (A) Purchases and sales of units in the FMC Stock Fund (other than for exchanges) shall be made on the date on which the Trustee receives from the Administrator in good order all information, documentation, and wire transfers of funds (if applicable), necessary to accurately effect such transactions. Exchanges of units in the FMC Stock Fund shall be made in accordance with the Telephone Exchange Guidelines attached hereto as Schedule "H". The Trustee may follow directions from the Administrator or Named Fiduciary to deviate from the above purchase and sale procedures provided that such direction is made in writing by the Administrator or Named Fiduciary. (B) Purchases and Sales from or to Sponsor. If directed by the Sponsor in writing prior to the trading date, the Trustee may purchase or sell Sponsor Stock from or to the Sponsor if the purchase or sale is for adequate consideration (within the meaning of section 3(18) of ERISA) and no commission is charged. If Sponsor contributions (employer) or contributions made by the Sponsor on behalf of the participants (employee) under the Plan are to be invested in Sponsor Stock, the Sponsor may transfer Sponsor Stock in lieu of cash to the Trust. In either case, the number of shares to be transferred will be determined by dividing the total amount of Sponsor Stock to be purchased or sold by the 4:00 p.m. NYSE closing price of the Sponsor Stock on the trading date. (C) Use of an Affiliated Broker. The Sponsor hereby directs the Trustee to use Fidelity Brokerage Services, Inc. ("FBSI") to provide brokerage services in connection with any purchase or sale of Sponsor Stock in accordance with directions from Plan participants. FBSI shall execute such directions directly or through its affiliate, National Financial Services Company ("NFSC"). The provision of brokerage services shall be subject to the following: (1) As consideration for such brokerage services, the Sponsor agrees that FBSI shall be entitled to remuneration under this authorization provision in the amount of three and one-half cents ($.035) 9 commission on each share of Sponsor Stock. Any change in such remuneration may be made only by a signed agreement between Sponsor and Trustee. (2) Following the procedures set forth in Department of Labor Prohibited Transaction Class Exemption 86-128 (PTCE 86-128), the Trustee will provide the Sponsor with the following documents: (1) a description of FBSI's brokerage placement practices; (2) a copy of PTCE 86-128; and (3) a form by which the Sponsor may terminate this authorization to use a broker affiliated with the Trustee. The Trustee will provide the Sponsor with this termination form annually, as well as quarterly and annual reports which summarize all securities transaction related charges incurred by the Plan. (3) Any successor organization of FBSI, through reorganization, consolidation, merger or similar transactions, shall, upon consummation of such transaction, become the successor broker in accordance with the terms of this authorization provision. (4) The Trustee and FBSI shall continue to rely on this authorization provision until notified to the contrary. The Sponsor reserves the right to terminate this authorization upon sixty (60) days written notice to FBSI (or its successor) and the Trustee, in accordance with Section 11 of this Agreement. (iv) Securities Law Reports. The Named Fiduciary shall be responsible for filing all reports required under Federal or state securities laws with respect to the Trust's ownership of Sponsor Stock, including, without limitation, any reports required under section 13 or 16 of the Securities Exchange Act of 1934, and shall immediately notify the Trustee in writing of any requirement to stop purchases or sales of Sponsor Stock pending the filing of any report. The Trustee shall provide to the Named Fiduciary such information on the Trust's ownership of Sponsor Stock as the Named Fiduciary may reasonably request in order to comply with Federal or state securities laws. (v) Voting and Tender Offers. Notwithstanding any other provision of this Agreement the provisions of this Section shall govern the voting and tendering of Sponsor Stock. The Sponsor, after consultation with 10 the Trustee, shall provide and pay for all printing, mailing, tabulation and other costs associated with the voting and tendering of Sponsor Stock. (A) Voting. ------ (1) When the issuer of Sponsor Stock prepares for any annual or special meeting, the Sponsor shall notify the Trustee at least thirty (30) days in advance of the intended record date and shall cause a copy of all proxy solicitation materials to be sent to the Trustee. If requested by the Trustee, the Sponsor shall certify to the Trustee that the aforementioned materials represents the same information that is distributed to shareholders of Sponsor Stock. Based on these materials the Trustee shall prepare a voting instruction form and shall provide a copy of all proxy solicitation materials to be sent to each Plan participant with an interest in Sponsor Stock held in the Trust, together with the foregoing voting instruction form to be returned to the Trustee or its designee. The form shall show the proportional interest in the number of full and fractional shares of Sponsor Stock credited to the participant's accounts held in the FMC Stock Fund. (2) Each participant with an interest in the FMC Stock Fund shall have the right to direct the Trustee as to the manner in which the Trustee is to vote (including not to vote) that number of shares of Sponsor Stock reflecting such participant's proportional interest in the FMC Stock Fund (both vested and unvested). Directions from a participant to the Trustee concerning the voting of Sponsor Stock shall be communicated in writing, or by mailgram or similar means as is agreed upon by the Trustee and the Sponsor. These directions shall be held in confidence by the Trustee and shall not be divulged to the Sponsor, or any officer or employee thereof, or any other person except to the extent that the consequences of such directions are reflected in reports regularly communicated to any such persons in the ordinary course of the performance of the Trustee's services hereunder. Upon its receipt of the directions, the Trustee shall vote the shares of Sponsor Stock reflecting the participant's proportional interest in the FMC Stock Fund as directed by the participant. 11 (3) For all undirected shares of Sponsor Stock, both allocated and unallocated shares, the Trustee shall vote as directed by the Sponsor, which may delegate to a fiduciary independent of the Trustee and the Sponsor, the authority to so direct the Trustee. All fees associated with the appointment of an independent fiduciary will be borne by the Sponsor. (B) Tender Offers. (1) Upon commencement of a tender offer for any securities held in the Trust that are Sponsor Stock, the Sponsor shall timely notify the Trustee in advance of the intended tender date and shall cause a copy of all materials to be sent to the Trustee. The Sponsor shall certify to the Trustee that the aforementioned materials represent the same information distributed to shareholders of Sponsor Stock. Based on these materials and after consultation with the Sponsor the Trustee shall prepare a tender instruction form and shall provide a copy of all tender materials to be sent to each plan participant, together with the foregoing tender instruction form, to be returned to the Trustee or its designee. The tender instruction form shall show the number of full and fractional shares of Sponsor Stock that reflect the participants proportional interest in the FMC Stock Fund (both vested and unvested). (2) Each participant shall have the right to direct the Trustee to tender or not to tender some or all of the shares of Sponsor Stock reflecting such participant's proportional interest in the FMC Stock Fund (both vested and unvested). Directions from a participant to the Trustee concerning the tender of Sponsor Stock shall be communicated in writing, or by mailgram or such similar means as is agreed upon by the Trustee and the Sponsor. These directions shall be held in confidence by the Trustee and shall not be divulged to the Sponsor, or any officer or employee thereof, or any other person except to the extent that the consequences of such directions are reflected in reports regularly communicated to any such persons in the ordinary course of the performance of the Trustee's services hereunder. The Trustee shall tender or not tender shares of Sponsor Stock as directed by the participant. Except as otherwise required by law, the Trustee shall not tender shares of Sponsor Stock reflecting a participant's proportional interest in the FMC Stock Fund for which it has received no direction from the participant. 12 (3) Except as otherwise required by law, the Trustee shall tender that number of shares of Sponsor Stock not credited to participants' accounts in the same proportion as the total number of shares of Sponsor Stock credited to participants' accounts for which it has received instructions from Participants. (4) A participant who has directed the Trustee to tender some or all of the shares of Sponsor Stock reflecting the participant's proportional interest in the FMC Stock Fund may, at any time prior to the tender offer withdrawal date, direct the Trustee to withdraw some or all of the tendered shares reflecting the participant's proportional interest, and the Trustee shall withdraw the directed number of shares from the tender offer prior to the tender offer withdrawal deadline. Prior to the withdrawal deadline, if any shares of Sponsor Stock not credited to participants' accounts have been tendered, the Trustee shall redetermine the number of shares of Sponsor Stock that would be tendered under Section 5(e)(v)(B)(3) if the date of the foregoing withdrawal were the date of determination, and withdraw from the tender offer the number of shares of Sponsor Stock not credited to participants' accounts necessary to reduce the amount of tendered Sponsor Stock not credited to participants' accounts to the amount so redetermined. A participant shall not be limited as to the number of directions to tender or withdraw that the participant may give to the Trustee. (5) A direction by a participant to the Trustee to tender shares of Sponsor Stock reflecting the participant's proportional interest in the FMC Stock Fund shall not be considered a written election under the Plan by the participant to withdraw, or have distributed, any or all of his withdrawable shares. The Trustee shall credit to each proportional interest of the participant from which the tendered shares were taken the proceeds received by the Trustee in exchange for the shares of Sponsor Stock tendered from that interest. Pending receipt of directions (through the Administrator) from the participant or the Named Fiduciary, as provided in the Plan, as to which of the remaining investment options the proceeds should be invested in, the Trustee shall invest the proceeds in the investment option described in Schedule "C". (vi) General. With respect to all rights other than the right to vote, the right to tender, and the right to withdraw shares previously tendered, in the case of Sponsor Stock credited to a participant's proportional 13 interest in the FMC Stock Fund, the Trustee shall follow the directions of the participant and if no such directions are received, the directions of the Named Fiduciary. The Trustee shall have no duty to solicit directions from participants. With respect to all rights other than the right to vote and the right to tender, in the case of Sponsor Stock not credited to participants' accounts, the Trustee shall follow the directions of the Named Fiduciary. (vii) Conversion. All provisions in this Section 5(e) shall also apply to any securities received as a result of a conversion of Sponsor Stock. (f) Harsco Stock. Trust investments in Harsco Stock shall be made via the Harsco Stock Fund (the "Harsco Stock Fund"). Investments in the Harsco Stock Fund shall consist primarily of shares of Harsco Stock. In order to satisfy daily participant exchange or withdrawal requests for transfers and payments, the Harsco Stock Fund shall also include cash or short-term liquid investments in accordance with this paragraph. Such holdings will include Fidelity Institutional Cash Portfolios: Money Market Portfolio: Class I or such other Mutual Fund or commingled money market pool as agreed to by the Sponsor and Trustee. The Named Fiduciary shall, after consultation with the Trustee, establish and communicate to the Trustee in writing a target percentage and drift allowance for such short-term liquid investments. The Trustee shall be responsible for ensuring that the actual cash held in the Harsco Stock Fund falls within the agreed upon range over time. Each participant's proportional interest in the Harsco Stock Fund shall be measured in units of participation, rather than shares of Harsco Stock. Such units shall represent a proportionate interest in all of the assets of the Harsco Stock Fund, which includes shares of Harsco Stock, short-term investments and at times, receivables for dividends and/or Harsco Stock sold and payables for Harsco Stock purchased. The Trustee shall determine a daily net asset value ("NAV") for each unit outstanding of the Harsco Stock Fund. Valuation of the Harsco Stock Fund shall be based upon the 4:00 p.m. New York Stock Exchange ("NYSE") closing price of the stock, or if unavailable, the latest available price as reported by the principal national securities exchange on which the Harsco Stock is traded. The NAV shall be adjusted by dividends paid on the shares of Harsco Stock held by the Harsco Stock Fund, gains or losses realized on sales of Harsco Stock, appreciation or depreciation in the market price of those shares owned, and interest on the short-term investments held by the Harsco Stock Fund, expenses that, pursuant to Sponsor direction, the Trustee accrues from the Harsco Stock Fund, and 14 commissions on purchases and sales of Harsco Stock. Investments in Harsco Stock shall be subject to the following limitations: (i) Fiduciary Duty of Named Fiduciary. The Trustee shall have no duty to monitor the suitability under the fiduciary duty rules of section 404(a)(1) of ERISA (as modified by section 404(a)(2) of ERISA) of the Sponsor acquiring and holding Harsco Stock. The Trustee shall not be liable for any loss, or by reason of any breach, which arises from the directions of the Named Fiduciary with respect to the acquisition and holding of Harsco Stock, unless it is clear on their face that the actions to be taken under those directions would be prohibited by the foregoing fiduciary duty rules or would be contrary to the terms of this Agreement. (ii) Purchase and sales of Harsco Stock shall be made on the open market as necessary to maintain the target cash percentage and drift allowance for the Harsco Stock Fund, provided that: (1) If the Trustee is unable to purchase or sell the total number of shares required to be purchased or sold on such day as a result of market conditions; or (2) If the Trustee is prohibited by the Securities and Exchange Commission, the New York Stock Exchange, or any other regulatory body from purchasing or selling any or all of the shares required to be purchased or sold on such day, then the Trustee shall purchase or sell such shares as soon as possible thereafter. The Trustee may follow directions from the Administrator or Named Fiduciary to deviate from the above purchase and sale procedures provided that such direction is made in writing by the Administrator or Named Fiduciary. (iii) Execution of Purchases and Sales. (A) Purchases and sales of units in the Harsco Stock Fund (other than for exchanges) shall be made on the date on which the Trustee receives from the Administrator in good order all information, documentation, and wire transfers of funds (if applicable), necessary to accurately effect such transactions. Exchanges of units in the Harsco Stock Fund shall be made in accordance with the Telephone Exchange Guidelines attached hereto as Schedule "H". The Trustee may follow directions from the Administrator or Named 15 Fiduciary to deviate from the above purchase and sale procedures provided that such direction is made in writing by the Administrator or Named Fiduciary. (B) Purchases and Sales from or to Sponsor. If directed by the Sponsor in writing prior to the trading date, the Trustee may purchase or sell Harsco Stock from or to the Sponsor if the purchase or sale is for adequate consideration (within the meaning of section 3(18) of ERISA) and no commission is charged. If Sponsor contributions (employer) or contributions made by the Sponsor on behalf of the participants (employee) under the Plan are to be invested in Harsco Stock, the Sponsor may transfer Harsco Stock in lieu of cash to the Trust. In either case, the number of shares to be transferred will be determined by dividing the total amount of Harsco Stock to be purchased or sold by the 4:00 p.m. NYSE closing price of the Harsco Stock on the trading date. (C) Use of an Affiliated Broker. The Sponsor hereby directs the Trustee to use Fidelity Brokerage Services, Inc. ("FBSI") to provide brokerage services in connection with any purchase or sale of Harsco Stock in accordance with directions from Plan participants. FBSI shall execute such directions directly or through its affiliate, National Financial Services Company ("NFSC"). The provision of brokerage services shall be subject to the following: (1) As consideration for such brokerage services, the Sponsor agrees that FBSI shall be entitled to remuneration under this authorization provision in the amount of three and one-half cents ($.035) commission on each share of Harsco Stock. Any change in such remuneration may be made only by a signed agreement between Sponsor and Trustee. (2) Following the procedures set forth in Department of Labor Prohibited Transaction Class Exemption 86-128 (PTCE 86-128), the Trustee will provide the Sponsor with the following documents: (1) a description of FBSl's brokerage placement practices; (2) a copy of PTCE 86-128; and (3) a form by which the Sponsor may terminate this authorization to use a broker affiliated with the Trustee. The Trustee will provide the Sponsor with this termination form annually, as well as quarterly and annual reports which summarize all securities transaction related charges incurred by the Plan. 16 (3) Any successor organization of FBSI, through reorganization, consolidation, merger or similar transactions, shall, upon consummation of such transaction, become the successor broker in accordance with the terms of this authorization provision. (4) The Trustee and FBSI shall continue to rely on this authorization provision until notified to the contrary. The Sponsor reserves the right to terminate this authorization upon sixty (60) days written notice to FBSI (or its successor) and the Trustee, in accordance with Section 11 of this Agreement. (iv) Securities Law Reports. The Named Fiduciary shall be responsible for filing all reports required under Federal or state securities laws with respect to the Trust's ownership of Harsco Stock, including, without limitation, any reports required under section 13 or 16 of the Securities Exchange Act of 1934, and shall immediately notify the Trustee in writing of any requirement to stop purchases or sales of Harsco Stock pending the filing of any report. The Trustee shall provide to the Named Fiduciary such information on the Trust's ownership of Harsco Stock as the Named Fiduciary may reasonably request in order to comply with Federal or state securities laws. (v) Voting and Tender Offers. Notwithstanding any other provision of this Agreement the provisions of this Section shall govern the voting and tendering of Harsco Stock. The Sponsor, after consultation with the Trustee, shall provide and pay for all printing, mailing, tabulation and other costs associated with the voting and tendering of Harsco Stock. (A) Voting (l) When the issuer of Harsco Stock prepares for any annual or special meeting, the Sponsor shall notify the Trustee at least thirty (30) days in advance of the intended record date and shall cause a copy of all proxy solicitation materials to be sent to the Trustee. If requested by the Trustee, the Sponsor shall certify to the Trustee that the aforementioned materials represents the same information that is distributed to shareholders of Harsco 17 Stock. Based on these materials the Trustee shall prepare a voting instruction form and shall provide a copy of all proxy solicitation materials to be sent to each Plan participant with an interest in Harsco Stock held in the Trust, together with the foregoing voting instruction form to be returned to the Trustee or its designee. The form shall show the proportional interest in the number of full and fractional shares of Harsco Stock credited to the participant's accounts held in the Harsco Stock Fund. (2) Each participant with an interest in the Harsco Stock Fund shall have the right to direct the Trustee as to the manner in which the Trustee is to vote (including not to vote) that number of shares of Harsco Stock reflecting such participant's proportional interest in the Harsco Stock Fund (both vested and unvested). Directions from a participant to the Trustee concerning the voting of Harsco Stock shall be communicated in writing, or by mailgram or similar means as is agreed upon by the Trustee and the Sponsor. These directions shall be held in confidence by the Trustee and shall not be divulged to the Sponsor, or any officer or employee thereof, or any other person except to the extent that the consequences of such directions are reflected in reports regularly communicated to any such persons in the ordinary course of the performance of the Trustee's services hereunder. Upon its receipt of the directions, the Trustee shall vote the shares of Harsco Stock reflecting the participant's proportional interest in the Harsco Stock Fund as directed by the participant. (3) For all undirected shares of Sponsor Stock, both allocated and unallocated shares, the Trustee shall vote as directed by the Sponsor, which may delegate to a fiduciary independent of the Trustee and Sponsor, the authority to so direct the Trustee. All fees associated with the appointment of an independent fiduciary will be borne by the Sponsor. (B) Tender Offers. (1) Upon commencement of a tender offer for any securities held in the Trust that are Harsco Stock, the Sponsor shall timely notify the Trustee in advance of the intended tender date and shall cause a copy of all materials received by the Sponsor to be sent to the Trustee. The Sponsor shall certify to the Trustee that the 18 aforementioned materials represent the same information distributed to shareholders of Harsco Stock. Based on these materials and after consultation with the Sponsor the Trustee shall prepare a tender instruction form and shall provide a copy of all tender materials to be sent to each plan participant, together with the foregoing tender instruction form, to be returned to the Trustee or its designee. The tender instruction form shall show the number of full and fractional shares of Harsco Stock that reflect the participants proportional interest in the Harsco Stock Fund (both vested and unvested). (2) Each participant shall have the right to direct the Trustee to tender or not to tender some or all of the shares of Harsco Stock reflecting such participant's proportional interest in the Harsco Stock Fund (both vested and unvested). Directions from a participant to the Trustee concerning the tender of Harsco Stock shall be communicated in writing, or by mailgram or such similar means as is agreed upon by the Trustee and the Sponsor. These directions shall be held in confidence by the Trustee and shall not be divulged to the Sponsor, or any officer or employee thereof, or any other person except to the extent that the consequences of such directions are reflected in reports regularly communicated to any such persons in the ordinary course of the performance of the Trustee's services hereunder. The Trustee shall tender or not tender shares of Sponsor Stock as directed by the participant. Except as otherwise required by law, the Trustee shall not tender shares of Harsco Stock reflecting a participant's proportional interest in the Harsco Stock Fund for which it has received no direction from the participant. (3) Except as otherwise required by law, the Trustee shall tender that number of shares of Harsco Stock not credited to participants' accounts in the same proportion as the total number of shares of Harsco Stock credited to participants' accounts for which it has received instructions from Participants. (4) A participant who has directed the Trustee to tender some or all of the shares of Harsco Stock reflecting the participant's proportional interest in the Harsco Stock Fund may, at any time prior to the tender offer withdrawal date, direct the Trustee to withdraw some or all of the tendered shares reflecting the participant's proportional interest, and the Trustee shall withdraw the directed number of shares from the tender offer prior to the tender offer withdrawal deadline. Prior to the withdrawal deadline, if any shares of Harsco Stock not credited to 19 participants' accounts have been tendered, the Trustee shall redetermine the number of shares of Harsco Stock that would be tendered under Section 5(f)(v)(B)(3) if the date of the foregoing withdrawal were the date of determination, and withdraw from the tender offer the number of shares of Harsco Stock not credited to participants' accounts necessary to reduce the amount of tendered Harsco Stock not credited to participants' accounts to the amount so redetermined. A participant shall not be limited as to the number of directions to tender or withdraw that the participant may give to the Trustee. (5) A direction by a participant to the Trustee to tender shares of Harsco Stock reflecting the participant's proportional interest in the Harsco Stock Fund shall not be considered a written election under the Plan by the participant to withdraw, or have distributed, any or ail of his withdrawable shares. The Trustee shall credit to each proportional interest of the participant from which the tendered shares were taken the proceeds received by the Trustee in exchange for the shares of Harsco Stock tendered from that interest. Pending receipt of directions (through the Administrator) from the participant or the Named Fiduciary, as provided in the Plan, as to which of the remaining investment options the proceeds should be invested in, the Trustee shall invest the proceeds in the investment option described in Schedule "C". (vi) General. With respect to all rights other than the right to vote, the right to tender, and the right to withdraw shares previously tendered, in the case of Harsco Stock credited to a participant's proportional interest in the Harsco Stock Fund, the Trustee shall follow the directions of the participant and if no such directions are received, the directions of the Named Fiduciary. The Trustee shall have no duty to solicit directions from participants. With respect to all rights other than the right to vote and the right to tender, in the case of Harsco Stock not credited to participants' accounts, the Trustee shall follow the directions of the Named Fiduciary. (vii) Conversion. All provisions in this Section 5(f) shall also apply to any securities received as a result of a conversion of Harsco Stock. 20 (g) Notes. For Plans which allow loans, the Administrator shall act as the Trustee's agent for participant loan notes and as such shall (i) collect and remit all principal and interest payments to the Trustee and (ii) keep the proceeds of such loans separate from the other assets of the Administrator and clearly identify such assets as Plan assets. To originate a participant loan, the Plan participant shall direct the Trustee as to the term and amount of the loan to be made from the participant's individual account. Such directions shall be made by Plan participants by use of the telephone exchange system maintained for such purpose by the Trustee or its agent. The Trustee shall determine, based on the current value of the participant's account on the date of the request and any guidelines provided by the Sponsor, the amount available for the loan. Based on the interest rate supplied by the Sponsor in accordance with the terms of the Plan, the Trustee shall advise the participant of such interest rate, as well as the installment payment amounts. The Trustee shall distribute the loan note with the proceeds check to the participant. The Trustee also shall distribute truth- in-lending disclosure to the participant. To facilitate recordkeeping, the Trustee may destroy the original of any promissory note made in connection with a loan to a participant under the Plan, provided that the Trustee first creates a duplicate by a photographic or optical scanning or other process yielding a reasonable facsimile of the promissory note and the Plan participant's signature thereon, which duplicate may be reduced or enlarged in size from the actual size of the original promissory note. (ii) For loans which require spousal consent, the Administrator shall act as the Trustee's agent for the purpose of holding all trust investments in participant loan notes and related documentation and as such shall (i) hold physical custody of and keep safe the notes and other loan documents, (ii) collect and remit all principal and interest payments to the Trustee, (iii) keep the proceeds of such loans separate from the other assets of the Administrator and clearly identify such assets as Plan assets, and (iv) cancel and surrender the notes and other loan documentation when a loan has been paid in full. To originate a participant loan, the Plan participant shall direct the Trustee as to the type of loan to be made from the participant's individual account. Such directions shall be made by Plan participants by use of the telephone exchange system maintained for such purpose by the Trustee or 21 its agent. The Trustee shall determine, based on the current value of the participant's account, the amount available for the loan. Based on the interest rate supplied by the Sponsor in accordance with the terms of the Plan, the Trustee shall advise the participant of such interest rate, as well as the installment payment amounts. The Trustee shall forward the loan document to the participant for execution and submission for approval to the Administrator. The Administrator shall have the responsibility for approving the loan and instructing the Trustee to send the loan proceeds to the Administrator or to the participant if so directed by the Administrator. In all cases, such instruction by the Administrator shall be made within thirty (30) days of the participant's initial request (the origination date). (h) Guaranteed Investment Contracts. Trust investments in GICs shall be subject to the following limitations: (i) Commingled Pool Investments. To the extent that the Named Fiduciary selects as an investment option the Managed Income Portfolio of the Fidelity Group Trust for Employee Benefit Plans (the "Group Trust"), the Sponsor hereby (A) agrees to the terms of the Group Trust and adopts said terms as a part of this Agreement and (B) acknowledges that it has received from the Trustee a copy of the Group Trust, the Declaration of Separate Fund for the Managed Income Portfolio of the Group Trust, and the Circular for the Managed Income Portfolio. (ii) Individually-Managed Investments. To the extent that the Named Fiduciary selects GICs chosen by the Trustee as an investment option, the Sponsor hereby directs the Trustee to choose such GICs in accordance with the Investment Guidelines for GIC Management attached hereto as Schedule "I". (iii) In order to provide the necessary monies for exchanges or redemptions from the GIC investment option, if any, under the Plan, the Sponsor agrees that the Plan shall maintain a liquidity reserve allocated to such investment option in Fidelity Institutional Cash Portfolios: Money 22 Market Portfolio: Class I or such other Mutual Fund or commingled money market pool as agreed to by the Sponsor and the Trustee. (i) Participation in Commingled Pools. To the extent that the Named Fiduciary selects as an investment option the U.S. Equity Index Commingled Pool of the Fidelity Group Trust for Employee Benefit Plans (the "Group Trust"), the Sponsor hereby (A) agrees to the terms of the Group Trust and adopts said terms as a part of this Agreement and (B) acknowledges that it has received from the Trustee a copy of the Group Trust, the Declaration of Separate Fund for the U.S. Equity Index Commingled Pool of the Group Trust, and the Circular for the U.S. Equity Index Commingled Pool. (j) Reliance of Trustee on Directions. (i) The Trustee shall not be liable for any loss, or by reason of any breach, which arises from any Participant's exercise or non-exercise of rights under this Agreement over the assets in the Participant's accounts. (ii) The Trustee shall not be liable for any loss, or by reason of any breach, which arises from the Named Fiduciary's exercise or non-exercise of rights under this Section 5, unless it was clear on their face that the actions to be taken under the Named Fiduciary's directions were prohibited by the fiduciary duty rules of Section 404(a) of ERISA or were contrary to the terms of the Plan or this Agreement. (k) Trustee Powers. The Trustee shall have the following powers and authority: (i) Subject to paragraphs (b), (c), (d) and (e) of this Section 5, to sell, exchange, convey, transfer, or otherwise dispose of any property held in the Trust, by private contract or at public auction. No person dealing with the Trustee shall be bound to see to the application of the purchase money or other property delivered to the Trustee or to inquire into the validity, expediency, or propriety of any such sale or other disposition. 23 (ii) Subject to paragraphs (b) and (c) of this Section 5, to invest in GICs and short term investments (including interest bearing accounts with the Trustee or money market mutual funds advised by affiliates of the Trustee) and in collective investment funds maintained by the Trustee for qualified plans, in which case the provisions of each collective investment fund in which the Trust is invested shall be deemed adopted by the Sponsor and the provisions thereof incorporated as a part of this Trust as long as the fund remains exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended. (iii) To cause any securities or other property held as part of the Trust to be registered in the Trustee's own name, in the name of one or more of its nominees, or in the Trustee's account with the Depository Trust Company of New York and to hold any investments in bearer form, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust. (iv) To keep that portion of the Trust in cash or cash balances as the Named Fiduciary or Sponsor may, from time to time, deem to be in the best interest of the Trust. (v) To borrow funds from a bank not affiliated with the Trustee in order to provide sufficient liquidity to process Plan transactions in a timely fashion, provided that the cost of borrowing shall be allocated in a reasonable fashion to the investment fund(s) in need of liquidity. (vi) To make, execute, acknowledge, and deliver any and all documents of transfer or conveyance and to carry out the powers herein granted. (vii) To settle, compromise, or submit to arbitration any claims, debts, or damages due to or arising from the Trust; to commence or defend suits or legal or administrative proceedings; to 24 represent the Trust in all suits and legal and administrative hearings; and to pay all reasonable expenses arising from any such action, from the Trust if not paid by the Sponsor. (viii) To employ legal, accounting, clerical, and other assistance as may be required in carrying out the provisions of this Agreement and to pay their reasonable expenses and compensation from the Trust if not paid by the Sponsor. (ix) To do all other acts although not specifically mentioned herein, as the Trustee may deem necessary to carry out any of the foregoing powers and the purposes of the Trust. Section 6. Recordkeeping and Administrative Services to Be Performed. (a) General. The Trustee shall perform those recordkeeping and administrative functions described in Schedule "A" attached hereto. These recordkeeping and administrative functions shall be performed within the framework of the Named Fiduciary's written directions regarding the Plan's provisions, guidelines and interpretations. (b) Accounts. The Trustee shall keep accurate accounts of all investments, receipts, disbursements, and other transactions hereunder, and shall report the value of the assets held in the Trust as of each Reporting Date. Within thirty (30) days following each Reporting Date or within sixty (60) days in the case of a Reporting Date caused by the resignation or removal of the Trustee, or the termination of this Agreement, the Trustee shall file with the Sponsor a written account setting forth all investments, receipts, disbursements, and other transactions effected by the Trustee between the Reporting Date and the prior Reporting Date, and setting forth the value of the Trust as of the Reporting Date. Except as otherwise required under ERISA, upon the expiration of one year from the date of filing such account with the Sponsor, the Trustee shall have no liability or further accountability to anyone with respect to the propriety of its acts or transactions shown in such account, except with respect 25 to such acts or transactions as to which the Sponsor shall within such one year period file with the Trustee written objections. (c) Inspection and Audit. All records generated by the Trustee in accordance with paragraphs (a) and (b) shall be open to inspection and audit, during the Trustee's regular business hours prior to the termination of this Agreement, by the Administrator or any person designated by the Administrator. Upon the resignation or removal of the Trustee or the termination of this Agreement, the Trustee shall provide to the Administrator, at no expense to the Sponsor, (i) test data in the format available from Fidelity's Participant Recordkeeping System (FPRS) (via diskette or tape, with corresponding hard copy reports and file layout information) containing a file dump of plan data, including a statement of each participant's accounts, which statement shall include at least the name, address, social security number, date of hire, date of birth, vesting, account balances by participant and source, forfeiture balances and any other indicative data maintained on FPRS, and (ii) a final file dump in the same format as the test data as of the final date specified in the notice of resignation, removal, or termination of the Trustee or the termination of this Agreement. The Sponsor will be responsible for any cost associated with providing the Administrator or the Plan's new recordkeeper with additional records which are not routinely prepared by Fidelity in recordkeeping the Plan. Such costs shall be communicated to the Sponsor in advance, and the Sponsor's written approval of such costs shall be obtained before such costs are incurred. (d) Effect of Plan Amendment. A confirmation of the current qualified status of each Plan is attached hereto as Schedule "F". The Trustee's provision of the recordkeeping and administrative services set forth in this Section 6 shall be conditioned on the Sponsor delivering to the Trustee a copy of any amendment to the Plan as soon as administratively feasible following the amendment's adoption, with, if requested due to an issue of the Plans' qualification status, an IRS determination letter or an opinion of counsel substantially in the form of Schedule "F" covering such amendment, and on the Sponsor providing the Trustee on a timely basis with all the information the Sponsor deems necessary for the Trustee to perform the recordkeeping and administrative services and such other information as the Trustee may reasonably request. 26 (e) Returns, Reports and Information. The Sponsor shall be responsible for the preparation and filing of all returns, reports, and information required of the Trust or Plan by law. The Trustee shall provide the Sponsor with such information as the Sponsor may reasonably request to make these filings. The Sponsor shall also be responsible for making any disclosures to Participants required by law including, without limitation, such disclosures as may be required by law, except such disclosure as may be required under federal or state truth-in-lending laws with regard to Participant loans, which shall be provided by the Trustee. (f) Allocation of Plan Interests. All transfers to, withdrawals from, or other transactions regarding the Trust shall be conducted in such a way that the proportionate interest in the Trust of each Plan and the fair market value of that interest may be determined at any time. Whenever the assets of more than one Plan are commingled in the Trust or in any investment option, the undivided interest therein of each such Plan shall be debited or credited (as the case may be) (i) for the entire amount of every contribution received on behalf of such Plan, every benefit payment, or other expense attributable solely to such Plan, and every other transaction relating only to such Plan; and (ii) for its proportionate share of every item of collected or accrued income, gain or loss, and general expense, and of any other transactions attributable to the Trust or that investment option as a whole. Section 7. Compensation and Expenses. Within thirty (30) days of receipt of the Trustee's bill, which shall be computed and billed in accordance with Schedule "B" attached hereto and made a part hereof, as amended from time to time, the Sponsor shall send to the Trustee a payment in such amount or the Sponsor may direct the Trustee to deduct such amount from Participants' account. All expenses of the Trustee relating directly to the acquisition and disposition of investments constituting part of the Trust, and all taxes of any kind whatsoever that may be levied or assessed under existing or future laws upon or in respect of the Trust or the income thereof, shall be a charge against and paid from the appropriate Participants' accounts. 27 Section 8. Directions and Indemnification. (a) Identity of Sponsor and Named Fiduciaries. The Trustee shall be fully protected in relying on the fact that the Sponsor and the Named Fiduciaries under a Plan are the individuals or persons named as such on the Authorization Letters in the form of Schedules "D" and "E" attached hereto or on a Plan Designation Form in accordance with Schedule "J" attached hereto or such other individuals or persons as the Sponsor may notify the Trustee in writing. (b) Directions from Sponsor or Administrator. Whenever the Sponsor or Administrator provides a direction to the Trustee, the Trustee shall not be liable for any loss, or by reason of any breach, arising from the direction if the direction is contained in a writing (or is oral and immediately confirmed in a writing) signed by any individual whose name and signature have been submitted (and not withdrawn) in writing to the Trustee by the Sponsor in the form attached hereto as Schedule "D", provided the Trustee reasonably believes the signature of the individual to be genuine. Such direction may also be made via EDT in accordance with procedures agreed to by the Sponsor and the Trustee; provided, however, that the Trustee shall be fully protected in relying on such direction as if it were a direction made in writing by the Sponsor. The Trustee shall have no responsibility to ascertain any direction's (i) accuracy, (ii) compliance with the terms of the Plan or any applicable law, or (iii) effect for tax purposes or otherwise. (c) Directions from Named Fiduciary. Whenever a Named Fiduciary provides a direction to the Trustee, the Trustee shall not be liable for any loss, or by reason of any breach, arising from the direction (i) if the direction is contained in a writing (or is oral and immediately confirmed in a writing) signed by any individual whose name and signature have been submitted (and not withdrawn) in writing to the Trustee by the Named Fiduciary in the form attached hereto as Schedule "E" and (ii) if the Trustee reasonably believes the signature of the individual to be genuine, unless it is clear on the direction's face that the actions to be taken under the direction would be prohibited by the fiduciary duty rules of section 404(a) of ERISA or would be contrary to the terms of the Plan or this Agreement. 28 (d) Co-Fiduciary Liability. In any other case, the Trustee shall not be liable for any loss, or by reason of any breach, arising from any act or omission of another fiduciary under the Plan except as provided in section 405(a) of ERISA. Without limiting the foregoing, the Trustee shall have no liability for the acts or omissions of any predecessor or successor trustee. (e) Indemnification. The Sponsor shall indemnify the Trustee against, and hold the Trustee harmless from, any and all loss, damage, penalty, liability, cost, and expense, including without limitation, reasonable attorneys' fees and disbursements, that may be incurred by, imposed upon, or asserted against the Trustee by reason of any claim, regulatory proceeding, or litigation arising from any act done or omitted to be done by any individual or person with respect to the Plan or Trust, excepting only any and all loss, etc., arising solely from the Trustee's negligence, bad faith, violations of law, terms of this Agreement or error. (f) Survival. The provisions of this Section 8 shall survive the termination of this Agreement. Section 9. Resignation or Removal of Trustee. (a) Resignation. The Trustee may resign at any time upon sixty (60) days' notice in writing to the Sponsor, unless a shorter period of notice is agreed upon by the Sponsor. (b) Removal. The Sponsor may remove the Trustee at any time upon thirty (30) days' notice in writing to the Trustee, unless a shorter period of notice is agreed upon by the Trustee. Section 10. Successor Trustee. (a) Appointment. If the office of Trustee becomes vacant for any reason, the Sponsor may in writing appoint a successor trustee under this Agreement. The successor trustee shall have all of the 29 rights, powers, privileges, obligations, duties, liabilities, and immunities granted to the Trustee under this Agreement. The successor trustee and predecessor trustee shall not be liable for the acts or omissions of the other with respect to the Trust. (b) Acceptance. When the successor trustee accepts its appointment under this Agreement, title to and possession of the Trust assets shall immediately vest in the successor trustee without any further action on the part of the predecessor trustee. The predecessor trustee shall execute all instruments and do all acts that reasonably may be necessary or reasonably may be requested in writing by the Sponsor or the successor trustee to vest title to all Trust assets in the successor trustee or to deliver all Trust assets to the successor trustee. (c) Corporate Action. Any successor of the Trustee or successor trustee, through sale or transfer of the business or trust department of the Trustee or successor trustee, or through reorganization, consolidation, or merger, or any similar transaction, shall, upon consummation of the transaction, become the successor trustee under this Agreement. Section 11. Termination. This Agreement may be terminated at any time by the Sponsor upon thirty (30) days' notice in writing to the Trustee. On the date of the termination of this Agreement, the Trustee shall forthwith transfer and deliver to such individual or entity as the Sponsor shall designate, all cash and assets then constituting the Trust. If, by the termination date, the Sponsor has not notified the Trustee in writing as to whom the assets and cash are to be transferred and delivered, the Trustee may bring an appropriate action or proceeding for leave to deposit the assets and cash in a court of competent jurisdiction. The Trustee shall be reimbursed by the Sponsor for all costs and expenses of the action or proceeding including, without limitation, reasonable attorneys' fees and disbursements. Section 12. Resignation, Removal, and Termination Notices. All notices of resignation, removal, or termination under this Agreement must be in writing and mailed to the party to which the notice is being 30 given by certified or registered mail, return receipt requested, to the Sponsor c/o Directors of Benefits, FMC Corporation, 200 East Randolph Drive, Chicago, Illinois 60601, and to the Trustee c/o John M. Kimpel, Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109, or to such other addresses as the parties have notified each other of in the foregoing manner. Section 13. Duration. This Trust shall continue in effect without limit as to time, subject, however, to the provisions of this Agreement relating to amendment, modification, and termination thereof. Section 14. Amendment or Modification. This Agreement may be amended or modified at any time and from time to time only by an instrument executed by both the Sponsor and the Trustee (whose consent shall not be unreasonably withheld or delayed). Notwithstanding the foregoing, and not prior to June 1, 2000, to reflect increased operating costs the Trustee may once each calendar year amend Schedule "B" with the Sponsor's consent, which consent shall not be unreasonably withheld or delayed, upon seventy-five (75) days written notice to the Sponsor. Section 15. General (a) Performance by Trustee, its Agents or Affiliates. The Sponsor acknowledges and authorizes that the services to be provided under this Agreement shall be provided by the Trustee, its agents or affiliates, including Fidelity Investments Institutional Operations Company, Inc. or its successor, and that certain of such services may be provided pursuant to one or more other contractual agreements or relationships. (b) Delegation by Employer. By authorizing the assets of any Plan as to which it is an Employer to be deposited in the Trust, each Employer, other than the Sponsor, hereby irrevocably delegates and grants to the Sponsor full and exclusive power and authority to exercise all of the powers conferred upon the Sponsor and each Employer by the terms of this Agreement, and to take or refrain from taking any and all action which such Employer might otherwise take or refrain from talking with 31 respect to this Agreement, including the sole and exclusive power to exercise, enforce or waive any rights whatsoever which such Employer might otherwise have with respect to the Trust, and irrevocably appoints the Sponsor as its agent for all purposes under this Agreement. The Trustee shall have no obligation to account to any such Employer or to follow the instructions of or otherwise deal with any such Employer, the intention being that the Trustee shall deal solely with the Sponsor. (c) Entire Agreement. This Agreement contains all of the terms agreed upon between the parties with respect to the subject matter hereof. (d) Waiver. No waiver by either party of any failure or refusal to comply with an obligation hereunder shall be deemed a waiver of any other or subsequent failure or refusal to so comply. (e) Successors and Assigns. The stipulations in this Agreement shall inure to the benefit of, and shall bind, the successors and assigns of the respective parties. (f) Partial Invalidity. If any term or provision of this Agreement or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. (g) Section Headings. The headings of the various sections and subsections of this Agreement have been inserted only for the purposes of convenience and are not part of this Agreement and shall not be deemed in any manner to modify, explain, expand or restrict any of the provisions of this Agreement. 32 Section 16. Governing Law. (a) Massachusetts Law Controls. This Agreement is being made in the Commonwealth of Massachusetts, and the Trust shall be administered as a Massachusetts trust. The validity, construction, effect, and administration of this Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, except to the extent those laws are superseded under section 514 of ERISA. (b) Trust Agreement Controls. The Trustee is not a party to the Plan, and in the event of any conflict between the provisions of the Plan and the provisions of this Agreement, the provisions of this Agreement shall control. Section 17. Plan Qualification. The Sponsor shall be responsible for verifying that while any assets of a particular Plan are held in the Trust, the Plan (i) is qualified within the meaning of section 401(a) of the Code; (ii) is permitted by existing or future rulings of the United States Treasury Department to pool its funds in a group trust; and (iii) permits its assets to be commingled for investment purposes with the assets of other such plans by investing such assets in this Trust. If any Plan ceases to be qualified within the meaning of section 401(a) of the Code, the Sponsor shall notify the Trustee as promptly as is reasonable. Upon receipt of such notice, the Trustee shall promptly segregate and withdraw from the Trust, the assets which are allocable to such disqualified Plan, and shall dispose of such assets in the manner directed by the Sponsor. 33 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. FMC CORPORATION /s/ W.R. Cooper /s/ David J. Kostelansky Attest: _______________ By: ________________________________ Secretary David J. Kostelansky Name: ______________________________ Director Benefits and Information Technology Title: _____________________________ 5/30/97 Date: ______________________________ FIDELITY MANAGEMENT TRUST COMPANY /s/ Douglas O. Kent /s/ Lucy B. Lewis Attest: ___________________ By: ________________________________ Assistant Clerk Lucy B. Lewis Name: ______________________________ Vice President Title: _____________________________ 6/11/97 Date: ______________________________ 34 Schedule "A" ADMINISTRATIVE SERVICES ------------------------ Administration - -------------- * Establishment and maintenance of Participant account and election percentages. * Maintenance of the following plan investment options: - Fidelity Retirement Government Money Market Portfolio - Stable Value Fund - Fidelity Puritan Fund - Fidelity U.S. Equity Index Commingled Pool - Mutual Qualified Fund (class Z) - Fidelity Low Priced Stock Fund - Sequoia Fund - Fidelity Blue Chip Growth Fund - Fidelity Diversified International Fund - Clipper Fund - FMC Stock Fund - Harsco Stock Fund (United Defense Limited Partnership Salaried Employees' Plan and United Defense Limited Partnership York Plan) * Maintenance of the following money classifications: - Basic Pre-Tax - Supplemental Pre-Tax - Pre-Tax Match - Basic After-Tax - Supplemental After-Tax - After-Tax Match - Rollover - Prior Plan Company Match - Harsco Company Rollover (United Defense Limited Partnership Salaried Employees' Plan and United Defense Limited Partnership York Plan) * Processing of mutual fund trades. The Trustee will provide only the recordkeeping and administrative services set forth on this Schedule "A" and as detailed in the Plan Administrative Manual and no others. A) Provide Participant Telephone Services 1. Fidelity registered representatives are available from 8:30 a.m. - 12:00 midnight ET to provide toll free telephone service for participant inquiries and transactions, including hearing impaired participants and accepting collect calls from international participants. Additionally, participants have 24 hour account balance inquiry and transaction capability access utilizing our automated voice response system. 35 2. For security purposes, all calls are recorded. In addition, several levels of security are available including the verification of a Personal Identification Number (PIN) and/or any other indicative data resident on the system. 3. Through our telephone services, Fidelity provides the following services: . Provide investment option information. . Maintain plan and GIC specific provisions. . Process exchanges (transfers) between investment options on a daily basis . Maintain and process changes to participants' contribution allocations for all money sources. . Allow participants to change their deferral and after-tax percentages and provide updates via EDT for customer to apply to its payrolls accordingly. . Consult with participants in various loan scenarios and generate all documentation. . Process all participant loan and withdrawal requests via Fidelity's toll-free telephone service according to plan provisions on a daily basis. . Process in-service and hardship withdrawals via telephone due to certain circumstances previously approved by the Sponsor. . Enroll new participants via telephone; provide confirmation of enrollment within five (5) days of the request. . Literature fulfillment. B) Plan Accounting 1. Process payroll contributions according to payroll frequency via electronic data transfer (EDT). The data format will be provided by Fidelity. 2. Provide plan and participant level accounting for up to fifteen (15) money classifications for the Plan. 3. Audit and reconcile the plan and participant accounts daily. 4. Provide daily plan and participant level accounting for all investment options. 5. Reconcile and process participant withdrawal requests as approved and directed by the Sponsor. All requests are paid based on the current market values of participants' accounts, not advanced or estimated values. A distribution report will accompany each check. 6. Track individual participant loans; process loan withdrawals; re-invest loan repayments; and prepare and deliver comprehensive reports to plan sponsor to assist in the administration of participant loans. 7. Fidelity's Guaranteed Investments Daily Equity System (GUIDE) is an automatic GIC daily portfolio accounting system. GUIDE provides the Sponsor with daily valuation of their plan assets whether individually managed or in our Managed Income Portfolio. 8. Maintain and process changes to participants' prospective and existing investment mix elections via Fidelity's toll-free telephone service. C) Participant Reporting 1. Mail confirmation to participants of all transactions initiated via Fidelity Telephone Services within three (3) calendar days of the transaction. 2. Prepare and mail via first class to each plan participant a quarterly detailed participant statement reflecting all activity for the period. Statements will be mailed no later than twenty (20) calendar days after each quarter end. 36 D) Plan Reporting 1. Prepare, reconcile and deliver a monthly Trial Balance Report presenting all money classes and investments. This report is based on the market value as of the last business day of the month. The report will be delivered not later than twenty (20) days after the end of each month in the absence of unusual circumstances. 2. Prepare, reconcile and deliver a Quarterly Administrative Report presenting both on a participant and a total plan basis all money classes, investment positions and a summary of all activity of the participant and plan as of the last business day of the quarter. The report will be delivered not later than twenty (20) days after the end of each quarter in the absence of unusual circumstances. E) Government Reporting Process year-end tax reports for participants - 1099R, as well as financial reporting to assist in the preparation of Form 5500. F) Communication Services On a fee for service basis (as requested by the Sponsor), employee communications describing available investment options, including multimedia informational materials and group presentations. G) Other Performance of non-discrimination limitation testing upon request. In order to obtain this service, the client shall be required to provide the information identified in the Fidelity Discrimination Testing Package Guidelines. Monitor and process required minimum distribution amounts as follows: the Trustee will notify the MRD participant and, upon notification from the MRD participant, will use the MRD participant's information to process their distributions. If the MRD participant does not respond to the Trustee's notification, the Sponsor directs the Trustee to automatically begin the required distributions for the participant. Determine whether domestic relations orders ("DRO"), issued by a court of competent jurisdiction, are "qualified" under section 414(p) of the Internal Revenue Code and section 206(d) of ERISA. In conjunction with making this determination, the Trustee shall provide the following services in accordance with the Sponsor's written administrative guidelines for processing QDROs: . Upon receipt of the DRO, the Trustee will notify the Participant, alternate payee(s) and their legal representatives, if any, will segregate that portion of a member's account necessary to satisfy the DRO while the determination is made; . After completing a review, the Trustee will provide notification to the affected parties of whether the DRO is qualified and, if not qualified, the reason(s) for the DRO's failure to be qualified; . If the DRO is determined to be a good QDRO, the alternate payee(s) will be notified, which notification shall also include information regarding distribution of the account balance; . Distribution of that portion of the account balance, as specified in the QDRO, to the alternate payee(s) and the appropriate federal and state withholding and reporting on such distribution. 37 FMC CORPORATION FIDELITY MANAGEMENT TRUST COMPANY By: /s/ David J. Kostelansky 5/30/97 By: /s/ Lucy B. Lewis 6/11/97 --------------------------------- --------------------------- Director Date Vice President Date Benefits Information Technology 38 Schedule "B" FEE SCHEDULE ------------ Annual Participant Fee: $25.00 per participant*, billed and payable quarterly. Enrollments by Phone: $5.00 per non-active employee residing on Fidelity's participant recordkeeping system. Loan Fee: Establishment fee of $75.00 per loan account. In-Service Withdrawals by Phone: $20.00 per withdrawal. Return of Excess Contribution Fee: $25.00 per participant, one-time charge per calculation and check generation. Plan Sponsor Workstation (PSW): $5.00 per hour per PSW for on-line usage (no charge if accessed via another internet service provider.) Three PSW provided free of charge. QDRO Qualification: $750.00 per order (to be paid by the Sponsor or deducted from participant balances as a plan expense.) Minimum Require Distributions: $25.00 per MRD participant per year. Non-Fidelity Mutual Funds: .10% service fee on Clipper Fund, .05% service fee on Mutual Qualifed Fund and 0% on Sequoia Fund (to be paid by the Non-Fidelity Mutual Fund vendor.) * This fee will be imposed pro rata for each calendar quarter, or any part thereof, that it remains necessary to keep a participant's account(s) as part of the Plan's records, e.g., vested, deferred, forfeiture, top-heavy and terminated participants who must remain on file through calendar year- end for 1099-R reporting purposes. GIC Fees - -------- . To the extent that assets are invested in GICs chosen by the Trustee: .12% basis points on first 100 million. .10% basis points on next 100 million. .07% basis points on assets in excess of 200 million. 39 Trustee Fee - ----------- . To the extent that assets are invested in Sponsor Stock, .10% of such assets in the Trust payable pro rata quarterly on the basis of such assets as of the calendar quarter's last valuation date, but no less than $10,000 nor more than $100,000 per year. Other Fees - ---------- Separate charges for optional non-discrimination testing, extraordinary expenses resulting from large numbers of simultaneous manual transactions or from errors not caused by Fidelity, or for reports not contemplated in this Agreement. The Administrator may withdraw reasonable administrative fees from the Trust by written direction to the Trustee. All communications will be fee for service, excluding STAGES and postage for literature fulfillment and quarterly statements. Fees for the Super 800 telephone service will be passed through to the Sponsor at cost following installation. No fee will be charged for customizing the Voice Response System (VRS) for deferrals; additional VRS customization which occurs after the phone opening may require additional fees. Note: These fees have been negotiated and accepted based on the following Plan characteristics: eight (8) Plans in the relationship, current plan assets of $892 million, current participation of 13,944 participants, current GIC assets of $245 million, stock assets of $532 million and projected net cash flows of $25 million per year. Fees will be subject to revision if these Plan characteristics change significantly by either falling below or exceeding current or projected levels. Fees also have been based on the use of up to twelve (12) investment options, and such fees will be subject to revision if additional investment options are added. FMC CORPORATION FIDELITY MANAGEMENT TRUST COMPANY By: /s/ David J. Kostelansky 5/30/97 By: /s/ Lucy B. Lewis 6/11/97 --------------------------------- --------------------------- Date Vice President Date 40 Schedule "C" INVESTMENT OPTIONS ------------------ In accordance with Section 4(b), the Named Fiduciary hereby directs the Trustee that participants' individual accounts may be invested in the following investment options: - Fidelity Retirement Government Money Market Portfolio - Stable Value Fund - Fidelity Puritan Fund - Fidelity U.S. Equity Index Commingled Pool - Mutual Qualified Fund (class Z) - Fidelity Low Priced Stock Fund - Sequoia Fund - Fidelity Blue Chip Growth Fund - Fidelity Diversified International Fund - Clipper Fund - FMC Stock Fund - Harsco Stock Fund (United Defense Limited Partnership Salaried Employees' Plan and United Defense Limited Partnership York Plan) The investment option referred to in Section 4(c) and Section 4(e)(v)(B)(5) shall be the FMC Stock Fund. FMC CORPORATION By: /s/ David J. Kostelansky 5/30/97 --------------------------------- Date 41 FMC Corporation Executive Offices 200 East Randolph Drive Chicago, Illinois 60601 312 861 6000 Schedule "D" [FMC LOGO] June 2, 1997 Ms. Carolyn Redden Fidelity Investments Institutional Operations Company, Inc. 82 Devonshire Street - MM3H Boston, Massachusetts 02109 FMC Master Trust ***NOTE: This schedule should contain names and signatures for ALL individuals who will be providing directions to Fidelity representatives in connection with the Plan. Fidelity representatives will be unable to accept directions from any individual whose name does not appear on this schedule.*** Dear Ms. Redden: This letter is sent to you in accordance with Section 8(b) of the Trust Agreement dated as June 2, 1997 between FMC Corporation and Fidelity Management Trust Company. I hereby designate David J. Kostelansky, Henry Kahn and Yasmin J. Kwentus, as the individuals who may provide directions upon which Fidelity Management Trust Company shall be fully protected in relying. Only one such individual need provide any direction. The signature of each designated individual is set forth below and certified to be such. You may reply upon each designation and certification set forth in this letter until I deliver to you written notice of the termination of authority of a designated individual. Very truly yours, /s/ David J. Kostelansky David J. Kostelansky Director Benefits and Information Technology /s/ David J. Kostelansky ------------------------ David J. Kostelansky Director, Benefits and Information Technology ------------------------ Henry Kahn Vice President and Treasurer /s/ Yasmin J. Kwentus ------------------------ Yasmin J. Kwentus Sr. Human Resources Analyst FMC Corporation Executive Offices 200 East Randolph Drive Chicago Illinois 60601 312 861 6000 Schedule "E" [LOGO] June 2, 1997 Ms. Carol Redden Fidelity Investments Institutional Operations Company, Inc. 82 Devonshire Street- MM3H Boston, Massachusetts 02109 FMC Master Trust Dear Ms. Redden: This letter is sent to you in accordance with Section 8(c) of the Trust Agreement dated as June 2, 1997 between FMC Corporation and Fidelity Management Trust Company. I hereby designate David J. Kostelansky, J. Paul McGrath and Henry Kahn, as the individuals who may provide directions upon which Fidelity Management Trust Company shall be fully protected in relying. Only one such individual need provide any direction. The signature of each designated individual is set forth below and certified to be such. You may reply upon each designation and certification set forth in this letter until I deliver to you written notice of the termination of authority of a designated individual. Very truly yours, /s/ David J. Kostelansky David J. Kostelansky Director Benefits and Information Technology /s/ David J. Kostelansky - ------------------------- David J. Kostelansky Director Benefits and Information Technology /s/ J. Paul McGrath - ------------------------- J. Paul McGrath General Counsel - ------------------------- Henry Kahn Vice President and Treasurer FMC Corporation Executive Offices 200 East Randolph Drive Chicago Illinois 60601 312 861 6000 May 29, 1997 [FMC LOGO] Ms. Carolyn Redden Fidelity Investments Institutional Operations Company, Inv. 82 Devonshire Street Boston, Massachusetts 02109 Dear Ms. Redden: This letter is sent to you in accordance with Section 8(a) of the Trust Agreement dated as of the second day of June, 1997 between FMC Corporation and Fidelity Management Trust Company. Each of the plans identified below is a tax-qualified defined contribution plan which meets the requirements of Section 17 of said Trust Agreement and which is maintained by the undersigned, or one of its subsidiaries or affiliates, for the benefit of their eligible employees. Each such plan is hereby designated as a "Plan" for purposes of said Trust Agreement. FMC Corporation is the Administrator and Named Fiduciary of said Plan(s). Plans ----- FMC Corporation Employees Thrift and Stock Purchase Plan UDLP Salaried Employees Thrift and Stock Purchase Plan FMC Corporation 401(k) Plan for Employees covered by a Collective Bargaining Agreement UDLP Louisville Union Employees Thrift Plan UDLP York Plan We hereby further certify that each Employer with respect to each of the foregoing Plan(s) has authorized the assets of such Plan to be deposited in the Trust and, as a result, is bound by Section 15(b) of said Trust Agreement. You may reply upon the foregoing designations and certifications until we deliver to you written notice of a change in any of the information set forth therein. Very truly yours, /s/ David J. Kostelansky David J. Kostelansky Director Benefits and Information Technology Schedule "G" EXISTING GICs ------------- A. In accordance with Section 5(b), the Named Fiduciary hereby directs the Trustee to continue to hold the following Existing GICs until such time as the Named Fiduciary directs otherwise: - Contract Issuer: Allstate Life Insurance - Contract Number: GA-5168 - Contract Issuer: Metropolitan Life Insurance Company - Contract Number: 13156 - Contract Issuer: The Prudential Insurance Company of America - Contract Number: GA-5632-213 - Contract Issuer: The Prudential Insurance Company of America - Contract Number: GA-5632-214 - Contract Issuer: The Prudential Insurance Company of America - Contract Number: GA-5646 B. In accordance with a separate Investment Management Agreement between the Sponsor and the Trustee, dated , 1997, the Trustee became Investment Manager of the following GICs: - Contract Issuer: Citibank, N.A. - Contract Number: 120217 - Contract Issuer: Commonwealth Life Insurance Company - Contract Number: ADA00023TR - Contract Issuer: Commonwealth Life Insurance Company - Contract Number: ADA00023TR-1 - Contract Issuer: Commonwealth Life Insurance Company - Contract Number: ADA00577FR - Contract Issuer: Commonwealth Life Insurance Company - Contract Number: ADA00774FR - Contract Issuer: John Hancock - Contract Number: 7787 GAC - Contract Issuer: Metropolitan Life Insurance Company - Contract Number: 13156 45 - Contract Issuer: SEI Stable Asset Fund - Contract Number: GIC Fund FMC CORPORATION By /s/ David J. Kostelansky 5/30/97 ---------------------------------- Date Schedule "H" TELEPHONE EXCHANGE GUIDELINES ----------------------------- The following telephone exchange guidelines are currently employed by Fidelity Investments Institutional Operations Company, Inc. (FIIOC). Telephone exchange hours are 8:30 a.m. (ET) to 12:00 midnight (ET) on each business day. A "business day" is any day on which the New York Stock Exchange is open. FIIOC reserves the right to change these telephone exchange guidelines at its discretion upon ninety (90) days prior written notice. Investment Options ------------------ Exchanges Between Investment Options ------------------------------------ Participants may call on any business day to exchange between the investment options. If the request is received before 4:00 p.m. (ET), it will receive that day's trade date. Calls received after 4:00 p.m. (ET) will be processed on a next day basis. Exchange Restrictions - --------------------- Investments in the Sponsor Stock Fund will consist primarily of shares of Sponsor Stock. Investments in the Harsco Stock Fund will consist primarily of shares of Harsco Stock. In order to satisfy daily participant requests for exchanges, loans and withdrawals, the Stock Funds will also hold cash or other short-term liquid investments in an amount that has been agreed to in writing by the Sponsor and the Trustee. The Trustee will be responsible for ensuring that the percentage of these investments falls within the agreed upon range over time. However, if there is insufficient liquidity in the Stock Funds to allow for such activity, the Trustee will sell shares of the appropriate Stock in the open market. Participants may not exchange out of the FMC Stock held in employee contribution sources until they have attained age 55. Participants who have attained age 55 may exchange out of the FMC Stock Fund once each year. Participants may not exchange out of the FMC Stock held in employer contribution sources. Participants will not be permitted to make direct transfers between the Stable Value Fund and a competing fund. Participants who wish to exchange between the Stable Value Fund and a competing fund must first exchange into a non-competing fund for a period of 90 days. FMC CORPORATION By: /s/ 5/30/97 -------------------------------- Date 47 SCHEDULE "I" ------------ INVESTMENT GUIDELINES --------------------- Set forth below are the objectives and guidelines to be followed by Fidelity Management Trust Company for the administration of the stable value investment option (the "Account") within the FMC Employees' Thrift and Stock Purchase Plan (the "Plan"), established by FMC Corporation (the "Sponsor"). I. INVESTMENT OBJECTIVES The primary objective is to seek the preservation of capital. The secondary objective is to attempt to provide over time a competitive level of income consistent with the preservation of capital. II. PORTFOLIO GUIDELINES The Account shall be invested in the following classes of assets. A. Universe 1. Investment Contracts. Investment Contracts ("Contracts") are issued by insurance companies, banks or other financial-services institutions (the "Issuer(s)") and evidence debt obligations of the applicable Contract Issuer(s) to the Plan. Contracts are either collateralized by the general underlying assets, or certain specific underlying assets, of the Contract Issuer(s). All Contracts, at the time of purchase, shall be benefit-responsive, which means that they shall provide for benefit withdrawals and investment exchanges to be paid at full book-value (i.e., principal plus accrued interest). However, withdrawals prompted by an employer-initiated-event, such as withdrawals resulting from the sale of a division of the Sponsor, a corporate layoff or the addition of Plan investment options, for example, may be paid at the Contract's market-value, which may be more or less than book-value. The interest rate of a particular Contract may be either fixed or adjusted periodically according to an index or to reflect the performance of certain assets of the Contract Issuer. Maturity dates of Contracts may or may not be fixed. Contracts may include, but are not limited to, the following: . Fixed-rate contracts . Indexed-rate contracts . Participating-rate contracts . Structured contracts . Separate-account contracts 2. Synthetic Investment Products. Synthetic investment contract products ("Synthetic Products") are comprised of both an investment component and a contractual component. The investment component consists of one or more securities or shares or units of a pooled portfolio of fixed-income securities ("Underlying Investment(s)"). 48 Underlying Investments may include, but are not limited to, the following: . Asset-backed securities . Mortgage-backed securities . Commercial mortgage-backed securities . Collateralized mortgage obligations . U.S. Treasuries . Securities issued or backed by U.S. government agencies, government-sponsored enterprises or similar U.S. government entities or instrumentalities . Securities issued by supranational organizations . Structured notes and similar arrangements . Corporate bonds . Yankees . Private placements (including Rule 144a securities) . Units of commingled pools primarily invested in the above . Shares of mutual funds primarily invested in the above . Money market instruments This investment component is "wrapped" by one or more contracts ("Wrap Contract(s)") issued by insurance companies, banks or other financial- services institutions (the "Wrap Contract Issuers"). Wrap Contracts, at the time of purchase, shall be benefit-responsive, which means that they shall provide for benefit withdrawals and investment exchanges to be paid at the full book-value of the Underlying Investment(s) (i.e., principal plus accrued interest). In this manner, Wrap Contracts are designed to decrease the normal market fluctuations associated with the performance of the Underlying Securities. However, certain withdrawals, similar to those described above with respect to Contracts, may be paid at the market-value of the Underlying Investment(s) (which may be more or less than book- value). The interest rate of a particular Synthetic Product may be either fixed or adjusted periodically and is in either case tied to the performance of the Underlying Investment(s). The maturity date of a particular Synthetic Product may be a fixed date or an indeterminate date. 3. Money Market Investments. Investments may be shares of mutual funds or units of commingled pools which are invested primarily in money-market instruments. B. Credit and Diversification Limitations 1. At the time of purchase, Contract Issuers, Wrap Contract Issuers and issuers of the Underlying Investments ("Securities Issuers"), whether domestic or foreign, must be deemed to be creditworthy by Fidelity Management Trust Company ("FMTC"). 2. At the time of purchase, Contract Issuers and Securities Issuers must meet the then-current diversification requirements established by FMTC. C. Investment Contract Disclosures Detailed investment contract disclosures are attached as Appendix A. 49 D. Special Limitations and Restrictions Imposed by the Sponsor Notwithstanding anything herein to the contrary, the Sponsor hereby imposes special limitations and restrictions as set forth below: 1. Prior to purchasing for the Plan any class of assets not contemplated by the then-existing Investment Guidelines, the Investment Manager shall provide, and the Sponsor shall review, the contractual terms and conditions to investments in said class of assets that may apply with respect to the determination at various times of (i) market value, (ii) book value and (iii) the consequences, if any, of termination prior to maturity. If such terms and conditions are deemed in the Sponsor's sole discretion to be acceptable, the Investment Guidelines shall be amended, upon the mutual written consent of the parties, to permit the Account to be invested in that class of assets. These Investment Guidelines are effective as of March 1, 1997 and supersede all prior written and oral agreements regarding investments of the Account. Any deviation from or amendment to these Investment Guidelines must be approved in writing by both the Trustee and Sponsor prior to implementation thereof. FMC CORPORATION FIDELITY MANAGEMENT TRUST COMPANY By: /s/ David J. Kostelansky By: /s/ Lucy B. Lewis -------------------------------- -------------------------------- Name: David J. Kostelansky Name: Lucy B. Lewis ------------------------------ ------------------------------ Title: Director of Benefits and Title: Vice President ----------------------------- ----------------------------- Information Technology Date: 6/11/97 ----------------------------- ------------------------------ Date: 5/30/97 ------------------------------ 50 Appendix A Investment Contract Disclosures ------------------------------- 1. FUNDING COMMITMENTS The terms of each investment contract are based upon the information in the bidding specifications given to potential bidders. Often detailed information about expected deposits and withdrawals is necessary to receive the best rate from an issuer on a given placement day. Some investment contracts obligate the Plan to give a designed lump sum deposit to the issuer by a specific date. Other contracts require a Plan to direct all cash flow, including other contract maturities, to the issuer over a set period (the funding "window"). At the end of the window, the issuer expects a certain dollar amount to be received and may refuse to accept additional cash flow. In either case the funding date may be several months following the commitment ("advance commitment" contracts). If the Plan fails to fulfill its contractual funding obligations, there may be financial consequences for Plan participants. This is because the issuer conducts its financial affairs in reliance on receiving the deposits as promised. Consequently, issuers may include shortfall funding provisions in their contracts (particularly advance commitment contracts) in order to protect their financial position. The responsibility for a funding shortfall will vary depending on the underlying cause. If participant activity (e.g. increased transfers out of the Account) causes the shortfall, issuers will generally either assume the risk or extend the funding date indefinitely. However, if a shortfall is caused by an employer- initiated event (e.g. an unexpected layoff, plan termination, or a change in funding policy, the issuer will seek to be made whole under the terms of the contract. If the contract has not yet been funded, the issuer may seek reimbursement from the contractholder if the issuer incurs a financial loss. As contractholder, FMTC intends to honor all funding commitments made on behalf of the Plan. In the event of a shortfall, however, FMTC would only assume responsibility to the extent that FMTC has been given funds by the Plan for deposit and subsequently fails to remit the funds to the issuer. 11. PLAN WITHDRAWALS AND INVESTMENT EXCHANGES An investment contract generally imposes ongoing contractual commitments on the Plan to maintain the issuer's promise to pay the book value of the contract. If the sponsoring employer changes Plan rules in a manner which changes significantly the amount of "benefit-responsive" withdrawals from a contract, the insurer may be authorized to lower the interest rate or assess a monetary penalty. Alternatively, the insurer may refuse to pay withdrawals prompted by the plan change. Employer-initiated events such as a large scale layoff or a sale of part of the business may cause the same consequences. Early advance notice to FMTC of a coming Plan change or corporate event is critical to provide FMTC sufficient time to try to minimize any financial consequences to the Plan. A request by the Plan contractholder (sponsoring employer or trustee) to withdraw funds prior to the contract maturity date may also result in the assessment of a market value adjustment on the amount withdrawn. Some contracts don't allow such pre-maturity withdrawals without issuer consent. 51 Due to the potential financial consequences to Plan participants in these types of situations, funding and withdrawal decisions must be carefully weighed by Plan sponsors, managers and trustees. The undersigned hereby acknowledges and agrees that it has read and understood the foregoing disclosures. FMC Corporation BY: /s/ David J. Kostelansky --------------------------- Name: Title: Director, Benefits and Information Technology Date: 5/30/97 ----------------------- 52 Schedule "J" [Sponsor's Letterhead] Ms. Carolyn Redden Fidelity Investments Institutional Operations Company, Inc. 82 Devonshire Street Boston, Massachusetts 02109 [Name of Plan] Dear Ms. Redden: This letter is sent to you in accordance with Section 8(a) of the Trust Agreement dated as of the [_] day of [_], 199X, between [_] and Fidelity Management Trust Company. Each of the plans identified below is a tax-qualified defined contribution plan which meets the requirements of Section 17 of said Trust Agreement and which is maintained by the undersigned, or one of its subsidiaries or affiliates, for the benefit of their eligible employees. Each such plan is hereby designated as a "Plan" for purposes of said Trust Agreement. The following individuals or entities are the Administrator and Named Fiduciary (ies) of said Plan(s). Plans Administrator Named Fiduciary(ies) - ---------------------------------------- We hereby further certify that each Employer with respect to each of the foregoing Plan(s) has authorized the assets of such Plan to be deposited in the Trust and, as a result, is bound by Section 15(b) of said Trust Agreement. You may rely upon the foregoing designations and certifications until we deliver to you written notice of a change in any of the information set forth therein. Very truly yours, [SPONSOR] By ----------------------------- 53 Schedule "K" OPERATIONAL GUIDELINES FOR NON-FIDELITY MUTUAL FUNDS ---------------------------------------------------- Pricing By 7:00 p.m. Eastern Time ("ET") each Business Day, the Fund Vendor will input the following information ("Price Information") into the Fidelity Participant Recordkeeping System ("FPRS") via the remote access price screen that Fidelity Investments Institutional Operations Company ("FIIOC"), an affiliate of the Trustee, has provided to the Fund Vendor: (1) the net asset value for each Fund at the Close of Trading, (2) the change in each Fund's net asset value from the Close of Trading on the prior Business Day, and (3) in the case of an income fund or funds, the daily accrual for interest rate factor ("mil rate"). FIIOC must receive Price Information each Business Day. If on any Business Day the Fund Vendor does not provide such Price Information to FIIOC, FIIOC shall pend all associated transaction activity in the Fidelity Participant Recordkeeping System ("FPRS") until the relevant Price Information is made available by Fund Vendor. Trade Activity and Wire Transfers By 7:00 a.m. ET each Business Day following Trade Date ("Trade Date plus One"), FIIOC will provide, via facsimile, to the Fund Vendor a consolidated report of net purchase or net redemption activity that occurred in each of the Funds up to 4:00 p.m. ET on the prior Business Day. The report will reflect the dollar amount of assets and shares to be invested or withdrawn for each Fund. FIIOC will transmit this report to the Fund Vendor each Business Day, regardless of processing activity. In the event that data contained in the 7:00 a.m. ET facsimile transmission represents estimated trade activity, FIIOC shall provide a final facsimile to the Fund Vendor by no later than 9:00 a.m. ET. Any resulting adjustments shall be processed by the Fund Vendor at the net asset value for the prior Business Day. The Fund Vendor shall send via regular mail to FIIOC transaction confirms for all daily activity in each of the Funds. The Fund Vendor shall also send via regular mail to FIIOC, by no later than the fifth Business Day following calendar month close, a monthly statement for each Fund. FIIOC agrees to notify the Fund Vendor of any balance discrepancies within twenty (20) Business Days of receipt of the monthly statement. For purposes of wire transfers, FIIOC shall transmit a daily wire for aggregate purchase activity and the Fund Vendor shall transmit a daily wire for aggregate redemption activity, in each case including all activity across all Funds occurring on the same day. 54 Prospectus Delivery FIIOC shall be responsible for the timely delivery of Fund prospectuses and periodic Fund reports ("Required Materials") to Plan participants, and shall retain the services of a third-party vendor to handle such mailings. The Fund Vendor shall be responsible for all materials and production costs, and hereby agrees to provide the Required Materials to the third-party vendor selected by FIIOC. The Fund Vendor shall bear the costs of mailing annual Fund reports to Plan participants. FIIOC shall bear the costs of mailing prospectuses to Plan participants. Proxies Participants shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the shares of the Non-Fidelity Mutual Funds credited to the participant's accounts (both vested and unvested). The Trustee shall vote the shares as directed by the participant. The Trustee shall not vote shares for which it has received no directions from the participant. During the participant recordkeeping reconciliation period, the Sponsor shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the shares of the Non-Fidelity Mutual Funds in the Trust. With respect to all rights other than the right to vote, the Trustee shall follow the directions of the participant and if no such directions are received, the directions of the Named Fiduciary. The Trustee shall have no further duty to solicit directions from participants or the Sponsor. The Fund Vendor shall be responsible for all costs associated with the production of proxy materials. FIIOC shall retain the services of a third-party vendor to handle proxy solicitation mailings and vote tabulation. Expenses associated with such services shall be billed directly to the Fund Vendor by the third-party vendor. Participant Communications The Fund Vendor shall provide internally-prepared fund descriptive information approved by the Funds' legal counsel for use by FIIOC in its written participant communication materials. FIIOC shall utilize historical performance data obtained from third-party vendors (currently Morningstar, Inc., FACTSET Research Systems and Lipper Analytical Services) in telephone conversations with plan participants and in quarterly participant statements. The Sponsor hereby consents to FIIOC's use of such materials and acknowledges that FIIOC is not responsible for the accuracy of such third-party information. FIIOC shall seek the approval of the Fund Vendor prior to retaining any other third-party vendor to render such data or materials under this Agreement. Compensation FIIOC shall be entitled to fees as set forth in a separate agency agreement with the Fund Vendor. 55 Indemnification The Fund Vendor shall be responsible for compensating participants and/or FIIOC in the event that losses occur as a result of (1) the Fund Vendor's failure to provide FIIOC with Price Information or (2) providing FIIOC with incorrect Price Information. 56 FIRST AMENDMENT TO MASTER TRUST AGREEMENT BETWEEN FIDELITY MANAGEMENT TRUST COMPANY AND FMC CORPORATION THIS FIRST AMENDMENT, dated as of the fifteenth day of July, 1997, by and between Fidelity Management Trust Company (the "Trustee") and FMC Corporation (the "Sponsor"); WITNESSETH: WHEREAS, the Trustee and the Sponsor heretofore entered into a Trust Agreement dated June 1, 1997, with regard to the FMC Corporation Employees' Thrift and Stock Purchase Plan, the United Defense Limited Partnership Salaried Employees' Plan, the FMC Corporation 401(k) Plan for Employees Covered by a Collective Bargaining Agreement, the United Defense Limited Partnership Louisville Union Employees' Thrift Plan and the United Defense Limited Partnership York Plan (individually and collectively, the "Plan"); and WHEREAS, the Trustee and the Sponsor now desire to amend said Trust Agreement as provided for in Section 14 thereof; NOW THEREFORE, in consideration of the above premises, the Trustee and the Sponsor hereby amend the Trust Agreement by: (1) Amending Section "B" of Schedule "G" "Existing GICs" by deleting from said section any reference to Metropolitan Life Insurance Company Contract Number 13156. IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this First Amendment to be executed by their duly authorized officers effective as of the day and year first above written. FMC CORPORATION FIDELITY MANAGEMENT TRUST COMPANY By: /s/ D. J. Kostelansky By: /s/ Lucy B. Lewis 7/25/97 ---------------------------- ----------------------------- Date Vice President Date SECOND AMENDMENT TO TRUST AGREEMENT BETWEEN FIDELITY MANAGEMENT TRUST COMPANY AND FMC CORPORATION THIS SECOND AMENDMENT, dated as of the sixth day of October, 1997, by and between Fidelity Management Trust Company (the "Trustee") and FMC Corporation (the "Sponsor"); WITNESSETH: WHEREAS, the Trustee and the Sponsor heretofore entered into a Trust Agreement dated June 1, 1997, with regard to the FMC Corporation Employees' Thrift and Stock Purchase Plan, the United Defense Limited Partnership Salaried Employees' Plan, the FMC Corporation 401(k) Plan for Employees Covered by a Collective Bargaining Agreement, the United Defense Limited Partnership Louisville Union Employees' Thrift Plan and the United Defense Limited Partnership York Plan (individually and collectively, the "Plan"); and WHEREAS, the Sponsor has notified the Trustee that effective October 6, 1997 the United Defense Limited Partnership Salaried Employees' Plan, the United Defense Limited Partnership Louisville Union Employees' Thrift Plan and the United Defense Limited Partnership York Plan will no longer be part of the FMC Corporation Master Trust; and WHEREAS, the Trustee and the Sponsor now desire to amend said Trust Agreement as provided for in Section 14 thereof; NOW THEREFORE, in consideration of the above premises, the Trustee and the Sponsor hereby amend the Trust Agreement by: (1) Deleting all references to the United Defense Limited Partnership Salaried Employees' Plan, the United Defense Limited Partnership Louisville Union Employees' Thrift Plan and the United Defense Limited Partnership York Plan. IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this Second Amendment to be executed by their duly authorized officers effective as of the day and year first above written. FMC CORPORATION FIDELITY MANAGEMENT TRUST COMPANY By: /s/ David J. Kostelansky 10/7/97 By: /s/ 11/4/97 -------------------------------- ----------------------------- Date Vice President Date THIRD AMENDMENT TO TRUST AGREEMENT BETWEEN FIDELITY MANAGEMENT TRUST COMPANY AND FMC CORPORATION THIS THIRD AMENDMENT, dated as of the thirtieth day of November, 1997, by and between Fidelity Management Trust Company (the "Trustee") and FMC Corporation (the "Sponsor"); WITNESSETH: WHEREAS, the Trustee and the Sponsor heretofore entered into a Master Trust Agreement dated June 1, 1997, with regard to the FMC Corporation Employees' Thrift and Stock Purchase Plan and the FMC Corporation 401(k) Plan for Employees Covered by a Collective Bargaining Agreement (individually and collectively, the "Plan"); and WHEREAS, the Trustee and the Sponsor now desire to amend said Trust Agreement as provided for in Section 14 thereof; NOW THEREFORE, in consideration of the above premises the Trustee and the Sponsor hereby amend the Trust Agreement by: (1) Amending Schedule "G", Existing GICs, by removing the following from subsection B and adding it to subsection A: - Contract Issuer: John Hancock - Contract Number: 7787 GAC IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this Third Amendment to be executed by their duly authorized officers effective as of the day and year first above written. FMC CORPORATION FIDELITY MANAGEMENT TRUST COMPANY By: /s/ David J. Kostelansky 11/14/97 By: /s/ 11/26/97 --------------------------------- ------------------------------ Date Vice President Date EX-12 12 STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS EXHIBIT 12
FMC CORPORATION --------------- COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES -------------------------------------------------- (AMOUNTS IN MILLIONS) Years ended December 31, -------------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Earnings: Income (loss) from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principle $ (59.7) $ 235.8 $ 152.7 $ 150.9 $ (79.9) Minority interests 8.9 9.6 5.1 1.6 0.5 Undistributed (earnings) loss of affiliates (2.0) (6.7) 1.9 4.0 0.3 Interest expense and amortization of debt discount, fees and expenses 118.3 103.0 84.0 64.1 70.4 Amortization of capitalized interest 7.0 7.5 7.7 7.5 7.4 Interest included in rental expense 16.6 15.2 16.7 17.8 18.0 ------------------------------------------------- Total earnings $ 89.1 $ 364.4 $ 268.1 $ 245.9 $ 16.7 ================================================= Fixed charges: Interest expense and amortization of debt discount, fees and expenses $ 118.3 $ 103.0 $ 84.0 $ 64.1 $ 70.4 Interest capitalized as part of fixed assets 6.6 15.5 10.2 2.7 0.6 Interest included in rental expense 16.6 15.2 16.7 17.8 18.0 ------------------------------------------------- Total fixed charges $ 141.5 $ 133.7 $ 110.9 $ 84.6 $ 89.0 ================================================= Ratio of earnings to fixed charges 0.6 2.7 2.4 2.9 0.2 ================================================= (A) (B) (C)
(A) The ratio of earnings to fixed charges for the year ended December 31, 1997 before asset impairments and restructuring and other charges was 2.5x. (B) The ratio of earnings to fixed charges for the year ended December 31, 1995 before the gain on the sale of FMC Wyoming stock, asset impairments, restructuring and other charges, and write-off of acquired in-process research and development costs was 2.9x. (C) The ratio of earnings to fixed charges for the year ended December 31, 1993 before asset impairments and restructuring and other charges was 1.6x EX-13 13 ANNUAL REPORT TO STOCKHOLDERS Exhibit 13 [LOGO OF FMC] 1997 Annual Report Shareholder Value People Superb Execution Growth [PHOTOS APPEAR HERE] [LOGO OF FMC] As one of the world's leading producers of chemicals and machinery for industry and agriculture, FMC participates on a worldwide basis in three broad markets: Machinery and Equipment, Industrial Chemicals and Performance Chemicals. FMC operates 104 manufacturing facilities and mines in 26 countries. About the cover: From Argentina to Maine, from Norway to Wyoming, FMC employees around the world are developing new products and technologies, improving production processes, providing solutions to customers, and serving the communities in which we operate. Together, we're charting a successful course into the 21st Century.
Financial Summary (In millions, except per share, common stock price, employee and stockholder data) 1997 1996 - -------------------------------------------------------------------------------------------------------------------------------- Sales In the United States $ 1,818.3 $ 1,754.7 Outside the United States, including exports 2,440.7 2,196.0 - -------------------------------------------------------------------------------------------------------------------------------- Total sales $ 4,259.0 $ 3,950.7 ================================================================================================================================ Income (loss) (after tax) Income (loss) from continuing operations before cumulative effect of change in accounting principle $ (24.5) $ 162.8 - -------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before asset impairments, restructuring and other charges and cumulative effect of change in accounting principle(1) $ 156.4 $ 162.8 - -------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) per share from continuing operations before cumulative effect of change in accounting principle: Basic $ (0.67) $ 4.40 Diluted $ (0.67) $ 4.28 - -------------------------------------------------------------------------------------------------------------------------------- Earnings per share from continuing operations before asset impairments, restructuring and other charges and cumulative effect of change in accounting principle:(1) Basic $ 4.25 $ 4.40 Diluted $ 4.13 $ 4.28 ================================================================================================================================ FINANCIAL AND OTHER DATA Common stock price range $ 90 5/8-59 5/8 $ 77 3/4-62 1/4 - -------------------------------------------------------------------------------------------------------------------------------- Capital expenditures excluding acquisitions $ 316.7 $ 485.1 - -------------------------------------------------------------------------------------------------------------------------------- Research and development expense $ 174.0 $ 176.5 - -------------------------------------------------------------------------------------------------------------------------------- At December 31 Working capital $ 251.1 $ 172.0 Operating working capital(2) $ 410.4 $ 627.4 Number of employees 16,805 16,731 Number of stockholders 10,523 11,339 - --------------------------------------------------------------------------------------------------------------------------------
As described further in Notes 1 and 3 to the consolidated financial statements, FMC's Defense Systems segment has been reclassified as a discontinued operation and results of prior years have been restated for comparative purposes. (1) Supplemental financial information. Income from continuing operations before asset impairments, restructuring and other charges and cumulative effect of change in accounting principle, and earnings per share from continuing operations before asset impairments, restructuring and other charges and cumulative effect of change in accounting principle, should not be considered in isolation nor as an alternative for income from continuing operations or earnings per share determined in accordance with generally accepted accounting principles, nor as the sole measure of the company's profitability. (2) Operating working capital includes trade receivables (net), inventories, other current assets, accounts payable, accrued payroll, other current liabilities, and the current portion of accrued pension and other postretirement benefits. -1- Message to Shareholders [Photo of Robert N. Burt] ROBERT N. BURT In early 1997, FMC Chairman and CEO Bob Burt visited Brazil, where the company's new sulfentrazone herbicide was first sold commercially under the tradename Boral. In 1997, we saw our investments and confidence in our machinery and equipment businesses pay off with record profits. This superior performance, however, was not enough to overcome difficult market conditions throughout our chemical businesses, as well as start-up problems with our new herbicide plant. As a result, operating earnings per share were down 3 percent from 1996, and our stock under-performed the market. Sales from continuing operations were $4.3 billion, up 8 percent from $4 billion in 1996. After-tax income from continuing operations, before the charges detailed below, was $156 million, or $4.13 per share on a diluted basis, compared with $163 million, or $4.28 per share, in 1996. In the 1997 fourth quarter, we announced charges of $310 million before income taxes, or $208 million after income taxes, for asset impairments and restructuring and other costs, as well as environmental reserves related to discontinued operations. Although earnings were disappointing, our traditional emphasis on cash flow produced $350 million (before financing activities) from continuing operations. We reduced operating working capital, exceeding our $100 million target. And we sold our defense business to The Carlyle Group, which resulted in an after-tax gain of $180 million and after-tax cash flow of approximately $375 million for our 60 percent share of the business. Given reduced capital expenditure needs and the uneconomically high price of acquisitions, our cash flow exceeded our forecast needs. Therefore, we announced a $500 million, three-year stock buyback program, and purchased 2.7 million shares in 1997 for $209 million. Our major strategic initiative in 1997 was the sale of our defense business. Our decision to exit defense was influenced by the outlook for profitability for the next several years, as well as the significant budget pressures that we believe will lead to further declines in defense budgets after the turn of the century. The stagnant or declining profits in our defense business have significantly affected our profit growth, as shown in the table below:
(In millions) 1997 1993 Annual Growth - ----------------------------------------------------------------------------- Operating profit (excluding defense) $ 314 $ 105 32 percent Operating profit (with defense) $ 390* $ 265 10 percent
*Estimated -2- [Photo of Larry D. Brady] Larry D. Brady In Japan, FMC President Larry Brady visited a Fresh'n Squeeze orange juice display at a local grocery store. FMC equipment processes 75 percent of the world's orange juice. In the future, we expect a similar pattern of significantly greater growth without defense. This should translate into growth in our price/earnings ratio at the same time our stock repurchase program reduces and eventually eliminates the dilution from the lack of defense earnings. Although 1997 was disappointing, that's water under the bridge. We are moving on and concentrating on plans to improve earnings and enter the new century with strong momentum. In 1998 our highest priority is a significant increase in profits, which translates into 25-plus percent growth in earnings per share. At the same time, we will continue to focus on improving our working capital efficiency. Where market conditions have deteriorated, we will aggressively reduce expenses, as we've already done in both our industrial chemicals and agricultural products businesses. We will not neglect the need to invest in areas critical to our long-term success, including research and development, strategic acquisitions and, most important, training and development for our employees. The review of operations reports on the strategies, key events and outlook for our businesses and highlights representative FMC employees who are helping us achieve our goals. Management changes. In 1997 we were pleased to welcome Ted Mooney to our board of directors. As chairman and chief executive officer of Nalco Chemical Company, Ted brings well-honed management and related industry experience to help chart our future path. We're sorry to report that Pehr Gyllenhammar has resigned from our board due to increased time commitments in Europe. Pehr brought us broad-ranging experience in international business and finance, and we'll miss his wise counsel. We're also pleased to announce several management changes. We brought Bill Wheeler home to Philadelphia from Tokyo to help direct our development and shared services efforts in the chemicals businesses. Reg Hall moved to Asia to take Bill's place in heading our efforts in Asia-Pacific--no small challenge given recent events. Replacing Reg as head of our specialty chemicals businesses is recently elected FMC Vice President Bill Walter, who brings to his new assignment 24 years of experience with FMC operations. We elected Gene McCluskey, whose expertise on tax issues is an invaluable asset, as vice president--tax. And given the importance of information technology to our future success, we elected Craig Watson as FMC vice president and chief information officer. -3- In 1997 we also bid farewell to FMC Corporate Secretary and Associate General Counsel Bob Day. Bob took early retirement after 25 years of guiding us through corporate governance issues, providing us with sound legal advice and safeguarding our ethical values. Building on core values. Inherent in the success of any company is what some call ethics, others call corporate responsibility, and we call core values. At FMC, core values are the heart of our company. These values center on valuing the diversity and skills of our employees and providing for their development; protecting the environment and the health and safety of our employees; and improving the communities in which we operate. We value our relationships with our customers. We take an analytical approach to decision-making. And we work to continuously improve everything we do while maintaining the highest ethical standards. As in the past, we believe our future success in creating superior shareholder value is built on these values. No report to shareholders is complete without reinforcing our commitment to maintaining these values. Outlook. Our overriding priority in 1998 is producing strong operating earnings that exceed the financial expectations of our investors and increase our stock price. Although market conditions in some of our chemicals businesses still will be unfavorable, we expect to achieve significant growth from crop protection chemicals, which should snap back from low pest infestations in 1997 and from improved operations at our Authority herbicide plant. We also expect continued strength in our machinery businesses after a record-breaking 1997 performance. Over the past five years, we've established a strong trend of growth in operating earnings from our continuing businesses. We will continue to run our businesses well--both in terms of productivity and controlling costs. We will maintain our financial discipline, while continuing to look for growth opportunities. We believe double-digit growth in earnings per share through the turn of the century will favorably affect our stock price. These accomplishments will be due to the efforts of terrific FMC employees who bring their enthusiasm, commitment and know-how to work every day. /s/ Robert N. Burt /s/ Larry D. Brady Robert N. Burt Larry D. Brady Chairman of the Board and President Chief Executive Officer February 25, 1998 -4- Industry Segment Data
(In millions) Year ended December 31 ------------------------------------------------------- 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------ SALES Machinery and Equipment $2,030.9 $1,684.9 $1,351.0 $ 972.7 $ 870.9 Industrial Chemicals 1,012.0 1,041.3 976.8 866.8 866.7 Performance Chemicals 1,242.2 1,251.8 1,176.5 1,060.5 973.5 Eliminations (26.1) (27.3) (21.7) (30.6) (32.3) - ------------------------------------------------------------------------------------------------------------ Total $4,259.0 $3,950.7 $3,482.6 $2,869.4 $2,678.8 ============================================================================================================ Income (loss) from continuing operations before income taxes and cumulative effect of change in accounting principle(1) Machinery and Equipment $ 140.4 $ 75.9 $ 49.4 $ 31.6 $ 5.5 Industrial Chemicals 135.7 181.8 153.1 115.2 52.2 Performance Chemicals 112.3 159.2 163.7 154.2 139.4 - ------------------------------------------------------------------------------------------------------------ Segment operating profit 388.4 416.9 366.2 301.0 197.1 Corporate (86.2) (91.3) (99.0) (105.9) (117.0) Other income and expense, net 11.8 3.2 12.2 15.3 24.6 - ------------------------------------------------------------------------------------------------------------ Operating profit before asset impairments, restructuring and other charges, gain on sale of FMC Wyoming stock and net interest expense 314.0 328.8 279.4 210.4 104.7 Asset impairments(2) (224.0) -- (26.4) -- (8.1) Restructuring and other charges(3) (40.9) -- (123.6) -- (114.4) Gain on sale of FMC Wyoming stock(4) -- -- 99.7 -- -- Net interest expense (108.8) (93.0) (76.4) (59.5) (62.1) - ------------------------------------------------------------------------------------------------------------ Total $ (59.7) $ 235.8 $ 152.7 $ 150.9 $ (79.9) ============================================================================================================ December 31 ------------------------------------------------------ 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------ IDENTIFIABLE ASSETS Machinery and Equipment $1,496.0 $1,599.0 $1,221.8 $ 669.4 $ 564.8 Industrial Chemicals 1,028.9 1,185.3 1,106.6 932.4 873.0 Performance Chemicals 1,408.0 1,366.7 1,040.9 870.1 806.8 - ------------------------------------------------------------------------------------------------------------ Subtotal 3,932.9 4,151.0 3,369.3 2,471.9 2,244.6 Corporate and other 180.2 202.9 199.4 279.9 242.2 - ------------------------------------------------------------------------------------------------------------ FMC continuing operations 4,113.1 4,353.9 3,568.7 2,751.8 2,486.8 Net assets of discontinued operations(5) -- 113.5 183.1 105.3 45.3 - ------------------------------------------------------------------------------------------------------------ Total $4,113.1 $4,467.4 $3,751.8 $2,857.1 $2,532.1 ============================================================================================================
Business segment results are presented net of minority interest, reflecting only FMC's share of earnings. The corporate line primarily includes staff expenses, and other income and expense consists of all other corporate items, including LIFO inventory adjustments. As described in Notes 1 and 3 to the consolidated financial statements, the operations constituting FMC's Defense Systems and Precious Metals segments have been reclassified as discontinued operations and results of prior years have been restated for comparative purposes. (1) Results for all segments are net of minority interests in 1997, 1996, 1995 and 1994 of $8.9 million, $9.7 million, $5.1 million and $1.6 million, respectively, the majority of which pertain to Industrial Chemicals. Minority interests in 1993 were not significant. (2) Asset impairments in 1997 (Note 4 to the consolidated financial statements) are related to Machinery and Equipment ($27.0 million), Industrial Chemicals ($126.0 million) and Performance Chemicals ($71.0 million). Asset impairments in 1995 are related to Industrial Chemicals ($3.0 million) and Performance Chemicals ($23.4 million). Asset impairments in 1993 are related to Machinery and Equipment ($7.6 million) and Industrial Chemicals ($0.5 million). (3) Restructuring and other charges in 1997 (Note 4 to the consolidated financial statements) are related to Machinery and Equipment ($27.9 million) and Performance Chemicals ($13.0 million). Restructuring and other charges in 1995 are related to Machinery and Equipment ($15.5 million), Industrial Chemicals ($74.5 million), Performance Chemicals ($21.6 million) and Corporate ($12.0 million). Restructuring and other charges in 1993 are related to Machinery and Equipment ($58.4 million), Industrial Chemicals ($29.2 million), Performance Chemicals ($3.2 million), and Corporate ($23.6 million). (4) Gain on sale of FMC Wyoming stock (Note 2 to the consolidated financial statements) is attributable to Industrial Chemicals. (5) Net assets of discontinued operations comprise the net assets of FMC's Defense Systems and Precious Metals segments. -5- Products & Markets - -------------------------------------------------------------------------------- MACHINERY & EQUIPMENT Markets Served -------------- Energy & Transportation - ----------------------- Oil and gas wellhead completion equipment; Oil and gas drilling, production, engineering, procurement, construction and refining, transportation and power equipment for subsea exploration; metering generation companies. products and systems; loading systems; marine terminals and floating production systems; pressure-relief valves. Airline equipment, automated material Airlines, airports, industrial handling systems. manufacturing, mining, warehouses, newsprint, publishing, chemicals, utilities. FMC FoodTech - ------------ Global full-line food technology provider, Fruit and vegetable growers, food including harvesting, preparing, and juice processors and canners. processing, packaging, and preserving Beef, poultry, seafood, potato, and systems. Market-leading position in snack food markets. Restaurants and thermal processing, sterilizing, cooking, fast-food industry. frying and freezing systems, citrus and tomato processing, vegetable harvesting, and processing, handling and conveying systems. PERFORMANCE CHEMICALS Markets Served -------------- Agricultural Products - --------------------- Produces crop protection and pest control Food and fiber growers, pest control chemicals for worldwide markets. More markets. than 50 percent of sales derived outside the United States. Food Ingredients - ---------------- Leading worldwide producer of carrageenan Food processing industry, personal and Avicel cellulose gel. Market leader care products. in applications technologies specializing in fat replacement, texture, structure and stability for food systems. Pharmaceutical - -------------- World's leading producer of Avicel Global pharmaceutical and binders and Ac-Di-Sol disintegrants, as nutritional supplement industries. well as other specialty excipients used in pharmaceutical and vitamin manufacture. -6-
Products & Markets - ---------------------------------------------------------------------------------------------------------------------------------- MACHINERY & EQUIPMENT FMC Competitive Advantage Growth and Superb Execution Outlook - ------------------------- --------------------------- ------- Energy & Transportation - ----------------------- Provides a complete package of products Excellent performance and integration Strong global growth based on leadership in and services in subsea/floating of recent acquisitions. Ongoing deepwater technology. Continuing to exploit production and deepwater technology. technological achievements, including synergies and technologies from recent Strategic alliances with key energy HOST, FMC's customized subsea system. acquisitions and internal development. customers. Continuing to set standards in innovation, adaptability, precision and safety. Member of alliance awarded Terra Nova project from Petro-Canada. Market leader in ground support Strong growth in cargo loaders and New products, alliances and international equipment for the air transport aircraft deicers. Positioned for future market penetration driving future growth. industry and in passenger boarding growth through leadership in automated, Monitoring Southeast Asian economies. bridges worldwide. Sole source laser-guided vehicle systems. alliances with several key airlines. Only supplier to provide air conditioning, auxiliary power and drinking water from the jet bridge. FMC FoodTech - ------------ Integrated provider of systems and Excellent performance and integration Continued positive performance. Applications equipment, covering almost every phase of recent acquisitions. Leveraged focus on food safety. Solid growth potential of the food harvesting, preparation, synergies among business units. New in the developing Latin American markets. processing and preservation enterprise. product introductions focusing on Monitoring Southeast Asian economies. Global sales and service. Partnerships customer needs and benefits include with key food processors. the DSI W-624 Plus portioner, Special Delivery and Express Limited conveyors, and SPS (steam pasteurization system). PERFORMANCE CHEMICALS FMC Competitive Advantage Growth and Superb Execution Outlook - ------------------------- --------------------------- ------- Agricultural Products - --------------------- Solid business presence around the Sulfentrazone herbicide registered for New registrations and expanding sales world. Direct distribution in key use as Authority Broadleaf (U.S.), Boral in U.S. and international markets. Growing markets. Strong insecticide and growing (Brazil), Capaz (Argentina, Paraguay). portfolio of herbicides and pest control herbicide portfolio. Introduction of a Continued investment in R&D. Successfully products. Improved cost position. new class of herbicides. Productive R&D introduced Command 3ME (microencapsulation) effort, generating high profitability. herbicide. Carfentrazone-ethyl herbicide Leader in applications technology. registered for use in Europe as Affinity, Solid product stewardship programs. Lexus Class, Platform, Aurora and Spotlight. U.S. registrations expected in 1998. Food Ingredients - ---------------- Excellent product quality. Superior Developing new product applications Solid position as industry leader. applications knowledge and product to meet customer needs, especially in Improved earnings through market-driven performance capability. Global dairy, convenience foods and meat applications and lower costs. Increased customer service and manufacturing. applications. International sales now sales to Europe. Monitoring Southeast account for more than 50 percent of Asian economies. total worldwide revenues. Pharmaceutical - -------------- Proprietary technology, brand Launched new binder products and Continued global market penetration, recognition and global market presence. suspension aids. Leveraging superior driven by pharmaceutical company growth Strong formulation support. Global applications knowledge and technology and greater use of prescription drugs as service capabilities. with key customers worldwide. a result of managed healthcare programs.
-7- Products & Markets - -------------------------------------------------------------------------------- PERFORMANCE CHEMICALS (cont.) Markets Served -------------- Lithium - ------- World's largest producer of Pharmaceuticals, primary and secondary lithium-based products. batteries, air conditioning, rubber and plastic, primary aluminum and aluminum alloys, ceramics and glass, lubricating greases, swimming pool sanitation, textiles, concrete applications. Process Additives - ----------------- World's largest producer of Plastics, hydraulic fluids, phosphate ester flame retardants. lubricant additives, industrial Leading supplier of specialty water water treatment and desalination. treatment chemicals. BioProducts - ----------- Largest worldwide producer of Life science research, including agarose. Leading supplier of DNA sequencing, mutation detection proprietary DNA and protein products and protein analysis. for life science markets. INDUSTRIAL CHEMICALS Markets Served -------------- Alkali Chemicals - ---------------- World's largest producer of natural Glass-making, chemicals, detergents, soda ash and market leader in North food products, animal feed additives, America. Downstream products include mining, air/water treatment, pulp and sodium bicarbonate, sodium cyanide, paper. sodium sesquicarbonate, caustic soda. Active Oxidants - --------------- Major worldwide producer of Polymers, electronic circuit boards, persulfates, peracetic acid and process equipment sanitizers, specialty peroxygens. industrial biocides. Hydrogen Peroxide - ----------------- Major worldwide producer of hydrogen Pulp and paper, textiles, peroxide. environmental clean-up, mining, detergents, electronics. Phosphorus Chemicals - -------------------- Major worldwide supplier and leading Detergents, cleaning compounds, North American producer of phosphorus metal treatment, food products, and its derivatives, phosphates and textiles, pesticide intermediates, phosphoric acid. additives, pharmaceuticals, water treatment. Foret - ----- Major European chemical Detergents, pulp and paper, textiles, producer. Products include chemicals, tanning, animal feed, hydrogen peroxide, perborates, mining, rubber, pharmaceuticals, phosphates, silicates, zeolites, ceramics, paint, food, photography, sulfur derivatives. Leading agriculture, water treatment. share in Spanish peroxygen and phosphate markets. -8-
Products & Markets - --------------------------------------------------------------------------------------------------------------------------------- PERFORMANCE CHEMICALS (cont.) FMC Competitive Advantage Growth and Superb Execution Outlook - ------------------------- --------------------------- ------- Lithium - ------- Diverse, high-value-added products. Technology and market leader in R&D effort spurring growth in Strong manufacturing capabilities. New, downstream specialty markets. Investment specialty markets, such as batteries, proprietary extraction technology. in capacity additions to meet growing pharmaceuticals and polymers. New demand for butyllithium, specialty reagents competitor causing price pressure for and rechargeable battery applications. commodity products. Lithium resource in Argentina coming on stream. Low-cost position in lithium chloride. Process Additives - ----------------- Global manufacturing and technical Introduced Belgard EV2030, an enhanced Competitive markets continue. Focus sales capabilities. Diverse products. maleate polymer technology, to the on new products, applications, and Applications know-how. thermal desalination market. Bellacide ongoing cost improvements. 375 biocide was registered and introduced to the U.S. cooling water market. Two new lubricant additives were introduced to the fluids market: Durad 310M and Durad 90. Continuing R&D investments. Continued process improvements driven by technology. BioProducts - ----------- Advanced applications technology. Introduced new application-specific Increasing demand for DNA and Excellent product quality. Proprietary products for conducting DNA sequencing, protein-related analysis in research and technology. Worldwide brand recognition. mutation detection and protein analysis. diagnostics. Life science funding remains Continuing R&D investments. Improved strong in private and public sectors. market position in DNA sequencing. INDUSTRIAL CHEMICALS FMC Competitive Advantage Growth and Superb Execution Outlook - ------------------------- --------------------------- ------- Alkali Chemicals - ---------------- Proprietary, low-cost solution mining Continuing focus on new proprietary Volumes will increase in 1998 to technology. Significant share of mining technology, improving costs. continue fill-out of earlier expansion. worldwide capacity. Excellent Fill-out of most recent expansion is on Overall pricing will remain steady. distribution and transportation systems. track. Increased market penetration Monitoring Southeast Asian economies. from new products in cleaning compounds, feed additives, and acid waste neutralization. Active Oxidants - --------------- Strong North American market position. Continuing focus on cost improvement Continued growth in global markets Unique operational and cost advantage through process control and proprietary and product applications. at manufacturing site. process technology. Growth is expected in all market segments. New product applications. Hydrogen Peroxide - ----------------- Highly cost-effective manufacturing Continued focus on cost reduction. Seeing more demand in pulp and paper and distribution. High level of service, Improved cost position through capital- and some industry improvement in Europe. reliability, product quality and safety. efficient technology, reduction of Continue to face over-capacity issues Major capacity share. Downstream share high-cost capacity, and restructuring of until 1999 or 2000. Focus is on cost of specialty market niches. the business. Improved market position improvement. in industrial segments. Phosphorus Chemicals - -------------------- World's lowest-cost elemental phosphorus Growing diversity of product uses. Volumes remain high; however, imports production. Significant U.S. capacity Introduced new high-performance product influenced by a stronger U.S. dollar may share. Lowest-cost U.S. production of for cleaning compounds industry. Optimized pressure prices. sodium tripolyphosphate--our largest product mix. downstream product--used in automatic dish detergents. High level of service and reliable delivery. Foret - ----- Excellent cost positions. Strong Continuing focus on strong market Continued solid performance based on manufacturing and distribution positions and growth. costs, exports and competitive advantages capabilities. Growing export business. of product portfolio.
-9- MACHINERY AND EQUIPMENT Machinery and Equipment sales for 1997 were up 21 percent to $2 billion. Profits rose 85 percent to $140 million. In 1997, FMC employees ROBERT "BUBBA" HARDEE and CORTEZ BURKHART led a successful installation of three HOST platforms at Mobil's Zafiro Field in Equatorial Guinea, West Africa. The satisfied customer has summoned Hardee and Burkhart to return to install another HOST in 1998. UNDERWATER WONDERLAND. FMC subsea trees and HOST platforms form the foundation for oil production at Mobil Oil's Zafiro Field project in Equatorial Guinea, West Africa. * THE PRESSURE'S OFF. FMC's Crosby pressure-relief valves, manufactured here at Market Harborough, England, deliver critical protection against high-pressure situations in oil production. PER MORTEN of FMC Kongsberg Offshore in Norway leads a team of engineers in designing deep-water systems for major oil producers like Statoil and Mobil. Morten and his team use the full range of FMC's subsea resources to "knit systems together" for customers. * MOVING ON. FMC Jetway Systems passenger boarding bridges, such as the one here at Ronald Reagan Washington National Airport, provide air conditioning, electricity and drinking water to the aircraft. NO MOVING PARTS. Our new coriolis mass flowmeter applies the properties of physics to provide extremely precise measurements of the flow of gas and oil in pipelines. [SIX PHOTOS APPEAR HERE] -10- MACHINERY & EQUIPMENT ENERGY AND TRANSPORTATION EQUIPMENT. We continued to solidify our position as a complete supplier of equipment and services for oil and gas customers-- especially in the offshore arena. FMC's integrated capabilities in wellhead, subsea, floating production and metering systems--built through internal development and acquisition in recent years--have allowed FMC to develop strong, profitable alliances with key energy customers around the world. In the transportation field, we're also positioned as an integrated supplier--offering a full package of ground support and bridge products to airport and airline customers. In 1997, energy and transportation equipment sales and earnings were up significantly, driven by our market leadership in subsea systems. Strong demand by oil companies in exploration and production, high capital spending in the airline industry and improved margins also contributed to increased results. OUR ENERGY BUSINESS, with industry-leading technology, continued to dominate in deep-water applications. In 1997, we installed the subsea manifold and two subsea trees for the Shell Mensa project in the Gulf of Mexico-at 5,300 feet below sea level, the deepest project off the coast of the United States. We'll install a third tree in 1998. We also installed the world's deepest floating production and storage systems for Petrobras Barracuda offshore Brazil in 2,798 feet of water. In 1997, we received an order to supply subsea trees and tools for Brazil's Petrobras Roncador project, which will become the world's deepest installation at 8,250 feet below sea level. Exxon awarded us the contract to supply subsea trees and controls for the Diana project at 4,295 feet of water in the Gulf of Mexico. We'll deliver equipment for both projects over the next few years. In addition, we installed a hinge-over-subsea-template and subsea trees at Mobil's Zafiro project offshore West Africa. Our interest in forging multi-year, preferred-provider alliances with strategic customers continued across product lines. Long-time Norwegian customers Statoil and Norske Hydro are committing 100 percent of their petroleum measurement business to FMC for five years. In a new, five-year alliance with Mobil Lubricants, we're providing the combined capabilities of our loading and transfer systems, Smith meters, and Waugh blending and control systems for Mobil's integrated lube blending plants. OUR AIRPORT PRODUCTS AND SYSTEMS BUSINESS performed well as the airline industry continued to invest in FMC support equipment, including cargo loaders, deicers and passenger boarding bridges. We continued to pursue sole-source alliances, and entered into multi-year agreements to provide ground support equipment to Federal Express and UPS. STRONG PERFORMANCE SHOULD CONTINUE for FMC's energy and transportation businesses. While our energy customers continue to actively explore and produce, we remain well positioned as a supplier capable of serving their complete oilfield needs with the latest technology. With our formal alliance commitments, improved pricing and efficient plants, we expect profit growth to exceed sales growth. In the airport products and systems arena, our total-capabilities approach, leading-edge technology and alliance partnerships also should result in ongoing strong performance. -11- MACHINERY & EQUIPMENT TITLE CHANGE. FMC FoodTech made its debut in 1997 to better reflect food processing expertise in the global market. FMC Citrus Systems' Mike Suter worked with employees of FMC Brazil to automate juice extractors at Citrosuco Paulista S.A., one of the world's largest juice processors. The upgrade dramatically increased the customer's extraction efficiency. * SAFE AND SOUND. At Ameriqual Foods in Indiana, FMC FoodTech equipment sterilizes combat rations for the U.S. Army and non-refrigerated products for major food companies. SOME LIKE IT HOT. Perdigao, Brazil's second largest producer of processed chicken, used FMC Stein and Frigoscandia cooking, frying and freezing technology to launch more than 30 new products in 1997. * HERE'S THE BEEF. At Wis-Pak Foods Inc. of Milwaukee, Wisconsin, FMC's Frigoscandia Flat Products Freezer processes more than 500,000 hamburger patties a day. A small team of engineers, led by Ramesh Gunawardena, is responsible for much of Stein's recent success in cooking and frying applications. Gunawardena and his team develop new technologies, like the THERMoFIN fryer, which safely fries foods coated with delicate seasonings. [SIX PHOTOS APPEAR HERE] -12- MACHINERY & EQUIPMENT FMC FoodTech. Following a series of recent acquisitions of strategic businesses, we've built our food processing business into a multi-capabilities supplier with expanded global markets. In 1997, we adopted the name FMC FoodTech--an evolution from the original Food Machinery Group--to reflect our shifting product and market orientation toward systems and processing technology. Sales and profits were up sharply in 1997. Contributing to performance was a strong year for citrus machinery, margin improvement for food processing systems, and a full year of strong operating results for Frigoscandia Equipment, the Swedish-based marketer of industrial freezers that we acquired in 1996. The addition of Frigoscandia freezing equipment and Stein fryers, ovens, and batter and breading equipment further broadens FMC's food processing capabilities and expands our presence in key markets around the world. Throughout 1997, we concentrated on integrating these new businesses with FMC's existing operations to take advantage of marketplace synergies and provide complete solutions to customer needs. Citrus systems, the world leader in citrus processing equipment, met heightened demand for industry capacity in 1997 by enhancing our products' efficiency to boost customers' throughput and yield. Our ongoing development work also centers on continually improving the quality of citrus juices. Our food processing systems business had success with sterilization and fruit processing lines in Europe and North and South America. Food systems and handling also benefited from several strong key markets, particularly in poultry, the meat of choice around the world because it is low- fat and low-cost. Our business is a specialist in providing complete poultry processing lines, and late in the year, we concluded a sale to Perdue Chicken that encompassed the battering, breading, frying and cooking capabilities of Stein, the freezing component of Frigoscandia Equipment and the conveying systems of our food handling business. A new product we introduced in the last half of 1997, our DSI 624 water jet cutter, uses an advanced robotic system and high-pressure water jets to cut poultry with greater speed and efficiency than any product on the market. We're taking orders on the product now and expect to see sales gains in 1998. In December, FMC FoodTech signed a global sales and service agreement with food giant Unilever. FMC will be considered a preferred supplier for the variety of products this customer requires, and conducting business will be easier. We anticipate negotiating more of this type of preferred-partner arrangement in the future. We expect FMC FoodTech will turn in another positive performance in 1998. A number of key markets remain strong, and FMC FoodTech is armed with a fuller, more diversified portfolio of capabilities to meet the needs of food processing customers worldwide. We continue to consider acquiring appropriate businesses worldwide to close the remaining gaps in our diversified product lines. -13- [PHOTO APPEARS HERE] SUBSEA SUPERSTAR. An FMC development team graphically displays a complete subsea oilfield project. FMC combined its petroleum equipment, floating production systems and advanced metering technologies to become a leading supplier of subsea systems. Technology Watch FMC technology leads the industry. Building on our longstanding expertise in subsea systems, we're engineering equipment to perform at the extreme pressures and temperatures of the deepest subsea installations. As we design even deeper systems in the coming years, our customized products will become more sensitive to challenging environments. Through recent technology acquisitions, FMC is now the leader in highly accurate, electronic flowmeter equipment that measures the flow of oil and gas. Our airport products and systems, also, are at the forefront of the trend to move services such as air conditioning, electricity and potable water from ground support vehicles to the passenger boarding bridge. At FMC FoodTech, our new name reflects our commitment to technology. In 1997, we worked closely with our customers to introduce a range of new products to help them operate more safely and effectively. In response to the beef industry's concerns about food safety and product contamination, Frigoscandia Equipment introduced a new Steam Pasteurization System that minimizes the risk of beef contamination from E. Coli bacteria or other harmful microorganisms. FMC FoodTech's food processing systems also addressed food safety issues with FranRica's commercialization of a system to process tomato and fruit particulates and LogTec automated sterilization modeling tools and controls. As food safety continues to emerge as a pressing issue throughout the world, FMC offers solid expertise in solving problems. -14- Machinery and Equipment--Management's Discussion and Analysis 1997 COMPARED WITH 1996 Machinery and Equipment segment sales of $2.0 billion increased 21 percent from sales of $1.7 billion in 1996, and operating profits of $140.4 million in 1997 were 85 percent higher than the prior year. These gains were achieved across a broad range of products, primarily as a result of improved market conditions and continuing cost reductions. FMC's FoodTech (formerly the food machinery group) operations also benefited from the inclusion of a full year of operating results of Frigoscandia Equipment, acquired on June 30, 1996. Sales of energy equipment were significantly higher in 1997, reflecting strong demand from oil companies in exploration and production, including Shell Oil Co., and higher subsea equipment sales under a contract with Statoil, Norway's state-owned oil company. FMC's recent internal development investments and acquisitions in deep water technologies have resulted in profitable alliances with major oil customers throughout the world. The company's market leadership position in the expanding subsea market, coupled with strong cost control activities, improved 1997's margins and operating profits. Sales of airport products and systems were also significantly higher in 1997 as a result of a period of strong airline investment. Increased sales of ground support and automated material handling equipment and higher shipments under several Jetway passenger boarding bridge projects also positively affected operating profits. FMC FoodTech's performance improved significantly in 1997, primarily from the inclusion of full-year results for the operations of Frigoscandia Equipment. Increased sales and profits of citrus machinery in 1997 also contributed to the improved operating results of FMC FoodTech. Profits of the food processing equipment business benefited from a healthy poultry market, as well as the strength of FMC's sterilization and fruit processing lines. 1996 COMPARED WITH 1995 Machinery and Equipment segment sales of $1.7 billion increased 25 percent from 1995, and operating profits of $75.9 million in 1996 were 54 percent higher than the prior year. Increased sales resulted from acquisitions and strengthening market conditions in the energy, food machinery and transportation equipment businesses. Improved market conditions and continuing cost improvement contributed to the increased profitability. Sales and operating profits of energy equipment were significantly higher than in 1995 as the result of increased sales in most product lines. Higher subsea equipment volume reflected sales to two major oil companies and performance under the contract with Statoil. Partially offsetting these increases were lower sales related to projects completed or nearing completion (on a percentage-of- completion basis) during the year. Sales and profits of energy equipment benefited from the inclusion of full-year results for businesses acquired in the June 1995 purchase of Moorco International Inc. and from growth in sales of loading systems to the liquefied natural gas market. Airline equipment sales and profits increased significantly in 1996, reflecting a strong deicer season, increased shipments of Commander 15 main deck loaders, and improved sales of Jetway boarding bridges. Sales of material handling systems declined slightly in 1996, but operating profits improved due to higher international sales and margins for water treatment and screening equipment. The company's strategic divestiture of the Automotive Service Equipment Division early in 1996 resulted in an overall decrease in sales of transportation equipment for the year. FMC FoodTech sales increased significantly in 1996, primarily as the result of the inclusion of FranRica for a full year and the acquisitions of Sandei in April 1996 and Frigoscandia Equipment on June 30, 1996. Sales of citrus equipment and food processing systems also improved. Operating profits declined slightly from 1995, however, as a result of incremental costs related to the acquisitions. OUTLOOK FOR MACHINERY AND EQUIPMENT The order backlog for Machinery and Equipment was $988.8 million at December 31, 1997, compared with $923.0 million at the end of the prior year. This increase of $65.8 million reflects the improved market conditions in 1997 for energy equipment. Continued growth in the subsea business of energy equipment is expected in 1998, but delays could occur in some programs, partially due to the economic issues in Southeast Asia. The company continues to enter into strategic alliances with customers, many of which are of a long-term nature. The transportation equipment business expects sustained growth in 1998 with a strong market in airport products and systems and continued demand for material handling systems products. The company anticipates that the citrus equipment business will remain strong in early 1998, but possible economic problems in the Brazilian market may negatively affect the latter part of the year. FMC FoodTech expects to record another strong year in 1998, although backlog is down from the prior year. Performance for all machinery and equipment operations will be negatively affected in 1998 if anticipated business in Southeast Asia does not materialize. -15- INDUSTRIAL CHEMICALS Industrial Chemicals sales of $1 billion were slightly below the previous year. Profits of $136 million were down 25 percent, or 46 million dollars from 1996, a year that included a $24 million gain from the sale of our minority interest in a Japanese hydrogen peroxide venture. In Barcelona, FMC Foret's Miguel Naya suggested modifying the metasilicate plant steam system to better clean process pipes. Naya's idea saved time and improved safety conditions for plant operators. A GREEN SOLUTION. As an environmentally sound solution, FMC's hydrogen peroxide eliminates odor-causing compounds in this water treatment system at the Encina Wastewater Authority in California. DISTRIBUTION PARTNERS. FMC's phosphoric acid, used in chemical and food processing, arrives at the new Van Waters & Rogers distribution facility in Illinois. This distributor sells a variety of FMC chemicals to customers in North America. * ACTIVE AGENT. Sodium perborate, produced by FMC Foret, provides the bleaching power for these powdered laundry detergents manufactured in Turkey. In his role as union president at FMC's phosphorus-producing facility in Lawrence, Kansas, Cheldon Coleman shares a common goal with FMC management: Deliver an accident-free workplace. Coleman has worked to meet that goal, conducting day-long safety programs for more than 200 employees at the plant. * INTO THE LIGHT. FMC's natural soda ash is a key raw ingredient in the high- quality fluorescent tubing made by Philips Lighting company in Kentucky. GROWTH-ORIENTED. At its feed-formulating operation in Arkansas, ConAgra uses FMC's feed-grade sodium bicarbonate for poultry feed that promotes growth. [SEVEN PHOTOS APPEARS HERE] -16- INDUSTRIAL CHEMICALS Industrial Chemicals. Our ongoing strategy is to effect cost improvements to maintain our low-cost positions across global product lines, encompassing phosphorus, soda ash, hydrogen peroxide and persulfates. Demand is strong for phosphorus products, and our phosphorus chemicals operations in North America and at FMC Foret in Europe performed well in 1997. Volumes were higher, operating performance improved, and costs were lower. In 1997, we introduced Polyclear, a soluble phosphate product that offers cost- effective performance in liquid industrial and institutional cleaners. Our research into new, higher-performing phosphate products is ongoing, and we offer a growing portfolio of products for food applications, including special blends for the meat industry. Our newly added soda ash capacity operated for a full year in 1997, and we sold record volumes, offset by lower prices. We had success with AbsorptaPlus, a highly absorptive soda ash for powdered detergents, and with S-Carb, a purified sodium sesquicarbonate product used as an animal feed buffer. Excess industry capacity and resulting price declines made 1997 a disappointing year for our hydrogen peroxide business. In response to these tough conditions, we focused on cost reductions throughout the business and retired some capacity within our multi-plant supply network. New, proprietary process technology has significantly reduced plant costs at our operation in Mexico and will contribute to cost reductions at our Bayport, Texas, facility, where the new system was installed on-time and on-budget in 1996. By year-end 1997, we began to see stronger pulp and paper demand and some industry improvement in Europe. Our active oxidants business performed well in 1997. The demand for persulfates remains steady in two major market segments, polymer and printed circuit board manufacturing. We are leveraging technology and cost advantages to provide a reliable global supply. Also, newly registered applications are driving demand for peracetic acid. For the future, demand remains strong for phosphorus. But pricing pressures will continue given increases in capacity worldwide and competition from imports based on the strength of the U.S. dollar. We'll continue to fill out our capacity expansion for soda ash as we see continued growth in demand, moderated somewhat by the Asian economic situation. The hydrogen peroxide industry continues to face over-capacity issues, and we don't expect relief until 1999 or 2000. We'll continue to concentrate on cost improvements across all our businesses. -17- [PHOTO APPEARS HERE] STICK-TO-IT-TIVENESS. Rohm and Haas, the Philadelphia-based specialty chemicals manufacturer, tests the bonding properties of adhesives manufactured using FMC persulfates. Technology Watch Advances that our industrial chemicals businesses have introduced in processing and systems in recent years are providing FMC a competitive edge in efficiency and cost. The solution-mining technology and capacity expansion put in place at our Green River, Wyoming, soda ash site from 1995 to 1996 are allowing us to retrieve previously unrecoverable deposits of trona ore, process record volumes and slash production costs. We're currently the lowest-cost producer in the industry. Similarly, the new, proprietary process installed with our capacity expansion for hydrogen peroxide in Bayport, Texas, in 1996 is resulting in more cost- efficient production. The system will also give us the flexibility to add significant capacity in future years at a low investment cost. Meanwhile, the installation of an SAP-based integrated business system across our chemical businesses is allowing all of these operations to meet the growing needs of our customers more effectively. Tracking purchasing, order entry, scheduling, shipping, inventory and account information, the system provides for faster, more accurate retrieval of information and more thorough customer service. This computer system installation was one of the largest and more complex projects under way in the chemical industry. -18- Industrial Chemicals--Management's Discussion and Analysis 1997 COMPARED WITH 1996 Industrial Chemicals sales of $1.0 billion declined slightly from 1996, as improved phosphorus sales essentially offset declines in sales of soda ash and peroxygen products. Operating profits (net of minority interest) of $135.7 million in 1997 declined significantly from $181.8 million in the prior year, which included a $24.1 million gain from the sale of FMC's minority interest in Tokai Denka Kogyo ("TDK"), a Japanese hydrogen peroxide joint venture. Continued price erosion in hydrogen peroxide due to a weak pulp market and industry overcapacity resulting from recent hydrogen peroxide plant expansions have also contributed to the profit decline. Soda ash sales volume increased in 1997, primarily due to the continuing fill- out of expanded capacity, but declines in prices partially offset the volume gains. Lower volumes and prices for caustic soda and sodium cyanide also contributed to lower operating profits. Sales volumes for peroxygen products, which include hydrogen peroxide, persulfates and peracetic acid, improved in 1997, but declines in hydrogen peroxide prices resulted in a net reduction in sales from the prior year. Operating profits decreased substantially from the 1996 level as the result of the price declines and the absence of the gain from the 1996 sale of the company's minority interest in TDK. Phosphorus chemical sales were slightly higher in 1997 due to improved domestic sales, partially offset by lower exports. Operating profits were also slightly stronger than the prior year as a result of the higher sales volume and better operating performance. During the fourth quarter of 1997, the company recorded an asset impairment charge of $120.0 million against the division's property, plant and equipment based on recently increased environmental capital cost estimates and the impact of increasing international competition. Spain-based FMC Foret reported increased sales volumes and pricing improvements in most product lines. However, sales and operating profits declined in the U.S. dollar financial statements primarily as a result of the strong U.S. dollar. 1996 COMPARED WITH 1995 Industrial Chemicals sales of $1.0 billion increased 7 percent, and operating profits (net of minority interest) of $181.8 million increased 19 percent in 1996, primarily reflecting improved pricing and a gain on the sale of the company's interest in TDK. Earnings comparisons were negatively affected by the full year minority interest expense in 1996 following the July 1995 sale of a 20 percent interest in FMC's soda ash business. Sales of alkali chemicals increased from 1995 levels primarily as a result of higher prices and volumes for soda ash and sodium cyanide. Strong soda ash volumes reflected increased export sales and the impact of new product applications. Operating profit gains from higher soda ash volumes and prices and a non-recurring gain on a property sale were partially offset by an increase in minority interest expense related to the soda ash joint venture. Sales of peroxygen products were higher in 1996, largely due to increased sales by FMC's Mexican peroxygen operation. However, lower sales of hydrogen peroxide to the North American pulp and paper market reduced operating earnings compared to the prior year. During 1996, the unit benefited from a $24.1 million gain ($6.5 million after tax) on the sale of FMC's 27 percent investment in TDK. Phosphorus chemical sales and operating profits improved significantly in 1996 as a result of higher pricing and volume for most products, partially offset by reduced export sales. Sales by FMC Foret were higher than 1995 levels due to a significant improvement in Spanish and export pricing, partially offset by reduced sales volume within the Spanish market. The higher selling prices, combined with lower raw material costs, more than offset the reduced Spanish sales volume, resulting in improved operating profits. OUTLOOK FOR INDUSTRIAL CHEMICALS In 1998, soda ash volumes are expected to remain approximately even with 1997, largely due to the economic situation in Southeast Asia. Domestic prices are expected to approximate prior-year levels in response to strong competition. Sodium cyanide product sales will continue to be negatively affected by declining gold production and expanded industry capacity. Although the pulp market is expected to recover in 1998, the Company anticipates that underutilization of industry capacity will limit favorable hydrogen peroxide price movements in the near term. In recent years, FMC has added significant capacity in both soda ash and hydrogen peroxide, which positions these businesses to benefit from expected long-term increases in worldwide demand. Phosphorus chemical sales volumes are expected to rise in 1998, although competitive pricing pressures could limit increases in total sales. The 1997 asset impairment charge will result in significantly reduced depreciation charges in 1998 and future years, which will favorably affect earnings. FMC Foret expects its strong performance to continue in 1998, with increasing demand for phosphate and peroxygen products and pricing improvements in certain other products. -19- PERFORMANCE CHEMICALS Performance Chemicals sales for 1997 were $1.2 billion, approximately even with 1996 sales. Profits dipped 29 percent to $112 million. WEED IT OUT. Sulfentrazone, successfully introduced in the United States in 1997 as Authority Broadleaf, is one of FMC's new-generation herbicides used on soybeans. Rod Winter works closely with his customers in the fertile farmlands of northwest Illinois to find solutions to crop safety and agronomic problems. In 1997, Winter's approach generated strong sales of FMC Command herbicide and Furadan and Pounce insecticides. FIELDS OF GOLD. Protecting Poland's wheat crop from devastating weeds is the job of FMC's new herbicide, carfentrazone-ethyl. The product is marketed in Poland as Affinity and Aurora Super. VINE RIPE. Tomatoes from the field reach this packaging house in Culiacan, Mexico, ready for export, thanks to the protection supplied by FMC Furadan and Pounce pesticides. GROWING INDEPENDENCE. FMC's highly effective Furadan insecticide is helping Indonesia sustain self sufficiency in rice production. For nearly five years, Callista Chukwunenye worked with the EPA to register FMC's new herbicide, sulfentrazone, for sale in the United States. In February 1997, Chukwunenye traveled to Washington to personally collect the EPA-approved registration. [SIX PHOTOS APPEARS HERE] -20- PERFORMANCE CHEMICALS Agricultural Products. FMC's agricultural products business remains focused on internal development--to research new solutions to effectively protect the world's crops and bring our newly developed products to market as quickly as possible. Historically, this business has been a global one, and we continue to penetrate important markets around the world. 1997 was a disappointing year for our agricultural products business. Sales were slightly lower, reflecting low pest pressure in key markets and declines in Asian markets. Profits declined significantly, with continuing difficulties in starting up production of our new herbicide, sulfentrazone. Sulfentrazone was launched, as planned, as Authority Broadleaf herbicide in the United States in 1997. But problems in bringing the new plant in Baltimore on stream limited volumes significantly. We expect the operational issues to be resolved early in 1998, and in the process we'll double production capacity. In Brazil, where sulfentrazone was introduced as Boral in late 1996, we gained strength in sugar cane markets. Our second new herbicide, carfentrazone-ethyl, was introduced in Europe in 1997 as Affinity, Lexus Class and Platform for use on cereal crops. We're expecting strong sales in 1998. We also launched this product on wheat in Pakistan and will proceed with a larger-scale introduction in 1998. The product is on a fast track for registration for wheat and corn in the United States in 1998. Around the world, decreased demand, weather problems and currency issues cut into sales and depressed profits in 1997. In North America, sales to cotton growers diminished because insects didn't present a significant problem, and a wet spring led to late planting of the crop. We did expand sales of a variety of insecticide products on corn crops and the new microencapsulated formulation of Command herbicide on soybeans. In Central America, demand was down as farmers planted fewer crops following heavy rains. Weakening European currencies, a deteriorating economic situation in Ukraine and floods in Poland hurt our position in Europe. Also, the financial crisis in Southeast Asia had a slight impact on our business in that region. Our best performance was in South America, where sales and profits were strong. Despite a difficult fourth quarter with currency stabilization efforts in Brazil, FMC took the lead in that country's cotton market and also gained strength in sugar cane in Brazil and rice markets in Argentina, Bolivia, Brazil and Uruguay. We expect to see a significant upturn in our agricultural products business in 1998. With the resolution of our sulfentrazone production problems early in the year, we should successfully expand our sales in the United States and elsewhere in the world. The herbicide component of our product portfolio should be significant. By the years 2001 and 2002, sales of both sulfentrazone and carfentrazone-ethyl will be major contributors to our business. And with significant cost-cutting measures in early 1998, FMC's agricultural products business is on track for improved results. -21- PERFORMANCE CHEMICALS "Apply FMC technologies to regional formulation needs," George Ayling directed his technical team of food ingredients specialists in Latin America. That approach helped strengthen FMC's food ingredients presence in the region. And in 1997, the team surpassed expectations with increased sales of Avicel microcrystalline cellulose and Novagel cellulose gel. IT'S IN THE GENES. FMC's MetaPhor agarose gel and GelStar nucleic acid stain allow researchers to analyze high-resolution images of DNA fragments. FMC's BioProducts business supplies essential genetic-detection tools to researchers worldwide. DRINKING IT UP. FMC's Flocon 260 prevents iron from damaging the filter membranes of this water softening plant, allowing Miramar, Florida, to produce 4.5 million gallons of drinking water each day. HAVE A HEART. FMC lithium metal forms the heart of pacemaker batteries produced by Wilson Greatbatch Ltd. FMC's versatile product has a range of powerful applications, from AIDS-combating drugs to power sources for the International Space Station. TAKING OUT THE FAT. San-Ei Gen F.F.I., Inc., the largest food ingredients manufacturer in Japan, uses FMC's Novagel cellulose gel as a fat replacer for dairy and bakery foods. Puerto Rico, which produces $8 billion of the world's pharmaceuticals, is a major portion of Erin O'Brien's sales territory. Her drive and commitment has enabled FMC's pharmaceutical business to sustain greater than 95 percent market share in that territory-despite aggressive competition. NUTRITIONALLY FIT. Nutritional supplements, such as these manufactured by General Nutrition Products, are prepared with FMC excipients, Accelerate, Endurance MCC and Endurance Plus. [SEVEN PHOTOS APPEARS HERE] -22- PERFORMANCE CHEMICALS Specialty Chemicals. Our specialty chemicals businesses--pharmaceutical, food ingredients, lithium, process additives--are focused on growing already strong market positions by developing targeted, value-added products for our customers, as well as managing costs internally. In 1997, sales were even, and profits improved. Sales of new products and cost improvements in food ingredients and pharmaceuticals more than offset operating difficulties and weak pricing in our lithium business and the impact of unfavorable currency trends for our United Kingdom-based process additives business. PHARMACEUTICAL PRODUCTS registered another year of robust performance with strong market demand. We expanded our product offerings by signing agreements to distribute two binders that complement our original Avicel microcrystalline cellulose product line: Super-Tab spray-dried lactose monohydrate, engineered for direct-compression tableting, and Ceolus microcrystalline cellulose, a highly compressible binder used to produce smaller, easier-to-swallow tablets. We also expanded globally with successful, direct sales of Avicel microcrystalline cellulose and Ac-Di-Sol super-disintegrant in China and Australia. EARNINGS FOR OUR FOOD INGREDIENTS BUSINESS improved substantially following several years of high raw material costs and supply pressures. To produce carrageenan, a food stabilizer, we expanded the sourcing of seaweed, our raw material, and introduced new, lower-cost process technologies for several specific food applications. RESULTS FOR LITHIUM were depressed slightly given substantially lower prices for lithium carbonate. In Argentina, the new lithium carbonate plant came onstream in the last half of 1997, to be followed by lithium chloride production in 1998. This new, proprietary extraction technology will help us achieve a cost- competitive position in carbonate and the low-cost position in lithium chloride. In 1997, we continued to focus on our value-added products and saw ongoing strong demand for our specialty products, led by the pharmaceutical and battery markets. OUR PROCESS ADDITIVES BUSINESS, producer of flame retardants, fluids and water additives, continued to face highly competitive markets worldwide. As the world leader in water treatment polymer technology to arrest scale build-up in thermal desalination processes, we introduced our enhanced product, Belgard EV2030, developed for Middle East customers. In the United States, we launched Bellacide 375, a new biocide that controls microorganisms in cooling towers. In flame retardants and fluids, we launched two new lubricant additives, Durad 310M and Durad 90. CONTINUED INNOVATION, as well as the focus of managed care providers on overall health care spending, will stimulate strong demand from our pharmaceutical customers. But the increasing price pressure on our customers from managed care providers will likely squeeze margins. We expect our food ingredients business will see improved earnings in 1998 with the continued success of new products, lower raw material costs and reduced spending. Competitive markets will continue in our process additives lines. But we also expect profit growth from new applications, continued cost improvements and new products based on proprietary technology for the flame retardants and fluids markets. In the lithium business, the market for value-added products for use in batteries and pharmaceuticals remains strong, though we'll continue to face stiff price competition in commodity products. -23- [PHOTO APPEARS HERE] A MODEL CONCEPT. Molecular models of insect enzymes reveal important clues in the discovery of new insecticides. FMC scientists use the information to determine the efficiency and safety of promising compounds. TECHNOLOGY WATCH With the introduction of next-generation products the key to our success in the 21st Century, R&D spending for agricultural products is at 12 percent of sales-- higher than the industry average. Our focus is on low-dose products and environmentally friendly compounds in both insecticides and herbicides. FMC also is recognized as a technology leader in our specialty chemicals businesses. With diverse products and applications, we're known for working closely with our customers to develop highly tailored solutions to their needs. In the pharmaceutical area, we made progress in 1997 with our advanced drug delivery technologies that allow customers to load more active ingredients into the tablet and improve drug-release action. We'll continue testing in these areas in 1998. In lithium, our R&D effort is zeroing in on specialty markets, such as batteries, pharmaceuticals and polymers. We continue to make research and development investments in flame retardants, fire-resistant fluids and water treatment chemicals. And our new, lower-cost process technology for carrageenan production will be rolled out over the next few years on existing and new applications. PERFORMANCE CHEMICALS-MANAGEMENT'S DISCUSSION AND ANALYSIS 1997 COMPARED WITH 1996 Performance Chemicals sales of $1.2 billion remained approximately even with 1996. Operating profits declined significantly, however, to $112.3 million in 1997 from $159.2 million in the prior year, primarily as the result of lower sales and prices of some insecticide products, as well as continued start-up problems associated with the introduction of the new Authority herbicide. Sales of most insecticides and agricultural intermediates declined in 1997 as the result of weaker sales in Southeast Asia, lower pest infestations in some markets, and competitive pressure surrounding some product lines. Operating profits declined significantly as a result of these factors and production start-up problems associated with the introduction of Authority, a new herbicide being produced at the company's plant in Baltimore, Maryland. During the fourth quarter of 1997, the division recorded a $10.0 million restructuring charge to cover workforce reductions across the business, as well as an asset impairment of $9.0 million related to the partial reengineering and debottlenecking of the Authority plant. Sales of U.K.-based water additives and flame retardant products were approximately even with 1996, while operating profits were slightly lower due to significant foreign currency impacts. The division recorded a $46.0 million impairment charge in the fourth quarter of 1997, largely resulting from competitive and foreign exchange factors. -24- PERFORMANCE CHEMICALS - MANAGEMENT'S DISCUSSION AND ANALYSIS CONT'D Food ingredients sales volumes improved from 1996, but total sales in dollars remained level, largely due to the effects of weaker European currencies. Operating profits improved, however, as a result of operating efficiencies, lower raw material costs and reductions in selling and administrative costs. Sales of pharmaceutical products improved in 1997, primarily due to increased volumes. Operating profits improved slightly, primarily due to strong sales volumes and a partial recovery from the 1996 increase in raw material costs. Lithium products operating profits declined from 1996 as a result of a new competitor's impact on the pricing of lithium carbonate. The company successfully began producing lithium carbonate at its new Argentine facility in 1997, and shut down its aging North Carolina mine and mill in early 1998. 1996 COMPARED WITH 1995 Performance Chemicals sales of $1.3 billion increased 6 percent from sales of $1.2 billion in 1995 as worldwide growth continued in these businesses. Operating profits declined, however, to $159.2 million in 1996 from a record $163.7 million in the prior year, primarily as the result of higher raw material costs in food ingredients and pharmaceuticals and higher expenses relating to the pending launch of Authority. Sales increased in 1996 for most insecticides, herbicides and agricultural intermediates, as well as in most geographic regions, with the largest gains in the Asia-Pacific regions and Brazil. Operating profits declined slightly from the record 1995 performance, primarily due to higher selling and marketing expenses related to the scheduled North American introduction in 1997 of Authority herbicide, as well as increased spending on herbicide research and development projects. Sales of water additives and flame retardant products declined in 1996 due principally to the weak European economy. Operating profits improved, however, as a result of favorable manufacturing performance, lower selling and distribution costs, and reduced general and administrative expenses. Food ingredients sales improved from 1995, although margins declined primarily as the result of the higher cost of Philippine-harvested seaweed. Lower selling and administrative costs, resulting from personnel reductions and improved cost controls, partially offset lower sales margins. Sales of pharmaceutical products increased from the prior year, but operating profits declined slightly due to increased pulp costs and a higher investment in advertising, selling and research costs to support the introduction of several new products. Sales and operating profits of lithium products increased in 1996, primarily as a result of continued worldwide sales growth of products used in specialty applications. Profits from the increased sales were partially reduced by increased spending on research and development projects to support the specialty performance products and by costs related to the new Argentine production facility. OUTLOOK FOR PERFORMANCE CHEMICALS The strategic focus of the Performance Chemicals business continues to be on developing and marketing specialty products for new applications, while the operational objectives include bringing FMC's newer investments to a state of full performance. Sales of insecticides, herbicides and agricultural intermediates in 1998 may continue to be affected by the economic issues in Southeast Asia. Management expects the operating issues at the Baltimore facility to be resolved in early 1998, which will result in the doubling of production capacity in the coming year. The agricultural chemicals operations also are expected to significantly reduce operating costs in 1998 as a result of workforce reductions and cost management efforts. The process additives business expects its base to expand in 1998 through the offering of several new products in the flame retardant product line. The business will also have reduced costs in 1998 as the result of the asset impairment charge recorded in 1997. Potential negative factors for 1998 include the possibility of higher raw material costs, the continued strength of the British pound and increased business risk in Southeast Asia. The outlook for food ingredients in 1998 remains positive. New process technology is expected to provide continued cost savings. This factor, combined with growth of the company's key product lines, should result in significant improvement from 1997 results. The forecast for the pharmaceutical industry is for continued strong growth in 1998, although customer price pressures, particularly in the binders and disintegrants lines, may dampen revenue growth for components used in prescription products. FMC's strategy is to maintain a strong market position in these products by providing superior quality products and services, while focusing on cost management. Further growth depends on introducing value-added products. Pricing pressures and competitive conditions in the lithium carbonate market are expected to remain intense in 1998. Specialty lithium applications should continue to grow in 1998 due to increasing demand for pharmaceutical reagents, polymer initiators, rechargeable battery materials and butyllithium. In response to this expected demand, capacity expansions for specialty lithium products will be initiated at several production facilities worldwide and investments will continue to be made in research and development. -25- GENERAL--MANAGEMENT'S DISCUSSION AND ANALYSIS Management's Discussion and Analysis should be read in conjunction with the company's consolidated financial statements and accompanying notes, segment data and other supplemental information. Additional background information on the company's operations is provided in the segment discussions on pages 5 through 25. 1997 COMPARED WITH 1996 Sales from continuing operations of $4.3 billion in 1997 were up 8 percent from $4.0 billion in 1996. Sales in the United States increased 4 percent during the year, while sales outside the United States increased 11 percent from 1996. After-tax income from continuing operations in 1997, before asset impairments of $154.0 million and restructuring and other charges of $26.9 million (Note 4 to the consolidated financial statements) and the cumulative effect of a change in accounting principle (Note 1 to the consolidated financial statements), was $156.4 million, compared with $162.8 million in 1996. Earnings from continuing operations in 1997, before asset impairments, restructuring and other charges and the cumulative effect of a change in accounting principle, were $4.13 per share on a diluted basis versus $4.28 per share in 1996. Net income per share, including discontinued operations in 1997 and 1996, and asset impairments, restructuring and other charges, and the cumulative effect of a change in accounting principle in 1997, decreased to $4.41 on a diluted basis in 1997 from $5.54 in 1996. Net income from discontinued operations (Note 3 to the consolidated financial statements) in 1997 of $191.4 million includes an after-tax gain on the sale of FMC's Defense Systems operations of $179.7 million and after-tax income from operations of the Defense Systems segment through August 25, 1997 of $38.7 million, partially offset by an after-tax increase in environmental reserves for previously divested operations of $27.0 million. 1996 COMPARED WITH 1995 Sales from continuing operations in 1996 were $4.0 billion, an increase of 13 percent from $3.5 billion in 1995. Sales in the United States increased 13 percent during the year, while sales outside the United States increased 14 percent from 1995. Net income in 1996 was $210.7 million, compared with $215.6 million in 1995. After-tax income from continuing operations increased to $162.8 million in 1996 from $151.2 million, before asset impairments and restructuring and other charges of $80.7 million, a $99.7 million non-taxable gain on the sale of FMC Wyoming stock (Note 2 to the consolidated financial statements) and a $15.5 million write-off of acquired in-process research and development costs, in 1995. Earnings per share were $5.54 on a diluted basis in 1996, compared with $5.72 in 1995. Earnings per share from continuing operations on a diluted basis were $4.28 in 1996 compared with $4.01, before asset impairments and restructuring and other charges, a non-taxable gain on the sale of FMC Wyoming stock and a write-off of acquired in-process research and development costs, in 1995. Net income of $47.9 million from discontinued operations in 1996 consisted primarily of after-tax income from operations of the Defense Systems segment and a net gain from the sale of FMC's 80 percent interest in FMC Gold Company on July 31, 1996, partially offset by an increase in general and product liability reserves for previously divested operations. INDUSTRY SEGMENTS Results on a segment basis for the five years ended December 31, 1997 are presented on page 5. Segment operating profits exclude certain elements of revenue and expense as described in Note 1 to the consolidated financial statements. Management's Discussion and Analysis of segment operating performance appears on these pages following the operating highlights for each segment: Machinery and Equipment on page 15; Industrial Chemicals on page 19; and Performance Chemicals on pages 24 and 25. OTHER INFORMATION TAXES Although FMC's domestic earnings (losses) are generally subject to tax expense (benefit) at the statutory rate of 35 percent, many factors can alter the company's consolidated tax expense (or tax benefit) rate. These factors include non-deductible or non-benefitable transactions related to goodwill or other items, differing foreign tax rates, state tax increments, and other permanent differences. The effective tax benefit rate in 1997 was 59 percent, which includes the impact of asset impairments and restructuring and other charges (Note 4 to the consolidated financial statements). The effective rate excluding these charges was 24 percent. The effective tax rate of 31 percent in 1996 includes taxes provided on the sale of the company's investment in Tokai Denka Kogyo (Note 1 to the consolidated financial statements). The effective tax rate excluding this event was 26 percent. The effective tax benefit rate of 1 percent for 1995 includes the impact of asset impairments, restructuring and other charges and a write-off of acquired in-process research and development costs (Note 4 to the consolidated financial statements) and the tax-free gain on the sale of a minority interest in FMC's soda ash business (Note 2 to the consolidated financial statements). The 1995 effective rate excluding these events was 25 percent. Depletion and foreign sales corporation benefits, as well as income from foreign operations taxed at rates lower than the U.S. statutory rate, also contributed to the different effective rates in 1997, 1996 and 1995. -26- ASSET IMPAIRMENTS, RESTRUCTURING AND OTHER CHARGES FMC recorded pretax charges of $264.9 million ($180.9 million after tax) in the fourth quarter of 1997, primarily related to asset impairments and restructuring activities. Of this amount, $224.0 million ($154.0 million after tax) related to asset impairments, primarily in the phosphorus chemicals and process additives businesses, and $40.9 million ($26.9 million after tax) was provided primarily to cover smaller restructuring activities in several other businesses. See Note 4 to the consolidated financial statements for further discussion of the asset impairments and restructuring charges. In addition, the company increased its environmental reserves related to discontinued operations by $45.0 million ($27.0 million after tax), as more fully described in Note 3 to the consolidated financial statements. FMC recorded restructuring and other charges of $35.0 million ($20.0 million after tax) in the third quarter of 1995 covering asset impairments and related exit liabilities for the shift of lithium-based production from North Carolina to a new lower-cost, higher quality mineral resource in Argentina. Other charges of $17.0 million ($10.0 million after tax) related primarily to asset impairments. In addition, the company increased its environmental reserves by $82.5 million, or $50.7 million after tax, as part of its ongoing assessment of sites with known environmental issues. See Notes 4 and 15 to the consolidated financial statements for further discussions of the restructuring and environmental reserves. ACCOUNTING STANDARDS ADOPTED IN 1997 During 1997, the company adopted the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share"; the Emerging Issues Task Force consensus on Issue No. 97-13, "Accounting for Costs Incurred in Connection with a Consulting Contract or an Internal Project That Combines Business Process Reengineering and Information Technology Transformation"; AICPA Statement of Position 96-1, "Environmental Remediation Liabilities"; and the Securities and Exchange Commission's requirements for additional disclosures regarding derivative financial instruments. These changes are described in further detail in Note 1 to the consolidated financial statements. ENVIRONMENTAL FMC, like other industrial manufacturers, is involved with a variety of environmental matters in the ordinary course of conducting its business that are subject to federal, state and local environmental laws. FMC feels strongly about its responsibility to protect the environment, public health and employee safety. This includes cooperating with other parties to resolve issues created by past and present handling of wastes. When issues arise, including notices from the Environmental Protection Agency, or other government agencies, identifying FMC as a Potentially Responsible Party, FMC's Environment, Health, Safety and Toxicology staff assess and manage the issues. When necessary, the company utilizes multifunctional advisory teams composed of environmental, legal, financial and communications management to ensure that the company's actions are consistent with its responsibilities to the environment and public health, as well as to employees and shareholders. Additional information regarding the company's environmental accounting policies and potential environmental liability is included in Notes 1 and 15, respectively, to the company's consolidated financial statements. Information regarding environmental obligations associated with the company's discontinued operations (including additional amounts recorded in 1997) is included in Note 3 to the consolidated financial statements. Estimates of 1998 environmental spending are included under Liquidity and Capital Resources below. LIQUIDITY AND CAPITAL RESOURCES Total cash and cash equivalents at December 31, 1997 and 1996 were $62.7 million and $74.8 million, respectively. At December 31, 1997, the company had total borrowings of $1.3 billion, down from $1.8 billion at December 31, 1996. Advances under uncommitted credit facilities decreased $239.6 million and commercial paper borrowings decreased $235.6 million (net of discount) from 1996 to 1997. The decrease in debt results from cash generated by operations, as well as the use of cash received from the sale of the company's Defense Systems business. The company also has $750.0 million in committed credit facilities consisting of a $300.0 million, 364-day non-amortizing revolving credit agreement due in December 1998, and a $450.0 million, five-year non-amortizing revolving credit agreement due in December 2001. At December 31, 1997, no amounts were outstanding under these credit facilities. See Note 9 to the consolidated financial statements for further discussion of the company's debt facilities. In 1995, the company filed a universal shelf registration statement under which $500.0 million of debt and/or equity securities may be publicly offered. As discussed further in Note 9 to the consolidated financial statements, the company issued $100.0 million of 7.75 percent senior debentures for net proceeds of $98.2 million in 1996 and issued $70.0 million of medium-term notes during 1997 for net proceeds of $69.6 million. The net proceeds of the 1996 and 1997 debt issues under the shelf registration statement were used to retire short- term debt. -27- Capital spending (including property, plant and equipment from acquisitions) of $316.7 million for the twelve months ended December 31, 1997 decreased $195.4 million versus 1996. The decrease is primarily driven by lower capital spending in the company's chemical businesses and the absence of acquisition spending in 1997. During 1996, FMC completed expansions of the Green River, Wyoming soda ash facility and the Bayport, Texas hydrogen peroxide plant and substantially completed construction of a plant in Baltimore, Maryland to manufacture a new family of herbicides. Development of a new lithium resource in Argentina and modifications to the herbicide plant continued throughout 1997. In addition, in June 1996, FMC acquired Frigoscandia Equipment Holding AB for approximately $165 million plus acquisition costs and debt assumed. The company continues to evaluate potential acquisitions on an ongoing basis. On August 28, 1997, the Board of Directors authorized a $500.0 million, open- market stock repurchase program for FMC common stock through the end of 1999. During 1997, the company repurchased a total of 2.7 million shares of its common stock at a cost of $209.0 million, including shares repurchased under the $500.0 million stock repurchase program as well as shares repurchased throughout the first half of 1997 under a smaller, previously announced program. The company plans to continue purchasing shares of its common stock on the open market from time to time, depending on market conditions, and expects to repurchase approximately $150 million of the company's common stock during both 1998 and 1999. As discussed in Note 3 to the company's consolidated financial statements, the company sold its defense operations to The Carlyle Group on October 6, 1997 (the closing date). As a result of the transaction, all 1997 and prior year financial disclosures have been restated to present FMC's Defense Systems segment as a discontinued operation. On the closing date, the company received its share of the net proceeds (to be adjusted based on certain closing balance sheet items as of the closing date) from the sale, which included $460.0 million in cash (approximately $375 million in cash after tax). FMC used the proceeds to reduce its outstanding debt and to fund its stock repurchase program. Cash generated from operations in 1998 and available credit facilities are expected to be sufficient to meet operating needs, fund capital expenditures and potential acquisitions, and meet debt service requirements for the year. Expected cash requirements for 1998 include approximately $275 million to $350 million for planned capital expenditures, including approximately $50 million for capital projects related to environmental control facilities. Projected 1998 spending also includes approximately $60 million for environmental compliance at current operating sites, plus approximately $20 million of remediation spending and $20 million for environmental study costs at current operating, previously operated and other sites. Total working capital of $251.1 million at December 31, 1997 increased by $79.1 million compared with 1996, as a decrease in short-term debt of $369.2 million more than offset a decrease in current assets and an increase in accounts payable. Operating working capital, excluding cash and cash equivalents, short- term debt and income tax balances, decreased $217.0 million to $410.4 million at December 31, 1997 from $627.4 million at December 31, 1996. The majority of the decrease is due to a combination of sustainable and temporary decreases in trade receivables and increases in accounts payable as a result of the company's overall effort to reduce working capital. Working capital increased to $172.0 million at December 31, 1996 from $66.2 million at December 31, 1995, primarily due to higher trade receivables and inventories as a result of increased sales volumes and acquisitions, partially offset by higher short-term debt levels. An increase in other non-current assets from $155.2 million at December 31, 1996 to $174.1 million at December 31, 1997 included the capitalization of manufacturing start-up costs and certain costs related to the development of internal-use software in 1997. See Note 1 to the consolidated financial statements. The company's ratios of earnings to fixed charges were 0.6x and 2.7x for the years ended December 31, 1997 and 1996, respectively. The decrease in the ratio in 1997 is primarily the result of lower 1997 earnings, including asset impairments and restructuring and other charges, as well as an increase in interest expense in 1997. The company's foreign currency translation adjustment increased from $65.5 million at December 31, 1996 to $135.7 million at December 31, 1997, primarily as a result of the weakening of the Spanish peseta, Belgian franc and Norwegian krone against the U.S. dollar. DIVIDENDS No dividends were paid in 1997, 1996 and 1995, and no dividends are expected to be paid in 1998. -28- DERIVATIVE FINANCIAL INSTRUMENTS FMC's primary financial market risks include fluctuations in interest rates and currency exchange rates. The company manages these risks by using derivative financial instruments in accordance with established policies and procedures. FMC does not use derivative financial instruments for trading purposes. When FMC sells or purchases products or services outside the United States, transactions are frequently denominated in currencies other than U.S. dollars. At December 31, 1997, the foreign currencies to which the company had the most significant exchange rate exposure were the Spanish peseta, Swedish krona, Japanese yen, Italian lira, British pound, German mark, Belgian franc, Norwegian krone and Irish punt. Exposure to variability in currency exchange rates is mitigated, when possible, through the use of natural hedges, whereby purchases and sales in the same foreign currency and with similar maturity dates offset one another. Additionally, FMC initiates hedging activities by entering into foreign exchange forward contracts with third parties when the use of natural hedges is not possible. The maturity dates of the currency exchange agreements which provide hedge coverage are consistent with those of the underlying purchase or sales commitments. To monitor its currency exchange rate risks, the company uses sensitivity analysis, which measures the impact on earnings of a 10 percent devaluation of the foreign currencies to which it has exposure. Based on its sensitivity analysis at December 31, 1997, fluctuations in currency exchange rates in the near term would not materially affect FMC's consolidated operating results, financial position or cash flows. FMC's management believes that its hedging activities have been effective in reducing its limited risks related to currency exchange rate fluctuations. FMC utilizes interest rate swaps to manage its exposure to fluctuations in earnings due to changes in interest rates. The company's interest rate swap portfolio is an integral part of its risk management strategy and as such, all swaps are linked to an underlying debt obligation. At December 31, 1997, the company had in place one interest rate swap denominated in British pounds with a notional amount of 30.0 million ($49.3 million at December 31, 1997) which matures in May 1998. The swap settles monthly, and the receive and pay rates are British pounds Libor and 6.885 percent, respectively. For more information on derivative financial instruments, see Notes 1 and 7 to the consolidated financial statements. YEAR 2000 COMPLIANCE FMC management has established a companywide initiative to examine the implications of the Year 2000 on the company's computing systems and related technologies, and to assess the potential need for changes. The company has identified areas of potential business impact, and appropriate modifications to its computing systems are underway. Management believes this will be accomplished in a timely manner. The company is also communicating with suppliers and customers to coordinate Year 2000 conversion. Although final cost estimates have yet to be determined, management does not currently believe that the costs related to the company's compliance with the Year 2000 issue will have a material adverse effect on the company's financial position, results of operations or cash flows. However, in the event that the company or any of the company's significant suppliers or customers experience disruptions due to the Year 2000 issue, the company's operations could be adversely affected. -29- Consolidated Statements of Income
(In millions, except per share data) Year ended December 31 ----------------------------------- 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------- REVENUE Sales $ 4,259.0 $ 3,950.7 $ 3,482.6 Other revenue 53.6 79.6 35.5 - ----------------------------------------------------------------------------------------------------------------------------- Total revenue 4,312.6 4,030.3 3,518.1 - ----------------------------------------------------------------------------------------------------------------------------- COSTS AND EXPENSES Cost of sales 3,190.4 2,929.4 2,540.5 Selling, general and administrative expenses 625.3 586.0 533.2 Research and development 174.0 176.5 175.4 Asset impairments (Note 4) 224.0 -- 26.4 Restructuring and other charges (Note 4) 40.9 -- 108.1 - ----------------------------------------------------------------------------------------------------------------------------- Total costs and expenses 4,254.6 3,691.9 3,383.6 - ----------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before minority interests, net interest expense, gain on sale of FMC Wyoming stock, income taxes and cumulative effect of change in accounting principle 58.0 338.4 134.5 - ----------------------------------------------------------------------------------------------------------------------------- Minority interests 8.9 9.6 5.1 Interest income 9.5 10.0 7.6 Interest expense 118.3 103.0 84.0 Gain on sale of FMC Wyoming stock (Note 2) -- -- 99.7 - ----------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes and cumulative effect of change in accounting principle (59.7) 235.8 152.7 Provision for (benefit from) income taxes (Note 10) (35.2) 73.0 (2.0) - ----------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before cumulative effect of change in accounting principle (24.5) 162.8 154.7 Discontinued operations, net of income taxes (Note 3) 191.4 47.9 60.9 - ----------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of change in accounting principle 166.9 210.7 215.6 Cumulative effect of change in accounting principle, net of income taxes (Note 1) (4.5) -- -- - ----------------------------------------------------------------------------------------------------------------------------- Net income $ 162.4 $ 210.7 $ 215.6 ============================================================================================================================= BASIC EARNINGS (LOSS) PER COMMON SHARE (NOTE 1) Continuing operations $ (0.67) $ 4.40 $ 4.23 Discontinued operations (Note 3) 5.20 1.29 1.66 Cumulative effect of change in accounting principle (Note 1) (0.12) -- -- - ----------------------------------------------------------------------------------------------------------------------------- $ 4.41 $ 5.69 $ 5.89 ============================================================================================================================= DILUTED EARNINGS (LOSS) PER COMMON SHARE (NOTE 1) Continuing operations $ (0.67) $ 4.28 $ 4.10 Discontinued operations (Note 3) 5.20 1.26 1.62 Cumulative effect of change in accounting principle (Note 1) (0.12) -- -- - ----------------------------------------------------------------------------------------------------------------------------- $ 4.41 $ 5.54 $ 5.72 =============================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. -30- Consolidated Balance Sheets
(In millions, except share and per share data) December 31 ------------------- 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 62.7 $ 74.8 Trade receivables, net of allowances of $10.4 in 1997 and $10.8 in 1996 834.2 913.7 Inventories (Note 5) 524.1 497.3 Other current assets 210.4 190.2 Deferred income taxes (Note 10) 84.2 86.8 - ----------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 1,715.6 1,762.8 Investments 35.9 54.5 Net assets of discontinued operation (Note 3) -- 113.5 Property, plant and equipment, net (Note 8) 1,679.3 1,834.5 Goodwill and intangible assets (Note 2) 420.4 471.7 Other assets 174.1 155.2 Deferred income taxes (Note 10) 87.8 75.2 - ----------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $4,113.1 $4,467.4 ======================================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term debt (Note 9) $ 186.4 $ 555.6 Accounts payable, trade and other 663.5 538.7 Accrued payroll 115.5 101.1 Other current liabilities 362.3 321.8 Current portion of long-term debt (Note 9) 14.0 10.4 Current portion of accrued pension and other postretirement benefits (Notes 13 and 14) 17.0 12.2 Income taxes payable (Note 10) 105.8 51.0 - ----------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 1,464.5 1,590.8 Long-term debt, less current portion (Note 9) 1,140.2 1,268.4 Accrued pension and other postretirement benefits, less current portion (Notes 13 and 14) 246.5 266.6 Reserve for discontinued operations (Note 3) 231.3 191.4 Other liabilities 212.0 236.9 Minority interests in consolidated companies 58.0 57.5 Commitments and contingent liabilities (Notes 15 and 16) - ----------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY (NOTE 12) Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 1997 or 1996 -- -- Common stock, $0.10 par value, authorized 60,000,000 shares; issued 37,875,549 shares in 1997 and 37,480,854 shares in 1996 3.8 3.7 Capital in excess of par value of common stock 141.0 120.1 Retained earnings 969.2 806.8 Foreign currency translation adjustment (Note 6) (135.7) (65.5) Treasury stock, common, at cost; 2,951,573 shares in 1997 and 300,427 shares in 1996 (217.7) (9.3) - ----------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 760.6 855.8 - ----------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,113.1 $4,467.4 =======================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. -31- Consolidated Statements of Cash Flows
(In millions) Year ended December 31 ------------------------------ 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------- RECONCILIATION FROM INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE TO CASH PROVIDED (REQUIRED) BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS Income (loss) from continuing operations before cumulative effect of change in accounting principle $ (24.5) $ 162.8 $ 154.7 Adjustments to reconcile income (loss) from continuing operations before cumulative effect of change in accounting principle to cash provided (required) by operating activities of continuing operations: Asset impairments (Note 4) 224.0 -- 26.4 Restructuring and other charges (Note 4) 40.9 -- 108.1 Gain on sale of FMC Wyoming stock (Note 2) -- -- (99.7) Depreciation and amortization 238.4 223.4 194.0 Deferred income taxes (15.8) 52.0 (3.7) Minority interests 8.9 9.6 5.1 Other (21.2) (6.4) (7.4) Changes in operating assets and liabilities: Trade receivables 73.1 (180.7) (171.0) Inventories (39.9) (96.7) (151.4) Other current assets and other assets (37.8) (287.3) (304.3) Accounts payable, accrued payroll, other current liabilities and other liabilities 111.3 92.4 144.9 Income taxes payable 56.8 (3.3) (15.2) Restructuring reserve (13.7) (14.7) (48.5) Accrued pension and other postretirement benefits, net (12.5) (28.1) 0.1 - ---------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED (REQUIRED) BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS 588.0 (77.0) (167.9) - ---------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED (REQUIRED) BY DISCONTINUED OPERATIONS 353.9 116.7 (32.9) - ---------------------------------------------------------------------------------------------------------------------------- Cash provided (required) by investing activities: Capital spending (316.7) (512.1) (500.0) Disposal of property, plant and equipment 57.1 43.7 25.4 Decrease in investments 21.2 35.2 48.7 - ---------------------------------------------------------------------------------------------------------------------------- CASH REQUIRED BY INVESTING ACTIVITIES (238.4) (433.2) (425.9) - ---------------------------------------------------------------------------------------------------------------------------- Cash provided (required) by financing activities: Net increase (decrease) in short-term debt (368.3) 127.0 79.5 Net proceeds from issuance of (repayments of) commercial paper (252.3) 94.7 272.3 Net increase under credit facilities 60.6 84.2 89.0 Increase in other long-term debt 69.7 112.4 18.5 Repayment of other long-term debt (18.9) (37.5) (49.4) Proceeds from sale of FMC Wyoming stock (Note 2) -- -- 171.8 Distributions to minority partners (8.0) (6.9) -- Repurchases of common stock (Note 12) (209.0) (0.1) (0.1) Issuances of common stock 21.6 20.4 9.3 - ---------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED (REQUIRED) BY FINANCING ACTIVITIES (704.6) 394.2 590.9 - ---------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents (11.0) 3.2 8.5 - ---------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12.1) 3.9 (27.3) - ---------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, beginning of year 74.8 70.9 98.2 - ---------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 62.7 $ 74.8 $ 70.9 ============================================================================================================================
Supplemental cash flow information: The company considers investments in all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Cash flows from hedging contracts are reported in the statements of cash flows in the same categories as the cash flows from the transactions being hedged. Income taxes paid (including taxes paid related to Defense Systems operations), net of refunds, were $46.0 million, $47.1 million and $29.4 million for 1997, 1996 and 1995, respectively. Interest payments, excluding amounts capitalized (Note 1), for 1997, 1996 and 1995 were $112.0 million, $94.9 million and $76.3 million, respectively. The accompanying notes are an integral part of the consolidated financial statements. -32- Consolidated Statements of Changes in Stockholders' Equity
(In millions, except par value) Common Capital Foreign stock, $0.10 in excess Retained currency Treasury par value of par earnings translation stock - ------------------------------------------------------------------------------------------------------------------- BALANCE DECEMBER 31, 1994 $ 3.7 $ 90.4 $ 380.5 $ (48.9) $ (9.1) Net income 215.6 Stock options exercised (Note 11) 9.3 Purchases of treasury shares (Note 12) (0.1) Translation adjustment (Note 6) 12.1 - ------------------------------------------------------------------------------------------------------------------- BALANCE DECEMBER 31, 1995 3.7 99.7 596.1 (36.8) (9.2) Net income 210.7 Stock options exercised (Note 11) 20.4 Purchases of treasury shares (Note 12) (0.1) Translation adjustment (Note 6) (28.7) - ------------------------------------------------------------------------------------------------------------------- BALANCE DECEMBER 31, 1996 3.7 120.1 806.8 (65.5) (9.3) Net income 162.4 Stock options exercised (Note 11) 0.1 20.3 Purchases of treasury shares (Note 12) (209.0) Shares reissued 0.6 0.6 Translation adjustment (Note 6) (70.2) - ------------------------------------------------------------------------------------------------------------------- BALANCE DECEMBER 31, 1997 $ 3.8 $ 141.0 $ 969.2 $ (135.7) $ (217.7) ===================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. -33- GEOGRAPHIC SEGMENT INFORMATION
SALES Year ended December 31 - -------------------------------------------------------------------------------------------------------------------------- (In millions) 1997 1996 1995 - -------------------------------------------------------------------------------------------------------------------------- Third party sales (by origin of sale) - -------------------------------------------------------------------------------------------------------------------------- United States $ 2,553.3 $ 2,504.8 $ 2,242.8 Latin America and Canada 285.9 203.8 179.8 Europe 1,232.2 1,084.9 947.3 Asia, Africa & others 187.6 157.2 112.7 - -------------------------------------------------------------------------------------------------------------------------- Total sales 4,259.0 3,950.7 3,482.6 - -------------------------------------------------------------------------------------------------------------------------- Intersegment sales (by origin of sale) - -------------------------------------------------------------------------------------------------------------------------- United States 276.1 193.7 151.5 Latin America and Canada 22.6 12.6 10.1 Europe 126.4 113.3 92.2 Asia, Africa & others 33.3 27.3 22.1 Eliminations (458.4) (346.9) (275.9) - -------------------------------------------------------------------------------------------------------------------------- Total sales $ 4,259.0 $ 3,950.7 $ 3,482.6 ========================================================================================================================== INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE Year ended December 31 - -------------------------------------------------------------------------------------------------------------------------- (In millions) 1997 1996 1995 - -------------------------------------------------------------------------------------------------------------------------- United States $ 202.2 $ 265.9 $ 219.2 Latin America and Canada 36.5 19.7 21.3 Europe 137.0 119.1 121.5 Asia, Africa & others 12.7 12.2 4.2 - -------------------------------------------------------------------------------------------------------------------------- Operating profit from continuing operations 388.4 416.9 366.2 Asset impairments (Note 4) (224.0) -- (26.4) Restructuring and other charges (Note 4) (40.9) -- (123.6) Gain on sale of FMC Wyoming stock (Note 2) -- -- 99.7 Net interest expense (108.8) (93.0) (76.4) Corporate and other (86.2) (91.3) (99.0) Other income and expense, net 11.8 3.2 12.2 - -------------------------------------------------------------------------------------------------------------------------- Total $ (59.7) $ 235.8 $ 152.7 ========================================================================================================================== IDENTIFIABLE ASSETS December 31 - -------------------------------------------------------------------------------------------------------------------------- (In millions) 1997 1996 1995 - -------------------------------------------------------------------------------------------------------------------------- United States $ 2,455.3 $ 2,540.1 $ 2,173.8 Latin America and Canada 392.4 329.9 208.2 Europe 980.3 1,155.9 900.2 Asia, Africa & others 104.9 125.1 87.1 - -------------------------------------------------------------------------------------------------------------------------- Subtotal 3,932.9 4,151.0 3,369.3 Corporate and other 180.2 202.9 199.4 - -------------------------------------------------------------------------------------------------------------------------- Continuing operations 4,113.1 4,353.9 3,568.7 Net assets of discontinued operations -- 113.5 183.1 - -------------------------------------------------------------------------------------------------------------------------- Total $ 4,113.1 $ 4,467.4 $ 3,751.8 ========================================================================================================================== U.S. EXPORT SALES TO UNAFFILIATED CUSTOMERS BY DESTINATION OF SALE Year ended December 31 - -------------------------------------------------------------------------------------------------------------------------- (In millions) 1997 1996 1995 - -------------------------------------------------------------------------------------------------------------------------- Latin America and Canada $ 245.7 $ 267.8 $ 210.9 Europe 113.1 88.6 94.5 Asia, Africa & others 376.2 393.7 378.3 - -------------------------------------------------------------------------------------------------------------------------- Total $ 735.0 $ 750.1 $ 683.7 ==========================================================================================================================
-34- OTHER SUPPLEMENTAL INFORMATION Quarterly financial information (unaudited)
- ------------------------------------------------------------------------------------------------------------------------ (In millions, except per share and common stock data) 1997 - ------------------------------------------------------------------------------------------------------------------------ 1st 2nd 3rd 4th Qtr. Qtr. Qtr Qtr - ------------------------------------------------------------------------------------------------------------------------ Sales $ 992.9 $1,134.3 $1,059.4 $1,072.4 Income (loss) from continuing operations before minority interests, net interest expense, income taxes and cumulative effect of change in accounting principle $ 60.3 $ 111.1 $ 103.2 $ (216.6) Income from discontinued operations, net of income taxes $ 18.8 $ 12.1 $ 7.8 $ 152.7 Income (loss) before cumulative effect of change in accounting principle $ 40.0 $ 72.7 $ 62.9 $ (8.7) Net income (loss) $ 40.0 $ 72.7 $ 62.9 $ (13.2) - ----------------------------------------------------------------------------------------------------------------------- Basic net income (loss) per common share: Income (loss) before cumulative effect of change in accounting principle $ 1.07 $ 1.95 $ 1.69 $ (0.24) Cumulative effect of change in accounting principle -- -- -- (0.13) - ------------------------------------------------------------------------------------------------------------------------ $ 1.07 $ 1.95 $ 1.69 $ (0.37) - ------------------------------------------------------------------------------------------------------------------------ Diluted net income (loss) per common share: Income (loss) before cumulative effect of change in accounting principle $ 1.05 $ 1.90 $ 1.63 $ (0.24) Cumulative effect of change in accounting principle -- -- -- (0.13) - ------------------------------------------------------------------------------------------------------------------------ $ 1.05 $ 1.90 $ 1.63 $ (0.37) - ------------------------------------------------------------------------------------------------------------------------ Common stock prices: High $ 72 1/8 $ 79 1/16 $ 90 5/8 $ 89 1/2 Low $ 61 1/4 $ 59 5/8 $ 78 5/8 $ 64 1/4 ======================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------ (In millions, except per share and common stock data) 1996 - ------------------------------------------------------------------------------------------------------------------------ 1st 2nd 3rd 4th Qtr. Qtr. Qtr. Qtr. - ------------------------------------------------------------------------------------------------------------------------ Sales $ 861.2 $ 973.7 $1,023.8 $1,092.0 Income (loss) from continuing operations before minority interests, net interest expense, income taxes and cumulative effect of change in accounting principle $ 69.4 $ 88.9 $ 98.9 $ 81.2 Income from discontinued operations, net of income taxes $ 21.8 $ 9.5 $ 3.1 $ 13.5 Income (loss) before cumulative effect of change in accounting principle $ 55.2 $ 56.3 $ 54.6 $ 44.6 Net income (loss) $ 55.2 $ 56.3 $ 54.6 $ 44.6 - ------------------------------------------------------------------------------------------------------------------------ Basic net income (loss) per common share: Income (loss) before cumulative effect of change in accounting principle $ 1.50 $ 1.52 $ 1.47 $ 1.20 Cumulative effect of change in accounting principle -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ $ 1.50 $ 1.52 $ 1.47 $ 1.20 - ------------------------------------------------------------------------------------------------------------------------ Diluted net income (loss) per common share: Income (loss) before cumulative effect of change in accounting principle $ 1.45 $ 1.48 $ 1.44 $ 1.17 Cumulative effect of change in accounting principle -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ $ 1.45 $ 1.48 $ 1.44 $ 1.17 - ------------------------------------------------------------------------------------------------------------------------ Common stock prices: High $ 76 1/4 $ 76 $ 67 7/8 $ 77 3/4 Low $ 67 1/4 $ 62 1/4 $ 62 3/4 $ 64 1/2 ========================================================================================================================
Significant transactions that affect quarterly results in 1997 and 1996 are described in Notes 1, 2, 3 and 4 to the consolidated financial statements. Quarterly earnings per common share may differ from full-year amounts due to changes in the number of shares outstanding during the year. OTHER INDUSTRY SEGMENT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------- Depreciation Research and Capital expenditures and amortization development expense - ------------------------------------------------------------------------------------------------------------------------- Year ended December 31 Year ended December 31 Year ended December 31 - ------------------------------------------------------------------------------------------------------------------------- (In millions) 1997 1996 1995 1997 1996 1995 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------- Machinery and Equipment $ 65.1 $ 87.5 $132.2 $ 64.8 $ 57.9 $ 45.6 $ 46.7 $ 41.5 $ 49.0 Industrial Chemicals 112.6 167.5 205.1 92.6 91.6 75.2 18.2 20.4 16.2 Performance Chemicals 129.2 219.0 143.3 67.8 59.3 59.4 109.1 113.1 109.2 Corporate 9.8 38.1 19.4 13.2 14.6 13.8 -- 1.5 1.0 - ------------------------------------------------------------------------------------------------------------------------- Total $316.7 $512.1 $500.0 $238.4 $223.4 $194.0 $174.0 $176.5 $175.4 =========================================================================================================================
Descriptions of the company's industry segments are on pages 10 through 25 of this annual report. Sales, income (loss) from continuing operations before income taxes and cumulative effect of change in accounting principle, and identifiable assets by industry segment are on page 5. Research and development expense in 1995 for the Machinery and Equipment segment includes a $15.5 million write-off of acquired in-process research and development costs related to the Moorco International Inc. acquisition (Note 2 to the consolidated financial statements).
Order backlog (unaudited) December 31 - ------------------------------------------------------------------------------------------------------------------------- (In millions) 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------- Machinery and Equipment $988.8 $923.0 $545.0 =========================================================================================================================
Backlogs are not reported for Industrial Chemicals or Performance Chemicals due to the nature of these businesses. -35- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE [1] PRINCIPAL ACCOUNTING POLICIES NATURE OF OPERATIONS. FMC Corporation ("FMC" or "the company") is a diversified producer of chemicals, machinery and other products for industry and agriculture. Further descriptions of FMC's products, its principal markets and the relative significance of its operations are included in this annual report in Products and Markets on pages 6 through 9 and in the Industry Segment Data on page 5. RESTATEMENTS AND RECLASSIFICATIONS. As described further in Note 3, during 1997 the company divested its defense operations, including its interest in the United Defense, L.P. partnership. As a result of the divestiture, the operations constituting the Defense Systems segment have been accounted for as a discontinued operation, and all prior-period financial statements and disclosures presented herein have been restated for comparative purposes. Certain prior-period balances have been reclassified to conform with the current period's presentation. USE OF ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results are likely to differ from those estimates, but management does not believe such differences will materially affect the company's financial position, results of operations or cash flows. CONSOLIDATION. The consolidated financial statements include the accounts of FMC and all significant majority-owned subsidiaries and joint ventures except those excluded because control is restricted or temporary in nature. All material intercompany accounts and transactions are eliminated in consolidation. INVESTMENTS. Investments in companies in which ownership interests are 50 percent or less and in which FMC exercises significant influence over operating and financial policies are accounted for using the equity method after eliminating the effects of any material intercompany transactions. All other investments are carried at their fair values, or at cost, if appropriate. During the fourth quarter of 1996, FMC sold its 27 percent interest in Tokai Denka Kogyo, a Japanese hydrogen peroxide joint venture, resulting in a gain of $24.1 million ($6.5 million after tax). INVENTORIES. Inventories are stated at the lower of cost or market value. Cost is determined on the last-in, first-out ("LIFO") basis for all domestic inventories, except certain inventories relating to contracts which are stated at the actual production cost incurred to date, reduced by amounts identified with recognized revenue. The first-in, first-out ("FIFO") method is used to determine the cost for all other inventories. Inventory costs include those directly attributable to products prior to sale, including all manufacturing overhead but excluding costs to distribute. REVENUE RECOGNITION FOR CONTRACTS-IN-PROGRESS. Sales are recorded for most production contracts as deliveries are made. A smaller portion of production contracts use the percentage-of-completion method. Losses are provided for contracts-in-progress in the period in which such losses become probable. PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment, including capitalized interest, is recorded at cost. Depreciation for financial reporting purposes is provided principally on the straight-line basis over the estimated useful lives of the assets (land improvements-20 years, buildings-20 to 50 years, and machinery and equipment-3 to 18 years). Gains and losses are reflected in income upon sale or retirement of assets. Expenditures that extend the useful life of property, plant and equipment or increase its productivity are capitalized. The company periodically evaluates the recoverability of property, plant and equipment net book values, particularly in the case of a change in business circumstances or other triggering events, based on expected future undiscounted cash flows for the asset or group of assets. As described further in Notes 4 and 8, the company recognized significant impairments of certain long-lived assets during the fourth quarter of 1997. The company believes that no additional material impairment of long-lived assets existed at December 31, 1997. CAPITALIZED INTEREST. Interest costs of $6.6 million in 1997 ($15.5 million in 1996 and $10.2 million in 1995) associated with the construction of certain long-lived assets have been capitalized as part of the cost of those assets and are being amortized over their estimated useful lives. DEFERRED COSTS AND OTHER ASSETS. Pre-operating and start-up costs directly related to, and incurred in the start-up phase of, major new manufacturing facilities are deferred and amortized over a five-year period. The company also capitalizes certain costs related to software for internal use. Such costs are amortized over periods not exceeding the expected life of software technology (three to seven years). Recoverability of deferred costs is assessed on an ongoing basis and writedowns to net realizable value are recorded as necessary. The deferred start-up costs totaling $46.5 million and $22.2 million and capitalized software costs totaling $58.0 million and $41.7 million at December 31, 1997 and 1996, respectively, are components of other assets, which also include anticipated environmental recoveries (Note 15), bond discounts and other deferred charges. GOODWILL AND INTANGIBLE ASSETS. Goodwill and identifiable intangible assets (such as trademarks) are amortized on a straight-line basis over their estimated useful or legal lives, not exceeding 40 years. At each balance sheet date, the company -36- evaluates the recoverability of goodwill based on expected future undiscounted cash flows for each operation having a significant goodwill balance. As described further in Note 4, the company recognized impairments of certain intangible assets, including goodwill and patents, during the fourth quarter of 1997. The company believes that no additional material impairment of recorded goodwill existed at December 31, 1997. ACCOUNTS PAYABLE. Amounts advanced by customers as deposits on orders not yet billed, and progress payments on contracts-in-progress, are recorded as accounts payable ($130.6 million at December 31, 1997 and $85.1 million at December 31, 1996). INCOME TAXES. Current income taxes are provided on income reported for financial statement purposes adjusted for transactions that do not enter into the computation of income taxes payable. Deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Income taxes are not provided for the equity in undistributed earnings of foreign subsidiaries or affiliates when it is management's intention that such earnings will remain invested in those companies. Taxes are provided in the year a dividend payment is received or when the decision is made to repatriate the earnings. FOREIGN CURRENCY TRANSLATION. Assets and liabilities of most foreign operations are translated at exchange rates in effect at year-end, and income statements are translated at the average monthly exchange rates prevailing during the year. Translation gains and losses are accumulated in a separate component of stockholders' equity until the foreign entity is sold or liquidated. For operations in highly inflationary countries and where the local currency is not the functional currency, inventories, property, plant and equipment, and other noncurrent assets are converted to U.S. dollars at historical exchange rates, and all gains or losses from conversion are included in net income. DERIVATIVE FINANCIAL INSTRUMENTS AND FOREIGN CURRENCY TRANSACTIONS. The company uses derivative financial instruments selectively to offset exposure to market risks arising from changes in foreign exchange rates and interest rates. Derivative financial instruments currently utilized by the company primarily include foreign currency forward contracts. Hedges are executed centrally to minimize transaction costs on currency conversions and minimize losses due to adverse changes in foreign currency rates. The company evaluates and monitors consolidated net exposures by currency and maturity, and external derivative financial instruments correlate with that net exposure in all material respects. Gains and losses on hedges of existing assets and liabilities are included in the carrying amounts of those assets or liabilities and are ultimately recognized in income when those carrying amounts are converted. Gains and losses related to hedges of firm commitments are also deferred and included in the basis of the transaction when it is completed. Gains and losses on unhedged foreign currency transactions are included in income as part of cost of sales. Gains and losses on derivative financial instruments which protect the company from exposure in a particular currency, but do not currently have a designated underlying transaction, are also included in income as part of cost of sales. If a hedged item matures, or is sold, extinguished, terminated, or is related to an anticipated transaction that is no longer likely to take place, the derivative financial instrument is closed out and the related gain or loss is included in income as part of cost of sales. TREASURY STOCK. Shares of common stock repurchased under the company's stock repurchase plans are recorded at cost as treasury stock and result in a reduction of stockholders' equity in the consolidated balance sheet. When the treasury shares are reissued under FMC's stock compensation plans, the company uses a first-in, first-out method for determining cost. The difference between the cost of the shares and the reissuance price is added to or deducted from capital in excess of par value of common stock. EARNINGS (LOSSES) PER COMMON SHARE ("EPS"). Basic EPS is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted EPS is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year plus the weighted average number of additional common shares that would have been outstanding during the year if potentially dilutive common shares had been issued under the company's stock compensation plans. The weighted average numbers of shares outstanding used to calculate the company's annual EPS are as follows:
- ------------------------------------------------------------------------------ (IN THOUSANDS) 1997 1996 1995 - ------------------------------------------------------------------------------ Basic EPS 36,805 37,024 36,615 Diluted EPS 36,805 38,058 37,721 - ------------------------------------------------------------------------------
The company's loss from continuing operations in 1997 results in an antidilutive effect in the calculation of diluted EPS. Accordingly, the potential common shares that cause the antidilutive effect have been omitted from the calculation of 1997 diluted EPS. During January and February 1998, FMC repurchased an additional 311,100 common shares, and will continue to repurchase common shares during 1998 under its stock repurchase plan. SEGMENT INFORMATION. Segment operating profit from continuing operations is defined as total revenue less operating expenses. The following items have been excluded in computing segment operating profit: general corporate income and expense, non-operating interest income and expense, income -37- taxes, significant gains or losses on abnormal retirements of assets, restructuring and other charges (Note 4), asset impairments (Note 4), the 1995 gain on the sale of FMC Wyoming stock (Note 2), LIFO inventory adjustments and other income and expense items. Identifiable assets by industry segment are those assets that are used by or attributable to segment operations. Corporate assets are principally cash and cash equivalents, LIFO reserves, deferred income tax benefits and non-operating property and equipment. ENVIRONMENTAL. The company provides for environmental-related obligations when they are probable and amounts can be reasonably estimated. Where the available information is sufficient to estimate the amount of liability, that estimate has been used; where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any other, the lower end of the range has been used. Estimated obligations to remediate sites that involve the United States Environmental Protection Agency ("EPA"), or equivalent government agencies, are generally accrued no later than when a Record of Decision, or equivalent, is issued, or upon completion of a Remedial Investigation/Feasibility Study ("RI/FS") that is accepted by FMC and the appropriate government agency or agencies. Estimates are reviewed quarterly by the company's Environment, Health, Safety and Toxicology organization, as well as financial and legal management and, if necessary, adjusted as additional information becomes available. The estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, required remediation methods, and other actions by or against governmental agencies or private parties. The company's environmental liabilities for continuing and discontinued operations are principally for costs associated with the remediation and/or study of sites at which the company is alleged to have disposed of hazardous substances. Such costs include, among other items, remedial investigations and feasibility studies, site remediation, costs of operation and maintenance of the remediation plan, fees to outside law firms and consultants for work related to the environmental effort, and future monitoring costs. Estimated site liabilities are determined based upon existing remediation technologies, specific site consultants' engineering studies or by extrapolating experience with environmental issues at comparable sites. Provisions for environmental costs are reflected in income, net of probable and reasonably estimable recoveries from named Potentially Responsible Parties ("PRPs") or other third parties. Such provisions incorporate inflation and are not discounted to their present values. In calculating and evaluating the adequacy of its environmental reserves, the company has taken into account the joint and several liability imposed by the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and the analogous state laws on all PRPs and has considered the identity and financial condition of each of the other PRPs at each site to the extent possible. The company has also considered the identity and financial condition of other third parties from whom recovery is anticipated, as well as the status of the company's claims against such parties. In general, the company is aware of a degree of uncertainty in disputes regarding the financial contribution by certain named PRPs, which is common to most multi-party sites. Although the company is unable to forecast the ultimate contributions of PRPs and other third parties with absolute certainty, the degree of uncertainty with respect to each party is taken into account when determining the environmental reserve by adjusting the reserve to reflect the facts and circumstances on a site-by-site basis. The company believes that recorded recoveries related to PRPs are realizable in all material respects. Recoveries, excluding those relating to discontinued operations, are recorded as other assets, and those relating to discontinued operations are recorded in the reserve for discontinued operations. ACCOUNTING STANDARDS ADOPTED. The company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," for the period ended December 31, 1997. Prior-period EPS data included herein have been restated as required under the new standard. SFAS No. 128 replaces Accounting Principles Board Opinion No. 15 and simplifies the computation of EPS by replacing the presentation of primary EPS with a presentation of basic EPS, which includes no dilution from potential common stock. Diluted EPS, which replaces fully diluted EPS, reflects the dilution from potential common stock that could share in the earnings of the company. The standard requires dual presentation of basic and diluted EPS by entities with complex capital structures, including FMC. During 1997, the company adopted the Securities and Exchange Commission's requirements for additional disclosures regarding derivative financial instruments. The required disclosures are included in Derivative financial instruments and foreign currency transactions above, Note 7 and in Management's Discussion and Analysis on page 29. In the fourth quarter of 1997, the company adopted the requirements of the Emerging Issues Task Force ("EITF") consensus on Issue No. 97-13, "Accounting for Costs Incurred in Connection with a Consulting Contract or an Internal Project That Combines Business Process Reengineering and Information Technology Transformation." In conjunction with the adoption, the company charged $7.6 million ($4.5 million after tax, or $0.12 per share on a diluted basis) to expense, which was reported as the cumulative effect of a change in accounting principle. -38- The expense represented the write-off of business process reengineering costs capitalized prior to October 1, 1997. Had the consensus in EITF 97-13 been applied historically by the company, net income in 1997, 1996 and 1995 would have been $166.6 million ($4.53 per share on a diluted basis), $210.0 million ($5.52 per share) and $212.4 million ($5.63 per share), respectively. AICPA Statement of Position ("SOP") 96-1, "Environmental Remediation Liabilities," was adopted by the company effective January 1, 1997. SOP 96-1 provides guidance on the recognition, measurement and display and disclosure of environmental remediation liabilities. The adoption of SOP 96-1 did not have a material impact on the company's consolidated financial position, results of operations, or cash flows. ACCOUNTING STANDARDS NOT ADOPTED. SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal years beginning after December 15, 1997, and establishes standards for the reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general- purpose financial statements. The standard requires that all items that must be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The company is evaluating the statement's provisions to conclude how it will present comprehensive income in its financial statements, and has not yet determined the amounts to be disclosed. FMC will adopt SFAS No. 130 in 1998. SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," is effective for financial statements for periods beginning after December 15, 1997. SFAS No. 131 establishes standards for the way that public business enterprises report financial and descriptive information about reportable operating segments in annual financial statements and interim financial reports issued to stockholders. SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise," but retains the requirement to report information about major customers. The company is evaluating the new statement's provisions to determine the additional disclosures required in its financial statements. FMC will adopt SFAS No. 131 in 1998. NOTE [2] BUSINESS COMBINATIONS ACQUISITIONS. In June 1996, FMC acquired all of the common shares of Frigoscandia Equipment Holding AB ("Frigoscandia"), a wholly owned subsidiary of ASG AB, for approximately $165 million plus acquisition costs and debt assumed. Frigoscandia is a leading worldwide manufacturer of industrial freezers, ovens, fryers and other equipment for the food processing industry. Frigoscandia's operations are included in the company's Machinery and Equipment segment. In conjunction with the acquisition of Frigoscandia, goodwill and other intangible assets of $164.4 million were recorded during 1996. In June 1995, FMC acquired all of the common shares of Moorco International Inc. ("Moorco") for $28 per share, or approximately $350 million (including acquisition costs and debt assumed). Moorco is the leading worldwide manufacturer of meters for the petroleum industry and a leading manufacturer of valves for the process and power generation industries. Moorco's operations are included in the company's Machinery and Equipment segment. In conjunction with the acquisition of Moorco, goodwill and other intangible assets of $218.4 million were recorded, and $15.5 million of acquired in-process research and development costs were charged to research and development expense during 1995. The company also completed a number of other smaller acquisitions and joint ventures during the years ended December 31, 1997, 1996 and 1995. The purchase prices for all the aforementioned acquisitions were satisfied from cash flow from operations and short-term and long-term financing. Results of operations of the acquired companies have been included in the company's consolidated statements of income from the respective dates of acquisition. The company's 1997 and 1996 acquisitions did not have a material pro forma impact on the company's consolidated results of operations. These acquisitions were accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on the estimated fair values of such assets and liabilities at the date of acquisition. The excess of the purchase price over the fair value of the net tangible assets acquired has been recorded as intangible assets, primarily goodwill, which are amortized over periods ranging from 15 to 40 years. JOINT VENTURE. In July 1995, FMC completed a joint venture involving the sale of 20 percent of its soda ash business, FMC Wyoming Corporation, to Sumitomo Corporation and Nippon Sheet Glass Company, Ltd. for $150.0 million, resulting in a nontaxable gain of $99.7 million ($2.64 per share on a diluted basis). The company retains management control of the joint venture. In accordance with the agreement, the company's joint venture partners also contributed approximately $22 million to the joint venture, representing their share of preformation funding of capital projects at FMC Wyoming Corporation's soda ash facilities. -39- NOTE [3] DISCONTINUED OPERATIONS The company's results of discontinued operations for the years ended December 31, 1997, 1996 and 1995 comprise the following:
- --------------------------------------------------------------- (In millions) 1997 1996 1995 - --------------------------------------------------------------- Gain on sale of Defense Systems operations (net of income taxes of $138.7) $179.7 $ -- $ -- Income from operations of Defense Systems segment through August 25, 1997 (net of income taxes of $25.5 in 1997, $31.6 in 1996 and $37.8 in 1995) 38.7 55.3 62.8 Gain on disposal of FMC Gold Company (including income tax benefit of $10.3) -- 19.7 -- Loss from operations of Precious Metals segment through July 31, 1996 (net of income tax benefits of $1.8 in 1996 and $4.5 in 1995) -- (3.7) (1.9) Provision for liabilities related to previously discontinued operations (net of income tax benefits of $18.0 in 1997 and $15.6 in 1996) (27.0) (23.4) -- - --------------------------------------------------------------- Discontinued operations, net of income taxes $191.4 $ 47.9 $ 60.9 ===============================================================
SALE OF DEFENSE SYSTEMS OPERATIONS. On August 25, 1997, FMC, Harsco Corporation, Harsco UDLP Corporation (together with Harsco Corporation, "Harsco"), and Iron Horse Acquisition Corp., an affiliate of The Carlyle Group ("Carlyle"), signed a definitive agreement for the sale of United Defense, L.P. ("United Defense" or "UDLP") and certain other assets to Carlyle for approximately $850 million. The transaction closed on October 6, 1997. FMC was the managing general partner and 60 percent owner of United Defense, which was formed in 1994 by combining FMC's Defense Systems Group with Harsco's BMY Combat Systems Division. Harsco owned the remaining 40 percent of UDLP. United Defense supplies ground combat and naval weapons systems for the U.S. armed forces and military customers around the world. The gross sale proceeds to FMC and Harsco consisted of $800.0 million in cash, to be adjusted based on certain closing balance sheet items as of October 6, 1997, and a $50.0 million note payable to FMC by Carlyle upon finalization of certain international joint-venture agreements. Of the estimated proceeds, FMC received $460.0 million in cash (subject to adjustment) and expects to collect the $50.0 million note, which bears interest at 8 3/4 percent, in 1998. In addition to its interest in the UDLP partnership, FMC sold to Carlyle as part of UDLP its wholly owned Corporate Technology Center ("CTC"). FMC also agreed to contract for certain research services with CTC in the future. FMC transferred 92 of its CTC, legal and defense audit staff to UDLP in conjunction with the disposition of UDLP. These staff primarily performed defense-related duties while at FMC. After deducting its investment in UDLP of $97.9 million, including FMC's share of UDLP's results of operations during the period from August 25, 1997 (measurement date) through October 6, 1997, and providing for required pension funding of $22.0 million, transaction costs, valuation reserves against certain retained properties, and other costs, FMC recognized a gain of $318.4 million ($179.7 million after tax) during the fourth quarter of 1997. The reported gain is subject to resolution of closing issues in accordance with the sale contract. FMC used the cash received to retire variable rate debt and commercial paper and contribute towards its common stock repurchase program. Sales of the Defense Systems segment were $918.9 million for the period from January 1, 1997 through August 25, 1997 and $1,018.8 million and $968.2 million, respectively, for the years ended December 31, 1996 and 1995. SALE OF PRECIOUS METALS OPERATIONS. On July 15, 1996, FMC's management approved a plan to dispose of shares of FMC Gold Company through a secondary offering of substantially all of FMC's interest following a reincorporation of FMC Gold Company in Canada under the name Meridian Gold Inc. In connection with the disposal, the Precious Metals segment have been accounted for as a discontinued operation. Upon completion of the reincorporation and offering in the third quarter of 1996, FMC received cash proceeds, including a dividend of $0.02 per share, of $210.7 million. Amounts owing to FMC Gold Company totaling $79.2 million at July 31, 1996 and transaction and other related costs aggregating $23.3 million were paid from proceeds or accrued pending payment. FMC recorded a gain of $9.4 million ($19.7 million after tax) on the transaction. A net tax benefit of $10.3 million on the gain included the reversal of previously recorded valuation allowances, which are no longer required, related to certain deferred tax assets arising from the Precious Metals business. Sales of the Precious Metals segment were $41.3 million for the seven months ended July 31, 1996 and $59.0 million for the year ended December 31, 1995. RESERVE FOR DISCONTINUED OPERATIONS. In the fourth quarter of 1997, FMC provided $45.0 million ($27.0 million after tax) for environmental costs at discontinued operations' sites based on the company's quarterly assessment of future remediation costs. -40- In the third quarter of 1996, the company recorded a charge of $39.0 million ($23.4 million after tax) to increase reserves related to operations discontinued by the company between 1976 and 1984. These additional reserves resulted primarily from an increase in the company's actuarially determined estimate of product liability and in other potential claims principally related to the discontinued Construction Equipment and Chlor-Alkali businesses. Disposal of all assets related to discontinued operations has been completed in accordance with plans adopted within one year of the measurement dates. In addition to the 1997 sale of the company's Defense Systems operations and the 1996 sale of FMC Gold Company, residual liabilities relate to operations discontinued between 1976 and 1984--primarily the Film, Fiber, Power Transmission and Construction Equipment businesses. Most residual liabilities are of a long-term nature and will be settled over a number of years. Liabilities remaining with FMC total $231.3 million at December 31, 1997 ($191.4 million at December 31, 1996) and comprise: $64.7 million (net of $68.0 million in anticipated third party recoveries) for environmental remediation and study obligations, most of which relate to former chemical plant sites; $58.2 million for product liability and other potential claims principally related to the discontinued Construction Equipment group; $68.1 million for retiree benefits provided to employees of former chemical businesses and the Construction Equipment group; $36.6 million related to the sale of the Defense Systems operations; and $3.7 million related to the sale of FMC Gold Company. The company uses actuarial methods, to the extent practicable, to monitor the adequacy of product liability and retiree benefit reserves on an ongoing basis. The environmental liabilities are subject to the environmental accounting and review practices described in Notes 1 and 15. While the amounts required to settle the company's liabilities for discontinued operations could ultimately differ materially from the estimates used as a basis for recording these liabilities, management believes that changes in estimates or required expenditures for any individual cost component will not have a material adverse impact on the company's liquidity or financial condition in any single year and that, in any event, such costs will be satisfied over many years. Spending in 1997, 1996 and 1995, respectively, included $25.9 million, $9.4 million and $12.4 million for environmental obligations, net of recoveries; $10.2 million, $8.2 million and $5.7 million for product liability claims; and $4.5 million, $3.5 million and $5.2 million for retiree benefits. NOTE [4] ASSET IMPAIRMENTS AND RESTRUCTURING AND OTHER CHARGES FMC recorded pre-tax charges of $264.9 million ($180.9 million after tax, or $4.92 per share on a diluted basis) in the fourth quarter of 1997. Of this amount, $224.0 million ($154.0 million after tax, or $4.19 per share) related to asset impairments primarily in the phosphorus chemicals and process additives businesses, and $40.9 million ($26.9 million after tax, or $0.73 per share) was provided to cover restructuring and other activities in several businesses. Restructuring and other reserves related to the 1997 charge totaled $29.3 million at December 31, 1997. In the phosphorus chemicals business, asset impairments of $120.0 million were based on recently increased environmental capital cost estimates and difficult market conditions resulting from increased international competition. Based on an agreement subject to final negotiation with the U.S. government, the increased capital costs include environmental projects to reduce air emissions and meet waste handling and waste pond treatment requirements at the company's Pocatello, Idaho facility. In the United Kingdom-based process additives business, asset impairments of $46.0 million, including the impairment of $19.8 million of goodwill, reflected lower expected future cash flows resulting from increased market competition in the flame retardant and water treatment businesses, as well as the strength of the British pound. Additional asset impairments of $58.0 million primarily related to a partial re-engineering of the Authority herbicide plant, the write-off of certain impaired assets at both the lithium facility in North Carolina and at the food ingredients facility in Cork, Ireland, and the write-off of unused patents in the airport products business. The fair values of impaired assets were determined using discounted cash flow models and assumptions based on management's estimates. Restructuring charges of $26.0 million related primarily to the agricultural products business ($10.0 million), the FMC FoodTech businesses ($7.0 million), and the Crosby industrial valve business ($6.0 million). In conjunction with the restructuring process, the company has severed, or expects to sever, approximately 270 personnel, and has eliminated about 70 unfilled positions. Other charges of $14.9 million consist of various one-time writeoffs and other costs . FMC recorded pre-tax asset impairments and restructuring and other charges of $35.0 million ($20.0 million after tax, or $0.53 per share on a diluted basis) in the third quarter of 1995 covering asset impairments and related exit liabilities for the shift of lithium-based production from North Carolina to a new lower-cost, higher-quality mineral resource in Argentina. Additional charges of $17.0 million ($10.0 million after tax, or $0.27 per share) related primarily to asset impairments, and the -41- company recorded $82.5 million ($50.7 million after tax, or $1.34 per share) of additional environmental reserves (Note 15). In addition, FMC wrote off $15.5 million ($0.41 per share) of acquired in-process research and development costs with no associated tax benefit (Note 2), which was charged to research and development expense. Except for environmental reserves (Note 15), remaining accruals related to the 1995 charges are not significant at December 31, 1997. NOTE [5] INVENTORIES Inventories are recorded at the lower of cost or market value. The current replacement costs of inventories exceeded their recorded values by approximately $283.8 million at December 31, 1997 and $279.4 million at December 31, 1996. During 1997, 1996 and 1995 there were no reductions in LIFO inventories which were carried at lower than prevailing costs. NOTE [6] FOREIGN CURRENCY Net income for 1997, 1996 and 1995 included aggregate foreign currency gains of $0.8 million, $2.3 million and $0.2 million, respectively. The U.S. dollar strengthened significantly against most currencies in 1997 while European currencies were mixed against the U.S. dollar in 1996. The Japanese yen and Mexican peso continued their 1995 weakening trend during 1996. The 1997 decrease in the foreign currency translation adjustment component of stockholders' equity was largely due to the weakening of European currencies, particularly the Spanish peseta, against the U.S. dollar. The 1996 decrease was due to the sale of the company's minority interest in a Japanese hydrogen peroxide venture (Note 1) as well as smaller amounts related to European currency movements against the U.S. dollar. The 1995 increase was primarily attributable to a weaker U.S. dollar in relation to European currencies, particularly the Spanish peseta. The following table presents the foreign currency adjustments to key balance sheet categories and the offsetting adjustments to the foreign currency translation adjustment component or to income. Interest earned on foreign cash and cash equivalents and debt service costs are classified as interest income and interest expense, respectively, and are not included in the table. In addition, foreign currency impacts on cash and cash equivalents and debt in hyperinflationary economies are netted against interest income and expense and are also not shown in the table.
- ------------------------------------------------------------------ Gains (Losses) - ------------------------------------------------------------------ (In millions) 1997 1996 1995 - ------------------------------------------------------------------ Cash and cash equivalents $(11.0) $ 3.2 $ 8.5 Debt 1.5 (7.3) (3.1) Other working capital (19.5) 1.7 2.1 Property, plant & equipment, net (38.5) (1.3) 15.1 Investments (3.0) (17.8) (3.6) Other 1.1 (4.9) (6.7) - ------------------------------------------------------------------ $(69.4) $(26.4) $12.3 ================================================================== Foreign currency translation adjustment $(70.2) $(28.7) $12.1 Gain in income 0.8 2.3 0.2 - ------------------------------------------------------------------ $(69.4) $(26.4) $12.3 - ------------------------------------------------------------------
NOTE [7] FINANCIAL INSTRUMENTS FAIR VALUE DISCLOSURES. The carrying amounts of cash and cash equivalents, trade receivables, other current assets, accounts payable and amounts included in investments and accruals meeting the definition of a financial instrument approximate fair value. The carrying value and related estimated fair values for the company's remaining financial instruments are as follows:
- ------------------------------------------------------------------ December 31, 1997 - ------------------------------------------------------------------ Carrying Estimated (In millions) Amount Fair Value - ------------------------------------------------------------------ Assets - ------------------------------------------------------------------ Foreign exchange forward contracts $ -- $ 2.1 Interest rate swap agreement $ -- $ 0.1 - ------------------------------------------------------------------ Liabilities - ------------------------------------------------------------------ Total debt $1,340.6 $1,354.6 ==================================================================
Fair values of debt have been determined through a combination of management estimates and information obtained from independent third parties using market data, such as bid/ask spreads, available on the last business day of the year. Fair values relating to derivative financial instruments reflect the estimated amounts that the company would receive or pay to terminate the contracts at the reporting date based on quoted market prices of comparable contracts as of December 31, 1997. DERIVATIVE FINANCIAL INSTRUMENTS. The company has entered into an interest rate swap agreement under which the company pays fixed-rate British pound amounts in exchange for floating-rate British pound amounts. This swap agreement reduces the company's risk to higher British pound interest rates on sterling- denominated debt. -42- In addition, as of December 31, 1997 and 1996, the company had approximately $436.4 million and $410.6 million, respectively, of outstanding foreign exchange forward contracts in which foreign currencies (primarily Spanish peseta, Swedish krona, Japanese yen, Italian lira, British pound and German mark in 1997 and Belgian franc, British pound, Norwegian krone and Spanish peseta in 1996) were purchased, and approximately $485.9 million and $495.5 million, respectively, of outstanding foreign exchange forward contracts in which foreign currencies (primarily Spanish peseta, British pound, Belgian franc, Swedish krona, Norwegian krone and Irish punt in 1997 and British pound, Japanese yen, Spanish peseta and Swedish krona in 1996) were sold. Cross-currency contracts at December 31, 1997 and 1996 were not significant. Such contracts provide for the exchange of certain European currencies. At December 31, 1997, the majority of outstanding hedges relate to receivables, payables and intercompany transactions. NOTE [8] PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following:
- ------------------------------------------------------------------- December 31 - ------------------------------------------------------------------- (In millions) 1997 1996 - ------------------------------------------------------------------- Land and land improvements $ 189.9 $ 173.8 Buildings 521.6 469.7 Machinery and equipment 2,751.5 2,780.3 Construction in progress 192.2 343.0 - ------------------------------------------------------------------- Total cost 3,655.2 3,766.8 Accumulated depreciation 1,975.9 1,932.3 - ------------------------------------------------------------------- Net property, plant and equipment $1,679.3 $1,834.5 ===================================================================
Depreciation expense was $218.3 million, $205.7 million and $182.6 million in 1997, 1996 and 1995, respectively. As discussed further in Note 4, impairment charges recorded in the fourth quarter of 1997 reduced net property, plant and equipment by $169.2 million. NOTE[9] DEBT LONG-TERM DEBT. Long-term debt consists of the following:
- ------------------------------------------------------------------- December 31 - ------------------------------------------------------------------- (In millions) 1997 1996 - ------------------------------------------------------------------- Revolving credit facility (effective rate: 1997--6.7%; 1996--6.2%)/(1)/ $ -- $ -- Commercial paper (effective rate: 1997--5.7%; 1996--5.5%)/(2)/ 155.0 390.6 Uncommitted credit facilities (effective rate: 1997--5.8%; 1996--5.6%)/(2)/ 120.0 59.4 Notes payable to banks, various rates, due 1998 to 2042 18.7 28.4 Pollution control and industrial revenue bonds, 3.8% to 7.1%, due 1998 to 2024 166.5 175.7 Senior debt, 8 3/4%, due 1999, less unamortized discount (1997--$0.2; 1996--$0.4), effective rate 8.8% 249.8 249.6 Senior debt, 6 3/8%, due 2003, less unamortized discount (1997--$0.6; 1996--$0.7), effective rate 6.4% 199.4 199.3 Senior debt, 7 3/4%, due 2011, less unamortized discount (1997--$1.0; 1996--$1.0), effective rate 7.9% 99.0 99.0 Medium term notes, 7.20% and 7.21%, due 2002, less unamortized discount (1997--$0.1), effective rate 7.2% 24.9 -- Medium term notes, 7.32%, due 2007, less unamortized discount (1997--$0.3), effective rate 7.4% 44.7 -- Exchangeable senior subordinated debentures, 6 3/4%, due 2005 75.0 75.0 Other 1.2 1.8 - ------------------------------------------------------------------- Total 1,154.2 1,278.8 Less current portion 14.0 10.4 - ------------------------------------------------------------------- Long-term portion $1,140.2 $1,268.4 ===================================================================
(1) The effective rate for the revolving credit facility is based on average balances outstanding during the year and includes facility fees. (2) The effective rates for commercial paper and uncommitted facilities are based on average balances outstanding during the year. -43- In December 1996, the company entered into a $450.0 million, five-year non- amortizing revolving credit agreement and a $300.0 million, 364-day non- amortizing revolving credit agreement (which was subsequently renewed until December 1998). These agreements provide the company with $750.0 million in committed credit facilities. No amounts were outstanding under these credit facilities as of December 31, 1997 and 1996. Among other restrictions, the credit agreements contain covenants relating to liens, consolidated net worth and cash flow coverage (as defined in the agreements). The company is in compliance with all financial debt covenants. Committed credit available under the revolving credit facilities provides management with the ability to refinance a portion of its debt on a long-term basis and, as it is management's intent to do so, $155.0 million and $390.6 million in outstanding commercial paper, which is supported by credit facilities, have been classified as long-term debt at December 31, 1997 and 1996, respectively. In addition, $120.0 million and $59.4 million of borrowings under short-term uncommitted credit facilities have been classified as long-term debt at December 31, 1997 and 1996, respectively. In January 1997, the company registered $400.0 million of medium-term debt securities pursuant to a $500.0 million universal shelf registration statement filed in 1995 under which, on January 29, 1997, the company issued $45.0 million of 7.32 percent notes due in 2007. The net proceeds totaled $44.7 million and were used to retire short-term borrowings. Additionally, on May 2, 1997, the company issued $25.0 million of notes due in 2002 at rates of 7.20 percent and 7.21 percent. The net proceeds of $24.9 million were also used to retire short- term debt. In July 1996, the company issued $100.0 million of 7.75 percent Senior Debentures due 2011 pursuant to the 1995 universal shelf registration statement. The net proceeds from the issuance totaled $98.2 million and were used to reduce variable rate short-term debt. The exchangeable senior subordinated debentures bearing interest at 6 3/4 percent and maturing in 2005 are exchangeable at any time into Meridian Gold Inc. common stock at an exchange price of $15 1/8 per share, subject to adjustment. The company may, at its option, pay an amount equal to the market price of Meridian Gold Inc. common stock in lieu of delivery of the shares. However, the market price at December 31, 1997 was substantially below $15 1/8 per share. The debentures are redeemable at the option of FMC at prices decreasing from 103 3/8 percent of face amount on January 16, 1995, to par on January 16, 2000. The debentures are subordinated in right of payment to all existing and future senior indebtedness of the company. Aggregate maturities and sinking fund requirements over the next five years are (in millions): 1998--$14.0, 1999--$264.2, 2000--$0.7, 2001--$277.6, 2002-- $25.8, and thereafter--$571.9. The maturities in the year 2001 include commercial paper redemptions of $155.0 million and $120.0 million of borrowings under short-term uncommitted credit facilities. SHORT-TERM DEBT. At December 31, 1997, short-term debt consisted entirely of foreign short-term borrowings. The balance at December 31, 1996 included foreign short-term borrowings and advances under uncommitted credit facilities. Outstanding foreign short-term borrowings totaled $186.4 million and $255.4 million at December 31, 1997 and 1996, respectively. The weighted average interest rates on outstanding foreign short-term borrowings at December 31, 1997 and 1996 were 8.4 percent and 9.7 percent, respectively. The average interest rates have been adjusted for currency devaluation associated with borrowing in hyperinflationary countries. In November 1995, the company commenced a short-term commercial paper program, providing for the issuance of up to $500.0 million in aggregate maturity value of commercial paper at any given time. Two-day to 30-day commercial paper with an aggregate maturity value of $155.0 million was outstanding at December 31, 1997. As described above, the outstanding balance at December 31, 1997 was classified as long-term debt. At December 31, 1996, $390.6 million of outstanding commercial paper was classified as long-term debt. Advances under uncommitted credit facilities were $120.0 million and $359.6 million at December 31, 1997 and 1996, respectively. As described above, $120.0 million of the outstanding balance at December 31, 1997 ($59.4 million at December 31, 1996) was classified as long-term debt. COMPENSATING BALANCE AGREEMENTS. FMC maintains informal credit arrangements in many foreign countries. Foreign lines of credit, which include overdraft facilities, typically do not require the maintenance of compensating balances, as credit extension is not guaranteed but is subject to the availability of funds. -44- NOTE [10] INCOME TAXES Domestic and foreign components of income (loss) from continuing operations before income taxes and the cumulative effect of a change in accounting principle are shown below:
- ----------------------------------------------------------- Year ended December 31 - ----------------------------------------------------------- (In millions) 1997 1996 1995 - ----------------------------------------------------------- Domestic $(174.2) $100.4 $ 43.0 Foreign 114.5 135.4 109.7 - ----------------------------------------------------------- Total $ (59.7) $235.8 $152.7 ===========================================================
The provision for (benefit from) income taxes attributable to continuing operations before the cumulative effect of a change in accounting principle consists of:
- ----------------------------------------------------------- Year ended December 31 - ----------------------------------------------------------- (In millions) 1997 1996 1995 - ----------------------------------------------------------- Current: Federal $ (33.0) $ (8.3) $ (7.6) Foreign 17.3) 28.6 14.4 State and local (3.7) 0.7 (5.1) - ----------------------------------------------------------- Total current (19.4) 21.0 1.7 Deferred (15.8) 52.0 (3.7) - ----------------------------------------------------------- $ (35.2) $ 73.0 $ (2.0) ===========================================================
Total income tax provisions (benefits) for the years ended December 31 were allocated as follows:
- ----------------------------------------------------------- (In millions) 1997 1996 1995 - ----------------------------------------------------------- Continuing operations before the cumulative effect of a change in accounting principle $ (35.2) $ 73.0 $ (2.0) Discontinued operations 146.2 3.8 33.3 Cumulative effect of a change in accounting principle (3.1) - - Items charged directly to stockholders' equity (7.1) (7.8) (3.7) - ----------------------------------------------------------- Income tax provision $ 100.8 $ 69.0 $ 27.6 ===========================================================
Significant components of the deferred income tax provision (benefit) attributable to income (loss) from continuing operations before income taxes and the cumulative effect of a change in accounting principle for the years ended December 31 are as follows:
- ----------------------------------------------------------- (In millions) 1997 1996 1995 - ----------------------------------------------------------- Deferred tax (exclusive of the valuation allowance) $(15.4) $ 57.3 $ (7.4) (Decrease) increase in the valuation allowance for deferred tax assets (0.4) (5.3) 3.7 - ----------------------------------------------------------- Deferred income tax provision (benefit) $(15.8) $ 52.0 $ (3.7) ===========================================================
Significant components of the company's deferred tax assets and liabilities as of December 31 are as follows:
- ----------------------------------------------------------- (In millions) 1997 1996 - ----------------------------------------------------------- Reserves for discontinued operations and restructuring $209.7 $156.7 Accrued pension and other postretirement benefits 92.8 103.6 Other reserves 61.3 43.2 Net operating loss carryforwards 15.8 22.7 Alternative minimum tax credit carryforwards - 46.0 Other 20.0 16.0 - ----------------------------------------------------------- Deferred tax assets 399.6 388.2 Valuation allowance (12.9) (13.3) - ----------------------------------------------------------- Deferred tax assets, net of valuation allowance $386.7 $374.9 =========================================================== Property, plant and equipment $210.3 $204.9 Other 4.4 8.0 - ----------------------------------------------------------- Deferred tax liabilities $214.7 $212.9 =========================================================== Net deferred tax assets $172.0 $162.0 ===========================================================
-45- The effective income tax rate applicable to income (loss) from continuing operations before income taxes and the cumulative effect of a change in accounting principle is different from the statutory U.S. federal income tax rate due to the factors listed in the following table:
- -------------------------------------------------------------------------------- (Percent of income (loss) from continuing operations before income taxes and the cumulative effect of a change in accounting principle) Year ended December 31 - -------------------------------------------------------------------------------- 1997 1996 1995 - -------------------------------------------------------------------------------- Statutory U.S. tax rate (35)% 35% 35 % - -------------------------------------------------------------------------------- Net difference: Foreign sales corporation income not subject to U.S. tax (13) (3) (3) Percentage depletion (12) (5) (8) State and local income taxes, less federal income tax effect (11) 3 (1) Foreign earnings subject to different tax rates (18) (2) (4) Tax on intercompany dividends and deemed dividends for tax purposes 6 2 2 Sale of a minority interest in FMC Wyoming not taxed -- -- (24) Nondeductible goodwill 16 1 1 Nondeductible expenses 5 1 3 Minority interests 5 1 2 Additional taxes on sale of investment -- 4 -- Equity in earnings of affiliates not taxed (3) (2) (1) Other 1 (4) (3) - -------------------------------------------------------------------------------- Total difference (24) (4) (36) - -------------------------------------------------------------------------------- Effective tax rate (59)% 31% (1)% ================================================================================
The effective tax benefit rate of 59 percent for 1997 includes the impact of restructuring and other charges (Note 4). The effective tax rate excluding these charges was 24 percent. The effective tax rate of 31 percent in 1996 includes taxes provided on the sale of the company's investment in Tokai Denka Kogyo (Note 1). The effective tax rate excluding this event was 26 percent. The effective tax benefit rate of 1 percent for 1995 includes the impact of restructuring and other charges (Note 4) and the nontaxable gain on the sale of FMC Wyoming stock (Note 2). The effective tax rate excluding these events was 25 percent. FMC's federal income tax returns for years through 1994 have been examined by the Internal Revenue Service and substantially all issues have been settled. Management believes that adequate provision for income taxes has been made for the open years 1995 and after and for any unsettled issues prior to 1995. U.S. income taxes have not been provided for the equity in undistributed earnings of foreign consolidated subsidiaries ($484.2 million and $440.8 million at December 31, 1997 and 1996, respectively) or unconsolidated subsidiaries and affiliates ($14.8 million and $16.1 million at December 31, 1997 and 1996, respectively). Restrictions on the distribution of these earnings are not significant. Foreign earnings taxable to the company as dividends were $28.1 million, $20.3 million and $9.5 million in 1997, 1996 and 1995, respectively. NOTE [11] INCENTIVE COMPENSATION PLANS The 1995 Management Incentive Plan (the Incentive Plan) and the 1995 Stock Option Plan (the Option Plan), approved by the stockholders on April 21, 1995, provide certain incentives and awards to key employees. The plans are administered by the Compensation and Organization Committee of the Board of Directors (the Committee) which, subject to the provisions of the plans, reviews and approves financial targets, times and conditions for payment. The Incentive Plan provides for the grant of multi-year incentive awards payable partly in cash and partly in stock. The Option Plan (and its predecessor plans) provides for regular grants of stock options which may be incentive and/or nonqualified stock options. The exercise price for options is not less than the fair market value of the stock at the date of grant. Options are exercisable at the time designated by the Committee in the option (four years for grants prior to 1995 and three years for grants during 1995 and thereafter). Incentive options expire not later than 10 years from the grant date. Nonqualified options expire not later than 15 years from the grant date (10 years for grants prior to 1990), although the Committee may extend the expiration date of any nonqualified stock option upon such terms and conditions as the Committee shall determine. Under the plans adopted in 1995, 3 million shares became available for awards and options granted in 1995 and later years. These shares are in addition to the shares available from the predecessor plans. Cancellation (through expiration, forfeiture or otherwise) of outstanding awards and options granted after 1989 increases the shares available for future awards or grants. At December 31, 1997, 2,081,650 shares were available for future use under these plans. The company has adopted the disclosure-only provisions of SFAS No. 123 "Accounting for Stock-Based Compensation". Accordingly, no compensation cost has been recognized for the Option Plan. Had compensation cost for the Option Plan been determined based on the fair value at the grant date for awards in 1997, 1996 and 1995 consistent with the provisions of SFAS -46- No. 123, the company's net income and diluted earnings per share for the three years ended December 31, 1997 would have been reduced to the pro forma amounts indicated below:
- ------------------------------------------------------------ (Net income in millions) 1997 1996 1995 - ------------------------------------------------------------ Net income--as reported $162.4 $210.7 $215.6 Net income--pro forma $157.6 $207.3 $214.5 Diluted earnings per share --as reported $ 4.41 $ 5.54 $ 5.72 Diluted earnings per share --pro forma $ 4.28 $ 5.45 $ 5.69 - ------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1997, 1996 and 1995, respectively: dividend yield of 0 percent for all years; expected volatility of 17.4 percent, 17.8 percent and 22.5 percent; risk-free interest rates of 6.8 percent, 6.0 percent and 6.9 percent; and expected lives of 5 years for all grants. The weighted average fair value per share of stock options granted during the years ended December 31, 1997, 1996 and 1995 calculated using the Black- Scholes option-pricing model was $19.84, $21.51 and $21.00, respectively. The following summary shows stock option activity for the three years ended December 31, 1997:
- ------------------------------------------------------------ Number of Weighted- Shares Average (Number of shares Optioned But Exercise Price in thousands) Not Exercised per Share - ------------------------------------------------------------ December 31, 1994 (1,141 shares exercisable) 2,888 $37.21 Granted 372 $58.71 Exercised (210) $25.62 Forfeited (66) $47.07 - ------------------------------------------------------------ December 31, 1995 (1,092 shares exercisable) 2,984 $40.49 Granted 520 $70.93 Exercised (457) $27.67 Forfeited (121) $51.73 - ------------------------------------------------------------ December 31, 1996 (1,200 shares exercisable) 2,926 $47.44 Granted 555 $61.42 Exercised (395) $33.54 Forfeited (169) $63.73 - ------------------------------------------------------------ December 31, 1997 (1,012 shares exercisable) 2,917 $51.05 ============================================================
The following tables summarize information about fixed-priced stock options outstanding at December 31, 1997:
- ------------------------------------------------------------------------------- Options Outstanding - ------------------------------------------------------------------------------- Weighted- Weighted- Number Average Average Outstanding at Remaining Exercise Range of December 31, 1997 Contractual Life Price Exercise Prices (in thousands) (in years) per Share - ------------------------------------------------------------------------------- $24.50-$31.13 516 6.9 $30.42 $45.00-$46.38 1,169 10.5 $46.20 $59.63-$69.00 812 10.4 $60.72 $71.13-$86.38 420 8.2 $71.20 - ------------------------------------------------------------------------------- Total 2,917 9.5 $51.05 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Options Exercisable - ------------------------------------------------------------------------------- Number Weighted- Exercisable at Average Range of December 31, 1997 Exercise Price Exercise Prices (in thousands) per Share - ------------------------------------------------------------------------------- $24.50-$31.13 516 $30.42 $45.00-$46.38 496 $46.12 - ------------------------------------------------------------------------------- Total 1,012 $38.12 - -------------------------------------------------------------------------------
On January 2, 1998 an additional 1,016,100 shares became exercisable at prices of $46.25, $59.625 and $79.00 with expiration dates of March 31, 2009 and April 21, 2010. Under a plan adopted in 1995, discretionary awards of restricted stock may be made to selected employees. The awards vest over a period designated by the Committee, with payment conditional based on continued employment. Compensation cost is recognized over the vesting period based on the market value of the stock on the date of the award and is adjusted to reflect the market value of FMC stock at each reporting date. Compensation cost recognized in 1997 and 1996 was $1.6 million in each year. Under the FMC Deferred Stock Plan for Non-Employee Directors, a portion of the annual retainer for these directors was deferred and paid in the form of shares of the company's common stock upon retirement or other termination of their directorships. Effective January 1, 1997, the Board of Directors approved a comprehensive compensation plan that terminated the retirement plan for directors and increased the proportion of director compensation paid in common stock of the company. Each current director elected to convert the benefits provided for and earned under the old plan into stock units payable in shares of common stock of the company upon retirement from the Board based on the fair market value of the common stock on December 31, 1996. At December 31, 1997, stock units representing an aggregate of 39,847 shares of stock were credited to the nonemployee directors' accounts. -47- NOTE [12] STOCKHOLDERS' EQUITY The following is a summary of FMC's capital stock activity over the past three years:
- -------------------------------------------------------- Common Treasury (In thousands) stock stock - -------------------------------------------------------- December 31, 1994 36,814 298 Stock options exercised 210 2 - -------------------------------------------------------- December 31, 1995 37,024 300 Stock options exercised 457 (2) Stock repurchases -- 2 - -------------------------------------------------------- December 31, 1996 37,481 300 Stock options exercised 395 -- Stock repurchases -- 2,667 Shares reissued -- (15) - -------------------------------------------------------- December 31, 1997 37,876 2,952 ========================================================
At December 31, 1997 and 1996, treasury stock consisted of 3.0 million and 0.3 million shares of common stock, respectively. During 1997, 2.7 million shares were acquired under the company's stock repurchase plans at an aggregate cost of $209.0 million. Also in 1997, 15,000 shares of treasury stock were reissued under the restricted stock award plan and the deferred compensation plan for nonemployee directors. At December 31, 1997, 5,160,205 shares of unissued FMC common stock were reserved for stock options and awards. Common stock equivalents at December 31, 1997 totaled 968,253 potential shares. Covenants of the revolving credit facility agreement (Note 9) contain minimum net worth and other requirements. No dividends are expected to be paid on the company's common stock in 1998. On February 22, 1986, the Board of Directors of the company declared a dividend distribution to each recordholder of common stock as of March 7, 1986, of one Preferred Share Purchase Right for each share of common stock outstanding on that date. Each right entitles the holder to purchase, under certain circumstances related to a change in control of the company, one one-hundredth of a share of Junior Participating Preferred Stock, Series A, without par value, at a price of $300 per share (subject to adjustment), subject to the terms and conditions of a Rights Agreement dated February 22, 1986 as amended through February 9, 1996. The rights expire on March 7, 2006, unless redeemed by the company at an earlier date. The redemption price of $.05 per right is subject to adjustment to reflect stock splits, stock dividends or similar transactions. The company has reserved 400,000 shares of Junior Participating Preferred Stock for possible issuance under the agreement. NOTE [13] RETIREMENT PLANS FMC has retirement plans for substantially all domestic employees and certain employees in other countries. Plans covering salaried employees provide pension benefits based on years of service and an average of the highest 60 consecutive months of compensation during the last 120 months of consecutive employment. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. The company's funding policy is to make contributions based on the projected unit credit actuarial cost method and to limit contributions to amounts that are currently deductible for income tax purposes. As a result of divestitures described in Note 3, the 1996 and 1995 pension income and the December 31, 1996 plan funded status amounts have been restated to exclude plans no longer sponsored by FMC. The 1997 and 1996 net pension income includes salaried and hourly retirement plans of Frigoscandia Equipment, which was acquired in June 1996. The following table summarizes the assumptions used and the components of domestic net pension income:
- ------------------------------------------------------------------- Year ended December 31 - ------------------------------------------------------------------- Assumptions: 1997 1996 1995 - ------------------------------------------------------------------- Weighted average discount rate 8.0% 8.0% 8.0% Rate of increase in future compensation levels 5.0% 5.0% 5.0% Weighted average expected long-term asset return 9.2% 9.2% 9.2% - ------------------------------------------------------------------ Components (in millions): - ------------------------------------------------------------------ Service cost of benefits earned $ 21.2 $ 17.9 $ 16.3 Interest cost on projected benefit obligation 55.8 47.2 42.2 Actual return on plan assets-- investment gains (182.9) (73.7) (133.6) Net amortization and deferral: Net transition asset amortization (22.8) (22.0) (22.0) Prior service cost amortization 3.1 2.5 2.2 Net (gain) loss amortization (2.8) 0.2 (0.4) Net asset gain deferred 123.1 27.3 91.8 - ------------------------------------------------------------------ Net pension (income) $ (5.3) $ (0.6) $ (3.5) ==================================================================
-48- The funded status of the plans and accrued pension liability recognized in the company's consolidated financial statements as of December 31 are as follows:
- ---------------------------------------------------------------- (In millions) 1997 1996 - ---------------------------------------------------------------- Actuarial present value of benefits for service rendered to date: Accumulated benefit obligation based on salaries to date, including vested benefits of $613.8 in 1997 and $511.3 in 1996 $(654.5) $ (544.0) Additional benefits based on estimated future salary levels (116.5) (94.5) - ---------------------------------------------------------------- Projected benefit obligation (771.0) (638.5) Plan assets at fair value/1/ 860.6 643.3 - ---------------------------------------------------------------- Projected benefit obligation less than plan assets 89.6 4.8 Unrecognized net gain (127.7) (24.2) Unrecognized prior service cost 25.1 10.5 Unrecognized net transition asset (84.1) (95.0) - ---------------------------------------------------------------- Accrued pension liability $ (97.1) $ (103.9) ================================================================
/1/ Primarily equities, bonds and participating annuities. In 1997, the company adopted SFAS No. 87, "Employers" Accounting for Pensions," for its pension plan for employees in the United Kingdom. The adoption increased 1997 pension income by $2.0 million. The financial impact of compliance with SFAS No. 87 for other non-U.S. pension plans is not materially different from the locally reported pension expense. The cost of providing those pension benefits for foreign employees was $6.9 million in 1997, $9.5 million in 1996 and $8.6 million in 1995. EMPLOYEES' THRIFT AND STOCK PURCHASE PLAN. The FMC Employees' Thrift and Stock Purchase Plan is a qualified salary-reduction plan under Section 401(k) of the Internal Revenue Code in which all salaried and non-union hourly employees of the company may participate by contributing a portion of their compensation. The company matches contributions up to specified percentages of each employee's compensation depending on profits and fund elections. Charges against income for FMC's matching contributions, net of forfeitures, were $16.2 million in 1997, $14.8 million in 1996 and $13.4 million in 1995. NOTE [14] POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS FMC provides retiree health care and life insurance benefits for substantially all domestic employees. There are no significant plans for international employees. Employees generally become eligible for retiree benefits when they meet minimum retirement age and service requirements. The cost of providing most of these benefits is shared with retirees. The company has reserved the right to change or eliminate these benefit plans. As a result of divestitures described in Note 3, the 1996 and 1995 net periodic postretirement benefit cost (income) and the December 31, 1996 accrued postretirement benefit obligation have been restated to exclude plans no longer sponsored by FMC. During 1997 and 1996, the company's medical contributions for certain hourly employees were capped. The changes, effective January 1, 1997 and 1996, reduced the company's benefit obligation by $4.7 million and $9.0 million in 1997 and 1996, respectively, amortizable over the remaining years of service to full eligibility. As a result, postretirement benefit cost in 1997 and 1996 was reduced by $1.0 million and $2.0 million, respectively. For measurement purposes, the assumed rate of future increases in per capita cost of health care benefits was 7 and 10 percent in 1997 and 1996, respectively, decreasing gradually to 5 percent by the year 2001 and remaining at that level thereafter. The health care cost trend rate assumption has a significant effect on amounts recorded. Increasing the health care cost trend rates by one percentage point would increase the accumulated postretirement benefit obligation by $1.1 million and would increase annual service and interest costs by $0.1 million. -49- The following table summarizes the assumptions used and the components of net periodic postretirement benefit cost (income):
- ---------------------------------------------------------------- Year ended December 31 - ---------------------------------------------------------------- Assumptions: 1997 1996 1995 - ---------------------------------------------------------------- Weighted average discount rate 8.0% 8.0% 8.0% - ---------------------------------------------------------------- Components (in millions): - ---------------------------------------------------------------- Service cost of benefits earned $ 2.4 $ 2.4 $ 2.8 Interest cost on accumulated postretirement benefit obligation 8.3 9.2 9.6 Net amortization and deferral: Plan amendment amortization (8.3) (7.8) (12.7) Net loss amortization 0.1 0.2 -- - ---------------------------------------------------------------- Net periodic postretirement benefit cost (income) $ 2.5 $ 4.0 $ (0.3) ================================================================
The accrued postretirement benefits recognized in the company's consolidated financial statements as of December 31 are as follows:
- ---------------------------------------------------------------- (In millions) 1997 1996 - ---------------------------------------------------------------- Accumulated postretirement benefit obligation (APBO): Retirees $ (64.9) $ (75.1) Fully eligible active participants (11.5) (12.5) Other active participants (33.3) (34.4) - ---------------------------------------------------------------- APBO (109.7) (122.0) Unamortized plan amendments (47.4) (51.3) Unrecognized net gain (9.3) (1.6) - ---------------------------------------------------------------- Accrued postretirement benefits $(166.4) $(174.9) ================================================================
NOTE [15] ENVIRONMENTAL FMC is subject to various federal, state and local environmental laws and regulations that govern emissions of air pollutants, discharges of water pollutants, and the manufacture, storage, handling and disposal of hazardous substances, hazardous wastes and other toxic materials. The most significant environmental liabilities of the company consist of obligations relating to the remediation and/or study of sites at which the company is alleged to have disposed of hazardous substances. In particular, the company is subject to liabilities arising under CERCLA and similar state laws that impose responsibility on persons who arranged for the disposal of hazardous substances and on current and previous owners and operators of a facility for the cleanup of hazardous substances released from the facility into the environment. In addition, the company is subject to liabilities under the corrective action provisions of the Resource Conservation and Recovery Act ("RCRA") and analogous state laws that require owners and operators of facilities that treat, store or dispose of hazardous waste to clean up releases of hazardous waste constituents into the environment associated with past or present practices. The company has been named a PRP at 30 sites on the government's National Priority List. In addition, the company also has received notice from the EPA or other regulatory agencies that the company may be a PRP, or PRP equivalent, at other sites, including 48 sites at which the company has determined that it is reasonably possible that it has an environmental liability. The company, in cooperation with appropriate government agencies, is currently participating in, or has participated in, RI/FS or their equivalent at most of the identified sites, with the status of each investigation varying from site to site. At certain sites, RI/FS have just begun, providing limited information, if any, relating to cost estimates, timing, or the involvement of other PRPs; whereas, at other sites, the studies are complete, remedial action plans have been chosen, or Records of Decision have been issued. In the fourth quarter of 1997, FMC provided $45.0 million for environmental costs at discontinued operations. The company has provided reserves for potential environmental obligations which management considers probable and for which a reasonable estimate of the obligation could be made. Accordingly, total reserves of $263.8 million and $264.4 million, respectively, before recoveries, were recorded at December 31, 1997 and 1996, of which $132.7 million and $116.8 million, respectively, are included in the reserve for discontinued operations at December 31, 1997 and 1996. The company's total environmental reserves include $247.4 million and $242.4 million for remediation activities and $16.4 million and $22.0 million for RI/FS costs at December 31, 1997 and 1996, respectively. In addition, the company has estimated that reasonably possible environmental loss contingencies may exceed amounts accrued by as much as $150 million at December 31, 1997. An environmental inspection was conducted in July 1993 at FMC's Phosphorus Chemicals Division ("PCD") plant in Pocatello, Idaho. In August 1994, the EPA (Region 10) formally notified FMC of a number of alleged violations of the RCRA and related environmental regulations governing the management of hazardous waste generated by the plant, including the operations of hazardous waste storage and treatment units without interim status, the failure to submit timely closure plans, the failure to comply with related reporting requirements and the existence of several other improper treatment and disposal practices. Although there are no legal proceedings pending at this time, FMC has been advised that the matter has been referred to the United States Department of Justice for an evaluation of whether to file a civil enforcement action. If such a civil action is filed, the government is likely to demand both injunctive relief and civil penalties. FMC has had extensive discussions with the Department -50- of Justice and the EPA concerning substantial proposed environmental projects involving pond closure and remediation, changes to waste handling practices and additional air control in an effort to settle this matter in advance of litigation. As described in Note 4, an expected increase in capital costs for environmental compliance contributed to an impairment in the value of PCD's assets during the fourth quarter of 1997. In a separate matter, the EPA issued a draft Risk Assessment on August 17, 1995 for the Eastern Michaud Flats Superfund site, which includes FMC's Pocatello phosphorus facility, identifying potential risks from contamination potentially associated with FMC. Release of the Risk Assessment allowed FMC to complete a draft of the Remedial Investigation documenting the nature and extent of contamination from the site. The company submitted its draft Remedial Investigation to the EPA on September 28, 1995. On April 21, 1997, the EPA issued for public comment its proposed remediation plan for the site. The EPA's preferred remediation alternative is a combination of capping, surface runoff controls and institutional controls for soils, and extraction and recycling for hydraulic control of groundwater. While the company is still reviewing the EPA's proposed plans, FMC believes its reserve at December 31, 1997 of $66.1 million for future environmental costs at the Eastern Michaud Flats site adequately provides for the estimated costs of the proposed Superfund remediation plan for the site. Although potential environmental remediation expenditures in excess of the current reserves and estimated loss contingencies could be significant, the impact on the company's future financial results is not subject to reasonable estimation due to numerous uncertainties concerning the nature and scope of contamination at many sites, identification of remediation alternatives under constantly changing requirements, selection of new and diverse clean-up technologies to meet compliance standards, the timing of potential expenditures, and the allocation of costs among PRPs as well as other third parties. The liability arising from potential environmental obligations that have not been reserved for at this time may be material to any one quarter's or year's results of operations in the future. Management, however, believes the liability arising from the potential environmental obligations is not likely to have a material adverse effect on the company's liquidity or financial condition and may be satisfied over the next 20 years or longer. To ensure FMC is held responsible only for its equitable share of site remediation costs, FMC has initiated, and will continue to initiate, legal proceedings for contributions from other PRPs, and for a determination of coverage against its comprehensive general liability insurance carriers. The Supreme Court of California has determined that FMC's clean-up costs are insured damages under its liability insurance policies, subject to a determination of the application of certain policy exclusions and conditions. Recoveries of $104.9 million ($36.9 million as other assets and $68.0 million as an offset to the reserve for discontinued operations) and $107.2 million ($37.0 million as other assets and $70.2 million as an offset to the reserve for discontinued operations), have been recorded as probable realization on claims against insurance companies and other third parties at December 31, 1997 and 1996, respectively. The majority of recorded assets related to recoveries from PRPs are associated with existing contractual arrangements with U.S. government agencies and amounts due from insurance carriers. Regarding current operating sites, the company spent $29.9 million, $21.8 million and $16.6 million for the years 1997, 1996 and 1995, respectively, on capital projects relating to environmental control facilities, and expects to spend additional capital of approximately $53 million and $40 million in 1998 and 1999, respectively. Additionally, in 1997, 1996, and 1995, FMC spent $60.1 million, $54.9 million and $48.2 million, respectively, for environmental compliance costs. Regarding current operating, previously operated (including discontinued operations) and other sites for the years 1997, 1996 and 1995, FMC charged $29.0 million, $22.0 million and $13.8 million, respectively, against established reserves for remediation spending, and $18.7 million, $12.0 million and $11.8 million, respectively, against reserves for spending on RI/FS. Recoveries from third parties of $3.3 million, $13.1 million and $4.5 million, respectively, were received in 1997, 1996 and 1995. FMC anticipates that the expenditures for current operating, previously operated and other sites will continue to be significant for the foreseeable future. NOTE [16] COMMITMENTS AND CONTINGENT LIABILITIES FMC leases office space, plants and facilities, and various types of manufacturing, data processing and transportation equipment. Capital leases are not significant. Total rent expense under operating leases amounted to $49.9 million, $45.6 million and $50.2 million in 1997, 1996 and 1995, respectively. Minimum future rentals under noncancellable leases aggregated approximately $348 million as of December 31, 1997 and are estimated to be payable as follows: $43 million in 1998, $38 million in 1999, $35 million in 2000, $25 million in 2001, $23 million in 2002 and $184 million thereafter. The real estate leases generally provide for payment of property taxes, insurance and repairs by FMC. The company also has certain other contingent liabilities resulting from litigation, claims, performance guarantees, and other commitments incident to the ordinary course of business. Management believes that the probable resolution of such contingencies will not materially affect the financial position, results of operations or cash flows of FMC. -51- INDEPENDENT AUDITORS' REPORT KPMG Peat Marwick LLP The Board of Directors and Stockholders, FMC Corporation: We have audited the accompanying consolidated balance sheets of FMC Corporation and consolidated subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, cash flows and changes in stockholders' equity for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. With respect to information as of December 31, 1996, and for each of the years in the two-year period ended December 31, 1996, we did not audit the net assets of discontinued operations and results of discontinued operations of United Defense, L.P. Those net assets and results of discontinued operations were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for United Defense, L.P., is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based upon our audits and the report of the other auditors, the accompanying consolidated financial statements referred to above present fairly, in all material respects, the financial position of FMC Corporation and consolidated subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Chicago, Illinois January 20, 1998 MANAGEMENT REPORT ON FINANCIAL STATEMENTS The consolidated financial statements and related information have been prepared by management, which is responsible for the integrity and objectivity of that information. Where appropriate, they reflect estimates based on judgments of management. The statements have been prepared in conformity with accounting principles generally accepted in the United States and are generally consistent with standards issued by the International Accounting Standards Committee. Financial information included elsewhere in this annual report is consistent with that contained in the consolidated financial statements. FMC maintains a system of internal control over financial reporting and over safeguarding of assets against unauthorized acquisition, use or disposition which is designed to provide reasonable assurance as to the reliability of financial records and the safeguarding of such assets. The system is maintained by the selection and training of qualified personnel, by establishing and communicating sound accounting and business policies, and by an internal auditing program that constantly evaluates the adequacy and effectiveness of such internal controls, policies and procedures. The Audit Committee of the Board of Directors, composed of directors who are not officers or employees of the company, meets regularly with management, with the company's internal auditors, and with its independent auditors to discuss their evaluation of internal accounting controls and the quality of financial reporting. Both the independent auditors and the internal auditors have free access to the Audit Committee to discuss the results of their audits. The company's independent auditors have been engaged to render an opinion on the consolidated financial statements. They review and make appropriate tests of the data included in the financial statements. As independent auditors, they also provide an objective, outside review of management's performance in reporting operating results and financial condition. /s/ Michael J. Callahan /s/ Ronald D. Mambu Michael J. Callahan Ronald D. Mambu Executive Vice President Vice President and Chief Financial Officer and Controller Chicago, Illinois January 20, 1998 -52- DIRECTORS AND OFFICERS BOARD OF DIRECTORS Robert N. Burt/1/ Chairman of the Board and Chief Executive Officer LARRY D. BRADY/4/ President B. A. BRIDGEWATER, JR./1/2/5/ Chairman of the Board, President and Chief Executive Officer, Brown Group, Inc. PATRICIA A. BUFFLER/3/4/ Dean, Professor of Epidemiology, School of Public Health, University of California, Berkeley ALBERT J. COSTELLO/2/3/ Chairman, President and Chief Executive Officer, W.R. Grace & Co. PAUL L. DAVIES, JR./1/2/ President, Lakeside Corporation a private real estate investment company JEAN A. FRANOIS-PONCET Member of the French Senate EDWARD C. MEYER /1/4/5/ Chairman, GRC International, Inc., former Chief of Staff, United States Army EDWARD J. MOONEY/3/ Chairman of the Board and Chief Executive Officer, Nalco Chemical Company WILLIAM F. REILLY/1/2/3/ Chairman and Chief Executive Officer, PRIMEDIA JAMES R. THOMPSON/4/5/ Former Governor of Illinois; Chairman, Chairman of the Executive Committee, and Partner; Law Firm of Winston & Strawn CLAYTON YEUTTER/4/5/ Of Counsel, Hogan & Hartson, former U.S. Trade Representative, and former Secretary, U.S. Department of Agriculture /1/Executive Committee /2/Compensation and Organization Committee /3/Audit Committee /4/Public Policy Committee /5/Nominating and Board Procedures Committee OFFICERS ROBERT N. BURT * Chairman of the Board and Chief Executive Officer LARRY D. BRADY * President WILLIAM F. BECK * Executive Vice President MICHAEL J. CALLAHAN * Executive Vice President and Chief Financial Officer WILLIAM J. KIRBY * Senior Vice President J. PAUL MCGRATH * Senior Vice President, General Counsel and Corporate Secretary ALFREDO BERNAD Vice President; President, FMC Europe PATRICIA D. BROZOWSKI Vice President Communications CHARLES H. CANNON, JR.* Vice President; General Manager Food Machinery Group ROBERT J. FIELDS Vice President Environment, Health, Safety and Toxicology W. REGINALD HALL Vice President; President Asia-Pacific ROBERT I. HARRIES * Vice President; General Manager Chemical Products Group HENRY KAHN * Vice President and Treasurer RONALD D. MAMBU * Vice President and Controller JAMES A. MCCLUNG * Vice President Worldwide Marketing MICHAEL W. MURRAY Vice President Human Resources JOSEPH H. NETHERLAND * Vice President; General Manager Energy and Transportation Equipment Group HAROLD S. RUSSELL Vice President Government Affairs WILLIAM H. SCHUMANN * Vice President; General Manager Agricultural Products Group WILLIAM G. WALTER * Vice President; General Manager Specialty Chemicals Group CRAIG M. WATSON Vice President and Chief Information Officer PETER E. WEBER Vice President; President FMC Latin America/ Middle East/Africa WILLIAM J. WHEELER * Vice President Chemical Development and Shared Services *Executive Officer -53- TEN-YEAR FINANCIAL SUMMARY
(In millions, except per share amounts) 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ SUMMARY OF EARNINGS - ------------------------------------------------------------------------------------------------------------------------------------ Total revenue $ 4,312.6 4,030.3 3,518.1 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from continuing operations before minority interests, net interest expense, gain on sale of FMC Wyoming stock, income taxes, extraordinary items and cumulative effect of change in accounting principle/1/ $ 58.0 338.4 134.5 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from continuing operations before special income and expense items/4/, net interest expense, income taxes, extraordinary items and cumulative effect of change in accounting principle/5/ $ 314.0 328.8 279.4 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from continuing operations before income taxes, extraordinary items and cumulative effect of change in accounting principle/1//2/ $ (59.7) 235.8 152.7 Provision (benefit) for income taxes (35.2) 73.0 (2.0) ----------------------------------------------- Income (loss) from continuing operations before extraordinary items and cumulative effect of change in accounting principle/3/ (24.5) 162.8 154.7 Discontinued operations, net of income taxes 191.4 47.9 60.9 Extraordinary items, net of income taxes - - - Cumulative effect of change in accounting principle, net of income taxes (4.5) - - ----------------------------------------------- Net income (loss)/3/ $ 162.4 210.7 215.6 - ------------------------------------------------------------------------------------------------------------------------------------ Asset impairments and restructuring and other charges/1/ $ 264.9 - 150.0 - ------------------------------------------------------------------------------------------------------------------------------------ Gain on sale of FMC Wyoming stock/2/ $ - - 99.7 - ------------------------------------------------------------------------------------------------------------------------------------ Total dividends $ - - - - ------------------------------------------------------------------------------------------------------------------------------------ SHARE DATA Average number of shares used in earnings per share computations (thousands): Basic 36,805 37,024 36,615 Diluted 36,805 38,058 37,721 - ------------------------------------------------------------------------------------------------------------------------------------ Basic earnings (loss) per share: Continuing operations/3/ $ (0.67) 4.40 4.23 Discontinued operations 5.20 1.29 1.66 Extraordinary items - - - Cumulative effect of change in accounting principle (0.12) - - ----------------------------------------------- Net income (loss)/3/ $ 4.41 5.69 5.89 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings (loss) per share: Continuing operations/3/ $ (0.67) 4.28 4.10 Discontinued operations 5.20 1.26 1.62 Extraordinary items - - - Cumulative effect of change in accounting principle (0.12) - - ----------------------------------------------- Net income (loss)/3/ $ 4.41 5.54 5.72 - ------------------------------------------------------------------------------------------------------------------------------------ After-tax income per share from continuing operations before special income and expense items/4//5/ Basic $ 4.25 4.40 4.13 Diluted $ 4.13 4.28 4.01 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL POSITION AT YEAR-END Total assets $ 4,113.1 4,467.4 3,751.8 Long-term debt (less current portion) $ 1,140.2 1,268.4 974.4 Stockholders' equity (deficit) $ 760.6 855.8 653.5 OTHER DATA Capital expenditures $ 316.7 512.1 500.0 Provision for depreciation $ 218.3 205.7 182.6 - ------------------------------------------------------------------------------------------------------------------------------------
/1/ Includes pretax asset impairments of $224.0 million in 1997, $26.4 million in 1995 and $8.1 million in 1993, pretax restructuring and other charges of $40.9 million in 1997, $108.1 million in 1995 and $114.4 million in 1993, and a write-off of acquired in-process research and development of $15.5 million in 1995. /2/ Includes a nontaxable gain on the sale of FMC Wyoming stock of $99.7 million in 1995. /3/ Includes asset impairments and restructuring and other charges of $(180.9) million after tax in 1997 ($(4.92) per share-basic and diluted); after-tax restructuring and other charges, a write-off of acquired in-process research and development and a gain on the sale of FMC Wyoming stock of $3.5 million, net, after tax in 1995 ($0.10 per share-basic and $0.09 per share-diluted); and restructuring and other charges of $(73.5) million after tax in 1993 ($(2.04) per share-basic and diluted). -54-
1994 1993 1992 1991 1990 1989 1988 - -------------------------------------------------------------------------------- 2,898.3 2,700.2 2,712.2 2,593.4 2,513.5 2,356.1 2,206.5 - -------------------------------------------------------------------------------- 212.0 (17.3) 143.0 172.7 166.5 216.0 193.2 - -------------------------------------------------------------------------------- 210.4 104.7 142.8 171.2 164.9 214.6 191.8 - -------------------------------------------------------------------------------- 150.9 (79.9) 59.9 63.8 36.9 70.6 38.7 41.6 (62.8) 9.4 9.4 (4.3) 13.6 11.7 - -------------------------------------------------------------------------------- 109.3 (17.1) 50.5 54.4 41.2 57.0 27.0 64.1 58.1 68.9 118.7 114.1 99.8 102.2 - (4.7) (11.4) (9.2) - (20.4) - - - (183.7) - - - - - -------------------------------------------------------------------------------- 173.4 36.3 (75.7) 163.9 155.3 136.4 129.2 - -------------------------------------------------------------------------------- - 122.5 - - - - - - -------------------------------------------------------------------------------- - - - - - - - - -------------------------------------------------------------------------------- - - - - - - - - -------------------------------------------------------------------------------- 36,369 35,976 35,595 35,024 34,739 34,407 34,142 37,195 35,976 36,796 36,267 36,075 36,006 35,860 - -------------------------------------------------------------------------------- 3.01 (0.48) 1.42 1.55 1.19 1.66 0.79 1.76 1.62 1.94 3.39 3.28 2.90 2.99 - (0.13) (0.32) (0.26) - (0.59) - - - (5.16) - - - - - -------------------------------------------------------------------------------- 4.77 1.01 (2.12) 4.68 4.47 3.97 3.78 - -------------------------------------------------------------------------------- 2.94 (0.48) 1.37 1.50 1.14 1.58 0.75 1.72 1.62 1.87 3.27 3.16 2.77 2.85 - (0.13) (0.31) (0.25) - (0.56) - - - (4.99) - - - - - -------------------------------------------------------------------------------- 4.66 1.01 (2.06) 4.52 4.30 3.79 3.60 - -------------------------------------------------------------------------------- 3.01 1.56 1.42 1.55 1.19 1.66 0.79 2.94 1.53 1.37 1.50 1.14 1.58 0.75 - -------------------------------------------------------------------------------- 2,857.1 2,532.1 2,565.3 2,393.6 2,484.8 2,421.3 2,392.8 901.2 749.8 843.4 928.6 1,158.6 1,325.6 1,468.0 416.6 216.9 219.0 309.8 149.6 (70.6) (223.6) 279.7 206.7 274.9 171.4 266.1 221.1 134.0 173.8 172.8 179.9 166.7 159.8 147.1 147.4 - --------------------------------------------------------------------------------
/4/ Excludes asset impairments and restructuring and other charges of $(264.9) million, or $(180.9) million after tax in 1997 ($(4.92) per share-basic and $(4.77) per share-pro forma diluted); restructuring and other charges, a write-off of acquired in-process research and development and a gain on the sale of FMC Wyoming stock of $50.3 million, or $3.5 million, net, after tax in 1995 ($0.10 per share-basic and $0.09 per share-diluted); and restructuring and other charges of $(122.5) million, or $(73.5) million after tax in 1993 ($(2.04) per share-basic and $(1.99) per share-pro forma diluted). /5/ Supplemental financial information. Should not be considered in isolation nor as an alternative for income from continuing operations or net income determined in accordance with generally accepted accounting principles, nor as the sole measure of the company's profitability. -55-
MAJOR OPERATING UNITS SUBSIDIARIES AND AFFILIATES IN OTHER NATIONS Performance Chemicals Angola FMC Subsea Services, Inc. Agricultural Products Argentina FMC Argentina, S.A. Specialty Chemicals Minera Del Altiplano, S.A. Food Ingredients Australia Lithium FMC (Australia), Ltd. Pharmaceutical Frigoscandia Equipment Pty. Ltd. Process Additives Austria BioProducts FMC Chemikalien Handelsgesellschaft m.b.H. Bangladesh Industrial Chemicals FMC International A.G. Barbados Chemical Products FMC International Sales Corporation Active Oxidants Moorco Foreign Sales Corporation Alkali Chemicals Belgium FMC Foret, S.A. FMC Europe N.V. Peroxygen Chemicals Brazil Phosphorus Chemicals CBV Industria Mecanica, S.A. Crosby Valve & Gage Participacoes Ltda. FMC do Brasil, Ltda. Machinery and Equipment Jetway Systems Equipamentos Aeroportuarios Ltda. Energy and Transportation Canada Equipment FMC of Canada, Ltd. Crosby Valve FMC Offshore Canada Inc. Energy Transportation Chile and Measurement FMC Corporation, Inc. Chile Limitada Petroleum Equipment Neogel, S.A. and Systems China Smith Meter FMC Asia Pacific Inc. SOFEC FMC Hong Kong Limited Airport Products and Systems Suzhou Fu Mei-Shi Crop Care Material Handling Systems Company, Ltd. Huzou FMC Chemical Company, Ltd. FMC FoodTech Colombia Agricultural Machinery FMC Latino America, S.A. Citrus Systems Czech Republic Food Processing Systems F&N Agro Ceska Republica, S.r.o. Food Systems and Handling Denmark Frigoscandia Freezer FMC A/S Frigoscandia Equipment A/S Egypt FMC International, A.G. Equatorial Guinea FMC Subsea Services, Inc. France FMC Europe, S.A. FMC Food Machinery FMC France S.A. FMC Overseas, S.A. Frigoscandia Equipment S.A. Gabon FMC Gabon, S.A.R.L. EXECUTIVE OFFICES Germany FMC G.m.b.H. FMC Corporation Frigoscandia Equipment G.m.b.H. 200 E. Randolph Drive Jetway G.m.b.H. Chicago, Illinois 60601 F.A. Sening G.m.b.H. Internet: www.fmc.com Smith Meter G.m.b.H. Greece FMC Hellas, EPE FMC International, A.G. Guatemala FMC Guatemala, S.A. Hong Kong FMC Asia Pacific, Inc. FMC Hong Kong Ltd. Friendship Minerals and Chemicals, Ltd. India FMC Sanmar Limited FMC Asia Pacific, Inc. Frigoscandia Equipment AB Indonesia FMC Hong Kong Limited P.T. Bina Guna Kimia Indonesia P.T. FMC Santana Petroleum Equipment Indonesia Ireland FMC International, A.G. Italy FMC Italy, S.p.A. Japan Asia Lithium Corporation FMC Asia Pacific, Inc. FMC K.K. Honjo-FMC Energy Systems, Inc. L.H. Company, Ltd. Jordan FMC International, A.G. Kenya FMC International, A.G. Korea FMC Korea Limited Malaysia FMC Wellhead Equipment, Bhd. FMC Petroleum Equipment (Malaysia) Sdn. Bhd. Jetway Systems Asia, Inc. Mexico Electro Quimica Mexicana, S.A. de C.V. E.M.D., S.A. de C.V. Fabricacion, Maquinaria y Ceras, ES.A. de C.V. FMC Agroquimica de Mexico ES. de R.L. de C.V. FMC Equipo Petrolero, S.A. de C.V. FMC Ingredientes Alimenticios Netherlands FMC Fluid Control (Nederland) B.V. FMC Industrial Chemicals (Netherlands), B.V. Norway Kongsberg Offshore, A/S Oman FMC ETEG & Partners LLC Pakistan FMC International, S.A. FMC United (Private) Ltd. Panama FMC Latino America S.A. Philippines FMC International, S.A. Marine Colloids (Philippines) Inc. Poland FMC Corporation Poland Puerto Rico FMC-KOS International FMC International, A.G. Russia A/O FMC Overseas A/O FMC Siberia Petroleum Equipment Singapore Crosby Valve Pte. Ltd. FMC Singapore Pte. Ltd. FMC Southeast Asia Pte., Ltd. Frigoscandia Equipment Pte. Ltd Slovakia F&N Agro Slovensko, S.R.O. South Africa FMC (South Africa)(Proprietary) Ltd. Spain FMC Airline Equipment Europe, S.A. FMC Foret, S.A. Forel, S.L. Foreneto, S.L. Forsean, S.A. Frigoscandia Equipment Iberica, S.A. Peroxidos Organicos, S.A. Sibelco Espanola, S.A. Valentin Herraiz, S.A. Sweden Frigoscandia Equipment Holding AB Frigoscandia Equipment AB Frigoscandia Equipment International AB Frigoscandia Equipment Norden AB Frigoscandia Freezer AB Potato Processing Machinery AB Switzerland FMC International, A.G. Kongsberg Offshore G.m.b.H. Thailand FMC Thailand Ltd. Thai Peroxide Company, Ltd. Ukraine FMC Kiev FMC International, A.G. United Arab Emirates FMC International, S.A. (Dubai) United Kingdom FMC Corporation (UK), Ltd. Frigoscandia Equipment Ltd. Lewis Freezing Systems Ltd. Potato Processing Machinery Ltd. SOFEC, Ltd. Uruguay Lanfor Investment, S.A. Venezuela Tripoliven, C.A. FMC Wellhead de Venezuela, S.A. Virgin Islands FMC International Sales Corporation
-56- Stockholder Data Annual Meeting of Stockholders - ------------------------------ FMC's annual meeting of stockholders will be held at 2 p.m. on Friday, April 24, 1998, at 200 E. Randolph Drive, Chicago. Notice of the meeting, together with proxy material, will be mailed approximately 40 days prior to the meeting to stockholders of record as of March 6, 1998. Transfer Agent and Registrar of Stock - ------------------------------------- Harris Trust and Savings Bank P.O. Box 755, Chicago, Illinois 60690 Questions concerning FMC common stock should be sent to the above address. Stock Exchange Listing - ---------------------- New York Stock Exchange Pacific Stock Exchange Chicago Stock Exchange Stock Exchange Symbol - ---------------------- FMC Form 10-K - --------- A copy of the company's annual report to the Securities and Exchange Commission on Form 10-K for 1997 is available upon written request to: FMC Corporation Communications Department 200 E. Randolph Drive Chicago, Illinois 60601 However, most information required under Parts II and III of Form 10-K has been incorporated by reference to the annual report to stockholders or the proxy statement. FMC was incorporated in Delaware in 1928. -57- FMC FMC Corporation 200 East Randolph Drive Chicago, Illinois 60601 EX-21 14 LIST OF SIGNIFICANT SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 LIST OF SIGNIFICANT SUBSIDIARIES OF REGISTRANT December 31, 1997
Company(1) Organized Under Percent of Voting - ---------- Laws of Securities Owned(2) --------------- ------------------- FMC Corporation Delaware Registrant Jetway Systems, Inc. Delaware 100% Intermountain Research and Development Corporation Wyoming 100% Crosby Valve Inc. Massachusetts 100% Smith Meter Inc. Delaware 100% Direct Measurement Corporation Colorado 100% FMC Asia-Pacific, Inc. Delaware 100% Frigoscandia Equipment Holding AB Sweden 100% Stein, Inc. Delaware 100% Frigoscandia Equipment Inc. Delaware 100% Frigoscandia Equipment AB Sweden 100% Frigoscandia Freezer AB Sweden 100% FMC of Canada Limited Ontario 100% FMC do Brasil Industria e Comercio Ltda. Brazil 100% Minera Del Altiplano S.A. Argentina 100% FMC International, A.G. Switzerland 100% FMC Corporation (UK) Limited England 100% FMC Europe N.V. Belgium 100% FMC Europe, S.A. France 100% FMC Wyoming Corporation Delaware 80% FMC Food Machinery Italy, S.p.A. Italy 100% Smith Meter GmbH Germany 100% FMC A/S Denmark 100% Kongsberg Offshore A/S Norway 100% FMC Food Machinery and Chemical Holding Company B.V. The Netherlands 100% FMC Foret, S.A. Spain 100% FMC Industrial Chemicals (Netherlands) B.V. Holland 100% A/O FMC Siberia Petroleum Equipment Russia 99.6% FMC Southeast Asia Pte. Ltd. Singapore 100% FMC Hong Kong Limited Hong Kong 100% FMC Petroleum Equipment (Malaysia) Sdn. Bhd. Malaysia 100% FMC (Australia) Limited Australia 100%
- ---------------------------- (1) The names of various active and inactive subsidiaries have been omitted. Such subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. (2) With respect to certain companies, qualifying shares in names of directors are included in these percentages. Percentages shown for indirect subsidiaries reflect the percentage of voting securities owned by the parent subsidiary. EX-23 15 CONSENT OF KPMG PEAT MARWICK LLP Exhibit 23 CONSENT OF KPMG PEAT MARWICK LLP The Board of Directors FMC Corporation We consent to incorporation by reference in Registration Statement Nos. 33-7749, 33-10661 and 33-18383 on Form S-8 and Registration Statement Nos. 33-45648 and 33-62415 on Form S-3 of FMC Corporation and consolidated subsidiaries of our report dated January 20, 1998, relating to the consolidated balance sheets of FMC Corporation and consolidated subsidiaries as of December 31, 1997 and 1996, and the related consolidated statement of income, cash flows and changes in stockholders' equity for each of the years in the three-year period ended December 31, 1997, which report is incorporated by reference in the December 31, 1997 annual report on Form 10-K of FMC Corporation and consolidated subsidiaries. /s/ KPMG PEAT MARWICK LLP Chicago, Illinois March 13, 1998 EX-24 16 POWERS OF ATTORNEY Exhibit 24 FMC Corporation Executive Offices 200 East Randolph Drive Chicago, Illinois 60601 312-861-6000 [FMC LOGO] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: WHEREAS, FMC CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file with the Securities and Exchange Commission an Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities and Exchange Act of 1934, as amended; and WHEREAS, the undersigned holds and may hereafter from time to time hold one or more positions in the Corporation whether as an Officer, a Director, or both, such that the undersigned may be required or permitted in such capacity or capacities, or on behalf of the Corporation, to sign one or more of such documents; NOW, THEREFORE, the undersigned hereby constitutes and appoints M.J. Callahan, J.P. McGrath, and C.M. Smith or any of them, his attorney for him or her and in his or her name, place and stead, and in each of his or her offices and capacities in the Company as may now or hereafter exist, to sign and file said Form 10-K and any and all amendments, schedules and exhibits thereto, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand as of the 13th day of March, 1998. EX-27 17 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from FMC Corporation Form 10-K for the year ended December 31, 1997 and is qualified in its entirety by reference to such financial statements. 1,000,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 63 0 845 10 524 1716 3655 1976 4113 1465 1140 0 0 4 757 4113 4259 4313 3190 3190 0 0 118 (60) (35) (25) 191 0 (5) 162 4.41 4.41 Loss from continuing operations before income taxes and accounting change is net of minority interests of 9 for December 31, 1997. Minority interests are primarily limited to partners' share of partnership profits for which tax has not been provided.
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