-----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, QI/XeDKcgM1TTSDv/MlD0QxenuV255XG9BG5NZcdKZRQ/ARyU4Jm4qRchetGTeYP hdkV4x97YN6Gp6TgxUdh7g== 0000950131-96-003005.txt : 19960627 0000950131-96-003005.hdr.sgml : 19960627 ACCESSION NUMBER: 0000950131-96-003005 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960626 SROS: CSX SROS: NYSE SROS: PSE 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: 424B5 SEC ACT: 1933 Act SEC FILE NUMBER: 033-62415 FILM NUMBER: 96585733 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 424B5 1 PROSPECTUS SUPPLEMENT PURSUANT TO RULE 424(B)(5) REGISTRATION NO. 33-62415 ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS SUBJECT TO + +COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE + +SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE + +SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE + +TIME THAT A FINAL PROSPECTUS SUPPLEMENT IS DELIVERED. THIS PRELIMINARY + +PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN + +OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY + +SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR + +SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE + +SECURITIES LAWS OF ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PROSPECTUS SUPPLEMENT (Subject to Completion, Issued June 25, 1996) (To Prospectus dated November 20, 1995) $100,000,000 FMC Corporation LOGO % SENIOR DEBENTURES DUE -------- Interest payable January and July -------- THE SENIOR DEBENTURES WILL NOT BE REDEEMABLE PRIOR TO MATURITY AND WILL NOT BE SUBJECT TO ANY SINKING FUND. THE SENIOR DEBENTURES WILL BE REPRESENTED BY GLOBAL DEBENTURES REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC") OR ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL DEBENTURES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED THROUGH, RECORDS MAINTAINED BY DTC OR ITS PARTICIPANTS. EXCEPT AS DESCRIBED HEREIN, SENIOR DEBENTURES IN DEFINITIVE FORM WILL NOT BE ISSUED. SEE "DESCRIPTION OF SENIOR DEBENTURES." -------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------- PRICE % AND ACCRUED INTEREST, IF ANY --------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3) ---------- -------------- ------------- Per Senior Debenture.................... % % % Total................................... $ $ $
- ----- (1) Plus accrued interest, if any, from July , 1996. (2) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (3) Before deduction of estimated expenses of $ payable by the Company. -------- The Senior Debentures are offered, subject to prior sale, when, as and if accepted by the Underwriters and subject to approval of certain legal matters by Mayer, Brown & Platt, counsel for the Underwriters. It is expected that delivery of the Senior Debentures will be made on or about July , 1996 through the book-entry facilities of DTC against payment therefor in immediately available funds. -------- MORGAN STANLEY & CO. SALOMON BROTHERS INC Incorporated June , 1996 NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER OR DEALER. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. TABLE OF CONTENTS ----------------
PAGE ---- PROSPECTUS SUPPLEMENT The Company............................................................... S-3 Recent Developments....................................................... S-3 Use of Proceeds........................................................... S-3 Summary Financial Information............................................. S-4 Capitalization............................................................ S-5 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... S-6 Description of Senior Debentures.......................................... S-16 Underwriting.............................................................. S-17 Legal Matters............................................................. S-18 Experts................................................................... S-18 PROSPECTUS Available Information..................................................... 2 Documents Incorporated by Reference....................................... 3 The Company............................................................... 4 Use of Proceeds........................................................... 5 Ratio of Earnings to Fixed Charges........................................ 5 General Description of the Offered Securities............................. 5 Description of the Common Stock........................................... 5 Description of the Preferred Stock........................................ 7 Description of Depository Shares.......................................... 8 Description of the Debt Securities........................................ 11 Description of the Warrants to Purchase Common Stock or Preferred Stock... 20 Description of the Warrants to Purchase Debt Securities................... 22 Plan of Distribution...................................................... 23 Legal Matters............................................................. 24 Experts................................................................... 24
---------------- IN CONNECTION WITH THIS OFFFERING THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR DEBENTURES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 THE COMPANY The Company is one of the world's leading producers of chemicals and machinery for industry, agriculture and government. The Company, incorporated in 1928, operates on a worldwide basis in five broad markets: Performance Chemicals, Industrial Chemicals, Machinery and Equipment, Defense Systems and Precious Metals. The Company operates 113 manufacturing facilities and mines in 24 states and 24 countries. Performance Chemicals businesses develop, manufacture and market proprietary specialty chemicals, including agricultural chemicals, pharmaceutical products, food ingredients, water additives, flame retardants and lithium-based chemicals. Industrial Chemicals businesses manufacture a wide variety of chemicals including soda ash, phosphates, hydrogen peroxide and a range of other industrial chemicals. Major customers include glass, paper and detergent producers, as well as food processors and other chemical companies. Machinery and Equipment businesses provide specialized machinery and services to the energy, transportation, food, and food handling industries. Defense Systems develops, manufactures and supplies ground combat vehicles and armament systems to the armed forces of the United States and other governments. In the first quarter of 1994, the Company and Harsco Corporation ("Harsco") announced the establishment of a joint venture, United Defense, L.P., which was a combination of certain assets and liabilities of the Company's Defense Systems Group and Harsco's BMY Combat Systems Division and pursuant to which the Company is the Managing General Partner with a 60% equity interest. The Precious Metals business focuses on the mining of gold in the western United States and the exploration for precious metals in Latin America and North America and is conducted by FMC Gold Company. The Company owns 80% of FMC Gold Company's outstanding common stock. See "Recent Developments." The Company is a corporation organized under the laws of the State of Delaware. As used hereunder, "FMC" or the "Company" refers to FMC Corporation and its subsidiaries, unless otherwise indicated by the context. The Company's principal executive offices are located at 200 East Randolph Drive, Chicago, Illinois 60601 (telephone number: (312) 861-6000). RECENT DEVELOPMENTS On June 21, 1996, a registration statement was filed with the Securities and Exchange Commission relating to the possible reincorporation of FMC Gold Company (to be renamed Meridian Gold Inc.) in Canada. In addition, on June 10, 1996, FMC Gold Company filed preliminary documents with securities regulators in Canada relating to a possible secondary public offering of the Company's 80% equity interest in FMC Gold Company. The reincorporation and offering transactions would be subject to approval of a definitive merger agreement by the board of directors and stockholders of FMC Gold Company, to the successful marketing of the Company's equity interest in FMC Gold Company and to other conditions. As a result, there is no assurance that the transactions will be completed. FMC Gold Company had previously announced that it was reviewing several alternatives to maximize its value to its stockholders, including the secondary public offering described above and the sale of some or all of its stock or assets. Investment advisors have been retained to assist in this process, which may or may not result in the consummation of one or more transactions. On June 20, 1996, the Company purchased Frigoscandia Equipment Holding AB ("Frigoscandia") from ASG AB for approximately $160 million in cash plus the assumption of certain indebtedness. Frigoscandia, headquartered in Helsingborg, Sweden, is the global leader in equipment for industrial in-line freezing and has a strong market position in additional food processing equipment, such as fryers, ovens and portioners. USE OF PROCEEDS The Company intends to use the net proceeds from the sale of the Senior Debentures to repay outstanding short-term borrowings with interest rates ranging from 5.40% to 5.75% and having maturities of less than 90 days. Such short-term borrowings were incurred for general corporate purposes, including the financing of capital expenditures and acquisitions. S-3 SUMMARY FINANCIAL INFORMATION The following table sets forth summary financial information of the Company and its consolidated subsidiaries and is qualified in its entirety by, and should be read in conjunction with, the consolidated financial statements and notes thereto and management's discussion and analysis included elsewhere herein or incorporated into this Prospectus by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and to the Company's Annual Report on Form 10-K for the year ended December 31, 1995. The balance sheet data as at December 31 of the years set forth below and the income statement data for the years then ended have been extracted from financial statements of the Company and its consolidated subsidiaries which were audited by KPMG Peat Marwick LLP ("KPMG"), independent certified public accountants, whose report, with respect to United Defense, L.P. for the years ended December 31, 1995 and 1994, is based on the report of Ernst & Young LLP ("Ernst & Young"), independent auditors.
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, -------------------------- --------------------------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 ------------ ------------ -------- -------- -------- -------- -------- (UNAUDITED; IN MILLIONS, EXCEPT RATIOS) (IN MILLIONS, EXCEPT RATIOS) OPERATING RESULTS Net sales............... $ 1,112.1 $ 1,015.5 $4,509.8 $4,010.8 $3,753.9 $3,973.7 $3,899.4 Income from continuing operations before restructuring and other charges, the gain on sale of FMC Wyoming Corp. stock and income taxes.................. 77.8 74.9 297.2(/1/) 252.3 210.1(/1/) 279.6 255.9 Income from continuing operations before income taxes........... 77.8 74.9 246.9 252.3 37.8 279.6 255.9 Net income (loss)....... 55.2 52.4 215.6 173.4 36.3(/2/) (75.7)(/2/) 163.9 BALANCE SHEET Total assets............ $ 4,479.0 $ 3,561.1 $4,301.1 $3,351.5 $2,845.1 $2,856.6 $2,774.2 Total debt.............. 1,626.1 1,202.1 1,425.0 1,009.4 831.8 906.9 992.2 Total stockholders' equity................. 705.7 473.5 653.4 416.5 216.9 219.0 309.8 OTHER DATA Ratio of earnings to fixed charges(/3/)..... 4.1x 4.5x 3.4x(/4/) 4.4x 1.5x(/5/) 3.4x 2.8x
- -------- (/1/)Restructuring and other charges in 1995 consisted of increases in environmental reserves ($82.5 million), charges related to the shift of lithium-based production to Argentina ($35.0 million), asset write-downs and other charges ($17.0 million) and the write-off of acquired in-process research and development related to the Moorco International Inc. acquisition ($15.5 million). The gain on sale of FMC Wyoming stock was $99.7 million in 1995. Restructuring and other charges in 1993 consisted of $172.3 million (net of $12.7 million of minority interest) related primarily to restructuring costs associated with the Machinery and Equipment and Industrial Chemicals segments, expenses to restructure companywide functional support staffs and a write-down of FMC Gold Company's investment in the Beartrack development property. (/2/)Extraordinary charges of $4.7 million and $11.4 million (net of tax) were recorded in 1993 and 1992, respectively, related to early debt retirements, and in 1992 a provision of $73.2 million (net of tax) was recorded for discontinued operations. (/3/)The ratios of earnings to fixed charges have been determined by dividing fixed charges into earnings. Earnings consist of income from continuing operations before income taxes and extraordinary items, plus minority interests, less undistributed earnings (and plus losses) of affiliates, plus interest expense and amortization of debt discount, fees and expenses, plus amortization of capitalized interest, plus one-third of rentals. Fixed charges consist of interest expense and amortization of debt discount, fees and expenses, interest capitalized as part of fixed assets and interest included in rental expense. (/4/)The ratio of earnings to fixed charges for the year ended December 31, 1995 before the gain on sale of FMC Wyoming stock, restructuring and other charges and write-off of acquired in-process research and development was 3.9x. (/5/)The ratio of earnings to fixed charges for the year ended December 31, 1993 before restructuring and other charges was 3.3x. S-4 CAPITALIZATION The following table sets forth the consolidated capitalization of the Company and its subsidiaries at March 31, 1996 and as adjusted to give effect to the sale of the Senior Debentures offered hereby and the application of the estimated net proceeds therefrom. From time to time, the Company may issue additional debt or equity securities. The following information should be read in conjunction with the Company's consolidated financial statements for the quarter ended March 31, 1996, including the notes thereto, and management's discussion and analysis which are included elsewhere herein or incorporated herein by reference. See "Documents Incorporated by Reference."
MARCH 31, 1996 ---------------------- HISTORICAL AS ADJUSTED ---------- ----------- (UNAUDITED; IN MILLIONS) INDEBTEDNESS* Short-term borrowings................................. $ 650.9 $ 551.8 Current maturities of long-term debt.................. 16.2 16.2 Long-term debt, less current maturities............... 959.0 959.0 Senior Debentures offered hereby...................... -- 100.0 -------- -------- Total indebtedness.................................. 1,626.1 1,627.0 -------- -------- STOCKHOLDERS' EQUITY* Common stock, $0.10 par value, authorized 60,000,000 shares; issued 37,228,971 shares..................... 3.7 3.7 Capital in excess of par value of capital stock....... 109.1 109.1 Retained earnings..................................... 651.3 651.3 Foreign currency translation adjustment............... (49.2) (49.2) Treasury stock, common, at cost; 300,447 shares....... (9.2) (9.2) -------- -------- Total stockholders' equity.......................... 705.7 705.7 -------- -------- Total capitalization................................ $2,331.8 $2,332.7 ======== ========
- -------- *For additional information regarding long-term debt (including repayment requirements) and stockholders' equity, see Note 2 to the unaudited consolidated financial statements included in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and Notes 5, 6, 8, 9, 10 and 11 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. S-5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth below consists of management's discussion and analysis contained or incorporated by reference in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Such information is presented in this Prospectus Supplement for convenience of reference and has not been updated in any material respect since the dates of such documents. GENERAL Quarter Ended March 31, 1996 Compared with Quarter Ended March 31, 1995 Sales increased 10 percent to $1.1 billion, driven by continuing growth in Machinery and Equipment, Performance Chemicals and Industrial Chemicals as well as the acquisition of Moorco International Inc. Net income was $55 million and earnings per share were $1.45, compared with $52 million and $1.40, respectively, in last year's period. 1995 Compared with 1994 Sales in 1995 were $4.5 billion, an increase of 12 percent from 1994. Sales in the United States increased 13 percent during the year, while sales outside the United States increased 12 percent from 1994. Before restructuring and other charges of $80 million after tax (discussed further below), a $100 million non-taxable gain on the sale of FMC Wyoming stock and a $15.5 million write-off of acquired in-process research and development costs, consolidated net income of $212 million, or $5.63 per share, increased 22 percent. Including these items, the Company earned $216 million, or $5.72 per share. Results for 1995 were the best in FMC's history. On an overall basis, improving markets and the benefits of the Company's restructuring programs, as well as strategic acquisitions, more than offset significantly higher interest expense related to acquisition and expansion efforts. 1994 Compared with 1993 Sales increased 7 percent in 1994 to $4 billion, mainly due to increases in the Defense Systems, Machinery and Equipment, and Performance Chemicals segments. While sales in the United States remained flat in 1994, sales outside the United States grew 18 percent, driven by an increase in export sales of $256 million. Net income in 1994 was $173 million, or $4.66 per share. Net income in 1993 included after-tax restructuring and other charges, net of minority interest, of $123 million, or $3.34 per share. An after-tax extraordinary charge of about $5 million was also recorded in 1993 for debt restructuring. After these charges, net income for 1993 was $36 million, or $0.98 per share. Taxes The effective tax rate in 1995 was 13 percent. This rate reflects the tax- free gain on sale of a minority interest in FMC's soda ash business as well as depletion and foreign sales corporation benefits. The Company's effective tax rate, excluding the impact of restructuring and other charges and the gain on the sale of FMC Wyoming stock, was 29 percent. The effective tax rate for 1994 was 31 percent, primarily reflecting depletion and foreign sales corporation benefits. Income from foreign operations taxed at rates lower than the U.S. statutory rate also contributed to lower effective rates in 1995, 1994 and 1993. In 1993, the Company reported a credit for income taxes of $3 million on pretax income of $38 million. This unusually low rate was driven primarily by the low level of pretax income in 1993. S-6 Restructuring and Other Charges FMC recorded restructuring and other charges of $35 million ($20 million after tax) in the third quarter of 1995 covering asset writedowns and related exit liabilities for the expected shift in 1997 of lithium-based production from North Carolina to a new lower-cost, higher quality mineral resource in Argentina. Other charges of $17 million ($10 million after tax) related primarily to asset write-downs. In addition, the Company increased its environmental reserves by $83 million, or $51 million after tax, as part of its ongoing assessment of sites with known environmental issues. See Note 14 to the Company's consolidated financial statements for the year ended December 31, 1995 and "Environmental" below for a discussion of FMC's environmental reserves. In 1993, FMC recorded restructuring and other charges of $172 million, net of minority interest ($123 million after tax). These charges primarily related to restructuring costs associated with the Machinery and Equipment and Industrial Chemical segments, expenses to restructure companywide functional support staffs and a write-down of the investment in the Beartrack property in the Precious Metals segment. During 1995 and 1994, approximately 1,100 employee positions were eliminated. (Additionally, 500 positions were eliminated at United Defense, L.P., that were not covered by the 1993 restructuring program.) FMC's programs to reorganize functional support staffs throughout the Company to align their activities more closely with the Company's growth initiatives, as well as severance programs within the Industrial Chemical and Machinery and Equipment segments designed to improve operating performance, resulted in the majority of the eliminated positions. Cash payments related to these separations were approximately $16 million and $32 million in 1995 and 1994, respectively. Approximately $34 million and $40 million of spending in 1995 and 1994, respectively, related to the consolidation of manufacturing facilities, the exiting of unprofitable product lines and other restructuring activities was charged to the restructuring reserve. 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, the Company utilizes multifunctional advisory teams comprising 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 its potential environmental liability (including additional amounts recorded in 1995) is included in Note 1 and Note 14, respectively, to the Company's consolidated financial statements for the year ended December 31, 1995. Information regarding environmental obligations associated with the Company's discontinued operations is included in Note 3 to the consolidated financial statements for the year ended December 31, 1995. Estimates of 1996 environmental spending are included under Liquidity and Capital Resources herein. No significant adjustments to accruals, recovery estimates or spending estimates occurred during the three months ended March 31, 1996. PERFORMANCE CHEMICALS Quarter Ended March 31, 1996 Compared with Quarter Ended March 31, 1995 Performance Chemicals sales of $304 million increased 7 percent compared with results of $285 million in last year's period, reflecting continued market growth across most product lines. Earnings of $39 million in the 1996 quarter decreased compared with $43 million in last year's period. The lower results were due primarily to a decline in North American sales of food ingredients, significantly higher costs for carrageenan and wood pulp S-7 (key raw materials in the food and pharmaceutical businesses) and weather- related manufacturing difficulties in the lithium business. Sales and earnings related to insecticides and herbicides increased on continued higher volumes in North America, Europe and Asia-Pacific, reflecting increased market demand, new product registrations and label expansions. Sales of food ingredients, pharmaceutical, and BioProducts increased slightly in the first quarter 1996 but earnings declined due to higher costs for carrageenan, wood pulp, and other key raw materials. Lithium sales increased in first quarter 1996, due to higher volumes and price increases. However, earnings decreased from first quarter 1995's record level due mainly to weather-related manufacturing difficulties, higher maintenance spending and other reductions from production shortfalls. 1995 Compared with 1994 Performance Chemicals 1995 sales of $1.2 billion increased 11 percent from sales of $1.1 billion in 1994, reflecting the continued worldwide growth in these businesses. Operating profits improved to $162 million from $154 million in the prior year as a result of increased volume and pricing and a favorable mix of products, partially offset by unfavorable raw material prices, higher distribution and marketing costs, and record expenditures for research and development. Sales of insecticides, herbicides and agricultural intermediates increased from 1994. Sales gains across a range of products worldwide accounted for the improvement. Insecticides were the principal contributor in North America and in Asia-Pacific. A variety of products accounted for the sales increases in the European, Middle Eastern and South American markets. Operating profits improved in 1995, but not in proportion to the increase in sales. Profit margins were lowered as a result of increased expenditures for research and development and higher marketing expenses associated with preparing for new herbicide introductions. The Company continues to take actions to offset the effects of the continued weakening of the Mexican peso against the U.S. dollar, including tightening credit policies, implementing price increases for certain products and adjusting the Mexican company's borrowing structure. Sales of water additives and flame retardant products improved in 1995. Nearly all of this improvement was achieved in the flame retardant line, primarily from price increases and volume gains. Operating profits from these products declined in 1995, however, due to operating difficulties at the Company's phosphate esters plant and price competition in the Middle East desalination market. Food ingredient and pharmaceutical sales increased in 1995 primarily as the result of price increases for most products and increased pharmaceutical sales in Europe. Operating profits were lower, however, due to higher prices of key raw materials, primarily wood pulp and Philippine-harvested seaweed, partially offset by manufacturing efficiencies. Higher marketing and research and development costs associated with the launch of five new pharmaceutical products late in 1995 also affected earnings. Lithium product sales increased in 1995 from higher volumes in products used in specialty applications, offset to some extent by declines in sales of basic products. Operating profits also increased due to favorable sales volumes and pricing, offset partially by increased spending on research and development. 1994 Compared with 1993 Sales of $1.1 billion in 1994 represented an increase of 9 percent over 1993 sales, and profits increased 11 percent to $154 million. Performance Chemicals showed strong worldwide growth in all businesses. Sales of insecticides, herbicides and agricultural intermediates increased in 1994 as a result of improvements in both the domestic and export markets. The domestic increase was primarily due to sales of insecticides, while S-8 the export increase was due to greater sales of herbicides and insecticides in various foreign markets. Operating profits also increased from the improvement in sales. Sales of food ingredients and pharmaceutical products increased versus 1993 due to growth in demand for water dessert gel, confectionery, and low-fat cookie and cracker applications. Pharmaceutical volumes increased in emerging markets due to improved customer relations, and in the European and North American markets due to Europe's economic recovery and applications development. Higher volumes and a favorable sales mix in North America drove higher profits for the year. Sales of lithium products increased versus 1993 as the worldwide markets for the products rebounded. Operating profits increased due to the increased volume and lower manufacturing costs. These factors were partially offset by higher exploration spending associated with FMC's new lithium resource in Argentina. Although sales of water additives and flame retardant products were up from 1993, operating profits declined. Flame retardant volume and revenue increased due to strong sales, but water additives volume was down due to intensified competition in the Middle East desalination market. Increased raw material prices contributed to the reduced profitability. Outlook for Performance Chemicals FMC's focus on developing specialty products and herbicides will result in new applications and products over the next several years. A manufacturing facility to produce a new family of herbicides is scheduled to be completed in the third quarter of 1996. Registration of these products was completed in Paraguay and Brazil and is proceeding in the United States and other foreign markets. The water additives and flame retardant business is expected to benefit in 1996 from the restructuring effort that began in the fourth quarter of 1995 and from investments to improve manufacturing efficiencies. However, price competition in the desalination market in the Middle East is expected to continue as a challenge for the water additives business. The outlook for food ingredients and pharmaceutical products in 1996 is positive. A number of new food product applications were developed in 1995, and this process is expected to continue in 1996. Alternative sources for the supply of seaweed are being sought in order to reduce the high cost of this key raw material. Growth in sales of pharmaceutical products is expected to continue as the result of the introduction of five new products in 1995 and from long-term commitments from global customers. The outlook for lithium products in 1996 remains strong, with continuing sales gains expected in Europe and Asia. A new, low-cost source for lithium production is expected to be completed in early 1997 in Argentina. INDUSTRIAL CHEMICALS Quarter Ended March 31, 1996 Compared with Quarter Ended March 31, 1995 During first quarter 1996, Industrial Chemicals sales of $242 million increased 6 percent compared with 1995 sales of $228 million, primarily reflecting the benefit of price increases across major product lines. The decline in earnings from $40 million in the first quarter of 1995 to $38 million in the 1996 quarter reflects the reduction for the 20 percent minority interest in the soda ash joint venture (formed in the third quarter of 1995), expenses related to the Company's major cost reduction and expansion projects, and lower hydrogen peroxide volumes resulting from the slowdown in demand from pulp and paper producers. First quarter 1996 sales of alkali products increased over first quarter 1995 sales due mainly to price increases, partly offset by lower volumes due to the impact of pre-price increase buying. Earnings were down slightly, primarily due to the minority interest reduction reflected in 1996 first quarter results. S-9 Phosphorus sales increased significantly in the first quarter 1996, reflecting higher volumes, as well as the benefit of higher prices across major product lines. However, earnings increased at a slower rate over the same period due to higher production costs. Peroxygen sales increased slightly from the year-ago period due to improved hydrogen peroxide pricing, partly offset by lower sales volumes into the pulp and paper market. Earnings remained flat due to costs associated with expansions of facilities incurred during the 1996 first quarter. Sales in the 1996 first quarter of FMC Foret, FMC's European industrial chemicals subsidiary, were down slightly due to lower domestic and export volume, partly offset by increases in domestic and export prices. Earnings remained consistent with the same period in 1995, although the 1995 period included the favorable impact of certain reversals of previously accrued expenses. 1995 Compared with 1994 Industrial Chemicals 1995 sales of $977 million increased 13 percent from $867 million in 1994, and operating profits of $162 million were up 36 percent, reflecting improved pricing, higher capacity utilization across key product lines and the benefits of cost improvements throughout manufacturing operations. Alkali chemicals recorded an increase in sales from the prior year. Increased volumes for all product lines, particularly soda ash and cyanide, as well as price increases for soda ash, were the drivers of improved sales and profitability. Export sales increased 22 percent, particularly to Latin American and Asian markets. Sales increases, combined with cost improvement efforts, resulted in a significant improvement in operating profit. In July 1995, FMC sold a 20 percent interest in its soda ash business to Nippon Sheet Glass Co., Ltd., and Sumitomo Corporation for $150 million in cash. The nontaxable gain of $100 million on this transaction is not reflected in 1995 segment earnings. Sales of peroxygen products increased from 1994, and operating earnings increased as well. Volume improvements in most products accounted for the increases. The persulfates manufacturing process was interrupted by a fire in the Company's Tonawanda, New York, warehouse in August 1995. The impact on 1995 earnings was not material. The continued decline in the peso did not have a significant impact on FMC's Mexican peroxygen operations, primarily due to actions taken to mitigate the exchange rate impact. These actions included tightening credit policies and adjusting the Company's local borrowing structure. Sales of phosphorus chemicals increased in 1995, but operating profits declined. The sales increase occurred despite a loss of export business in Mexico. Profits were adversely affected by raw material price increases and manufacturing issues in the fourth quarter of 1995. FMC Foret reported a significant improvement in sales in 1995, and profits increased correspondingly. Pricing improvements in most product lines were driven by earlier restructuring of the European industry and overall market conditions. Volumes were favorably affected by strong demand for pulp and paper and for conventional solid detergents in Europe, North Africa and the Middle East. Revenue increases and a gain of $3 million from the sale of a sulfuric acid plant were partially offset by hydrogen peroxide plant start-up costs in Delfzijl, Netherlands, and a decrease in equity earnings from FMC Foret's Venezuelan affiliate, largely due to the devaluation of the bolivar. 1994 Compared with 1993 Sales of $867 million were the same as in 1993. Operating profits, however, doubled to $119 million. This increase in profits was the result of significant cost improvement programs. Alkali sales declined from 1993 as the result of lower soda ash volume and prices in the domestic market, offset to some extent by increased export sales. Although sales declined, operating profits improved considerably in 1994 as a result of strong manufacturing performance. S-10 Sales of phosphorus chemicals were down slightly from 1993 as the result of lower domestic sales volume, partially offset by increased exports into the Mexican market. Favorable manufacturing performance resulted in improvements to operating profits during 1994. Peroxygen chemicals sales increased in 1994 and operating profits also improved. This was achieved by an increase of domestic sales, which was partially diminished by overall sales price decreases. The domestic hydrogen peroxide industry experienced growth and high capacity utilization as the pulp and paper industry continued to move toward hydrogen peroxide as a replacement for chlorine. FMC Foret sales decreased slightly in 1994 due to the effects of currency translations, although overall domestic and export volume increased. Outlook for Industrial Chemicals FMC continues to expand its industrial chemical capacity to meet expected strong demand in domestic and international markets. The Company's soda ash investments are expected to result in a more than 30 percent reduction in soda ash cash manufacturing costs at operations that use the new lower-cost, proprietary solution mining technique, and to increase the Company's soda ash capacity by 700,000 tons to 3.55 million tons. In addition, soda ash price increases announced in 1995 are expected to significantly increase 1996 revenues. In 1995, peroxygen sales and profits were favorably affected by the strength of the North American pulp and paper market. Any significant reduction in this market in 1996 could have a negative impact on peroxygen revenues. FMC's $65 million expansion at Bayport, Texas, is expected to begin production in late 1996 using higher-efficiency technology. Continued instability in the Mexican economy could affect future earnings from the Company's Mexican peroxygen operation. In anticipation of additional demand, FMC Foret continues to expand its hydrogen peroxide manufacturing capacity. The Delfzijl plant came on stream in October 1995. Significant growth is expected in 1996 in the phosphorus business primarily as a result of FMC's efforts to diversify away from home laundry detergent applications plus the full year impact of the supply contract with Rhone- Poulenc. MACHINERY & EQUIPMENT Quarter Ended March 31, 1996 Compared with Quarter Ended March 31, 1995 Machinery and Equipment sales of $323 million increased 22 percent from $264 million in the 1995 quarter, and profits of $14 million increased significantly compared with $8 million in the prior-year period. These results reflect a recovery in food processing markets, improving energy equipment margins, and the impact of acquisitions, net of increased amortization of goodwill and other intangible assets resulting from acquisitions. Petroleum equipment sales increased in first quarter 1996 primarily due to higher western region subsea sales and increased sales to Statoil. Earnings increased slightly due to these sales increases offset partially by the absence of favorable one-time 1995 items at FMC's Kongsberg operation. Sales of energy and transportation measurement equipment in first quarter 1996 increased due to the acquisition of Moorco's Smith Meter division in June 1995 while earnings remained flat compared to the same period in 1995. Moorco's Crosby Valve and Gage operations, also acquired in June 1995, contributed to the overall increase in Machinery and Equipment sales. S-11 The sale of FMC's Automotive Service Equipment Division to Snap-on Inc., effective March 31, 1996, resulted in an immaterial gain on the sale, favorably affecting Machinery and Equipment earnings. However, operating losses during 1996 for the division partially offset the gain. Food processing systems sales increased significantly from the year-ago period due to improved volumes in most product lines as well as the positive impact from sales at FranRica, which was acquired in the third quarter of 1995. Earnings also increased in the first quarter 1996, driven essentially by higher sales. On April 15, 1996, the Company acquired Sandei SRL, a leading manufacturer of tomato harvesters. 1995 Compared with 1994 Sales of FMC's Machinery and Equipment segment increased to $1.4 billion in 1995 from $973 million in 1994, and operating profits were up 50 percent to $50 million. These results reflect the performance of a number of newly acquired businesses, market share gains in oil field systems and ongoing cost improvements. A significant increase in sales of energy equipment in 1995 included full- year sales of businesses acquired in 1994 and sales of Moorco International Inc. since June 30, 1995. In addition to the increased sales resulting from the acquired businesses, significant gains occurred in petroleum equipment and systems, primarily from continued growth in subsea business in the North Sea region. SOFEC also realized sales gains arising from additional volume in the floating production and storage and offloading vessel markets. Operating profits of energy equipment businesses increased only slightly from 1994, reflecting increasing price competition in certain markets and the amortization of costs related to the acquisitions. Transportation equipment operations benefited from the inclusion of full- year results of Jetway Systems, acquired in May 1994, as well as increased shipments of the Commander 30 main deck loader. Operating profits of the transportation equipment operations improved from 1994 primarily due to increased sales volumes. Sales of food processing systems, packaging and material handling equipment, and agricultural machinery decreased in 1995 due to the absence of sales of product lines divested in 1994. Operating profits of the food machinery operations improved from 1994 primarily as a result of favorable mix and manufacturing cost savings. 1994 Compared with 1993 Machinery and Equipment sales were up 12 percent in 1994 to $973 million, and operating profits also rose substantially to $33 million. Most of the improvement in sales resulted from the businesses acquired in 1993 and 1994 and from improved operating results for some product lines. Sales of airport products and systems increased significantly in 1994 due to the 1994 acquisition of Jetway Systems and the successful introduction of a new main-deck cargo loader. Sales of energy equipment increased from 1993 due to increased demand and the 1993 acquisition of Kongsberg Offshore, partially offset by declines in orders for fluid control products. Sales of food machinery operations improved slightly from 1993 despite the strategic divestiture in 1994 of three non-core product lines with annual sales of approximately $40 million. Operating profits were favorably affected by the Kongsberg acquisition, other sales growth and the benefits of restructuring and cost reduction programs. Partially offsetting these improvements were costs of acquisitions and new project development and higher research and development expenditures. Outlook for Machinery and Equipment The order backlog for Machinery and Equipment was $557 million at December 31, 1995 compared with $480 million at the end of the prior year. Most of the increase reflects the backlog for businesses acquired from Moorco International Inc. Significant increases were also recorded by SOFEC for floating production storage and offloading vessels and for boarding bridges in the airport products business. Not included in backlog at S-12 December 31, 1995, is a five-year agreement with Statoil for the delivery of up to $450 million of subsea systems. An increase in backlog to $923 million at March 31, 1996 includes the recognition of orders representing a portion of the Statoil agreement. Increasing competition in many markets and resulting pricing pressures could affect future earnings. However, with lower product costs resulting from cost reduction and restructuring actions and from improvements in market positions as the result of strategic acquisitions, growth in the Machinery and Equipment segment is expected to continue. DEFENSE SYSTEMS Quarter Ended March 31, 1996 Compared with Quarter Ended March 31, 1995 Defense Systems sales of $233 million were even with last year's period, as increased development-related revenues on the Crusader program and higher shipments on the Paladin program offset lower production-related volumes. Profits of $37 million increased 30 percent compared with $28 million in last year's quarter. The higher profits reflect increased dividends from the Company's joint venture in Turkey, and improved contract performance. Income from the Turkish joint venture is recognized as dividends and royalties are received, and management does not anticipate that 1996's high dividend level will reoccur in 1997, as the joint venture recovers from an insured warehouse fire which occurred in 1996. Ground Systems first quarter 1996 sales were lower than the same period in 1995 primarily due to lower volumes and the completion of certain contracts during 1995. However, lower sales were offset by contract settlements which produced level earnings for the first quarter 1996 as compared to the same period a year ago. Armament sales and earnings increased during first quarter 1996 as compared to 1995. Sales benefited from Crusader program revenues partially offset by lower volumes of other products. Increased Crusader and aftermarket sales positively impacted earnings during the quarter. The Paladin production operation experienced a strong rise in sales reflecting higher vehicle deliveries in the first quarter 1996 as compared to the same period in 1995. Earnings also increased during 1996 as a result of higher sales. First quarter 1996 sales of steel products were up slightly from 1995 due to full production on the M113 overhaul program. Earnings increased in 1996 due to the absence of M113 start up costs incurred in the first quarter 1995. 1995 Compared with 1994 Sales of the Defense Systems segment declined to $968 million in 1995 from $1.1 billion in 1994 while operating profits, after deducting minority interest, improved to $107 million from approximately $100 million in 1994. The sales decline resulted primarily from lower volumes of Bradley Fighting Vehicles and naval weapons systems, partially offset by $84 million of increased revenue from the Crusader development contract and increases of $53 million in deliveries of Paladin self-propelled vehicles. The increase in operating profits primarily resulted from favorable cost performance throughout the business, strong international results, including an increase in royalty and dividend income from the Turkish joint venture, and the recognition in the second quarter of 1995 of a significant portion of a $17.8 million judgment against a subcontractor. 1994 Compared with 1993 Effective January 1, 1994, FMC completed the transaction to combine its defense business with Harsco Corporation's BMY Combat Systems Division. The combined company, United Defense, L.P., operates as a limited partnership. FMC is the general partner with a 60 percent equity interest and responsibility for managing the operation. Sales in 1994 included sales of the former Harsco BMY Combat Division and sales of the Paladin self-propelled howitzer business. Sales of FMC businesses alone were $950 million in 1993. Segment profits, S-13 net of minority interest, were approximately $100 million in 1994. In 1993, profits of FMC's Defense Systems Group were $162 million. Sales of the businesses Harsco contributed to the partnership more than offset declines in Bradley Fighting Vehicle deliveries, Vertical Launching Systems and an engineering contract for the Armored Gun System in 1994. Other product sales were generally flat from 1993 to 1994, and segment profits were down in 1994 due to the lower volume, a favorable insurance settlement in 1993, and start-up costs relating to overhaul and conversion of armored personnel carriers. International defense sales and operating profits were up in 1994. The sales increase was driven largely by the deliveries of M113 upgrade kits to Singapore. An increase in international operating profits was largely the result of increased royalties and dividends from the Turkish joint venture. Outlook for Defense Systems The order backlog of the Defense Systems segment increased to $1.7 billion at March 31, 1996, from $1.5 billion at December 31, 1995 and $1.4 billion at the end of 1994. The backlog increase results primarily from new orders for upgrading Bradley Fighting Vehicles, cannisters for the U.S. Navy, M113 vehicles for Thailand and Amphibious Assault Vehicle kits for Korea. U.S. government budgetary pressures are likely to result in reduced defense spending in the coming years, and lower-margin research programs are replacing some production. As a result, Defense Systems' earnings may decline. In the second quarter of 1996, United Defense was notified that its contract with the U.S. Army for the Armored Gun System will be terminated. While Defense Systems will be affected by such a cancellation, no immediate material impact is likely to occur to FMC's financial position or results of operations. Because Defense Systems is the prime supplier for the early-phase developmental work on the U.S. Army's Crusader and Bradley A3 programs, the business is in a key position to benefit from follow-on production contract awards. Defense Systems also continues to pursue international opportunities and system upgrades. PRECIOUS METALS Quarter Ended March 31, 1996 Compared with Quarter Ended March 31, 1995 Precious Metals sales of $18 million increased from $9 million in last year's period. Losses of $2 million compared with a loss of $4 million in the first quarter of 1995. Results primarily reflect the benefits of production from the Beartrack mine, which started up in the 1995 third quarter, and lower exploration spending. As previously announced, FMC Gold Company is pursuing the possible sale of the company via a number of alternatives to maximize shareholder value. See "Recent Developments." 1995 Compared with 1994 Precious Metals sales in 1995 were $59 million, approximately level with 1994. The operating loss declined to $5.7 million compared with a $9 million loss in the prior year. Lower cash production costs at the Jerritt Canyon operations and the start-up of the Beartrack mine were the primary contributors to the improvement. Gold production declined to 151,000 ounces from 163,000 ounces in 1994. Silver production, at 27,000 ounces, was only 15 percent of 1994's output. The increasing output from the Beartrack mine, which began production in the third quarter of 1995, did not wholly offset the elimination of production from the Company's Royal Mountain King and Paradise Peak mines. In the fourth quarter of 1995, the Company sold its 100 percent interest in Paradise Peak Corporation to Arimetco, Inc. for $4 million. In addition, Arimetco assumed all site reclamation liabilities. A pretax gain of $1.7 million was recognized on the sale, and $4.5 million of reclamation reserves were reversed to cost of sales. Net exploration expense of $11 million, approximately even with 1994, was focused primarily on development projects at the El Penon property in northern Chile and the Rossi property in Nevada. S-14 1994 Compared with 1993 Due to decreased production, sales of the Precious Metals segment declined by more than 50 percent from 1993 to $61 million. Gold production declined to 163,000 ounces, approximately half of the gold production in 1993, and silver production declined to 154,000 ounces, about 18 percent of 1993's total. Decreased production resulted from the closure of the Paradise Peak mine in May 1993 and the Royal Mountain King mine in July 1994. This reduction in sales, as well as disappointing ore grades and recoveries at Jerritt Canyon, and spending on exploration, resulted in an operating loss of $9 million for the year. Beartrack Legal Proceedings See Note 15 to FMC's consolidated financial statements for the year ended December 31, 1995 for a description of legal proceedings related to the Beartrack mine. No significant changes in the information presented therein occurred during the three months ended March 31, 1996. Outlook for Precious Metals Continued operation of the Beartrack mine should increase gold production, further reduce cash costs and improve the segment's profitability in 1996. Exploration at both the Chilean and Rossi properties has been successful in delineating mineralization and is expected to continue in 1996. As discussed in Note 15 to the Company's consolidated financial statements for the year ended December 31, 1995, FMC Gold Company is pursuing the possible sale of such company or its assets. See "Recent Developments." LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1996, the Company had total borrowings of $1.6 billion, up from $1.4 billion at December 31, 1995. The increase in debt resulted primarily from capital expenditures and working capital requirements. Advances under uncommitted facilities totaled $310 million and commercial paper borrowings were $384 million at March 31, 1996 (net of discount). Capital and acquisition spending of $123 million for the three months ended March 31, 1996 increased $30 million versus the first three months of 1995. The increase is primarily driven by spending in the Company's chemical businesses, largely for the expansion of the Green River soda ash facility, a plant to manufacture a new family of herbicides, and the development of a new lithium resource in Argentina. Cash generated from operations and available credit facilities provided the resources to meet 1995 operating needs and fund capital expenditures and acquisitions. Debt levels increased by $416 million in 1995 as a result of higher capital and acquisition spending. Interest expense increased by $19 million in 1995, primarily due to higher debt levels. Capital expenditures excluding acquisitions approximated $494 million. At December 31, 1995, the Company had borrowed $272 million (net of a $3 million discount) under a commercial paper program that began in November 1995. The Company borrowed an additional $125 million under uncommitted bank facilities during 1995. In 1995, the Company filed a universal shelf registration under which $500 million of debt and/or equity securities may be publicly offered. At March 31, 1996, no securities had been offered under this registration. Expected cash requirements for the remainder of 1996 include approximately $325 million to $375 million for planned capital expenditures, excluding potential acquisitions, and net after-tax interest payments of approximately $40 million based on current debt levels and interest rates. Cash to meet these requirements will be provided primarily by the Company's operations and, if necessary, by existing cash balances and available short or long-term credit facilities. S-15 Projected full year 1996 spending also includes approximately $50 million for environmental compliance at current operating sites, plus approximately $35 million of remediation spending and $10 million for study costs at current operating, previously operated and other sites. Working Capital
MARCH 31 DECEMBER 31 ---------------- ------------------------- 1996 1995 1995 1994 1993 ------- ------- ------- ------- ------- (UNAUDITED; IN (IN MILLIONS) MILLIONS) Operating working capital: Trade receivables............... $ 827.2 $ 695.6 $ 837.8 $ 642.8 $ 573.2 Inventories..................... 700.4 455.5 615.0 403.9 268.1 Accounts payable................ (779.0) (676.7) (848.5) (676.9) (501.2) Accrued payroll and other current liabilities............ (398.7) (358.4) (419.4) (405.9) (390.9) ------- ------- ------- ------- ------- Total operating working capital... 349.9 116.0 184.9 (36.1) (50.8) Cash and cash equivalents......... 107.6 146.0 70.9 98.4 77.5 Other............................. (423.5) (15.8) (243.7) 45.1 12.9 ------- ------- ------- ------- ------- Total working capital......... $ 34.0 $ 246.2 $ 12.1 $ 107.4 $ 39.6 ======= ======= ======= ======= =======
Operating working capital increased by $221 million in 1995 compared with 1994. The increases in the components of operating working capital are primarily due to higher sales volumes and the acquisition of Moorco. The decrease in net other current assets and liabilities ("Other") of $289 million is primarily due to higher short-term debt levels. Dividends No dividends were paid during the first three months of 1996 or in 1995, 1994 and 1993, and no dividends are expected to be paid in the remainder of 1996. DESCRIPTION OF SENIOR DEBENTURES The following description of the particular terms of the Senior Debentures offered hereby (referred to in the accompanying Prospectus as the "Offered Securities") supplements and, to the extent inconsistent therewith, supersedes the description of the general terms and provisions of the Offered Securities set forth in the Prospectus, to which description reference is hereby made. The Senior Debentures constitute a series of Senior Debt Securities described in the accompanying Prospectus under "Description of the Debt Securities." GENERAL The Senior Debentures will be issued under an Indenture, dated as of July , 1996 (the "Senior Indenture"), between the Company and Harris Trust and Savings Bank, as trustee, will be limited to $100 million aggregate principal amount and will mature on July , . Each Senior Debenture will bear interest at the rate set forth on the cover page of this Prospectus Supplement from July , 1996, payable semi-annually on January and July , beginning January , 1997, to persons in whose names the Senior Debentures are registered at the close of business on the next preceding December and June . The Senior Debentures may not be redeemed by the Company or any holder prior to maturity, and do not provide for any sinking fund. BOOK-ENTRY SYSTEM The Senior Debentures will be represented by global securities (the "Global Debentures"). The Global Debentures will be deposited with, or on behalf of, The Depository Trust Company ("DTC") and registered in S-16 the name of a nominee of DTC. Except under circumstances described in the Prospectus, the Senior Debentures will not be issuable in definitive form. A further description of DTC's procedures with respect to the Global Debentures is set forth in the Prospectus under "Description of the Debt Securities--Global Debt Securities." DEFEASANCE AND COVENANT DEFEASANCE The provisions of the Senior Indenture relating to defeasance and covenant defeasance described under the caption "Description of the Debt Securities-- Defeasance and Covenant Defeasance" in the accompanying Prospectus will apply to the Senior Debentures. UNDERWRITING Subject to the terms and conditions contained in an Underwriting Agreement dated the date hereof, the Company has agreed to sell to each of the Underwriters named below, severally, and each of the Underwriters has severally agreed to purchase, the respective principal amount of Senior Debentures set forth below:
PRINCIPAL AMOUNT OF SENIOR NAME DEBENTURES ---- ------------ Morgan Stanley & Co. Incorporated........................... $ Salomon Brothers Inc........................................ ------------ Total................................................... $100,000,000 ============
The Underwriting Agreement provides that the obligation of the several Underwriters to pay for and accept delivery of the Senior Debentures are subject to the approval of certain legal matters by their counsel and to certain other conditions. The Underwriters are committed to take and pay for all of the Senior Debentures if any are taken. The Underwriters initially propose to offer the Senior Debentures directly to the public at the public offering price set forth on the cover page of this Prospectus Supplement and to certain dealers at such price less a concession not in excess of % of the principal amount of the Senior Debentures. The Underwriters may allow, and such dealers may reallow, a concession not in excess of % of the principal amount of the Senior Debentures to certain other dealers. After the initial public offering, the public offering price and such concessions may be changed by the Underwriters. The Company does not intend to apply for listing of the Senior Debentures on a national securities exchange. The Underwriters presently intend to make a market in the Senior Debentures in the secondary trading market. However, the Underwriters are not obligated to make a market in the Senior Debentures and any such market making may be discontinued at any time at the sole discretion of the Underwriters. No assurance can be given as to the liquidity of, or the trading markets for, the Senior Debentures. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. The Underwriters and certain of their affiliates have from time to time performed various investment banking services for the Company and its subsidiaries, for which compensation has been received. S-17 LEGAL MATTERS Certain legal matters with respect to the validity of the Senior Debentures will be passed upon for the Company by Winston & Strawn, Chicago, Illinois. The Chairman of the Executive Committee of Winston & Strawn, Governor James R. Thompson, serves as a member of the Company's Board of Directors and as of June 1, 1996 beneficially owned 1,607 shares of common stock of the Company. Certain legal matters with respect to the Senior Debentures will be passed upon for the Underwriters by Mayer, Brown & Platt, Chicago, Illinois. Mayer, Brown & Platt from time to time acts as counsel in certain matters for the Company. EXPERTS The consolidated financial statements of the Company and its consolidated subsidiaries as of December 31, 1995 and 1994 and for the years ended December 31, 1995, 1994 and 1993 incorporated by reference herein and elsewhere in the Registration Statement have been audited by KPMG as set forth in their report thereon incorporated by reference herein which, as to 1995 and 1994, is based in part on the report of Ernst & Young that also is incorporated by reference herein. The financial statements referred to above are incorporated by reference in reliance upon such reports given upon the authority of such firms as experts in accounting and auditing. To the extent that KPMG audits and reports on consolidated financial statements of the Company and consolidated subsidiaries issued at future dates, and consents to the use of their reports thereon, such consolidated financial statements also will be incorporated by reference in the Registration Statement in reliance upon their reports given upon the authority of such firm as experts in accounting and auditing. To the extent that Ernst & Young audits and reports on financial statements of United Defense, L.P., a limited partnership that is 60% owned by the Company, issued at future dates, and consents to the use of their reports thereon, such reports also will be incorporated by reference in the Registration Statement in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. With respect to the unaudited interim financial information of the Company and its consolidated subsidiaries as of and for the periods ended March 31, 1996 and March 31, 1995, incorporated by reference herein, KPMG has reported that they applied limited procedures in accordance with professional standards for a review of such information. The reports of KPMG for such periods state that such reports are based on the reports of other accountants with respect to interim financial information of United Defense, L.P. With respect to the unaudited interim financial information of United Defense, L.P., as of and for the periods ended March 31, 1996 and March 31, 1995, Ernst & Young has reported that they applied limited procedures in accordance with professional standards for a review of such information. However, the separate reports of KPMG and Ernst & Young included in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, and incorporated by reference herein, state that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. Neither KPMG nor Ernst & Young is subject to the liability provisions of Section 11 of the Securities Act for their reports on the unaudited interim financial information because neither report is a "report" or a "part" of the Registration Statement prepared or certified by the accountants within the meaning of Sections 7 and 11 of the Securities Act. S-18 PROSPECTUS $500,000,000 FMC CORPORATION COMMON STOCK, PREFERRED STOCK, DEPOSITORY SHARES, DEBT SECURITIES, WARRANTS TO PURCHASE COMMON STOCK, WARRANTS TO PURCHASE PREFERRED STOCK AND WARRANTS TO PURCHASE DEBT SECURITIES FMC Corporation, a Delaware corporation (the "Company"), may from time to time offer in one or more series (i) shares of Common Stock, $.10 par value per share ("Common Stock"), (ii) whole or fractional shares of Preferred Stock, no par value (collectively, "Preferred Stock"), (iii) Preferred Stock represented by depository shares ("Depository Shares"), (iv) unsecured debt securities ("Debt Securities"), which may be senior debt securities ("Senior Debt Securities") or subordinated debt securities ("Subordinated Debt Securities"), (v) warrants to purchase Common Stock ("Common Stock Warrants"), (vi) warrants to purchase Preferred Stock ("Preferred Stock Warrants"), and (vii) warrants to purchase Debt Securities ("Debt Warrants"), with an aggregate public offering price of up to $500,000,000, on terms to be determined at the time or times of offering. The Common Stock, Preferred Stock, Depository Shares, Debt Securities, Common Stock Warrants, Preferred Stock Warrants and Debt Warrants (collectively referred to herein as the "Offered Securities") may be offered, separately or together, in separate classes or series, in amounts, at prices and on terms to be set forth in one or more supplements to this Prospectus (each, a "Prospectus Supplement"). All specific terms of the offering and sale of the Offered Securities in respect of which this Prospectus is being delivered will be set forth in the applicable Prospectus Supplement and will include, when applicable: (i) in the case of Common Stock, any public offering price and the aggregate number of shares offered; (ii) in the case of Preferred Stock, the specific class, series, title and stated value, any dividend, liquidation, redemption, conversion, voting and other rights, any dividend payment dates, any sinking fund provisions, the aggregate number of shares offered and any public offering price; (iii) in the case of Depository Shares, the aggregate number of shares offered, the shares of whole or fractional Preferred Stock represented by each such Depository Share and any public offering price; (iv) in the case of Debt Securities, the specific title, aggregate principal amount, ranking as Senior Debt Securities or as Subordinated Debt Securities, currency, form (which may be registered or bearer or certificated or global), authorized denominations, maturity, rate (or manner of calculation thereof) and time of payment of interest, if any, terms for redemption at the option of the Company or repayment at the option of the holder thereof, terms for sinking fund payments, terms for conversion into Common Stock or Preferred Stock and any public offering price; (v) in the case of Common Stock Warrants, the duration, offering price, exercise price and detachability features; (vi) in the case of Preferred Stock Warrants, description of the Preferred Stock for which each warrant will be exercisable and the duration, offering price, exercise price and detachability features; and (vii) in the case of Debt Warrants, description of the Debt Securities for which each warrant will be exercisable and the duration, offering price, exercise price and detachability features. The applicable Prospectus Supplement will also contain information, when applicable, about certain United States federal income tax considerations relating to, and any listing on a securities exchange of, the Offered Securities covered by that Prospectus Supplement. The Offered Securities may be offered directly, through agents designated from time to time by the Company, or to or through underwriters or dealers. If any agents or underwriters are involved in the sale of any of the Offered Securities, their names and any applicable purchase price, fee, commission or discount arrangement between or among them will be set forth in or will be calculable from the information set forth in the applicable Prospectus Supplement. No Offered Securities may be sold without delivery of the applicable Prospectus Supplement describing the method and terms of the offering of those Offered Securities. See "Plan of Distribution" for possible indemnification arrangements with underwriters, dealers and agents. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------- This Prospectus may not be used to consummate sales of the Offered Securities unless accompanied by a Prospectus Supplement. ---------------- November 20, 1995 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR AN APPLICABLE PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS AND ANY APPLICABLE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF. IN CONNECTION WITH THIS OFFERING, UNDERWRITERS, IF ANY, MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OFFERED SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, reports, proxy statements and other information concerning the Company may be inspected and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, the Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605, and the Pacific Stock Exchange, Inc., 301 Pine Street, San Francisco, California 94104 or 618 South Spring Street, Los Angeles, California 90014. The Company has filed with the Commission on September 7, 1995 a Registration Statement on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"), which relates to the Offered Securities (the "Registration Statement"). This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto as permitted by the rules and regulations of the Commission. For information with respect to the Company and the Offered Securities, reference is hereby made to such Registration Statement, exhibits and schedules. The Registration Statement may be inspected without charge by anyone at the office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part thereof may be obtained from the Commission upon payment of the prescribed fees. Statements contained in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and in each instance reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in all respects by such reference. 2 DOCUMENTS INCORPORATED BY REFERENCE The following documents filed with the Commission (File No. 1-2376) are incorporated herein by reference: (i) the Company's Annual Report on Form 10-K for the year ended December 31, 1994; (ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995; and (iii) the Company's Current Reports on Form 8-K dated February 6, 1995, April 4, 1995, September 1, 1995 and September 12, 1995. A description of the Common Stock is incorporated by reference to Item 1 of the Company's Registration Statement on Form 8-A dated May 12, 1986. A description of the Company's Preferred Stock Purchase Rights is incorporated by reference to Item 1 of the Company's Registration Statement on Form 8-A dated March 6, 1986, as amended. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Offered Securities shall be deemed to be incorporated in this Prospectus by reference and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein (or in the applicable Prospectus Supplement) or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide, without charge to any person to whom a copy of this Prospectus is delivered, upon the written or oral request of such person, a copy of any document incorporated by reference herein other than exhibits to such documents unless such exhibits are specifically incorporated by reference in such document. Requests should be directed to Robert L. Day, Secretary, FMC Corporation, 200 East Randolph Drive, Chicago, Illinois 60601 (telephone: (312) 861-6000). 3 THE COMPANY The Company is one of the world's leading producers of chemicals and machinery for industry, agriculture and government. The Company, incorporated in 1928, operates on a worldwide basis in selected segments of five broad markets: Performance Chemicals, Industrial Chemicals, Machinery and Equipment, Defense Systems and Precious Metals. The Company operates 102 manufacturing facilities and mines in 25 states and 21 countries. Performance Chemicals develops, manufactures and markets proprietary specialty chemicals for the agricultural, food and pharmaceutical industries. Industrial Chemicals businesses manufacture a wide variety of chemicals including soda ash, phosphates, hydrogen peroxide and lithium. Major customers include detergent, glass and paper producers, as well as food processors and other chemical companies. Machinery and Equipment businesses provide specialized machinery to the food, petroleum, transportation and material handling industries. Defense Systems develops, manufactures and supplies ground combat vehicles and naval weapons systems to the armed forces of the United States and other governments. In the first quarter of 1994 the Company and Harsco Corporation ("Harsco") announced the establishment of a joint venture, United Defense, L.P., which was a combination of certain assets and liabilities of the Company's Defense Systems Group and Harsco's BMY Combat Systems Division and pursuant to which the Company is the Managing General Partner with a 60% equity interest. The Precious Metals business focuses on the exploration of precious metals in Latin America and the western United States and is conducted by FMC Gold Company. The Company owns 80% of FMC Gold Company's outstanding Common Stock. The Company is a corporation organized under the laws of the State of Delaware. As used hereunder, "FMC" or the "Company" refers to FMC Corporation and its subsidiaries, unless otherwise indicated by the context. The Company's principal executive offices are located at 200 East Randolph Drive, Chicago, Illinois 60601 (telephone number: (312) 861-6000). 4 USE OF PROCEEDS Unless otherwise described in the applicable Prospectus Supplement, the Company intends to use the net proceeds from the sale of the Offered Securities for general corporate purposes, which may include the repayment of existing indebtedness and the financing of capital expenditures and acquisitions. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges of the Company for the periods indicated:
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ------------------------- -------------------------------------------------- 1995 1994 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- ---- 3.7(/1/)x 4.9x 4.4x 1.5(/2/)x 3.4x 2.8x 2.3x
- -------- (/1/The)ratio of earnings to fixed charges for the nine months ended September 30, 1995 before the gain on sale of FMC Wyoming stock, restructuring and other charges and write-off of acquired in-process research and development was 4.2x. (/2/)The ratio of earnings to fixed charges for the year ended December 31, 1993 before restructuring and other charges was 3.3x. For purposes of calculating this ratio, earnings consist of income from continuing operations before income taxes and extraordinary items, plus minority interests, less undistributed earnings (and plus losses) of affiliates, plus interest expense and amortization of debt discount, fees and expenses, plus amortization of capitalized interest, plus one-third of rentals. Fixed charges consist of interest expense and amortization of debt discount, fees and expenses, interest capitalized as part of fixed assets and interest included in rental expense. GENERAL DESCRIPTION OF THE OFFERED SECURITIES The Company may offer under this Prospectus Common Stock, Preferred Stock, Depository Shares, Debt Securities, Common Stock Warrants, Preferred Stock Warrants, or Debt Warrants or any combination of the foregoing, either individually or as units consisting of two or more Offered Securities. The aggregate offering price of Offered Securities offered by the Company under this Prospectus will not exceed $500,000,000. If Offered Securities are offered as units, the terms of the units will be set forth in a Prospectus Supplement. DESCRIPTION OF THE COMMON STOCK GENERAL Under the Company's Restated Certificate of Incorporation (the "Certificate of Incorporation"), the Company is authorized to issue up to 60,000,000 shares of Common Stock. As of September 30, 1995, there were 36,696,286 shares of Common Stock issued and outstanding. In addition, up to 3,087,992 shares have been reserved as of September 30, 1995 for issuance upon the exercise of options and awards under the Company's incentive compensation plans. The shares of Common Stock are listed on the New York Stock Exchange under the symbol "FMC". Harris Trust and Savings Bank, Chicago, Illinois, is the transfer agent and registrar of the shares of Common Stock. The Common Stock is not redeemable, does not have any conversion rights and is not subject to call. Holders of shares of Common Stock have no preemptive rights to maintain their percentage of ownership in future offerings or sales of stock of the Company. Holders of shares of Common Stock have one vote per share in all elections of directors and on all other matters submitted to a vote of stockholders of the Company. The holders of Common Stock are entitled to receive dividends, if any, as and when declared from time to time by 5 the Board of Directors of the Company out of funds legally available therefor. Upon liquidation, dissolution or winding up of the affairs of the Company, the holders of Common Stock will be entitled to participate equally and ratably, in proportion to the number of shares held, in the net assets of the Company available for distribution to holders of Common Stock. The shares of Common Stock currently outstanding are fully paid and nonassessable. The shares of Common Stock offered hereby, upon issuance against full payment of the purchase price therefor, will be fully paid and nonassessable. CERTAIN CERTIFICATE OF INCORPORATION PROVISIONS General Effect The Company has adopted a number of provisions in its Certificate of Incorporation that might discourage certain types of transactions that involve an actual or threatened change of control of the Company. The provisions may make it more difficult and time-consuming to change majority control of the Board of Directors and thus reduce the vulnerability of the Company to an unsolicited offer, particularly an offer that does not contemplate the acquisition of all of the Company's outstanding shares. These provisions are intended to encourage persons seeking to acquire control of the Company to initiate such an acquisition through arm's-length negotiations with the Company's management and Board of Directors. Additionally, such provisions provide management with the time and information necessary to evaluate a takeover proposal and to study alternative proposals. Nonetheless, the provisions could have the effect of discouraging a third party from making a tender offer or otherwise attempting to obtain control of the Company, even though such an attempt might be beneficial to the Company and its stockholders. Business Combination The Certificate of Incorporation provides that significant asset sales, dispositions of stock, liquidations, mergers and certain other business combinations ("Business Combinations") involving the Company and persons beneficially owning 10% or more of the voting power of the outstanding shares of Common Stock (an "Interested Stockholder") must be approved by the holders of at least 80% of the voting power of the Company's outstanding voting stock ("Voting Stock"). The Certificate of Incorporation requires the affirmative vote of the holders of 80% or more of the outstanding Voting Stock to amend, alter or repeal, or to adopt any provisions inconsistent with, such provisions. Stockholders' Meetings The Certificate of Incorporation provides that special meetings of the stockholders may only be called pursuant to a resolution approved by a majority of the Board of Directors. This limitation prevents a stockholder or group of stockholders from forcing the Company to conduct a stockholders' meeting at any time not sanctioned by the Board of Directors, regardless of the number of shares of Common Stock held by such stockholder or group of stockholders. No Action by Stockholder Consent The Company's Certificate of Incorporation prohibits action that is required or permitted to be taken at any annual or special meeting of stockholders of the Company from being taken by the written consent of stockholders without a meeting. This provision may be altered, amended or repealed only if the holders of 80% or more of Voting Stock vote in favor of such action. PREFERRED STOCK PURCHASE RIGHTS The Company has adopted a preferred stock purchase rights plan and has distributed preferred stock purchase rights (the "Rights") to holders of the Company's Common Stock. The preferred stock purchase rights 6 plan enables the holder of such Rights to purchase, under certain circumstances, one one-hundredth (1/100) of a share of Junior Participating Preferred Stock, Series A, without par value (the "Series A Preferred Stock"), of the Company at a price of $75 per one one-hundredth (1/100) of a share, subject to certain adjustments. The Rights are intended to deter attempts to acquire the Company on terms not approved by the Company's Board of Directors. DESCRIPTION OF THE PREFERRED STOCK Under the Certificate of Incorporation, the Board of Directors of the Company may direct the issuance of up to 5,000,000 shares of Preferred Stock in one or more series and with rights, preferences, privileges and restrictions, including dividend rights, voting rights, conversion rights, terms of redemption and liquidation preferences, that may be fixed or designated by the Board of Directors pursuant to a certificate of designation without any further vote or action by the Company's stockholders. As of June 30, 1995 the Board of Directors had designated 400,000 shares of the Preferred Stock as Series A Preferred Stock for possible issuance in connection with the Rights. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change in control of the Company. Preferred Stock, upon issuance against full payment of the purchase price therefor, will be fully paid and nonassessable. The specific terms of a particular series of Preferred Stock will be described in the Prospectus Supplement relating to that series. The description of Preferred Stock set forth below and the description of the terms of a particular series of Preferred Stock set forth in the related Prospectus Supplement do not purport to be complete and are qualified in their entirety by reference to the certificate of designation relating to that series. The related Prospectus Supplement will contain a description of certain United States federal income tax consequences relating to the purchase and ownership of the series of Preferred Stock described in such Prospectus Supplement. As of June 30, 1995 no shares of Preferred Stock were issued or outstanding. The rights, preferences, privileges and restrictions of the Preferred Stock of each series will be fixed by the certificate of designation relating to such series. A Prospectus Supplement, relating to each series, will specify the terms of the Preferred Stock as follows: (a) The maximum number of shares to constitute the series and the distinctive designation thereof; (b) The annual dividend rate, if any, on shares of the series, whether such rate is fixed or variable or both, the date or dates from which dividends will begin to accrue or accumulate and whether dividends will be cumulative; (c) The price at and the terms and conditions on which the shares of the series may be redeemed, including the time during which shares of the series may be redeemed and any accumulated dividends thereon that the holders of shares of the series shall be entitled to receive upon the redemption thereof; (d) The liquidation preference, if any, and any accumulated dividends thereon, that the holders of shares of the series shall be entitled to receive upon the liquidation, dissolution or winding up of the affairs of the Company; (e) Whether or not the shares of the series will be subject to operation of a retirement or sinking fund, and, if so, the extent and manner in which any such fund shall be applied to the purchase or redemption of the shares of the series for retirement or for other corporate purposes, and the terms and provisions relating to the operation of such fund; (f) The terms and conditions, if any, on which the shares of the series shall be convertible into, or exchangeable for, shares of any other class or classes of capital stock of the Company or a third party or of any other series of the same class, including the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same and whether such conversion is mandatory or optional; (g) The stated value of the shares of such series; (h) The voting rights, if any, of the shares of the series; and 7 (i) Any or all other preferences and relative, participating, optional or other special rights or qualifications, limitations or restrictions thereof. In the event of any voluntary liquidation, dissolution or winding up of the affairs of the Company, the holders of any series of any class of Preferred Stock shall be entitled to receive in full out of the assets of the Company, including its capital, before any amount shall be paid or distributed among the holders of the Common Stock or any other shares ranking junior to such series, the amounts fixed by the Board of Directors with respect to such series and set forth in the applicable Prospectus Supplement plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up the affairs of the Company. After payment to the holders of the Preferred Stock of the full preferential amounts to which they are entitled, the holders of Preferred Stock, as such, shall have no right or claim to any of the remaining assets of the Company. If liquidating distributions shall have been made in full to all holders of Preferred Stock, the remaining assets of the Company shall be distributed among the holders of any other classes or series of capital stock ranking junior to the Preferred Stock upon liquidation, dissolution or winding up, according to their respective rights and preferences and in each case according to their respective numbers of shares. The merger or consolidation of the Company into or with any other corporation, or the sale, lease or conveyance of all or substantially all of the assets of the Company, shall not constitute a dissolution, liquidation or winding up of the Company. DESCRIPTION OF DEPOSITORY SHARES GENERAL The Company may offer receipts ("Depository Receipts") for Depository Shares, each of which will represent a fractional interest in a share of a particular series of a class of Preferred Stock, as specified in the applicable Prospectus Supplement. Preferred Stock of each series of each class represented by Depository Shares will be deposited under a separate Deposit Agreement (each, a "Deposit Agreement") among the Company, the depository named therein (such depository or its successor, the "Preferred Stock Depository") and the holders from time to time of the Depository Receipts. Subject to the terms of the Deposit Agreement, each owner of a Depository Receipt will be entitled, in proportion to the fractional interest of a share of the particular series of a class of Preferred Stock represented by the Depository Shares evidenced by such Depository Receipt, to all the rights and preferences of the Preferred Stock represented by such Depository Shares (including dividend, voting, conversion, redemption and liquidation rights). The Depository Shares will be evidenced by Depository Receipts issued pursuant to the applicable Deposit Agreement. Immediately following the issuance and delivery of the Preferred Stock by the Company to the Preferred Stock Depository, the Company will cause the Preferred Stock Depository to issue, on behalf of the Company, the Depository Receipts. Copies of the applicable form of Deposit Agreement and Depository Receipt may be obtained from the Company upon request. DIVIDENDS AND OTHER DISTRIBUTIONS The Preferred Stock Depository will distribute all cash dividends or other cash distributions received in respect of the Preferred Stock to the record holders of the Depository Receipts evidencing the related Depository Shares in proportion to the number of such Depository Receipts owned by such holder, subject to certain obligations of holders to file proofs, certificates and other information and to pay certain charges and expenses to the Preferred Stock Depository. In the event of a distribution other than in cash, the Preferred Stock Depository will distribute property received by it to the record holders of Depository Receipts entitled thereto, subject to certain obligations of holders to file proofs, certificates and other information and to pay certain charges and expenses to the Preferred 8 Stock Depository, unless the Preferred Stock Depository determines that it is not feasible to make such distribution, in which case the Preferred Stock Depository may, with the approval of the Company, sell such property and distribute the net proceeds from such sale to such holders. WITHDRAWAL OF SHARES Upon surrender of the Depository Receipts at the corporate trust office of the Preferred Stock Depository (unless the related Depository Shares have previously been called for redemption), the holders thereof will be entitled to delivery at such office, to or upon such holder's order, of the number of whole shares of Preferred Stock and any money or other property represented by the Depository Shares evidenced by such Depository Receipts. Holders of Depository Receipts will be entitled to receive whole shares of the related Preferred Stock on the basis of the proportion of Preferred Stock represented by each Depository Share as specified in the applicable Prospectus Supplement, but holders of such Preferred Stock will not thereafter be entitled to receive Depository Shares therefor. If the Depository Receipts delivered by the holder evidence a number of Depository Shares in excess of the number of Depository Shares representing the number of shares of Preferred Stock to be withdrawn, the Preferred Stock Depository will deliver to such holder at the same time a new Depository Receipt evidencing such excess number of Depository Shares. REDEMPTION OF DEPOSITORY SHARES Whenever the Company redeems Preferred Stock held by the Preferred Stock Depository, the Preferred Stock Depository will redeem as of the same redemption date the number of Depository Shares representing the Preferred Stock so redeemed, provided the Company shall have paid in full to the Preferred Stock Depository the redemption price of the Preferred Stock to be redeemed plus an amount equal to any accrued and unpaid dividends (except, with respect to noncumulative shares of Preferred Stock, dividends for the current dividend period only) thereon to the date fixed for redemption. The redemption price per Depository Share will be equal to the redemption price and any other amounts per share payable with respect to the Preferred Stock. If less than all the Depository Shares are to be redeemed, the Depository Shares to be redeemed will be selected by the Preferred Stock Depository by lot. After the date fixed for redemption, the Depository Shares so called for redemption will no longer be deemed to be outstanding and all rights of the holders of the Depository Receipts evidencing the Depository Shares so called for redemption will cease, except the right to receive any moneys payable upon such redemption and any money or other property to which the holders of such Depository Receipts were entitled upon such redemption upon surrender thereof to the Preferred Stock Depository. VOTING OF THE UNDERLYING PREFERRED STOCK Upon receipt of notice of any meeting at which the holders of the Preferred Stock are entitled to vote, the Preferred Stock Depository will mail the information contained in such notice of meeting to the record holders of the Depository Receipts evidencing the Depository Shares which represent such Preferred Stock. Each record holder of Depository Receipts evidencing Depository Shares on the record date (which will be the same date as the record date for the Preferred Stock) will be entitled to instruct the Preferred Stock Depository as to the exercise of the voting rights pertaining to the amount of Preferred Stock represented by such holder's Depository Shares. The Preferred Stock Depository will vote the amount of Preferred Stock represented by such Depository Shares in accordance with such instructions, and the Company will agree to take all reasonable action which may be deemed necessary by the Preferred Stock Depository in order to enable the Preferred Stock Depository to do so. The Preferred Stock Depository will abstain from voting the amount of Preferred Stock represented by such Depository Shares to the extent it does not receive specific instructions from the holders of Depository Receipts evidencing such Depository Shares. 9 LIQUIDATION PREFERENCE In the event of liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, each holder of a Depository Receipt will be entitled to the fraction of the liquidation preference accorded each share of Preferred Stock represented by the Depository Share evidenced by such Depository Receipt, as set forth in the applicable Prospectus Supplement. CONVERSION OF PREFERRED STOCK The Depository Shares, as such, are not convertible into Common Stock or any securities or property of the Company. Nevertheless, if so specified in the applicable Prospectus Supplement relating to an offering of Depository Shares, the Depository Receipts may be surrendered by holders thereof to the Preferred Stock Depository with written instructions to the Preferred Stock Depository to instruct the Company to cause conversion of the Preferred Stock represented by the Depository Shares evidenced by such Depository Receipts into whole shares of Common Stock, other Preferred Stock of the Company or other shares of capital stock, and the Company has agreed that upon receipt of such instructions and any amounts payable in respect thereof, it will cause the conversion thereof utilizing the same procedures as those provided for delivery of Preferred Stock to effect such conversion. If the Depository Shares evidenced by a Depository Receipt are to be converted in part only, one or more new Depository Receipts will be issued for any Depository Shares not to be converted. No fractional shares of Common Stock will be issued upon conversion, and if such conversion will result in a fractional share being issued, an amount will be paid in cash by the Company equal to the value of the fractional interest based upon the closing price of the Common Stock on the last business day prior to the conversion. AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT The form of Depository Receipt evidencing the Depository Shares which represent the Preferred Stock and any provision of the Deposit Agreement may at any time be amended by agreement between the Company and the Preferred Stock Depository. However, any amendment that materially and adversely alters the rights of the holders of Depository Receipts will not be effective unless such amendment has been approved by the existing holders of at least a majority of the Depository Shares evidenced by the Depository Receipts then outstanding. The Deposit Agreement may be terminated by the Company upon not less than 30 days' prior written notice to the Preferred Stock Depository if a majority of each class of Depository Shares affected by such termination consents to such termination, whereupon the Preferred Stock Depository shall deliver or make available to each holder of Depository Receipts, upon surrender of the Depository Receipts held by such holder, such number of whole or fractional shares of Preferred Stock as are represented by the Depository Shares evidenced by such Depository Receipts. In addition, the Deposit Agreement will automatically terminate if (i) all outstanding Depository Shares shall have been redeemed, (ii) there shall have been a final distribution in respect of the related Preferred Stock in connection with any liquidation, dissolution or winding up of the Company and such distribution shall have been distributed to the holders of Depository Receipts evidencing the Depository Shares representing such Preferred Stock or (iii) each related share of Preferred Stock shall have been converted into capital stock of the Company not so represented by Depository Shares. CHARGES OF PREFERRED STOCK DEPOSITORY The Company will pay all transfer and other taxes and governmental charges arising solely from the existence of the Deposit Agreement. In addition, the Company will pay the fees and expenses of the Preferred Stock Depository in connection with the performance of its duties under the Deposit Agreement. However, holders of the Depository Receipts will pay the fees and expenses of the Preferred Stock Depository for any duties requested by such holders to be performed which are outside of those expressly provided for in the Deposit Agreement. 10 RESIGNATION AND REMOVAL OF PREFERRED STOCK DEPOSITORY The Preferred Stock Depository may resign at any time by delivering to the Company notice of its election to do so, and the Company may at any time remove the Preferred Stock Depository, any such resignation or removal to take effect upon the appointment of a successor Preferred Stock Depository. A successor Preferred Stock Depository must be appointed within 60 days after delivery of the notice of resignation or removal and must be a bank or trust company having its principal office in the United States and having a combined capital and surplus of at least $50,000,000. MISCELLANEOUS The Preferred Stock Depository will forward to holders of Depository Receipts any reports and communications from the Company that are received by the Preferred Stock Depository with respect to the related Preferred Stock. Neither the Preferred Stock Depository nor the Company will be liable if it is prevented from or delayed in, by law or any circumstances beyond its control, performing its obligations under the Deposit Agreement. The obligations of the Company and the Preferred Stock Depository under the Deposit Agreement will be limited to performing their duties thereunder in good faith and without gross negligence or willful misconduct, and the Company and the Preferred Stock Depository will not be obligated to prosecute or defend any legal proceeding in respect of any Depository Receipts, Depository Shares or Preferred Stock represented thereby unless satisfactory indemnity is furnished. The Company and the Preferred Stock Depository may rely on written advice of counsel or accountants, or information provided by persons presenting Preferred Stock represented thereby for deposit, holders of Depository Receipts or other persons believed to be competent to give such information, and on documents believed to be genuine and signed by a proper party. If the Preferred Stock Depository shall receive conflicting claims, requests or instructions from any holders of Depository Receipts, on the one hand, and the Company, on the other hand, the Preferred Stock Depository shall be entitled to act on such claims, requests or instructions received from the Company. DESCRIPTION OF THE DEBT SECURITIES The Senior Debt Securities will be issued under an Indenture, as amended or supplemented from time to time (the "Senior Indenture"), between the Company and Harris Trust and Savings Bank, as trustee (the "Trustee"). The Subordinated Debt Securities will be issued under an Indenture, as amended or supplemented from time to time (the "Subordinated Indenture"), between the Company and the Trustee. The Senior Indenture and the Subordinated Indenture are sometimes referred to herein collectively as the "Indentures" and each individually as an "Indenture". The forms of the Indentures have been filed as exhibits to the Registration Statement of which this Prospectus is a part and are available for inspection at the corporate trust office of the Trustee at 111 West Monroe Street, Chicago, Illinois 60603. The Indentures are subject to, and are governed by, the Trust Indenture Act of 1939, as amended. The statements made hereunder relating to the Indentures and the Debt Securities to be issued hereunder are summaries of certain provisions thereof and do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all provisions of the Indentures and such Debt Securities. All section references appearing in this section "Description of the Debt Securities" are to sections of the applicable Indenture, and capitalized terms used but not defined herein shall have the respective meanings set forth in the applicable Indenture. GENERAL The Indentures do not limit the amount of Debt Securities that can be issued thereunder and provide that Debt Securities of any series may be issued thereunder up to the aggregate principal amount which may be 11 authorized from time to time by the Company. The Indentures do not limit the amount of other indebtedness or securities, other than certain secured indebtedness as described below which is limited by the Senior Indenture, that may be issued by the Company or its subsidiaries. The Debt Securities will be direct, unsecured obligations of the Company and will constitute Senior Debt Securities and/or Subordinated Debt Securities. Creditors of the Company's subsidiaries are entitled to a claim on the assets of such subsidiaries. Consequently, in the event of a liquidation or reorganization of any subsidiary, creditors of the subsidiary are likely to be paid in full before any distribution is made to the Company and holders of Debt Securities, except to the extent that the Company is itself recognized as a creditor of such subsidiary, in which case the claims of the Company would still be subordinate to any security interests in the assets of such subsidiary and any indebtedness of such subsidiary senior to that held by the Company. Reference is made to the Prospectus Supplement for the following and other possible terms of each series of the Debt Securities in respect of which this Prospectus is being delivered: (i) the title of the Debt Securities; (ii) any limit upon the aggregate principal amount of the Debt Securities; (iii) if other than 100% of the principal amount, the percentage of their principal amount at which the Debt Securities will be offered; (iv) the date or dates on which the principal of the Debt Securities will be payable (or method of determination thereof); (v) the rate or rates (or method of determination thereof) at which the Debt Securities will bear interest, if any, the date or dates from which any such interest will accrue and on which such interest will be payable, and the record dates for the determination of the holders to whom interest is payable; (vi) if other than as set forth herein, the place or places where the principal of and interest, if any, on the Debt Securities will be payable; (vii) the price or prices at which, the period or periods within which and the terms and conditions upon which Debt Securities may be redeemed, in whole or in part, at the option of the Company; (viii) if other than the principal amount thereof, the portion of the principal amount of the Debt Securities payable upon declaration of acceleration of the maturity thereof; (ix) the obligation, if any, of the Company to redeem, repurchase or repay Debt Securities, whether pursuant to any sinking fund or analogous provisions or pursuant to other provisions set forth therein or at the option of a Holder thereof; (x) whether the Debt Securities will be represented in whole or in part by one or more global notes registered in the names of a depository or its nominee; (xi) any conversion or exchange provisions and whether such conversion or exchange is optional or mandatory; (xii) the ranking of such Debt Securities as Senior Debt Securities or Subordinated Debt Securities; and (xiii) any other terms or conditions not inconsistent with the provisions of the Indenture under which the Debt Securities will be issued. (Section 2.3) "Principal" when used herein includes, when appropriate, the premium, if any, on the Debt Securities. Unless otherwise provided in the Prospectus Supplement relating to any Debt Securities, principal and interest, if any, will be payable, and the Debt Securities will be transferable, at the office or offices or agency maintained by the Company for such purposes, provided that payment of interest on the Debt Securities will be paid at such place of payment by check mailed to the persons entitled thereto at the addresses of such persons appearing on the Security register. Interest on the Debt Securities will be payable on any interest payment date to the persons in whose name the Debt Securities are registered at the close of business on the record date with respect to such interest payment date. The Debt Securities may be issued only in fully registered form in minimum denominations of $1,000 and any integral multiple thereof. Additionally, the Debt Securities may be represented in whole or in part by one or more global notes registered in the name of a depository or its nominee and, if so represented, interests in such global note will be shown on, and transfers thereof will be effected only through, records maintained by the designated depository and its participants. The Debt Securities may be exchanged for an equal aggregate principal amount of Debt Securities of the same series and date of maturity in such authorized denominations as may be requested upon surrender of the Debt Securities at an agency of the Company maintained for such purpose and upon fulfillment of all other requirements of such agent. No service charge will be made for any transfer or exchange of the Debt Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (Section 2.8) 12 The Indentures require the annual filing by the Company with the Trustee of a certificate as to compliance with certain covenants contained in the Indentures. (Section 3.4) The Company will comply with Section 14(e) under the Exchange Act, to the extent applicable, and any other tender offer rules under the Exchange Act which may then be applicable, in connection with any obligation of the Company to purchase Debt Securities at the option of the holders thereof. Any such obligation applicable to a series of Debt Securities will be described in the Prospectus Supplement relating thereto. Unless otherwise described in a Prospectus Supplement relating to any Debt Securities, there are no covenants or provisions contained in the Indentures which may afford the holders of Debt Securities protection in the event of a highly leveraged transaction involving the Company. CONVERSION AND EXCHANGE The terms, if any, on which Debt Securities of any series are convertible into or exchangeable for Common Stock or Preferred Stock, property or cash, or a combination of any of the foregoing, will be set forth in the Prospectus Supplement relating thereto. Such terms may include provisions for conversion or exchange, either mandatory, at the option of the holder, or at the option of the Company, in which the number of shares of Common Stock or Preferred Stock to be received by the holders of the Debt Securities would be calculated according to the factors and at such time as set forth in the related Prospectus Supplement. COVENANTS APPLICABLE TO SENIOR DEBT SECURITIES Limitations on Liens The Senior Indenture provides that, so long as any of the Senior Debt Securities of a series remain outstanding, the Company will not, nor will it permit any Restricted Subsidiary (as hereinafter defined) to, secure indebtedness for money borrowed ("Secured Debt") by placing a Lien (as hereinafter defined) on any Principal Property (as hereinafter defined) now or hereafter owned by the Company or any Restricted Subsidiary or on any shares of stock or securing indebtedness for money borrowed of any Restricted Subsidiary without equally and ratably securing the Debt Securities of such series, unless (i) the aggregate principal amount of such Secured Debt then outstanding plus (ii) all Attributable Debt (as hereinafter defined) of the Company and its Restricted Subsidiaries in respect of sale and leaseback transactions described below covering Principal Properties (other than sale and leaseback transactions under (b) of the following paragraph) does not exceed an amount equal to 10% of Consolidated Net Tangible Assets (as hereinafter defined). This restriction will not apply to, and there shall be excluded in computing such Secured Debt for purposes of this restriction, certain permitted Liens, including (a) with respect to each series of Senior Debt Securities, Liens existing as of the date of the issuance of Senior Debt Securities of such series; (b) Liens on property or assets of, or any shares of stock or securing indebtedness for money borrowed of, any corporation existing at the time such corporation becomes a Restricted Subsidiary; (c) Liens on property or assets or shares of stock or securing indebtedness for money borrowed existing at the time of acquisition (including acquisition through merger or consolidation) and certain Liens to secure indebtedness incurred prior to, at the time of or within 120 days after the later of the acquisition of, or the completion of the construction of and commencement of operation of, any such property, for the purpose of financing all or any part of the purchase price or construction cost thereof; (d) Liens to secure certain development, operation, construction, alteration, repair or improvement costs; (e) Liens in favor of, or which secure indebtedness owing to, the Company or a Restricted Subsidiary; (f) Liens in connection with government contracts, including the assignment of moneys due or to come due thereon; (g) certain Liens in connection with legal proceedings to the extent such proceedings are being contested in good faith; (h) certain Liens arising in the ordinary course of business and not in connection with the borrowing of money such as mechanics', materialmens', carriers' or other similar Liens; (i) Liens on property securing obligations issued by a domestic governmental issuer to finance the cost of acquisition or construction of such property; and (j) extensions, substitutions, replacements or renewals of the foregoing. (Section 3.5) 13 Limitations on Sale and Leaseback Transactions The Senior Indenture provides that, so long as any of the Senior Debt Securities of a series remain outstanding, the Company will not, nor will it permit any Restricted Subsidiary to, enter into any sale and leaseback transaction (except a lease for a period not exceeding three years) covering any Principal Property which was or is owned by the Company or a Restricted Subsidiary and which has been or is to be sold or transferred more than 120 days after such property has been owned by the Company or such Restricted Subsidiary and completion of construction and commencement of full operation thereof, unless (a) the Attributable Debt in respect thereto and all other sale and leaseback transactions entered into after the date of the first issuance of Senior Debt Securities of such series (other than those the proceeds of which are applied to reduce indebtedness or acquire additional property under (b) following), plus the aggregate principal amount of then outstanding Secured Debt not otherwise permitted or excepted without equally and ratably securing the Senior Debt Securities does not exceed 10% of Consolidated Net Tangible Assets; or (b) an amount equal to the value of the Principal Property sold and leased back is applied within 120 days after the sale or transfer to (x) the voluntary retirement of Funded Debt (as hereinafter defined), including Senior Debt Securities, or (y) the acquisition of properties, facilities or equipment used for general operating purposes for the Company or any Restricted Subsidiary. (Section 3.6) Certain Definitions The term "Subsidiary" is defined to mean (i) a corporation, a majority of whose capital stock with voting power, under ordinary circumstances, to elect directors is, at the date of determination, directly or indirectly owned by the Company, by one or more Subsidiaries of the Company or by the Company and one or more Subsidiaries of the Company, (ii) a partnership in which the Company or a Subsidiary of the Company holds a majority interest in the equity capital or profits of such partnership, or (iii) any other person (other than a corporation) in which the Company, a Subsidiary of the Company or the Company and one or more Subsidiaries of the Company, directly or indirectly, at the date of determination, has (x) at least a majority ownership interest or (y) the power to elect or direct the election of a majority of the directors or other governing body of such person. The term "Restricted Subsidiary" is defined to mean any Subsidiary (other than FMC Gold Company) (i) substantially all the property of which is located within the continental United States of America or Canada and (ii) which owns or leases a Principal Property. The term "Principal Property" is defined to mean any manufacturing or processing plant or facility (other than any pollution control facility) or any mineral producing property which is located within the continental United States of America and is owned by the Company or any Subsidiary, whether owned at or acquired after the date of the applicable Indenture, the gross book value on the books of the Company or such Subsidiary (without deduction of any depreciation reserve) of which on the date as of which the determination is being made exceeds 1% of Consolidated Net Tangible Assets, other than any such property, plant or facility, or any portion thereof, which in the opinion of the Board of Directors is not of material importance to the total business conducted by the Company and its Restricted Subsidiaries as an entirety or which is financed with certain tax exempt securities. The term "Attributable Debt", in respect of the sale and leaseback transactions described above, is defined to mean the amount determined by multiplying the greater, at the time such transaction is entered into, of (i) the fair value of the property, plant or facility subject to such arrangement (as determined by the Company); or (ii) the net proceeds of the sale of such property, plant or facility to the lender or investor, by a fraction of which the numerator shall be the unexpired initial term of the lease of such real property as of the date of determination of such computation and of which the denominator shall be the full initial term of such lease. Sale and leasebacks with respect to facilities financed with certain tax exempt securities are excepted from the definition. 14 The term "Consolidated Net Tangible Assets" is defined to mean the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any thereof constituting Funded Debt by reason of being extendible or renewable); and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the books and records of the Company and its consolidated subsidiaries and computed in accordance with generally accepted accounting principles. The term "Funded Debt" is defined to mean all indebtedness whether or not evidenced by a bond, debenture, note or similar instrument or agreement, for the repayment of money borrowed, having a maturity of more than 12 months from the date of its creation or having a maturity of less than 12 months from the date of its creation but by its terms being renewable or extendible beyond 12 months from such date at the option of the borrower. For the purpose of determining "Funded Debt" of any corporation, there shall be excluded any particular indebtedness if, on or prior to the maturity thereof, there shall have been deposited with the proper depository in trust the necessary funds for the payment, redemption or satisfaction of such indebtedness. (Section 1.1) The term "Lien" is defined to mean any pledge, mortgage or other lien (including lease purchase, installment purchase and other title retention financing arrangements) on or in respect of any Principal Property owned by the Company or any Restricted Subsidiary, or on any shares of stock or indebtedness for money borrowed of any Restricted Subsidiary. (Section 3.5) EVENTS OF DEFAULT An Event of Default with respect to the Debt Securities of any series is defined in the Indentures as: (i) default in the payment of any installment of interest upon any of the Debt Securities of such series as and when the same shall become due and payable, and continuance of such default for a period of 30 days; (ii) default in the payment of all or any part of the principal of any of the Debt Securities of such series as and when the same shall become due and payable either at maturity, upon any redemption, by declaration or otherwise; (iii) default in the performance, or breach, of any other covenant or warranty of the Company contained in the Debt Securities of such series or set forth in the applicable Indenture (other than a covenant or warranty included in the applicable Indenture solely for the benefit of a series of Debt Securities other than such series) and continuance of such default or breach for a period of 90 days after due notice by the Trustee or by the holders of at least 25% in principal amount of the outstanding securities of that series; or (iv) certain events of bankruptcy, insolvency or reorganization of the Company. (Section 5.1) Additional Events of Default may be added for the benefit of holders of certain series of Debt Securities which, if added, will be described in the Prospectus Supplement relating to such Debt Securities. The Indentures provide that the Trustee shall notify the holders of Debt Securities of each series of any continuing default known to the Trustee which has occurred with respect to that series within 90 days after the occurrence thereof. The Indentures provide that notwithstanding the foregoing, except in the case of default in the payment of the principal of, or interest, if any, on any of the Debt Securities of such series, the Trustee may withhold such notice if the Trustee in good faith determines that the withholding of such notice is in the interests of the holders of Debt Securities of such series. (Section 6.5) The Indentures provide that if an Event of Default with respect to any series of Debt Securities shall have occurred and be continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of Debt Securities of that series then outstanding may declare the principal amount of all Debt Securities of that series to be due and payable immediately, but upon certain conditions such declaration may be annulled. (Section 5.1) Any past defaults and the consequences thereof (except a default in the payment of principal of or interest, if any, on Debt Securities of that series) may be waived by the holders of a majority in principal amount of the Debt Securities of that series then outstanding. (Section 5.9) The Senior Indenture also permits the Company to omit compliance with certain covenants in such Indentures with respect to Senior Debt Securities of any series upon waiver by the holders of a majority in principal amount of the Senior Debt Securities of such series then outstanding. (Section 3.7) 15 Subject to the provisions of the Indentures relating to the duties of the Trustee, in case an Event of Default with respect to any series of Debt Securities shall occur and be continuing, the Trustee shall not be under any obligation to exercise any of the trusts or powers vested in it by the Indentures at the request or direction of any of the holders of that series, unless such holders shall have offered to such Trustee reasonable security or indemnity. (Sections 6.1 and 6.2) The holders of a majority in aggregate principal amount of the Debt Securities of each series affected and then outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee under the applicable Indenture or exercising any trust or power conferred on the Trustee with respect to the Debt Securities of that series; provided that the Trustee may refuse to follow any direction which is in conflict with any law or such Indenture and subject to certain other limitations. (Section 5.8) No holder of any Debt Security of any series will have any right by virtue or by availing of any provision of the Indentures to institute any proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to the Indentures or for any remedy thereunder, unless such holder shall have previously given the Trustee written notice of an Event of Default with respect to Debt Securities of that series and unless the holders of at least 25% in aggregate principal amount of the outstanding Debt Securities of that series shall also have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee and the Trustee shall have failed to institute such proceeding within 60 days after its receipt of such request, and the Trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding Debt Securities of that series a direction inconsistent with such request. (Section 5.5) However, the right of a holder of any Debt Security to receive payment of the principal of and interest, if any, on such Debt Security on or after the due dates expressed in such Debt Security, or to institute suit for the enforcement of any such payment on or after such dates, shall not be impaired or affected without the consent of such holder. (Section 5.6) MERGER Each Indenture provides that the Company may consolidate with, or sell, convey or lease all or substantially all of its assets to, or merge with or into, any other corporation, if (i) either the Company is the continuing corporation or the successor corporation is a domestic corporation and expressly assumes the due and punctual payment of the principal of and interest on all the Debt Securities outstanding under such Indenture according to their tenor and the due and punctual performance and observance of all of the covenants and conditions of such Indenture to be performed or observed by the Company; and (ii) the Company or such successor corporation, as the case may be, is not, immediately after such merger or consolidation, or such sale, conveyance or lease, in material default in the performance or observance of any such covenant or condition. (Section 9.1) SATISFACTION AND DISCHARGE OF INDENTURES The Indenture with respect to any series of Debt Securities (except for certain specified surviving obligations including, among other things, the Company's obligation to pay the principal of and interest on the Debt Securities of such series) will be discharged and cancelled upon the satisfaction of certain conditions, including the payment of all the Debt Securities of such series or the deposit with the Trustee under such Indenture of cash or appropriate Government Obligations or a combination thereof sufficient for such payment or redemption in accordance with the applicable Indenture and the terms of the Debt Securities of such series. (Section 10.1) MODIFICATION OF THE INDENTURES The Indentures contain provisions permitting the Company and the Trustee thereunder, with the consent of the holders of not less than a majority in aggregate principal amount of the Debt Securities of each series at the time outstanding under the applicable Indenture, to execute supplemental indentures adding any provisions to, or changing in any manner or eliminating any of the provisions of, the applicable Indenture or any supplemental indenture with respect to the Debt Securities of such series or modifying in any manner the rights of the holders 16 of the Debt Securities of such series; provided that no such supplemental indenture may (i) extend the final maturity of any Debt Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of any interest thereon, or reduce any amount payable on redemption thereof, or impair or affect the right of any holder of Debt Securities to institute suit for payment thereof or, if the Debt Securities provide therefor, any right of repayment at the option of the holders of the Debt Securities, without the consent of the holder of each Debt Security so affected or (ii) reduce the aforesaid percentage of Debt Securities of such series, the consent of the holders of which is required for any such supplemental indenture, without the consent of the holders of all Debt Securities of such series so affected. (Section 8.2) Additionally, in certain prescribed instances, the Company and the Trustee may execute supplemental indentures without the consent of the holders of Debt Securities. (Section 8.1) DEFEASANCE AND COVENANT DEFEASANCE The Indentures provide, if such provision is made applicable to the Debt Securities of any series, that the Company may elect either (a) to terminate (and be deemed to have satisfied) all its obligations with respect to such Debt Securities (except for the obligations to register the transfer or exchange of such Debt Securities, to replace mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or agency in respect of the Debt Securities, to compensate and indemnify the Trustee and to punctually pay or cause to be paid the principal of, and interest, if any, on all Debt Securities of such series when due) ("defeasance"); or (b) in the case of the Senior Indenture, to be released from its obligations with respect to Senior Debt Securities under Sections 3.5 and 3.6 of the Senior Indenture (being the restrictions described above under "Limitations on Liens" and "Limitations on Sale and Leaseback Transactions") ("covenant defeasance"), upon the deposit with the Trustee, in trust for such purpose, of money and/or Government Obligations which through the payment of principal and interest in accordance with their terms will provide money, in an amount sufficient (in the opinion of a nationally recognized firm of independent public accountants) to pay the principal of and premium and interest, if any, on the outstanding Debt Securities of such series, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust may be established only if, among other things, the Company has delivered to the Trustee an opinion of counsel (as specified in the applicable Indenture) with regard to certain matters, including an opinion to the effect that the Holders of such Debt Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and discharge and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance or covenant defeasance, as the case may be, had not occurred. The Prospectus Supplement may further describe these or other provisions, if any, permitting defeasance or covenant defeasance with respect to the Debt Securities of any series. (Section 10.1) SUBORDINATION OF SUBORDINATED DEBT SECURITIES The Senior Debt Securities will constitute part of the Senior Indebtedness (as defined below) of the Company and will rank pari passu with all outstanding senior debt. Except as set forth in the related Prospectus Supplement, the Subordinated Debt Securities will be subordinated, in right of payment, to the prior payment in full of the Senior Indebtedness (as defined below), including the Senior Debt Securities, whether outstanding at the date of the Subordinated Indenture or thereafter incurred, assumed or guaranteed. The term "Senior Indebtedness" means (1) the principal of and premium, if any, and unpaid interest on indebtedness for money borrowed, (2) purchase money and similar obligations, (3) obligations under capital leases, (4) guarantees, assumptions or purchase commitments relating to, or other transactions as a result of which the Company is responsible for the payment of, such indebtedness of others, (5) renewals, extensions and refunding of any such indebtedness, (6) interest or obligations in respect of any such indebtedness accruing after the commencement of any insolvency or bankruptcy proceedings and (7) obligations associated with derivative products such as interest rate and currency exchange contracts, foreign exchange contracts, commodity contracts, and similar arrangements, unless, in each case, the instrument by which the Company incurred, assumed or guaranteed the indebtedness or obligations described in clauses (1) through (7) hereof expressly provides that such indebtedness or obligation is not senior in right of payment to the Subordinated Debt Securities. 17 Upon any distribution of assets of the Company in connection with any dissolution, winding up, liquidation or reorganization of the Company, whether in a bankruptcy, insolvency, reorganization or receivership proceeding or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Company or otherwise, except a distribution in connection with a merger or consolidation or a conveyance or transfer of all or substantially all of the properties of the Company in accordance with the Subordinated Indenture, the holders of all Senior Indebtedness shall first be entitled to receive payment of the full amount due thereon, or provision shall be made for such payment in money or money's worth, before the holders of any of the Subordinated Debt Securities are entitled to receive any payment in respect of the Subordinated Debt Securities. In the event that a payment default shall have occurred and be continuing with respect to the Senior Indebtedness, the holders of all Senior Indebtedness shall first be entitled to receive payment of the full amount due thereon, or provision shall be made for such payment in money or money's worth, before the holders of any of the Subordinated Debt Securities are entitled to receive any payment in respect of the Subordinated Debt Securities. In the event that the principal of the Subordinated Debt Securities of any series shall have been declared due and payable pursuant to the Subordinated Indenture and such declaration shall not have been rescinded and annulled, the holders of all Senior Indebtedness outstanding at the time of such declaration shall first be entitled to receive payment of the full amount due thereon, or provision shall be made for such payment in money or money's worth, before the holders of any of the Subordinated Debt Securities are entitled to receive any payment in respect of the Subordinated Debt Securities. This subordination will not prevent the occurrence of any event of default with respect to the Subordinated Debt Securities. There is no limitation on the issuance of additional Senior Indebtedness in the Subordinated Indenture. GLOBAL DEBT SECURITIES The Debt Securities of a series may be issued in whole or in part in the form of one or more global securities (each, a "Global Security") that will be deposited with, or on behalf of, a Debt Depository identified in the applicable Prospectus Supplement. Global Securities may be issued in either registered or bearer form and in either temporary or permanent form. Unless otherwise provided in such Prospectus Supplement, Debt Securities that are represented by a Global Security will be issued in denominations of $1,000 or any integral multiple thereof and will be issued in registered form only, without coupons. Payments of principal of, and interest, if any, on Debt Securities represented by a Global Security will be made by the Company to the Trustee under the applicable Indenture, and then forwarded to the Debt Depository. The Company anticipates that any Global Securities will be deposited with, or on behalf of, The Depository Trust Company, New York, New York ("DTC"), and that such Global Securities will be registered in the name of Cede & Co., DTC's nominee. The Company further anticipates that the following provisions will apply to the depository arrangements with respect to any such Global Securities. Any additional or differing terms of the depository arrangements will be described in the Prospectus Supplement relating to a particular series of Debt Securities issued in the form of Global Securities. So long as DTC or its nominee is the registered owner of a Global Security, DTC or its nominee, as the case may be, will be considered the sole Holder of the Debt Securities represented by such Global Security for all purposes under the applicable Indenture. Except as described below, owners of beneficial interests in a Global Security will not be entitled to have Debt Securities represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Debt Securities in certificated form and will not be considered the owners or Holders thereof under the applicable Indenture. The laws of some states require that certain purchasers of securities take physical delivery of such securities in certificated form; accordingly, such laws may limit the transferability of beneficial interests in a Global Security. 18 If DTC is at any time unwilling or unable to continue as depository or if at any time DTC ceases to be a clearing agency registered under the Exchange Act if so required by applicable law or regulation, and, in either case, a successor Debt Depository is not appointed by the Company within 90 days, the Company will issue individual Debt Securities in certificated form in exchange for the Global Securities. In addition, the Company may at any time, and in its sole discretion, determine not to have any Debt Securities represented by one or more Global Securities, and, in such event, will issue individual Debt Securities in certificated form in exchange for the relevant Global Securities. In any such instance, an owner of a beneficial interest in a Global Security will be entitled to physical delivery of individual Debt Securities in certificated form of like tenor and rank, equal in principal amount to such beneficial interest, and to have such Debt Securities in certificated form registered in its name. Unless otherwise described in the applicable Prospectus Supplement, Debt Securities so issued in certificated form will be issued in denominations of $1,000 or any integral multiple thereof, and will be issued in registered form only, without coupons. DTC will act as securities depository for the Debt Securities. The Debt Securities will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully registered Debt Security certificate will be issued with respect to each $200 million of principal amount of the Debt Securities of a series, and an additional certificate will be issued with respect to any remaining principal amount of such series. DTC is a limited purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others, such as securities brokers and dealers, and banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of Debt Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Debt Securities on DTC's records. The ownership interest of each actual purchaser of each Debt Security ("Beneficial Owner") is in turn recorded on the Direct and Indirect Participants' records. A Beneficial Owner does not receive written confirmation from DTC of its purchase, but is expected to received a written confirmation providing details of the transaction, as well as periodic statements of its holdings, from the Direct or Indirect Participants through which such Beneficial Owner entered into the action. Transfers of ownership interests in Debt Securities are accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners do not receive certificates representing their ownership interests in Debt Securities, except in the event that use of the book-entry system for the Debt Securities is discontinued. To facilitate subsequent transfers, the Debt Securities are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of the Debt Securities with DTC and their registration in the name of Cede & Co. will effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Debt Securities; DTC records reflect only the identity of the Direct Participants to whose accounts Debt Securities are credited, which may or may not be the Beneficial Owners. The Participants remain responsible for keeping account of their holdings on behalf of their customers. 19 Delivery of notice and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners are governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. consents or votes with respect to the Debt Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy") to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Debt Securities are credited on the record date (identified on a list attached to the Omnibus Proxy). Principal and interest payments, if any, on the Debt Securities are made to DTC. DTC's practice is to credit Direct Participants' accounts on the payment date in accordance with their respective holdings as shown on DTC's records unless DTC has reason to believe that it will not receive payment on the payment date. Payments by Participants to Beneficial Owners are governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name" and are the responsibility of such Participant and not of DTC, the Trustee or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest, if any, to DTC is the responsibility of the Company or the Trustee, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Debt Securities at any time by giving reasonable notice to the Company or the Trustee. Under such circumstances, in the event that a successor securities depository is not appointed, Debt Security certificates are required to be printed and delivered. The Company may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Debt Security certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Company believes to be reliable, but the Company takes no responsibility for the accuracy thereof. Unless stated otherwise in the Prospectus Supplement, the underwriters or agents with respect to a series of Debt Securities issued as Global Securities will be Direct Participants in DTC. None of the Company, any underwriter or agent, the Trustee or any applicable paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial interests in a Global Security, or for maintaining, supervising or reviewing any records relating to such beneficial interest. CONCERNING THE TRUSTEE The Trustee has extended credit facilities to the Company and conducts other business with the Company and certain of its affiliates, including cash management and stock transfer services and serving as the trustee for the FMC Employees' Thrift and Stock Purchase Plan. DESCRIPTION OF THE WARRANTS TO PURCHASE COMMON STOCK OR PREFERRED STOCK The following statements with respect to the Common Stock Warrants and Preferred Stock Warrants (collectively, the "Stock Warrants") are summaries of, and subject to, the detailed provisions of a warrant agreement ("Stock Warrant Agreement") to be entered into by the Company and a warrant agent to be selected 20 at the time of issue (the "Stock Warrant Agent"), which Stock Warrant Agreement may include or incorporate by reference standard warrant provisions substantially in the form of the Standard Stock Warrant Provisions (the "Stock Warrant Provisions") filed as an exhibit to the Registration Statement. GENERAL The Stock Warrants, evidenced by warrant certificates (the "Stock Warrant Certificates"), may be issued under the Stock Warrant Agreement independently or together with any Offered Securities offered by any Prospectus Supplement and may be attached to or separate from such Offered Securities. If Stock Warrants are offered, the related Prospectus Supplement will describe the terms of the Stock Warrants, including without limitation the following: (1) the offering price, if any; (2) the designation and terms of the Common or Preferred Stock purchasable upon exercise of the Stock Warrants; (3) the number of shares of Common or Preferred Stock purchasable upon exercise of one Stock Warrant and the initial price at which such shares may be purchased upon exercise; (4) the date on which the right to exercise the Stock Warrants shall commence and the date on which such right shall expire; (5) a discussion of certain federal income tax considerations; (6) the call provisions, if any; (7) the currency, currencies or currency units in which the offering price, if any, and exercise price are payable; (8) the antidilution provisions of the Stock Warrants; and (9) any other terms of the Stock Warrants. The shares of Common or Preferred Stock issuable upon exercise of the Stock Warrants will, when issued in accordance with the Stock Warrant Agreement, be fully paid and nonassessable. EXERCISE OF STOCK WARRANTS Stock Warrants may be exercised by surrendering to the Stock Warrant Agent the Stock Warrant certificate signed by the warrantholder, or its duly authorized agent, indicating the warrantholder's election to exercise all or a portion of the Stock Warrants evidenced by the certificate. Surrendered Stock Warrant certificates shall be accompanied by payment of the aggregate exercise price of the Stock Warrants to be exercised, as set forth in the related Prospectus Supplement, which payment may be made in the form of cash or a check equal to the exercise price. Certificates evidencing duly exercised Stock Warrants will be delivered by the Stock Warrant Agent to the transfer agent for the Common Stock or the Preferred Stock, as the case may be. Upon receipt thereof, the transfer agent shall deliver or cause to be delivered, to or upon the written order of the exercising warrantholder, a certificate representing the number of shares of Common Stock or Preferred Stock purchased. If fewer than all of the Stock Warrants evidenced by any certificate are exercised, the Stock Warrant Agent shall deliver to the exercising warrantholder a new Stock Warrant certificate representing the unexercised Stock Warrants. ANTIDILUTION PROVISIONS The exercise price payable and the number of shares of Common or Preferred Stock purchasable upon the exercise of each Stock Warrant will be subject to adjustment in certain events, including the issuance of a stock dividend to holders of Common or Preferred Stock, respectively, or a combination, subdivision or reclassification of Common or Preferred Stock, respectively. In lieu of adjusting the number of shares of Common or Preferred Stock purchasable upon exercise of each Stock Warrant, the Company may elect to adjust the number of Stock Warrants. No adjustment in the number of shares purchasable upon exercise of the Stock Warrants will be required until cumulative adjustments require an adjustment of at least 1% thereof. The Company may, at its option, reduce the exercise price at any time. No fractional shares will be issued upon exercise of Stock Warrants, but the Company will pay the cash value of any fractional shares otherwise issuable. Notwithstanding the foregoing, in case of any consolidation, merger, or sale or conveyance of the property of the Company as an entirety or substantially as an entirety, the holder of each outstanding Stock Warrant shall have the right to the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common or Preferred Stock into which such Stock Warrants were exercisable immediately prior thereto. 21 NO RIGHTS AS STOCKHOLDERS Holders of Stock Warrants will not be entitled, by virtue of being such holders, to vote, to consent, to receive dividends, to receive notice as stockholders with respect to any meeting of stockholders for the election of directors of the Company or any other matter, or to exercise any rights whatsoever as stockholders of the Company. DESCRIPTION OF THE WARRANTS TO PURCHASE DEBT SECURITIES The following statements with respect to the Debt Warrants are summaries of, and subject to, the detailed provisions of a warrant agreement (the "Debt Warrant Agreement") to be entered into by the Company and a warrant agent to be selected at the time of issue (the "Debt Warrant Agent"), which Debt Warrant Agreement may include or incorporate by reference standard warrant provisions substantially in the form of the Standard Debt Securities Warrant Provisions (the "Debt Warrant Provisions") filed as an exhibit to the Registration Statement. GENERAL The Debt Warrants, evidenced by warrant certificates (the "Debt Warrant Certificates"), may be issued under the Debt Warrant Agreement independently or together with any Offered Securities offered by any Prospectus Supplement and may be attached to or separate from such Offered Securities. If Debt Warrants are offered, the related Prospectus Supplement will describe the terms of the warrants, including without limitation the following: (1) the offering price, if any; (2) the designation, aggregate principal amount and terms of the Debt Securities purchasable upon exercise of the warrants; (3) if applicable, the designation and terms of the Debt Securities with which the Debt Warrants are issued and the number of Debt Warrants issued with each such Debt Security; (4) if applicable, the date on and after which the Debt Warrants and the related Offered Securities will be separately transferable; (5) the principal amount of Debt Securities purchasable upon exercise of one Debt Warrant and the price at which such principal amount of Debt Securities may be purchased upon exercise; (6) the date on which the right to exercise the Debt Warrants shall commence and the date on which such right shall expire; (7) a discussion of certain federal income tax considerations; (8) whether the warrants represented by the Debt Warrant Certificates will be issued in registered or bearer form; (9) the currency, currencies or currency units in which the offering price, if any, and exercise price are payable; (10) the antidilution provisions of the Debt Warrants; and (11) any other terms of the Debt Warrants. Debt Warrant Certificates may be exchanged for new Debt Warrant Certificates of different denominations and may (if in registered form) be presented for registration of transfer at the corporate trust office of the Debt Warrant Agent, which will be listed in the related Prospectus Supplement, or at such other office as may be set forth therein. Warrantholders do not have any of the rights of holders of Debt Securities (except to the extent that the consent of warrantholders may be required for certain modifications of the terms of an Indenture or form of the Debt Security, as the case may be, and the series of Debt Securities issuable upon exercise of the Debt Warrants) and are not entitled to payments of principal of and interest, if any, on the Debt Securities. 22 EXERCISE OF DEBT WARRANTS Debt Warrants may be exercised by surrendering the Debt Warrant Certificate at the corporate trust office of the Debt Warrant Agent, with the form of election to purchase on the reverse side of the Debt Warrant Certificate properly completed and executed, and by payment in full of the exercise price, as set forth in the Prospectus Supplement. Upon the exercise of Debt Warrants, the Debt Warrant Agent will, as soon as practicable, deliver the Debt Securities in authorized denominations in accordance with the instructions of the exercising warrantholder and at the sole cost and risk of such holder. If less than all of the Debt Warrants evidenced by the Debt Warrant Certificate are exercised, a new Debt Warrant Certificate will be issued for the remaining amount of Debt Warrants. PLAN OF DISTRIBUTION The Company may sell Offered Securities (1) through underwriters or dealers, (2) directly to one or more purchasers, or (3) through agents. A Prospectus Supplement will set forth the terms of the offering of the Offered Securities offered thereby, including the name or names of any underwriters, the purchase price of the Offered Securities, and the proceeds to the Company from the sale, any underwriting discounts and other items constituting underwriters' compensation, any public offering price, any discounts or concessions allowed or reallowed or paid to dealers, and any securities exchange or market on which the Offered Securities may be listed. Only underwriters so named in such Prospectus Supplement are deemed to be underwriters in connection with the Offered Securities offered thereby. If underwriters are used in the sale, the Offered Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase the Offered Securities will be subject to certain conditions precedent, and the underwriters will be obligated to purchase all the Offered Securities of the series offered by the Prospectus Supplement if any of the Offered Securities are purchased. Any public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. Offered Securities may also be sold directly by the Company or through agents designated by the Company from time to time. Any agent involved in the offering and sale of Offered Securities in respect of which this Prospectus is delivered will be named, and any commissions payable by the Company to such agent will be set forth, in the Prospectus Supplement. Unless otherwise indicated in the related Prospectus Supplement, any such agent will be acting on a best-efforts basis for the period of its appointment. All Offered Securities offered other than Common Stock will be a new issue of securities with no established trading market. Any underwriters to whom such Offered Securities are sold by the Company for public offering and sale may make a market in such Offered Securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of or the trading markets for any such Offered Securities. Agents and underwriters may be entitled under agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the Securities Act that may arise from any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact in this Prospectus, any supplement or amendment hereto, or in the registration statement of which this Prospectus forms a part, or to contribution with respect to payments which the agents or underwriters may be required to make in respect thereof. Agents and underwriters may engage in transactions with, or perform services for, the Company in the ordinary course of business. 23 LEGAL MATTERS Certain legal matters with respect to the validity of the Offered Securities will be passed upon for the Company by Winston & Strawn, Chicago, Illinois. The Chairman of the Executive Committee of Winston & Strawn, Governor James R. Thompson, serves as a member of the Company's Board of Directors and as of March 1, 1995 beneficially owned 983 shares of Common Stock. Certain legal matters with respect to the Offered Securities will be passed upon for any underwriters or agents by Mayer, Brown & Platt, Chicago, Illinois. Mayer, Brown & Platt from time to time acts as counsel in certain matters for the Company. EXPERTS The consolidated financial statements of the Company and its consolidated subsidiaries as of December 31, 1993 and 1994 and for the years ended December 31, 1992, 1993 and 1994 incorporated by reference herein and elsewhere in the Registration Statement have been audited by KPMG Peat Marwick LLP ("KPMG"), independent certified public accountants, as set forth in their report thereon incorporated by reference herein which, as to 1994, is based in part on the report of Ernst & Young LLP ("Ernst & Young"), independent auditors, that also is incorporated by reference herein. The financial statements referred to above are incorporated by reference in reliance upon such reports given upon the authority of such firms as experts in accounting and auditing. To the extent that KPMG audits and reports on consolidated financial statements of the Company and consolidated subsidiaries issued at future dates, and consents to the use of their reports thereon, such consolidated financial statements also will be incorporated by reference in the Registration Statement in reliance upon their reports given upon the authority of such firm as experts in accounting and auditing. To the extent that Ernst & Young audits and reports on financial statements of United Defense, L.P., a subsidiary of the Company issued at future dates, and consents to the use of their reports thereon, such reports also will be incorporated by reference in the Registration Statement in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. With respect to the unaudited interim financial information of the Company and its consolidated subsidiaries for the periods ended March 31, 1995 and 1994, June 30, 1995 and 1994 and September 30, 1995 and 1994, incorporated by reference herein, KPMG has reported that they applied limited procedures in accordance with professional standards for a review of such information. The reports of KPMG for such periods state that such reports are based on the reports of other accountants with respect to interim financial information of United Defense, L.P. With respect to the unaudited interim financial information of United Defense, L.P., for the periods ended March 31, 1995 and 1994, June 30, 1995 and 1994 and September 30, 1995 and 1994, Ernst & Young has reported that they applied limited procedures in accordance with professional standards for a review of such information. However, the separate reports of KPMG and Ernst & Young included in the Company's Quarterly reports on Form 10-Q for the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995, and incorporated by reference herein, state that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. Neither KPMG nor Ernst & Young is subject to the liability provisions of Section 11 of the Securities Act for their reports on the unaudited interim financial information because neither report is a "report" or a "part" of the Registration Statement prepared or certified by the accountants within the meaning of Sections 7 and 11 of the Securities Act. 24 [FMC LOGO] -----END PRIVACY-ENHANCED MESSAGE-----