-----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, NV0x9H3KbE3cpAOKq23gosEfc1YYT4DPNDiiULR+Dxer97E8CVfHwWHN3juW4KRs 7/VdhGC/yNIz+bsL9zTkmg== 0000930661-02-000678.txt : 20020415 0000930661-02-000678.hdr.sgml : 20020415 ACCESSION NUMBER: 0000930661-02-000678 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020311 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FMC CORP CENTRAL INDEX KEY: 0000037785 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 940479804 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02376 FILM NUMBER: 02572661 BUSINESS ADDRESS: STREET 1: 200 E RANDOLPH DR CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3128616000 FORMER COMPANY: FORMER CONFORMED NAME: BEAN SPRAY PUMP CO DATE OF NAME CHANGE: 19670706 FORMER COMPANY: FORMER CONFORMED NAME: FOOD MACHINERY & CHEMICAL CORP DATE OF NAME CHANGE: 19670706 10-K 1 d10k.txt FMC CORPORATION FORM 10-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-2376 FMC CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-0479804 (State or other (I.R.S. Employer jurisdiction of Identification No.) incorporation or organization) 1735 Market Street Philadelphia, Pennsylvania 19103 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: 215/299-6000 Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock, $0.10 par value.. New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [_] INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [_] THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF MARCH 1, 2002 WAS $1,186,791,031. THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK, $0.10 PAR VALUE, OUTSTANDING AS OF THAT DATE WAS 31,573,929. THE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES EXCLUDES THE VALUE OF THOSE SHARES HELD BY TEN PERCENT STOCKHOLDERS AND EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT. DOCUMENTS INCORPORATED BY REFERENCE DOCUMENT FORM 10-K REFERENCE -------- ------------------- Portions of Proxy Part III Statement for 2002 Annual Meeting of Stockholders ================================================================================ PART I FMC Corporation was incorporated in 1928 under Delaware law and has its principal executive offices at 1735 Market Street, Philadelphia, Pennsylvania 19103. As used in this report, except where otherwise stated or indicated by the context, FMC, the company or the Registrant means FMC Corporation and its consolidated subsidiaries and their predecessors. ITEM 1. BUSINESS General FMC is a diversified chemical company serving agricultural, industrial and consumer markets globally with innovative solutions, applications and quality products. As one of the world's leading producers of chemicals, FMC employs approximately 6,000 people and has 37 manufacturing facilities in 19 countries. The company operates in three distinct business segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. Agricultural Products provides crop protection and pest control products for worldwide markets. Specialty Chemicals includes food ingredients that are used to enhance structure, texture and taste; pharmaceutical additives for binding and disintegrant use; and lithium specialties for pharmaceutical synthesis and energy storage. Industrial Chemicals encompasses a wide range of inorganic materials in which FMC possesses market and technology leadership, including soda ash, hydrogen peroxide, phosphorus and specialty peroxygens in both North America and in Europe through FMC's subsidiary, FMC Foret, S.A. ("Foret"). Effective December 31, 2001, the company completed its previously announced plan to separate into two separately traded public companies. FMC has retained the three chemical segments. A separate company, FMC Technologies, Inc. ("Technologies"), operates the businesses that comprised the former Energy Systems and Food and Transportation Systems segments. The company's plan of separation was first announced publicly on October 31, 2000. On May 31, 2001, FMC contributed the two non-chemical business segments to Technologies, which at the time was a wholly-owned subsidiary of FMC. The company completed an initial public offering of approximately 17% of Technologies' stock in June 2001 and completed the separation on December 31, 2001 by distributing all remaining shares of Technologies owned by FMC as a tax-free dividend to its stockholders. The majority of historical data in this Report regarding the company's financial condition or results of operations have been reclassified to reflect the separation of Technologies' businesses. Financial Information About Industry Segments. See Note 20 in the company's 2001 consolidated financial statements at pages 64 through 66 of this report which is incorporated herein by reference. General Description of the Business Segments The following is a description of the company's three business segments. Agricultural Products The majority of Agricultural Product sales are from insecticide chemistries including carbamates and pyrethroids. The remaining sales are from herbicides including clomazone and the newer chemistries of sulfentrazone and carfentrazone. Key crops for FMC include cotton, corn, fruits, rice and vegetables. This segment has a leading global position in pyrethroid chemistry and a portfolio of commercialized herbicides with growth opportunities. Agricultural Products differentiates itself by its flexibility to react to worldwide market conditions, direct distribution in key markets, solid product stewardship programs and focused research and development ("R&D"). 2 Agricultural Products is a business characterized by R&D innovation in order to both grow and maintain share. In an increasingly competitive market, the development of innovative R&D and market access programs has been and will continue to be essential. FMC has a focused strategy to: . gain near term growth through label expansions in carfentrazone and newer generation pyrethroids; . develop novel insecticide chemistry in a strategic alliance with Ishihara Sangyo Kaisha, Ltd. ("ISK") for use on certain pests in the Americas; . expand a leading genomics-based research program in a strategic alliance with Devgen to identify target specific insect sites and chemistries; and . focus our sales and marketing organization in the Americas and expand market access abroad through regional alliances in Europe and Asia. Specialty Chemicals BioPolymer and lithium-based operations make up the Specialty Chemicals segments. BioPolymer provides products that add structure, texture and taste to a wide range of beverage, dairy, meat and low-fat products as well as act as binders and disintegrants for dry tablet drugs. Lithium is a technology-based business in which mined lithium is refined into many end uses including pharmaceutical synthesis and energy storage in batteries. Specialty Chemicals has leading or significant positions in alginates, carrageenan, microcrystalline cellulose and lithium-based products. This segment's customers consist primarily of industrial companies engaged in the food, pharmaceutical and specialty additives businesses. Remaining sales are to the personal care, dental, industrial and energy storage markets. The ongoing strength of Specialty Chemicals is the development of customer-focused solutions and new product concepts. Key elements include plans to: . grow market share with large food and pharmaceutical firms as their partner for developing new food categories and innovative drugs; . explore complementary technologies that could further enhance the product offering of the food and pharmaceutical franchises; . focus on high value-added applications for lithium specialties and continue to exit more commodity-like markets; and . invest in large market potential opportunities for lithium including hybrid electric vehicles and concrete restoration. Industrial Chemicals Industrial Chemicals sales comprise several products: soda ash, peroxygens (hydrogen peroxide and active oxidants) and phosphorus. FMC's alkali chemicals division manufactures soda ash and related derivatives for the U.S. and Asian glass, detergents and chemicals markets. FMC is the largest producer in the world of natural soda ash and has enjoyed strong growth outside the U.S. based upon the superior cost economics of naturally occurring soda ash from Green River, Wyoming versus synthetic soda ash produced abroad. Sales of peroxygens, including hydrogen peroxide and specialty derivatives, make up approximately 25% of Industrial Chemicals' sales. FMC is the market leader in the U.S. for hydrogen peroxide and is the worldwide leader in the specialty markets for persulfates and peracetic acid. The array of end-use markets served includes pulp and paper, polymers, electronics and food. FMC is a 50% owner of a joint venture with Solutia, Inc. in phosphorus chemicals, Astaris LLC ("Astaris"). Astaris offers a wide range of phosphorus compounds for markets ranging from agriculture to detergents. During late 2001, Astaris undertook significant restructuring of its supply chain to move away from production of elemental phosphorus to lower cost purified phosphoric acid. 3 FMC's European Industrial Chemicals subsidiary, Foret, leverages its strong brand name in southern Europe to provide sulfur derivatives, peroxygens and phosphorus products to Europe, Africa and the Middle East. The focus of Industrial Chemicals is toward maximizing cash generation through cost reduction initiatives and prudent capital management. The segment has three key strategies: . focus on the development of new and innovative process and mining technologies to continue to lower unit production costs; . manage capacity effectively in order to keep utilization rates high and control fixed costs; and . shift commercial resources towards the development of specialty niches that have few competitive alternatives and higher corresponding margins. Source and Availability of Raw Materials FMC's raw material requirements vary by business segment and include mineral related natural resources, processed chemicals, seaweed, and energy sources such as oil, gas, coal, and electricity generated by hydroelectric and nuclear power. Ores used in Industrial Chemicals manufacturing processes, such as trona, are extracted from mines in the United States on property held by FMC under long-term leases subject to periodic adjustment of royalty rates. Raw materials used by Specialty Chemicals include lithium carbonate, which is obtained from a South American manufacturer under a long-term sourcing agreement, alginates and carrageenan, which are derived from various types of seaweed that are sourced by the company on a global basis and wood pulp which is purchased from several North American producers. Raw materials used by Agricultural Products, primarily processed chemicals, are obtained from worldwide sources. The company does not use single source suppliers for the majority of its raw material purchases and believes the available supplies of raw materials are adequate. Patents FMC owns a number of U.S. and foreign patents, trademarks and licenses that are cumulatively important to its business. FMC does not believe that the loss of any one or group of related patents, trademarks or licenses would have a material adverse effect on the overall business of FMC. Seasonality The seasonal nature of the crop protection market and the geographic spread of the Agricultural Products business generally produce stronger earnings in the second and third quarters. Agricultural products sold into the northern hemisphere (North America, Europe and parts of Asia) serve seasonal agricultural markets from March through September, while markets in the southern hemisphere (Latin America, parts of Asia and Australia) are served from July through December. The remainder of FMC's businesses is generally not subject to significant seasonal fluctuations. Competitive Conditions FMC encounters substantial competition in each of its three business segments. This competition is expected to continue in both the United States and markets outside the United States. FMC markets its products through its own sales organization and through independent distributors and sales representatives. The number of the company's principal competitors varies from segment to segment. In general, FMC competes by operating in a cost-efficient manner and by leveraging its industry experience to provide advanced technology, high product quality and reliability and quality customer and technical service. 4 FMC's Agricultural Products segment competes in the global crop protection market for insecticides and herbicides. The industry is characterized by a small number of large competitors and a large number of smaller, often regional competitors such as FMC. Industry products include crop protection chemicals and, for major competitors, genetically engineered (crop biotechnology) products. Competition from generic producers has increased as a significant number of product patents have expired in the last decade. In general, FMC competes as a product innovator by focusing on insecticide discovery and development and licensing products from alliance partners when the products complement FMC's product portfolio. FMC also differentiates itself by reacting quickly in key markets, establishing effective product stewardship programs, and developing strategic alliances, which strengthen market access in key countries. With leading or significant positions in markets that include alginate, carrageenan, microcrystalline cellulose and lithium-based products, Specialty Chemicals competes on the basis of product differentiation, customer service and price. BioPolymer competes with both direct suppliers of cellulose and seaweed extract as well as suppliers of other hydrocolloids, which may provide similar functionality in specific applications. In cellulose, competitors are typically smaller than FMC, while in seaweed extracts, FMC competes with other broad-based chemical companies. Both of FMC's two most significant competitors in lithium each extract the element from naturally occurring, lithium-rich brines located in the Andes mountains of Argentina and Chile which are believed to be the world's most significant and lowest cost sources of lithium. Industrial Chemicals serves the alkali, hydrogen peroxide and phosphorus markets predominantly in the United States and to a lesser extent, Europe. The Alkali Chemicals Division is the world's largest producer of natural soda ash. In North America, the soda ash business competes with five domestic producers of natural soda ash, three of which operate in the vicinity of our mine and processing facility in Green River, Wyoming. Outside of North America and Europe, FMC sells soda ash through American Natural Soda Ash Corporation (ANSAC), a foreign sales association organized under the Webb-Pomerene Act. Internationally, FMC's natural soda ash competes with synthetic soda ash manufactured by numerous producers, ranging from integrated multinational companies to smaller regional players. The Hydrogen Peroxide Division maintains a leading position in the North American market for hydrogen peroxide. There are currently five firms competing in the hydrogen peroxide market in North America. The primary competitive factor affecting the sales of soda ash and hydrogen peroxide is price. FMC seeks to maintain its competitive position by employing low cost processing technology. At Foret, FMC possesses a strong cost and market position in phosphates, perborates, peroxygens, zeolites and sulfur derivatives. In each of these markets FMC faces significant competition from a range of multinational and regional chemical producers. FMC participates in the phosphorus business in the United States through Astaris, FMC's joint venture with Solutia Inc. Astaris competes primarily with Rhodia which is the only other global producer competing with Astaris across a wide variety of phosphorus chemicals in the North American market. Competition in phosphorus is based primarily on price and product differentiation through customer service. Research and Development Expense FMC's research and development expenditures in the last three years are set forth below:
Year Ended December 31, ----------------------- 2001 2000 1999 ----- ----- ------ In Millions Agricultural Products $72.5 $66.7 $ 60.9 Specialty Chemicals.. 15.9 19.1 21.2 Industrial Chemicals. 11.4 12.0 18.5 ----- ----- ------ Total............. $99.8 $97.8 $100.6 ===== ===== ======
Compliance with Environmental Laws and Regulations See Note 13 "Environmental Obligations" in the company's 2001 consolidated financial statements at pages 53 through 55 in this report which is incorporated herein by reference. 5 Employees FMC employs approximately 6,000 people in its domestic and foreign operations. Approximately 18% of such employees are represented by collective bargaining agreements in the United States. In 2002, one of the company's six collective bargaining agreements will expire, covering less than 100 employees. FMC believes that it maintains good employee relations and has successfully concluded virtually all of its recent negotiations without a work stoppage. In those rare instances where a work stoppage has occurred, there has been no material effect on consolidated sales and earnings. FMC cannot predict, however, the outcome of future contract negotiations. Financial Information About Geographic Areas See Table on "Geographic Segment Information Revenue and Long-lived Assets" in Note 20 to the company's 2001 consolidated financial statements at page 66 in this report which is incorporated herein by reference. ITEM 2. PROPERTIES FMC leases executive offices in Philadelphia and subleases administrative offices from Technologies in Chicago. The company operates 37 manufacturing facilities and mines in 19 countries. Its major research facility is in Princeton, NJ. Trona ore, used for soda ash production in Green River, WY, is mined primarily from property held under long-term leases. FMC owns the land and mineral rights to the Salar del Hombre Muerto lithium reserves in Argentina. A number of FMC's chemical plants require the basic raw materials which are provided by these FMC-owned or leased mines, without which other sources would have to be obtained. With regard to FMC's mining properties operated under long-term leases, no single lease or related group of leases is material to the businesses or to the company as a whole. Most of FMC's plant sites are owned, with some under lease. FMC believes its properties and facilities meet present requirements and are in good operating condition and that each of its significant manufacturing facilities is operating at a level consistent with capacity utilization prevalent in the industries in which it operates. The number and location of FMC's production properties for continuing operations are:
Latin America United And Western Asia- States Canada Europe Pacific Total ------ ------- ------- ------- ----- Agricultural Products 5 1 -- 3 9 Specialty Chemicals.. 3 2 5 4 14 Industrial Chemicals. 5 1 8 -- 14 -- - -- -- -- Total............. 13 4 13 7 37 == = == == ==
ITEM 3. LEGAL PROCEEDINGS See Note 1 "Principal Accounting Policies--Environmental Obligations," Note 13 "Environmental Obligations" and Note 19 "Commitments and Contingent Liabilities" in the company's consolidated financial statements beginning on page 32, page 53 and page 63, respectively, of this report which is incorporated herein by reference. 6 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. Executive Officers of the Registrant The executive officers of FMC Corporation, the offices currently held by them, their business experience since January 1, 1997 and earlier and their ages as of March 1, 2002, are as follows:
Age on Office, year of election and other Name 3/1/2002 information - ---- -------- ---------------------------------- William G. Walter 56 Chairman of the Board, Chief Executive Officer and President (01-present); Executive Vice President (00); Vice President and General Manager-- Specialty Chemicals Group (97); General Manager--Alkali Division (92); International Managing Director--Agricultural Products Group (91); Division Manager, Defense Systems International (86); Director of Market/Sales-- Construction Equipment Group (82). W. Kim Foster 53 Senior Vice President and Chief Financial Officer (01-present); Vice President and General Manager--Agricultural Products Group (98); Director, International, Agricultural Products Group (97-98); Division Manager, Airport Products and Systems Division (91-97). Robert I. Harries 58 Senior Vice President and General Manager Industrial Chemicals Group and Shared Services (01-present); Vice President and General Manager--Chemical Products Group (94). Thomas C. Deas, Jr 51 Vice President and Treasurer (01-present); Vice President, Treasurer and CFO, Applied Tech Products Corp. (98); Vice President, Treasurer and CFO, Airgas, Inc. (97); Vice President, Treasurer and CFO, Maritrans, Inc. (96); Vice President--Treasury and Assistant Treasurer, Scott Paper Company (88). Milton Steele 53 Vice President and General Manager Agricultural Products Group (01-present); International Director, Agricultural Products (99); General Manager BioProduct Division (98); General Manager, Asia Pacific (96); Area Manager, Asia Pacific (92). Andrea E. Utecht 53 Vice President, General Counsel and Secretary (01-present); Senior Vice President, Secretary and General Counsel, AtoFina Chemicals, Inc. (96). Graham R. Wood 48 Vice President, Corporate Controller (01-present); Group Controller-- Agricultural Products Group (99); Chief Financial Officer--European Region (95); Group Controller--FMC Foodtech (93).
No family relationships exist among any of the above-listed officers, and there are no arrangements or understandings between any of the above-listed officers and any other person pursuant to which they serve as an officer. All officers are elected to hold office for one (1) year or until their successors are elected and qualified. 7 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The company's common stock of $0.10 par value is traded on the New York Stock Exchange, the Pacific Stock Exchange and the Chicago Stock Exchange (Symbol: FMC). There were 8,022 registered common stockholders as of December 31, 2001. The 2001 and 2000 quarterly summaries of the high and low prices of the company's common stock are represented herein under Item 8 (see Note 21 "Quarterly Financial Information" on page 67 of this report). No cash dividends were paid in 2001, 2000 or 1999. FMC's annual meeting of stockholders will be held at 2 p.m. on Tuesday, April 23, 2002, at the Top of the Tower, 1717 Arch Street, 50/th/ Floor, Philadelphia, PA 19103. Notice of the meeting, together with proxy materials, will be mailed approximately 40 days prior to the meeting to stockholders of record as of March 1, 2002. Transfer Agent and Registrar of Stock: Shareholder Communications, Computershare Investor Services, LLC, P.O. Box A3504, Chicago, IL 60690-3504. A copy of this report on Form 10-K for 2001 is available upon written request to: FMC Corporation, Communications Department, 1735 Market Street, Philadelphia, PA, 19103. ITEM 6. SELECTED FINANCIAL DATA The company's summary of selected financial data and related notes for the years 1997 through 2001 are included herein under Item 8 (see "Five Year Summary of Selected Financial Data" on pages 68 and 69 of this report). FORWARD-LOOKING INFORMATION Statement under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995: FMC Corporation ("FMC" or the "company") and its representatives may from time to time make written or oral statements that are "forward-looking" and provide other than historical information, including statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations within, in the company's Annual Report, in the company's other filings with the Securities and Exchange Commission, or in reports to its stockholders. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the risk factors listed below. In some cases, FMC has identified forward-looking statements by such words or phrases as "will likely result," "is confident that," "expect," "expects," "should," "could," "may," "will continue to," "believe," "believes," "anticipates," "predicts," "forecasts," "estimates," "projects," "potential," "intends" or similar expressions identifying "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including the negative of those words and phrases. Such forward-looking statements are based on management's current views and assumptions regarding future events, future business conditions and the outlook for the company based on currently available information. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. The company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. In connection with the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, the company is hereby identifying important factors that could affect the company's financial performance and could cause the company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. 8 Among the factors that could have an impact on our ability to achieve operating results and meet our other goals are: Industry Risks: Pricing and volumes in our markets are sensitive to a number of industry specific and global issues and events including: . Capacity Utilization--Our Industrial Chemicals businesses are sensitive to industry capacity utilization. As a result, pricing tends to fluctuate when capacity utilization changes occur within our industry. . Competition--All of our segments face competition, which could affect our ability to raise prices or successfully enter certain markets. . Climatic Conditions--Our Agricultural Products markets are affected by climatic conditions, which could adversely affect crop pricing and pest infestations. The nature of these events makes them difficult to predict. . Changing Regulatory Environment--Changes in the regulatory environment, particularly in the United States, could adversely impact our ability to continue selling certain products in our domestic and foreign markets. . Changes in Our Customer Base--Our customer base has the potential to change, especially when long-term supply contracts are renegotiated. Our Industrial Chemical and Specialty Chemical businesses are most sensitive to this risk. . Energy Costs--Energy costs represent a significant portion of our manufacturing costs and dramatic increases in such costs could have an adverse affect on our results of operations. . Unforeseen Economic and Political Change--Our business could be adversely affected by unforeseen economic and political changes in the international markets where we compete including: war, civil unrest, inflation rates, recessions, trade restrictions, foreign ownership restrictions and economic embargoes imposed by the United States or any of the foreign countries in which FMC does business; change in governmental laws and regulations and the level of enforcement of these laws and regulations; other governmental actions; and other external factors over which we have no control. . Litigation and Environmental Risks--Current reserves relating to FMC's ongoing litigation and environmental liabilities may prove inadequate. . Production Hazards--Our facilities are subject to operating hazards, which may disrupt our business. Technology Risks: . Failure to make continued improvements in our product technology and new product introductions could impede our competitive position, particularly in Agricultural Products and Specialty Chemicals. . Failure to continue to make process improvements to reduce costs could impede our competitive position. Financial Risks: . We have a significant amount of indebtedness, which could adversely affect our financial condition and limit our ability to grow and compete successfully in our markets. We also rely on a revolving credit facility that requires renegotiation as circumstances warrant. This also subjects us to the impact of changing interest rates. 9 . We have certain commitments and guarantees which could adversely affect our liquidity and financial condition. . We are an international company and therefore face foreign exchange rate risks. We are particularly sensitive to the euro and the Brazilian real. To a lesser extent, we are sensitive to Asian currencies, particularly the Japanese yen. . We have a number of agreements with our former subsidiary, FMC Technologies, Inc., dealing with matters such as tax sharing and insurance. Under certain circumstances, we may incur liabilities under these agreements and become entitled to be indemnified by FMC Technologies, Inc. Our ability to be indemnified will depend on the ability of FMC Technologies, Inc. to pay us. The company wishes to caution that the preceding list of important factors may not be all inclusive and specifically declines to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. With respect to forward-looking statements set forth in the notes to our consolidated financial statements, including those relating to environmental obligations, contingent liabilities and legal proceedings, some of the factors that could affect the ultimate disposition of those contingencies are changes in applicable laws, the development of facts in individual cases, settlement opportunities and the actions of plaintiffs, judges and juries. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Reorganization of our Company We implemented our plan to split FMC into separate chemical and machinery companies in 2001 through a two-step process. The first step included an initial public offering ("IPO") of 17 percent of our machinery businesses, named FMC Technologies, Inc. ("Technologies"), which took place in the second quarter of 2001. Technologies consists of our former Energy Systems and Food and Transportation Systems business segments. Subsequent to the IPO, Technologies made payments of $480.1 million to our company in exchange for the net assets distributed to Technologies on June 1, 2001, which we used to retire short-term and long-term debt. The second step, the distribution of our remaining 83 percent ownership in Technologies (the "spin-off") occurred on December 31, 2001. Total net assets distributed on December 31, 2001 were $509.5 million. We believe that the spin-off of Technologies will allow our company to focus its efforts in the chemical industry through improved customer orientation, increased innovation and overall growth. In an effort to align our business with our future growth plans, we took various strategic measures, including the restructuring of businesses, reduction of staff, plant shutdowns and the writedown of certain underperforming assets. We believe these steps will increase our company's financial flexibility as market conditions change. Risk and our Significant Accounting Policies As would be expected, these changes in our company have altered our overall risk environment as described below and elsewhere in this report. In addition to risk factors, we have also identified and reviewed our significant accounting policies, all of which are described in Note 1 to our consolidated financial statements, while noting that the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that require judgment. These estimates and assumptions can significantly affect the reported amounts of assets, liabilities, revenues and expenses at the date of our financial statements and for the reporting periods shown. Our disclosures of contingent assets and liabilities at the date of our financial statements are similarly affected by estimates and assumptions. 10 Some of these accounting estimates and assumptions are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that future events affecting them may differ markedly from what had been assumed when the financial statements were prepared. For example, we provide for environmental related obligations when they are believed to be probable and amounts can be reasonably estimated. Also, we review the recoverability of the net book values of our investments in affiliates and, our fixed and intangible assets whenever events or circumstances suggest that the net book value of these assets may not be recoverable. When this is the case, we record an impairment loss. We also continually assess the return on our business segments, which sometimes results in a plan to restructure the operations of a business. When such a plan is final, we record an accrual for severance and other contractual commitments and obligations. Finally, our reserves for discontinued operations consist of obligations for discontinued operations, for environmental remediation and study obligations from some of our former chemical plant sites, and product liabilities and other potential claims, including those related to retiree medical and life insurance benefits. (See a further discussion on all of the policies in Notes 1, 3, 6, 7, 11, 12 and 13 to our consolidated financial statements.) Results of Operations General All results discussed in this analysis address the continuing operations of our chemical businesses. Technologies results have been reclassified to discontinued operations within our consolidated statements of income and consolidated statements of cash flows for the periods ended December 31, 2001, 2000 and 1999. Accordingly, the results of the Energy Systems and Food and Transportation Systems business segments will not be included in the results of operations discussion and analysis. Our loss from continuing operations for the year ended December 31, 2001, was $306.3 million compared to income of $125.6 million and $158.7 million in 2000 and 1999, respectively. Income from continuing operations before cumulative effect of change in accounting principle, excluding special items defined below for the year ended December 31, 2001, was $99.6 million compared to $153.5 million and $132.0 million in 2000 and 1999, respectively. Special items in 2001 consisted of asset impairments and restructuring and other charges totaling $603.5 million ($405.9 million after tax). Special items in 2000 consisted of asset impairments and restructuring and other charges totaling $45.3 million ($27.9 million after tax). Special items in 1999 consisted of asset impairments, restructuring and other charges and gains on divestitures of businesses totaling a gain of $21.3 million ($26.7 million after tax). The following table displays the results for the years 2001, 2000 and 1999 through a reconciliation between as-reported income (loss) from continuing operations before cumulative effect of change in accounting principle and income from continuing operations before cumulative effect of change in accounting principle, excluding special items.
Years Ended December 31 ----------------------- 2001 2000 1999 ------- ------ ------ (In Millions) Income (loss) from continuing operations before cumulative effect of change in accounting principle--as reported............ $(306.3) $125.6 $158.7 Asset impairments.................................................. 323.1 10.1 23.1 Restructuring and other charges.................................... 280.4 35.2 11.1 Gains on divestitures of businesses................................ -- -- (55.5) Tax effect of asset impairments, restructuring and other charges and gains on divestitures of businesses.......................... (197.6) (17.4) (5.4) ------- ------ ------ Income from continuing operations before cumulative effect of change in accounting principle, excluding special items $ 99.6 $153.5 $132.0 ======= ====== ======
11 Results of Operations--2001 Compared to 2000 In the following discussion, "year" refers to the year ending December 31, 2001 and "prior year" refers to the year ending December 31, 2000. All comparisons are between these periods unless otherwise noted. Revenue was $1,943.0 million in 2001, down from $2,050.3 million in 2000. Revenue in the United States decreased 8.6 percent compared with 2000, while revenue outside the United States, including exports, decreased 2.2 percent from 2000. Sales in the United States represented 45.4 percent of our 2001 revenue, slightly less than in 2000. Income from continuing operations, before the cumulative effect of change in accounting principle, net of income taxes, excluding asset impairments and restructuring and other charges was $99.6 million in 2001 compared to $153.5 million in 2000. This decline can be attributed to an overall economic downturn impacting the chemical industry worldwide and other factors discussed under "Segment Results" below. Asset impairments totaled $323.1 million ($233.8 million after tax) for 2001 compared to $10.1 million ($6.2 million after tax) in 2000. Based upon a comprehensive review of our long-lived assets we recorded asset impairment charges of $211.9 million related to our U.S. based phosphorus business. The components of asset impairments related to this business, include a $171.0 million impairment of environmental assets built to comply with a Resource Conservation and Recovery Act ("RCRA") Consent Decree ("Consent Decree") at the Pocatello, Idaho facility and a $36.5 million impairment charge for our investment in Astaris, LLC ("Astaris"), our phosphorus joint venture with Solutia, Inc. ("Solutia"). (See Notes 4 and 13 to our consolidated financial statements.) Driving these charges were a decline in market conditions, the loss of a potential site on which to develop an economically viable second purified phosphoric acid ("PPA") plant and our agreement to pay into a fund for the Shoshone-Bannock Tribes as a result of an agreement to support a proposal to amend the Consent Decree permitting the earlier closure of the largest remaining waste disposal pond at Pocatello. In addition, we recorded an impairment charge of $98.9 million related to our Specialty Chemicals segment's lithium operations in Argentina. We established this operation, which includes a lithium mine and processing facilities, approximately five years ago in a remote area of the Andes Mountains. With the entry of a South American manufacturer into this business, resulting in decreased revenues and following the continuation of other unfavorable market conditions, our lithium assets in Argentina became impaired as the total capital invested is not expected to be recovered. An additional $12.3 million of charges related to the impairment of assets in our cyanide operations. During the second quarter of 2000, we recorded asset impairments of $10.1 million ($6.2 million after tax). Impairments of $9.0 million were recognized because of the formation of Astaris (see Note 4 to our consolidated financial statements), including the write down of certain phosphorus assets retained by our company and the accrual of costs related to our planned closure of two phosphorus facilities. Other asset impairments were due to the impact of underlying changes within the Specialty Chemicals segment. See Note 1 to our consolidated financial statements for further discussion on our accounting policies related to asset impairments. Restructuring and other charges. A change in market conditions and in our corporate strategy resulted in restructuring and other charges of $280.4 million ($172.1 million after tax) in the year. A charge of $35.2 million ($21.7 million after tax) was recorded in 2000. We believe that the restructuring and other charges recorded in 2001 have enabled us to engage in long-term growth opportunities for all of our business segments. See Note 1 to our consolidated financial statements for further discussion on our accounting policies related to restructuring and other charges. We had several minor restructuring activities related to corporate reorganization in the first quarter of 2001 totaling approximately $1.0 million. 12 During the second quarter of 2001, we recorded $175.0 million in restructuring and other charges including $160.0 million related to our Industrial Chemicals segment's U.S. based phosphorus business. The components included in restructuring and other charges related to the phosphorus business were as follows: a $68.7 million reserve for further required Consent Decree spending at the Pocatello site; $42.7 million of financing obligations to the Astaris joint venture and other related costs; and a $40.0 million reserve for payments to the Shoshone-Bannock Tribes and $8.6 million of other related charges. In addition, restructuring charges for the quarter included $8.0 million related to our corporate reorganization. The remaining charges of $7.0 million were for the restructuring of two smaller chemical facilities. We reduced our workforce by approximately 135 people in connection with these restructuring activities. During the third quarter of the year, we recorded restructuring charges of $8.5 million. These charges were largely for reorganization costs and corporate restructuring activities including severance and contract commitment costs. (See Note 2 to our consolidated financial statements). We recorded restructuring and other charges of $95.9 million in the fourth quarter of 2001. Most of these charges related to our decision to shutdown operations at Pocatello. These charges include: $36.3 million for our share of Astaris shutdown costs including environmental cleanup, waste removal and other activities; also included are $44.6 million of Pocatello costs related to plant demolition, plant shutdown, severance and other activities. In addition, $12.5 million of severance and other costs related to the Agricultural Products segment were recorded primarily as a result of our decision to refocus certain research and development activities. The remaining charges reflected restructuring initiatives in our Specialty Chemicals segment and in corporate. We reduced our workforce by approximately 182 people in connection with the third and fourth quarter restructuring activities. During 2000, we recorded restructuring and other charges of $35.2 million ($21.7 million after tax). Restructuring charges of $20.6 million were attributable to the formation of Astaris and the concurrent reorganization of our Industrial Chemicals sales, marketing and support organizations, the reduction of office space requirements in our Philadelphia chemical headquarters and pension expense related to the separation of phosphorus personnel from our company. In addition, we recorded environmental accruals of $12.5 million because of increased cost estimates for ongoing remediation of several phosphorus properties. Other restructuring charges included $2.1 million for other projects. Of the approximately 350 employee severances that were expected to occur through the completion of these programs in 2000, 281 occurred at December 31, 2000 while the remainder occurred in 2001. Income (loss) from continuing operations was a loss of $306.3 million in 2001 compared to income of $125.6 million in 2000. Most of the decline can be attributed to after-tax asset impairments and restructuring and other charges of $405.9 million in 2001 compared to after-tax charges of $27.9 million in 2000. Also contributing to the decline were poor economic conditions affecting the chemical industry worldwide. Corporate expenses (excluding restructuring and other charges in 2001 and 2000) were $36.3 million in 2001 and $36.2 million in 2000. Other income and expense, net is comprised primarily of LIFO inventory adjustments and pension income or expense. Net other expense for the year was $1.6 million compared to net other income of $9.6 million in 2000. This variance is largely attributable to increased pension costs and lower amortization of a deferred pension asset. Net interest expense in 2001 was $58.3 million compared to $61.8 million in 2000. The decrease in net interest expense in 2001 was primarily the result of lower average debt levels during the year. 13 Provision (benefit) for income taxes. We recorded an income tax benefit of $166.6 million in 2001 resulting in an effective tax rate of 35.2 percent compared to income tax expense of $33.0 million and an effective tax rate of 20.8 percent in 2000. The differences between the effective tax rates for these periods and the statutory U.S. Federal income tax rate relate primarily to differing foreign tax rates, the impairment of certain Argentina assets, foreign sales corporation benefits, incremental state taxes and non-deductible goodwill amortization. Discontinued operations. We recorded a loss from discontinued operations of $42.5 million ($30.5 million after tax) in 2001. Included in this amount are earnings of Technologies, including interest expense of $11.2 million, which was allocated to discontinued operations in accordance with Accounting Principles Board Statement No. 30 ("APB 30") and later relevant accounting guidance, costs related to the spin-off and additional income tax provision related to the reorganization of our worldwide entities in anticipation of the separation of Technologies from FMC. In addition, we recorded a charge of $18.0 million for updated estimates of environmental remediation costs related to our other discontinued businesses. During 2000, we recorded a net loss from discontinued operations of $17.7 million ($15.0 million after tax). Of this amount, $64.0 million are earnings of the spun-off Technologies business, including allocated interest expense of $30.9 million. Also included are a $80.0 million loss for a settlement of litigation related to our discontinued Defense Systems business and a charge of $1.7 million for interest charges on postretirement benefit obligations. Net income (loss). We recorded a net loss of $337.7 million for 2001 compared to net income of $110.6 million in 2000. This variance reflects the effect of significant asset impairments and restructuring and other charges recorded in 2001. Additional information regarding discontinued operations and the related accounting policies can be found in Notes 1, 3 and 20 to our consolidated financial statements. Segment Results--2001 Compared to 2000 (See Note 20 to our consolidated financial statements for detailed segment results.) Segment operating profit is presented before taxes, asset impairments and restructuring and other charges. Information about how each of these items relates to our businesses at the segment level is discussed below and in Note 20 to our consolidated financial statements. Agricultural Products Agricultural Products revenue decreased to $653.1 million in 2001 from $664.7 million in 2000. Agricultural Products segment operating profit declined to $72.8 million, down 17.1 percent from the prior year. The decrease in Agricultural Products revenues was largely due to a lack of sulfentrazone sales to E.I. du Pont de Nemours and Company ("DuPont") in 2001. In 1998 we entered into an exclusive agreement with DuPont to provide them sulfentrazone in North America for use on soybeans. However, the sale of formulated products incorporating sulfentrazone did not reach expectations and the contract purchases were cancelled in 2001. DuPont no longer has exclusive rights to the use of sulfentrazone on soybeans in North America. We began developing new markets in 2001, expanding our sulfentrazone sales, including sales into the soybean market in North America. We believe that we have recovered approximately one third of the sulfentrazone volumes lost from the absence of DuPont's purchases. Somewhat offsetting the sulfentrazone sales decline in North America was an increase in carfentrazone sales into the rice and cotton defoliation markets as a result of new product registrations. We believe that sulfentrazone sales will increase slightly in 2002; however, we will idle our production facility early in 2002 to allow product inventories to align with expected sales volumes. 14 Agricultural Products sales were also affected by weakened Asian markets due to depressed crop prices, unfavorable climatic conditions and lower pricing in some Asian markets due to weaker exchange rates. Asian revenue shortfalls were offset by stronger demand for herbicides in Latin and South America due mainly to the introduction of several new herbicide registrations in 2001. Agricultural Products operating profit declined to $72.8 million from $87.8 million as a result of a decline in operating margins to 11.1 percent in 2001 from 13.2 percent in 2000. This lower profitability reflects reduced volumes of sulfentrazone, weaker pricing due to lower crop prices, and weaker currencies in Asia and Brazil. The adverse impact of the lower sulfentrazone volumes in North America was significantly offset by a one time contract penalty payment from DuPont of $20.0 million which was paid in the first half of 2001. Additionally, Agricultural Products incurred higher selling costs in North America in 2001 as it pursued new sulfentrazone markets through direct selling instead of through DuPont's sales channels. During the fourth quarter of 2001, Agricultural Products began a restructuring of its operations to focus on key markets and products. We will concentrate our future research and development ("R&D") activities on our core strength of insecticides and reduce all work on herbicides, while continuing our efforts to maximize the market potential of already commercialized herbicide chemistries including clomazone, carfentrazone and sulfentrazone. Additionally, we have reduced our direct sales and support staffs outside North, South and Latin America, relying instead on new and expanded strategic alliances with Ishihara Sangyo Kaisha, Ltd ("ISK") in Asia and Belchim in Europe. A restructuring charge of $12.5 million ($7.8 million after tax) was taken in the fourth quarter to implement these plans. This restructuring should be complete by the end of the first quarter 2002. We believe that Agricultural Products will have a challenging year in 2002, but the actions we have taken to expand product labels, improve market access and reduce costs should allow us to recover the earnings decline that resulted from the loss of DuPont's sulfentrazone business. Specialty Chemicals Specialty Chemicals revenue was $472.0 million in 2001, down from $488.8 million in 2000 due to lower revenue in both the FMC BioPolymer AS ("BioPolymer") and Lithium businesses. Specialty Chemicals segment operating profit declined to $87.5 million, or 5.3 percent from $92.4 million in the prior year. BioPolymer revenue decreases resulted from a combination of weaker demand and lower selling prices for alginate and carrageenan in specialty markets, partially offset by strong growth from microcrystalline cellulose in the pharmaceutical and food ingredients markets. Specialty markets, which include pet food, textiles and household products, experienced the impacts of a slowing economy and lower competitor pricing. Customer inventory corrections and a weak euro also drove sales lower. Lithium revenue decreases resulted from our strategic exit from the commodity lithium carbonate market and slower industrial markets, particularly in Europe. The lithium carbonate market has experienced substantially lower prices since the entry of a new competitor in 1997 which resulted in our decision to exit the market. These sales declines were offset by continued growth in lithium specialty products. Specialty Chemicals operating profit decreased to $87.5 million in 2001 from $92.4 million in 2000 despite relatively flat operating margins as compared to 2000. The decrease in operating profit can be attributed to a decrease in BioPolymer volumes and prices in the pet food, textile and household products markets offset, in part, by lower operating costs and an improved mix in lithium. A weaker euro, compared to the prior year, also unfavorably impacted earnings. 15 Industrial Chemicals Industrial Chemicals revenue decreased to $822.0 million in 2001, compared to $905.6 million in 2000. Industrial Chemical segment operating profit declined by 36.6 percent to $72.6 million in 2001 from $114.5 million in 2000. Revenue decreases reflected weaker demand in most markets for Industrial Chemicals. Weaker end-market demand for glass and the entry of a new competitor resulted in lower soda ash volumes and revenue compared to the prior year. Price increases announced in the late summer of 2001 are not expected to have any material effect on revenues until 2002. In hydrogen peroxide, weakness in the pulp and textile markets resulted in decreased revenues despite the price increases initiated in late 2000 and the application of an energy surcharge in early 2001. Softer demand in the polymer and electronics end-markets also resulted in lower volumes for specialty peroxygens. Foret, our Spain-based operation, recorded increases in sales that reflected strong phosphate and zeolite markets. Phosphate volumes improved as a result of a recovery in their export markets, particularly in the Middle East and North Africa. Zeolite sales increased as a result of an acquisition in the third quarter of 2001 and stronger sales to new and existing customers. Conversely, peroxygen sales declined on lower export sales. Foret's increase in sales was offset by unfavorable translation, due to a weaker euro in 2001. These revenue comparisons were further affected by the inclusion of the sales of our U.S. based phosphorus business in the first three months of 2000. Subsequent U.S. phosphorus sales have been deconsolidated and recorded in earnings from equity investments as part of Astaris, which was formed effective April 1, 2000 (see Note 4 to our consolidated financial statements). We account for Astaris on an equity basis for Industrial Chemicals and therefore, the sales of Astaris are not reflected in our consolidated revenues after March 2000. Industrial Chemicals operating profit (net of minority interests) decreased 36.6 percent to $72.6 million in 2001 from $114.5 million in 2000. Driving the Industrial Chemicals segment's profit decreases were lower sales volumes in hydrogen peroxide, soda ash and active oxidants and reduced earnings from Astaris, as discussed below. Additionally, during 2000 we hedged our natural gas requirements for 2001, which, due to the forward pricing in the market at that time, resulted in generally higher gas costs in 2001 versus the prior year. Offsetting these unfavorable factors were increased pricing in several products. Our U.S. based phosphorus business is comprised of our 50 percent interest in Astaris for the manufacture and sale of our phosphorus-based products, and the activities of our corporate phosphorus division, which manages remediation and other environmental projects associated with the Astaris elemental phosphorus plant in Pocatello, Idaho. Astaris has experienced a difficult business environment as a result of the economic slowdown and significant changes in its manufacturing and sourcing strategy. During the first quarter of 2001, Astaris was asked by its electric power provider, Idaho Power Company, to assist in combating the energy crisis in the state of Idaho. Historically, the Astaris elemental phosphorus facility has been the largest consumer of power in the state. Astaris agreed to work with Idaho Power and signed a two-year agreement to resell 50 megawatts of power to Idaho Power at rates below the then current market prices, but above the rate paid by Astaris under its power contract. The gross economic value of the power contract, in the nine months of 2001 during which the contract was in effect, was $68.0 million of which half, or $34.0 million, is reflected in FMC's earnings in Astaris. However, this decision required Astaris to shutdown one of the two remaining operating furnaces in Pocatello and to source raw materials including purified phosphoric acid and other products from third-party suppliers at an additional cost to Astaris of approximately $60.0 million ($30.0 million is reflected in FMC's earnings in Astaris). This significant restructuring of the supply chain also adversely impacted Astaris' sales. Sales declined due to the intentional reduction of volume capacity and Astaris' inability to meet customer material needs. In December 2001, the Idaho Public Utility Commission ("IPUC") was petitioned by its staff to reduce the future amounts to be paid to Astaris under the power resale contract. This petition is subject to the approval of the full IPUC, which is expected to make a decision later in 2002. Any adverse decision would be subject to appeal. 16 Additionally, the start-up of the new Astaris PPA plant in Soda Springs, Idaho in the second half of the year added costs in 2001. Start-up costs for this plant are expected to continue until early 2002. Our corporate phosphorus division also affected segment operating profit in 2001. Working with the EPA and the Shoshone-Bannock Tribes we agreed to amend the July 1999 Consent Decree to permit the capping of a specific waste disposal pond at the Pocatello site. As part of this settlement, FMC agreed to contribute $40.0 million to a fund for the Tribes to support various Tribal activities. ($30.0 million was paid during 2001). This agreement enabled Astaris to shutdown the Pocatello operation in December 2001. We expect the results of our U.S. based phosphorus operations to improve in 2002. The new Astaris PPA plant in Idaho should be fully operational in early 2002 and start-up expenses experienced in 2001 should be significantly less in 2002. In addition, spending by the corporate phosphorus division will be lower in 2002 compared with 2001 due to lower spending on projects under the Consent Decree. We believe the shutdown of the elemental phosphorus production at Pocatello will enable Astaris to lower its costs by increasing the share of the supplies it obtains from lower cost purified phosphoric acid. Following this challenging year, we believe that results in the Industrial Chemicals segment will improve in 2002. We will continue to focus on lowering the cost of production and we expect to benefit from the 2001 restructuring of our U.S. phosphorus business. However, market demand is expected to continue to be weak through most of 2002 partially offsetting the improvements in our U.S. phosphorus business. Results of Operations - 2000 Compared to 1999 Revenue was $2,050.3 million in 2000, down from $2,320.5 million in 1999. Revenue in the United States decreased 17.3 percent compared with 1999, while revenue outside the United States, including exports, decreased by less than 5.9 percent when compared to 1999. Sales in the United States represented 47.1 percent of our 2000 revenue compared to 50.3 percent in 1999. Revenue. Lower revenue in 2000 when compared with 1999 was principally attributable to the contribution of our phosphorus operations to a joint venture and to divestitures of other businesses, and was offset by revenue from a Specialty Chemicals business acquired in 1999. Beginning April 1, 2000, sales of phosphorus chemicals were recorded by Astaris and are not reflected as revenue in our consolidated financial statements. Our interest in Astaris is accounted for under the equity method and our share of Astaris' operating earnings is included in operating profit for our Industrial Chemicals segment. (See Note 4 to our consolidated financial statements.) Income from continuing operations, before the cumulative effect of change in accounting principle, net of income taxes excluding asset impairments and restructuring and other charges (in 2000 and 1999) and gains on divestitures of businesses (in 1999) was $153.5 million in 2000 compared with $132.0 million in 1999. This increase reflects the performance of our business segments discussed more fully below and in Note 20 to our consolidated financial statements. Gains on divestitures of businesses. On July 9, 1999, we completed the sale of our bioproducts business to Cambrex Corporation for $38.2 million in cash, resulting in a pre-tax gain of $20.1 million. Our bioproducts business was included in our Specialty Chemicals segment and had 1999 revenue of $13.3 million (through the date of divestiture). On July 31, 1999, we completed the sale of our process additives business to Great Lakes Chemical Corporation for $161.1 million in cash, resulting in a gain of $35.4 million on both a pre-tax and after-tax basis. Our process additives business was included in our Specialty Chemicals segment and had 1999 revenue of $98.5 million (through the date of divestiture). 17 Asset impairments recorded by the company amounted to $10.1 million ($6.2 million after tax) and $23.1 million ($14.1 million after tax) for the years ended December 31, 2000 and 1999, respectively. During the second quarter of 2000, we recorded asset impairments of $10.1 million. Impairments of $9.0 million were recognized as a result of the formation of Astaris (see Note 4 to our consolidated financial statements), including the writedown of certain phosphorus assets retained by our company and the accrual of costs related to the planned closure of two phosphorus facilities. Other impairments were due to the impact of underlying changes within the Specialty Chemicals segment. In the third quarter of 1999, we recorded asset impairments of $23.1 million. Asset impairments of $14.7 million were required to write off the remaining net book values of two U.S. lithium facilities. Both facilities were constructed to run pilot and development quantities for new lithium-based products. During the third quarter of 1999, management determined that it would not be feasible to use the facilities as configured. Additionally, an impairment charge of $8.4 million was required to write off the remaining net book value of a caustic soda facility in Green River, Wyoming. Estimated future cash flows related to this facility indicated that an impairment of the full value had occurred. Restructuring and other charges. Total restructuring and other charges of $35.2 million ($21.7 million after tax) were recorded in 2000 compared to $11.1 million ($6.8 million after tax) in 1999. Restructuring charges of $20.6 million were attributable to the Astaris formation and the concurrent reorganization of our Industrial Chemicals sales, marketing and support organizations, the reduction of office space requirements in our Philadelphia chemical headquarters and pension expense related to the separation of phosphorus personnel from our company. In addition, we recorded environmental accruals of $12.5 million because of increased cost estimates for ongoing remediation of several phosphorus properties. Other restructuring charges included $2.1 million for several smaller projects. In the third quarter of 1999, we recorded restructuring and other charges of $11.1 million ($6.8 million after tax). Restructuring and other charges of $9.2 million resulted primarily from strategic decisions to divest or restructure a number of businesses and support departments, including certain Agricultural Products and corporate and shared service support departments. The remaining charge related to actions, including headcount reductions, required to achieve planned synergies from acquisitions of businesses in Specialty Chemicals. Income (loss) from continuing operations of $125.6 million in 2000 was lower when compared with $158.7 million in 1999, primarily resulting from gains on divestitures of businesses in 1999 and higher restructuring and other charges recorded in 2000. Corporate expenses (excluding restructuring and other charges in 2000 and 1999) of $36.2 million in 2000 reflected a decrease of $5.1 million from 1999. The company's cost reduction efforts are responsible for this trend. Net interest expense was $61.8 million and $76.4 million during 2000 and 1999, respectively. The decrease in 2000 was the result of lower average debt levels when compared with 1999. Other income and expense, net is comprised primarily of LIFO inventory adjustments and pension and postretirement plan adjustments. Other income of $9.6 million remained relatively flat when compared to $9.3 million recorded in 1999. Discontinued operations. During 2000, we recorded a net loss from discontinued operations of $17.7 million ($15.0 million after tax). Of this amount, $64.0 million represents the earnings of the spun-off Technologies business including interest expense of $30.9 million allocated to discontinued operations in accordance with APB 30 and later relevant accounting guidance. Also included is a $80.0 million loss for a settlement of litigation related to our discontinued Defense Systems business and a charge of $1.7 million for interest charges on postretirement benefit obligations. 18 We recorded net income from discontinued operations of $73.5 million ($53.9 million after tax) in 1999. Of this amount, $79.2 million related to the earnings of the spun-off Technologies businesses including allocated interest expense of $30.3 million. Results of discontinued operations in 1999 included gains of $53.7 million from the sale of properties in California that were formerly used by our divested defense business (as discussed below). In addition, in the fourth quarter of 1999, we provided $59.4 million in response to updated estimates of environmental remediation costs, primarily at our former Defense Systems sites, and increased estimates of our liabilities for general liability, workers' compensation, postretirement benefit obligations, legal defense, property maintenance and other costs. During the year ended December 31, 1999, we sold several real estate properties formerly used by United Defense, L.P., and our Defense Systems operations divested by our company in 1997. In the second quarter of 1999, we received $33.5 million in cash, recognizing a gain of $29.5 million, and in the fourth quarter of 1999, we received $31.0 million in cash, recognizing a gain of $24.2 million related to property sales. Net income in 2000 was $110.6 million compared to $212.6 million in 1999. Contributing to this decrease was a one-time gain of $55.5 million related to the divestiture of a Specialty Chemicals business in 1999 offset by a charge of $66.7 million to discontinued operations in 2000 related to our former Defense Systems business segment. Segment Results - 2000 Compared to 1999 Agricultural Products Agricultural Products revenue increased to $664.7 million in 2000 compared to $632.4 million in 1999. Operating profits increased to $87.8 million in 2000 compared to $64.3 million in 1999. Agricultural Products revenue increased because of stronger sales in Latin and North America, which more than offset lower sales in Asia. North American revenue improved after a return to more normal pest pressures following 1999's unusually low levels. Latin American sales improved due to a rapid recovery from the devaluation of the Brazilian real in 1999, a new distribution agreement for third-party products in Brazil and a stronger Mexican market. Increased revenue in 2000 also reflected higher volumes for herbicides and pyrethroids, offset by lower sales of carbamates. Operating profits in our Agricultural Products segment increased to $87.8 million in 2000 from $64.3 million in 1999 on increased volumes and lower costs, partially offset by higher research and development spending to develop a new herbicide and to fund our strategic alliance with Devgen, a Belgian biotechnology company, to support the company's insecticide discovery program. Specialty Chemicals Specialty Chemicals revenue was $488.8 million in 2000, down from $564.5 million in 1999. Operating profit was $92.4 million compared to $73.5 million. Lower revenue in 2000 reflected our divestitures of the process additives and bioproducts businesses, both of which occurred in the third quarter of 1999, and the effect of unfavorable foreign currency exchange rates. Partially offsetting this decrease in 2000 was revenue from Pronova Biopolymer AS, an alginate business acquired in mid-1999. The Pronova Biopolymer operation was combined with certain carrageenan and microcrystalline cellulose businesses and renamed FMC BioPolymer AS. BioPolymer's revenue reflected a strong market for pharmaceutical and food-grade microcrystalline cellulose along with growth in sales to Latin America and Asia, but was partially offset by the impact of foreign currency translation of the euro to the U.S. dollar. 19 Sales of lithium products were up slightly in 2000. Increased revenue reflected higher volumes of butyllithium to the polymer and pharmaceutical markets. Lithium volume increases were offset by lower pricing, primarily the result of weak European currencies. Specialty Chemicals' operating profit in 2000 increased to $92.4 million from $73.5 million in 1999. BioPolymer's increased profitability was based on lower manufacturing costs in 2000 for carrageenan and realized synergies associated with the acquisition of the alginate product line when compared with 1999. Lithium's improved operating profitability in 2000 when compared with 1999 was a result of higher sales, and the successful implementation of manufacturing cost reduction initiatives. Industrial Chemicals Industrial Chemicals revenue decreased to $905.6 million in 2000 from $1,141.3 million in 1999. Operating profit (net of minority interests) declined to $114.5 million in 2000 from $144.4 million in 1999. Lower revenue was primarily the result of the contribution of the phosphorus business to the newly formed Astaris joint venture, effective April 1, 2000. After that date, phosphorus revenue was no longer consolidated with our revenue. Phosphorus revenue of $327.0 million through December 31, 1999 is included in 1999 segment revenue, while revenue in 2000 before the joint venture formation amounted to $79.2 million. Subsequent to the first quarter of 2000, our equity share of Astaris' earnings was included in segment operating profit for Industrial Chemicals. Other factors contributing to reduced revenue were the translation impact of the weaker euro and competitive pressures both at Spain-based FMC Foret and at Astaris. Partially offsetting the decline in revenue were increased sales of hydrogen peroxide, reflecting both volume and price increases compared with 1999, and soda ash, a result of the Tg Soda Ash acquisition in mid-1999. Reduced profitability for Industrial Chemicals to $114.5 million in 2000 was primarily the result of increased energy costs for all businesses, but especially at Astaris, while foreign currency translation losses negatively affected reported operating profitability at Foret. In addition, segment profits were down due to phosphorus environmental compliance costs retained by our company for design, implementation and depreciation of capital assets in Pocatello, Idaho in connection with the Consent Decree. Offsetting these declines in profitability were higher earnings for soda ash and hydrogen peroxide. Soda ash profitability increased in 2000, reflecting the Tg Soda Ash acquisition and reduced costs despite significant increases in energy prices. Hydrogen peroxide's favorable operating profits were largely the result of a strong pulp and paper market. In addition, our share of Astaris' results reflected the cost reduction benefits of the joint venture's rationalization and restructuring programs. Taxes Although our domestic earnings (losses) are generally subject to tax expense (benefit) at the statutory rate of 35.0 percent, many factors alter our consolidated tax rate. These factors include non-deductible or non-taxable transactions related to goodwill or other items, differing foreign tax rates, state tax increments, depletion, extraterritorial income exclusion, and other permanent differences. Our effective tax rate of 35.2 percent on income from continuing operations in 2001 also includes the beneficial impact of deductible restructuring and impairment charges recorded during the year. (See Notes 6, 7 and 10 to our consolidated financial statements.) New Accounting Standards Adopted On January 1, 2001 we adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS No. 138, "Accounting for Certain 20 Derivative Instruments and Certain Hedging Activities," an amendment of SFAS No. 133. These Statements establish accounting and reporting standards that require every derivative instrument to be recorded on the consolidated balance sheet as either an asset or a liability measured at its fair value. SFAS No. 133, as amended, requires the transition adjustment resulting from adopting these Statements to be reported in net income or accumulated other comprehensive income, as appropriate, as the cumulative effect of change in accounting principle. On January 1, 2001, we recorded the fair value of all outstanding derivative instruments as assets or liabilities on the consolidated balance sheet. The transition adjustment was a $0.9 million after-tax loss to earnings and a $16.4 million after-tax gain to accumulated other comprehensive income (loss). Both components of the adjustment were recorded as a cumulative effect of change in accounting principle. New Accounting Pronouncements In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations." SFAS No. 141 requires that all business combinations be accounted for by the purchase method and adds disclosure requirements related to business combination transactions. SFAS No. 141 also establishes criteria for the recognition of intangible assets apart from goodwill. This Statement applies to all business combinations for which the acquisition date was July 1, 2001 or later. We had no significant acquisitions during 2001. We intend to implement the provisions of SFAS No. 141 in any of our future business combinations. On June 30, 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which establishes guidelines for the financial accounting and reporting of acquired goodwill and other intangible assets. With the adoption of SFAS No. 142, goodwill is no longer subject to amortization; rather, it will be subject to at least an annual assessment for impairment by applying a fair value based test. We are required to adopt the provisions of this pronouncement no later than the beginning of 2002, however, goodwill and other intangible assets acquired after June 30, 2001, are subject immediately to the amortization provisions of this statement. We had no material acquisitions of goodwill or other intangibles in the second half of 2001. We will adopt the amortization provisions of SFAS No. 142 beginning in the first quarter of 2002. During 2001, 2000 and 1999, goodwill and other intangible amortization (pretax and after discontinued operations) was $19.4 million, $13.5 million and $12.0 million, respectively. We believe adopting SFAS No. 142 will result in approximately a $4.0 million pre-tax benefit to earnings in 2002. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. We are required to adopt the provisions of this pronouncement no later than the beginning of 2003 and are evaluating the potential impact of adopting SFAS No. 143. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The Statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Statement also supersedes APB No. 30 provisions related to the accounting and reporting for the disposal of a segment of a business. This Statement establishes a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. The Statement retains most of the requirements in SFAS No. 121 related to the recognition of impairment of long-lived assets to be held and used. The Statement is effective for years beginning after December 15, 2001. We are evaluating the potential impact of adopting SFAS No. 144. Environmental Obligations Our company, like other industrial manufacturers, is involved with a variety of environmental matters in the ordinary course of conducting its business and is subject to federal, state and local environmental laws. We believe strongly that we have a responsibility to protect the environment, public health and employee safety. This responsibility includes cooperating with other parties to resolve issues created by past and present handling of wastes. 21 When issues arise, including notices from the Environmental Protection Agency or other government agencies identifying our company as a Potentially Responsible Party ("PRP"), our environmental remediation management assesses and manages the issues. When necessary, we use multifunctional teams composed of environmental, legal, financial and communications personnel to ensure that our actions are consistent with our responsibilities to the environment and public health, as well as to our employees and shareholders. Environmental provisions totaling $68.8 million ($42.0 million after tax) were recorded this year. These provisions largely related to the remediation of the Pocatello site as discussed in Note 13 of our consolidated financial statements. Also included were costs related to continued cleanup of certain discontinued manufacturing operations from previous years. This provision and those made in 2000 and 1999, and our accounting policies on environmental remediation, are more fully described in Notes 1 and 13 to our consolidated financial statements. In the second quarter of 2000, we provided environmental reserves totaling $12.5 million related to ongoing remediation of several phosphorus manufacturing properties as part of the restructuring and other charges described previously. Additional information regarding our environmental accounting policies and environmental liabilities is included in Notes 1 and 13, respectively, to our consolidated financial statements. Information regarding environmental obligations associated with our discontinued operations is included in Note 3 to our consolidated financial statements. Estimates of 2002 environmental spending are included in the section below entitled "Cash Flow Analysis." Liquidity and Capital Resources In 2001, we experienced the net cash impact of significant special items recorded in the year and spending related to the spin-off of Technologies. This spending was somewhat offset by the cash proceeds received in the IPO of Technologies. Cash from operations, supplemented with proceeds from the IPO and a new credit facility, provided funding for our capital spending program, debt pay down and interest payments throughout 2001. Capital expenditures totaling $145.6 million in 2001, which included $41.2 million of required Pocatello Consent Decree spending, were down 26.2 percent from 2000. We believe capital expenditures will be reduced in 2002, largely because of the absence of this Consent Decree spending. Principal categories of capital spending in 2002 include replacement of existing plant equipment and compliance spending related to environmental and safety standards. We retired $128.3 million of long-term debt in 2001, in part with a portion of the proceeds from the IPO of Technologies. Cash paid for interest in 2001 was $79.1 million compared with $101.6 million in 2000. This decrease can be attributed to lower average debt levels in 2001 compared to 2000. Future cash needs include the scheduled repayment of several significant financings over the next two years, operating cash requirements and capital expenditures. We plan to meet these liquidity needs through cash generated from operations, commercial paper borrowings, accounts receivable securiti-zation, borrowings under bank credit facilities, and if necessary, the issuance of additional long-term debt. We maintain a universal shelf registration under which, at December 31, 2001, $345.0 million of securities could be issued. We currently maintain a commercial paper financing program with outstanding borrowings at December 31, 2001 of $33.0 million compared to $16.8 million at December 31, 2000. 22 Our total committed contracts that will affect cash over the next five years and beyond are as follows:
Expected Cash Payments by Year ---------------------------------- 2006 & Contractual Commitments 2002 2003 2004 2005 beyond Total - ----------------------- ------ ------- ----- ------ ------ -------- (In Millions) Short-term debt.............................. $136.5 $ -- $ -- $ -- $ -- $ 136.5 Long-term debt............................... 135.2 182.2 0.5 89.5 379.6 787.0 Lease obligations............................ 25.8 24.9 23.3 22.7 103.2 199.9 Forward energy and foreign exchange contracts 16.2 6.2 2.4 1.1 -- 25.9 Guarantees of vendor financing............... 56.0 -- -- -- -- 56.0 ------ ------- ----- ------ ------ -------- Total........................................ $369.7 $ 213.3 $26.2 $113.3 $482.8 $1,205.3 ====== ======= ===== ====== ====== ========
Our five-year, non-amortizing committed revolving credit agreement expired in December 2001. There were no outstanding balances under this agreement at the due date. At the same time we entered into a new $240.0 million committed revolving credit facility to meet certain operating cash needs, capital expenditures, and commercial paper demands. This credit facility will expire in December 2002. The total amount outstanding under this facility at December 31, 2001 was $68.0 million, which was used to pay down outstanding commercial paper. The credit agreement contains financial covenants related to leverage (measured as the ratio of debt to adjusted earnings), interest coverage (measured as the ratio of interest expense to adjusted earnings) and consolidated net worth. We were in compliance with the covenants as of December 31, 2001. We expect to renew or replace this credit facility prior to its expiration. In January 2002, we arranged a supplemental $50.0 million committed credit facility to meet short-term seasonal financing needs. This credit facility expires on August 31, 2002. We also obtain financing through an accounts receivable securitization. We sell receivables, without recourse, through our wholly owned bankruptcy-remote subsidiary, FMC Funding Corporation, which then sells the receivables to an unrelated finance company. The sold receivables and repurchase obligations related to the financing are not recorded on our consolidated balance sheets, because we have limited risk to repurchase the receivables. The financing from the securitization totaled $79.0 million at December 31, 2001 compared to $113.0 million on December 31, 2000. The agreement for the sale of accounts receivable provides for the continuation of the program on a revolving basis through November 2002. We expect to renew or replace this financing prior to its expiration. At December 31, 2001, long-term debt included $28.8 million of 6.75 percent Exchangeable Senior Subordinated Debentures due 2005. (See Note 11 to our consolidated financial statements.) These debentures are callable by FMC at par plus accrued interest upon at least 30 days' prior notice. These debentures are exchangeable by the holders at any time into the common stock of Meridian Gold, Inc. (NYSE: MDG), the successor to a former subsidiary of FMC, at an exchange price of $15.125 per share, subject to adjustment. FMC may elect to pay the holders in cash an amount equivalent to the value of the Meridian Gold common stock into which the holders could exchange their debentures. At December 31, 2001, FMC did not hold any shares of Meridian Gold common stock. On February 19, 2002, the closing price of Meridian Gold common stock on the New York Stock Exchange was $13.16. If the price goes above $15.125, it is reasonably likely that during 2002 the holders would exercise their exchange rights. Long-term debt also includes $44.3 million of variable rate industrial and pollution control revenue bonds that are supported by bank letters of credit. The letters of credit generally have a term of thirteen months and extend each month for an additional month unless and until the bank sends us a letter of non-renewal. At December 31, 2001, no notice of non-renewal had been received. 23 The current rating of our commercial paper and similar short-term indebtedness is A-3 by Standard & Poor's Ratings Group ("S&P") and P-3 by Moody's Investors Service, Inc. ("Moody's"). The market for commercial paper with this rating is limited. The current rating of our senior unsecured long-term indebtedness is BBB- by S&P and Baa3 by Moody's. A downgrade in our credit ratings, which may be changed, superseded or withdrawn at any time, could increase the cost and restrict the availability of future financings. The following table displays credit facilities, debt obligations and other items along with the cash payments that could be required to repay them, if required following a downgrade or series of downgrades in our credit rating:
Potential Cash Facility Payments -------- ------------- (In Millions) Commercial paper..................... $33.0 Accounts receivable securitization(1) $79.0 Forward energy contracts............. $13.3
- -------- (1) Program terminates upon a reduction in rating to Ba2 by Moody's or BB by S&P or below Our future liquidity could be affected by certain letters of credit, commitments and guarantees we provide to vendors, customers and others for which we are contingently liable. In connection with the spin-off of Technologies, we retained liability for various contingent obligations totaling $289.0 million at December 31, 2001. Contingent obligations include guarantees of the performance of Technologies under various customer contracts, reimbursements on behalf of Technologies under letters of credit and surety bonds, and guarantees of indebtedness of Technologies. We have a guarantee from Technologies providing for reimbursement to us if we are ever called upon to satisfy these obligations. Technologies has obtained contractual releases of FMC reducing the level of liabilities for which we are contingently liable to $175.0 million at February 12, 2002. Because our expectation that the underlying obligations will be met and the existence of the guarantee from Technologies, we believe it is unlikely that we would have to pay any of these contingent obligations and expect this contingent liability to continue to be reduced throughout 2002. The majority of these obligations will expire before the end of 2003. We have provided an agreement to lenders of Astaris under which we have agreed to make equity contributions to Astaris sufficient to make up one half of any short-fall in Astaris earnings below certain levels. Astaris earnings did not meet the agreed levels for 2001 and we do not expect that such earnings will meet the levels agreed for 2002. We contributed $31.3 million to Astaris under this arrangement in 2001 and expect to contribute a similar amount in 2002. The proportional amount of Astaris indebtedness subject to this agreement from FMC at December 31, 2001 was $111.9 million. Our estimates of future contributions are based on Astaris forecasts and are subject to some uncertainty. We provide guarantees to financial institutions on behalf of certain Agricultural Products customers for their seasonal borrowing. The customers' obligations to us are largely secured by liens on their crops. The total of these guarantees at December 31, 2001 was $56.0 million. (See Note 19 to our consolidated financial statements.) On June 30, 1999, FMC acquired the assets of Tg Soda Ash, Inc. ("TgSA") from Elf Atochem North America, Inc. for approximately $51.0 million in cash and a contingent payment due at year-end 2003. The contingent payment amount, which will be based on the financial performance of the combined soda ash operations between 2001 and 2003, cannot currently be determined but could be as much as $75.0 million. Our ability to pay the principal and interest on our indebtedness as it comes due will depend upon our current and future performance. Our performance is affected by general economic conditions and by financial, competitive, political, business and other factors. Many of these factors are beyond our control. We believe that the cash generated from our businesses coupled with our ability to obtain financing will be sufficient to enable us 24 to make our debt payments as they become due. We also actively evaluate opportunities to refinance our existing obligations when financing is available on attractive terms. If, however, we do not generate sufficient cash or complete such financings on a timely basis, we may be required to seek additional financing or sell equity on terms which may not be as favorable as we could have otherwise obtained. No assurance can be given that any refinancing, additional borrowing or sale of equity will be possible when needed or that we will be able to negotiate acceptable terms. In addition, our access to capital is affected by prevailing conditions in the financial and equity capital markets, as well as our own financial condition. Cash Flow Analysis Cash and cash equivalents at December 31, 2001 and December 31, 2000 were $23.4 million and $7.3 million, respectively. We had total borrowings of $923.5 million and $1,007.5 million as of December 31, 2001 and 2000, respectively. Operating working capital, which includes trade receivables (net), inventories, other current assets, accounts payable, accrued payroll, other current liabilities and the current portion of accrued pension and other postretirement benefits, increased $67.0 million to $24.8 million at December 31, 2001, from an unfavorable $42.2 million at December 31, 2000. Factors contributing to the increase in operating working capital at year-end 2001 when compared with 2000 include increased accounts receivable and inventory amounts. Cash required by operating activities of $90.0 million for the year ended December 31, 2001 decreased from $298.3 million of cash provided by operations in 2000 primarily as a result of increased restructuring spending accompanied by higher inventory and accounts receivable balances. Also contributing to the variance was a decrease in our accounts receivable financing balance in 2001 compared to the prior year. Cash required by investing activities of $154.9 million in 2001 increased from the 2000 requirement of $97.4 million, reflecting the impact of a prior year distribution from Astaris, which was not repeated in the current year. Capital spending (excluding acquisitions) of $145.6 million for the year ended December 31, 2001 decreased when compared with 2000. Lower spending on significant capital projects was due to lower Consent Decree spending at Pocatello. Cash provided by financing activities in 2001 of $376.5 million was higher than the 2000 requirement of $162.0 million, primarily due to the contribution related to the distribution of Technologies assets and an increase in long-term debt offset by long-term debt paydowns of $128.3 million. Projected 2002 spending also includes approximately $10.3 million for environmental compliance at current operating sites, which is an operating expense of the company, plus approximately $35.5 million of remediation spending and $11.2 million for environmental study costs at current operating, previously operated and other sites, which have been accrued in prior periods. Dividends On November 29, 2001, our Board of Directors approved the spin-off of the remaining 83 percent of Technologies making it an independent publicly traded company. The spin-off qualified as a tax-free distribution to U.S. stockholders. Stockholders of record as of December 31, 2001 received approximately 1.72 shares of common stock of the new company for every 1.0 share of our stock. Fractional shares were paid in cash to stockholders in lieu of fractional shares on December 31, 2001. No cash dividends were paid in 2001 other than amounts paid in lieu of fractional shares as discussed above. No cash dividends were paid in 2000. No cash dividends are expected to be paid in 2002. 25 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our primary financial market risks include changes in foreign currency exchange rates, interest rates and commodity pricing. In managing our exposure to these risks, we may use derivative financial instruments in accordance with established policies and procedures. We account for these derivatives in accordance with SFAS No. 133 (see "New Accounting Standards Adopted" and Note 1 to our consolidated financial statements). We do not use derivative financial instruments for trading purposes. At December 31, 2001, our derivative holdings consisted primarily of foreign currency forward contracts and natural gas forward contracts. When we or one of our subsidiaries sells or purchases products or services outside the United States, transactions are frequently denominated in currencies other than the U.S. dollar. Exposure to variability in currency exchange rates is mitigated, when possible, with natural hedges, whereby purchases and sales in the same foreign currency and with similar maturity dates offset one another. A significant portion of our business is conducted in currencies other than the U.S. dollar, which is our reporting currency. We recognize foreign currency gains and losses arising from our operations in the period incurred. As a result, currency fluctuations among the U.S. dollar and the currencies in which we do business have caused and will continue to cause foreign currency transaction gains and losses, which could be material. Due to the weakness of the euro in the period from 1999 through 2001, our business results have been adversely affected by unfavorable U.S. dollar translation of earnings of our operations in Europe. We cannot predict the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates. We take actions to manage our foreign currency exposure such as entering into forwards and swaps, where available, but we cannot ensure that our strategies will adequately protect our operating results from the effects of exchange rate fluctuations. Additionally, we initiate hedging activities by entering into foreign exchange forward or option contracts with third parties when natural hedges do not exist. The maturity dates of the currency exchange agreements that provide hedge coverage are consistent with those of the underlying purchase or sales commitments. To monitor our currency exchange rate risks, we use a sensitivity analysis, which measures the impact on earnings of an immediate 10 percent devaluation of the foreign currencies to which it has exposure. Based on a sensitivity analysis at December 31, 2001, fluctuations in currency exchange rates in the near term would not materially affect our consolidated operating results, financial position or cash flows. We believe that our hedging activities have been effective in reducing our risks related to currency exchange rate fluctuations. We are exposed to changes in interest rates because of our financing and cash management activities, which include long- and short-term debt to maintain liquidity and fund our business operations. In managing interest rate risk, our strategic policy is to monitor the ratio of our fixed- to floating-rate debt. We may, from time to time, use interest rate swaps to manage our exposure to changes in interest rates. We did not enter into any material interest rate swaps in 2001 or 2000. To address our exposure to risks from changes in commodity prices, we enter into forward or swap contracts relating to energy purchases used in our manufacturing processes. The forward energy contracts qualifying as hedges are accounted for in accordance with SFAS No. 133. The gains or losses on these contracts are included as an adjustment to the cost of sales or services when the contracts are settled. For more information on derivative financial instruments and related accounting policies, see Notes 1 and 17 to our consolidated financial statements. 26 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following are included herein: 1) Consolidated Statements of Income for the years ended December 31, 2001, 2000 and 1999 2) Consolidated Balance Sheets as of December 31, 2001 and 2000 3) Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 4) Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999 5) Notes to Consolidated Financial Statements 6) Five-Year Summary of Selected Financial Data Supplementary selected financial data is incorporated herein under Note 21 "Quarterly Financial Information" on page 68 of this report. 7) Independent Auditors' Report 8) Management's Report on Financial Statements 27 FMC CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31 ----------------------------------- 2001 2000 1999 -------- -------- -------- (In Millions, Except Per Share Data Revenue..................................................... $1,943.0 $2,050.3 $2,320.5 Costs and expenses Cost of sales or services................................... 1,408.7 1,450.9 1,691.6 Selling, general and administrative expenses................ 243.3 231.3 273.0 Research and development expenses........................... 99.8 97.8 100.6 Gains on divestitures of businesses (Note 5)................ -- -- (55.5) Asset impairments (Note 6).................................. 323.1 10.1 23.1 Restructuring and other charges (Note 7).................... 280.4 35.2 11.1 -------- -------- -------- Total costs and expenses.................................... 2,355.3 1,825.3 2,043.9 -------- -------- -------- Income (loss) from continuing operations before minority interests, interest income and expense, income taxes and cumulative effect of change in accounting principle.................................. (412.3) 225.0 276.6 Minority interests.......................................... 2.3 4.6 5.1 Interest income............................................. 4.7 4.5 7.4 Interest expense............................................ 63.0 66.3 83.8 -------- -------- -------- Income (loss) from continuing operations before income taxes and cumulative effect of change in accounting principle.................................. (472.9) 158.6 195.1 Provision (benefit) for income taxes (Note 10).............. (166.6) 33.0 36.4 -------- -------- -------- Income (loss) from continuing operations before............. cumulative effect of change in accounting principle...... (306.3) 125.6 158.7 Discontinued operations, net of income taxes (Note 3)....... (30.5) (15.0) 53.9 -------- -------- -------- Income (loss) before cumulative effect of change in accounting principle.................................. (336.8) 110.6 212.6 Cumulative effect of change in accounting principle, net of income taxes (Note 1)............................. (0.9) -- -- -------- -------- -------- Net income (loss)........................................... $ (337.7) $ 110.6 $ 212.6 ======== ======== ======== Basic earnings (loss) per common share (Note 1) Continuing operations....................................... $ (9.85) $ 4.13 $ 5.04 Discontinued operations (Note 3)............................ (0.98) (0.49) 1.71 Cumulative effect of change in accounting principle (Note 1) (0.03) -- -- -------- -------- -------- Net income (loss)........................................... $ (10.86) $ 3.64 $ 6.75 ======== ======== ======== Diluted earnings (loss) per common share (Note 1) Continuing operations....................................... $ (9.85) $ 3.97 $ 4.90 Discontinued operations (Note 3)............................ (0.98) (0.47) 1.67 Cumulative effect of change in accounting principle (Note 1) (0.03) -- -- -------- -------- -------- Net income (loss)........................................... $ (10.86) $ 3.50 $ 6.57 ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 28 FMC CORPORATION CONSOLIDATED BALANCE SHEETS
December 31 ------------------------- 2001 2000 -------- -------- (In Millions, Except Share and Par Value Data) ASSETS Current assets Cash and cash equivalents........................................................ $ 23.4 $ 7.3 Trade receivables, net of allowance of $8.4 in 2001 and $6.2 in 2000 (Note 1).... 441.7 358.6 Inventories (Notes 1 and 8)...................................................... 207.2 171.4 Other current assets............................................................. 99.6 90.2 Deferred income taxes (Note 10).................................................. 48.4 60.8 Net assets of Technologies (Note 2).............................................. -- 637.7 -------- -------- Total current assets............................................................. 820.3 1,326.0 Investments...................................................................... 25.2 73.0 Property, plant and equipment, net (Note 9)...................................... 1,087.8 1,358.8 Goodwill and intangible assets, net.............................................. 116.3 121.5 Other assets..................................................................... 132.8 100.3 Deferred income taxes (Note 10).................................................. 294.8 82.1 -------- -------- Total assets..................................................................... $2,477.2 $3,061.7 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term debt (Note 11)........................................................ $ 136.5 $ 113.0 Accounts payable, trade and other................................................ 327.7 329.1 Amounts owed to Technologies (Note 18)........................................... 4.7 -- Accrued and other liabilities.................................................... 319.7 257.0 Accrued payroll.................................................................. 53.4 52.0 Guarantees of vendor financing (Note 19)......................................... 56.0 51.8 Current portion of long-term debt (Note 11)...................................... 135.2 22.7 Current portion of accrued pensions and other postretirement benefits (Note 12).. 18.2 24.3 Income taxes payable (Note 10)................................................... 27.8 32.3 -------- -------- Total current liabilities........................................................ 1,079.2 882.2 Long-term debt, less current portion (Note 11)................................... 651.8 871.8 Accrued pension and other postretirement benefits, less current portion (Note 12) 109.2 130.7 Reserve for discontinued operations and other liabilities (Notes 3 and 13)....... 296.3 261.3 Other liabilities................................................................ 77.1 68.8 Minority interests in consolidated companies..................................... 44.8 46.5 Commitments and contingent liabilities (Notes 13, 17 and 19)..................... -------- -------- Stockholders' equity (Notes 14 and 15) Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 2001 or 2000............................................... -- -- Common stock, $0.10 par value, authorized 130,000,000 shares in 2001 and 2000; issued 39,234,578 shares in 2001 and 38,662,349 shares in 2000.................. 3.9 3.9 Capital in excess of par value of common stock................................... 217.5 181.6 Retained earnings................................................................ 691.8 1,398.9 Accumulated other comprehensive loss............................................. (186.8) (272.6) Treasury stock, common, at cost; 7,929,281 shares in 2001 and 7,977,709 shares in 2000.................................................... (507.6) (511.4) -------- -------- Total stockholders' equity....................................................... 218.8 800.4 -------- -------- Total liabilities and stockholders' equity....................................... $2,477.2 $3,061.7 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 29 FMC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31 ------------------------- 2001 2000 1999 ------- ------- ------- (In Millions) Cash provided (required) by operating activities of continuing operations: Income from continuing operations before cumulative effect of change in accounting principle......................... $(306.3) $ 125.6 $ 158.7 Adjustments to reconcile income from continuing operations before cumulative effect of change in accounting principle to cash provided by operating activities of continuing operations: Depreciation and amortization.................................. 131.6 129.8 128.5 Gains on divestitures of businesses (Note 5)................... -- -- (55.5) Asset impairments (Note 6)..................................... 323.1 10.1 23.1 Restructuring and other charges (Note 7)....................... 280.4 35.2 11.1 Deferred income taxes (Note 10)................................ (200.3) (19.0) 3.9 Minority interests............................................. 2.3 4.6 5.1 Other.......................................................... 2.3 (21.4) 1.9 Changes in operating assets and liabilities, excluding the effect of acquisitions and divestitures of businesses and formation of a joint venture: Accounts receivable sold (Note 1).............................. (34.0) (8.9) 120.1 Trade receivables, net......................................... (48.7) 70.9 (6.9) Inventories.................................................... (40.9) (0.2) 24.9 Other current assets and other assets.......................... (54.8) 15.9 0.6 Accounts payable, accrued payroll, other current liabilities and other liabilities............... (108.6) (31.1) 24.5 Income taxes payable........................................... (4.5) (7.5) (4.7) Accrued pension and other postretirement benefits, net......... (31.6) (5.7) (10.7) ------- ------- ------- Cash provided (required) by operating activities.................. (90.0) 298.3 424.6 ======= ======= ======= Cash provided (required) by discontinued operations (Note 3)...... (119.3) (56.0) 17.4 ======= ======= ======= Cash provided (required) by investing activities: Acquisitions and joint venture investments (Note 4)............. (0.3) -- (236.9) Capital expenditures............................................ (145.6) (197.3) (195.4) Proceeds from divestitures of businesses (Note 5)............... -- -- 199.3 Distribution from Astaris (Note 4).............................. -- 88.8 -- Proceeds from disposal of property, plant and equipment......... 11.3 5.5 2.6 (Increase) decrease in investments.............................. (20.3) 5.6 (18.3) ------- ------- ------- Cash required by investing activities............................. (154.9) (97.4) (248.7) ======= ======= ======= Cash provided (required) by financing activities: Net proceeds from issuance (repayment) of commercial paper...... 44.6 (191.5) 23.9 Net increase (decrease) under uncommitted credit facilities..... (18.6) (37.9) 39.7 Net increase (decrease) in other short-term debt................ (8.5) (11.2) (72.3) Increase in long-term debt...................................... 20.0 -- 84.6 Contribution from Technologies, net (Note 2).................... 430.7 117.9 122.8 Repayment of long-term debt..................................... (128.3) (51.7) (270.1) Distributions to minority partners.............................. (3.2) (2.8) (5.9) Issuances of common stock....................................... 39.8 15.8 7.4 Repurchase of capital stock, net (Note 15)...................... -- (0.6) (136.4) ------- ------- ------- Cash provided (required) by financing activities.................. 376.5 (162.0) (206.3) ------- ------- ------- Effect of exchange rate changes on cash and cash equivalents...... 3.8 0.5 0.6 ======= ======= ======= Increase (decrease) in cash and cash equivalents.................. 16.1 (16.6) (12.4) Cash and cash equivalents, beginning of year...................... 7.3 23.9 36.3 ======= ======= ======= Cash and cash equivalents, end of year............................ $ 23.4 $ 7.3 $ 23.9 ======= ======= =======
- -------- Supplemental cash flow information: Cash paid for interest was $79.1 million, $101.6 million and $118.7 million and cash paid for income taxes, net of refunds, was $18.0 million, $33.3 million and $27.0 million for 2001, 2000 and 1999, respectively. The accompanying notes are an integral part of the consolidated financial statements. 30 FMC CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Accumulated Stock, Capital Other $0.10 in Excess Retained Comprehensive Treasury Comprehensive Par Value of Par Earnings Income (loss) Stock Income (loss) --------- --------- -------- ------------- -------- ------------- (In Millions, Except Par Value) Balance December 31, 1998.............. $ 3.8 $158.4 $1,075.7 $(134.1) $(374.4) $ 108.1 ======= Net income............................. 212.6 $ 212.6 Stock options and awards exercised (Note 14)............................ 7.4 Purchases of treasury shares (Note 15)............................ (135.9) Net purchases of shares for benefit plan trust (Note 15)................. (0.5) Foreign currency translation adjustments (Note 16)................ (61.9) (61.9) Minimum pension liability adjustment (Note 12)................. (7.5) (7.5) ----- ------ -------- ------- ------- ------- Balance December 31, 1999.............. 3.8 165.8 1,288.3 (203.5) (510.8) $ 143.2 ======= Net income............................. 110.6 $ 110.6 Stock options and awards exercised (Note 14)............................ 0.1 15.8 Net purchases of shares for benefit plan trust (Note 15)................. (0.6) Foreign currency translation adjustments (Note 16)................ (69.8) (69.8) Minimum pension liability adjustment (Note 12)................. 0.7 0.7 ----- ------ -------- ------- ------- ------- Balance December 31, 2000.............. 3.9 181.6 1,398.9 (272.6) (511.4) $ 41.5 ======= Net income (loss)...................... (337.7) $(337.7) Stock options and awards exercised (Note 14)............................ 35.9 Net purchases of shares for benefit plan trust (Note 15)................. 3.8 Gain from sale of Technologies stock................................ 140.1 Equity distribution related to spin-off of Technologies (Note 2)............. (509.5) 115.0 Net deferred loss on derivative contracts (Notes 1 and 17)........... (16.6) (16.6) Foreign currency translation adjustments (Note 16)................ (12.5) (12.5) Minimum pension liability adjustment (Note 12)................. (0.1) (0.1) ----- ------ -------- ------- ------- ------- Balance December 31, 2001.............. $ 3.9 $217.5 $ 691.8 $(186.8) $(507.6) $(366.9) ===== ====== ======== ======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 31 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 PRINCIPAL ACCOUNTING POLICIES Nature of operations. FMC Corporation ("FMC" or "the company") is a diversified chemical company serving agricultural, industrial and consumer markets globally with innovative solutions, applications and quality products. FMC increased its focus on the chemical industry in 2001 by spinning off its non-chemical business segments, Energy Systems and Food and Transportation Systems, into a separately owned public company, FMC Technologies, Inc. ("Technologies") (Note 2). The company operates in three distinct business segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. Agricultural Products provides crop protection and pest control products for worldwide markets. Specialty Chemicals includes food ingredients that are used to enhance structure, texture and taste; pharmaceutical additives for binding and disintegrant use; and lithium specialties for pharmaceutical synthesis and energy storage. Industrial Chemicals encompasses a wide range of inorganic materials in which FMC possesses market and technology leadership, including soda ash, hydrogen peroxide, phosphorus and peroxygens in both North America and in Europe through FMC's subsidiary, FMC Foret, S.A. Consolidation. The consolidated financial statements include the accounts of FMC and all significant majority-owned subsidiaries and ventures. All material intercompany accounts and transactions are eliminated in consolidation. Basis of presentation. In 2001 the company spun off a significant portion of its business into FMC Technologies, a separately-owned public company (Note 2). The spin-off, which was completed through a tax-free dividend, was accounted for in accordance with Accounting Principles Board Statement No. 30 ("APB 30"). The Consolidated Statements of Income and Consolidated Statements of Cash Flows for the periods ended December 31, 2000 and 1999 and all corresponding footnotes, have been reclassified to reflect Technologies as a discontinued operation. The Consolidated Balance Sheet for the year ended December 31, 2000, along with the corresponding footnotes, have also been reclassified with the net assets to be distributed to Technologies segregated and shown as a current asset. The Consolidated Statements of Changes in Stockholders' Equity has not been reclassified. Interest expense. Net interest expense, for all periods presented, has been allocated to discontinued operations based on net assets in accordance with APB 30 and later relevant accounting guidance. The amount of net interest expense allocated to discontinued operations was $6.8 million (net of an income tax benefit of $4.4 million), $18.8 million (net of an income tax benefit of $12.1 million) and $18.5 million (net of an income tax benefit of $11.8 million) for 2001, 2000 and 1999 respectively. Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results are likely to differ from those estimates, but management does not believe such differences will materially affect the company's financial position, results of operations or cash flows. Investments. Investments in companies in which FMC's ownership interest is 50.0 percent or less and in which FMC does not exercise significant influence are accounted for using the equity method after eliminating the effects of any material intercompany transactions. All other investments are carried at their fair values or at cost, as appropriate. Cash equivalents. The company considers investments in all liquid debt instruments with original maturities of three months or less to be cash equivalents. 32 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Accounts receivable. The company sells trade receivables without recourse through its wholly owned bankruptcy-remote subsidiary, FMC Funding Corporation. The subsidiary then sells the receivables to a securitization company under an accounts receivable financing facility on an ongoing basis. These transactions resulted in reductions of accounts receivable of $79.0 million and $113.0 million at December 31, 2001 and 2000, respectively. Net discounts recognized on sales of receivables are included in selling, general and administrative expenses in the consolidated statements of income and amounted to $0.8 million, $0.2 million and $1.6 million for the years ended December 31, 2001, 2000 and 1999, respectively. The agreement for the sale of accounts receivable provides for continuation of the program on a revolving basis expiring in November 2002. The company accounts for the sales of receivables in accordance with the requirements of Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities," which the company adopted in 2001. Inventories. Inventories are stated at the lower of cost or market value. Inventory costs include those costs directly attributable to products before sale, including all manufacturing overhead but excluding costs to distribute. All domestic inventories, excluding materials and supplies, are determined on a last-in, first-out ("LIFO") basis (Note 8). Property, plant and equipment. Property, plant and equipment, including capitalized interest, are recorded at cost. Depreciation for financial reporting purposes is provided principally on the straight-line basis over the estimated useful lives of the assets (land improvements--20 years, buildings--20 to 50 years, and machinery and equipment--3 to 18 years). Gains and losses are reflected in income upon sale or retirement of assets. Expenditures that extend the useful lives of property, plant and equipment or increase productivity are capitalized. Ordinary repairs and maintenance are charged to operating costs. Asset impairments. The company reviews the recovery of the net book value of property, plant and equipment in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," for impairment whenever events and circumstances indicate that the net book value of an asset may not be recoverable from the estimated undiscounted future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the net book value, an impairment loss is recognized equal to an amount by which the net book value exceeds the fair value of assets. The company will be revising its impairment review process in 2002 in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Restructuring and other charges. Management continually performs strategic reviews and assesses the return on its business. This sometimes results in a plan to restructure the operations of a business. When a plan is final, an accrual for severance and other contractual obligations is recorded. Capitalized interest. Interest costs of $9.4 million in 2001 ($9.0 million in 2000 and $2.3 million in 1999) associated with the construction of certain long-lived assets have been capitalized as part of the cost of those assets and are being amortized over the assets' estimated useful lives. Deferred costs and other assets. Unamortized capitalized software costs totaling $35.7 million and $40.1 million at December 31, 2001 and 2000, respectively, are components of other assets, which also include bond discounts and other deferred charges. Capitalized software costs are amortized over expected useful lives ranging from three to ten years. Recoverability of deferred software costs is assessed on an ongoing basis, and write-downs to net realizable value are recorded as necessary. 33 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Goodwill and intangible assets. Goodwill and identifiable intangible assets (such as trademarks) are amortized on a straight-line basis over their estimated useful or legal lives, not exceeding 40 years. The company periodically evaluates the recoverability of the net book value of goodwill and intangible assets based on expected future undiscounted cash flows for each operation having a significant goodwill balance. In cases where undiscounted expected future cash flows are less than the net book value, an impairment loss is recognized equal to an amount by which the net book value exceeds the fair value of assets. Goodwill and intangible amortization amounted to $19.4 million, $13.5 million and $12.0 million for the years ended December 31, 2001, 2000 and 1999, respectively. The company will be adopting SFAS 142, "Goodwill and Other Intangible Assets," in 2002. (See "New Accounting Pronouncements.") Revenue recognition. Revenue is recognized when the earnings process is complete, which is generally upon transfer of title, which occurs upon shipment. Income taxes. Current income taxes are provided on income reported for financial statement purposes adjusted for transactions that do not enter into the computation of income taxes payable. Deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Income taxes are not provided for the equity in undistributed earnings of foreign subsidiaries or affiliates when it is management's intention that such earnings will remain invested in those companies, but are provided in the year in which the decision is made to repatriate the earnings. Foreign currency translation. Assets and liabilities of most foreign operations are translated at exchange rates in effect at the balance sheet date, and the foreign operations' income statements are translated at the monthly exchange rates for the period. For operations in non-highly inflationary countries, translation gains and losses are recorded as a component of accumulated other comprehensive income (loss) in stockholders' equity until the foreign entity is sold or liquidated. For operations in highly inflationary countries and where the local currency is not the functional currency, inventories, property, plant and equipment, and other non-current assets are converted to U.S. dollars at historical exchange rates, and all gains or losses from conversion are included in net income. Foreign currency effects on cash and cash equivalents and debt in hyperinflationary economies are included in interest income or expense. Derivative financial instruments. FMC mitigates certain financial exposures, including currency risk and energy purchase exposures, through a controlled program of risk management that includes the use of derivative financial instruments. The company enters into foreign exchange contracts, including forward, option combination, and purchased option contracts, to reduce the effects of fluctuating foreign currency exchange rates. FMC adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS No. 133") and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," an amendment of SFAS No. 133, on January 1, 2001. These Statements establish accounting and reporting standards that require every derivative instrument to be recorded on the consolidated balance sheet as either an asset or a liability measured at its fair value. SFAS No. 133 requires the transition adjustment resulting from adopting these Statements to be reported in net income or accumulated other comprehensive income, as appropriate, as the cumulative effect of a change in accounting principle. Accordingly, on January 1, 2001, the company recorded the fair value of all outstanding derivative instruments as assets or liabilities on the consolidated balance sheet. The transition adjustment was a $0.9 million after-tax loss to earnings and $16.4 million after-tax gain to accumulated other comprehensive income. The loss was recorded as a cumulative effect of a change in accounting principle. In accordance with the provisions of SFAS No. 133, as amended, the company recognizes all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, the company generally 34 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) designates the derivative as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). Changes in the fair value of a derivative that is designated as and meets all the required criteria for a cash flow hedge are recorded in accumulated other comprehensive income and reclassified into earnings as the underlying hedged item affects earnings. Changes in the fair value of a derivative that is not designated as a hedge are recorded immediately in earnings. For periods prior to 2001, gains and losses on foreign currency hedges of existing assets and liabilities are included in the carrying amounts of those assets or liabilites and are ultimately recognized in income when those carrying amounts are converted. Gains and losses related to foreign currency hedges of firm commitments also are deferred and included in the basis of the transaction when it is complete. Gains and losses on unhedged foreign currency transactions are included in income as part of cost of sales or services. Gains and losses on derivative financial instruments that protect the company from exposure in a particular currency, but do not currently have a designated underlying transaction, are also included in income as part of cost of sales or services. If a hedged item matures, is sold, extinguished, or terminated, or is related to an anticipated transaction that is no longer likely to take place, the derivative financial instrument related to the hedged item is closed out and the related gain or loss is included in income as part of cost of sales or services or interest expense as appropriate in relation to the hedged item. Also, FMC purchased exchange-traded contracts to manage exposure to energy purchases used in the company's manufacturing processes. Gains and losses on these contracts are included as adjustments to cost of sales or service when the contracts are settled. FMC formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes relating all derivatives that are designated cash flow hedges to specific forecasted transactions. The company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, the company will discontinue hedge accounting with respect to that derivative prospectively. The gains and losses reported for the ineffective portion of its cash flow hedges were minimal for 2001. Cash flows from hedging contract settlements are reported in the statements of cash flows in the same categories as the cash flows from the transactions being hedged. Treasury stock. Shares of common stock repurchased under the company's stock repurchase plans are recorded at cost as treasury stock and result in a reduction of stockholders' equity in the consolidated balance sheets. When the treasury shares are reissued under FMC's stock compensation plans, the company uses a FIFO method for determining cost. The difference between the cost of the shares and the reissuance price is added to or deducted from capital in excess of par value of common stock. Earnings (loss) per common share ("EPS"). Basic EPS has been computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted EPS has been computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year plus the weighted average number of additional common shares that would have been outstanding during the year if potentially dilutive common shares had been issued under the company's stock 35 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) compensation plans. In periods such as 2001, when a net loss from continuing operations has been recorded, basic shares outstanding are used to compute both basic and diluted EPS, as the use of diluted shares would be anti-dilutive. The weighted average numbers of shares outstanding used to calculate the company's annual EPS were as follows:
December 31 2001 2000 1999 ------ ------ ------ (In Thousands) Basic.. 31,052 30,439 31,516 Diluted 31,052 31,576 32,377
Segment information. The company's determination of its reportable segments based on its strategic business units and the commonalities among the products and services within each segment corresponds to the manner in which the company's management reviews and evaluates operating performance. FMC has combined certain similar operating businesses that meet applicable criteria established under SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." Agricultural Products, Specialty Chemicals and Industrial Chemicals have been identified as the reportable segments of the company under SFAS No. 131. Business segment data are included in Note 20. Segment operating profit is defined as total revenue less operating expenses. The following items have been excluded in computing segment operating profit: corporate staff expense, interest income and expense associated with corporate debt facilities and investments, income taxes, gains (or losses) on divestitures of businesses (Note 5), restructuring and other charges (Note 7), asset impairments (Note 6), LIFO inventory adjustments, and other income and expense items. Information about how asset impairments, restructuring, and other charges relate to FMC's businesses at the segment level is discussed in Notes 6 and 7. Segment assets and liabilities are those assets and liabilities that are recorded and reported by segment operations. Segment operating capital employed represents segment assets less segment liabilities. Segment assets exclude corporate and other assets, which are principally cash equivalents, LIFO reserves, deferred income tax benefits, eliminations of intercompany receivables, property and equipment not attributable to a specific segment, and credits relating to the sale of receivables. Segment liabilities exclude substantially all debt, income taxes, pension and other postretirement benefit liabilities, environmental reserves, restructuring reserves, deferred gains on sale and leaseback of equipment, fair value of currency contracts, intercompany eliminations, and reserves for discontinued operations. Geographic segment revenue represents sales by location of the company's customers. Geographic segment long-lived assets include investments, net property, plant and equipment, and other non-current assets. Geographic segment data are included in Note 20. Environmental obligations. The company provides for environmental-related obligations when they are probable and amounts can be reasonably estimated. Where the available information is sufficient to estimate the amount of liability, that estimate has been used. Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any other, the lower end of the range has been used. Estimated obligations to remediate sites that involve oversight by the U.S. Environmental Protection Agency ("EPA"), or similar government agencies, are generally accrued no later than when a Record of Decision ("ROD"), or equivalent, is issued, or upon completion of a Remedial Investigation/Feasibility Study ("RI/FS") that is accepted by FMC and the appropriate government agency or agencies. Estimates are reviewed quarterly by 36 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) the company's environmental remediation management, as well as by financial and legal management and, if necessary, adjusted as additional information becomes available. The estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, required remediation methods, and other actions by or against governmental agencies or private parties. The company's environmental liabilities for continuing and discontinued operations are principally for costs associated with the remediation and/or study of sites at which the company is alleged to have disposed of hazardous substances. Such costs principally include, among other items, RI/FS, site remediation, costs of operation and maintenance of the remediation plan, fees to outside law firms and consultants for work related to the environmental effort, and future monitoring costs. Estimated site liabilities are determined based upon existing remediation laws and technologies, specific site consultants' engineering studies or by extrapolating experience with environmental issues at comparable sites. Provisions for environmental costs are reflected in income, net of probable and estimable recoveries from named Potentially Responsible Parties ("PRPs") or other third parties. Such provisions incorporate inflation and are not discounted to their present values. In calculating and evaluating the adequacy of its environmental reserves, the company has taken into account the joint and several liability imposed by the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and the analogous state laws on all PRPs and has considered the identity and financial condition of each of the other PRPs at each site to the extent possible. The company has also considered the identity and financial condition of other third parties from whom recovery is anticipated, as well as the status of the company's claims against such parties. In general, the company is aware of a degree of uncertainty in disputes regarding the financial contribution by certain named PRPs, which is common to most multiparty sites. Although the company is unable to forecast the ultimate contributions of PRPs and other third parties with absolute certainty, the degree of uncertainty with respect to each party is taken into account when determining the environmental reserve by adjusting the reserve to reflect the facts and circumstances on a site-by-site basis. The company believes that recorded recoveries related to PRPs are realizable in all material respects. Recoveries are recorded in the reserve for discontinued operations and other liabilities. New accounting standards adopted. FMC adopted SFAS No. 133,"Accounting for Derivative Instruments and Hedging Activities," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," an amendment of SFAS No. 133. These Statements establish accounting and reporting standards for derivative instruments. See discussion of the effects of this adoption under "Derivative Financial Instruments." New accounting pronouncements. In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations." SFAS No. 141 requires that all business combinations be accounted for by the purchase method and adds disclosure requirements related to business combination transactions. SFAS No. 141 also establishes criteria for the recognition of intangible assets apart from goodwill. This Statement applies to all business combinations for which the acquisition date was July 1, 2001 or later. The company intends to implement the provisions of SFAS No. 141 in any of its future business combinations. On June 30, 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which establishes guidelines for the financial accounting and reporting of acquired goodwill and other intangibles. With the adoption of SFAS No. 142, goodwill is no longer subject to amortization; rather it will be subject to at least an annual assessment for impairment by applying a fair value based test. The company is required to adopt the provisions of this pronouncement no later than the beginning of 2002; however, goodwill and other intangible 37 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) assets acquired after June 30, 2001, are subject immediately to the amortization provisions of this statement. FMC had no material acquisitions of goodwill or other intangibles in the second half of 2001. The company will adopt the amortization provisions of SFAS No. 142 beginning in the first quarter of 2002. The company believes adopting SFAS No. 142 will result in approximately a $4.0 million pre-tax benefit to earnings in 2002. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The company is required to adopt the provisions of this pronouncement no later than the beginning of fiscal 2003 and is evaluating the potential impact of adopting SFAS No. 143. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The Statement supersedes SFAS No. 121 and the Statement also supersedes APB No. 30 provisions related to the accounting and reporting for the disposal of a segment of a business. This Statement establishes a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. The Statement retains most of the requirements in SFAS No. 121 related to the recognition of impairment of long-lived assets to be held and used. The Statement is effective for fiscal years beginning after December 15, 2001. The company is evaluating the potential impact of adopting SFAS No. 144. Reclassifications. Certain prior period amounts have been reclassified to conform to the current period's presentation. NOTE 2 FMC'S PLAN FOR REORGANIZATION In October 2000, the company announced it was initiating a strategic reorganization (the "reorganization" or "separation") that ultimately would split the company into two independent publicly held companies--a chemical company and a machinery company. The remaining chemical company, which continues to operate as FMC Corporation, includes the Agricultural Products, Specialty Chemicals and Industrial Chemicals business segments. The new machinery company, FMC Technologies, Inc. ("Technologies") includes FMC's former Energy Systems and Food and Transportation Systems business segments. On June 1, 2001, in accordance with the Separation and Distribution Agreement between the two companies, FMC distributed substantially all of the net assets comprising the businesses of Technologies. On June 19, 2001, Technologies completed an initial public offering ("IPO") of 17 percent of its equity through the issuance of common stock. FMC continued to own the remaining 83 percent of Technologies through December 31, 2001. Subsequent to the IPO, Technologies made payments of $480.1 million to FMC in exchange for the net assets distributed to Technologies on June 1, 2001. The payments received by FMC were used to retire short-term and long-term debt. During the second quarter of 2001, FMC recognized a $140.1 million gain in stockholders' equity on the sale of Technologies stock. FMC expects to make a final payment in 2002 for the remaining shared expense amounts owed to Technologies. On November 29, 2001, FMC's Board of Directors approved the spin-off of the company's remaining 83 percent ownership in Technologies through a tax-free distribution to FMC's stockholders. Effective December 31, 2001, the company distributed approximately 1.72 shares of Technologies common stock for every share of FMC common stock based on the number of FMC shares outstanding on the record date, December 12, 2001. The distribution resulted in a reduction of stockholders' equity of $509.5 million. 38 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The total after-tax costs related to the spin-off were $31.6 million through December 31, 2001, of which $15.1 million has been classified as discontinued operations. NOTE 3 DISCONTINUED OPERATIONS The company's results of discontinued operations comprised the following:
Year Ended December 31 ---------------------- 2001 2000 1999 ------ ------ ------ (In Millions) Earnings (losses) of discontinued operations of Energy Systems and Food and Transportation Systems (net of income taxes of $19.1 million in 2001; $12.3 million in 2000 and $21.9 million in 1999)(1)........................ $(19.6) $ 51.7 $ 57.3 Provision for liabilities related to previously discontinued operations (net of income tax benefits of $7.1 million in 2001; $15.0 million in 2000 and $23.2 million in 1999)............................................................................... (10.9) (66.7) (36.2) Gain on sale of Defense Systems properties (net of income taxes of $20.9 million)................................................................... -- -- 32.8 ------ ------ ------ Discontinued operations, net of income taxes.......................................... $(30.5) $(15.0) $ 53.9 ====== ====== ======
- -------- (1) Results reported separately by Technologies are reported on a stand-alone basis and differ from results of discontinued operations as reported here. Effective December 31, 2001 the company completed the spin-off of its Energy Systems and Food and Transportation Systems business segments to its stockholders as an independent publicly-held company, FMC Technologies, Inc. (Note 2). The company recorded a loss from discontinued operations of $42.5 million ($30.5 million after tax). Included in this amount are earnings of Technologies, interest expense of $11.2 million, which was allocated to discontinued operations in accordance with APB 30 and later relevant accounting guidance, costs related to the spin-off and additional income tax provision related to the reorganization of FMC's worldwide entities in anticipation of the separation of Technologies from FMC. In addition, the company recorded a charge of $18.0 million for updated estimates of environmental remediation costs related to FMC's other discontinued businesses. During 2000, the company recorded a net loss from discontinued operations of $17.7 million ($15.0 million after tax). Of this amount, $64.0 million are the earnings of the spun-off Technologies business including interest expense of $30.9 million. Also included is a $80.0 million loss for a settlement of litigation related to our discontinued Defense Systems business, and a charge of $1.7 million for interest on postretirement benefit obligations. FMC recorded net income from discontinued operations of $73.5 million ($53.9 million after tax) in 1999. Of this amount, $79.2 million related to the earnings of the spun-off Technologies businesses, including allocated interest expense of $30.3 million. Results of discontinued operations in 1999 included gains of $53.7 million from the sale of properties in California that were formerly used by our divested defense business (as discussed below). In addition, in the fourth quarter of 1999, the company provided $59.4 million in response to updated estimates of environmental remediation costs, primarily at our former Defense Systems sites, and increased estimates of our liabilities for general liability, workers' compensation, postretirement benefit obligations, legal defense, property maintenance and other costs. 39 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) During the year ended December 31, 1999, FMC sold several real estate properties formerly used by United Defense, L.P., and our Defense Systems operations divested by our company in 1997. In the second quarter of 1999, the company received $33.5 million in cash, recognizing a gain of $29.5 million, and in the fourth quarter of 1999, we received $31.0 million in cash, recognizing a gain of $24.2 million (net of income tax provision of $9.4 million), related to property sales. Reserve for Discontinued Operations and Other Liabilities. With the exception of certain real estate for which FMC has short-term or long-term remediation obligations, disposals of the assets of discontinued operations have been completed within one year of the date the discontinuation plan was approved. In addition to the 1997 sale of the company's Defense Systems operations, residual liabilities relate to operations discontinued between 1976 and 1984 - primarily the Film and Fiber, Chlor-Alkali, Power Transmission and Construction Equipment businesses. Most residual liabilities are of a long-term nature and will be settled over a number of years. The reserve for discontinued operations and other liabilities consists of obligations for discontinued operations and for the long-term portion of the company's environmental remediation at continuing operations and at other closed sites. See Note 13 for further information regarding the nature of FMC's environmental liabilities. Liabilities totaled $296.3 million and $261.3 million at December 31, 2001 and 2000, respectively. The liability at December 31, 2001 comprised $203.5 million (net of recoveries) for environmental remediation and study obligations, most of which relate to former chemical plant sites; $38.0 million for product liability and other potential claims; $52.1 million for retiree medical and life insurance benefits provided to employees of former chemical businesses and the Construction Equipment business; and $2.7 million related to the sale of the Defense Systems and Chlor-Alkali operations. The company's obligation related to the settlement of litigation for discontinued operations amounted to $80.0 million and was included in other current liabilities at December 31, 2000. See Note 19. The company uses actuarial methods, to the extent practicable, to monitor the adequacy of product liability and postretirement benefit reserves on an ongoing basis. The environmental liabilities are subject to the accounting and review practices described in Notes 1 and 13. While the amounts required to settle the company's liabilities for discontinued operations could ultimately differ materially from the estimates used as a basis for recording these liabilities, management believes that changes in estimates or required expenditures for any individual cost component will not have a material adverse impact on the company's liquidity or financial condition in any single year and that, in any event, such costs will be satisfied over many years. Spending in 2001, 2000 and 1999, respectively, included $43.4 million, $53.5 million and $64.2 million for environmental obligations; $3.4 million, $7.9 million and $12.2 million for product liability and other claims; $3.3 million, $5.5 million and $4.8 million for retiree benefits; and $4.3 million, $4.7 million and $5.2 million related to net settlements of Defense Systems obligations. Environmental recoveries in 2001, 2000 and 1999 were $12.5 million, $14.2 million and $56.9 million, respectively. NOTE 4 BUSINESS COMBINATIONS AND JOINT VENTURES All acquisitions were accounted for using the purchase method and, accordingly, the purchase prices have been allocated to the assets acquired and liabilities assumed based on the estimated fair values of such assets and liabilities at the dates of acquisition. The excess of the purchase prices over the fair values of the net tangible assets acquired has been recorded as intangible assets, primarily goodwill, which has been amortized over 40 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) periods ranging from 10 to 40 years. The company is currently reviewing the impact of the adoption of SFAS No. 141 (Note 1). Had the below acquisitions occurred at the beginning of the earliest period presented, the effect on FMC's consolidated financial statements would not have been significantly different from the amounts reported, and accordingly, pro forma financial information has not been provided. The purchase prices for all the below acquisitions were satisfied from cash flows from operations and external financing. Results of operations of the acquired companies have been included in the company's consolidated statements of income from the respective dates of acquisition. On June 30, 1999, the company completed the acquisition of the assets of Pronova Biopolymer AS ("Pronova") from a wholly-owned subsidiary of Norsk Hydro for approximately $184.0 million in cash. The company made an additional payment of $3.3 million in January 2000 as final settlement of the transaction. Pronova, headquartered in Drammen, Norway, is a leading producer of alginates used in the pharmaceutical, food and industrial markets. The company recorded goodwill and other intangible assets totaling approximately $135.0 million related to the acquisition. Pronova's operations are included in the Specialty Chemicals segment. Also on June 30, 1999, FMC acquired the assets of Tg Soda Ash, Inc. ("TgSA") from Elf Atochem North America, Inc. for approximately $51.0 million in cash and a contingent payment due at year-end 2003. The contingent payment amount, which will be based on the financial performance of the combined soda ash operations between 2001 and 2003, cannot currently be determined but could be as much as $75.0 million. No goodwill was recorded as a result of this transaction. TgSA's operations are included in the Industrial Chemicals segment. Joint ventures. Effective April 1, 2000, FMC and Solutia Inc. ("Solutia") formed a joint venture that includes the North American and Brazilian phosphorus chemical operations of both companies. The joint venture, Astaris LLC ("Astaris"), is a limited liability company owned equally by FMC and Solutia. Solutia's equity interest in the Fosbrasil joint venture, which is engaged in the production of purified phosphoric acid ("PPA"), was also transferred and became part of Astaris. Astaris has also assumed all FMC/NuWest agreements relating to a PPA facility being built near Soda Springs, Idaho, and will purchase all of the PPA output from that facility as part of those agreements. The phosphate operations of FMC Foret were retained by FMC and were not transferred to the joint venture. Following its formation, Astaris divested certain operations in Lawrence, Kansas, and plant assets located in Augusta, Georgia. Effective April 1, 2000, FMC has accounted for its investment in Astaris under the equity method. FMC's share of Astaris' earnings is included in the Industrial Chemicals segment. FMC's sales of phosphorus chemicals were $327.0 million for the year ended December 31, 1999, and $79.2 million for the three months ended March 31, 2000. In the third quarter of 2000, FMC received a cash distribution from Astaris of $110.3 million. This amount included $21.5 million in satisfaction of FMC's receivable from the joint venture, resulting from FMC providing its share of operating capital to the joint venture during the interim period between its formation and the procurement of financing from an external source. Assets and liabilities transferred by FMC to the joint venture (including inventory, property and all other contributed accounts) have been deconsolidated from FMC's balance sheet. Restructuring charges and asset impairments (Notes 6 and 7) in 2001 resulted in FMC's equity investment in Astaris being fully impaired. FMC's equity investment in Astaris totaled $24.0 million at December 31, 2000. 41 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The company completed a number of smaller acquisitions and joint venture investments during the years ended December 31, 2001, 2000 and 1999. NOTE 5 BUSINESS DIVESTITURES On July 9, 1999, the company completed the sale of its Bioproducts business to Cambrex Corporation for $38.2 million in cash, resulting in a pre-tax gain of $20.1 million ($12.2 million after tax). The Bioproducts business was included in the Specialty Chemicals segment and had 1999 revenue of $13.3 million (through the date of divestiture). On July 31, 1999, FMC completed the sale of its process additives business to Great Lakes Chemical Corporation for $161.1 million in cash, resulting in a gain of $35.4 million on both a pre-tax and after-tax basis. The process additives business was included in the Specialty Chemicals segment and had 1999 revenue of $98.5 million (through the date of divestiture). The company also completed a number of smaller divestitures during the years ended December 31, 2001, 2000 and 1999. NOTE 6 ASSET IMPAIRMENTS The company periodically reviews the recorded value of its long-lived assets, to determine if the future cash flows to be derived from these properties will be sufficient to recover the remaining recorded asset values. Asset impairments totaled $323.1 million ($233.8 million after tax) for 2001 compared to $10.1 million ($6.2 million after tax) in 2000. Based upon a comprehensive review of FMC's long-lived assets the company recorded asset impairment charges of $211.9 million related to our U.S. based phosphorus business. The components of asset impairments related to this business include a $171.0 million impairment of environmental assets built to comply with a RCRA Consent Decree ("Consent Decree") at the Pocatello, Idaho facility and a $36.5 million impairment charge for the company's investment in Astaris. (See Note 4.) Driving these charges were a decline in market conditions, the loss of a potential site on which to develop economically viable second purified phosphoric acid ("PPA") plant and our agreement to pay into a fund for the Shoshone-Bannock Tribes as a result of an agreement to support a proposal to amend the Consent Decree to permit the earlier closure of the largest remaining waste disposal pond at Pocatello. In addition, FMC recorded an impairment charge of $98.9 million related to its Specialty Chemicals segment's lithium operations in Argentina. The company established this operation, which includes a lithium mine and processing facilities, approximately five years ago in a remote area of the Andes Mountains. With the entry of a South American manufacturer into this business, resulting in decreased revenues and following the continuation of other unfavorable market conditions, the company's lithium assets in Argentina became impaired as the total capital invested is not expected to be recovered. An additional $12.3 million of charges related to the impairment of assets in our cyanide operations. During 2000 FMC recorded asset impairments of $10.1 million ($6.2 million after tax). Impairments of $9.0 million were recognized because of the formation of Astaris (Note 4), including the write down of certain phosphorus assets retained by the company and the accrual of costs related to the company's planned closure of two phosphorus facilities. Other impairments were due to the impact of underlying changes within the Specialty Chemicals segment. In the third quarter of 1999, FMC recorded asset impairments of $23.1 million ($14.1 million after tax). Asset impairments of $14.7 million were required to write off the remaining net book values of two U.S. lithium 42 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) facilities. Both facilities were constructed to run pilot and development quantities for new lithium-based products. During the third quarter of 1999, management determined that it would not be feasible to use the facilities as configured. Additionally, an impairment charge of $8.4 million was required to write off the remaining net book value of a caustic soda facility in Green River, Wyoming. Estimated future cash flows related to this facility indicated that an impairment of the full value had occurred. NOTE 7 RESTRUCTURING AND OTHER CHARGES A change in market conditions and corporate strategy resulted in restructuring and other charges of $280.4 million ($172.1 million after tax) in 2001, a charge of $35.2 million ($21.7 million after tax) in 2000, and a charge $11.1 million ($6.8 million after tax) in 1999. During the second quarter of 2001, the company recorded $175.0 million in restructuring and other charges including $160.0 million related to its Industrial Chemicals segment's U.S. based phosphorus business. The components included in restructuring and other charges related to the phosphorus business were as follows: a $68.7 million reserve for further required Consent Decree spending at the Pocatello site; $42.7 million of financing obligations to the Astaris joint venture and other related costs; and a $40.0 million reserve for the payments to the Shoshone-Bannock Tribes and $8.6 million of other related charges. In addition, restructuring charges for the quarter included $8.0 million related to FMC's corporate reorganization. The remaining charges of $7.0 million were for the restructuring of two smaller chemical facilities. The company reduced its workforce by approximately 135 people in connection with these restructuring activities. During the third quarter of the year, the company recorded restructuring charges of $8.5 million. These charges were largely for reorganization costs and corporate restructuring activities including severance and contract commitment costs. (See Note 2.) FMC recorded restructuring and other charges of $95.9 million in the fourth quarter of 2001. Most of these charges related to the company's decision to shut down operations at Pocatello. These charges include: $36.3 million for its share of Astaris shutdown costs including plant demolition, environmental cleanup, waste removal and other activities; also included are $44.6 million of Pocatello costs related to plant shutdown, severance and other activities. In addition, $12.5 million of severance and other costs related to the Agricultural Products segment were recorded as a result of the company's decision to restructure research and development and certain administrative expenses. The remaining charges reflected restructuring initiatives in our Specialty Chemicals segment and in corporate. The following table shows a rollforward of restructuring and other reserves for 2001 and the related spending and other changes:
Workforce-Related, Facility Shutdown Financing Costs and Other Consent Obligations Reserves Tribal Fund(1) Decree(1) to Astaris(1) Reorganization Total ------------------ -------------- --------- ------------- -------------- ------- (In Millions) Reserve at 12/31/2000 $ 4.8 $ -- $ -- $ -- $ -- $ 4.8 Increase in reserves. 97.3 40.0 68.7 42.7 31.7 280.4 Cash payments........ (23.7) (30.0) (34.2) (14.7) (8.0) (110.6) Non-cash charges..... (5.8) -- (34.5)(2) -- (15.1)(3) (55.4) ------ ------ ------ ------ ------ ------- Reserve at 12/31/2001 $ 72.6 $ 10.0 $ -- $ 28.0 $ 8.6 $ 119.2 ====== ====== ====== ====== ====== =======
- -------- (1) Phosphorus related. (2) Relates to a change in the reserve as a result of the company's decision to shut down operations at Pocatello. (3) Costs related to the spin-off of Technologies reclassified to discontinued operations. 43 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) FMC reduced its workforce by approximately 182 people in connection with the third and fourth quarter restructuring activities. During 2000, the company recorded restructuring and other charges of $35.2 million ($21.7 million after tax). Restructuring charges of $20.6 million were attributable to the formation of Astaris and the concurrent reorganization of our Industrial Chemicals sales, marketing and support organizations, the reduction of office space requirements in our Philadelphia chemical headquarters and pension expense related to the separation of phosphorus personnel from the company. In addition, the company recorded environmental accruals of $12.5 million because of increased cost estimates for ongoing remediation of several phosphorus properties. Other restructuring charges included $2.1 million for other projects. Of the approximately 350 employee severances that were expected to occur through the completion of these programs in 2000, 281 occurred at December 31, 2000 while the remainder occurred in 2001. Spending related to this reserve was $14.9 million in 2000 and $0.5 million in 2001. Non-cash charges were $2.5 million in 2000. In the third quarter of 1999, we recorded restructuring and other charges of $11.1 million ($6.8 million after tax). Restructuring and other charges of $9.2 million resulted primarily from strategic decisions to divest or restructure a number of businesses and support departments, including certain Agricultural Products and certain corporate and shared service support departments. The remaining charge related to actions, including headcount reductions, required to achieve planned synergies from acquisitions of businesses in Specialty Chemicals. NOTE 8 INVENTORIES The current replacement cost of inventories exceeded their recorded values by $194.9 million at December 31, 2001 and $190.6 million at December 31, 2000. The effect of reducing certain LIFO quantities carried at lower than prevailing costs was not material to LIFO expense in 2001 and 2000. Approximately 60 percent of inventories in 2001 and 59 percent in 2000 are recorded on the LIFO basis. Inventories consisted of the following:
December 31 ------------- 2001 2000 ------ ------ (In Millions) Finished goods and work in process $141.7 $119.8 Raw materials..................... 65.5 51.6 ------ ------ Net inventory..................... $207.2 $171.4 ====== ======
44 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 9 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following:
December 31 ----------------- 2001 2000 -------- -------- (In Millions) Land and land improvements....... $ 156.0 $ 155.1 -------- -------- Buildings........................ 375.7 363.9 Machinery and equipment.......... 1,929.4 2,172.8 Construction in progress......... 77.1 130.3 -------- -------- Total cost....................... 2,538.2 2,822.1 Accumulated depreciation......... 1,450.4 1,463.3 -------- -------- Net property, plant and equipment $1,087.8 $1,358.8 ======== ========
Depreciation expense was $112.2 million, $116.3 million and $116.5 million in 2001, 2000 and 1999, respectively. NOTE 10 INCOME TAXES Domestic and foreign components of income from continuing operations before income taxes and the cumulative effect of a change in accounting principle are shown below:
Year Ended December 31 ---------------------- 2001 2000 1999 ------- ------ ------ (In Millions) Domestic $(537.3) $ 64.1 $ 41.3 Foreign. 64.4 94.5 153.8 ------- ------ ------ Total... $(472.9) $158.6 $195.1 ======= ====== ======
The provision (benefit) for income taxes attributable to income (loss) from continuing operations before a cumulative effect of a change in accounting principle consisted of:
Year Ended December 31 ---------------------- 2001 2000 1999 ------- ------ ----- (In Millions) Current: Federal... $ 10.5 $ 17.3 $12.0 Foreign... 22.0 32.1 21.1 State..... 1.2 2.6 (0.6) ------- ------ ----- Total current 33.7 52.0 32.5 Deferred..... (200.3) (19.0) 3.9 ------- ------ ----- Total........ $(166.6) $ 33.0 $36.4 ======= ====== =====
45 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Total income tax provisions (benefits) were allocated as follows:
Year Ended December 31 --------------------- 2001 2000 1999 ------- ----- ----- (In Millions) Continuing operations before the cumulative effect of a change in accounting principle................................................................. $(166.6) $33.0 $36.4 Discontinued operations..................................................... 12.0 (2.7) 19.6 Cumulative effect of a change in accounting principle....................... (0.9) -- -- Items charged directly to stockholders' equity.............................. (7.1) (3.0) (1.1) ------- ----- ----- Total....................................................................... $(162.6) $27.3 $54.9 ======= ===== =====
Significant components of the deferred income tax provision (benefit) attributable to income (loss) from continuing operations before income taxes and the cumulative effect of a change in accounting principle are as follows:
Year Ended December 31 ---------------------- 2001 2000 1999 ------- ------ ----- (In Millions) Deferred tax (exclusive of the valuation allowance)................... $(204.3) $(19.0) $ 5.0 Increase (decrease) in the valuation allowance for deferred tax assets 4.0 -- (1.1) ------- ------ ----- Deferred income tax provision (benefit)............................... $(200.3) $(19.0) $ 3.9 ======= ====== =====
Significant components of the company's deferred tax assets and liabilities were attributable to:
December 31 -------------- 2001 2000 ------ ------ (In Millions) Reserves for discontinued operations, environmental and restructuring $347.4 $109.0 Accrued pension and other postretirement benefits.................... 32.4 49.1 Other reserves....................................................... 56.2 75.2 Alternative minimum and foreign tax credit carryforwards............. 72.8 52.4 Net operating loss carryforwards..................................... 5.3 1.2 Other................................................................ 21.8 1.5 ------ ------ Deferred tax assets.................................................. 535.9 288.4 Valuation allowance.................................................. (18.0) (14.0) ------ ------ Deferred tax assets, net of valuation allowance...................... $517.9 $274.4 ------ ------ Property, plant and equipment........................................ $166.7 $110.2 Other................................................................ 8.0 21.3 ------ ------ Deferred tax liabilities............................................. $174.7 $131.5 ====== ====== ------ ------ Net deferred tax assets.............................................. $343.2 $142.9 ====== ======
46 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The company has recognized that it is more likely than not that certain future tax benefits may not be realized as a result of current and future income. Accordingly, the valuation allowance has been increased in the current year to reflect lower than anticipated net deferred tax asset utilization. The effective income tax rate applicable to income from continuing operations before income taxes and the cumulative effect of a change in accounting principle were different from the statutory U.S. Federal income tax rate due to the factors listed in the following table: (Percent of income from continuing operations before income taxes and the cumulative effect of a change in accounting principle)
Year Ended December 31 --------------------- 2001 2000 1999 ---- ---- ---- Statutory U.S. tax rate........................................... (35%) 35% 35% --- --- --- Net difference: U.S export sales benefit.......................................... (2) (4) (3) Percentage depletion.............................................. (1) (4) (4) State and local income taxes, less federal income tax benefit..... (5) 1 0 Foreign earnings subject to different tax rates................... (2) (10) (11) Impact of Argentina asset impairment.............................. 8 0 0 Non-taxable portion of gain on sale of business................... 0 0 (6) Tax on intercompany dividends and deemed dividend for tax purposes 1 1 1 Nondeductible expenses............................................ 1 1 1 Minority interests................................................ 1 1 1 Equity in earnings of affiliates not taxed........................ (1) (1) 0 Change in valuation allowance..................................... 0 0 6 Other............................................................. 0 1 (1) --- --- --- Total difference.................................................. 0 (14) (16) --- --- --- Effective tax rate................................................ (35%) 21% 19% === === ===
FMC's federal income tax returns for years through 1997 have been examined by the Internal Revenue Service ("IRS") and substantially all issues have been settled. Management believes that adequate provision for income taxes has been made for the open years 1998 and after and for any unsettled issues prior to 1998. U.S. income taxes have not been provided for the equity in undistributed earnings of foreign consolidated subsidiaries ($297.4 million and $371.3 million at December 31, 2001 and 2000, respectively) or foreign unconsolidated subsidiaries and affiliates ($14.5 million and $15.8 million at December 31, 2001 and 2000, respectively). Restrictions on the distribution of these earnings are not significant. Foreign earnings taxable to the company as dividends were $94.3 million, $51.5 million and $126.2 million in 2001, 2000 and 1999, respectively. 47 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 11 DEBT Long-term Debt Long-term debt consists of the following:
December 31 ------------- 2001 2000 ------ ------ (In Millions) Pollution control and industrial revenue bonds, 3.2% to 7.1%, due 2001 to 2032.............. $221.8 $204.0 Debentures, 6.375%, due 2003, less unamortized discount (2001 - $0.2; 2000 - $0.3), effective rate 6.4%....................................................................... 160.3 199.7 Debentures, 7.75%, due 2011, less unamortized discount (2001 - $0.3; 2000 - $0.6), effective rate 7.8%................................................................................. 45.2 82.4 Medium-term notes, 6.38% to 7.32%, due 2002 to 2008, less unamortized discounts (2001 - $0.7, 2000 - $1.1) effective rates 6.4% to 7.4%........................................... 330.9 368.4 Exchangeable senior subordinated debentures, 6.75%, due 2005................................ 28.8 39.9 Other....................................................................................... -- 0.1 ------ ------ Total....................................................................................... 787.0 894.5 Less: current portion....................................................................... 135.2 22.7 ------ ------ Long-term portion........................................................................... $651.8 $871.8 ====== ======
FMC maintains a universal shelf registration under which, at December 31, 2001, $345.0 million of debt or equity securities could be issued. During 2001 and 2000, the company did not issue new long-term debt. During 1999 the company borrowed $50.0 million at 6.45 percent interest with a maturity of 2032 from the proceeds of Power County, Idaho's Solid Waste Disposal Revenue Bonds. Undrawn bond proceeds of $8.4 million and $9.8 million at December 31, 2001 and 2000, respectively, are included in investments on the consolidated balance sheets and are being used to fund capital projects related to solid waste disposal. At December 31, 2001, long-term debt included $28.8 million in exchangeable senior subordinated debentures bearing interest at 6.75 percent, maturing in 2005 and exchangeable by the holders at any time into common stock of Meridian Gold, Inc. (NYSE: MDG), the successor of a former subsidiary of FMC, at an exchange price of $15.125 per share, subject to adjustment. The company no longer holds any shares of Meridian Gold and under the terms of the agreement may pay the holders in cash an amount equal to the market price of Meridian Gold common stock in lieu of delivery of the shares. The debentures are subordinated in right of payment to all existing and future indebtedness of the company. The debentures are currently redeemable at the option of FMC at par plus accrued interest upon at least thirty days prior written notice. The company redeemed $11.1 million of these debentures during 2001 and $8.5 million during 2000. The company redeemed $117.2 million, $42.5 million and $250.0 million in debentures and medium-term notes in 2001, 2000 and 1999, respectively. These debentures and notes had maturity dates ranging from 2001 through 2011, with interest rates at 6.375 percent to 7.75 percent. Short-term Debt Short-term debt of $136.5 million at December 31, 2001 and $113.0 million at December 31, 2000 consisted of commercial paper, borrowings under credit facilities, and foreign borrowings. 48 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The company elected not to renew an unused 364-day committed credit facility for $350.0 million that expired in July 2000. In July 2001, the company elected to reduce the availability of the committed $450.0 million non-amortizing revolving credit agreement to $300.0 million. In December 2001, the company replaced the $300.0 million credit agreement with a committed $240.0 million non-amortizing revolving credit agreement due in December 2002. The total amount outstanding under this facility at December 31, 2001 was $68.0 million. No amounts were outstanding under the former credit facility at December 31, 2000. Among other restrictions, the credit agreement contains financial covenants related to leverage (measured as the ratio of debt to adjusted earnings), interest coverage (measured as the ratio of interest expense to adjusted earnings), and consolidated net worth. FMC was in compliance with all debt covenants at December 31, 2001. In January 2002 the company arranged a supplemental $50.0 million committed credit facility to meet short-term seasonal financing needs. This credit facility expires on August 31, 2002. The company's short-term commercial paper program is supported by committed credit facilities and provides for the issuance of up to $300.0 million in aggregate maturity value of commercial paper at any given time. Commercial paper of $33.0 million was outstanding at December 31, 2001 and $16.8 million was outstanding at December 31, 2000. Effective rates on commercial paper were 3.2 percent at December 31, 2001 and 6.6 percent at December 31, 2000. Outstanding foreign and other short-term borrowings totaled $35.5 million at December 31, 2001 and $46.2 million at December 31, 2000. The company had advances under uncommitted credit facilities of $50.0 million at December 31, 2000. There were no outstanding uncommitted credit facilities balances at December 31, 2001. Compensating Balance Agreements FMC maintains informal credit arrangements in many foreign countries. Foreign lines of credit, which include overdraft facilities, typically do not require the maintenance of compensating balances, as credit extension is not guaranteed but is subject to the availability of funds. 49 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 12 PENSIONS AND OTHER POSTRETIREMENT BENEFITS The funded status of the company's domestic qualified and non-qualified pension plans, the United Kingdom pension plan, the defined benefit portion of the company's Canadian retirement plan and the company's domestic postretirement healthcare and life insurance benefit plans for continuing operations, together with the associated balances recognized in the company's consolidated financial statements as of December 31, were as follows:
Pensions Other Benefits ------------------ --------------- December 31 ----------------------------------- 2001 2000 2001 2000 -------- -------- ------ ------- (In Millions) Accumulated benefit obligation: Plans with unfunded accumulated benefit obligation....... $ 26.9 $ 43.6 $ -- $ -- -------- -------- ------ ------- Change in benefit obligation: Benefit obligation at January 1.......................... $1,001.8 $1,029.5 $105.0 $ 108.9 Spin-off of Technologies (Note 2)....................... (361.3) -- (35.1) -- Service cost............................................ 12.0 24.9 1.0 2.2 Interest cost........................................... 46.8 72.1 5.6 7.9 Actuarial (gain) or loss................................ 44.6 (19.9) 16.5 (5.4) Amendments.............................................. (3.2) 0.8 1.0 -- Divestitures............................................ (8.3) (47.6) -- -- Foreign currency exchange rate changes.................. (0.5) (13.1) -- -- Curtailments and settlements............................ (6.9) (1.1) -- -- Plan conversion......................................... -- 5.7 -- -- Plan participants' contributions........................ 0.2 1.1 5.2 5.6 Special termination benefits............................ -- 3.2 -- -- Benefits paid........................................... (38.1) (53.8) (11.8) (14.2) -------- -------- ------ ------- Benefit obligation at December 31........................ 687.1 1,001.8 87.4 105.0 -------- -------- ------ ------- Change in fair value of plan assets: Fair value of plan assets at January 1................... 953.9 909.4 -- -- Spin-off of Technologies (Note 2)....................... (328.9) -- -- -- Actual return on plan assets............................ 33.8 140.8 -- -- Divestitures............................................ (8.7) (47.6) -- -- Curtailments and settlements............................ (8.1) (1.3) -- -- Foreign currency exchange rate changes.................. (0.6) (14.2) -- -- Company contributions................................... 28.0 11.4 6.6 8.6 Plan conversion......................................... -- 8.1 -- -- Plan participants' contributions........................ 0.2 1.1 5.2 5.6 Benefits paid........................................... (38.1) (53.8) (11.8) (14.2) -------- -------- ------ ------- Fair value of plan assets at December 31................. 631.5 953.9 -- -- -------- -------- ------ ------- Funded status of the plan (liability).................... (55.6) (47.9) (87.4) (105.0) Unrecognized actuarial loss (gain)....................... 20.6 (31.7) 12.3 (6.7) Unrecognized prior service cost (income)................. 7.5 20.0 (13.2) (30.3) Unrecognized transition asset............................ (0.9) (13.4) -- -- Net amount recognized in the balance sheet for discontinued operations at December 31............. -- 24.9 -- 47.4 -------- -------- ------ ------- Net amount recognized in the balance sheet at December 31 $ (28.4) $ (48.1) $(88.3) $ (94.6) ======== ======== ====== ======= Prepaid benefit cost..................................... $ 1.2 $ 12.6 $ -- $ -- Accrued benefit liability................................ (40.3) (97.9) (88.3) (142.0) Intangible asset......................................... 2.4 5.5 -- -- Accumulated other comprehensive income................... 8.3 6.8 -- -- Net amount recognized in the balance sheet for discontinued operations at December 31............. -- 24.9 -- 47.4 -------- -------- ------ ------- Net amount recognized in the balance sheet at December 31 $ (28.4) $ (48.1) $(88.3) $ (94.6) ======== ======== ====== =======
50 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table summarizes the assumptions used and the components of net annual benefit cost (income) for the years ended December 31:
Year Ended December 31 ------------------------------------------- Pensions Other Benefits ---------------------- ------------------- 2001 2000 1999 2001 2000 1999 ------ ------ ------ ----- ----- ----- Assumptions as of September 30: Discount rate............................ 7.00% 7.50% 7.50% 7.00% 7.50% 7.50% Expected return on assets................ 9.25% 9.25% 9.25% -- -- -- Rate of compensation increase............ 4.25% 4.25% 5.00% -- -- -- Components of net annual benefit cost (in millions): Service cost............................ $ 12.0 $ 12.3 $ 17.9 $ 0.9 $ 1.2 $ 1.4 Interest cost........................... 46.8 48.0 45.8 5.6 5.3 5.0 Expected return on plan assets.......... (55.1) (56.4) (55.2) -- -- -- Amortization of transition asset........ (4.9) (16.0) (15.8) -- -- -- Amortization of prior service cost...... 2.0 2.9 3.0 (6.0) (6.1) (6.1) Recognized net actuarial (gain) loss.... (1.2) (1.4) (0.6) (0.3) (0.3) -- Curtailment and settlement.............. 4.2 0.2 -- -- -- -- ------ ------ ------ ----- ----- ----- Net annual benefit cost (income) from continuing operations.................. $ 3.8 $(10.4) $ (4.9) $ 0.2 $ 0.1 $ 0.3 Net annual benefit cost from discontinued operations............................. -- 5.0 8.0 -- 0.2 0.7 ------ ------ ------ ----- ----- ----- Net annual benefit cost (income)......... $ 3.8 $ (5.4) $ 3.1 $ 0.2 $ 0.3 $ 1.0 ====== ====== ====== ===== ===== =====
The change in the discount rate used in determining domestic pension and other postretirement benefit obligations from 7.50 percent to 7.00 percent increased the projected pension and other postretirement benefit obligations by $39.6 million and $4.4 million, respectively, at December 31, 2001. Effective May 1, 2001, in connection with the IPO of Technologies, the company transferred $251.5 million in qualified domestic pension plan assets to Technologies' pension trust. As a result of the transfer, the company's qualified pension plan obligation was reduced by $262.3 million. This initial allocation of assets and obligations between the company's and Technologies' plans and trusts was estimated. The final allocation of obligations following agreements entered into by the company and Technologies pursuant to the separation and in accordance with the Employee Retirement Income Security Act of 1974 ("ERISA") guidelines will be determined during 2002. Also in connection with the IPO of Technologies, the benefit obligation for the company's nonqualified pension plans was reduced by approximately $21.0 million. The company also transferred $77.4 million in foreign pension plan assets to Technologies' foreign plans and trusts, which in turn reduced the company's foreign pension plan obligation by approximately $78.0 million. In addition, effective December 31, 2001, a portion of the company's domestic other postretirement benefit obligations was assumed by Technologies. In connection with the 1999 divestiture of the process additives business (Note 5), the company transferred $8.7 million in qualified domestic pension plan assets to the buyer's pension plan during 2001, and in turn reduced the company's qualified pension plan obligation by $8.3 million. The postretirement medical obligations shown reflect a change in the assumed medical trend rate effective December 31, 2001. For measurement purposes, 10 percent and 12 percent increases in the per capita cost of 51 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) health care benefits for pre-65 and post-65 retirees, respectively, were assumed for 2002, grading down to an ultimate rate of 6 percent in 2009 and later years. The ultimate rate assumption used previously was 5 percent for 2001 and later years. The change in the rate of compensation increase used in determining pension plan obligations from 5.00 percent to 4.25 percent decreased the projected benefit obligation by approximately $20.0 million at December 31, 2000. Assumed health care cost trend rates have an effect on the amounts reported for the health care plan. A one-percentage point change in the assumed health care cost trend rates would have the following effects at December 31, 2001:
One Percentage One Percentage Point Increase Point Decrease -------------- -------------- (In Millions) Effect on total of service and interest cost components of net annual benefit cost (income).............................................. $0.2 $(0.1) Effect on postretirement benefit obligation.......................... $2.4 $(2.1)
The company has adopted SFAS No. 87, "Employer's Accounting for Pensions," for its defined benefit plans for substantially all employees in the United Kingdom and Canada. The financial impact of compliance with SFAS No. 87 for other non U.S. pension plans is not materially different from the locally reported pension expense. The cost of providing pension benefits for foreign employees, net of the cost associated with Technologies' foreign pension plans in 2000 and 1999, was $1.6 million in 2001, $1.2 million in 2000 and $6.7 million in 1999. As a result of the 1999 divestiture of the process additives business (Note 5), the FMC United Kingdom pension plan transferred $47.6 million of assets and liabilities to the buyer's pension plan in September 2000. In April 2000, the company formed Astaris, a joint venture (Note 4). As a result, the former Phosphorus Chemical Division's active employees began receiving benefits under Astaris plans and are not accruing further benefit in the FMC plan, the effect of which was a reduction in annual service cost of approximately $2.0 million. Under the joint venture agreement, Astaris agreed to fund an equal portion of FMC's and Solutia's future postretirement benefit payments. FMC's receivable from Astaris, representing the minimum amount of cash to be received under this portion of the agreement, amounted to $17.4 million at December 31, 2001 and $18.9 million at December 31, 2000, and is included as part of the company's recorded investment in the joint venture. FMC Corporation Savings and Investment Plan. The FMC Corporation Savings and Investment Plan (formerly known as the FMC Employees' Thrift and Stock Purchase Plan) is a qualified salary-reduction plan under Section 401(k) of the Internal Revenue Code in which substantially all domestic employees of the company may participate by contributing a portion of their compensation. The company matches contributions up to specified percentages of each employee's compensation depending on how the employee allocates his or her contributions. On September 28, 2001, in connection with the spin-off of Technologies, the company transferred the 401(k) plan assets relating to Technologies' plan participants to a separate trust established for the Technologies' Savings and Investment Plan. Charges against income for the company's matching contributions, net of forfeitures and net of matching contributions associated with Technologies (for 2000 and 1999 only) were $7.3 million in 2001, $7.7 million in 2000, and $8.4 million in 1999. 52 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 13 ENVIRONMENTAL OBLIGATIONS FMC is subject to various federal, state and local environmental laws and regulations that govern emissions of air pollutants, discharges of water pollutants, and the manufacture, storage, handling and disposal of hazardous substances, hazardous wastes and other toxic materials. The company is also subject to liabilities arising under CERCLA and similar state laws that impose responsibility on persons who arranged for the disposal of hazardous substances, and on current and previous owners and operators of a facility for the clean-up of hazardous substances released from the facility into the environment. In addition, the company is subject to liabilities under the RCRA and analogous state laws that require owners and operators of facilities that treat, store or dispose of hazardous waste to follow certain waste management practices and to clean up releases of hazardous waste into the environment associated with past or present practices. FMC has been named a PRP at 27 sites on the government's National Priority List. In addition, the company also has received notice from the EPA or other regulatory agencies that the company may be a PRP, or PRP equivalent, at other sites, including 55 sites at which the company has determined that it is reasonably possible that it has an environmental liability. FMC, in cooperation with appropriate government agencies, is currently participating in, or has participated in, RI/FS or their equivalent at most of the identified sites, with the status of each investigation varying from site to site. At certain sites, RI/FS have just begun, providing limited information, if any, relating to cost estimates, timing, or the involvement of other PRPs; whereas, at other sites, the studies are complete, remedial action plans have been chosen, or RODs have been issued. Environmental liabilities consist of obligations relating to waste handling and the remediation and/or study of sites at which the company is alleged to have disposed of hazardous substances. These sites include current operations, previously operated sites, and sites associated with discontinued operations. The company has provided reserves for potential environmental obligations that management considers probable and for which a reasonable estimate of the obligation could be made. Accordingly, total reserves of $260.4 million and $232.0 million, respectively, before recoveries, were recorded at December 31, 2001 and 2000. The long-term portion of these reserves is included in the reserve for discontinued operations and other liabilities on the consolidated balance sheets and amounted to $244.1 million and $222.0 million at December 31, 2001 and 2000, respectively. In addition, the company has estimated that reasonably possible environmental loss contingencies may exceed amounts accrued by as much as $70.0 million at December 31, 2001. The company's total environmental reserves include $245.7 million and $218.3 million for remediation activities and $14.7 million and $13.7 million for RI/FS costs at December 31, 2001 and 2000, respectively. For the years 2001, 2000 and 1999, FMC charged $31.3 million, $44.3 million and $20.9 million, respectively, against established reserves for remediation spending, and $12.1 million, $9.2 million and $43.3 million, respectively, against reserves for spending on RI/FS. FMC anticipates that the remediation and RI/FS expenditures for current operating, previously operated and other sites will continue to be significant for the foreseeable future. To ensure FMC is held responsible only for its equitable share of site remediation costs, FMC has initiated, and will continue to initiate, legal proceedings for contributions from other PRPs. FMC has recorded recoveries, representing probable realization of claims against insurance companies, U.S. government agencies and other third parties, of $41.3 million and $46.9 million, respectively, at December 31, 2001 and 2000 (all of which is recorded as an offset to the reserve for discontinued operations and other liabilities). Cash recoveries for the years 2001, 2000 and 1999 were $12.5 million, $14.2 million and $56.9 million, respectively. Recoveries in 1999 included a settlement with a consortium of FMC's general liability insurance carriers. During 2001 and 2000, the company recognized additional receivables for recoveries of $6.9 million and $0.9 million, respectively. 53 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In October of 2001, the Astaris joint venture announced its plans to cease production at the Pocatello, Idaho elemental phosphorus facility. FMC is responsible for decommissioning of the plant and remediation of the site at an estimated incremental after-tax cost (net of expected recoveries from Astaris) of $46.7 million, which the company has reserved at December 31, 2001. The estimated closure and remediation costs include the remaining costs of compliance with a June 1999 Consent Decree settling outstanding violations under RCRA at the Pocatello facility and costs to be incurred under a 1998 ROD under CERCLA which addresses previously closed ponds on the Pocatello facility portion of the Eastern Michaud Flats Superfund Site. FMC had previously signed a Consent Decree under CERCLA to implement this ROD, which was lodged in court on July 21, 1999. On August 3, 2000, the Department of Justice ("DOJ") withdrew the CERCLA Consent Decree and announced that it needed to review the administrative record supporting its remedy selection decision. FMC believes its reserves for environmental costs adequately provide for the estimated costs of the existing ROD for the site, the expenses previously described related to the RCRA Consent Decree and the incremental costs associated with the decommissioning and remediation of the facility associated with the cessation of production. Management cannot predict the potential changes in the scope of the ROD, if any, resulting from the EPA's remedy review, nor estimate the potential incremental costs, if any, of such changes. In October 2001, the company made a $30.0 million payment into a fund for the Shoshone-Bannock Tribes as a result of a second quarter agreement to support a proposal to amend the RCRA Consent Decree permitting the earlier closure of the largest remaining waste disposal pond at Pocatello. The company reserved $40.0 million in the second quarter of 2001 for this payment. The remaining balance of the reserve will be paid in five equal annual installments starting in 2002. In the second quarter of 2000, FMC recorded a charge of $12.5 million (net of $0.9 million of anticipated recoveries) to provide additional reserves for ongoing remediation of several phosphorus properties. Although these properties are part of the Astaris joint venture (Note 4), FMC retains certain remedial liabilities associated with the properties. In the fourth quarter of 1999, FMC provided $25.9 million (net of recoveries of $8.9 million), for environmental costs of discontinued operations (Note 3). FMC also provided $1.6 million related to environmental costs of continuing operations in 1999. On October 21, 1999, the Federal District Court for the Western District of Virginia approved a consent decree signed by the company, the EPA (Region III) and the DOJ regarding past response costs and future clean- up work at the discontinued fiber-manufacturing site in Front Royal, Virginia. As part of a prior settlement, government agencies are expected to reimburse FMC for approximately one third of the clean-up costs due to the government's role at the site. FMC's $70 million portion of the settlement was charged to earnings in 1998 and prior years. Although potential environmental remediation expenditures in excess of the current reserves and estimated loss contingencies could be significant, the impact on the company's future financial results is not subject to reasonable estimation due to numerous uncertainties concerning the nature and scope of contamination at many sites, identification of remediation alternatives under constantly changing requirements, selection of new and diverse clean-up technologies to meet compliance standards, the timing of potential expenditures, and the allocation of costs among PRPs as well as other third parties. The liabilities arising from potential environmental obligations that have not been reserved for at this time may be material to any one quarter or year's results of operations in the future. Management, however, believes any liability arising from potential environmental obligations is not likely to have a material adverse effect on the company's liquidity or financial condition and may be satisfied over the next 20 years or longer. Regarding current operating sites, the company spent $87.4 million, $79.4 million and $64.0 million for the years 2001, 2000 and 1999, respectively, on capital projects relating to environmental control facilities, the majority of which is associated with the RCRA Consent Decree discussed above. The company expects to spend approximately $15.9 million and $12.1 million in 2002 and 2003, respectively. Additionally, in 2001, 2000 and 54 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 1999, FMC spent $35.9 million, $44.0 million and $61.1 million, respectively, for environmental compliance costs, which are an operating cost of the company and are not covered by established reserves. NOTE 14 INCENTIVE COMPENSATION PLANS The FMC 1995 Management Incentive Plan and the FMC 1995 Stock Option Plan, approved by the stockholders on April 21, 1995, provided certain incentives and awards to key employees. In 2000, the Compensation and Organization Committee of the Board of Directors (the "Committee") which, subject to the provisions of the plans, reviews and approves financial targets, and the times and conditions for payment, adopted the FMC Corporation Stock Appreciation Rights and Phantom Stock Plan to provide equity-based cash compensation to foreign employees. Effective February 16, 2001, the FMC 1995 Management Incentive Plans and the FMC Corporation Stock Appreciation Rights and Phantom Stock Plans were merged with, and into, the FMC 1995 Stock Option Plan. The merged plan was restated and renamed the FMC Corporation Incentive Compensation and Stock Plan (the "Plan") and was approved by the stockholders on April 20, 2001. The provisions for incentives under the Plan provide for the grant of multi-year incentive awards payable partly in cash and partly in common stock. The provisions under the Plan and its predecessor plans for stock options provide for regular grants of common stock options, which may be incentive and/or nonqualified stock options. The exercise price for stock options is not less than the fair market value of the stock at the date of grant. Options are exercisable at the time designated by the Committee in the option (four years for grants prior to 1995 and three years for grants during 1995 and thereafter). Incentive and nonqualified options expire not later than 10 years from the grant date (15 years for grants prior to 1996). Under the plans adopted in 1995, three million shares became available for awards and options granted in 1995 and later years. These shares are in addition to the shares available from the predecessor plans. Cancellation (through expiration, forfeiture or otherwise) of outstanding awards and options granted after 1989 increases the shares available for future awards or grants. On February 16, 2001, the Committee approved an additional 800,000 shares for use under the Plan. At December 31, 2001, 2.3 million shares were available for future use under these plans. On February 14, 2002, the Committee approved an adjustment to the share allocation, increasing it to 4.4 million, based on a conversion factor of approximately 1.9, to reflect the change in the value of the stock options and restricted shares following the spin-off of Technologies. The Plan was also amended to change the total number of shares under the Plan from 3.8 million to 7.2 million. The company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the Plan. Had compensation cost for options under the Plan been determined based on the fair value at the grant date for awards in 2001, 2000 and 1999, consistent with the provisions of SFAS No. 123, the company's net income and diluted earnings per share for the three years ended December 31, 2001 would have been reduced to the pro forma amounts indicated below:
2001 2000 1999 ------- ------- ------- (Net Income (Loss) in Millions) Net income (loss)--as reported................ $(337.7) $ 110.6 $ 212.6 Net income (loss)--pro forma.................. $(344.1) $ 109.8 $ 211.2 Diluted earnings (loss) per share--as reported $(10.86) $ 3.50 $ 6.57 Diluted earnings (loss) per share--pro forma.. $(11.07) $ 3.48 $ 6.52
55 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) For 2000 and 1999, pro forma net income and pro forma diluted earnings per share have been reclassified to reflect the changes in stock-based compensation related to the distribution of net assets related to the spin-off of Technologies (Note 2). The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2001, 2000 and 1999, respectively: dividend yield of 0 percent for all years; expected volatility of 33.0 percent, 30.7 percent and 22.9 percent; risk-free interest rates of 4.8 percent, 6.7 percent and 5.1 percent; and expected lives of 5 years for all grants. The weighted average fair value of stock options, calculated using the Black-Scholes option-pricing model, granted during the years ended December 31, 2001, 2000 and 1999 was $27.75, $19.94 and $15.07, respectively. The tables and discussion below reflect revised share amounts and prices, using a conversion factor of 1.9 established on December 31, 2001, based on a ratio of FMC and Technologies closing stock prices on that date, following the spin-off of Technologies (Note 2). The following summary shows stock option activity for the three years ended December 31, 2001:
Number of Shares Weighted-Average Optioned But Not Exercised Exercise Price Per Share -------------------------- ------------------------ (Number of Shares in Thousands) December 31, 1998 (3,306 shares exercisable)............... 6,013 $28.77 Granted.................................. 667 $25.18 Exercised................................ (204) $21.68 Forfeited................................ (299) $32.68 ------ ------ December 31, 1999 (3,857 shares exercisable)............... 6,177 $28.42 Granted.................................. 385 $26.69 Exercised................................ (505) $22.89 Forfeited................................ (197) $32.59 ------ ------ December 31, 2000 (4,118 shares exercisable)............... 5,860 $28.65 Granted.................................. 793 $38.65 Exercised................................ (971) $24.69 Forfeited................................ (128) $31.38 Cancelled due to spin-off of Technologies (1,699) $38.85 ------ ------ December 31, 2001 (2,716 shares exercisable)............... 3,855 $30.84 ====== ======
56 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following tables summarize information about fixed-priced stock options outstanding at December 31, 2001:
Options Outstanding ---------------------------------------------------------------- Number Outstanding Weighted-Average Remaining Weighted-Average at December 31, 2001 Contractual Life Exercise Price Range of Exercise Prices (in Thousands) (in Years) Per Share - ------------------------ -------------------- -------------------------- ---------------- $ 15.47 - $ 23.60.... 344 3.7 $16.96 $ 24.26 - $ 31.28.... 1,423 7.1 $25.82 $ 32.13 - $ 37.31.... 1,386 5.2 $35.35 $ 38.42 - $ 43.28.... 702 9.1 $38.90 ----- --- ------ Total................ 3,855 6.5 $30.84 ===== === ======
Options Exercisable ------------------------------------- Number Exercisable Weighted-Average at December 31, 2001 Exercise Price Range of Exercise Prices (in thousands) Per Share ------------------------ -------------------- ---------------- $ 15.47 - $ 23.60.... 344 $16.96 $ 24.26 - $ 32.13.... 1,462 $27.90 $ 34.36 - $ 43.28.... 910 $37.05 ----- ------ Total................ 2,716 $29.58 ===== ======
On January 2, 2002, an additional 155,380 shares became exercisable at prices ranging from $25.18 to $25.31 with an expiration date of March 22, 2009. Under the Plan, discretionary awards of restricted stock may be made to selected employees. The awards vest over a period designated by the Committee, with payment conditional upon continued employment. Compensation cost is recognized over the vesting period based on the market value of the stock on the date of the award. At December 31, 2001, 486,436 shares of restricted stock were outstanding under the plan. Under the FMC Deferred Stock Plan for Non-Employee Directors, a portion of the annual retainer for these directors was deferred and paid in the form of shares of the company's common stock upon retirement or other termination of their directorships. Effective January 1, 1997, the Board of Directors approved a comprehensive compensation plan that terminated the retirement plan for directors and increased the proportion of director compensation paid in common stock of the company. Benefits provided for and earned under the former plan were converted into stock units payable in shares of common stock of the company upon retirement from the Board based on the fair market value of the common stock on December 31, 1996. At December 31, 2001, stock units representing an aggregate of 37,718 shares of stock were credited to the non-employee directors' accounts. In 1998 and 1999, non-employee directors were also granted options to purchase shares of stock at the fair market value of the stock at the date of grant. At December 31, 2001, options for 46,040 shares were outstanding at prices ranging from $33.76 to $40.56. These grants vested one year from the grant date and expire after ten years. Beginning in 2000, non-employee directors were paid in restricted stock units in lieu of stock options. The restriction on these shares lapsed on April 20, 2001. The shares, however, will not be paid out until retirement from the Board. At December 31, 2001 and December 31, 2000 units representing 14,941 shares and 15,251 shares of stock were outstanding, respectively. 57 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 15 STOCKHOLDERS' EQUITY On December 31, 2001 the company distributed its remaining 83 percent ownership in Technologies. The distribution was tax free. Each stockholder of record as of December 12, 2001 received approximately 1.72 shares of Technologies stock for every share of FMC stock. Total shares of Technologies' stock distributed were 53,950,000. The company recorded the distribution through a $509.5 million decrease in retained earnings and a $115.0 million decrease in the cumulative translation loss. The following is a summary of FMC's capital stock activity over the past three years:
Common Treasury Stock Stock ------ -------- (Number of Shares in Thousands) December 31, 1998.................... 38,189 5,486 Stock options and awards............. 143 -- Stock for employee benefit trust, net -- 12 Stock repurchases.................... -- 2,470 ------ ----- December 31, 1999.................... 38,332 7,968 Stock options and awards............. 290 -- Stock for employee benefit trust, net -- 10 ------ ----- December 31, 2000.................... 38,622 7,978 Stock options and awards............. 612 -- Stock for employee benefit trust, net -- (70) Stock Repurchase..................... -- 21 ------ ----- December 31, 2001.................... 39,234 7,929 ====== =====
During 1999, approximately 2.5 million shares were acquired under the company's stock repurchase plans at an aggregate cost and $135.9 million. Shares of common stock repurchased and contributed to a trust for an employee benefit program (net of shares resold as needed to administer the plan) were 9,470 shares in 2000 and 11,783 shares in 1999 at a cost of approximately $0.6 million and $0.5 million, respectively. At December 31, 2001, 8.9 million shares of unissued FMC common stock were reserved for stock options and awards. At December 31, 2001 and 2000, accumulated other comprehensive loss consisted of cumulative foreign currency translation losses of $158.6 million and $234.4 million and minimum pension liability adjustments of $0.1 million and $0.7 million, respectively. Also included in accumulated other comprehensive loss was a $16.6 million loss, net of taxes of $10.2 million related to the decrease in the fair value of currency and energy cash flow hedges (Notes 1 and 17). Covenants of the revolving credit facility agreement (Note 11) contain minimum net worth and other requirements, with which FMC was in compliance as of December 31, 2001. On February 22, 1986, the Board of Directors of the company declared a dividend distribution to each holder of record of common stock as of March 7, 1986, of one Preferred Share Purchase Right for each share of common stock outstanding on that date. Each right entitles the holder to purchase, under certain circumstances related to a change in control of the company, one one-hundredth of a share of Junior Participating Preferred 58 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Stock, Series A, without par value, at a price of $300 per share (subject to adjustment), subject to the terms and conditions of a Rights Agreement dated February 22, 1986 as amended through February 9, 1996. The rights expire on March 7, 2006, unless redeemed by the company at an earlier date. The redemption price of $.05 per right is subject to adjustment to reflect stock splits, stock dividends or similar transactions. The company has reserved 400,000 shares of Junior Participating Preferred Stock for possible issuance under the agreement. NOTE 16 FOREIGN CURRENCY The value of the U.S. dollar and other currencies in which FMC operates continually fluctuate. The company's results of operations and financial positions for all the years presented have been affected by such fluctuations. The company enters into certain foreign exchange contracts to mitigate the financial risk associated with this fluctuation (Note 17). These contracts typically qualify for hedge accounting under SFAS No. 133 (Notes 1 and 17). The company does not hedge 100 percent of its currency transactions or monetary assets and liabilities. Net income (loss) for 2001, 2000 and 1999 included aggregate transactional foreign currency gains. These gains of $0.1 million, $4.6 million and $2.2 million, respectively, excluded gains (losses) of the change in fair value related to the settling and ineffectiveness of cash flow hedges and gains (losses) related to the change in fair value of foreign currency contracts not qualifying as hedges (Note 17). Other comprehensive income (loss) for 2001, 2000 and 1999 included a loss of $12.5 million, $69.8 million and $61.9 million, respectively. NOTE 17 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The company's financial instruments include cash and cash equivalents, trade receivables, other current assets, accounts payable, and amounts included in investments and accruals meeting the definition of financial instruments. These financial instruments are stated at their carrying value which is a reasonable estimate of fair value. The following table of the estimated fair value of financial instruments is based on estimated fair-value amounts that have been determined using available market information and appropriate valuation methods. Accordingly, the estimates presented may not be indicative of the amounts that FMC would realize in a current market exchange and do not represent potential gains or losses on these agreements.
December 31, 2001 ------------------ Carrying Estimated Amount Fair Value -------- ---------- (In Millions) Assets (liabilities) Foreign exchange forward contracts $ 3.2 $ 3.2 Energy forward contracts.......... $ (29.1) $ (29.1) Debt.............................. $(923.5) $(919.8)
December 31, 2000 -------------------- Carrying Estimated Amount Fair Value --------- ---------- (In Millions) Assets (liabilities) Foreign exchange forward contracts $ 1.9 $ (2.4) Energy forward contracts.......... $ -- $ 27.6 Debt.............................. $(1,007.5) $(972.5)
Fair values of debt have been determined through a combination of management estimates and information obtained from independent third parties using market data, such as bid/ask spreads on the last business day of the year. 59 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Derivative financial instruments. The company conducts its business in many foreign countries, exposing earnings, cash flows, and the company's financial position to a series of foreign currency risks. The majority of these risks originate through foreign currency transactions. The company is also exposed to risks in energy costs due to fluctuations in energy prices. FMC's policy is to minimize its cash flow exposure to adverse changes in currency, energy prices and exchange rates. This is accomplished through a controlled program of risk management that includes the use of derivative financial instruments. The company's objective is to maintain economically balanced currency risk management strategies and energy risk management strategies that provide adequate protection from significant fluctuations in the currency and energy markets. The company enters into foreign exchange contracts, including forwards, options combination and purchased option contracts, to reduce the cash flow exposure of foreign currency fluctuations associated with monetary assets and liabilities and highly anticipated transactions. The company also enters into such contracts in an effort to mitigate energy cost variances. Hedge ineffectiveness and the portions of derivative gains and losses excluded from assessments of hedge effectiveness related to the company's outstanding cash flow hedges and which were recorded to earning for the year ended December 31, 2001, were less than $0.1 million. Changes in fair value of derivatives qualifying as cash flow hedges are recorded in accumulated other comprehensive income. At December 31, 2001 the net deferred after-tax hedging loss in accumulated other comprehensive income was $16.6 million, of which approximately $11.7 million in losses is expected to be realized in earnings over the next twelve months ending December 31, 2002, at the time the underlying hedging transactions are realized. At various times subsequent to December 31, 2002 the company expects losses from cash flow hedge transactions to total, in the aggregate, approximately $4.9 million. The company recognized its derivative gains and losses in the cost of sales line of the consolidated statements of income. The company continues to hold certain forward contracts that have not been designated as hedging instruments. Contracts used to hedge the exposure to foreign currency fluctuations associated with certain monetary assets and liabilities are not designated as hedging instruments, and changes in the fair value of these items are recorded in earnings. The net gain recorded in earnings, in cost of goods sold, for contracts not designated as hedging instruments through December 31, 2001 was $1.2 million. Fair values relating to derivative financial instruments reflect the estimated amounts that the company would receive or pay to terminate the contracts at the reporting date based on quoted market prices of comparable contracts as of December 31, 2001 and 2000. At December 31, 2001 and 2000, derivative financial instruments consisted primarily of foreign exchange forward contracts and energy forward contracts. As of December 31, 2001 and 2000, the company held foreign exchange forward contracts with notional amounts of $1,227.1 million and $187.5 million, respectively, in which foreign currencies (primarily Norwegian krone, euro, British pound sterling, Japanese yen and Singapore dollar in 2001 and Norwegian krone, euro and British pound in 2000) were purchased, and approximately $1,309.9 million and $314.7 million, respectively, in which foreign currencies (primarily euro, Norwegian krone, Swedish krona, British pound sterling, Brazilian real and Japanese yen in 2001 and euro, Swedish krona, British pound sterling and Japanese yen in 2000) were sold. Notional amounts are used to measure the volume of derivative financial instruments. 60 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Financial guarantees and letter of credit commitments. FMC is a party to various financial instruments with off-balance-sheet risk as part of its normal course of business, including financial guarantees and contractual commitments to extend financial guarantees under letters of credit and other assistance to its customers and the customers of its related parties (Notes 18 and 19). Decisions to extend financial guarantees to its customers, and the amount of collateral required under these guarantees, is based on management's evaluation of creditworthiness on a case-by-case basis. These financial instruments represent elements of credit risk, which are not recognized on FMC's consolidated balance sheet. FMC believes exposure to credit losses in the event of nonperformance by other parties is remote; therefore, the notional amounts listed below are not expected to represent future cash requirements. The table below displays amounts related to FMC's financial guarantees and contractual commitments to extend financial guarantees and other assistance as of December 31, 2001.
December 31, 2001 ------------------ Carrying Estimated Amount Fair Value -------- ---------- (In Millions) Technologies performance guarantees $ -- $(289.0) Brazilian customer guarantees...... $ -- $ (10.0) Guarantees of vendor financing..... $(56.0) $ (56.0) Astaris guarantee.................. $ -- $(111.9)
NOTE 18 RELATED PARTY TRANSACTIONS FMC's chemical and machinery businesses became two independent companies in 2001 through the spin-off of Technologies (see Note 2 for discussion of FMC's reorganization plan). Prior to Technologies' IPO, FMC and Technologies entered into certain agreements, which are described below, for purposes of governing the ongoing relationship between the two companies at and after the date of the Technologies separation from FMC. After the reorganization and spin-off activities described in Note 2, FMC and Technologies continued to be related in several general and administrative areas. The Separation and Distribution Agreement dated as of May 31, 2001 (the "SDA") includes provisions intended to govern this ongoing relationship by establishing indemnity responsibilities, allocating responsibility for costs of the IPO and distribution, and establishing a process for the assignment of certain operating costs both prior to and after the IPO. The Agreement also identified the assets to be transferred and the liabilities to be assumed by Technologies prior to the IPO. According to the SDA, costs related to the IPO were the responsibility of Technologies and costs related to the distribution of Technologies shares were the responsibility of FMC. These distribution costs, which were borne by FMC, were immaterial. The two companies also agreed to equally share most general and administrative costs prior to the distribution, with FMC's share of these expenses totaling $31.3 million in 2001. The SDA provided for FMC and Technologies to enter into arrangements to govern the various interim relationships between the two companies. A transition service agreement between FMC and Technologies, the provisions of which will largely terminate on December 31, 2002, governs the provisions between the two companies of certain support services such as cash management, accounting, tax, payroll, legal and other corporate, general and administrative functions. 61 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) FMC and Technologies entered into a tax sharing agreement wherein each company is obligated for those taxes associated with their respective businesses, determined as if each company filed its own consolidated, combined or unitary tax returns for any period where Technologies is included in the consolidated, combined or unitary tax return of FMC or its subsidiaries. Additionally, responsibility for all taxes for periods prior to the spin-off will be determined in the same manner. If, within thirty months following the spin-off, Technologies breaches any representations in the tax sharing agreement relating to the favorable ruling FMC received from the IRS regarding the tax-free nature of the spin-off; takes or fails to take any action that causes such representations to be untrue; engages in a sale of substantially all of its assets; undergoes a change of control; or, discontinues the conduct of its business, the spin-off may be taxable to FMC. In the event the spin-off is determined to be taxable to FMC as a result of any of the foregoing, Technologies will be required to indemnify FMC for any resulting taxes, which would likely be material to FMC's liquidity, results of operations and financial condition. FMC and Technologies agreed that they would share insurance coverage under FMC's comprehensive general liability and property policies during 2001 and 2002. FMC and Technologies will also share, on an equal basis, past insurance policies, subject to reservation of disproportionate coverage in favor of FMC for all prior policy periods up to 1985. This is to recognize certain legacy liabilities retained by FMC. If either company uses more than its share of the policy coverage, it must indemnify the other company to ensure that the indemnified company's share of policy coverage is unaffected. FMC agreed to guaranty the performance by Technologies of certain obligations under a number of contracts, debt instruments, and reimbursement agreements. The latter agreements are associated with certain letters of credit. Prior to the spin-off, these obligations related to the businesses of Technologies. As of December 31, 2001, these guaranteed obligations totaled $289.0 million. Under the SDA, Technologies agreed to indemnify FMC for these obligations. As of the distribution on December 31, 2001, and as of the date of this annual report, a portion of the previously identified shared costs and transitional costs have not been finalized. A payable to Technologies for an outstanding amount of $4.7 million is included in the December 31, 2001 consolidated balance sheet, but is subject to final approval by both parties. In addition to these costs, FMC and Technologies paid certain earnings distributions related to the reorganization of a number of subsidiaries that had resulted from the spin-off. FMC and Technologies generally did not engage in any inter-company commercial transactions; accordingly, there were no significant intercompany purchases, sales, receivables or payables in 2001, 2000, or 1999 from transactions of a commercial nature. FMC's Board of Directors has several members who will serve on Technologies' Board of Directors. They include: B.A. Bridgewater, Jr., Robert N. Burt, Edward J. Mooney, William F. Reilly and James R. Thompson. Robert N. Burt is the former Chief Executive Officer of FMC and will continue to serve as an FMC director. The company sells trade receivables without recourse through its wholly owned, bankruptcy-remote subsidiary, FMC Funding Corporation. This subsidiary then sells the receivables to a securitization company under an accounts receivable financing facility on an ongoing basis. These transactions resulted in reductions of accounts receivable of $79.0 million and $113.0 million at December 31, 2001 and 2000, respectively. Net discounts recognized on sales of receivables are included in selling, general and administrative expenses in the consolidated statements of income and amounted to $0.8 million, $0.2 million and $1.6 million for the years ended December 31, 2001, 2000 and 1999, respectively. The agreement for the sale of accounts receivable provides for continuation of the program on a revolving basis expiring in November 2002. 62 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 19 COMMITMENTS AND CONTINGENT LIABILITIES FMC leases office space, plants and facilities, and various types of manufacturing, data processing and transportation equipment. Leases of real estate generally provide for payment of property taxes, insurance and repairs by FMC. Capital leases are not significant. Rent expense under operating leases amounted to $13.0 million, $17.7 million and $20.5 million in 2001, 2000 and 1999, respectively. Rent expense is net of credits (received for the use of leased transportation assets) of $20.6 million, $18.6 million and $20.4 million in 2001, 2000 and 1999, respectively. Minimum future rentals under noncancelable leases aggregated approximately $199.9 million as of December 31, 2001 and are estimated to be payable as follows: $25.8 million in 2002, $24.9 million in 2003, $23.3 million in 2004, $22.7 million in 2005, $17.4 million in 2006 and $85.8 million thereafter. Minimum future rentals for transportation assets included above aggregated approximately $145.9 million, against which the company expects to continue to receive credits to substantially defray its rental expense. In connection with the finalization of Astaris' external financing agreement during the third quarter of 2000, FMC provided an agreement to lenders of Astaris under which the company has agreed to make equity contributions to Astaris sufficient to make up one half of any short-fall in Astaris earnings below certain levels. Astaris earnings did not meet the agreed levels for 2001 and the company does not expect that such earnings will meet the levels agreed for 2002. The company contributed $31.3 million to Astaris under this arrangement in 2001 and expects to contribute a similar amount in 2002. The proportional amount of Astaris indebtedness subject to this agreement from FMC at December 31, 2001 was $111.9 million. In October 2000, the company announced an agreement to settle a lawsuit related to its discontinued Defense Systems business. As a result, the company recorded $65.7 million (net of income taxes of $14.3 million) in its results of discontinued operations during the quarter ended September 30, 2000. After receiving approval from the DOJ and the U.S. District Court, the company paid approximately $80.0 million to settle the lawsuit in January 2001. The company provides guarantees to financial institutions on behalf of certain Agricultural Products customers, principally in Brazil, for their seasonal borrowing. The customers' obligations to FMC are largely secured by liens on their crops. Losses under these programs have been minimal. The total of these guarantees were $56.0 million recorded on the consolidated balance sheets as "Guarantees of Vendor Financing" at December 31, 2001 and $51.8 million at December 31, 2000. The company also provides guarantees to financial institutions on behalf of certain Agricultural Products customers in Brazil to support their importation of third party agricultural products. This guarantee program was implemented in 2001 and guarantees at December 31, 2001 were $10.0 million. The company also has certain other contingent liabilities arising from litigation, claims, performance guarantees and other commitments incident to the ordinary course of business. Management believes that the ultimate resolution of its known contingencies will not materially affect the consolidated financial position, results of operations or cash flows of FMC. 63 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 20 BUSINESS SEGMENT AND GEOGRAPHIC DATA
Year Ended December 31 ------------------------------------------------ 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- (In millions) Revenue Agricultural Products................................... $ 653.1 $ 664.7 $ 632.4 $ 647.8 $ 637.6 Specialty Chemicals..................................... 472.0 488.8 564.5 598.2 604.8 Industrial Chemicals.................................... 822.0 905.6 1,141.3 1,138.4 1,012.0 Eliminations............................................ (4.1) (8.8) (17.7) (27.5) (27.0) -------- -------- -------- -------- -------- Total................................................... $1,943.0 $2,050.3 $2,320.5 $2,356.9 $2,227.4 ======== ======== ======== ======== ======== Income (loss) from continuing operations before income taxes and cumumlative effect of changes in accounting principle Agricultural Products................................... $ 72.8 $ 87.8 $ 64.3 $ 76.3 $ 35.1 Specialty Chemicals..................................... 87.5 92.4 73.5 77.9 77.2 Industrial Chemicals.................................... 72.6 114.5 144.4 117.5 135.7 -------- -------- -------- -------- -------- Segment operating profit(1)............................. 232.9 294.7 282.2 271.7 248.0 Corporate............................................... (36.3) (36.2) (41.3) (48.7) (46.3) Other income and expense, net........................... (1.6) 9.6 9.3 7.1 2.6 -------- -------- -------- -------- -------- Operating profit before gains on divestitures of businesses, asset impairments, restructuring and other charges, and net interest expense..................... 195.0 268.1 250.2 230.1 204.3 Gains on divestitures of businesses(2).................. -- -- 55.5 -- -- Asset impairments(3).................................... (323.1) (10.1) (23.1) -- (197.0) Restructuring and other charges(4)...................... (280.4) (35.2) (11.1) -- (13.0) Net interest expense(5)................................. (64.4) (64.2) (76.4) (75.3) (71.6) -------- -------- -------- -------- -------- Total................................................... $ (472.9) $ 158.6 $ 195.1 $ 154.8 $ (77.3) ======== ======== ======== ======== ========
Business segment results are presented net of minority interests, reflecting only FMC's share of earnings. The corporate line primarily includes staff expenses, and other income and expense consists of all other corporate items, including LIFO inventory adjustments and pension income or expense. - -------- (1) Results for all segments are net of minority interests in 2001, 2000, 1999, 1998 and 1997 of $2.3 million, $4.6 million, $5.1 million, $6.2 million and $8.9 million, respectively, the majority of which pertain to Industrial Chemicals. (2) Gains on divestitures of businesses in 1999 (Note 5) relate to the process additives ($35.4 million) and bioproducts ($20.1 million) operations, both of which are attributable to Specialty Chemicals. (3) Asset impairments in 2001 related to Industrial Chemicals ($224.2 million) and Specialty Chemicals ($98.9 million). Asset impairments in 2000 are related to Specialty Chemicals ($1.1 million) and Industrial Chemicals ($9.0 million). Asset impairments in 1999 are related to Specialty Chemicals ($14.7 million) and Industrial Chemicals ($8.4 million). Asset impairments in 1997 are related to Agricultural Products ($9.0 million), Specialty Chemicals ($62.0 million) and Industrial Chemicals ($126.0 million). See Note 6. 64 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (4) Restructuring and other charges in 2001 are related to Industrial Chemicals ($247.9 million), Corporate ($17.5 million), Agricultural Products ($12.5 million) and Specialty Chemicals ($2.5 million). Restructuring and other charges in 2000 are related to Specialty Chemicals ($1.8 million), Industrial Chemicals ($33.1 million) and Corporate ($0.3 million). Restructuring and other charges in 1999 are related to Agricultural Products ($5.1 million), Specialty Chemicals ($1.3 million), Industrial Chemicals ($0.6 million) and Corporate ($4.1 million). Restructuring and other charges in 1997 are related to Agricultural Products ($13.0 million). See Note 7. (5) Net interest expense in 2001 and 2000 includes the company's share of interest expense related to the external financing of Astaris of $6.1 million and $2.4 million, respectively. The equity in earnings of Astaris, excluding restructuring charges, is included in Industrial Chemicals.
December 31 ---------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- (In Millions) Operating capital employed(1) Agricultural Products.................................. $ 565.5 $ 490.3 $ 552.0 $ 567.3 $ 503.9 Specialty Chemicals.................................... 561.4 661.2 652.9 638.8 642.8 Industrial Chemicals................................... 477.9 715.2 818.0 740.8 731.7 -------- -------- -------- -------- -------- Total operating capital employed....................... 1,604.8 1,866.7 2,022.9 1,946.9 1,878.4 Segment liabilities included in total operating capital employed............................................. 669.5 580.9 559.3 514.0 583.7 Corporate items........................................ 202.9 (23.6) (65.6) 40.4 87.3 -------- -------- -------- -------- -------- Assets of continuing operations........................ 2,477.2 2,424.0 2,516.6 2,501.3 2,549.4 Net assets of Technologies(2).......................... -- 637.7 722.2 818.1 789.4 -------- -------- -------- -------- -------- Total assets........................................... $2,477.2 $3,061.7 $3,238.8 $3,319.4 $3,338.8 ======== ======== ======== ======== ======== Segment assets(3) Agricultural Products.................................. $ 865.5 $ 738.9 $ 735.1 $ 702.3 $ 697.0 Specialty Chemicals.................................... 619.4 724.3 732.6 722.8 723.6 Industrial Chemicals................................... 789.4 984.4 1,114.5 1,035.8 1,041.5 -------- -------- -------- -------- -------- Total segment assets................................... 2,274.3 2,447.6 2,582.2 2,460.9 2,462.1 Corporate items........................................ 202.9 (23.6) (65.6) 40.4 87.3 -------- -------- -------- -------- -------- Assets of continuing operations........................ 2,477.2 2,424.0 2,516.6 2,501.3 2,549.4 Net assets of Technologies(2).......................... -- 637.7 722.2 818.1 789.4 -------- -------- -------- -------- -------- Total assets........................................... $2,477.2 $3,061.7 $3,238.8 $3,319.4 $3,338.8 ======== ======== ======== ======== ========
- -------- (1) Company management views operating capital employed, which consists of assets, net of liabilities, reported by the company's operations (and excludes corporate items such as cash equivalents, debt, pension liabilities, income taxes and LIFO reserves), as its primary measure of segment capital. (2) See Note 2. (3) Segment assets are assets recorded and reported by the segments, and are equal to segment operating capital employed plus segment liabilities. See Note 1. 65 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Year Ended December 31 -------------------------------------------------------------- Depreciation Research & Capital Expenditures & Amortization Development Expenses -------------------- -------------------- -------------------- 2001 2000 1999 2001 2000 1999 2001 2000 1999 ------ ------ ------ ------ ------ ------ ----- ----- ------ (In Millions) Agricultural Products $ 21.6 $ 21.8 $ 36.6 $ 28.0 $ 26.1 $ 23.1 $72.5 $66.7 $ 60.9 Specialty Chemicals.. 28.1 39.2 40.0 34.6 34.8 36.7 15.9 19.1 21.2 Industrial Chemicals. 87.3 126.0 115.5 60.5 62.9 63.4 11.4 12.0 18.5 Corporate............ 8.6 10.3 3.3 8.5 6.0 5.3 -- -- -- ------ ------ ------ ------ ------ ------ ----- ----- ------ Total................ $145.6 $197.3 $195.4 $131.6 $129.8 $128.5 $99.8 $97.8 $100.6 ====== ====== ====== ====== ====== ====== ===== ===== ======
Geographic Segment Information Revenue
Year Ended December 31 -------------------------- 2001 2000 1999 -------- -------- -------- (In Millions) Third party revenue (by location of customer): United States................................. $ 882.1 $ 965.5 $1,167.3 All other countries........................... 1,060.9 1,084.8 1,153.2 -------- -------- -------- Total revenue................................. $1,943.0 $2,050.3 $2,320.5 ======== ======== ========
Long-lived Assets
December 31 ----------------- 2001 2000 -------- -------- (In Millions) United States.......... $ 846.5 $1,095.1 All other countries.... 406.4 437.0 -------- -------- Total long-lived assets $1,252.9 $1,532.1 ======== ========
66 FMC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 21 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
2001 2000 ------------------------------------- ------------------------------------ 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. -------- -------- -------- -------- -------- -------- -------- -------- (In Millions, Except per Share Data and Common Stock Prices) Revenue............................. $ 447.2 $ 523.2 $ 482.8 $ 489.8 $ 561.7 $ 515.7 $ 505.9 $ 467.0 Income (loss) from continuing operations before minority interests, net interest expense and income taxes....................... 34.6 (428.3) 30.8 (49.4) 54.2 42.7 76.4 51.7 Income (loss) from continuing operations......................... 14.4 (298.9) 13.9 (35.7) 28.0 24.5 43.6 29.5 Income (loss) from discontinued operations, net of income taxes.... (40.0) (0.9) 7.4 3.0 4.8 13.5 (53.8) 20.5 Cumulative effect of change in accounting principle, net of income taxes.............................. (0.9) -- -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- Net income (loss)................... $ (26.5) $ (299.8) $ 21.3 $ (32.7) $ 32.8 $ 38.0 $ (10.2) $ 50.0 ======== ======== ======== ======== ======== ======== ======== ======== Basic net income (loss) per common share(1)........................... $ (0.86) $ (9.62) $ 0.68 $ (1.04) $ 1.08 $ 1.25 $ (0.34) $ 1.64 ======== ======== ======== ======== ======== ======== ======== ======== Diluted net income (loss) per common share(1)........................... $ (0.86) $ (9.62) $ 0.66 $ (1.04) $ 1.05 $ 1.20 $ (0.32) $ 1.57 ======== ======== ======== ======== ======== ======== ======== ======== Weighted average shares outstanding: Basic........................... 30.8 31.2 31.2 31.3 30.4 30.4 30.4 30.6 Diluted......................... 30.8 31.2 32.0 31.3 31.3 31.5 31.6 31.8 ======== ======== ======== ======== ======== ======== ======== ======== Common stock prices: High............................ $43.8864 $41.3731 $36.6769 $31.3459 $34.6717 $38.3788 $41.5043 $44.4482 Low............................. $35.9751 $35.6328 $24.6612 $24.6244 $27.1486 $32.8909 $33.9267 $38.2334 ======== ======== ======== ======== ======== ======== ======== ========
Significant transactions that affected quarterly results in 2001 and 2000 are described in Notes 1, 3, 4, 6 and 7. - -------- (1) The sum of quarterly earnings per common share may differ from the full-year amount due to changes in the number of shares outstanding during the year. 67 FMC CORPORATION FIVE-YEAR FINANCIAL SUMMARY Summary of Earnings
2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- (In Millions, Except per Share Amounts) ------------------------------------------------ Revenue....................... $1,943.0 $2,050.3 $2,320.5 $2,356.9 $2,227.4 Costs and expenses: Cost of sales and services... 1,408.7 1,450.9 1,691.6 1,738.7 1,585.7 Selling, general and administrative............. 243.3 231.3 273.0 274.9 301.2 Research and development..... 99.8 97.8 100.6 107.0 127.3 Gains on divestitures of businesses................. -- -- (55.5) -- -- Asset impairments............ 323.1 10.1 23.1 -- 197.0 Restructuring and other charges.................... 280.4 35.2 11.1 -- 13.0 -------- -------- -------- -------- -------- Total costs and expenses..... 2,355.3 1,825.3 2,043.9 2,120.6 2,224.2 -------- -------- -------- -------- -------- Income (loss) from continuing operations before minority interests, net interest expense and income taxes..... $ (412.3) $ 225.0 $ 276.6 $ 236.3 $ 3.2 Minority interest............. 2.3 4.6 5.1 6.2 8.9 Net interest expense.......... 58.3 61.8 76.4 75.3 71.6 -------- -------- -------- -------- -------- Income (loss) from continuing operations before income taxes........................ $ (472.9) $ 158.6 $ 195.1 $ 154.8 $ (77.3) Provision (benefit) for income taxes................. (166.6) 33.0 36.4 37.7 (42.9) -------- -------- -------- -------- -------- Income (loss) from continuing operations................... $ (306.3) $ 125.6 $ 158.7 $ 117.1 $ (34.4) Discontinued operations, net of income taxes.............. (30.5) (15.0) 53.9 25.5 201.3 Cumulative effect of change in accounting principle, net of income taxes.............. (0.9) -- -- (36.1) (4.5) -------- -------- -------- -------- -------- Net income (loss)............. $ (337.7) $ 110.6 $ 212.6 $ 106.5 $ 162.4 -------- -------- -------- -------- -------- After-tax income from continuing operations excluding special income and expense items, and before cumulative effect of change in accounting principle(1)(2) $ 99.6 $ 153.5 $ 132.0 $ 117.1 $ 93.7 ======== ======== ======== ======== ======== Share data Average number of shares -- basic........................ 31.052 30.439 31.516 34.007 36.805 Average number of shares -- diluted...................... 31.052 31.576 32.377 34.939 36.805 -------- -------- -------- -------- -------- Basic earnings (loss) per share Continuing operations......... $ (9.85) $ 4.13 $ 5.04 $ 3.44 $ (0.94) Discontinued operations....... (0.98) (0.49) 1.71 0.75 5.47 Cumulative effect of change in accounting principles..... (0.03) -- -- (1.06) (0.12) -------- -------- -------- -------- -------- $ (10.86) 3.64 6.75 3.13 4.41 ======== ======== ======== ======== ======== Diluted earnings (loss) per share Continuing operations......... $ (9.85) $ 3.97 $ 4.90 $ 3.35 $ (0.94) Discontinued operations....... (0.98) (0.47) 1.67 0.73 5.47 Cumulative effect of changes in accounting principle...... (0.03) -- -- (1.03) (0.12) -------- -------- -------- -------- -------- $ (10.86) $ 3.50 $ 6.57 $ 3.05 $ 4.41 ======== ======== ======== ======== ======== Other information After-tax income per share from continuing operations excluding special income and expense items(1)(2) Basic......................... $ 3.20 $ 5.05 $ 4.19 $ 3.44 $ 2.54 Diluted....................... 3.10 4.86 4.08 3.35 2.53 ======== ======== ======== ======== ======== Capital expenditures.......... $ 145.6 $ 197.3 $ 195.4 $ 207.0 $ 250.4 Depreciation and amortization expense...................... 131.6 129.8 128.5 148.9 176.1 ======== ======== ======== ======== ========
- -------- (1) Income from continuing operations excluding special income and expense items and income per share from continuing operations excluding special income and expense items are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from, or as a substitute for, income from continuing operations, net income or earnings per share determined in accordance with generally accepted accounting principles, nor as the sole measure of the company's profitability. 68 FMC CORPORATION FIVE-YEAR FINANCIAL SUMMARY (2) Summary of Special Income (Expense) Items
Year Ending December 31 -------------------------------- 2001 2000 1999 1997 ------- ------ ------ ------- (In Millions) Pre-tax basis Asset impairments......................................... $(323.1) $(10.1) $(23.1) $(197.0) Restructuring and other charges........................... (280.4) (35.2) (11.1) (13.0) Gains on divestitures of businesses....................... -- -- 55.5 -- ------- ------ ------ ------- Total special income (expense) items, pre-tax............. (603.5) (45.3) 21.3 (210.0) ------- ------ ------ ------- After-tax basis Total special income (expense) items, net of income taxes. $(405.9) $(27.9) $ 26.7 $(128.1) ======= ====== ====== =======
69 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders, FMC Corporation: We have audited the accompanying consolidated balance sheets of FMC Corporation and consolidated subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, cash flows and changes in stockholders' equity for each of the years in the three-year period ended December 31, 2001. In connection with our audits of the consolidated financial statements, we also have audited the related financial statement schedule as listed in the accompanying index in Item 14, Exhibit 11. These consolidated financial statements and financial statement schedule are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FMC Corporation and consolidated subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in Note 1 to the consolidated financial statements, the company changed its method of accounting for derivative instruments and hedging activities in 2001. /s/ KPMG LLP Philadelphia, Pennsylvania February 14, 2002 70 MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS The consolidated financial statements and related information have been prepared by management, who are responsible for the integrity and objectivity of that information. Where appropriate, they reflect estimates based on judgments of management. The statements have been prepared in conformity with accounting principles generally accepted in the United States. Financial information included elsewhere in this annual report is consistent with that contained in the consolidated financial statements. FMC maintains a system of internal control over financial reporting and over safeguarding of assets against unauthorized acquisition, use or disposition which is designed to provide reasonable assurance as to the reliability of financial records and the safeguarding of such assets. The system is maintained by the selection and training of qualified personnel, by establishing and communicating sound accounting and business policies, and by an internal auditing program that constantly evaluates the adequacy and effectiveness of such internal controls, policies and procedures. The Audit Committee of the Board of Directors, composed of directors who are not officers or employees of the company, meets regularly with management, with the company's internal auditors, and with its independent auditors to discuss their evaluation of internal accounting controls and the quality of financial reporting. Both the independent auditors and the internal auditors have free access to the Audit Committee to discuss the results of their audits. The company's independent auditors have been engaged to render an opinion on the consolidated financial statements. They review and make appropriate tests of the data included in the financial statements. W. Kim Foster Graham R. Wood Senior Vice President Vice President and Chief Financial Officer and Controller Philadelphia, Pennsylvania February 14, 2002 71 PART III Incorporated by Reference From: ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF -- Part I; Proxy Statement for 2002 Annual THE REGISTRANT Meeting of Stockholders ITEM 11. EXECUTIVE COMPENSATION -- Proxy Statement for 2002 Annual Meeting of Stockholders ITEM 12. SECURITY OWNERSHIP OF CERTAIN -- Proxy Statement for 2002 Annual Meeting BENEFICIAL OWNERS AND MANAGEMENT of Stockholders ITEM 13. CERTAIN RELATIONSHIPS AND RELATED -- Proxy Statement for 2002 Annual Meeting TRANSACTIONS of Stockholders and Note 18 included on pages 61 and 62 of this report.
PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed with this Report 1. Consolidated financial statements of FMC Corporation and its subsidiaries are incorporated under Item 8 of this Form 10-K. 2. All required financial statement schedules are included in the consolidated financial statements or notes thereto as incorporated under Item 8 of this Form 10-K. 3. Exhibits: See attached Index of Exhibits (b) Reports on Form 8-K During the quarter ended December 31, 2001, the Registrant filed reports on Form 8-K or Form 8-K/A as follows: The company filed a report on Form 8-K dated November 29, 2001 to report its Board of Director's approval of the spin-off of FMC Technologies, Inc. The company filed a report on Form 8-K dated December 14, 2001 to provide and information statement about the spin-off of FMC Technologies, Inc. (c) Exhibits See Index of Exhibits beginning on page 74 of this document. 72 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FMC CORPORATION (Registrant) By: /s/ W. KIM FOSTER ----------------------------- W. Kim Foster Senior Vice President and Chief Financial Officer Date: February 14, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature Title Date --------- ----- ---- /s/ W. KIM FOSTER Senior Vice President and February 14, 2002 - ----------------------------- Chief Financial Officer W. Kim Foster /s/ GRAHAM R. WOOD Vice President, Controller February 14, 2002 - ----------------------------- and Principal Accounting Graham R. Wood Officer /s/ WILLIAM G. WALTER - ----------------------------- Chairman of the Board and William G. Walter Chief Executive Officer /s/ ROBERT N. BURT - ----------------------------- Robert N. Burt Director /s/ B.A. BRIDGEWATER, JR. - ----------------------------- B.A. Bridgewater, Jr. Director /s/ PATRICIA A. BUFFLER - ----------------------------- Patricia A. Buffler Director /s/ ALBERT J. COSTELLO - ----------------------------- Albert J. Costello Director /s/ EDWARD J. MOONEY - ----------------------------- Edward J. Mooney Director /s/ WILLIAM F. REILLY - ----------------------------- William F. Reilly Director /s/ ENRIQUE J. SOSA - ----------------------------- Enrique J. Sosa Director /s/ JAMES R. THOMPSON - ----------------------------- James R. Thompson Director 73 INDEX OF EXHIBITS FILED WITH OR INCORPORATED BY REFERENCE INTO FORM 10-K OF FMC CORPORATION FOR THE YEAR ENDED DECEMBER 31, 2001
Exhibit No. Exhibit Description - ----------- ------------------- 3.1 Restated Certificate of Incorporation, as filed on June 23, 1998 (incorporated by reference from Exhibit 4.1 to FMC Corporation's Form S-3 filed on July 21, 1998) 3.2 Restated By-Laws of FMC Corporation, as of January 1, 2002 4.1 Amended and Restated Rights Agreement, dated as of February 19, 1988, between FMC Corporation and Harris Trust and Savings Bank (incorporated by reference from Exhibit 4 to FMC Corporation's Registration Statement on Form SE (File No. 1-02376) filed on March 25, 1993) 4.2 Amendment to Amended and Restated Rights Agreement, dated February 9, 1996 (incorporated by reference from Exhibit 1 to FMC Corporation's Current Report on Form 8-K filed on February 9, 1996) 4.3 Fiscal Agency Agreement between FMC Corporation and Union Bank of Switzerland, Fiscal Agent, dated as of January 16, 1990 (incorporated by reference from Exhibit 10.4 to FMC Corporation's Form SE (File No. 1-02376) filed on March 28, 1990) 4(iii) (A) FMC Corporation undertakes to furnish to the Commission upon request, a copy of any instrument defining the rights of holders of long-term debt of FMC Corporation and its consolidated subsidiaries and for any of its unconsolidated subsidiaries for which financial statements are required to be filed. 10.1* FMC Corporation Compensation Plan for Non-Employee Directors, as amended and restated May 1, 2000 (incorporated by reference from Exhibit 10.1 to the Annual Report on Form 10-K filed March 29, 2001) 10.2 $240,000,000 364-Day Credit Agreement, dated as of December 6, 2001, among FMC Corporation, the Lenders party thereto, Citibank, N.A., Bank of America, N.A., and ABN AMRO Bank N.V. and First Union National Bank (incorporated by reference from Exhibit 4.1 to FMC Corporation's Current Report on Form 8-K filed on January 15, 2002) 10.3* FMC 1990 Incentive Share Plan (incorporated by reference from Exhibit 10.1 to the Form SE (File No. 1-02376) filed on March 26, 1991) 10.3.a* Amendment dated April 18, 1997 to FMC 1990 Incentive Share Plan (incorporated by reference from Exhibit 10.3.a to FMC Corporation's Quarterly Report on Form 10-Q filed on May 15, 1997) 10.3.b* Amendment to the FMC 1990 Incentive Share Plan (incorporated by reference from Exhibit 10.1.a to FMC Corporation's Annual Report on Form 10-K filed March 29, 2000) 10.4* FMC Corporation Employees' Retirement Program, as amended and restated effective January 1, 1999 (incorporated by reference from Exhibit 10.4 to the Annual Report on Form 10-K filed March 29, 2000) 10.4.a* First Amendment of FMC Corporation Employee's Retirement Program Part I Salaried and Non- Union Hourly Employees' Plan (incorporated by reference from Exhibit 10.4.a to the Annual Report on Form 10-K filed March 29, 2000)
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Exhibit No. Exhibit Description - ------- ------------------- 10.4.b* First Amendment of FMC Corporation Employees' Retirement Program Part II Union Employees' Plan (dated September 16, 1999) (incorporated by reference from Exhibit 10.4.b to the Annual Report on Form 10-K filed March 29, 2000) 10.4.c* Second Amendment of FMC Corporation Employee's Retirement Program Part I Salaried and Non- Union Hourly Employees' Plan (incorporated by reference from Exhibit 10.4.a.1 to the Quarterly Report on Form 10-Q filed on November 14, 2000) 10.4.d* Second Amendment of FMC Corporation Employees' Retirement Program--Part II Union Hourly Employees' Retirement Plan (incorporated by reference from Exhibit 10.4.b.1 to the Quarterly Report on Form 10-Q filed on November 14, 2000) 10.4.e* Third Amendment of FMC Corporation Employees' Retirement Program--Part I Salaried and Non- Union Hourly Employees' Plan effective as of May 1, 2001 (incorporated by reference from Exhibit 10.4.e to the Quarterly Report on Form 10-Q filed on August 14, 2001) 10.4.f* Third Amendment of FMC Corporation Employees' Retirement Program--Part II Union Hourly Employees' Plan, effective as of May 1, 2001 (incorporated by reference from Exhibit 10.4.f to the Quarterly Report on Form 10-Q filed on August 14, 2001) 10.4.g* Fourth Amendment of FMC Corporation Employees' Retirement Program--Part I Salaried and Non- Union Hourly Employees' Plan, effective as of January 1, 1999 (incorporated by reference from Exhibit 10.4.g to the Quarterly Report on Form 10-Q filed on August 14, 2001) 10.4.h* Fourth Amendment of FMC Corporation Employees' Retirement Program--Part II Union Hourly Employees' Plan, effective January 1, 1999 (incorporated by reference from Exhibit 10.4.h to the Quarterly Report on Form 10-Q filed on August 14, 2001) 10.4.i* Fifth Amendment of FMC Corporation Employees' Retirement Program--Part I Salaried and Non- Union Hourly Employees' Retirement Plan, as amended and restated effective January 1, 1999 (incorporated by reference from Exhibit 10.4.i to the Quarterly Report on Form 10-Q filed on August 14, 2001) 10.5* FMC Corporation Savings and Investment Plan, adopted effective as of September 28, 2001 (incorporated by reference from Exhibit 10.5 to FMC Corporation's Quarterly Report on Form 10-Q filed on November 7, 2001) 10.5.a* FMC Corporation Savings and Investment Plan Trust Agreement, as amended and restated as of September 28, 2001 (incorporated by reference from Exhibit 10.5.a to FMC Corporation's Quarterly Report on Form 10-Q filed on November 7, 2001) 10.6* FMC Corporation Salaried Employees' Equivalent Retirement Plan, as amended and restated effective as of May 1, 2001 (incorporated by reference from Exhibit 10.6 to FMC Corporation's Quarterly Report on Form 10-Q filed on November 7, 2001) 10.6.a* FMC Corporation Salaried Employees' Equivalent Retirement Plan Grantor Trust, as amended and restated effective as of July 31, 2001 (incorporated by reference from Exhibit 10.6.a to FMC Corporation's Quarterly Report on Form 10-Q filed on November 7, 2001) 10.7* FMC Corporation Non-Qualified Savings and Investment Plan, as amended and restated effective as of September 28, 2001 (incorporated by reference from Exhibit 10.7 to FMC Corporation's Quarterly Report on Form 10-Q filed on November 7, 2001)
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Exhibit No. Exhibit Description - -------- ------------------- 10.7.a* FMC Corporation Non-Qualified Savings and Investment Plan Trust, as amended and restated effective as of September 28, 2001 (incorporated by reference from Exhibit 10.7.a to FMC Corporation's Quarterly Report on Form 10-Q filed on November 7, 2001) 10.8* FMC Corporation Incentive Compensation and Stock Plan, effective as of February 16, 2001. 10.9 Purchase and Contribution Agreement, dated as of November 24, 1999 among FMC Corporation, FMC Wyoming Corporation and FMC Funding Corporation. 10.10* FMC Corporation Executive Severance Plan, as amended and restated effective as of May 1, 2001 (incorporated by reference from Exhibit 10.10 to FMC Corporation's Quarterly Report on Form 10-Q filed on November 7, 2001) 10.10.a* FMC Corporation Executive Severance Grantor Trust Agreement, dated July 31, 2001 (incorporated by reference from Exhibit 10.10.a to FMC Corporation's Quarterly Report on Form 10-Q filed on November 7, 2001) 10.11 Receivables Purchase Agreement, dated as of November 24, 1999, among FMC Funding Corporation, FMC Corporation, CIESCO, L.P., Citibank, N.A. and Citicorp North America, Inc. 10.12* FMC Corporation Defined Benefit Retirement Trust, as amended and restated as of October 2, 2000 (incorporated by reference from Exhibit 10.4.c to the Quarterly Report on Form 10-Q filed November 14, 2000) 10.12.a* Amendment to the FMC Corporation Defined Benefit Retirement Trust, effective April 30, 2001 (incorporated by reference from Exhibit 10.12.a to the Quarterly Report on Form 10-Q filed August 14, 2001) 10.12.b* Second Amendment to the FMC Corporation Defined Benefit Retirement Trust effective November 1, 2001(incorporated by reference from Exhibit 10.12.b to the Quarterly Report on Form 10-Q filed November 7, 2001) 10.13 Separation and Distribution Agreement by and between FMC Corporation and FMC Technologies, Inc., dated as of May 31, 2001 (incorporated by reference from Exhibit 2.1 to Form S-1/A for FMC Technologies, Inc.) (Registration No. 333-55920) filed June 6, 2001). 10.14 Tax Sharing Agreement by and between FMC Corporation and FMC Technologies, Inc., dated as of May 31, 2001 (incorporated by reference from Exhibit 10.1 to Form S-1/A for FMC Technologies, Inc.) (Registration No. 333-55920) filed June 6, 2001). 10.15* Employee Benefits Agreement by and between FMC Corporation and FMC Technologies, Inc., dated as of May 31, 2001 (incorporated by reference from Exhibit 10.2 to Form S-1/A for FMC Technologies, Inc.) (Registration No. 333-55920) filed June 6, 2001). 10.16 Transition Services Agreement by and between FMC Corporation and FMC Technologies, Inc., dated as of May 31, 2001 (incorporated by reference from Exhibit 10.3 to Form S-1/A for FMC Technologies, Inc.) (Registration No. 333-55920) filed June 6, 2001). 10.17 Joint Venture Agreement between Solutia Inc. and FMC Corporation, made as of April 29, 1999 (incorporated by reference from Exhibit 2.I to Solutia's Current Report on Form 8-K (File Number 001-13255) filed on April 27, 2000)
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Exhibit No. Exhibit Description - ------- ------------------- 10.17.a First Amendment to Joint Venture Agreement, effective as of December 29, 1999, by and among Solutia Inc. and FMC Corporation (incorporated by reference from Exhibit 2.II to Solutia's Current Report on Form 8-K (File Number 001-13255) filed on April 27, 2000) 10.17.b Second Amendment to Joint Venture Agreement, effective as of February 2, 2000, by and among Solutia Inc. and FMC Corporation (incorporated by reference from Exhibit 2.III to Solutia's Current Report on Form 8-K (File Number 001-13255) filed on April 27, 2000) 10.17.c Third Amendment to Joint Venture Agreement, effective as of March 31, 2000, by and among Solutia Inc. and FMC Corporation (incorporated by reference from Exhibit 2.IV to Solutia's Current Report on Form 8-K (File Number 001-13255) filed on April 27, 2000) 10.18* Consulting Agreement, dated October 31, 2001, by and between FMC Corporation and Robert N. Burt 10.19* Consulting Agreement, dated August 2, 2001, by and between FMC Corporation and Stephen F. Gates 10.20* Executive Severance Agreement, entered into as of October 1, 2001, by and between FMC Corporation and William G. Walter 10.21* Executive Severance Agreement, entered into as of December 31, 2001, by and between FMC Corporation and Robert I. Harries, with attached schedule 10.22* Executive Severance Agreement, entered into as of December 31, 2001, by and between FMC Corporation and Graham R. Wood, with attached schedule 11 Computation of Per Share Earnings 12 Computation of Ratios of Earnings to Fixed Charges 21 FMC Corporation List of Significant Subsidiaries 23 Consent of KPMG LLP
- -------- * Indicates a management contract or compensation plan or arrangement 77 EX-3.2 3 dex32.txt RESTATED BY-LAWS OF FMC CORPORATION EXHIBIT 3.2 RESTATED BY-LAWS OF FMC CORPORATION (as of January 1, 2002) ARTICLE I LOCATION OF OFFICES Section 1. Principal Delaware Office. The principal office of the Corporation in ------------------------- the State of Delaware shall be in the City of Wilmington, County of New Castle, and the name and address of the Resident Agent in charge thereof shall be the Corporation Trust Company, 100 West Tenth Street, Wilmington, Delaware. Section 2. Principal Pennsylvania Office. The Corporation shall also have and ----------------------------- maintain an office or principal place of business in the State of Pennsylvania at 1735 Market Street, Philadelphia, Pennsylvania, the location of such office to be subject to change by resolution of the Board of Directors. Section 3. Other Offices. The Corporation may also have offices in such other ------------- places, both within and without the State of Delaware, as the Board of Directors from time to time may designate or the business of the Corporation require. ARTICLE II CORPORATE SEAL The corporate seal shall be circular in form and have inscribed thereon the following: "FMC Corporation, Incorporated Delaware 1928." ARTICLE III STOCKHOLDERS Section 1. Meetings of Stockholders. ------------------------- (a) Annual Meetings. The annual meeting of the stockholders of the Corporation shall be held on such date and at such time as may be fixed by resolution of the Board of Directors. At the annual meeting stockholders shall elect Directors and transact such other business as properly may be brought before the meeting. (b) Special Meetings. Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. (c) Place of Meetings. Unless otherwise directed by the Board of Directors, all meetings of the stockholders shall be held at the office of the Corporation at 1735 Market Street, Philadelphia, Pennsylvania. (d) Notice of Meetings. Unless otherwise provided by statute, written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation. Any previously scheduled meeting of the stockholders may be postponed, and any special meeting of the stockholders may be cancelled, by resolution of the Board of Directors upon public notice given prior to the date previously scheduled for such meeting of stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors. Section 2. Quorum of Stockholders. The holders of a majority of the total number ----------------------- of shares issued and outstanding, and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by law, by the certificate of incorporation, or by these By-Laws. The presiding officer of the meeting or a majority of the shares so represented may adjourn the meeting from time to time, whether or not there is such a quorum, without notice other than by announcement at the meeting, until the requisite number of shares of stock entitled to vote shall be present. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally noticed. When a quorum is present at any meeting of stockholders, a majority of the number of shares of the stock entitled to vote which is represented thereat shall decide any question brought before such meeting, unless the question is one upon which by express provision of law or the certificate of incorporation or of these By-Laws a larger or different vote is required, in which case such express provision shall govern and control the decision of such question. Section 3. Voting by Stockholders. Each stockholder of record entitled to vote ----------------------- at any meeting may do so in person or by proxy appointed by instrument in writing, subscribed by such stockholder or his duly authorized attorney, and filed with the Secretary. Section 4 [RESERVED] Section 5. Business Brought Before a Meeting. At an annual meeting of the ---------------------------------- stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than sixty days nor more than ninety days prior to the meeting; provided, however, that in the event that less than seventy days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the date on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section. The presiding officer of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section; and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 6. Inspectors of Elections; Opening and Closing the Polls. The Board of ------------------------------------------------------- Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of stockholders and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders, the presiding officer of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector shall have the duties prescribed by law. The presiding officer of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting. ARTICLE IV DIRECTORS Section 1. Election. Number and Term of Office. Directors shall be chosen by ------------------------------------ ballot at the annual meeting of the stockholders. The number of Directors of this Corporation which shall constitute the whole Board shall be fixed by resolution adopted by affirmative vote of a majority of the whole Board except that such number shall not be less than three (3) nor more than fifteen (15) the exact number to be eleven (11) until otherwise determined by resolution adopted by affirmative vote of a majority of the whole Board. Each director shall hold office until his respective successor is elected and qualified or until his earlier resignation or removal. Section 2. Nomination of Directors. Subject to the rights of holders of any ------------------------ class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of Directors generally. However, any stockholder entitled to vote in the election of Directors generally may nominate one or more persons for election as Directors at a meeting only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, ninety days prior to the anniversary date of the immediately preceding annual meeting, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of Directors, the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (e) the consent of each nominee to serve as a Director of the Corporation if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. Section 3. Removal of Directors. Subject to the rights of any class or series of -------------------- stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office with or without cause and only by the affirmative vote of the holders of 80% of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class. Section 4. Vacancies on Board. Vacancies on the Board of Directors may be filled ------------------ by a majority of the Directors then in office, although less than a quorum, or by a sole remaining Director. At any special meeting of stockholders called for the purpose of removing Directors pursuant to Section 3 of this ARTICLE, the vacancy or vacancies on the Board caused by such removal may be filled by the stockholders. Any Director elected to fill a vacancy resulting from an increase in the number of Directors shall hold office for a term that shall coincide with the remaining term of the class of Directors to which he is elected. A Director elected to fill a vacancy not resulting from an increase in the number of Directors shall have the same remaining term as that of his predecessor. Section 5. Powers of Directors. -------------------- (a) General Powers. The Board of Directors shall have the entire management of the business of this Corporation. In addition to such powers as are herein and in the certificate of incorporation expressly conferred upon it, the Board of Directors shall have and may exercise all the powers of the Corporation, subject to the provisions of the laws of Delaware, the certificate of incorporation and these By-Laws. (b) Appointment of Committees The Board of Directors may designate two or more of their number to constitute an Executive Committee, which Committee shall have and may exercise, when the Board is not in session, all of the powers of the Board in the management of the business and affairs of the Corporation, including the power to appoint Assistant Secretaries and Assistant Treasurers, and to authorize the seal of the Corporation to be affixed to all papers which may require it. The Executive Committee may make rules for the calling, holding and conduct of its meetings and the keeping of records thereof. The Board of Directors may also appoint other committees from their own number, the number (not less than two) composing such committees, and the powers conferred upon them, to be determined by such resolution or resolutions. In the absence or disqualification of any member of the Executive Committee or any other committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Meetings of any Committee designated by the Board of Directors may be called by the Board of Directors or by the Chairman of the Committee at any time or place upon at least twenty-four (24) hours notice. One third of the members of a Committee, but not less than two members, shall constitute a quorum of a Committee for the transaction of business. (c) Delegation of Duties of Directors The Board of Directors may delegate for the time being the powers or duties of any officer of the Corporation, in case of his absence, disability, death or removal, or "for any other reason, to any other officer or to any Director. Section 6. Meeting of Directors. --------------------- (a) Regular Meetings Regular meetings of the Board of Directors shall be held at such place within or without the State of Delaware, and at such times, as the Board by vote may determine from time to time, and if so determined no notice thereof need be given. After each election of Directors the newly constituted Board shall meet without notice for the purpose of electing officers and transacting such other business as lawfully may come before it. (b) Special Meetings Special meetings of the Board of Directors may be held at any time or place, within or without the State of Delaware, whenever called by the Chairman of the Board, the President, the Chief Financial Officer, the Secretary or a majority of the whole Board of Directors. (c) Notice of Meetings. Notice of any special meeting of directors shall be given to each director at his or her business or residence in writing by hand delivery, first- class or overnight mail or courier service, telegram or facsimile transmission, or orally by telephone. If mailed by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by telegram, overnight mail or courier service, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company or the notice. is delivered to the overnight mail or courier service company at least twenty-four (24) hours before such meeting. If by facsimile transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least twelve (12) hours before such meeting. If by telephone or by hand delivery, the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Such notice need not state the purposes of such meeting. Section 7. Quorum of Directors. Subject to Section 4 of this Article, a whole -------------------- number of directors equal to a majority of the whole Board of Directors shall constitute a quorum of the Board for the transaction of business, but a majority of directors present may adjourn the meeting from time to time until a quorum is present. When a quorum is present at any meeting of Directors, a majority of the members present thereat shall decide any question brought before such meeting, except as otherwise provided by law, the certificate of incorporation or these By-Laws. Section 8. Compensation of Directors. Directors other than those who are -------------------------- full-time salaried officers or other employees of the Corporation may be paid compensation for their services as Directors and may also be paid additional compensation for their services as members of any committee appointed by the Board of Directors, in such amounts as the Board of Directors by resolution shall from time to time determine to be appropriate. Directors may be paid their expenses, if any, incurred for attendance at each meeting of the Board of Directors or of any committee of which they may be members. No Director shall be precluded from serving the Corporation in any other capacity and receiving compensation therefore. ARTICLE V BOOKS AND RECORDS Unless otherwise required by the laws of Delaware, the books and records of the Corporation may be kept at the office of the Corporation in the City of Chicago, State of Illinois, or at any other place or places outside the State of Delaware, as the Board of Directors from time to time may designate. ARTICLE VI OFFICERS Section 1. Number and Titles. The officers of the Corporation shall be a ----------------- Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary, a Treasurer, and a Controller, all of whom shall be elected by the Board of Directors. The Board of Directors or the Chief Executive Officer may appoint such other officers, including one or more Assistant Secretaries, Assistant Treasurers and Assistant Controllers as either of them shall deem necessary, who shall have such authority and perform such duties as may be prescribed in such appointment. The Chairman of the Board, the Vice Chairman of the Board and the President shall be members of the Board of Directors, but the other officers need not be members of such Board. Any two or more offices, other than the offices of President and Secretary, may be held by the same person. Section 2. Tenure of Office. Officers of the Corporation shall hold their ---------------- respective offices at the pleasure of the Board of Directors and, in the case of officers who were appointed by the Executive Committee or by the Chief Executive Officer, also at the pleasure of such appointing authority. Section 3. Duties of Officers. -------------------- (a) Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors, of the Executive Committee and of the stockholders of the Corporation. He shall perform such other duties as may from time-to-time be assigned to him by the Board of Directors. (b) Chief Executive Officer. The Chief Executive Officer of the Corporation shall be in general charge and supervision of the affairs of the Corporation. (c) President. The President shall perform such duties as from time-to-time may be assigned to him by the Board of Directors or the Chief Executive Officer of the Corporation. (d) Vice Presidents. Each Vice President shall have such powers and shall perform such duties as may be assigned to him by the senior officers of the Corporation or by the Board of Directors. The Board of Directors may designate one or more Vice Presidents as Executive Vice Presidents or Senior Vice Presidents, or make such other designations of Vice Presidents as it may deem appropriate. (e) Secretary The Secretary shall attend and record all proceedings of the meetings of the Board of Directors, the stockholders, and the Executive Committee; shall be custodian of the corporate seal and affix such seal to all documents requiring the same; shall cause to be maintained a stock transfer book, and a stock ledger, and such other books as the Board of" Directors may direct; shall serve all notices required by law, or by these By-Laws, or by resolution of the Board of Directors; and shall perform such other duties as pertain to the office of Secretary, subject to the control of the Board of Directors. (f) Assistant Secretaries. The Assistant Secretaries shall assist the Secretary in the performance of his duties, and shall perform such other duties as the Board of Directors or the Chief Executive Officer from time to time may prescribe. If at any time the Secretary shall be unable to act, an Assistant Secretary may perform his duties. (g) Treasurer. The Treasurer shall perform all duties commonly incident to that office (including, but without limitation, the care and custody of the funds and securities of the Corporation which from time to time may come into his hands and the deposit of the funds of the Corporation in such banks or trust companies as the Board of Directors may authorize or direct) and, in addition, such other duties as the Board of Directors from time to time may prescribe. (h) Assistant Treasurers. Assistant Treasurers shall assist the Treasurer in the performance of his duties, and shall discharge such other duties as the Board of Directors or the Chief Executive Officer from time to time may prescribe. (i) Controller. The Controller shall be the principal accounting officer of the Corporation, and shall maintain adequate records of all assets, liabilities and transactions of the Corporation; and shall cause adequate audits of the Corporation's accounting records to be currently and regularly made; and shall perform such other duties as the Board of Directors from time to time may prescribe. (j) Assistant Controllers. Assistant Controllers shall assist the Controller in performance of his duties, and shall discharge such other duties as the Board of Directors or the Chief Executive Officer from time to time may prescribe. ARTICLE VII STOCK CERTIFICATES Section 1. Stock Certificates. Every holder of stock shall be entitled to have a ------------------ certificate or certificates duly numbered, certifying the number and class of shares in the Corporation owned by him, in such form as may be prescribed by the Board of Directors. Each such certificate shall be signed in the name of the Corporation by the Chairman of the Board, the President or a Vice President, and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. If any such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. All certificates shall be countersigned and registered in such manner as the Board of Directors may from time to time prescribe and there shall be impressed thereon the seal of the Corporation or imprinted thereon a facsimile of such seal. Any transfer agent may countersign by facsimile signature. No registrar of any stock of the Corporation appointed pursuant to this Section I shall be the Corporation or its employee. Section 2. Lost Certificates. In the case of the loss, mutilation or ----------------- destruction of a stock certificate, a duplicate certificate may be issued upon such terms and conditions as the Board of Directors from time to time may prescribe. Section 3. Transfers of Stock. Transfer of shares of stock of the Corporation ------------------ shall be made on the books of the Corporation only by the person named in the certificate evidencing such stock or by any attorney lawfully constituted in writing, and upon surrender and cancellation of such certificate, with duly executed assignment and power of transfer endorsed thereon or attached thereto, and with such proof of authenticity of the signatures and authority of the signatories as the Corporation or its agents may reasonably require, except that a new certificate may be issued in the name of an-appropriate state officer or office, without the surrender of the former certificate for shares presumed abandoned under the provisions of applicable state escheat or abandoned property laws. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly is not bound to recognize any equitable or other claim or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly otherwise provided by the laws of the state of Delaware. ARTICLE VIII DEPOSITARIES AND CHECKS Depositaries of the funds of the Corporation shall be designated by the Board of Directors; and all checks on such funds shall be signed by such officers or other employees of the Corporation as the Board from time to time may designate. ARTICLE IX WAIVER OF NOTICE Any notice required to be given by law, by the certificate of incorporation, or by these By-Laws, may be waived by the person entitled thereto, either before or after the time stated in such notice. ARTICLE X AMENDMENT OF BY-LAWS Subject to Section (c) of ARTICLE EIGHTH and Section (a) of ARTICLE TENTH of the Certificate of Incorporation of the Corporation these By-Laws may be amended, repealed or added to at any regular or special meeting of the Board of Directors or of the stockholders, by the affirmative vote of a majority of the whole Board of Directors, or by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote, as the case may be. ARTICLE XI INDEMNIFICATION OF OFFICERS, DIRECTORS AND EMPLOYEES (a) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit, or proceedings, whether civil, criminal, administrative or investigative(hereinafter a "Proceeding"), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Corporation, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of. the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in paragraph (c) of this Article XI, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the whole Board of Directors. The right to indemnification conferred in this Article XI shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition, such advances to be paid by the Corporation within 20 days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided, however, that if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article XI or otherwise. (b) To obtain indemnification under this Article XI, a claimant shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Upon written request by a claimant for indemnification pursuant to the first sentence of this Paragraph (b), a determination, if required by applicable law, with respect to the claimant's entitlement thereto shall be made as follows: (1) if requested by the claimant, by Independent Counsel (as hereinafter defined), or (2) if no request is made by the claimant for a determination by Independent Counsel, (i) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (ii) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (iii) if a quorum of Disinterested Directors so directs, by the stockholders of the Corporation. In the event the determination of entitlement to indemnification is to be made by Independent Counsel at the request of the claimant, the Independent Counsel shall be selected by the Board of Directors unless there shall have occurred within two years prior to the date of the commencement of the action, suit or proceeding for which indemnification is claimed a "Change of Control" as defined in the Executive Severance Plan of FMC Corporation (as amended as of April 18, 1997), in which case the Independent Counsel shall be selected by the claimant unless the claimant shall request that such selection be made by the Board of Directors. If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within 10 days after such determination. (c) If a claim under Paragraph (a) of this Article XI is not paid in full by the Corporation within thirty days after a written claim pursuant to Paragraph (b) of this Article XI has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition whether the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, Independent Counselor stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he -or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of Directors, Independent Counselor stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (d) If a determination shall have been made pursuant to Paragraph (b) of this Article XI that the claimant is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to Paragraph (c) of this Article XI. (e) The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to Paragraph (c) of this Article XI that the procedures and presumptions of this Article XI are not valid, binding and enforceable and shall stipulate in such proceeding that the Corporation is bound by all the provisions of this Article XI. (f) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article XI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Laws, agreement, vote of stockholders or Disinterested Directors or otherwise. No repeal or modification of this Article XI shall in any way diminish or adversely affect the rights of any director, officer, employee or agent of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification. (g) The Corporation may, but shall not be obligated to, purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation against any liability, cost or expense. (h) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent or class of employees or agents of the Corporation (including the heirs, executors, administrators or estate of each such person) to the fullest extent of the provisions of this Article XI with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. (i) If any provisions or provision of this Article XI shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article XI (including, without limitation, each provision of any paragraph of this Article XI containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article XI including, without limitation, each such portion of any paragraph of this Article XI containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. (j) For purposes of this Article XI: (1) "Disinterested Director" means a director of the Corporation who is not and was not a party to the matter in respect of which indemnification is sought by the claimant. (2) "Independent Counsel" means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of Corporation law and shall include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Corporation or the claimant in an action to determine the claimant's rights under this Article XI. (k) Any notice, request or other communication required or permitted to be given to the Corporation under this Article XI shall be in writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary. ARTICLE XII EMERGENCY BY-LAWS The Emergency By-Laws provided in this Article XII shall be operative during any emergency in the conduct of the business of the Corporation resulting from an attack on the Unit-ed States or on a locality in which the Corporation does business or customarily holds meetings of its board of directors or stockholders or during any nuclear or atomic disaster or during the existence of any catastrophe or other similar emergency condition as a result of which a quorum of the board of directors or a standing committee thereof cannot readily be convened for action notwithstanding any different provision in the preceding Articles of these By-Laws or in the Certificate of Incorporation of the Corporation or in the General Corporation Law of the State of Delaware. To the extent not inconsistent with the provisions of this Article, the By-Laws provided in the preceding Articles shall remain in effect during such emergency and upon its termination the Emergency By-Laws shall cease to be operative. During any such emergency: (a) A meeting of the Board of Directors or a committee thereof may be called by any officer or director of the Corporation. Notice of the time and place of the meeting shall be given by the person calling the meeting to such of the directors as it may be feasible to reach by any available means of communication. Such notice shall be given at such time in advance of the meeting as circumstances permit in the judgment of the person calling the meeting. (b) At any such meeting of the Board of Directors, a quorum shall consist of the director or directors in attendance at the meeting. (c) The Board of Directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during such an emergency any or all officers or agents of the Corporation shall for any reason be rendered incapable of discharging their duties. (d} To the extent required to constitute a quorum at any meeting of the Board of Directors during such an emergency, the officers of the Corporation who are present shall, unless otherwise provided in Emergency By-Laws, be deemed, in order of rank and within the same rank in order of seniority, directors for such meeting. (e) The Board of Directors, either before or during any such emergency, may, effective in the emergency, change the head office or designate several alternative head offices or regional offices or authorize the officers so to do. No officer, director or employee acting in accordance with these Emergency By-Laws shall be liable except for willful misconduct. These Emergency By-Laws shall be subject to repeal or change by further action of the Board of Directors or by action of the stockholders, but no such repeal or change shall modify the provisions of the next preceding paragraph with regard to action taken prior to the time of such repeal or change. Any amendment of these Emergency By-Laws may make any further or different provision that may be practical and necessary for the circumstances of the emergency. EX-10.8 4 dex108.txt INCENTIVE COMPENSATION AND STOCK PLAN Exhibit 10.8 FMC CORPORATION INCENTIVE COMPENSATION AND STOCK PLAN ------------------------------------- SECTION 1. HISTORY AND PURPOSE ------------------- 1.1 History. In 1995 the Company's stockholders approved the adoption of ------- the FMC 1995 Stock Option Plan and the FMC 1995 Management Incentive Plan with 3,000,000 shares of Common Stock available for issuance under the two plans combined. Effective as of February 16, 2001, the Board merged the FMC 1995 Management Incentive Plan with and into the FMC 1995 Stock Option Plan, and the FMC 1995 Stock Option Plan was restated as provided herein, and renamed the FMC Corporation Incentive Compensation and Stock Plan. Also effective as of February 16, 2001, the Board approved an addition to the authorization of shares available for issuance under the Plan of 800,000 shares of Common Stock, making the total shares available for issuance under the Plan 3,800,000. In 2000, the Committee adopted the FMC Corporation Stock Appreciation Rights and Phantom Stock Plan to provide equity-based cash compensation to foreign employees in an effort to reduce the foreign income taxes that would otherwise be payable by such foreign employees if they received traditional grants under the Plan. The FMC Corporation Stock Appreciation Rights and Phantom Stock Plan was merged with and into the Plan effective as of February 16, 2001. 1.2 Purpose. The purpose of the Plan is to give the Company a competitive ------- advantage in attracting, retaining and motivating officers, employees, directors and consultants of the Company and its Affiliates. SECTION 2. DEFINITIONS ----------- 2.1 General. For purposes of the Plan, the following terms are defined as ------- set forth below: (a) "Affiliate" means a corporation or other entity controlled by, controlling or under common control with the Company, including, without limitation any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent (50%) voting or profits interest is owned, directly or indirectly, by the Company or any successor to the Company. (b) "Award" means a Management Incentive Award, Stock Option, Stock Appreciation Right, Performance Unit, Restricted Stock or other award authorized under the Plan. (c) "Award Cycle" means a period of consecutive fiscal years or portions thereof designated by the Committee over which Awards are to be earned. (d) "Board" means the Board of Directors of the Company. (e) "Business Unit" means a unit of the business of the Company or its Affiliates as determined by the Committee and the CEO. (f) "Capital Employed" means operating working capital plus net property, plant and equipment. (g) "Cause" means (1) "Cause" as defined in any Individual Agreement to which the participant is a party, or (2) if there is no such Individual Agreement, or, if it does not define "Cause": (A) the participant having been convicted of, or pleading guilty or nolo contendere to, a felony under federal or state law; (B) the Willful and continued failure on the part of the participant to substantially perform his or her employment duties in any material respect (other than such failure resulting from Disability), after a written demand for substantial performance is delivered to the participant that specifically identifies the manner in which the Company believes the participant has failed to perform his or her duties, and after the participant has failed to resume substantial performance of his or her duties within thirty (30) days of such demand; or (C) Willful and deliberate conduct on the part of the participant that is materially injurious to the Company or an Affiliate; or (D) prior to a Change in Control, such other events as will be determined by the Committee. The Committee will, unless otherwise provided in an Individual Agreement with the participant, determine whether "Cause" exists. (h) "CEO" means the Company's chief executive officer. (i) "Change in Control" and "Change in Control Price" have the meanings set forth in Sections 14.2 and 14.3, respectively. (j) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (k) "Committee" means the Compensation and Organization Committee of the Board, or such other committee as the Board may from time to time designate. (l) "Common Stock" means (1) the common stock of the Company, par value $.10 per share, subject to adjustment as provided in Section 4.1 Shares Available for Issuance; or (2) if there is a merger or ----------------------------- consolidation and the Company is not the surviving corporation, the capital stock of the surviving corporation given in exchange for such common stock of the Company. (m) "Company" means FMC Corporation, a Delaware corporation. (n) "Covered Employee" means a participant who has received a Management Incentive Award, Restricted Stock or Performance Units, who has been designated as such by the Committee and who is or may be a "covered employee" within the meaning of Section 162(m)(3) of the Code in the year in which the Management Incentive Award, Restricted Stock or Performance Units are expected to be taxable to such participant. 2 (o) "Disability" means, unless otherwise provided by the Committee, (1) "Disability" as defined in any Individual Agreement to which the participant is a party, or (2) if there is no such Individual Agreement, or, if it does not define "Disability," permanent and total disability as determined under the Company's long-term disability plan. (p) "Dividend Equivalent Rights" means the right to receive cash, Stock Options, Restricted Stock or Performance Units, as determined by the Committee, in an amount equal to any dividends that would have been paid on a Stock Option, Restricted Stock or a Performance Unit, as applicable, with Dividend Equivalent Rights if such Stock Option, Restricted Stock or Performance Unit, as applicable, was a share of Common Stock held by the participant on the dividend payment date. Unless the Committee determines that Dividend Equivalent Rights will be paid in cash as of the dividend payment date, such Dividend Equivalent Rights, once credited, will be converted into an equivalent number of Stock Options, shares of Restricted Stock or Performance Units, as applicable; provided, however, that the number of shares subject to any Award will always be a whole number. Unless otherwise determined by the Committee as of the dividend payment date, if a dividend is paid in cash, the number of Stock Options, shares of Restricted Stock or Performance Units into which a Dividend Equivalent Right will be converted will be calculated as of the dividend payment date, in accordance with the following formula: (A x B)/C in which "A" equals the number of Stock Options, shares of Restricted Stock or Performance Units with Dividend Equivalent Rights held by the participant on the dividend payment date, "B" equals the cash dividend per share and "C" equals the Fair Market Value per share of Common Stock on the dividend payment date. Unless otherwise determined by the Committee as of the dividend payment date, if a dividend is paid in property other than cash, the number of Stock Options, shares of Restricted Stock or Performance Units, as applicable into which a Dividend Equivalent Right will be converted will be calculated, as of the dividend payment date, in accordance with the formula set forth above, except that "B" will equal the fair market value per share of the property which the participant would have received if the Stock Option, share of Restricted Stock or Performance Unit, as applicable, with Dividend Equivalent Rights held by the participant on the dividend payment date was a share of Common Stock. (q) "Effective Date" means February 16, 2001, the date the Plan was adopted by the Board. The Board's adoption of the increase of 800,000 shares of Common Stock reserved for issuance under the Plan is also effective as of February 16, 2001, subject to the approval by at least a majority of the holders of outstanding shares of Common Stock of the Company at the Company's next annual meeting. (r) "Eligible Individuals" means officers, employees, directors and consultants of the Company or any of its Affiliates, and prospective employees, directors and 3 consultants who have accepted offers of employment, membership on a board or consultancy from the Company or its Affiliates, who are or will be responsible for or contribute to the management, growth or profitability of the business of the Company or its Affiliates, as determined by the Committee. (s) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. (t) "Expiration Date" means the date on which an Award becomes unexercisable and/or not payable by reason of lapse of time or otherwise as provided in Section 6.2 Expiration Date. --------------- (u) "Fair Market Value" means, except as otherwise provided by the Committee, as of any given date, the closing price for the shares on the New York Stock Exchange for the specified date (as of 4:00 p.m. Eastern Standard Time or Eastern Daylight Savings Time, whichever is then in effect), or, if the shares were not traded on the New York Stock Exchange on such date, then on the next preceding date on which the shares were traded, all as reported by such source as the Committee may select. (v) "Grant Date" means the date designated by the Committee as the date of grant of an Award. (w) "Incentive Stock Option" means any Stock Option designated as, and qualified as, an "incentive stock option" within the meaning of Section 422 of the Code. (x) "Individual Agreement" means a severance, employment, consulting or similar agreement between a participant and the Company or one of its Affiliates. (y) "Management Incentive Award" means an Award of cash, Common Stock, Restricted Stock or a combination of cash, Common Stock and Restricted Stock, as determined by the Committee. (z) "Net Contribution" means for a Business Unit, its operating profit after-tax, less the product of (1) a percentage as determined by the Committee; and (2) the Business Unit's Capital Employed. (aa) "Nonqualified Stock Option" means any Stock Option that is not an Incentive Stock Option. (bb) "Notice" means the written evidence of an Award granted under the Plan in such form as the Committee will from time to time determine. (cc) "Performance Goals" means the performance goals established by the Committee in connection with the grant of Management Incentive Awards, Restricted Stock or Performance Units as set forth in the Notice. In the case of Qualified Performance-Based Awards, Performance Goals will be set by the 4 Committee within the time period prescribed by Section 162(m) of the Code and related regulations, and will be based on Net Contribution, or such other performance criteria selected by the Committee, including, without limitation, the Fair Market Value of the Common Stock, the Company's or a Business Unit's market share, sales, earnings, costs, productivity, return on equity or return on Capital Employed. (dd) "Performance Units" means an Award granted under Section 12 Performance Units. ----------------- (ee) "Plan" means the FMC Corporation Incentive Compensation and Stock Plan, as set forth herein and as hereinafter amended from time to time. (ff) "Qualified Performance-Based Award" means a Management Incentive Award, an Award of Restricted Stock or an Award of Performance Units designated as such by the Committee, based upon a determination that (1) the recipient is or may be a Covered Employee; and (2) the Committee wishes such Award to qualify for the Section 162(m) Exemption. (gg) "Restricted Stock" means an Award granted under Section 11 Restricted ---------- Stock. ----- (hh) "Section 162(m) Exemption" means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C) of the Code. (ii) "Stock Appreciation Right" means an Award granted under Section 10 Stock Appreciation Rights. ------------------------- (jj) "Stock Option" means an Award granted under Section 9 Stock Options. ------------- (kk) "Termination of Employment" means the termination of the participant's employment with, or performance of services for, the Company and any of its Affiliates. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its Affiliates will not be considered Terminations of Employment. (ll) "Vesting Date" means the date on which an Award becomes vested, and, if applicable, fully exercisable and/or payable by or to the participant as provided in Section 6.3 Vesting. ------- (mm) "Willful" means any action or omission by the participant that was not in good faith and without a reasonable belief that the action or omission was in the best interests of the Company or its Affiliates. Any act or omission based upon authority given pursuant to a duly adopted resolution of the Board, or, upon the instructions of the CEO or any other senior officer of the Company, or, based upon the advice of counsel for the Company will be conclusively presumed to be taken or omitted by the participant in good faith and in the best interests of the Company and/or its Affiliates. 5 2.2 Other Definitions. In addition, certain other terms used herein have definitions given to them in the first place in which they are used. SECTION 3. ADMINISTRATION -------------- 3.1 Committee Administration. The Committee is the administrator of ------------------------ the Plan. Among other things, the Committee has the authority, subject to the terms of the Plan: (a) To select the Eligible Individuals to whom Awards are granted; (b) To determine whether and to what extent Awards are granted; (c) To determine the amount of each Award; (d) To determine the terms and conditions of any Award, including, but not limited to, the option price, any vesting condition, restriction or limitation regarding any Award and the shares of Common Stock relating thereto, based on such factors as the Committee will determine; (e) To modify, amend or adjust the terms and conditions of any Award, at any time or from time to time; (f) To determine to what extent and under what circumstances Common Stock and other amounts payable with respect to an Award will be deferred; and (g) To determine under what circumstances an Award may be settled in cash or Common Stock or a combination of cash and Common Stock. The Committee has the authority to adopt, alter and repeal administrative rules, guidelines and practices governing the Plan, to interpret the terms and provisions of the Plan, any Award, any Notice and any other agreement relating to any Award and to take any action it deems appropriate for the administration of the Plan. 3.2 Committee Action. The Committee may act only by a majority of its ---------------- members then in office unless it allocates or delegates its authority to a Committee member or other person to act on its behalf. Except to the extent prohibited by applicable law or applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any other person or persons. Any such allocation or delegation may be revoked by the Committee at any time. Any determination made by the Committee or its delegate with respect to any Award will be made in the sole discretion of the Committee or such delegate. All decisions of the Committee or its delegate are final, conclusive and binding on all parties. 6 3.3 Board Authority. Any authority granted to the Committee may also --------------- be exercised by the full Board. To the extent that any permitted action taken by the Board conflicts with action taken by the Committee, the Board action will control. SECTION 4. SHARES ------ 4.1 Shares Available For Issuance. The maximum number of shares of ----------------------------- Common Stock that may be delivered to participants and their beneficiaries under the Plan will be 3,800,000, unless the Company's stockholders do not approve the Board's adoption of the 800,000 shares, in which case, the maximum number of shares of Common Stock that may be delivered under the Plan will be 3,000,000. Shares subject to an Award under the Plan may be authorized and unissued shares or may be treasury shares. For periods beginning on and after the Effective Date, the maximum number of shares of Common Stock that may be subject to Management Incentive Awards, Restricted Stock and Performance Units is 450,000 shares of Common Stock. No Award will be counted against the shares available for delivery under the Plan if the Award is payable to the participant only in the form of cash, or if the Award is paid to the participant in cash. If any Award is forfeited, or if any Stock Option (and any related Stock Appreciation Right) terminates, expires or lapses without being exercised, or if any Stock Appreciation Right is exercised for cash, the shares of Common Stock subject to such Awards will again be available for delivery in connection with Awards under the Plan. If the option price of any Stock Option granted under the Plan is satisfied by delivering shares of Common Stock to the Company (by either actual delivery or by attestation), only the number of shares of Common Stock delivered to the participant, net of the shares of Common Stock delivered or attested to, will be deemed delivered for purposes of determining the maximum numbers of shares of Common Stock available for delivery under the Plan. To the extent any shares of Common Stock subject to an Award are not delivered to a participant because such shares are used to satisfy an applicable tax-withholding obligation, such shares will not be deemed to have been delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan. In the event of any corporate event or transaction, (including, but not limited to, a change in the number of shares of Common Stock outstanding), such as a stock split, merger, consolidation, separation, including a spin-off or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code) or any partial or complete liquidation of the Company, the Committee may make such substitution or adjustments in the aggregate number, kind, and price of shares reserved for issuance under the Plan, and the maximum limitation upon any Awards to be granted to any participant, in the number, kind and price of shares subject to outstanding Awards granted under the Plan and/or such other equitable substitution or adjustments as it may determine to be appropriate; provided, however, that the number of shares subject to any Award will always be a whole number. Such adjusted price will be used to determine the amount payable in cash or shares, as applicable, by the Company upon the exercise of any Award. 7 4.2 Individual Limits. No participant may be granted Stock Options ----------------- and Stock Appreciation Rights covering in excess of 500,000 shares of Common Stock in any calendar year. The maximum aggregate amount with respect to each Management Incentive Award, Award of Performance Units or Award of Restricted Stock that may be granted, or, that may vest, as applicable, in any calendar year for any individual participant is 500,000 shares of Common Stock, or the dollar equivalent of 500,000 shares of Common Stock. SECTION 5. ELIGIBILITY ----------- Awards may be granted under the Plan to Eligible Individuals. Incentive Stock Options may be granted only to employees of the Company and its subsidiaries or parent corporation (within the meaning of Section 424(f) of the Code). SECTION 6. TERMS AND CONDITIONS OF AWARDS ------------------------------ 6.1 General. Awards will be in the form and upon the terms and ------- conditions as determined by the Committee, subject to the terms of the Plan. The Committee is authorized to grant Awards independent of, or in addition to other Awards granted under the Plan. The terms and conditions of each Award may vary from other Awards. Awards will be evidenced by Notices, the terms and conditions of which will be consistent with the terms of the Plan and will apply only to such Award. 6.2 Expiration Date. Unless otherwise provided in the Notice, the --------------- Expiration Date of an Award will be the earlier of the date that is ten (10) years after the Grant Date or the date of the participant's Termination of Employment. 6.3 Vesting. Each Award vests and becomes fully payable, exercisable ------- and/or released of any restriction on the Vesting Date. The Vesting Date of each Award, as determined by the Committee, will be set forth in the Notice. SECTION 7. QUALIFIED PERFORMANCE-BASED AWARDS ---------------------------------- The Committee may designate a Management Incentive Award, or an Award of Restricted Stock or an Award of Performance Units as a Qualified Performance-Based Award, in which case, the Award is contingent upon the attainment of Performance Goals. SECTION 8. MANAGEMENT INCENTIVE AWARDS --------------------------- 8.1 Management Incentive Awards. The Committee is authorized to grant --------------------------- Management Incentive Awards, subject to the terms of the Plan. Notices for Management Incentive Awards will indicate the Award Cycle, any applicable Performance Goals, any applicable designation of the Award as a Qualified Performance-Based Award and the form of payment of the Award. 8.2 Settlement. As soon as practicable after the later of the Vesting ---------- Date and the date any applicable Performance Goals are satisfied, Management Incentive Awards will be paid to 8 the participant in cash, Common Stock, Restricted Stock or a combination of cash, Common Stock and Restricted Stock, as determined by the Committee. The number of shares of Common Stock payable under the stock portion of a Management Incentive Award will equal the amount of such portion of the award divided by the Fair Market Value of the Common Stock on the date of payment. SECTION 9. STOCK OPTIONS ------------- 9.1 Stock Options. The Committee is authorized to grant Stock ------------- Options, including both Incentive Stock Options and Nonqualified Stock Options, subject to the terms of the Plan. Notices will indicate whether the Stock Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option, the option price, the term and the number of shares to which it pertains. To the extent that any Stock Option is not designated as an Incentive Stock Option, or, even if so designated does not qualify as an Incentive Stock Option on or subsequent to its Grant Date, it will constitute a Nonqualified Stock Option. 9.2 Option Price. The option price per share of Common Stock ------------ purchasable under a Stock Option will be determined by the Committee and will not be less than the Fair Market Value of the Common Stock subject to the Stock Option on the Grant Date. 9.3 Incentive Stock Options. The terms of the Plan addressing ----------------------- Incentive Stock Options and each Incentive Stock Option will be interpreted in a manner consistent with Section 422 of the Code and all valid regulations issued thereunder. 9.4 Exercise. Stock Options will be exercisable at such time or times -------- and subject to the terms and conditions set forth in the Notice. A participant can exercise a Stock Option, in whole or in part, at any time on or after the Vesting Date and before the Expiration Date by giving written notice of exercise to the Company specifying the number of shares of Common Stock subject to the Stock Option to be purchased. Such notice will be accompanied by payment in full to the Company of the option price by certified or bank check or such other cash equivalent instrument as the Company may accept. If approved by the Committee, payment in full or in part may also be made in the form of Common Stock (by delivery of such shares or by attestation) already owned by the optionee of the same class as the Common Stock subject to the Stock Option, based on the Fair Market Value of the Common Stock on the date the Stock Option is exercised. Notwithstanding the foregoing, the right to make payment in the form of already owned shares of Common Stock applies only to shares that have been held by the optionee for at least six (6) months at the time of exercise or that were purchased on the open market. If approved by the Committee, payment in full or in part may also be made by delivering a properly executed exercise notice to the Company, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the option price, and, if requested, by the amount of any federal, state, local or foreign withholding taxes. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. The Committee may also provide for Company loans to be made for purposes of the exercise of Stock Options. 9 9.5 Settlement. As soon as practicable after the exercise of a Stock ---------- Option, the Company will deliver to or on behalf of the optionee certificates of Common Stock for the number of shares purchased. No shares of Common Stock will be issued until full payment therefor has been made. Except as otherwise provided in Section 9.8 Deferral of Stock Options Shares below, an optionee will -------------------------------- have all of the rights of a stockholder of the Company holding Common Stock, including, but not limited to, the right to vote the shares and the right to receive dividends, when the optionee has given written notice of exercise, has paid in full for such shares and, if requested, has given the representation described in Section 18 General Provisions. The Committee may give optionees ------------------ Dividend Equivalent Rights. 9.6 Nontransferability. No Stock Option will be transferable by the ------------------ optionee other than by will or by the laws of descent and distribution. All Stock Options will be exercisable, subject to the terms of the Plan, only by the optionee, the guardian or legal representative of the optionee, or any person to whom such Stock Option is transferred pursuant to this paragraph, it being understood that the term "holder" and "optionee" include such guardian, legal representative and other transferee. No Stock Option will be subject to execution, attachment or other similar process. Notwithstanding anything herein to the contrary, the Committee may permit a participant at any time prior to his or her death to assign all or any portion without consideration therefor of a Nonqualified Stock Option to: (a) The participant's spouse or lineal descendants; (b) The trustee of a trust for the primary benefit of the participant and his or her spouse or lineal descendants, or any combination thereof; (c) A partnership of which the participant, his or her spouse and/or lineal descendants are the only partners; (d) Custodianships under the Uniform Transfers to Minors Act or any other similar statute; or (e) Upon the termination of a trust by the custodian or trustee thereof, or the dissolution or other termination of the family partnership or the termination of a custodianship under the Uniform Transfers to Minor Act or any other similar statute, to the person or persons who, in accordance with the terms of such trust, partnership or custodianship are entitled to receive the Nonqualified Stock Option held in trust, partnership or custody. In such event, the spouse, lineal descendant, trustee, partnership or custodianship will be entitled to all of the participant's rights with respect to the assigned portion of the Nonqualified Stock Option, and such portion will continue to be subject to all of the terms, conditions and restrictions applicable to the Nonqualified Stock Option. 9.7 Cashing Out. On receipt of written notice of exercise, the Committee ----------- may elect to cash out all or part of the portion of the shares of Common Stock for which a Stock Option is being exercised by paying the optionee an amount, in cash or Common Stock, equal to the excess 10 of the Fair Market Value of the Common Stock over the option price times the number of shares of Common Stock for which the Stock Option is being exercised on the effective date of such cash-out. In addition, notwithstanding any other provision of the Plan, the Committee, either on the Grant Date or thereafter, may give a participant the right to voluntarily cash-out the participant's outstanding Stock Options, whether or not then vested, during the sixty (60)-day period following a Change in Control. A participant who has such a cash-out right and elects to cash-out Stock Options may do so during the sixty (60)-day period following a Change in Control by giving notice to the Company to elect to surrender all or part of the Stock Option to the Company and to receive cash, within thirty (30) days of such election, in an amount equal to the amount by which the Change in Control Price per share of Common Stock on the date of such election exceeds the exercise price per share of Common Stock under the Stock Option multiplied by the number of shares of Common Stock granted under the Stock Option as to which this cash-out right is exercised. Notwithstanding the foregoing, if any cash-out right would make a Change in Control transaction ineligible for pooling-of-interests accounting, the Committee may eliminate or modify such cash-out right. 9.8 Deferral of Stock Option Shares. The Committee may from time to time ------------------------------- establish procedures pursuant to which an optionee may elect to defer, until a time or times later than the exercise of a Stock Option, receipt of all or a portion of the shares of Common Stock subject to such Stock Option and/or to receive cash at such later time or times in lieu of such deferred shares, all on such terms and conditions as the Committee will determine. If any such deferrals are permitted, an optionee who elects such deferral will not have any rights as a stockholder with respect to such deferred shares unless and until shares are actually delivered to the optionee with respect thereto, except to the extent otherwise determined by the Committee. SECTION 10. STOCK APPRECIATION RIGHTS ------------------------- 10.1 Stock Appreciation Rights. The Committee is authorized to grant Stock ------------------------- Appreciation Rights, subject to the terms of the Plan. Stock Appreciation Rights granted with a Nonqualified Stock Option may be granted either on or after the Grant Date. Stock Appreciation Rights granted with an Incentive Stock Option may be granted only on the Grant Date of such Stock Option. Notices of Stock Appreciation Rights granted with Stock Options may be incorporated into the Notice of the Stock Option. Notices of Stock Appreciation Rights will indicate whether the Stock Appreciation Right is independent of any Award or granted with a Stock Option, the price, the term, the method of exercise and the form of payment. 10.2 Exercise. A participant can exercise Stock Appreciation Rights, in -------- whole or in part, at any time after the Vesting Date and before the Expiration Date, or, with respect to Stock Appreciation Rights granted in connection with any Stock Option, at such time or times and to the extent that the Stock Options to which they relate are exercisable, by giving written notice of exercise to the Company specifying the number of Stock Appreciation Rights to be exercised. A Stock Appreciation Right granted with a Stock Option may be exercised by an optionee by surrendering any applicable portion of the related Stock Option in accordance with procedures established by the Committee. To the extent provided by the Committee, Stock Options which have been so surrendered will no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised. 11 10.3 Settlement. As soon as practicable after the exercise of a Stock ---------- Appreciation Right, an optionee will be entitled to receive an amount in cash, shares of Common Stock or a combination of cash and shares of Common Stock, as determined by the Committee, in value equal to the excess of the Fair Market Value on the date of exercise of one share of Common Stock over the Stock Appreciation Right price per share multiplied by the number of shares in respect of which the Stock Appreciation Right is being exercised. Upon the exercise of a Stock Appreciation Right granted with any Stock Option, the Stock Option or part thereof to which such Stock Appreciation Right is related will be deemed to have been exercised for the purpose of the limitation set forth in Section 4 Shares ------ on the number of shares of Common Stock to be issued under the Plan, but only to the extent of the number of shares delivered upon the exercise of the Stock Appreciation Right. 10.4 Nontransferability. Stock Appreciation Rights will be transferable ------------------ only to the extent they are granted with any Stock Option, and only to permitted transferees of such underlying Stock Option in accordance with the Nontransferability provisions of Section 9. - ------------------ SECTION 11. RESTRICTED STOCK ---------------- 11.1 Restricted Stock. The Committee is authorized to grant Restricted ---------------- Stock, subject to the terms of the Plan. Notices for Restricted Stock may be in the form of a Notice and book-entry registration or issuance of one or more stock certificates. Any certificate issued in respect of shares of Restricted Stock will be registered in the name of such participant and will bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions, including, but not limited to, forfeiture of the FMC Corporation Incentive Compensation and Stock Plan and a Restricted Stock Notice. Copies of such Plan and Notice are on file at the offices of FMC Corporation." The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon will have lapsed and that, as a condition of any Award of Restricted Stock, the participant will have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award. The Notice or certificates will indicate any applicable Performance Goals, any applicable designation of the Restricted Stock as a Qualified Performance-Based Award and the form of payment. 11.2 Participant Rights. Subject to the terms of the Plan and the Notice ------------------ or certificate of Restricted Stock, the participant will not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock until the later of the Vesting Date and the date any applicable Performance Goals are satisfied. Notwithstanding the foregoing, a participant may pledge Restricted Stock as security for a loan to obtain funds to pay the option price for Stock Options. Except as provided in the Plan and the Notice or certificate of the Restricted Stock, the participant will have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Company holding Common Stock, including, but not limited to, the right to vote the shares and Dividend Equivalent Rights, if so granted. 12 11.3 Settlement. As soon as practicable after the later of the Vesting ---------- Date and the date any applicable Performance Goals are satisfied and prior to the Expiration Date, unlegended certificates for such shares of Common Stock will be delivered to the participant upon surrender of any legended certificates, if applicable. SECTION 12. PERFORMANCE UNITS ----------------- 12.1 Performance Units. The Committee is authorized to grant Performance ----------------- Units, subject to the terms of the Plan. Notices of Performance Units will indicate any applicable Performance Goals, any applicable designation of the Award as a Qualified Performance-Based Award and the form of payment. 12.2 Settlement. As soon as practicable after the later of the Vesting ---------- Date and the date any applicable Performance Goals are satisfied, Performance Units will be paid in the manner as provided in the Notice. Payment of Performance Units will be made in an amount of cash equal to the Fair Market Value of one share of Common Stock multiplied by the number of Performance Units earned or, if applicable, in a number of shares of Common Stock equal to the number of Performance Units earned, each as determined by the Committee. The Committee may at or after the Grant Date give the participant a right to defer receipt of cash or shares in settlement of Performance Units for a specified period or until a specified event. Subject to any exceptions adopted by the Committee, an election by a participant to defer must be made before the commencement of the Award Cycle for the Performance Units. SECTION 13. OTHER AWARDS ------------ The Committee is authorized to make, either alone or in conjunction with other Awards, Awards of cash or Common Stock and Awards that are valued in whole or in part by reference to, or are otherwise based upon, Common Stock, including, without limitation, convertible debentures. SECTION 14. CHANGE IN CONTROL ----------------- 14.1 Impact of Change in Control. Notwithstanding any other provision of --------------------------- the Plan to the contrary, in the event of a Change in Control, as of the date such Change in Control is determined to have occurred, any outstanding: (a) Stock Options and Stock Appreciation Rights become fully exercisable and vested to the full extent of the original grant; (b) Restricted Stock becomes free of all restrictions and deferral limitations and becomes fully vested and transferable to the full extent of all or a portion of the maximum amount of the original grant as provided in the Notice, or, if not provided in the Notice, as determined by the Committee; (c) Performance Units are considered earned and payable to the full extent of all or a portion of the maximum amount of the original grant as provided in the Notice, (c) or, if not provided in the Notice, as determined by the Committee, any deferral or other restrictions lapse and such Performance Units will be settled in cash or Common Stock, as determined by the Committee, as promptly as is practicable following the Change in Control; and (d) Management Incentive Awards become fully vested to the full extent of all or a portion of the maximum amount of the original grant as provided in the Notice, or, if not provided in the Notice, as determined by the Committee, and such Management Incentive Awards will be settled in cash or Common Stock, as determined by the Committee, as promptly as is practicable following the Change in Control. The Committee may also make additional substitutions, adjustments and/or settlements of outstanding Awards as it deems appropriate and consistent with the Plan's purposes. 14.2 Definition of Change in Control. For purposes of the Plan, a "Change ------------------------------- in Control" will mean the happening of any of the following events: (a) An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either (1) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (A) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition pursuant to a transaction which complies with Subsections (1), (2) and (3) of Subsection (c) of this Section 14.2; (b) A change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (such Board will be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section 14.2, that any individual who becomes a member of the Board subsequent to the Effective Date, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) will be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened 14 solicitation of proxies or consents by or on behalf of a Person other than the Board will not be so considered as a member of the Incumbent Board; (c) Consummation of a reorganization, merger or consolidation, sale or other disposition of all or substantially all of the assets of the Company, or acquisition by the Company of the assets or stock of another entity ("Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, twenty percent (20%) or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction, and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (d) The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. 14.3 Change in Control Price. For purposes of the Plan, "Change in Control ----------------------- Price" means the higher of (a) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange or other national exchange on which such shares are listed during the sixty (60)-day period prior to and including the date of a Change in Control; or (b) if the Change in Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Common Stock paid in such tender or exchange offer or Corporate Transaction; provided, however, that in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, the Change in Control Price will be in all cases the Fair Market Value of the Common Stock on the date such Incentive Stock Option or Stock Appreciation Right is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration will be determined by the Committee. 15 SECTION 15. FORFEITURE OF AWARDS -------------------- Notwithstanding anything in the Plan to the contrary, the Committee may, in the event of serious misconduct by a participant (including, without limitation, any misconduct prejudicial to or in conflict with the Company or its Affiliates, or any Termination of Employment for Cause), or any activity of a participant in competition with the business of the Company or any Affiliate, (a) cancel any outstanding Award granted to such participant, in whole or in part, whether or not vested or deferred, and/or (b) if such conduct or activity occurs within one year following the exercise or payment of an Award, require such participant to repay to the Company any gain realized or payment received upon the exercise or payment of such Award (with such gain or payment valued as of the date of exercise or payment). Such cancellation or repayment obligation will be effective as of the date specified by the Committee. Any repayment obligation may be satisfied in Common Stock or cash or a combination thereof (based upon the Fair Market Value of Common Stock on the day of payment), and the Committee may provide for an offset to any future payments owed by the Company or any Affiliate to the participant if necessary to satisfy the repayment obligation. The determination of whether a participant has engaged in a serious breach of conduct or any activity in competition with the business of the Company or any Affiliate will be made by the Committee in good faith. This Section 15 will have no application following a Change in Control. SECTION 16. AMENDMENT AND TERMINATION ------------------------- The Committee may amend, alter, or discontinue the Plan or any Award, prospectively or retroactively, but no amendment, alteration or discontinuation may impair the rights of a recipient of any Award without the recipient's consent, except such an amendment made to comply with applicable law, stock exchange rules or accounting rules. No amendment will be made without the approval of the Company's stockholders to the extent such approval is required by applicable law or stock exchange rules, or, to the extent such amendment increases the number of shares available for delivery under the Plan, or changes the option price after the Grant Date. SECTION 17. UNFUNDED STATUS OF PLAN ----------------------- It is presently intended that the Plan constitute an "unfunded" plan for incentive and deferred compensation. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or make payments; provided, however, that unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the "unfunded" status of the Plan. SECTION 18. GENERAL PLAN PROVISIONS ----------------------- 18.1 General Provisions. The Plan will be administered in accordance with ------------------ the following provisions and any other rule, guideline and practice determined by the Committee: 16 (a) Each person purchasing or receiving shares pursuant to an Award may be required to represent to and agree with the Company in writing that he or she is acquiring the shares without a view to the distribution of the shares. (b) The certificates for shares issued under an Award may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. (c) Notwithstanding any other provision of the Plan, any Award, any Notice or any other agreements made pursuant thereto, the Company is not required to issue or deliver any shares of Common Stock prior to fulfillment of all of the following conditions: (i) Listing or approval for listing upon notice of issuance, of such shares on the New York Stock Exchange, Inc., or such other securities exchange as may at the time be the principal market for the Common Stock; (ii) Any registration or other qualification of such shares of the Company under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee deems necessary or advisable; and (iii) Obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee deems necessary or advisable. (d) The Company will not issue fractions of shares. Whenever, under the terms of the Plan, a fractional share would otherwise be required to be issued, the participant will be paid at Fair Market Value for such fractional share by rounding down the number of shares received to the nearest whole number and paying in cash the value of the fractional share. (e) In the case of a grant of an Award to any Eligible Individual of an Affiliate of the Company, the Company may, if the Committee so directs, issue or transfer the shares of Common Stock, if any, covered by the Award to the Affiliate, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Affiliate will transfer the shares of Common Stock to the Eligible Individual in accordance with the terms of the Award specified by the Committee pursuant to the provisions of the Plan. All shares of Common Stock underlying Awards that are forfeited or canceled revert to the Company. 18.2 Employment. The Plan will not constitute a contract of employment, ---------- and adoption of the Plan will not confer upon any employee any right to continued employment, nor will it interfere in any way with the right of the Company or an Affiliate to terminate at any time the employment of any employee or the membership of any director on a board of directors or any consulting arrangement with any Eligible Individual. 18.3 Tax Withholding Obligations. No later than the date as of which an --------------------------- amount first becomes includible in the gross income of the participant for federal income tax purposes with respect to any Award under the Plan, the participant will pay to the Company, or make 17 arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Company, withholding obligations may be settled with Common Stock, including Common Stock that is part of the Award that gives rise to the withholding requirement; provided, that not more than the legally required minimum withholding may be settled with Common Stock. The obligations of the Company under the Plan will be conditional on such payment or arrangements, and the Company and its Affiliates will, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the participant. The Committee may establish such procedures as it deems appropriate, including making irrevocable elections, for the settlement of withholding obligations with Common Stock. 18.4 Beneficiaries. The Committee will establish such procedures as it ------------- deems appropriate for a participant to designate a beneficiary to whom any amounts payable in the event of the participant's death are to be paid or by whom any rights of the participant, after the participant's death, may be exercised. 18.5 Governing Law. The Plan and all Awards made and actions taken ------------- thereunder will be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. Notwithstanding anything herein to the contrary, in the event an Award is granted to Eligible Individual who is employed or providing services outside the United States and who is not compensated from a payroll maintained in the United States, the Committee may modify the provisions of the Plan and/or any such Award as they pertain to such individual to comply with and account for the tax and accounting rules of the applicable foreign law so as to maintain the benefit intended to be provided to such participant under the Award. 18.6 Nontransferability. Except as otherwise provided in Section 9 Stock ------------------ ----- Options and Section 10 Stock Appreciation Rights, or by the Committee, Awards - ------- ------------------------- under the Plan are not transferable except by will or by laws of descent and distribution. 18.7 Severability. Wherever possible, each provision of the Plan and of ------------ each Award and of each Notice will be interpreted in such a manner as to be effective and valid under applicable law. If any provision of the Plan, any Award or any Notice is found to be prohibited by or invalid under applicable law, then (a) such provision will be deemed amended to and to have contained from the outset such language as will be necessary to accomplish the objectives of the provision as originally written to the fullest extent permitted by law; and (b) all other provisions of the Plan and any Award will remain in full force and effect. 18.8 Strict Construction. No rule of strict construction will be applied ------------------- against the Company, the Committee or any other person in the interpretation of the terms of the Plan, any Award, any Notice, any other agreement or any rule or procedure established by the Committee. 18.9 Stockholder Rights. Except as otherwise provided herein, no ------------------ participant will have dividend, voting or other stockholder rights by reason of a grant of an Award or a settlement of an Award in cash. 18 EX-10.9 5 dex109.txt PURCHASE AND CONTRIBUTION AGREEMENT EXHIBIT 10.9 ================================================================================ PURCHASE AND CONTRIBUTION AGREEMENT Dated as of November 24, 1999 Among FMC CORPORATION, as Seller, FMC WYOMING CORPORATION, as Seller, and FMC FUNDING CORPORATION, as Purchaser ================================================================================ TABLE OF CONTENTS
Page ---- PURCHASE AND CONTRIBUTION AGREEMENT ARTICLE I DEFINITIONS SECTION 1.01. Definition ...................................................... 1 SECTION 1.02. Rules of Construction; Other Terms .............................. 3 ARTICLE II SALES AND CONTRIBUTIONS SECTION 2.01. Sales and Contributions ......................................... 4 SECTION 2.02. Agreement to Contribute ......................................... 4 SECTION 2.03. Timing of Purchases and Contributions ........................... 4 SECTION 2.04. Initial Purchase Price Payment .................................. 5 SECTION 2.05. Subsequent Purchase Price Payments .............................. 5 SECTION 2.06. General Settlement Procedures ................................... 6 SECTION 2.07. Payments and Computations, Etc .................................. 7 ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. Conditions Precedent to Effectiveness of this Agreement ......... 7 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Sellers ................... 8 ARTICLE V COVENANTS SECTION 5.01. Covenants of the Sellers ........................................ 11 ARTICLE VI ADMINISTRATION AND COLLECTION SECTION 6.01. Designation of Collection Agent ................................. 17 SECTION 6.02. Certain Rights of the Purchaser ................................. 17 SECTION 6.03. Rights and Remedies ............................................. 18 SECTION 6.04. Transfer of Records to Purchaser ................................ 18
i ARTICLE VII INDEMNIFICATION SECTION 7.01. Indemnities by the Seller ....................................... 19 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc ................................................. 21 SECTION 8.02. Notices, Etc .................................................... 21 SECTION 8.03. Binding Effect; Assignability ................................... 21 SECTION 8.04. Costs, Expenses and Taxes ....................................... 22 SECTION 8.05. Fees ............................................................ 22 SECTION 8.06. No Proceedings .................................................. 22 SECTION 8.07. Waiver of Set-Off, Etc .......................................... 22 SECTION 8.08. Confidentiality ................................................. 23 SECTION 8.09. Intent of Agreement ............................................. 23 SECTION 8.10. Governing Law ................................................... 24 SECTION 8.11. Third-Party Beneficiary ......................................... 24 SECTION 8.12. Execution in Counterparts ....................................... 24 SECTION 8.13. Survival of Termination ......................................... 24 SECTION 8.14. Addition of FMCW ................................................ 24
EXHIBITS Exhibit A Form of Non-Negotiable Promissory Note Exhibit B List of Trade Names ii PURCHASE AND CONTRIBUTION AGREEMENT Dated as of November 24, 1999 FMC CORPORATION, a Delaware corporation (together with its permitted successors and assigns, "FMC"), FMC WYOMING CORPORATION, a Delaware corporation (together with its successors and assigns, "FMCW") and FMC FUNDING CORPORATION, a Delaware corporation (the "Purchaser"), agree as follows: PRELIMINARY STATEMENTS. Each of FMC and FMCW has originated and will continue to originate Receivables that it desires to sell to the Purchaser from time to time, and the Purchaser is prepared to purchase such Receivables on the terms set forth herein. FMC may also wish to contribute Receivables to the capital of the Purchaser on the terms set forth herein. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Unless otherwise defined herein capitalized terms used herein shall have the meanings assigned to such terms in the Second-Tier Agreement (as defined herein). As used in this Agreement, the following terms shall have the following meanings: "Agreement" means this Purchase and Contribution Agreement, as the same may from time to time be amended, waived, supplemented or otherwise modified. "Available Funds" shall have the meaning assigned to such term in Section 2.05. "Closing Date" means the date of the first transfer of an interest in any Receivable pursuant to the Second-Tier Agreement. "Contributed Receivable" shall have the meaning assigned to such term in Section 2.03(b). "Discount" means, in respect of the Receivables to be purchased on any day, 0.70% of the Outstanding Balance of such Receivables; provided, however, that the foregoing Discount may be revised prospectively by request of any of the parties hereto to reflect changes in recent experience with performance of the Receivables or funding costs, provided that such revision is consented to by each of the parties hereto (it being understood that each of the parties hereto agrees to duly consider such request but shall have no obligation to give such consent). "Indemnified Amounts" shall have the meaning assigned to such term in Section 7.01. "Initial Contributed Receivables" shall have the meaning assigned to such term in Section 2.02. "Initial Cut-Off Date" means (i) with respect to FMC, the Business Day immediately preceding the Closing Date, and (ii) with respect to FMCW, the Business Day immediately preceding the FMCW Effective Date. "Initial Purchase Date" means (i) with respect to FMC, the Closing Date, and (ii) with respect to FMCW, the first Business Day after the FMCW Effective Date. "Promissory Note" shall have the meaning assigned to such term in Section 2.04. "Purchase Date" means each day on which a purchase of Receivables is made pursuant to Article II. "Purchase Price" for the Receivables to be purchased on any day under this Agreement means an amount equal to the Outstanding Balance of such Receivables, minus the Discount for such Receivables. "Purchased Receivable" means any Receivable which has been sold to the Purchaser pursuant to this Agreement. "Related Security" means with respect to any Receivable: (i) all of the Seller's interest in any merchandise (including returned merchandise) relating to any sale giving rise to such Receivable; (ii) all security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements signed by an obligor describing any collateral securing such Receivable; (iii) all guaranties, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise; (iv) the Contract and all other books, records and other information (including, without limitation, computer programs, tapes, disks, punch cards, data processing software and related property and rights) relating to such Receivable and the related Obligor; (v) all of the Seller's rights, remedies and interest in, to and under the Deposit Agreements, the Contracts, including without limitation, the right to receive all payments thereunder and all claims for damages arising out of a breach or default thereunder; 2 (vi) the Lock-Boxes and the Deposit Accounts and all other accounts to which the proceeds of the foregoing are remitted, and all cash and investments therein; and (vii) the proceeds (as defined in the UCC) of the foregoing and of such Receivable. "Sale Indemnified Party" shall have the meaning assigned to such term in Section 7.01. "Second-Tier Agreement" means the Receivables Purchase Agreement, dated as of the date hereof, among the Purchaser, as seller, CIESCO, L.P., Citibank, N.A., the other banks from time to time parties thereto, Citicorp North America, Inc., as agent, and FMC, as initial servicer, as the same may from time to time be amended, waived, supplemented or modified. "Sellers" means FMC and FMCW. "Transferred Receivable" means a Purchased Receivable or a Contributed Receivable. SECTION 1.01. Rules of Construction; Other Terms. ----------------------------------- For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: Singular words shall connote the plural as well as the singular, and vice versa (except as indicated), as may be appropriate. The words "herein," "hereof" and "hereunder" and other words of similar import used herein refer to this Agreement as a whole and not to any particular appendix, article, schedule, section, paragraph, clause, exhibit or other subdivision. The headings, subheadings and table of contents set forth in this Agreement are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect the meaning, construction or effect of any provision hereof. References in this Agreement to "including" shall mean including without limiting the generality of any description preceding such term, and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. Each of the parties to this Agreement and their respective counsel have reviewed and revised, or requested revisions to, this Agreement, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in the construction and interpretation of this Agreement. 3 All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. ARTICLE II SALES AND CONTRIBUTIONS SECTION 2.01. Sales and Contributions. ----------------------- On the terms and subject to the conditions set forth in this Agreement, and in consideration of the Purchase Price, payable on the Initial Purchase Date until the Program Termination Date, each Seller agrees to sell, assign and transfer, and does hereby sell, assign and transfer to the Purchaser, and the Purchaser agrees to purchase, and does hereby purchase, from each such Seller, all of each such Seller's right, title and interest in, to and under (i) each Receivable (other than in the case of FMC, Initial Contributed Receivables) of each such Seller that existed and was owing to each such Seller as of the close of the Seller's business on the Initial Cut-Off Date; (ii) each Receivable (other than in the case of FMC, Contributed Receivables) created or originated by each such Seller from the close of business on the Initial Cut-Off Date to the Program Termination Date, (iii) all Related Security with respect to such Receivables, and (iv) all Collections in respect of, and other proceeds of, any of the foregoing. All purchases and capital contributions hereunder shall be made without recourse to the Sellers; provided, that each Seller will be liable to the Purchaser and its assigns for all representations, warranties, covenants and indemnities made by the Seller pursuant to the terms of the Program Documents. SECTION 2.02. Agreement to Contribute. ----------------------- In consideration of the capital stock of the Purchaser issued to FMC, FMC agrees to contribute, and does hereby contribute to the Purchaser, and the Purchaser agrees to accept, and does hereby accept, from FMC, on the Closing Date, all of FMC's right, title and interest in, to and under the Receivables and the Related Security and Collections with respect thereto, existing on the Initial Cut-Off Date, which have been specified to the Purchaser on or prior to the Closing Date (the "Initial Contributed Receivables"). SECTION 2.03. Timing of Purchases and Contributions. ------------------------------------- (a) On the Initial Purchase Date each Seller shall sell to the Purchaser and the Purchaser shall purchase from each Seller, pursuant to this Agreement, all of the Sellers' right, title and interest in, to and under (i) each Receivable (other than in the case of FMC, the Initial Contributed Receivables) that existed and was owing to each such Seller as of the close of business on the Initial Cut-Off Date, and (ii) all Related Security and Collections with respect thereto. (b) After the Initial Purchase Date, and continuing until the Program Termination Date, each Receivable created or originated by each Seller, and all the Related Security and Collections with respect thereto, shall be sold or contributed by each such Seller to 4 the Purchaser (without any further action) upon the creation or origination of such Receivables. All such Receivables, other than those Receivables which FMC has indicated by notice to the Purchaser as having been contributed by FMC to the Purchaser (such other contributed Receivables, together with the Initial Contributed Receivables, the "Contributed Receivables") and other than the Foreign Receivables, shall be sold to the Purchaser on such date and all Contributed Receivables shall be contributed by FMC to the Purchaser on such date. Each Originator agrees that upon the occurrence of a Special Event all outstanding Foreign Receivables and the Related Security and Collections with respect thereto shall be contributed to the Purchaser on the date of such occurrence and thereafter upon the creation or origination of any such Foreign Receivable such Foreign Receivable, together with the Related Security and Collection with respect thereto, shall be contributed to the Purchaser on the date of such creation or origination without any further action by the parties hereto. Notwithstanding anything to the contrary set forth herein until the occurrence of a Special Event, no Seller shall be obligated to sell or contribute any Foreign Receivable to the Purchaser. SECTION 2.04. Initial Purchase Price Payment. ------------------------------ On the terms and subject to the conditions set forth in this Agreement, the Purchaser agrees to pay to each Seller on the Initial Purchase Date the Purchase Price for the Receivables purchased from such Seller existing on or prior to the Initial Cut-Off Date (other than in the case of FMC, the Initial Contributed Receivables) in cash, as agreed to by the Purchaser and such Seller, and by the issuance of a promissory note in the form of Exhibit A hereto to such Seller (each such promissory note, as it may be amended, supplemented, indorsed or otherwise modified from time to time in substitution therefor or renewal thereof in accordance with the Program Documents, being herein called the "Promissory Note") in the initial principal amount equal to the balance of the Purchase Price owing to such Seller on the Initial Purchase Date after subtracting the amount paid to such Seller in cash. SECTION 2.05. Subsequent Purchase Price Payments. ---------------------------------- On each Business Day after the Initial Purchase Date until the Program Termination Date, the Purchaser shall pay to each Seller a portion of the Purchase Price due to such Seller by depositing into such account as such Seller shall designate immediately available funds from monies then held by or on behalf of the Purchaser solely to the extent that such monies do not constitute Collections that are required to be set aside or segregated and held by the Servicer pursuant to the Second-Tier Agreement or to be distributed to the Agent, any Investor or any Bank pursuant to the Second-Tier Agreement on the next Settlement Date or which are required to be paid to the Servicer as the Servicer Fee on the next Settlement Date, or which are otherwise necessary to pay current expenses of the Purchaser (in its reasonable discretion) (such available monies, the "Available Funds") and provided that each Seller has paid all amounts then due and payable by it hereunder; provided, however, that the term Available Funds does not include available monies to the extent that after making all such distribution to the Sellers on a given day the Tangible Net Worth of the Purchaser shall be less than the greater of (i) three percent (3%) of the Outstanding Balance of the Transferred Receivables, and (ii) $1,000,000. To the extent that the portion of the Available Funds remitted to any Seller are insufficient to pay the Purchase Price then due to such Seller in full, the remaining portion of 5 such Purchase Price shall be paid by increasing the principal amount of the Promissory Note issued to such Seller, effective as of the last day of the related Settlement Period. SECTION 2.06. General Settlement Procedures. ----------------------------- (a) If on any day: (i) the Outstanding Balance of a Transferred Receivable is reduced, adjusted or cancelled as a result of any billing adjustment, renegotiation, application of credit balances, rebates, discounts, charge-backs, exchanges, returns or other similar credits, allowances, net-outs, set-offs, offsets, defenses (including any failure by any Seller or any other Person to deliver any goods, provide any service or otherwise perform its obligations under any Contract) or other dilution factors; or (ii) the Outstanding Balance of a Transferred Receivable is reduced or cancelled as a result of a set-off or offset in respect of any claim by the Obligor thereof against any Seller, any Affiliate of any Seller or any other Person (whether such claim arises out of the same or a related transaction or an unrelated transaction); or (iii) any of the representations or warranties in clause (e), (j), or (p) of Section 4.01 is not true with respect to any Transferred Receivable; or (iv) any amount received by the Purchaser or its successors and assigns in respect of any Transferred Receivable is rescinded or must otherwise be returned by the Purchaser or its successors and assigns for any reason; then the applicable Seller shall be deemed to have received on such day, a Collection of such Transferred Receivable in an amount equal to (A) the amount of such reduction or cancellation, in the case of an event of the type described in clause (i) or (ii) above, (B) the full Outstanding Balance of such Transferred Receivable, in the case of an event of the type described in clause (iii) above, or (C) such amount so rescinded or returned, in the case of an event of the type described in clause (iv) above. The applicable Seller shall on such day pay to the Purchaser the amount of such deemed Collection by remitting such amount to such account of the Purchaser as the Purchaser shall designate. (b) For the purposes of this Agreement: (i) except as provided in Section 2.06 or as otherwise required by applicable law or the relevant Contract, all Collections received from an Obligor of any Receivable shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates its payment for, or the Contract requires, application to specific Receivables; and (ii) if and to the extent the Purchaser or any of its successors or assigns shall be required for any reason to pay over to an Obligor any amount received on its 6 behalf hereunder, such amount shall be deemed not to have been so received but rather to have been retained by the applicable Seller and, accordingly, the Purchaser shall have a claim against the applicable Seller for such amount, payable when and to the extent that any distribution from or on behalf of such Obligor is made in respect thereof. SECTION 2.07. Payments and Computations, Etc. ------------------------------- (a) All amounts to be paid or deposited by the Sellers hereunder shall be paid or deposited in accordance with the terms hereof no later than 11:00 A.M. (New York City time) on the day when due in lawful money of the United States in same day funds as directed by the Purchaser in writing. (b) The Seller shall, to the extent permitted by law, pay to the Purchaser interest on any amount not paid or deposited by the Seller when due hereunder, at an interest rate of two percent (2%) per annum above the Alternate Base Rate, payable on demand. (c) All computations of interest and fees hereunder shall be made on the basis of a year of 360 days for the actual number of days elapsed. Whenever any payment or deposit to be made hereunder shall be on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of such payment and deposit. ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. Conditions Precedent to Effectiveness of this Agreement. ------------------------------------------------------- The effectiveness of this Agreement is subject to the conditions precedent that the Purchaser shall have received the following, in form and substance satisfactory to the Purchaser: (a) acknowledgment copies or time-stamped receipt copies of proper financing statements, duly filed on or before the date of the initial purchase of Receivables hereunder, naming FMC as the seller/debtor and the Purchaser as the purchaser/secured party, or other similar instruments or documents, as the Purchaser may deem necessary or desirable under the UCC of all appropriate jurisdictions or other applicable law to perfect the Purchaser's ownership of the Transferred Receivables and Related Security and Collections with respect thereto; (b) acknowledgment copies or time-stamped receipt copies of proper financing statements, if any, necessary to release all security interests and other rights of any Person in the Transferred Receivables, Contracts or Related Security previously granted by FMC; (c) completed requests for information, dated on or before the date of such initial purchase of Receivables hereunder, listing the financing statements referred to in subsection (a) above and all other effective financing statements filed in the jurisdictions referred 7 to in subsection (a) above that name FMC, as debtor, together with copies of such other financing statements (none of which shall cover any Transferred Receivables, Contracts or Related Security); and (d) the executed fee agreement referred to in Section 8.05. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Sellers. --------------------------------------------- Each Seller represents and warrants as to itself, its assets and properties and its obligations as of the Initial Purchase Date and on each date a Receivable becomes a Transferred Receivable: (a) Such Seller has been duly organized and is validly existing and in good standing under the laws of the State of its respective organization, and is duly qualified to do business, and is in good standing in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to so qualify does not give rise to a reasonable possibility of a Material Adverse Effect. Such Seller had at all relevant times, and now has, all necessary power, authority and legal right to originate and own the Receivables generated by it and the Related Security with respect thereto and to sell (and/or in the case of FMC, contribute) such Receivables and Related Security to the Purchaser. (b) The execution, delivery and performance by such Seller of this Agreement and the other Program Documents to which it is a party, including such Seller's sale (and in the case of FMC, contribution) of Receivables hereunder and such Seller's use of the proceeds of purchases, (i) are within such Seller's powers, (ii) have been duly authorized by all necessary action, (iii) do not contravene (1) such Seller's certificate of incorporation, by-laws or other organizational documents, (2) any law, rule or regulation applicable to such Seller, (3) any contractual restriction binding on or affecting such Seller or its property or assets, or (4) any order, writ, judgment, award, injunction or decree binding on or affecting such Seller or its property or assets, and (iv) do not result in or require the creation of any Adverse Claim. This Agreement has been duly executed and delivered by such Seller. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Seller of this Agreement or any other Program Document to which it is a party, including, without limitation, the sale (and in the case of FMC,the contribution) and assignment of the Receivables as contemplated hereby, except for the filing of UCC financing statements which are referred to herein. (d) Each of this Agreement and each other Program Document to which such Seller is a party constitutes the legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of 8 creditors' rights generally and by general principles of equity, regardless or whether such enforcement is considered in a proceeding in equity or at law. (e) Sales and contributions made pursuant to this Agreement will constitute a valid True Sale of the Transferred Receivables to the Purchaser, enforceable against creditors of, and purchasers from, such Seller and its Affiliates and such Seller shall have no remaining property interest in any Transferred Receivable. (f) Each Investor Report (including, without limitation, each E-Mail Report), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of such Seller or any of its Affiliates to the Purchaser or its successors or assigns, in connection with any Program Documents is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Purchaser and the Agent at such time) as of the date so furnished, and no such document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein (when considered as a whole), in the light of the circumstances under which they were made, not misleading. (g) Except for the Schedule IV Claim and the claims and proceedings relating to or arising out of the Schedule IV Claim, there are no actions, suits or proceedings current or pending, or to its knowledge threatened before any court, governmental agency or arbitrator of any kind which may give rise to the reasonable possibility of a Material Adverse Effect. (h) No proceeds of any purchase of Receivables hereunder will be used in a manner which conflicts with or contravenes any of Regulations T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time. (i) No transaction contemplated hereby requires compliance with any bulk sales act or similar law. (j) Immediately prior to the sale or contribution of a Receivable to the Purchaser by such Seller pursuant to this Agreement, such Seller is the legal and beneficial owner of such Receivable and the Related Security and Collections with respect thereto free and clear of any Adverse Claims. This Agreement is effective to, and shall transfer to the Purchaser (and the Purchaser shall acquire) from such Seller all right, title and interest of such Seller in each Receivable and in the Related Security and Collections with respect thereto on the Initial Purchase Date, with respect to the Receivables outstanding on the Initial Cut-Off Date, and thereafter upon the creation and origination of each such Receivable free and clear of any Adverse Claim. (k) The principal place of business and chief executive office (for purposes of the UCC) of such Seller and the office where such Seller keeps its records concerning the Transferred Receivables are located at the address or addresses referred to in Section 5.01(b). (l) Prior to the occurrence of a Special Event, all Obligors and only Obligors of Transferred Receivables and Foreign Receivables have been instructed or, upon the creation of Receivables owed by them, will be instructed to make payments only to FMC Deposit 9 Accounts and Lock-Boxes and such instructions have not been modified or revoked by any Seller and such instructions that have been given are in full force and effect. (m) Except as set forth in Exhibit B hereto, such Seller is not known by and does not use any trade name or doing-business-as name. (n) With respect to any programs used by such Seller in the servicing of the Receivables, no sublicensing, approvals or agreements are necessary in connection with the designation of a new Servicer pursuant to the Second-Tier Agreement or for the Purchaser or its assignees use of such programs so that the Purchaser, its assignees and such new Servicer shall have the benefit of such programs. (o) The transfers of Transferred Receivables by such Seller to the Purchaser pursuant to this Agreement, and all other transactions between such Seller and the Purchaser, have been and will be made in good faith and without intent to hinder, delay or defraud creditors of such Seller. (p) Each Receivable, on the date of the purchase or contribution thereof and on the date such Receivable is identified as an Eligible Receivable by such Seller or the Servicer on the date any Investor Report or an E-Mail Report is delivered, is an Eligible Receivable on each such date. (q) Such Seller is not, and is not controlled by, an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended. (r) FMC owns all of the issued and outstanding common stock of the Purchaser. (s) Each of the Transferred Receivables constitutes an "account" as such term is defined in the UCC, or if such Transferred Receivable constitutes and Inventory Protection Receivable, such Transferred Receivable constitutes either an "account" or a "general intangible" as such terms are defined in the UCC. (t) Such Seller has (i) initiated a review and assessment of all areas within its business and operations (including those affected by suppliers and vendors) that could be adversely affected by the Year 2000 Problem; (ii) developed a plan and time line for addressing the Year 2000 Problem on a timely basis, and (iii) implemented such plan in accordance with such timetable. Such Seller is exercising commercially reasonable efforts to enable the computer hardware and software within the critical business systems of such Seller to perform properly date-sensitive functions for all dates before and after January 1, 2000. Such Seller has no reason to believe that such critical business systems will not function on any given date or that the ability of such Seller to perform its obligations under the Program Documents will be impaired. (u) After giving effect to this Agreement and each sale and contribution by such Seller of Receivables under this Agreement and the use of proceeds of each such sale, (i) the fair market value of its assets exceeds its total liabilities (including contingent, subordinated, matured and unliquidated liabilities), (ii) it has sufficient presently salable assets and sufficient cash flow to enable it to meet its debts as they mature (in each case as such concepts are defined 10 in applicable bankruptcy and related laws), and (iii) it does not have unreasonably small capital (within the meaning of Section 548(a)(2) of the Federal Bankruptcy Code). (v) The consideration received by the Sellers for the Transferred Receivables constitutes fair consideration and reasonably equivalent value. Each such sale and contribution of Receivables hereunder shall not have been made for or on account of an antecedent debt owed by it to the Purchaser and no such sale or contribution is or may be voidable or subject to avoidance under any section of the Federal Bankruptcy Code. (w) Except to the extent that such Seller has delivered to the Agent a direction letter addressed to the warehouseman of any off-site facility, such Seller does not maintain books and records relating to the Transferred Receivables originated by it at off-site data processing or storage facilities. ARTICLE V COVENANTS SECTION 5.01. Covenants of the Sellers. ------------------------ From the date hereof until the first day following the Program Termination Date: (a) Compliance with Laws, Etc. Each Seller, only as to itself and its respective assets and properties and its obligations, will comply in all material respects with all applicable laws, rules, regulations and orders and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges, except to the extent that the failure to so comply with such laws, rules and regulations or the failure to so preserve and maintain such existence, rights, franchises, qualifications, and privileges could not give rise to a reasonable possibility of a Material Adverse Effect. (b) Offices, Records and Books of Account. Each Seller will keep its principal place of business and chief executive office and the office where it keeps its records concerning the Transferred Receivables originated by it at the address of such Seller set forth under its name on the signature page to this Agreement or, upon thirty (30) days' prior written notice to the Purchaser and the Agent, at any other locations in jurisdictions where all actions required to protect and perfect the Purchaser's ownership interest in the Transferred Receivables originated by it shall have been taken and completed. Each Seller also will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Transferred Receivables originated by it and related Contracts relating to it in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Transferred Receivables originated by it (including, without limitation, records adequate to permit the daily identification of each new Transferred Receivable and all Collections of and adjustments to each existing Transferred Receivable originated by it). Each Seller shall make a notation in its books and records, including its computer files, to indicate which Receivables have been sold or contributed to the Purchaser hereunder. 11 (c) Performance and Compliance with Contracts and Credit and Collection Policy. Each Seller will, at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Transferred Receivables originated by it, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Transferred Receivable originated by it and the related Contract. (d) Sales, Liens, Etc. Except for the sales and contributions of Receivables contemplated herein, each Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any Transferred Receivable originated by it, the related Contract or the Collections or Related Security with respect thereto, or upon or with respect to any account to which any Collections of any Transferred Receivable are sent, or assign any right to receive income in respect thereof. (e) Extension or Amendment of Transferred Receivables. Except as permitted by the Second-Tier Agreement with respect to certain actions of the Servicer, no Seller will extend, amend or otherwise modify the terms of any Transferred Receivable, or amend, modify or waive any term or condition of any Contract related thereto. (f) Change in Business or Credit and Collection Policy. No Seller will make any change in the Credit and Collection Policy to the extent that such change could impair the collectibility of the Transferred Receivables or otherwise give rise to a Material Adverse Effect. (g) Audits. Each Seller will, from time to time during regular business hours as requested by the Purchaser or its assigns, permit the Purchaser, or its agents, representatives or assigns, or its agents or representatives (including independent public accountants which may be such Seller's independent public accountants), (i) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of such Seller relating to the Transferred Receivables and the Related Security, including, without limitation, the related Contracts, and (ii) to visit the offices and properties of such Seller for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to the Transferred Receivables and the Related Security or such Seller's performance hereunder or under the Contracts with any of the officers or employees of such Seller having knowledge of such matters; provided, however, that such periodic audits shall be limited to two (2) per calendar year unless an Audit Deficiency has occurred or unless an Event of Termination, Incipient Event of Termination or a Designated Event has occurred in such calendar year. In addition, such Seller shall annually (or more frequently as the Agent may require during the continuance of an Event of Termination or Incipient Event of Termination), at its expense, appoint independent public accountants (which may, with the consent of the Agent, be such Seller's independent public accountants), or utilize the Agent's representatives or auditors, to prepare and deliver to the Agent a written report with respect to the Receivables and the Credit and Collection Policy (including, in each case, the systems, procedures and records relating thereto) on a scope and in a form reasonably requested by the Agent. Each Seller shall, on or prior to March 31, 2000, (at the sole cost and expense of such Seller) (i) cause KPMG LLP or another nationally recognized ("big six") independent accounting firm to conduct an audit of such Seller's books, records and accounts, the scope of which has been agreed to by the Sellers and the Agent, (ii) permit such accounting firm to 12 discuss such Seller's affairs, finances and accounts with employees and representatives of the Agent, and (iii) cause such accounting firm to provide the Agent with a report in respect of the foregoing which shall be in form, scope and substance reasonably satisfactory to the Agent. (h) Change in Payment Instructions to Obligors. Subject only to Section 3.03 of the Second-Tier Agreement, no Seller shall add or terminate any bank as a Deposit Bank, make any changes in the Lock-Boxes or Deposit Accounts from those listed in Schedule III to the Second-Tier Agreement, or make any change in its instructions to Obligors regarding payments to be made to any Lock-Box or Deposit Account, unless the requirements set forth in Section 6.05(c) of the Second-Tier Agreement have been fully complied with. (i) Deposits to Deposit Accounts. Prior to the occurrence of a Special Event, each Seller shall deposit or cause to be deposited all Collections of Transferred Receivables into the FMC Deposit Accounts. After the occurrence of a Special Event and prior to instructing the Obligors to remit all Collections to a Seller Deposit Account following the occurrence of an Event of Termination or a Designated Event, each Seller shall deposit or cause to be deposited all Collections of Transferred Receivables into the FMC Deposit Accounts and shall cause such amounts to be promptly (and in any event within one (1) Business Day after receipt) remitted to a Seller Deposit Account. After instructing the Obligors to remit all Collections to a Seller Deposit Account following the occurrence of an Event of Termination or a Designated Event each Seller shall deposit or cause to be deposited all Collections of Transferred Receivables directly into the Seller Deposit Accounts. No Seller will deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Deposit Account cash or cash proceeds other than Collections of Transferred Receivables; provided, however, that prior to the occurrence of a Special Event, Collections in respect of Foreign Receivables may be remitted to the FMC Deposit Account. (j) Marking of Records. At its expense, each Seller shall identify on its books and records and master data processing records the Transferred Receivables originated by it and indicate that Receivable Interests related to such Transferred Receivables have been sold or contributed to the Purchaser in accordance with this Agreement. (k) Further Assurances. (i) Each Seller agrees from time to time, at its expense, promptly to execute and deliver all further instruments and documents, and to take all further actions, that may be necessary or desirable, or that the Purchaser or its assignees may reasonably request, to perfect, protect or more fully evidence the sale and contribution of Receivables under this Agreement, or to enable the Purchaser or its assignee to exercise and enforce its respective rights and remedies under this Agreement or with respect to the Transferred Receivables. Without limiting the foregoing, each Seller will, upon the request of the Purchaser or its assignee, (A) execute and file such financing or continuation statements, or amendments thereto, and such other instruments and documents, that may be necessary or desirable to perfect, protect or evidence such Transferred Receivables; and (B) deliver to the Purchaser or its assignees copies of all Contracts relating to the Transferred Receivables originated by it and all records relating to such Contracts 13 and the Transferred Receivables, whether in hard copy or in magnetic tape or diskette format (which if in magnetic tape or diskette format shall be compatible with the Purchaser's or its assignee's computer equipment). (ii) Each Seller authorizes the Purchaser or its assignee to file financing or continuation statements, and amendments thereto and assignments thereof, relating to the Transferred Receivables originated by it and the Related Security, the related Contracts and the Collections with respect thereto without the signature of such Seller where permitted by law. A photocopy or other reproduction of this Agreement shall be sufficient as a financing statement where permitted by law. (iii) Each Seller shall perform its obligations under the Contracts related to the Transferred Receivables originated by it to the same extent as if such Transferred Receivables had not been sold or transferred. No other Person (other than the relevant Obligor therein) shall have any obligation or liability with respect to any Transferred Receivable or related Contract, nor shall any such Person be obligated to perform the obligations of any Seller thereunder. (l) Reporting Requirements. Each Seller will provide to the Purchaser and the Agent the following: (i) as soon as available and in any event within forty-five (45) days after the end of the first three (3) quarters of each fiscal year of such Seller, balance sheets of such Seller and its consolidated subsidiaries as of the end of such quarter and statements of income and retained earnings of such Seller and its subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the chief financial officer, treasurer or chief accounting officer of such Seller; (ii) as soon as available and in any event within ninety (90) days after the end of each fiscal year of such Seller, a copy of the annual report for such year for such Seller and its consolidated subsidiaries, containing financial statements for such year audited by KPMG LLP or such other nationally regognized (big six) independent public accounting firm; (iii) as soon as possible and in any event within three (3) days after the occurrence of each Event of Termination or Incipient Event of Termination, a statement of the chief financial officer, treasurer or chief accounting officer of such Seller setting forth details of such Event of Termination or Incipient Event of Termination and the action that has been taken and which such Seller proposes to take with respect thereto; (iv) promptly after the filing or receiving thereof, copies of all reports and notices that such Seller or any of its Affiliate files under ERISA with the Internal Revenue Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that such Seller or any of its Affiliate receives from any 14 of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which such Seller or any of its Affiliates is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition which could, in the aggregate, result in the imposition of liability on such Seller and/or any such Affiliate which could reasonably be expected to give rise to a Material Adverse Effect; (v) at the time of the delivery of the financial statements provided for in clauses (i) and (ii) above, a certificate of the chief financial officer or the treasurer of such Seller, to the effect that, to the best of such officer's knowledge, no Event of Termination has occurred and is continuing or, if any Event of Termination has occurred and is continuing, specifying the nature and extent thereof; (vi) such other information respecting the Transferred Receivables originated by it or the condition or operations, financial or otherwise, of such Seller and its Affiliates as the Purchaser or its assigns may from time to time reasonably request; and (vii) as soon as possible and in any event within five (5) Business Days after any material change after the date hereof in the status of the Schedule IV Claim or any additional claims or proceedings relating to or arising out of the subject matter of the Schedule IV Claim, a statement of an officer of such Seller setting forth in reasonable detail such change and/or a description of such additional claims or proceedings. (m) Collections. (i) In the event that any Seller receives any Collections of Transferred Receivables, such Seller agrees to hold all such Collections in trust and to mail such Collections to a Lock-Box or deposit such Collections in the appropriate Deposit Account as soon as practicable, but in no event later than one (1) Business Day after receipt thereof. (ii) In the event that any Affiliate of any Seller receives any Collections of Transferred Receivables, such Seller agrees to cause such Affiliate to hold all such Collections in trust and to cause such Affiliate to mail such Collections to a Lock-Box or deposit such Collections to the appropriate Deposit Account as soon as practicable, but in no event later than one (1) Business Day after receipt thereof. (n) Cooperation with Servicer. Each of FMCW and FMC (if not the Servicer) shall cooperate with the Servicer in collecting amounts due from Obligors in respect of the Transferred Receivables originated by it. In addition, each of FMCW and FMC shall cause the Purchaser to be in compliance with its obligations under Section 3.03 of the Second-Tier Agreement. 15 (o) Transferred Receivables Not to be Evidenced by Promissory Notes. Each Seller shall not take any action to cause or permit any Transferred Receivable generated by it to become evidenced by any "instrument" (as defined in the applicable UCC), except in connection with the collection of overdue Receivables; provided, that the original of such instrument is delivered to the Agent, duly endorsed. (p) Negative Pledges. No Seller shall enter into or assume any agreement (other than this Agreement or any other Program Documents) prohibiting the creation or assumption of any Lien upon any Transferred Receivables, Related Security or Collections relating thereto, whether now owned or hereafter acquired, except as contemplated by the Program Documents, or otherwise prohibiting or restricting any transaction contemplated hereby or by the other Program Documents. (q) Change in Name. No Seller shall change its name or its corporate structure, as applicable, unless it shall have given the Purchaser and the Agent at least thirty (30) days' prior written notice thereof and has taken all steps necessary to continue the perfection of the Purchaser's ownership interest in the Transferred Receivables originated by it and the Related Security and Collections with respect thereto. (r) Mergers, Acquisitions, Sales, Etc. No Seller will be a party to any merger or consolidation, or purchase or otherwise acquire all or substantially all of the assets (whether now owned or hereafter acquired) of any stock of any class of, or any partnership or joint venture interest in, any other Person, or, except in the ordinary course of its business, sell, transfer, convey or lease all or any substantial part of its assets (whether in one transaction or in a series of transactions), other than the disposition of its assets pursuant to this Agreement and the other Program Documents; provided that a Seller may consolidate or merge with or into another Person if (A) such Seller is the surviving corporation of such consolidation or merger, and (B) immediately after giving effect to such consolidation or merger, no Event of Termination or Incipient Event of Termination shall be continuing or shall result therefrom. (s) Separate Conduct of Business. Each Seller shall take all steps necessary to ensure the continued identity of the Purchaser as a legal entity separate from such Seller and its other Affiliates and to make it apparent to third persons that the Purchaser is an entity with assets and liabilities distinct from such Seller and its other Affiliates. Each Seller agrees that it shall not hold itself out to be responsible for the debts of the Purchaser or the decisions or actions with respect to the daily business and affairs of the Purchaser, except as provided in the Second-Tier Agreement with respect to the duties of the Servicer. Without limiting or being limited by the foregoing, each Seller shall: (i) maintain separate corporate records and books of account from those of the Purchaser; (ii) maintain its deposit accounts separate from those of the Purchaser; (iii) conduct its business from an office separate from that of the Purchaser; (iv) ensure that all oral and written communications, including without limitation, letters, invoices, purchase orders, contracts, statements and applications, will be made solely in its own name; (v) have stationery and other business forms separate from those of the Purchaser; (vi) not hold itself out as having agreed to pay, or as being liable for, the obligations of the Purchaser; (vii) not engage in any transaction with the Purchaser except as contemplated by this Agreement or as permitted by the Second-Tier Agreement; (viii) continuously maintain as official records the resolutions, agreements and other instruments underlying the transactions contemplated by 16 this Agreement and the other Program Documents; (ix) disclose on its financial statements (A) the effects of the transactions contemplated by this Agreement and the other Program Documents in accordance with GAAP, and (B) that the assets of the Purchaser are not available to pay its creditors; and (x) maintain, and cause its subsidiaries to maintain, arm's-length relationships with the Purchaser. ARTICLE VI ADMINISTRATION AND COLLECTION SECTION 6.01. Designation of Collection Agent. ------------------------------- The servicing, administration and collection of the Transferred Receivables shall be conducted by such Person (the "Servicer") designated under the Second-Tier Agreement from time to time and in accordance with the Second-Tier Agreement. SECTION 6.02. Certain Rights of the Purchaser. ------------------------------- (a) The Purchaser may, at any time during the continuance of any Event of Termination, give notice of ownership and/or direct the Obligors of Transferred Receivables and any Person obligated on any Related Security, or any of them, that payment of all amounts payable under any Transferred Receivable shall be made directly to the Purchaser or its designee. Each Seller hereby transfers to the Purchaser the exclusive ownership and control of each Lock-Box and Deposit Account. (b) Each Seller shall, at any time upon the Purchaser's request and at such Seller's expense, give notice of the Purchaser's or its assignee's ownership of the Transferred Receivables originated by it to each Obligor of such Transferred Receivables and direct that payments of all amounts payable under such Transferred Receivables be made directly to the Purchaser or its designee. (c) At the Purchaser's request and at the Sellers' expense, each Seller and the Servicer (if other than the FMC) shall (A) assemble all of the documents, instruments and other records (including, without limitation, computer tapes and disks) that evidence or relate to the Transferred Receivables, and the related Contracts and Related Security, or that are otherwise necessary or desirable to collect the Transferred Receivables, and shall make the same available to the Purchaser at a place selected by the Purchaser or its designee, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Transferred Receivables in a manner acceptable to the Purchaser or its assignees and, promptly upon receipt, remit all such cash, checks and instruments, duly indorsed or with duly executed instruments of transfer, to the Purchaser or its designee. The Purchaser shall also have the right to make copies of all such documents, instruments and other records at any time. (d) Each Seller authorizes the Purchaser and its successors and assigns to take any and all steps in such Seller's name and on behalf of such Seller that are necessary or desirable, in the determination of the Purchaser, to collect amounts due under the Transferred Receivables, including, without limitation, endorsing the Seller's name on checks and other 17 instruments representing Collections of Transferred Receivables originated by it and enforcing such Transferred Receivables and the Related Security and related Contracts. SECTION 6.03. Rights and Remedies. ------------------- (a) If any Seller fails to perform any of its obligations under this Agreement, including without limitations, the obligations in respect of Section 3.03 of the Second-Tier Agreement, the Purchaser or its successors and assigns may (but shall not be required to) itself perform, or cause performance of, such obligation, and, if any Seller fails to so perform, the costs and expenses of the Purchaser or its successors and assigns incurred in connection therewith shall be payable by such Seller. (b) Each Seller hereby grants to the Servicer, the Purchaser and its successors and assigns an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of such Seller all steps necessary or advisable to endorse, negotiate or otherwise realize on any writing or other right of any kind held or transmitted by such Seller or transmitted or received by the Purchaser or its successors and assigns (whether or not from such Seller) in connection with any Transferred Receivable originated by it. SECTION 6.04. Transfer of Records to Purchaser. -------------------------------- Each Purchase and contribution of Receivables hereunder shall include the transfer to the Purchaser and its successors and assigns of all of each of the Seller's right and title to and interest in the records relating to such Receivables and shall include an irrevocable non-exclusive license to the use of each Seller's computer software system to access and create such records. Such license shall be without royalty or payment of any kind, is coupled with an interest, and shall be irrevocable until all of the Transferred Receivables originated by it are collected in full. Each Seller shall take such action requested by the Purchaser or its successors and assigns, from time to time hereafter, that may be necessary or appropriate to ensure that the Purchaser has an enforceable ownership interest in the records relating to the Transferred Receivables originated by it and rights (whether by ownership, license or sublicense) to the use of such Seller's computer software system to access and create such records. In recognition of the Sellers' need to have access to the records transferred to the Purchaser hereunder, the Purchaser hereby grants to each Seller an irrevocable license to access such records in connection with any activity arising in the ordinary course of such Sellers' business or in performance by FMC of its duties as Servicer, provided that (i) no Seller shall disrupt or otherwise interfere with the Purchaser's use of and access to such records during such license period and (ii) each Seller consents to the assignment and delivery of the records (including any information contained therein relating to such Seller or its operations) to any assignees or transferees of the Purchaser provided they agree to hold such records confidential. 18 ARTICLE VII INDEMNIFICATION SECTION 7.01. Indemnities by the Seller. ------------------------- Without limiting any other rights which the Purchaser may have hereunder or under applicable law, each Seller, severally and not jointly, hereby agrees to indemnify the Purchaser and its successors, assigns and transferees and their respective directors, partners, officers, employees and agents, including without limitation, each Indemnified Party (as defined in the Second-Tier Agreement) (each of the foregoing, a "Sale Indemnified Party") from and against any and all damages, claims, losses, liabilities (other than taxes on the overall net income of a Sale Indemnified Party and franchise taxes imposed on a Sale Indemnified Party by any taxing authority in any jurisdiction which asserts jurisdiction to impose such taxes on the basis of the contacts which such Sale Indemnified Party maintains with such jurisdiction other than the contacts arising from the execution, performance and delivery of, or receipt of payments under, this Agreement or any other Program Document) and related costs and expenses, including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts"), awarded against or incurred by any Sale Indemnified Party arising out of or as a result of: (i) any Receivable originated by such Seller identified as an Eligible Receivable by such Seller or the Servicer on the date of purchase or contribution thereof, or in any Investor Report or other statement that is not an Eligible Receivable on such date of transfer or the date of such report or statement; (ii) any representation or warranty or statement made or deemed made by such Seller (or any of its officers) under or in connection with this Agreement, which shall have been incorrect in any material respect when made; (iii) the failure by such Seller to comply with any applicable law, rule or regulation with respect to any Transferred Receivable or the related Contract; or the failure of any Transferred Receivable or the related Contract to conform to any such applicable law, rule or regulation; (iv) the failure to vest in the Purchaser absolute ownership of the Receivables that are, or that purport to be, the subject of a purchase from such Seller or contribution by FMC under this Agreement and the Related Security and Collections in respect thereof, free and clear of any Adverse Claim; (v) the failure of such Seller to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables that are, or that purport to be, the subject of a purchase from such Seller or contribution by FMC under this Agreement and the Related Security and Collections in respect thereof, whether at the time of any such Purchase or contribution or at any subsequent time; 19 (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable that is, or that purports to be, the subject of a purchase from such Seller or contribution by FMC under this Agreement including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms, or any other claim resulting from the sale of the merchandise or services related to such Receivable or the furnishing or failure to furnish such merchandise or services or relating to collection activities with respect to such Receivable; (vii) any failure of such Seller to perform its duties or obligations in accordance with the provisions hereof or any other Program Document or to perform its duties or obligations under any Contract related to a Transferred Receivable; (viii) any products liability or other claim arising out of or in connection with merchandise or services which are the subject of any of its Contracts; (ix) the commingling of Collections of Transferred Receivables by such Seller or a designee of such Seller at any time with other funds of such Seller or an Affiliate of such Seller; (x) any investigation, litigation or proceeding related to this Agreement or the use of proceeds of Purchases by such Seller or the ownership of Receivables sold or contributed by such Seller, the Related Security, or Collections with respect thereto or in respect of any Receivable originated by such Seller, Related Security or Contract relating thereto; (xi) any Transferred Receivable originated by such Seller becoming a Diluted Receivable; (xii) any failure of such Seller to comply with its covenants or obligations contained in this Agreement; (xiii) any Servicer Fees or other costs and expenses payable to any replacement Servicer, to the extent in excess of the Servicer Fees payable to FMC hereunder; (xiv) any claim brought by any Person other than a Sale Indemnified Party arising from any activity by such Seller in servicing, administering or collecting any Transferred Receivable; or (xv) any inability to litigate any claim against any Obligor in respect of any Receivable originated by such Seller as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding. 20 Notwithstanding the foregoing (and with respect to clause (ii) below, without prejudice to the rights that the Purchaser may have pursuant to the other provisions of this Agreement or the provisions of any other Program Document), in no event shall any Sale Indemnified Party be indemnified for any Indemnified Amounts to the extent (i) resulting from the gross negligence or willful misconduct on the part of such Sale Indemnified Party, or (ii) to the extent the same include, losses, in respect of Transferred Receivables that would constitute credit recourse to any Seller for the amount of any Transferred Receivable not paid by the related Obligor as a result of the bankruptcy or financial inability to pay by such Obligor. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. ---------------- No amendment or waiver of any provision of this Agreement or consent to any departure by any Seller therefrom shall be effective unless in a writing signed by the Purchaser and the Agent and, in the case of any amendment, also signed by each Seller, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Purchaser to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. SECTION 8.02. Notices, Etc. ------------- All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and be faxed or delivered, to each party hereto, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by regular mail), and notices and communications sent by other means shall be effective when received. SECTION 8.03. Binding Effect; Assignability. ----------------------------- (a) This Agreement shall be binding upon and inure to the benefit of the Sellers, the Purchaser and their respective successors and assigns; provided, however, that no Seller may assign its rights or obligations hereunder or any interest herein without the prior written consent of the Purchaser and the Agent. In connection with any sale or assignment by the Purchaser of all or a portion of the Transferred Receivables, the buyer or assignee, as the case may be, shall, to the extent of its purchase or assignment, have all rights of the Purchaser under this Agreement (as if such buyer or assignee, as the case may be, were the Purchaser hereunder). (b) This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until the Program Termination Date. 21 SECTION 8.04. Costs, Expenses and Taxes. ------------------------- (a) In addition to the rights of indemnification granted under Section 7.01, each Seller, jointly and severally, agrees to pay on demand all costs and expenses in connection with the preparation, execution, delivery and administration (including periodic auditing and other activities contemplated in Section 5.01(g)), including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Purchaser and its assignees and their respective Affiliates with respect thereto and with respect to advising the Purchaser and its assignees (including the Agent, CNAI, the Investors and the Banks) and their respective Affiliates as to their rights and remedies under this Agreement and the other Program Documents, and all costs and expenses, if any (including reasonable counsel fees and expenses), of the Purchaser and its assignees (including the Agent, CNAI, the Investors and the Banks) and their respective Affiliates, in connection with the enforcement of this Agreement and the other Program Documents and the other documents and agreements to be delivered hereunder. (b) Each Seller, jointly and severally, agrees to pay any present or future sales, stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payments made hereunder or deposit from Collections hereunder or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the other Program Documents (hereinafter referred to as "Taxes"). (c) Each Seller, jointly and severally, agrees to indemnify the Purchaser and its assignees for and hold them harmless against the full amount of Taxes imposed on or paid by the Purchaser or its assignees and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto whether or not such Taxes or other Taxes were correctly or legally asserted. This indemnification shall be made within ten (10) days from the date the Purchaser or its assignees makes written demand therefor. SECTION 8.05. Fees. ---- Each Seller agrees to pay the Purchaser the fees in the amounts and on the dates set forth in a separate fee agreement of even date among the Sellers and the Purchaser.(1) SECTION 8.06. No Proceedings. -------------- Each Seller hereby agrees that it will not institute against the Purchaser any bankruptcy, insolvency or other similar proceeding so long as there shall not have elapsed one year plus one day since the Program Termination Date. SECTION 8.07. Waiver of Set-Off, Etc. ------------------------- Each Seller hereby irrevocably and unconditionally waives and relinquishes to the fullest extent it may legally do so (i) any express or implied lien, security interest, charge or encumbrance, which would otherwise be imposed on or affect any Receivable, Related Security or Collections with respect thereto on account of any unpaid amount of any Purchase Price therefor or on account of any other unpaid amounts otherwise payable by the Purchaser under or (1) Should cover "Structuring Fee" only. 22 in connection with this Agreement or otherwise, and (ii) with respect to the obligations of any Seller to make payments or deposits under this Agreement, any set-off, counterclaim, recoupment, defense and other right or claim which such Seller may have against the Purchaser as a result of or arising out of the failure of the Purchaser to pay any amount on account of any Purchase Price or any other amount payable by the Purchaser to such Seller under this Agreement or otherwise. SECTION 8.08. Confidentiality. --------------- Each Seller agrees that it shall and shall cause each of its Affiliates (i) to keep this Agreement and the other Program Documents, the proposal relating to the structure of the facility contemplated by this Agreement and the other Program Documents (the "Facility"), any analyses, computer models, information or document prepared by the Agent, Citibank, N.A. or any of their respective Affiliates in connection with the Facility, the Agent's or its Affiliate's written reports to any Seller or any of their respective Affiliates and any related written information (collectively, the "Product Information") confidential and to disclose Product Information only to those of its officers, employees, agents, accountants, legal counsel and other representatives (collectively, the "Company Representatives") who have a need to know such Product Information for the purpose of obtaining any necessary consents or approvals (including any internal approvals) and for the purpose of assisting in the negotiation, completion and administration of the Facility or for any legitimate business purpose in connection therewith (the "Approved Purposes"); (ii) to use the Product Information only in connection with the Approved Purposes and not for any other purpose; and (iii) to cause the Company Representatives to comply with the provisions of this Section 8.08 and to be responsible for any failure of any Company Representative to so comply. The provisions of this Section 8.08 shall not apply to any Product Information that is a matter of general public knowledge or that has heretofore been made available to the public by any Person other than the Sellers and any of their respective Affiliates or any Company Representative or that is required to be disclosed by applicable law or is requested by any governmental authority with jurisdiction over the Sellers or any of their respective Affiliates. SECTION 8.09. Intent of Agreement. ------------------- It is the intention of the parties to this Agreement that each purchase and contribution of Receivables and the Related Security hereunder shall convey to the Purchaser an undivided ownership interest in such Receivables and Related Security and the Collections in respect thereto and that such transactions shall constitute a True Sale and not a secured loan. If, notwithstanding such intention, any conveyance of any Receivable, Related Security or the Collections with respect thereto hereunder shall ever be recharacterized as a secured loan and not a sale, it is the intention of this Agreement that this Agreement shall constitute a security agreement under applicable law, and that each Seller shall be deemed to have granted to the Purchaser a duly perfected first priority security interest in the Transferred Receivables, the Related Security and the Collections in respect thereto free and clear of any Adverse Claim. 23 SECTION 8.10. Governing Law. ------------- THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 8.11. Third-Party Beneficiary. ----------------------- Each of the parties hereto hereby acknowledges that the Purchaser has transferred the Transferred Receivables and the Collections and Related Security to the Agent, the Investors and the Banks pursuant to the Second-Tier Agreement and has assigned all of its rights and remedies under this Agreement to the Agent, the Investors and the Banks pursuant to the Second-Tier Agreement, and each Seller hereby consents to any such transfers and assignments. The Agent, the Investors and the Banks shall each be third-party beneficiaries of, and shall be entitled to enforce the Purchaser's rights and remedies under, this Agreement to the same extent as if they were parties hereto. SECTION 8.12. Execution in Counterparts. ------------------------- This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. SECTION 8.13. Survival of Termination. ----------------------- The provisions of Sections 2.06, 7.01, 8.04, 8.06, 8.07, 8.08 and 8.12 shall survive any termination of this Agreement. SECTION 8.14. Addition of FMCW. ---------------- Prior to the FMCW Effective Date (i) FMCW shall be deemed not to be a party to this Agreement, (ii) all references to an "Originator" or the "Originators" set for in the Second-Tier Agreement or the Undertaking and all references to a "Seller" or the "Sellers" set forth herein shall be deemed to refer only to FMC and all references to the Receivables shall (other than in Section 3.02 (b) of the Second-Tier Agreement) be deemed to only refer to the Receivables originated by FMC. From and after the FMCW Effective Date (i) FMCW shall be deemed to be a party to this Agreement, (ii) all references to an "Originator" or the "Originators" set forth in the Second-Tier Agreement and the Undertaking and all references to a "Seller" or the "Sellers" set forth herein shall be deemed to also refer to FMCW as applicable and all references to the Receivables shall be deemed to also include the Receivables originated by FMC. 24 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. FMC CORPORATION, as Seller By: /s/ S. K. Kushner -------------------------------------- Name: S. K. Kushner Title: VP & Treasurer Address: 200 East Randolph Drive Chicago, Illinois 60601 Attention: D. N. Schuchardt Telephone No.: 312/861-6143 Facsimile No.: 312/861-5797 FMC WYOMING CORPORATION, as Seller By: /s/ P. G. Bakas -------------------------------------- Name: P. G. Bakas Title: Assistant Secretary Address: Attention: D. N. Schuchardt Telephone No.: 312/861-6143 Facsimile No.: 312/861-5797 FMC FUNDING CORPORATION, as Purchaser By: /s/ S. K. Kushner --------------------------------- Name: S. K. Kushner Title: President Address: c/o FMC Corporation 200 East Randolph Drive Chicago, Illinois 60601 Attention: D. N. Schuchardt Telephone No.: 312/861-6143 Facsimile No.: 312/861-5797 EXHIBIT A NON-NEGOTIABLE PROMISSORY NOTE _________, 1999 FOR VALUE RECEIVED, the undersigned, FMC FUNDING CORPORATION (the "Purchaser"), promises to pay to [INSERT NAME OF SELLER], (the "Seller") on the terms and subject to the conditions set forth herein and in the Purchase Agreement referred to below, the principal sum of the aggregate unpaid Purchase Price of all Receivables originated by it and Related Security purchased from time to time by the Purchaser from the Seller pursuant to such Purchase Agreement, as such unpaid Purchase Price is shown in the records of the Seller. 1. Purchase Agreement. This promissory note (this "Promissory Note") is one of the Promissory Notes described in, and is subject to the terms and conditions set forth in, that certain Purchase and Contribution Agreement, dated as of the date hereof (as the same may be amended or otherwise modified from time to time, the "Purchase Agreement") among the Seller, the Purchaser and [INSERT NAME OF OTHER SELLER]. Reference is hereby made to the Purchase Agreement for a statement of certain other rights and obligations of the Seller and the Purchaser. 2. Definitions. Capitalized terms used (but not defined) herein have the meanings assigned thereto in the Purchase Agreement and the Second-Tier Agreement (defined therein). In addition, as used herein, the following terms have the following meanings: "Bankruptcy Proceedings" has the meaning set forth in clause (b) of paragraph 9 hereof. "Final Maturity Date" means the date that falls ninety-one days after the Program Termination Date. "Interest Period" means the period from and including a Settlement Date (or, in the case of the first Interest Period, the date hereof) to but excluding the next Settlement Date. "Senior Interests" means, the obligation of the Purchaser, the Seller, [INSERT NAME OF OTHER SELLER], the Servicer and their respective Affiliates to set aside, and to turn over, Collections and other proceeds of the Receivable Interests acquired by the Investors and the Banks pursuant to the Second-Tier Agreement, and all other obligations of the Purchaser and the Seller [INSERT NAME OF OTHER SELLER] that are due and payable to the Senior Interest Holders under the Program Documents, together with all interest accruing on any such amounts after the commencement of any Bankruptcy Proceedings, notwithstanding any provision or rule of law that might restrict the rights of any Senior Interest Holder, as against the Purchaser or any other Person, to collect such interest, including without limitation all amounts owing to the Senior Interest Holders under the Fee Letter and under Sections 2.04(b), 2.05, 2.08, 2.09, 6.06, 9.01 and 10.04 of the Third-Tier Agreement. "Senior Interest Holders" means, collectively, the Investors, the Banks, the Agent, the other Affected Persons, Indemnified Parties (as defined in the Second-Tier Agreement) and Sale Indemnified Parties. 3. Interest. Subject to the provisions set forth below, the Purchaser promises to pay interest on this Promissory Note as follows: (a) Prior to the Program Termination Date, the aggregate unpaid Purchase Price from time to time outstanding during any Interest Period shall bear interest at a rate per annum equal to [the Eurodollar Rate as in effect from time to time on the first Business Day of each Settlement Period, as determined by the Seller, plus .___%]; and (b) From (and including) the Program Termination Date to (but excluding) the date on which the entire aggregate unpaid Purchase Price is fully paid, the aggregate unpaid Purchase Price from time to time outstanding shall bear interest at a rate per annum equal to [the Eurodollar Rate as in effect from time to time on the first Business Day of each Settlement Period, as determined by the Seller, plus ___%], but in no event in excess of the maximum rate permitted by law. In the event that, contrary to the intent of the Seller, the Purchaser pays interest hereunder and it is determined that such interest rate was in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal then due hereunder. 4. Interest Payment Dates. Subject to the provisions set forth below, the Purchaser shall pay accrued interest on this Promissory Note on each Settlement Date, and shall pay accrued interest on the amount of each principal payment made in cash on a date other than a Settlement Date at the time of such principal payment. 5. Basis of Computation. Interest accrued hereunder shall be computed for the actual number of days elapsed on the basis of a 360-day year. 6. Principal Payment Dates. Subject to the provisions set forth below, payments of the principal amount of this Promissory Note shall be made as follows: The principal amount of this Promissory Note shall be reduced from time to time pursuant to Sections 2.05, 2.06 and 2.07 of the Purchase Agreement; and The entire remaining unpaid balance of this Promissory Note shall be paid on the Final Maturity Date. 2 Subject to the provisions set forth below, the principal amount of, and accrued interest on, this Promissory Note may be prepaid on any Business Day without premium or penalty. 7. Payments. All payments of principal and interest hereunder are to be made in lawful money of the United States of America. 8. Enforcement Expenses. In addition to and not in limitation of the foregoing, but subject to the provisions set forth below and to any limitation imposed by applicable law, the Purchaser agrees to pay all expenses, including reasonable attorneys' fees and legal expenses, incurred by the Seller in seeking to collect any amounts payable hereunder which are not paid when due. 9. Provisions Regarding Restrictions on Payment. The Purchaser covenants and agrees, and the Seller, by its acceptance of this Promissory Note, likewise covenants and agrees on behalf of itself and any holder of this Promissory Note, that the payment of the principal amount of, and interest on, this Promissory Note is hereby expressly subject to certain restrictions set forth in the following clauses of this paragraph 9: No payment or other distribution of the Purchaser's assets of any kind or character, whether in cash, securities, or other rights or property, shall be made on account of this Promissory Note except to the extent such payment or other distribution is made from Available Funds and is otherwise permitted under the Purchase Agreement and the Second-Tier Agreement; In the event of any dissolution, winding up, liquidation, readjustment, reorganization or other similar event relating to the Purchaser, whether voluntary or involuntary, partial or complete, and whether in bankruptcy, insolvency or receivership proceedings, or upon an assignment for the benefit of creditors, or any other marshalling of the assets and liabilities of the Purchaser or any sale of all or substantially all of the assets of the Purchaser (such proceedings being herein collectively called "Bankruptcy Proceedings"), the Senior Interests shall first be paid and performed in full and in cash before the Seller shall be entitled to receive and to retain any payment or distribution in respect of this Promissory Note. In order to implement the foregoing, the Seller hereby irrevocably agrees that Citicorp North America, Inc., as Agent for the Investors and the Banks (in such capacity together with its successors and assigns, the "Agent"), in the name of the Seller or otherwise, may demand, sue for, collect, receive and receipt for any and all such payments or distributions, and file, prove and vote or consent in any such Bankruptcy Proceedings with respect to any and all claims of the Seller relating to this Promissory Note, in each case until the Senior Interests shall have been paid and performed in full and in cash; In the event that the Seller receives any payment or other distribution of any kind or character from the Purchaser or from any other source whatsoever, in respect of this Promissory Note, other than as expressly permitted by the terms of this Promissory Note, such payment or other distribution shall be received for the sole 3 benefit of the Senior Interest Holders and shall be turned over by the Seller to the Agent (for the benefit of the Senior Interest Holders) forthwith; Notwithstanding any payments or distributions received by the Senior Interest Holders in respect of this Promissory Note, while any Bankruptcy Proceedings are pending the Seller shall not be subrogated to the then existing rights of the Senior Interest Holders in respect of the Senior Interests until the Senior Interests have been paid and performed in full and in cash. Upon the occurrence of the Program Termination Date, the Seller shall be subrogated to the then existing rights of the Senior Interest Holders, if any; The provisions set forth in this Section 9 are intended solely for the purpose of defining the relative rights of the Seller, on the one hand, and the Senior Interest Holders on the other hand. Nothing contained in this Promissory Note is intended to or shall impair, as between the Purchaser, its creditors (other than the Senior Interest Holders) and the Seller, the Purchaser's obligation, which is unconditional and absolute, to pay to the Seller the principal of and interest on this Promissory Note as and when the same shall become due and payable in accordance with the terms hereof or to affect the relative rights of the Seller and creditors of the Purchaser (other than the Senior Interest Holders); The Seller shall not, until the Final Maturity Date and all of the Senior Interests have been paid and performed in full and in cash, transfer, pledge or assign, or commence legal proceedings to enforce or collect this Promissory Note or any rights in respect hereof; The Seller shall not, without the advance written consent of the Agent, commence, or join with any other Person in commencing, any Bankruptcy Proceedings with respect to the Purchaser until at least one year and one day shall have passed since the Program Termination Date shall have occurred; If, at any time, any payment (in whole or in part) of any Senior Interest is rescinded or must be restored or returned by a Senior Interest Holder (whether in connection with Bankruptcy Proceedings or otherwise), these provisions shall continue to be effective or shall be reinstated, as the case may be, as though such payment had not been made; The Seller hereby waives: (i) notice of acceptance of these provisions by any of the Senior Interest Holders; (ii) notice of the existence, creation, non-payment or non-performance of all or any of the Senior Interests; and (iii) all diligence in enforcement, collection or protection of, or realization upon, the Senior Interests, or any thereof, or any security therefor; These provisions constitute a continuing offer from the holder of this Promissory Note to all Persons who become the holders of, or who continue to hold, Senior Interests; and these provisions are made for the benefit of the Senior Interest Holders, and 4 the Agent, the Investor or the Banks, may proceed to enforce such provisions on behalf of each of such Persons. 10. General. No failure or delay on the part of the Seller in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No amendment, modification or waiver of, or consent with respect to, any provision of this Promissory Note shall in any event be effective unless (i) the same shall be in writing and signed and delivered by the Purchaser, the Seller and the Agent and (ii) all consents required for such actions under the Program Documents shall have been received by the appropriate Persons. 11. No Negotiation. This Promissory Note is not negotiable. 12. Governing Law. THIS PROMISSORY NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. 13. Captions. Paragraph captions used in this Promissory Note are for convenience only and shall not affect the meaning or interpretation of any provision of this Promissory Note. FMC FUNDING CORPORATION By: ______________________________ 5 EXHIBIT B LIST OF TRADE NAMES Airport Products Systems Division Agricultural Products Group Alkili Chemicals Division Active Oxidants Division Food Ingredients Division Pharmaceutical Division Phosphorus Chemical Division Peroxide Division Jetway Systems Division FMC Biopolymers Hydrogen Peroxide Division FMC Wyoming Corporation EX-10.11 6 dex1011.txt RECEIVABLES PURCHASE AGREEMENT EXHIBIT 10.11 ================================================================================ RECEIVABLES PURCHASE AGREEMENT Dated as of November 24, 1999 Among FMC FUNDING CORPORATION, as Seller, FMC CORPORATION, as initial Servicer, CIESCO, L.P., as Investor, CITIBANK, N.A., as a Bank and CITICORP NORTH AMERICA, INC. as Agent ================================================================================ TABLE TO CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms ............................................ 1 SECTION 1.02. Rules of Construction; Other Terms ............................... 20 ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES SECTION 2.01. Purchase Facility ................................................ 21 SECTION 2.02. Making Purchases21 SECTION 2.03. Receivable Interest Computation .................................. 22 SECTION 2.04. Settlement Procedures ............................................ 22 SECTION 2.05. General Settlement Procedures .................................... 23 SECTION 2.06. Fees ............................................................. 25 SECTION 2.07. Payments and Computations, Etc ................................... 25 SECTION 2.08. Increased Costs .................................................. 25 SECTION 2.09. Additional Yield on Receivable Interests Bearing a Eurodollar Rate 27 SECTION 2.10. Funding Losses ................................................... 27 ARTICLE III CONDITIONS OF PURCHASES SECTION 3.01. Conditions Precedent to Initial Purchase ......................... 28 SECTION 3.02. Conditions Precedent to All Purchases and Reinvestments .......... 30 SECTION 3.03. Conditions Subsequent ............................................ 31 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Seller and the Servicer .... 31 ARTICLE V COVENANTS SECTION 5.01. Covenants of the Seller .......................................... 34 ARTICLE VI ADMINISTRATION AND COLLECTION OF POOL RECEIVABLES SECTION 6.01. Designation of Servicer .......................................... 42 SECTION 6.02. Duties of Servicer ............................................... 42 SECTION 6.03. Certain Rights of the Agent ...................................... 44 SECTION 6.04. Rights and Remedies .............................................. 44 SECTION 6.05. Covenants of the Servicer ........................................ 45 SECTION 6.06. Indemnities by the Servicer ...................................... 47
i ARTICLE VII EVENTS OF TERMINATION SECTION 7.01. Events of Termination ........................................... 48 ARTICLE VIII THE AGENT SECTION 8.01. Authorization and Action ........................................ 50 SECTION 8.02. Agent's Reliance, Etc ........................................... 51 SECTION 8.03. CNAI and Affiliates ............................................. 51 ARTICLE IX INDEMNIFICATION SECTION 9.01. Indemnities by the Seller ....................................... 51 ARTICLE X MISCELLANEOUS SECTION 10.01. Amendments, Etc ................................................. 54 SECTION 10.02. Notices, Etc .................................................... 54 SECTION 10.03. Assignability ................................................... 54 SECTION 10.04. Costs, Expenses and Taxes ....................................... 55 SECTION 10.05. No Proceedings .................................................. 55 SECTION 10.06. Confidentiality ................................................. 56 SECTION 10.07. Security Interest ............................................... 57 SECTION 10.08. Intent of Agreement ............................................. 57 SECTION 10.09. Governing Law ................................................... 58 SECTION 10.10. Execution in Counterparts ....................................... 58 SECTION 10.11. Survival of Termination ......................................... 58 SECTION 10.12. FMCW Effective Date ............................................. 57
SCHEDULES SCHEDULE I Form of Investor Report SCHEDULE II Credit and Collection Policy SCHEDULE III List of Deposit Banks, Lock-Boxes and Deposit Accounts SCHEDULE IV Proceedings SCHEDULE V List of Trade Names EXHIBITS EXHIBIT A-1 Forms of FMC Deposit Agreement EXHIBIT A-2 Forms of Seller Deposit Agreement EXHIBIT B Form of Assignment and Acceptance EXHIBIT C Form of Funds Transfer Letter ii RECEIVABLES PURCHASE AGREEMENT Dated as of November 24, 1999 FMC FUNDING CORPORATION (together with its permitted successors and assigns, the "Seller"), CIESCO, L.P., FMC CORPORATION, as Servicer (as defined below), CITIBANK, N.A., the other Banks (as defined below) from time to time parties hereto, and CITICORP NORTH AMERICA, INC. ("CNAI"), as agent (together with its successors and assigns, the "Agent") for the Investors (as defined herein) and the Banks, agree as follows: PRELIMINARY STATEMENT. The Seller has acquired, and may continue to acquire Receivables (as defined herein) from the Originators (as defined below), either by purchase or by contribution to the capital of the Seller pursuant to the First-Tier Agreement (as defined herein). CIESCO, L.P. and the Banks are prepared to purchase an undivided fractional ownership interest in the Receivables on the terms set forth herein. Accordingly, the parties agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms. --------------------- As used in this Agreement, the following terms shall have the following meanings: "Adverse Claim" means a lien, security interest, pledge, assignment, title retention, similar claim, right or interest or similar charge or encumbrance (other than the interest of the Investors and the Banks' pursuant to the Program Documents). "Affected Person" shall have the meaning assigned to such term in Section 2.08. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person. "Affiliated Obligor" means any Obligor that is an Affiliate of another Obligor. "Agent" shall have the meaning assigned to such term in the introduction to this Agreement. "Agent's Account" means the special account (acct. no. 38858248, ABA No. 021000089) of the Agent maintained at the office of Citibank, N.A. at 399 Park Avenue, New York, New York. "Agreement" means this Receivables Purchase Agreement, as the same may from time to time be amended, waived, supplemented or modified. "Alternate Base Rate" means a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the highest of: (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time as Citibank, N.A.'s base rate; (b) 1/2 of one percent above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank, N.A. on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank, N.A. from three New York certificate of deposit dealers of recognized standing selected by Citibank, N.A., in either case adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent; and (c) 1/2 of one percent above the Federal Funds Rate. "Applicable Division" means each of FMC's Airport Products & Systems Division, Chemical Products Group, Pharmaceutical Division, Food Ingredients Division, Hydrogen Peroxide Division, FMC Biopolymers Division and Jetway Systems Division or any successor division which sells the goods sold on the date hereof by any such division or on the date hereof provides the services provided by any such division. "Applicable Margin" means (i) if FMC shall have the Required Tier-1 Ratings, 1.25% per annum, (ii) if FMC shall have the Required Tier-2 Ratings, 1.75% per annum, and (iii) if FMC shall have neither the Required Tier-1 Ratings nor the Required Tier-2 Ratings, 2.00% per annum. "Asset Purchase Agreement" means the Asset Purchase Agreement entered into by a Bank (other than Citibank, N.A.) concurrently with the Assignment and Acceptance pursuant to which it became party to this Agreement. "Assignee Rate" for any Settlement Period for any Receivable Interest means an interest rate per annum equal to the Applicable Margin above the Eurodollar Rate for such Settlement Period; provided, however, that in case of: (i) any Settlement Period on or prior to the first day of which an Investor or Bank shall have notified the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Investor or Bank to fund such Receivable Interest at the Assignee Rate set forth above (and such Investor or 2 Bank shall not have subsequently notified the Agent that such circumstances no longer exist), (ii) any Settlement Period of one to (and including) 29 days, (iii) any Settlement Period as to which the Agent does not receive notice, by no later than 12:00 noon (New York City time) on the second Business Day preceding the first day of such Settlement Period, that the related Receivable Interest will not be funded by issuance of CIESCO's promissory notes, or (iv) any Settlement Period for a Receivable Interest the Capital of which allocated to the Investors or the Banks is less than $500,000, the "Assignee Rate" for such Settlement Period shall be an interest rate per annum equal to the Alternate Base Rate in effect on the first day of such Settlement Period; provided, further, that the Agent and the Seller may agree in writing from time to time upon a different Assignee Rate. "Assignment and Acceptance" means an Assignment and Acceptance Agreement entered into by a Bank, an Eligible Assignee and the Agent, pursuant to which such Eligible Assignee may become a party to this Agreement, in substantially the form of Exhibit B hereto. "Audit Deficiency" means in respect of any Person, any deficiency in any written report, statement or audit provided by or on behalf of such Person under the Program Documents. "Bank Commitment" of any Bank means, (a) with respect to Citibank, N.A., $200,000,000 or such amount as reduced by any Assignment and Acceptance entered into between Citibank, N.A. and other Banks, or (b) with respect to a Bank that has entered into an Assignment and Acceptance, the amount set forth therein as such Bank's Bank Commitment, in each case as such amount may be reduced by an Assignment and Acceptance entered into between such Bank and an Eligible Assignee, as such amount may be further reduced (or terminated) pursuant to the next sentence. Any reduction (or termination) of the Purchase Limit pursuant to the terms of this Agreement shall reduce ratably (or terminate) each Bank's Bank Commitment. "Banks" means Citibank, N.A. and each Eligible Assignee that shall become a party to this Agreement pursuant to Section 10.03. "Business Day" means any day on which (i) banks are not authorized or required to close in New York City, and (ii) if this definition of "Business Day" is utilized in connection with the Eurodollar Rate, dealings are carried out in the London interbank market. "Capital" of any Receivable Interest means the original amount paid to the Seller for such Receivable Interest at the time of its purchase by CIESCO or a Bank pursuant to this Agreement, in each case reduced from time to time by Collections distributed on account of such Capital pursuant to Section 2.04(d); provided, that if such Capital shall have been reduced by any distribution and thereafter all or a portion of such distribution is rescinded or must otherwise be 3 returned for any reason, such Capital shall be increased by the amount of such rescinded or returned distribution, as though it had not been made. "CIESCO" means CIESCO, L.P. and any successor or assign of CIESCO, L.P. that is a receivables investment company which in the ordinary course of its business issues commercial paper or other securities to fund its acquisition and maintenance of receivables. "Code" means the Internal Revenue Code of 1986, as the same may from time to time be amended. "Collections" means, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including, without limitation, all cash proceeds of Related Security with respect to such Receivable, and any Collection of such Receivable deemed to have been received pursuant to Section 2.05. "Commitment Termination Date" means the earliest of (a) November 22, 2000, unless, prior to such date (or the date so extended pursuant to this clause), upon the Seller's request, made not more than ninety (90) nor less than forty-five (45) days prior to the then Commitment Termination Date, one or more Banks having 100% of the Purchase Limit shall in their sole discretion consent, which consent shall be given not more than thirty (30) days prior to the then Commitment Termination Date (the date any such consent is given, the "Extension Date"), to the extension of the Commitment Termination Date to the date occurring 364 days after such Extension Date; provided, however, that any failure of any Bank to respond to the Seller's request for such extension shall be deemed a denial of such request by such Bank, (b) the Facility Termination Date, (c) the date determined pursuant to Section 7.01, and (d) the date the Purchase Limit reduces to zero. "Concentration Limit" for any Obligor means at any time 5.5% (the "Normal Concentration Limit"), or such other greater percentage or dollar amount ("Special Concentration Limit") for such Obligor designated by the Agent in a writing delivered to the Seller; provided, that in the case of an Obligor with any Affiliated Obligor, the Concentration Limit shall be calculated as if such Obligor and such Affiliated Obligor are one Obligor; provided, further that the Agent in its sole discretion may cancel any Special Concentration Limit upon three (3) Business Days' written notice to the Seller. "Contract" means any and all contracts, instruments, agreements, invoices, notes or other writings between any Originator and an Obligor, pursuant to or under which such Obligor shall be obligated to make payments (x) to FMCW with respect to the sale of goods or provisions of services by FMCW and (y) to FMC with respect to the sale of goods or provisions of services by FMC arising under the Applicable Division and Inventory Protection Receivables. "Credit and Collection Policy" means those receivables credit and collection policies and practices of the Originators in effect on the date of this Agreement and described in Schedule II hereto, as modified in compliance with this Agreement. "Debt" means (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have 4 been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above, and (vi) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA. "Default Ratio" means, the fraction (expressed as a percentage) (A) the numerator of which is the sum of (1) aggregate Outstanding Balance of all Defaulted Receivables originated by the Originators and outstanding as of the end of the most recent calendar month plus (2) the aggregate Outstanding Balance of all Receivables written off in the most recent calendar month (determined in each case immediately prior to such Receivables being written off), and (B) the denominator of which is the aggregate Outstanding Balance of all Pool Receivables on such day. "Defaulted Receivable" means a Receivable: (i) as to which any payment, or part thereof, remains unpaid for more than ninety (90) days from the original due date for such payment; (ii) as to which the Obligor thereof or any other Person obligated thereon or owning any Related Security in respect thereof has taken any action, or suffered any event to occur, of the type described in Section 7.01(g); or (iii) which, consistent with the Credit and Collection Policy, would be written off the Seller's, any Originator's or the Servicer's books as uncollectible. "Delinquency Ratio" means the ratio (expressed as a percentage) computed as of the last day of each calendar month by dividing (i) the aggregate Outstanding Balance of all Pool Receivables that were Delinquent Receivables on such day by (ii) the aggregate Outstanding Balance of all Pool Receivables on such day. "Delinquent Receivable" means a Receivable that is not a Defaulted Receivable and: (i) as to which any payment, or part thereof, remains unpaid for more than sixty (60) but less than ninety (90) days from the original due date for such payment; or (ii) which, consistent with the Credit and Collection Policy, would be classified as delinquent by the Seller, the applicable Originator or the Servicer. "Deposit Accounts" means each Seller Deposit Account and each FMC Deposit Account. "Deposit Agreement" means each Seller Deposit Agreement and each FMC Deposit Agreement. 5 "Deposit Bank" means any of the banks holding one or more Deposit Accounts listed on Schedule III hereto. "Designated Event" means that the Agent shall have notified the Seller in writing that in its reasonable determination there has been a material adverse change in the status of the Schedule IV Claim after the date hereof and/or a material amount of additional claims and proceedings relating to or arising out of the subject matter of the Schedule IV Claim after the date hereof which, together with the Schedule IV Claim, in the aggregate give rise to the reasonable possibility of a Material Adverse Effect. "Designated Obligor" means, at any time, each Obligor; provided, however, that any Obligor shall cease to be a Designated Obligor upon three (3) Business Days' notice by the Agent to the Seller stating that for bona fide credit related reasons such Obligor shall no longer constitute a Designated Obligor. "Diluted Receivable" means that portion (and only that portion) of any Receivable which is reduced or canceled as a result of (i) any defective, rejected or returned merchandise or services or any failure by the applicable Originator to deliver any merchandise or provide any services or otherwise to perform under the underlying Contract or invoice, (ii) any change in the terms of or cancellation of, a Contract or invoice or any other adjustment by such Originator which reduces the amount payable by the Obligor on the related Receivable (except any such change or cancellation resulting from or relating to the financial inability to pay or insolvency of the Obligor of such Receivable) or (iii) any set-off by an Obligor in respect of any claim by such Obligor as to amounts owed by it on the related Receivable; provided, that Diluted Receivables are calculated assuming that all chargebacks are resolved in the Obligor's favor and do not include contractual adjustments to the amount payable by an Obligor that are eliminated from the Receivables balance sold to the Seller through a reduction in the purchase price for the related Receivable. "Dilution Adjustment Factor" means on any date (i) during the period prior to the occurrence of a Special Event, 37.5%, and (ii) on and after the occurrence of a Special Event, 100%. "Dilution Horizon Ratio" means, on any date, the fraction (i) the numerator of which is the aggregate cumulative credit sales for each of FMCW and the Applicable Divisions of FMC during the two (2) calendar months most recently ended on or before such date, and (ii) the denominator of which is the Outstanding Balance of all Eligible Receivables originated by the Originators as of such date; provided, that for purposes of such calculation, the amount of credit sales for each calendar month which starts prior to the date hereof shall be as agreed to by the Agent and the Seller and set forth in the Investor Report delivered in connection with the initial purchase under this Agreement. "Dilution Ratio" means, for any calendar month, the fraction (i) the numerator of which is the aggregate Outstanding Balance of the portion of all Receivables that became Diluted Receivables during such calendar month and (ii) the denominator of which is the aggregate credit sales of the Originators during the second calendar month preceding the calendar month for which such calculation is being made; provided, that the Dilution Ratio with respect to any 6 calendar month prior to the date hereof shall be as agreed to by the Agent and the Seller and set forth in the Investor Report delivered in connection with the initial purchase under this Agreement. "Dilution Reserve" means for any Receivable Interest on any date, an amount equal to: C x (DRP x DAF) where: C = The Capital of such Receivable Interest at the close of business of the Originators on such date. DRP = The Dilution Reserve Percentage at the close of business of the Originators on the last day of the calendar month most recently ended. DAF = The Dilution Adjustment Factor on such date. "Dilution Reserve Percentage" means, for any Receivable Interest on any date, the product of (i) the highest Dilution Ratio during the twelve (12) calendar month period most recently ended, (ii) the Stress Factor on such date, and (iii) the Dilution Horizon Ratio on such date. "Dynamic Loss Percentage" means, for any Receivable Interest on any date, the product of (i) the Loss Ratio on such date, and (ii) three (3). "Eligible Assignee" means CNAI, any of its Affiliates, any Person managed by Citibank, N.A., CNAI or any of their Affiliates, or any financial or other institution acceptable to the Agent. "Eligible Receivable" means, at any time, a Receivable: (i) which constitutes a Transferred Receivable which was generated in the ordinary course of the applicable Originator's business and which, unless such Receivable constitutes an Inventory Protection Receivable, arises from the sale of goods or services owned by the related Originator; (ii) the Obligor of which is a United States resident, is not an Affiliate of any of the parties hereto; (iii) the Obligor of which, at the time of the creation of an interest therein under this Agreement, is a Designated Obligor and is not the Obligor of any Defaulted Receivables which in the aggregate constitute ten percent (10%) or more of the aggregate Outstanding Balance of all Receivables of such Obligor; 7 (iv) which at the time of the creation of an interest therein under this Agreement is not a Defaulted Receivable; (v) which, according to the Contract related thereto, is required to be paid in full within 240 days of the original billing date therefor; (vi) which is an obligation representing all or part of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended, and the nature of which is such that its purchase with the proceeds of notes would constitute a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended; (vii) which if such Receivable constitutes an Inventory Protection Receivable is either an "account" or a "general intangible" within the meaning of Section 9-106 of the UCC of the applicable jurisdictions governing the perfection of the interest created by a Receivable Interest and which if such Receivable does not constitute an Inventory Protection Receivable is an "account" within the meaning of Section 9-106 of the UCC of the applicable jurisdictions governing the perfection of the interest created by the Receivable Interest; (viii) which is denominated and payable only in United States dollars in the United States; (ix) which arises under a Contract which has been duly authorized and that together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor of such Receivable and is not subject to any dispute, offset, counterclaim or defense whatsoever (except the potential discharge in bankruptcy of such Obligor) and is not subject to any Adverse Claim; (x) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to usury, consumer protection, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no party to the Contract related thereto is in violation of any such law, rule or regulation in any material respect; (xi) which arises under a Contract which (A) does not require the Obligor under such Contract to consent to the transfer, sale or assignment of the rights and duties of the applicable Originator under such Contract and (B) does not contain a confidentiality provision that purports to restrict the ability of the Seller, the Agent, the Investors or the Banks to exercise their rights under any Program Document, including, without limitation, their right to review the Contract; (xii) the original term of which has not been extended and the Outstanding Balance of which has not been adjusted, except as expressly permitted by Section 6.02(c); 8 (xiii) which has been fully earned by performance on the part of the applicable Originator; (xiv) the sale of which in accordance with the Program Documents does not contravene of conflict with any law, rule or regulation; and (xv) which satisfies all applicable requirements of the Credit and Collection Policy. "Eligible SPE" shall mean each receivable investment company, partnership, trust, limited liability company or similar entity which in the ordinary course of its business issues commercial paper notes to fund its acquisition and maintenance of assets or to make advances to borrowers and which is either managed by CNAI or an Affiliate of CNAI. "E-Mail Report" shall have the meaning assigned to such term in Section 6.02(g). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Rate" means, for any Settlement Period, an interest rate per annum equal to the rate per annum at which deposits in U.S. dollars are offered by the principal office of Citibank, N.A. in London, England to prime banks in the London interbank market at 11:00 A.M. (London Time) two (2) Business Days before the first day of such Settlement Period in an amount substantially equal to the Capital associated with such Settlement Period on such first day and for a period equal to such Settlement Period. "Eurodollar Rate Reserve Percentage" of any Investor or Bank for any Settlement Period in respect of which Yield is computed by reference to the Eurodollar Rate means the reserve percentage applicable two (2) Business Days before the first day of such Settlement Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) (or if more than one such percentage shall be applicable, the daily average of such percentages for those days in such Settlement Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Investor or Bank with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurocurrency Liabilities is determined) having a term equal to such Settlement Period. "Event of Termination" has the meaning specified in Section 7.01. "Facility Termination Date" means the earliest of (a) November 20, 2002, (b) the date determined pursuant to Section 7.01, (c) the Commitment Termination Date, or (d) the date the Purchase Limit reduces to zero pursuant to Section 2.01(b). 9 "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three (3) Federal funds brokers of recognized standing selected by it. "Fee Letter" means the letter agreement dated as of the date hereof between the Seller and the Agent, as the same may from time to time be amended, waived, supplemental or otherwise modified. "Fees" shall have the meaning assigned to such term in Section 2.06(b). "First-Tier Agreement" means the Purchase and Contribution Agreement dated as of the date hereof among the Seller and each Originator, as the same may from time to time be amended, waived, supplemented or otherwise modified. "FMC" means FMC Corporation. "FMC Deposit Account" means an account of FMC maintained at a Deposit Bank for the purpose of receiving Collections listed on Schedule III hereto. "FMC Deposit Agreement" means each Deposit Agreement substantially in one of the forms attached hereto as Exhibit A-1 hereto, among a Deposit Bank, FMC and the Agent. "FMCW" means FMC Wyoming Corporation. "FMCW Effective Date" shall mean the first date upon which the conditions set forth in Section 3.01(b) shall have been fully satisfied. "Foreign Receivables" means each Receivable in respect of which the related Obligor is not a United States resident. "Funds Transfer Letter" means a letter in substantially the form of Exhibit C hereto executed and delivered by the Seller to the Agent, as the same may be amended or restated in accordance with the terms thereof. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such accounting profession, which are applicable to the circumstances as of the date of determination. "Incipient Event of Termination" means an event that but for the giving of notice or the lapse of time, or both, would constitute an Event of Termination. 10 "Investor" means CIESCO and all other owners by assignment or otherwise of a Receivable Interest and, to the extent of the undivided interests so purchased, shall include any participants. "Indemnified Party" shall have the meaning assigned to such term in Section 9.01. "Inventory Protection Receivables" means indebtedness of an Obligor in respect of payments made by FMC to such Obligor in connection with its inventory protection program. "Investor Rate" for any Settlement Period for any Receivable Interest means to the extent CIESCO funds such Receivable Interest for such Settlement Period by issuing promissory notes, the per annum rate equivalent to the weighted average of the per annum rates paid or payable by CIESCO from time to time as interest on or otherwise (by means of interest rate hedges or otherwise) in respect of those promissory notes issued by CIESCO that are allocated, in whole or in part, by the Agent (on behalf of CIESCO) to fund the purchase or maintenance of such Receivable Interest during such Settlement Period as determined by the Agent (on behalf of CIESCO) and reported to the Seller, which rates shall reflect and give effect to the commissions of placement agents and dealers (which currently does not exceed 0.05% per annum of the face amount of such promissory notes) in respect of such commercial paper notes, to the extent such commissions are allocated, in whole or in part, to such promissory notes by the Agent (on behalf of CIESCO; provided, however, that if any component of such rate is a discount rate, in calculating the "Investor Rate" for such Settlement Period the Agent shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum. "Investor Report" means a report in substantially the form of Schedule I hereto. "Liquidation Day" means, for any Receivable Interest, (i) each day during a Settlement Period for such Receivable Interest on which the conditions set forth in Section 3.02 are not satisfied, and (ii) each day which occurs on or after the Termination Date for such Receivable Interest. "Liquidation Fee" means, for any Settlement Period during which a Liquidation Day occurs, the amount, if any, by which (i) the additional Yield (calculated without taking into account any Liquidation Fee or any shortened duration of such Settlement Period which would have accrued during such Settlement Period) on the reductions of Capital of the Receivable Interest relating to such Settlement Period had such reductions remained as Capital, exceeds (ii) the income, if any, received by the Investors' investing the proceeds of such reductions of Capital. "Liquidity Fee" shall have the meaning assigned to such term in the Fee Letter. "Lock-Box" means a post office box maintained by a Deposit Bank and listed on Schedule III hereto. "Lock-Box Notice" means a notice, in substantially the form of Annex A to Deposit Agreements from the Agent to any Deposit Bank. 11 "Loss Horizon Ratio" means, on any date, the fraction (i) the numerator of which is the aggregate cumulative credit sales for each of FMCW and the Applicable Divisions of FMC during the six (6) calendar months most recently ended on or before such date, and (ii) the denominator of which is the Outstanding Balance of all Eligible Receivables originated by the Originators as of such date; provided, that for purposes of such calculation, the amount of credit sales for each calendar month which starts prior to the date hereof shall be as agreed to by the Agent and the Seller and set forth in the Investor Report delivered in connection with the initial purchase under this Agreement. "Loss Percentage" means, for any Receivable Interest on any date, (a) during the period prior to the occurrence of a Special Event, the greatest of (i) sixteen and one-half percent (16.5%), (ii) three (3) times the Normal Concentration Limit, and (iii) the Dynamic Loss Percentage, and (b) on and after the occurrence of a Special Event, the greatest of (i) 22%, (ii) four (4) times the Normal Concentration Limit, and (iii) the S&P Dynamic Loss Percentage. "Loss-to-Liquidation Ratio" means the ratio (expressed as a percentage) computed as of the last day of each calendar month by dividing (i) the aggregate Outstanding Balance of all Pool Receivables written off by the Seller, any Originator or the Servicer or which should have been so written off in accordance with the Credit and Collection Policy, during such calendar month period by (ii) the aggregate amount of Collections of Pool Receivables actually received during such calendar month. "Loss Ratio" means, in respect of any Receivable Interest on any date, the highest average Default Ratio for any period of three (3) consecutive calendar months ending during the preceding twelve (12) calendar months. "Loss Reserve" means, for any Receivable Interest on any date, an amount equal to LP x (C + YFR) where: YFR = the Yield/Fee Reserve at the time of computation. LP = the Loss Percentage for such Receivable Interest on such date. C = the Capital of such Receivable Interest at the close of business of the Servicer on such date. "Material Adverse Effect" means a material adverse effect on (i) the ability of the Seller, any Originator or the Servicer to fully perform its obligations under this Agreement or any other Program Document in a timely manner, (ii) the assets, operations, business or financial condition of the Seller or any Originator, (iii) the validity or enforceability of this Agreement or any other Program Document or the validity, enforceability or collectibility of a significant portion of the Pool Receivables, or (iv) any Investor's or any Bank's right, title or interest in a significant portion of the Pool Receivables or the Related Security with respect thereto. 12 "Moody's" means Moody's Investors Service, Inc., together with its successors. "Net Receivables Pool Balance" means at any time the Outstanding Balance of Eligible Receivables then in the Receivables Pool reduced (without duplication) by the sum of (i) the Outstanding Balance of such Eligible Receivables that are then Defaulted Receivables, (ii) the aggregate amount by which the Outstanding Balance of such Eligible Receivables (other than Defaulted Receivables) of each Obligor then in the Receivables Pool exceeds the product of (A) the Concentration Limit for such Obligor, and (B) the Capital of the Receivables Interests, (iii) the aggregate amount by which the Outstanding Balance of such Eligible Receivables (other than Defaulted Receivables) then in the Receivables Pool, the Obligors of which are a government or governmental subdivision or agency, exceeds (x) for the period prior to the occurrence of a Special Event, seven and one-half percent (7.5%) of the Outstanding Balance of such Eligible Receivables (other than Defaulted Receivables) in the Receivables Pool, and (y) for the period from and including the first day upon which a Special Event shall have occurred, zero (0), (iv) the aggregate amount by which the Outstanding Balance of such Eligible Receivables (other than Defaulted Receivables) then in the Receivables Pool which, in accordance with the related Contracts, are required to be paid in full within 91 to 150 days of the original billing date therefor, exceeds twenty-five percent (25%) of the Outstanding Balance of such Eligible Receivables (other than Defaulted Receivables) in the Receivables Pool, (v) the aggregate amount by which the Outstanding Balance of such Eligible Receivables (other than Defaulted Receivables) then in the Receivables Pool which, in accordance with the related Contract, are required to be paid in full within 151 to 240 days of the original billing date; exceeds twenty percent (20%) of the Outstanding Balance of such Eligible Receivables (other than Defaulted Receivables) in the Receivables Pool, (vi) the aggregate amount by which the Outstanding Balance of such Eligible Receivables (other than the Defaulted Receivables) then in the Receivables Pool which constitute Unbilled Jetway Receivables, exceeds (x) for the period prior to the occurrence of a Special Event, three percent (3%) of the Outstanding Balance of such Eligible Receivables (other than Defaulted Receivables) in the Receivables Pool, and (y) for the period from and including the first day upon which a Special Event shall have occurred, zero (0), and (vii) the aggregate amount of unapplied Collections in respect of Eligible Receivables. "Obligor" means a Person obligated to make payments pursuant to a Contract. "Originator" means each of FMC and FMCW, together with their respective permitted successors and assigns. "Outstanding Balance" of any Receivable at any time means the then outstanding principal balance thereof, excluding all the payment charges, delinquent charges and extension or collection fees. For the avoidance of doubt the Outstanding Balance of the Unbilled Jetway Receivables shall not exceed the principal balance thereof booked by FMC after the completion of established portions of the related project. "Percentage" of any Bank means, (a) with respect to Citibank, N.A., the percentage set forth on the signature page to this Agreement, as reduced by any Assignment and Acceptance entered into with an Eligible Assignee, or (b) with respect to a Bank that has entered into an Assignment and Acceptance, the percentage set forth therein as such Bank's Percentage, 13 as reduced by an Assignment and Acceptance entered into between such Bank and an Eligible Assignee. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company, or other entity, or a government or any political subdivision or agency thereof. "Pool Receivable" means a Transferred Receivable in the Receivables Pool. "Program Documents" means this Agreement, the First-Tier Agreement, the Fee Letter, the Asset Purchase Agreement, the Undertaking and the agreements and documents entered into in connection herewith and therewith. "Program Fee" shall have the meaning assigned to such term in the Fee Letter. "Program Termination Date" means the later to occur of (i) the Facility Termination Date, and (ii) the date on which no Capital of or Yield on any Receivable Interest shall be outstanding and all other amounts owed to the Investors, the Banks and the Agent under the Program Documents have been paid in full. "Purchase Limit" means $200,000,000, as such amount may be reduced pursuant to Section 2.01. References to the unused portion of the Purchase Limit shall mean, at any time, the Purchase Limit, as then reduced pursuant to Section 2.01(b), minus the aggregate outstanding Capital of Receivable Interests under this Agreement at such time. "Receivable" means the indebtedness of any Obligor under a Contract, and includes the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto. "Receivable Interest" means, at any time, an undivided percentage ownership interest in (i) all then outstanding Pool Receivables arising prior to the time of the most recent computation or recomputation of such undivided percentage interest pursuant to Section 2.03, (ii) all Related Security with respect to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables. Such undivided percentage interest shall be computed as C + YFR + LR + DR ----------------- NRPB where: C = the Capital of such Receivable Interest at the time of computation. YFR = the Yield/Fee Reserve of such Receivable Interest at the time of computation. LR = the Loss Reserve of such Receivable Interest at the time of computation. 14 DR = the Dilution Reserve of such Receivable Interest at the time of computation. NRPB = the Net Receivables Pool Balance at the time of computation. Each Receivable Interest shall be determined from time to time pursuant to the provisions of Section 2.03. "Receivable Turnover Days" means at any time, the average, for the immediately prior three (3) months, of the Outstanding Balance of Eligible Receivables at the end of each such month, divided by Collections received during such month, multiplied by thirty (30) days. "Receivables Pool" means at any time the aggregation of each then outstanding Transferred Receivable in respect of which the Obligor is a Designated Obligor at such time or was a Designated Obligor on the date of the initial creation of an interest in such Receivable under this Agreement. "Related Security" means with respect to any Receivable: (i) all of the Seller's interest in any merchandise (including returned merchandise) relating to any sale giving rise to such Receivable; (ii) all other security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements signed by an Obligor describing any collateral securing such Receivable; (iii) all guaranties, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise; (iv) the Contract and all other books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) relating to such Receivable and the related Obligor; (v) all of the Seller's and the applicable Originator's rights, remedies and interest in, to and under the First-Tier Agreement, the Deposit Agreement and the Contracts, including without limitation, the right to receive all payments thereunder and all claims for damages arising out of a breach or default thereunder; (vi) the Lock-Boxes and the Deposit Accounts and all other accounts to which the proceeds of the foregoing are remitted, and all cash and investments therein; and (vii) the proceeds (as defined in the UCC) of the foregoing and of such Receivable. 15 "Required Tier-1 Ratings" means long-term senior unsecured debt ratings from both S&P and Moody's of at least "BBB-" and "Baa3", respectively. "Required Tier-2 Ratings" means long-term senior unsecured debt ratings which are less than the Required Tier-1 Ratings but which are at least "BB+" and "Ba1" from both S&P and Moody's, respectively. "Schedule IV Claim" means the specific claim specified on Schedule IV hereto, as such claim exists on the date hereof. "S&P" shall mean Standard & Poor's Ratings Group, together with its successors. "S&P Default Ratio" means, on any date, the fraction (expressed as a percentage) (A) the numerator of which is the aggregate Outstanding Balance of all Receivables as to which any payment, or part thereof, remains unpaid for more than ninety (90) days but less than one hundred twenty (120) days from the original due date for such payment plus Receivables written off prior to 90 days, as of the end of the most recent calendar month, and (B) the denominator of which is the Originators' credit sales during the sixth calendar month immediately preceding the calendar month for which this calculation is being made; provided, that the S&P Default Ratio for any date prior to the date hereof and the amount of any credit sales for any calendar month which starts prior to the date hereof shall be as agreed to by the Agent and the Seller and set forth in the Investor Report delivered in connection with the initial purchase under this Agreement. "S&P Loss Ratio" means, in respect of any Receivable Interest on any date, the highest average S&P Default Ratio for any period of three (3) consecutive calendar months ending during the preceding twelve (12) calendar months. "S&P Dynamic Loss Percentage" means, for any Receivable Interest on any date, the product of (i)the S&P Loss Ratio on such date, (ii) 2.0 , and (iii) the Loss Horizon Ratio on such date. "SEC" means the Securities and Exchange Commission. "Seller" shall have the meaning assigned to such term in the introduction of this Agreement. "Seller Deposit Account" means an account of the Seller maintained at a Deposit Bank for the purpose of receiving Collections after a Special Event. "Seller Deposit Agreement" means each Deposit Agreement substantially in one of the forms attached hereto as Exhibit A-2, among a Deposit Bank, FMC, the Seller and the Agent. "Servicer" means at any time the Person then authorized pursuant to Section 6.01 to service, administer and collect Pool Receivables. "Servicer Fee" has the meaning specified in Section 2.06(a). 16 "Settlement Date" means the second (2nd) Business Day after the end of each Settlement Period during the term of this Agreement; provided, that with respect to any Settlement Period for which Yield is computed by reference to the Assignee Rate, the Settlement Date shall be the last day of the Settlement Period. "Settlement Period" means: (a) in the case of any Settlement Period in respect of which Yield is computed by reference to the Investor Rate, each successive period commencing on the first day of each calendar month during the term of this Agreement and ending on the last day of such calendar month during the term of this Agreement; provided, however, that in the case of any Settlement Period for any Receivable Interest which commences before the Termination Date for such Receivable Interest and would otherwise end on a date occurring after such Termination Date, such Settlement Period shall end on such Termination Date and the duration of each Settlement Period which commences on or after the Termination Date for such Receivable Interest may be any period (including, without limitation, a period of one day) as shall be selected from time to time by the Agent; (b) in the case of any Settlement Period in respect of which Yield is computed by reference to the Assignee Rate, each successive period commencing on the first day of each calendar month during the term of this Agreement and ending on the last day of such calendar month during the term of this Agreement; provided, however, that any Settlement Period which is other than the monthly Settlement Period shall be of such duration as shall be selected by the Agent; and (c) in the case of any Settlement Period in respect of which Yield is computed by reference to the Alternate Base Rate, such Settlement Period shall be of such duration as shall be selected by the Agent. "Special Event" means FMC's senior unsecured long-term debt rating is less than the Required Tier-1 Ratings. "Specified Percentage" means (i) during the period prior to the occurrence of a Special Event, one hundred percent (100%); provided, however, that, prior to the occurrence of a Special Event, during the months of April and May the Specified Percentage shall be eighty percent (80%), and (ii) on each day on and after the occurrence of a Special Event, eighty-five percent (85%); provided, however, that, after the occurrence of a Special Event, during the months of April and May the Special Percentage shall be seventy-two percent (72%). "Stress Factor" means on any date (i) during the period prior to the occurrence of a Special Event, one (1), and (ii) on and after the occurrence of a Special Event, two (2). "Tangible Net Worth" means at any time with respect to the Seller the excess of (i) the aggregated Outstanding Balance of all Pool Receivables plus cash and cash equivalents of the Seller, minus (ii) the sum of (a) the Outstanding Balance of such Receivables which have become Defaulted Receivables, plus (b) Capital, the Yield Reserve, Servicer Fee Reserve at such time, the Loss Reserve at such time, plus (c) all other amounts owed by the Seller under the Program Documents. 17 "Taxes" shall have the meaning assigned to such term in Section 10.04(c). "Termination Date" for any Receivable Interest means (i) in the case of a Receivable Interest owned by an Investor, the earlier of (a) the Business Day which the Seller so designates by notice to the Agent at least three (3) Business Days in advance for such Receivable Interest, and (b) the Facility Termination Date, and (ii) in the case of a Receivable Interest owned by a Bank, the earlier of (a) the Business Day which the Seller so designates by notice to the Agent at least three (3) Business Days in advance for such Receivable Interest, and (b) the Commitment Termination Date. "Transferred Receivables" shall have the meaning assigned to such term in the First-Tier Agreement. "True Sale" shall mean, with respect to any asset or property, the sale or transfer of an ownership interest in such asset or property (not the granting of a security interest therein), for purposes of the application of Section 541 of the Federal Bankruptcy Code, which sale or transfer was not made with the intent to hinder, delay or defraud any present or future creditors and is not voidable or subject to avoidance under the Federal Bankruptcy Code. "UCC" means the Uniform Commercial Code as from time to time in effect in the applicable jurisdiction. "Unbilled Jetway Receivable" means a Receivable booked (but not billed to the applicable Obligor) by FMC in accordance with its customary revenue recognition procedures for its Jetway Systems Division upon the completion of established portions of the related project. "Undertaking" means the Undertaking Agreement dated as of the date hereof from FMC to the Agent on behalf of itself, the Investor and the Banks, as the same may from time to time be amended, waived, supplemented or otherwise modified. "Year 2000 Problem" means in respect of any Person, the risk that the computer applications used by such Person, or the suppliers and vendors of such Person may be unable to recognize and perform data sensitive functions involving dates prior to any date after December 31, 1999. "Yield" means: (i) for each Receivable Interest for any Settlement Period to the extent CIESCO will be funding such Receivable Interest during such Settlement Period through the issuance of promissory notes, IR x C x ED + LF ----------- 360 (ii) for each Receivable Interest for any Settlement Period to the extent (x) the Investors will not be funding such Receivable Interest during such Settlement Period 18 through the issuance of commercial paper or (y) the Banks will be funding such Receivable Interest, AR x C x ED + LF ----------- 360 where: AR = the Assignee Rate for such Receivable Interest for such Settlement Period C = the Capital of such Receivable Interest during such Settlement Period IR = the Investor Rate for such Receivable Interest for such Settlement Period ED = the actual number of days elapsed during such Settlement Period LF = the Liquidation Fee, if any, for such Receivable Interest for such Settlement Period ; provided, that no provision of this Agreement shall require the payment or permit the collection of Yield in excess of the maximum permitted by applicable law; provided, further that Yield for any Receivable Interest shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason. "Yield/Fee Reserve" means, for any Receivable Interest on any date, an amount equal to (C x YFRP) + AUYF where: C = the Capital of such Receivable Interest at the close of business of the Servicer on such date. YFRP = the Yield/Fee Reserve Percentage on such date. AUYF = accrued and unpaid Yield, Servicer Fee and fees under the Fee Letter on such date. "Yield/Fee Reserve Percentage" means, for any Receivable Interest on any date, a percentage equal to: [(AER x 1.5) + AM + PF + SF] x RTD ---------------------------------- 360 19 where AER = the rate equal to the fraction expressed as a percentage the numerator of which is the one-month Eurodollar Rate in effect on such date and the denominator of which is one (1) minus the Eurodollar Rate Reserve Percentage. AM = the Applicable Margin in effect on such date. PF = the sum of the percentages per annum used in the calculation of the Program Fee (as defined in the Fee Letter) in effect on such date. SF = the percentage per annum used in the calculation of the Servicer Fee in effect on such date. RTD = the highest monthly Receivable Turnover Days during the most recently ended 12 months, plus 10 days. SECTION 1.02. Rules of Construction; Other Terms. ---------------------------------- For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: Singular words shall connote the plural as well as the singular, and vice versa (except as indicated), as may be appropriate. The words "herein," "hereof" and "hereunder" and other words of similar import used herein refer to this Agreement as a whole and not to any particular appendix, article, schedule, section, paragraph, clause, exhibit or other subdivision. The headings, subheadings and table of contents set forth in this Agreement are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect the meaning, construction or effect of any provision hereof. References in this Agreement to "including" shall mean including without limiting the generality of any description preceding such term, and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. Each of the parties to this Agreement and its counsel have reviewed and revised, or requested revisions to, this Agreement, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in the construction and interpretation of this Agreement. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. 20 ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES SECTION 2.01. Purchase Facility. ----------------- (a) On the terms and conditions hereinafter set forth, CIESCO may, in its sole discretion, and the Banks shall, ratably in accordance with their respective Bank Commitments, purchase Receivable Interests from the Seller from time to time during the period from the date hereof to the Facility Termination Date (in the case of CIESCO) and to the Commitment Termination Date (in the case of the Banks). Under no circumstances shall CIESCO make any such purchase, or the Banks be obligated to make any such purchase, if after giving effect to such purchase the aggregate outstanding Capital of Receivable Interests would exceed the Purchase Limit. (b) The Seller may, upon at least five (5) Business Days' written notice to the Agent, terminate the facility provided for in this Agreement in whole or, from time to time, reduce in part the unused portion of the Purchase Limit; provided that each partial reduction shall be in the amount of at least $1,000,000 or an integral multiple thereof. (c) The Agent, on behalf of the Investors which own Receivable Interests, may have the Collections attributable to such Receivable Interests automatically reinvested pursuant to Section 2.04 in additional undivided percentage interests in the Pool Receivables by making an appropriate readjustment of such Receivable Interests. The Agent, on behalf of the Banks which own Receivable Interests, shall have the Collections attributable to such Receivable Interests automatically reinvested pursuant to Section 2.04 in additional undivided percentage interests in the Pool Receivables by making an appropriate readjustment of such Receivable Interests. SECTION 2.02. Making Purchases. ---------------- (a) Each purchase by CIESCO or the Banks shall be made on at least two (2) Business Days' prior written notice from the Seller to the Agent. Each such notice of a purchase shall specify (i) the amount requested to be paid to the Seller (such amount, which shall not be less than $1,000,000, being referred to herein as the initial "Capital" of the Receivable Interest then being purchased), and (ii) the date of such purchase (which shall be a Business Day). The Agent shall promptly thereafter notify the Seller whether CIESCO has determined to make a purchase. If CIESCO has determined not to make a proposed purchase, the Agent shall promptly send notice of the proposed purchase to all of the Banks concurrently by telecopier or cable specifying the date of such purchase, each Bank's Percentage multiplied by the aggregate amount of Capital of Receivable Interest being purchased, and whether the Yield for such Receivable Interest is calculated based on the Eurodollar Rate (which may be selected only if such notice is given at least two (2) Business Days prior to the purchase date) or the Alternate Base Rate. (b) On the date of each such purchase of a Receivable Interest, CIESCO or the Banks, as the case may be, shall, upon satisfaction of the applicable conditions set forth in 21 Article III, make available to the Seller in same day funds an amount equal to the initial Capital of such Receivable Interest, at the account set forth in the Funds Transfer Letter. (c) Effective on the date of each purchase pursuant to this Section 2.02 and each reinvestment pursuant to Section 2.04, the Seller hereby sells and assigns to the Agent, for the benefit of the parties making such purchase, an undivided percentage ownership interest, to the extent of the Receivable Interest then being purchased, in each Pool Receivable then existing and in the Related Security and Collections with respect thereto. (d) Notwithstanding the foregoing, a Bank shall not be obligated to make purchases under this Section 2.02 at any time in an amount which would exceed such Bank's Bank Commitment less the outstanding and unpaid amount of any purchases made by such Bank under the Asset Purchase Agreement. Each Bank's obligation shall be several, such that the failure of any Bank to make available to the Seller any funds in connection with any purchase shall not relieve any other Bank of its obligation, if any, hereunder to make funds available on the date of such purchase, but no Bank shall be responsible for the failure of any other Bank to make funds available in connection with any purchase. SECTION 2.03. Receivable Interest Computation. ------------------------------- Each Receivable Interest shall be initially computed on its date of purchase. Thereafter until the Termination Date for such Receivable Interest, such Receivable Interest shall be automatically recomputed (or deemed to be recomputed) on each day other than a Liquidation Day. Any Receivable Interest, as computed (or deemed recomputed) as of the day immediately preceding the Termination Date for such Receivable Interest, shall thereafter remain constant. Such Receivable Interest shall become zero when Capital thereof and Yield thereon shall have been paid in full, and all other amounts owed by the Seller, the Originators and the Servicer under the Program Documents to the Investors, the Banks or the Agent are paid and the Servicer shall have received the accrued Servicer Fee thereon. SECTION 2.04. Settlement Procedures. --------------------- (a) Collection of the Pool Receivables shall be administered by the Servicer, in accordance with the terms of Article VI of this Agreement. FMCW and FMC (if FMC is not the Servicer) each shall provide to the Servicer on a timely basis all information needed for such administration, including notice of the occurrence of any Liquidation Day of which FMCW or FMC has knowledge and all information relating to the Receivables originated by such Originator which is necessary for the computations of each Receivable Interest. (b) The Servicer shall, on each day on which Collections of Pool Receivables are received by it with respect to any Receivable Interest: (i) set aside and hold in trust (and, at the request of the Agent, segregate) for the Investors or the Banks that hold such Receivable Interest, out of the percentage of such Collections represented by such Receivable Interest, an amount equal to the Yield and Servicer Fee accrued through such day for such Receivable Interest and not previously set aside; 22 (ii) if such day is not a Liquidation Day for such Receivable Interest, reinvest with the Seller on behalf of the Investors or the Banks that hold such Receivable Interest the percentage of such Collections represented by such Receivable Interest, to the extent representing a return of Capital, by recomputation of such Receivable Interest pursuant to Section 2.03 (each such transaction relating to a Receivable Interest, a "reinvestment"); (iii) if such day is a Liquidation Day for such Receivable Interest, set aside and hold in trust (and, at the request of the Agent, segregate) for the Investors or the Banks that hold such Receivable Interest the entire remainder of such percentage of Collections; provided, that if amounts are set aside and held in trust on any Liquidation Day occurring prior to the Termination Date, and thereafter during such Settlement Period the conditions set forth in Section 3.02 are satisfied or waived by the Agent, such previously set aside amounts shall, to the extent representing a return of Capital, be reinvested in accordance with the preceding subsection (ii) on the day of such subsequent satisfaction or waiver of conditions; and (iv) during such times as amounts are required to be reinvested in accordance with the foregoing subsection (ii) or the proviso to subsection (iii), release to the Seller for its own account any Collections in excess of such amounts or in excess of the amounts that are required to be set aside pursuant to subsection (i) above. (c) The Servicer shall deposit into the Agent's Account, on each Settlement Date, Collections held for the Investors or the Banks pursuant to Section 2.04(b) that relate to the Receivable Interests. (d) Upon receipt of funds deposited into the Agent's Account, the Agent shall distribute them as follows: (i) if such distribution occurs on a day that is not a Liquidation Day, first to the Investors or the Banks that hold the relevant Receivable Interest in payment in full of all accrued Yield and then to the Servicer in payment in full of all accrued Servicer Fee. (ii) if such distribution occurs on a Liquidation Day, first to the Investors or the Banks that hold the relevant Receivable Interest in payment in full of all accrued Yield, second to such Investors or Banks in reduction to zero of all Capital, third to such Investors, Banks or the Agent in payment of any other amounts owed by the Seller hereunder, and fourth to the Servicer in payment in full of all accrued Servicer Fee. After the Program Termination Date, all additional Collections with respect to such Receivable Interest shall be paid to the Seller for its own account. SECTION 2.05. General Settlement Procedures. ----------------------------- (a) If on any day 23 (i) the Outstanding Balance of a Pool Receivable is reduced, adjusted or cancelled as a result of any billing adjustment, renegotiation, application of credit balances, rebates, discounts, charge-backs, exchanges, returns or other similar credits, allowances, net-outs, set-offs, offsets, defenses (including any failure by any Originator to deliver any goods provide any service or otherwise perform its obligations under any Contract) or other dilution factors; or (ii) the Outstanding Balance of a Pool Receivable is reduced or cancelled as a result of a set-off or offset in respect of any claim by the Obligor thereof against any Originator, the Seller or any of their respective Affiliates or any other Person (whether such claim arises out of the same or a related transaction or an unrelated transaction); or (iii) any of the representations or warranties in clauses (i), (j), or (q) of Section 4.01 is at any time not true with respect to any Pool Receivable; or (iv) any amount received by the Agent, any Investor, any Bank or Servicer under this Agreement is rescinded or must otherwise be returned by the Agent, the Investor, any Bank or the Servicer for any reason; then the Seller shall be deemed to have received on such day, and shall be obligated to pay on such day, a Collection of such Pool Receivable or such other amount equal to (A) the amount of such reduction or cancellation, in the case of an event of the type described in clause (i) or (ii) above, (B) the full amount of such Pool Receivable, in the case of an event of the type described in clause (iii) above, or (C) such amount so rescinded or returned, in the case of an event of the type described in clause (iv) above, all such amounts to be distributed in accordance with the priorities set forth in Section 2.04. (b) For the purposes of Section 2.04: (i) except as provided in Section 2.05(a) or as otherwise required by applicable law or the relevant Contract, all Collections received from an Obligor of any Receivables shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates its payment for, or the Contract requires, application to specific Receivables; and (ii) if and to the extent the Agent, the Investor or the Banks shall be required for any reason to pay over to an Obligor any amount received on its behalf hereunder, such amount shall be deemed not to have been so received but rather to have been retained by the Seller and, accordingly, the Agent, the Investors or the Banks, as the case may be, shall have a claim against the Seller for such amount, payable when and to the extent that any distribution from or on behalf of such Obligor is made in respect thereof. 24 SECTION 2.06. Fees. ---- (a) Each Investor and Bank shall pay to the Servicer a fee (the "Servicer Fee") of 0.5% per annum on the average daily Capital of each Receivable Interest owned by such Investor or Bank, from the date of purchase of such Receivable Interest until the later of the Termination Date for such Receivable Interest or the date on which such Capital is reduced to zero, payable on each Settlement Date. Upon three (3) Business Days' notice to the Agent, the Servicer (if not FMC or its designee or an Affiliate of FMC) may elect to be paid, as such fee, another percentage per annum on the average daily Capital of such Receivable Interest, but in no event in excess for all Receivable Interests relating to a single Receivables Pool of 110% of the reasonable costs and expenses of the Servicer in administering and collecting the Receivables in such Receivables Pool. The Servicer Fee shall be payable only from Collections pursuant to, and subject to the priority of payment set forth in, Section 2.04. (b) The Seller shall pay to the Agent certain fees (collectively, the "Fees") in the amounts and on the dates set forth in the Fee Letter. (c) The Seller shall also pay to the Agent for the account of CIESCO fees for certain costs and expenses of any issuing and paying agent related to the issuance of promissory notes, auditing of the books and rating of the promissory notes, in the amounts and on the dates set forth in the Fee Letter. SECTION 2.07. Payments and Computations, Etc. ------------------------------- (a) All amounts to be paid or deposited by the Seller or the Servicer hereunder shall be paid or deposited no later than 11:00 A.M. (New York City time) on the day when due in same day funds to the Agent's Account. (b) The Seller shall, to the extent permitted by law, pay interest on any amount not paid or deposited by the Seller (whether as Servicer or otherwise) when due hereunder, at an interest rate per annum equal to two percent (2%) per annum above the Alternate Base Rate, payable on demand. (c) All computations of interest under subsection (b) above and all computations of Yield, fees and other amounts hereunder shall be made on the basis of a year of 360 days for the actual number of days elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit. SECTION 2.08. Increased Costs. --------------- (a) If CNAI, any Investor, any Bank, any entity which enters into a commitment to purchase Receivable Interests or interests therein, or any of their respective Affiliates (each an "Affected Person") determines that compliance with any law or regulation or any guideline (whether or not having the force of law) introduced or changed after the date hereof or that compliance with any request from any central bank or other governmental authority (whether or not having the force of law) made after the date hereof, affects or would 25 affect the amount of the capital required or expected to be maintained by such Affected Person and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of or otherwise to maintain the investment in Pool Receivables or interests therein related to this Agreement or to the funding thereof and other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Agent), the Seller shall immediately upon demand pay to the Agent for the account of such Affected Person (as a third-party beneficiary), from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments. A certificate as to such amounts submitted to the Seller and the Agent by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (b) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements referred to in Section 2.09) in or in the interpretation of any law or regulation after the date hereof, or (ii) compliance with any guideline introduced after the date hereof (whether or not having the force of law) or request from any central bank or other governmental authority made after the date hereof (whether or not having the force of law), there shall be any increase in the cost to any Investor or Bank of agreeing to purchase or purchasing, or maintaining the ownership of Receivable Interests in respect of which Yield is computed by reference to the Eurodollar Rate, then, upon demand by such Investor or Bank (with a copy to the Agent), the Seller shall immediately upon demand pay to the Agent, for the account of such Investor or Bank (as a third-party beneficiary), from time to time as specified by such Investor or Bank, additional amounts sufficient to compensate such Investor or Bank for such increased costs. A certificate as to such amounts submitted to the Seller and the Agent by such Investor or Bank shall be conclusive and binding for all purposes, absent manifest error. (c) If after the date hereof any Affected Person shall be charged any fee, expense or increased cost on account of the adoption of any applicable law, rule or regulation, or any change therein, or any change after the date hereof in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency made after the date hereof: (i) which subjects any Affected Person to any charge or withholding on or with respect to this Agreement or an Affected Person's obligations with respect to the Receivable Interest, or changes the basis of taxation of payments to any Affected Person or any amounts payable under this Agreement, except for changes in the rate of tax on the overall net income of an Affected Person and franchise taxes imposed on an Affected Person by any taxing authority in any jurisdiction which asserts jurisdiction to impose such taxes on the basis of the contacts which such Affected Person maintains with such jurisdiction other than the contacts arising from the execution, performance and delivery of, or receipt of payments under, this Agreement or any other Program Document or (ii) which imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of an Affected Person or credit extended by an Affected Person with respect to the Receivable Interest or (iii) which imposes any other condition the result of which is to increase the cost to an Affected Person of performing its obligations under this Agreement, or 26 to reduce the amount of any sum received or receivable by an Affected Person under this Agreement or to require any payment calculated by reference to the amount of interests or loans held or interest received by it, then, upon demand by such Affected Person (with a copy to the Agent), the Seller, shall pay to the Agent within ten (10) days after receipt of demand from such Affected Person, for the account of such Affected Person, such amounts charged to such Affected Person (without duplication of amounts payable under Section 2.08(a), 2.08(b) or 2.09). A certificate as to such amounts submitted to the Seller and the Agent by such Affected Person shall be conclusive and binding for all purposes absent manifest error. (d) Each Affected Person agrees that, upon the occurrence of any event giving rise to additional amounts pursuant to clauses (a), (b) or (c) of this Sections 2.08, it will, if requested by the Seller, use reasonable efforts (subject to overall policy considerations of such Affected Person) (i) to file any certificate or document requested by the Seller, or (ii) to designate a different lending office to mitigate or avoid the future consequences of the event or circumstances giving rise to the operation of any such Section; provided, however, that the filing of any such certificate or document or such designation of a different lending office is consistent with legal and regulatory restrictions and would not be disadvantageous to such Affected Person. SECTION 2.09. Additional Yield on Receivable Interests Bearing a -------------------------------------------------- Eurodollar Rate. - --------------- The Seller shall pay to any Investor or Bank, so long as such Investor or Bank shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional Yield on the unpaid Capital of each Receivable Interest of such Investor or Bank during each Settlement Period in respect of which Yield is computed by reference to the Eurodollar Rate, for such Settlement Period, at a rate per annum equal at all times during such Settlement Period to the remainder obtained by subtracting (i) the Eurodollar Rate for such Settlement Period from (ii) the rate obtained by dividing such Eurodollar Rate referred to in clause (i) above by that percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Investor or Bank for such Settlement Period. Such additional Yield shall be determined by such Investor or Bank and notice thereof given to the Seller through the Agent within thirty (30) days after any Yield payment is made with respect to which such additional Yield is requested and shall be paid on the next Settlement Date. A certificate as to such additional Yield submitted to the Seller and the Agent by such Investor or Bank shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.10. Funding Losses. -------------- (a) In the event that any Bank or Investor shall actually incur any loss or expense by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank or Investor to make any purchase or maintain the ownership of any Receivable Interest in respect of which Yield is computed by reference to the Eurodollar Rate as a result of (i) any settlement with respect to such Receivable Interest being made on any day other than the scheduled last day of an applicable Settlement Period with respect thereto, or (ii) any purchase not being made in accordance with a request therefor under Section 2.02, then, upon written notice from the Agent to the Seller, the Seller shall immediately pay to the Agent or for the 27 account of such Bank or Investor, the amount of such loss or expense. Such written notice shall be conclusive and binding for all purposes absent manifest error. (b) Each notice given by the Agent pursuant to subsection (a) of this Section 2.10 shall be irrevocable and binding on the Seller and the Seller shall indemnify the Investors and the Banks against any loss or expense incurred by any Investor or Bank as a result of any failure by the Seller to accept the amount requested to be paid by such Purchaser, including, without limitation, any loss or expense incurred by such Purchaser by reason of the liquidation or reemployment of deposits or other funds acquired or requested by such Investor or Bank to fund such requested amount. ARTICLE III CONDITIONS OF PURCHASES SECTION 3.01. Conditions Precedent to Initial Purchase. ---------------------------------------- (a) The initial purchase of a Receivable Interest originated by FMC under this Agreement is subject to the conditions precedent that the Agent shall have received on or before the date of such purchase the following, each (unless otherwise indicated) dated such date, in form and substance satisfactory to the Agent: (A) A certificate of the Secretary or Assistant Secretary of the Seller and FMC certifying (i) as to its certificate of incorporation and by-laws, (ii) as to the resolutions of its Board of Directors approving this Agreement and the other Program Documents to which it is a party and the transactions contemplated hereby and thereby, (iii) that its representations and warranties set forth in the Program Documents are true and correct, and (iv) the incumbency and specimen signature of each of its officers authorized to execute the Program Documents. (B) Acknowledgment copies or time stamped receipt copies of proper financing statements, duly filed on or before the date of such initial transfer under the UCC of all jurisdictions that the Agent may deem necessary or desirable in order to perfect the ownership interests in the Pool Receivables originated by FMC and the Related Security with respect thereto contemplated by this Agreement and the First-Tier Agreement. (C) Acknowledgment copies or time stamped receipt copies of proper financing statements, if any, necessary to release all security interests and other rights of any Person in the Receivables, Contracts or Related Security previously granted by FMC. (D) Completed requests for information, dated on or before the date of such initial transfer, listing the financing statements referred to in subsection (C) above and all other effective financing statements filed in the jurisdictions referred to in subsection (C) above that name the Seller or FMC as debtor, together with copies of such other financing statements (none of which shall cover any Receivables, Contracts or Related Security). (E) Fully executed copies of the Program Documents which shall each be in full force and effect. 28 (F) An executed copy of each FMC Deposit Agreement and each Seller Deposit Agreement. (G) Favorable opinions of Mayer, Brown & Platt, counsel for the Seller and FMC, as to such matters as the Agent may reasonably request, including without limitation as to the "true sale" nature of transfer of the Receivables contemplated by the First-Tier Agreement. (H) The Agent shall have received a pro-forma Investor Report, which shall evidence compliance with the terms of the Program Documents, after giving credit to the initial transfer of an interest in Receivables under this Agreement. (I) FMC shall have established the FMC Deposit Accounts and Lock-Boxes and the Seller shall have established the Seller Deposit Agreements and Lock-Boxes. (J) The conditions precedent set forth in Section 3.01(a) of the First-Tier Agreement shall have been fully satisfied. (b) The initial purchase of a Receivable Interest originated by FMCW under this Agreement is subject to the conditions precedent that the Agent shall have received on or before the date of such purchase the following, each (unless otherwise indicated) dated such date, in form and substance satisfactory to the Agent: (A) A certificate of the Secretary or Assistant Secretary of FMCW certifying (i) as to its certificate of incorporation and by-laws, (ii) as to the resolutions of its Board of Directors approving the Program Documents to which it is a party and the transactions contemplated hereby and thereby, (iii) that its representations and warranties set forth in the First-Tier Agreement are true and correct, and (iv) the incumbency and specimen signature of each of its officers authorized to execute the Program Documents. (B) Acknowledgment copies or time stamped receipt copies of proper financing statements, duly filed on or before the date of such initial transfer under the UCC of all jurisdictions that the Agent may deem necessary or desirable in order to perfect the ownership interests in the Pool Receivables (including the Pool Receivables originated by FMCW) and the Related Security with respect thereto contemplated by this Agreement and the First-Tier Agreement. (C) Acknowledgment copies or time stamped receipt copies of proper financing statements, if any, necessary to release all security interests and other rights of any Person in the Receivables originated by FMCW or Contracts or Related Security with respect thereto previously granted by FMCW. (D) Completed requests for information, dated on or before the date of such initial transfer, listing the financing statements referred to in subsection (C) above and all other effective financing statements filed in the jurisdictions referred to in subsection (C) above that name FMCW as debtor, together with copies of such other financing statements (none of which shall cover any Receivables, Contracts or Related Security). 29 (E) Favorable opinions of Mayer, Brown & Platt, counsel for the Seller and FMCW, as to such matters as the Agent may reasonably request, including without limitation as to the "true sale" nature of transfer of the Receivables contemplated by the First-Tier Agreement. (F) Such other instruments, certificates and documents as the Agent may have reasonably requested. SECTION 3.02. Conditions Precedent to All Purchases and Reinvestments. ------------------------------------------------------- Each purchase (including the initial purchase) and each reinvestment shall be subject to the further conditions precedent that (a) in the case of each purchase, the Servicer shall have delivered to the Agent at least two (2) Business Days prior to such purchase, in form and substance satisfactory to the Agent, a completed Investor Report containing information covering the most recently ended reporting period for which information is required pursuant to Section 6.02(g) and demonstrating that after giving effect to such purchase no Event of Termination or Incipient Event of Termination under Section 7.01(k) would occur; (b) in the case of each proposed purchase or reinvestment, the Servicer shall have delivered to the Agent on or prior to the date of such reinvestment, in form and substance satisfactory to the Agent, a completed Investor Report containing information covering the most recently ended reporting period for which information is required pursuant to Section 6.02(g); (c) on the date of such proposed purchase or reinvestment the following statements shall be true (and acceptance of the proceeds of such purchase or reinvestment shall be deemed a representation and warranty by the Seller that such statements are then true): (i) the representations and warranties contained in Section 4.01 are correct on and as of the date of such purchase or reinvestment as though made on and as of such date and shall be deemed made on such day, except to the extent such representation and warranty relates solely to an earlier date; and (ii) no event has occurred and is continuing, or would result from such purchase or reinvestment, that constitutes an Event of Termination or an Incipient Event of Termination; (d) no Designated Event shall have occurred; and (e) the Agent shall have received such other approvals, opinions or documents as it may reasonably request; provided, however, that the absence of the occurrence and continuance of an Incipient Event of Termination shall not be a condition precedent to any reinvestment or purchase on any day which does not cause the aggregate Capital after giving effect to such reinvestment or purchase to exceed aggregate Capital as of the opening of business on such day. 30 SECTION 3.03. Conditions Subsequent. --------------------- (a) Each of the Seller and the Servicer agree that upon the occurrence of a Special Event they shall promptly cause all Collections to be remitted from the FMC Deposit Accounts to the Seller Deposit Accounts in accordance with Section 5.01(i). (b) Each of the Seller and the Servicer agree that upon the occurrence of an Event of Termination or a Designated Event they shall promptly and in any event within fifteen (15) days after the occurrence of such event, instruct all Obligors to remit all Collections in respect of all Pool Receivables only to Seller Deposit Accounts and Lock-Boxes and provide to the Agent a certificate of the chief financial officer or Treasurer of FMC stating that such instructions have been duly given. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Seller and the ---------------------------------------------------- Servicer. - -------- Each of the Seller and the Servicer hereby represents and warrants as of the date hereof and as of each date purchase and reinvestment of or in a Receivable Interest as follows: (a) Such party is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its organization, and is duly qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified does not give rise to the reasonable possibility of a Material Adverse Effect. (b) The execution, delivery and performance by it of the Program Documents to which it is a party, (i) are within its corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene (1) its certificate of incorporation, by-laws or other organizational documents, (2) any law, rule or regulation applicable to it, (3) any contractual restriction binding on or affecting or its properties or assets or (4) any order, writ, judgment, award, injunction or decree binding on or affecting it or its properties or assets, and (iv) do not result in or require the creation of any Adverse Claim with respect to any of its assets or properties. This Agreement has been duly executed and delivered by it. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by it of the Program Documents to which it is a party, except for the filing UCC financing statement which are referred to herein. (d) Each of the Program Documents to which it is a party constitutes its legal, valid and binding obligation enforceable against it in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforcement is considered in a proceeding in equity or at law. 31 (e) The opening pro forma balance sheet of the Seller, copies of which have been furnished to the Agent, fairly present the financial condition of the Seller after giving effect to the initial transfer of Receivables under the First-Tier Agreement as the date thereof, all in accordance with GAAP consistently applied, and since such date there has been no material adverse change in the business, operations, property or financial or other condition of the Seller. (f) The balance sheets of each Originator and its consolidated subsidiaries as at December 31, 1998, and the related statements of income and retained earnings of the Servicer and its consolidated subsidiaries for the fiscal year then ended, copies of which have been furnished to the Agent, fairly present the financial condition of each such Originator and its consolidated subsidiaries as at such date and the results of the operations of each such Originator and its consolidated subsidiaries for the period ended on such date, all in accordance with GAAP consistently applied, and since December 31, 1998 there has been no material adverse change in the business, operations, property or financial condition of any Originator. (g) Except for the Schedule IV Claim and the claims and proceedings relating to or arising out of the subject matter of the Schedule IV Claim, there are no actions, suits or proceedings current or pending, or to its knowledge threatened before any court, governmental agency or arbitrator of any kind which may give rise to the reasonable possibility of a Material Adverse Effect. (h) No proceeds of any purchase or reinvestment will be used in a manner which contravenes or conflicts with Regulations T, U, or X promulgated by the Board of Governors of the Federal Reserve System. (i) Immediately prior to the sale or contribution of a Receivable to the Seller by an Originator pursuant to the First-Tier Agreement, such Originator is the legal and beneficial owner of such Receivable and the Related Security free and clear of any Adverse Claim. The First-Tier Agreement is effective to, and shall, transfer to the Seller (and the Seller shall acquire) from the Originators all right, title and interest of the Originators in each Receivable and in the Related Security (as defined in the First-Tier Agreement) and Collections with respect thereto on the initial sale date, with respect to Receivables outstanding on such date, and thereafter upon the creation and origination of each Receivable free and clear of any Adverse Claim. Each transfer or contribution of a Receivable and the Related Security (as defined in the First-Tier Agreement) and Collections with respect thereto by an Originator to the Seller pursuant to the First-Tier Agreement constitutes a True Sale. (j) Immediately prior to each transfer or reinvestment hereunder, the Seller is the legal and beneficial owner of each Pool Receivable and Related Security with respect thereto, free and clear of all Adverse Claims. This Agreement is effective to, and shall, upon each transfer and reinvestment hereunder, transfer and assign to the Investors and the Banks a valid and perfected first priority ownership interest to the extent of the Receivable Interest in the Pool Receivables, the Related Security and Collections with respect thereto. No effective financing statement or other instrument similar in effect covering any Pool Receivables, the Related Security, Collections or Contract with respect thereto is on file in any recording office, except those filed in favor of the Agent pursuant to this Agreement, and the Seller pursuant to the First-Tier Agreement. 32 (k) Each Investor Report (including without limitation, each E-Mail Report), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Seller, any Originator or the Servicer, to the Agent, the Investors or the Banks in connection with any Program Documents is or will be accurate in all material respects as of its date or as of the date so furnished, and no such document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein (when considered as a whole), in the light of the circumstances under which they were made, not misleading. (l) The principal place of business and chief executive office (for purposes of the UCC) of the Servicer and the Seller and the office where the Seller and the Servicer keep its records concerning the Pool Receivables are located at the address or addresses referred to in Section 5.01(b). (m) The names and addresses of all the Deposit Banks, together with the account numbers of the Deposit Accounts or supplemental at such Deposit Banks, are as specified in Schedule I hereto, as such Schedule I may be updated from time to time pursuant to Section 5.01(h). (n) Each purchase of a Receivable Interest and each reinvestment of Collections in Pool Receivables will constitute (i) a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended, and (ii) a purchase or other acquisition of notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended. (o) Except as set forth on Schedule V hereto, it is not known by and does not use any trade name or doing-business-as name. (p) No transaction contemplated by the Program Documents requires compliance with any bulk sales act or similar law. (q) Each Receivable included in the Net Receivables Pool Balance as an Eligible Receivable on the date of any purchase, reinvestment or computation of Net Receivables Pool Balance is an Eligible Receivable. (r) The Servicer represents that no license or approval is required for the Agent's use of any program used by the Servicer in the servicing of Pool Receivables, other than those which have been obtained and are in full force and effect. (s) The Seller is not, and is not controlled by, an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended. (t) FMC has (i) initiated a review and assessment of all areas within its business and operations (including those affected by suppliers and vendors) that could be adversely affected by the Year 2000 Problem; (ii) developed a plan and time line for addressing the Year 2000 Problem on a timely basis, and (iii) implemented such plan in accordance with such timetable. FMC is exercising commercially reasonable efforts to enable the computer 33 hardware and software within the critical business systems of FMC to perform properly date-sensitive functions for all dates before and after January 1, 2000. FMC has no reason to believe that such critical business systems will not function on any given date or that the ability of FMC to perform its obligations under the Program Documents will be impaired. (u) Prior to the occurrence of a Special Event, all Obligors and only Obligors of Pool Receivables and Foreign Receivables have been instructed or, upon the creation of Receivables owed by them, will be instructed to make payments only to FMC Deposit Accounts and Lock-Boxes and such instructions have not been modified or revoked by the Seller or the Servicer and such instructions that have been given are in full force and effect. (v) (i) The fair value of the property of the Seller is greater than the total amount of liabilities, including contingent liabilities, of the Seller, (ii) the present fair salable value of the assets of the Seller is not less than the amount that will be required to pay all probable liabilities of the Seller on its debts as they become absolute and matured, (iii) the Seller has not, does not intend to, and does not believe that it will, incur debts or liabilities beyond the Seller's abilities to pay such debts and liabilities as they mature and (iv) the Seller is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which the Seller's property would constitute unreasonably small capital. (w) With respect to each Pool Receivable, the Seller (i) shall have received such Pool Receivable as a contribution to the capital of the Seller by an Originator or (ii) shall have purchased such Pool Receivable from an Originator in exchange for payment (made by the Seller to such Originator in accordance with the provisions of the First-Tier Purchase Agreement) of cash, in an amount which constitutes fair consideration and reasonably equivalent value. Each such sale referred to in clause (ii) of the preceding sentence shall not have been made for or on account of an antecedent debt owed by an Originator to the Seller and no such sale is or may be voidable or subject to avoidance under any section of the Federal Bankruptcy Code. (x) The Seller was incorporated on October __, 1999 and the Seller did not engage in any business activity prior to the date hereof. The Seller has no subsidiaries. (y) Except to the extent that an Originator has delivered to the Agent a direction letter addressed to the warehouseman of any off-site facility, such Originator does not maintain books and records relating to the Pool Receivables at off-site data processing or storage facilities. ARTICLE V COVENANTS SECTION 5.01. Covenants of the Seller. ----------------------- Until the Program Termination Date: 34 (a) Compliance with Laws, Etc. The Seller will comply in all material respects with all applicable laws, rules, regulations and orders and preserve and maintain its corporate existence, rights, franchises, qualifications, and privileges except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such existence, rights, franchises, qualifications, and privileges could not give rise to a reasonable possibility of a Material Adverse Effect. (b) Offices, Records and Books of Account. The Seller will keep its principal place of business and chief executive office and the office where it keeps its records concerning the Pool Receivables at the address of the Seller set forth under its name on the signature pages to this Agreement or, upon thirty (30) days' prior written notice to the Agent, at any other locations in jurisdictions where all actions reasonably requested by the Agent to protect and perfect the interest in the Pool Receivables have been taken and completed. The Seller also will maintain and implement or cause the Servicer to maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Pool Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Pool Receivables (including, without limitation, records adequate to permit the daily identification of each Pool Receivable and all Collections of and adjustments to each existing Pool Receivable). (c) Performance and Compliance with Contracts and Credit and Collection Policy. The Seller will, at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Pool Receivables, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Pool Receivable and the related Contract. (d) Sales, Liens, Etc. The Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, the Seller's undivided interest in any Pool Receivable, Related Security, related Contract or Collections, or upon or with respect to any account to which any Collections of any Pool Receivable are sent, or assign any right to receive income in respect thereof. (e) Extension or Amendment of Receivables. Except as provided in Section 6.02(c), the Seller will not extend, amend or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any Contract related thereto or permit the Servicer to do the same. (f) Change in Business or Credit and Collection Policy. Without the prior written consent of the Agent, the Seller will not make any change in (i) the character of its business , or (ii) the Credit and Collection Policy to the extent that such change in the Credit and Collection Policy could impair the collectibility of the Pool Receivables or could otherwise give rise to a Material Adverse Effect. (g) Audits. The Seller will, from time to time during regular business hours as reasonably requested by the Agent, permit the Agent, or its agents or representatives (including independent public accountants, which may be the Seller's independent public 35 accountants), (i) to conduct periodic audits of the Receivables, the Related Security and the related books and records and collections systems of the Seller, (ii) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Seller relating to Pool Receivables and the Related Security, including, without limitation, the related Contracts, and (iii) to visit the offices and properties of the Seller for the purpose of examining such materials described in clause (ii) above, and to discuss matters relating to Pool Receivables and the Related Security or the Seller's performance hereunder or under the Contracts with any of the officers or employees of the Seller having knowledge of such matters; provided, however, that such periodic audits shall be limited to two (2) per calendar year unless an Audit Deficiency has occurred or unless an Event of Termination, Incipient Event of Termination or a Designated Event has occurred in such calendar year. (h) Change in Payment Instructions to Obligors. Subject to Section 3.03 the Seller will not add or terminate any bank as a Deposit Bank from those listed on Schedule III, make any changes in its Lock-Boxes or Deposit Accounts from those listed in Schedule III to this Agreement, or make any change in its instructions to Obligors regarding payments to be made to any Lock-Box or Deposit Account, unless the Agent shall have received written notice of such addition, termination or change at least fifty-seven (57) days prior to the effective date of such addition, termination or change (the "Control Modification Date") and the Agent shall have received at least thirty (30) days prior to the Control Modification Date, the following: a revised Schedule III, a Deposit Agreement executed by each new Deposit Bank or an existing Deposit Bank with respect to each new Lock-Box or Deposit Account, as applicable and by the Agent and FMC or the Seller, as applicable, and a certificate of an officer of FMC certifying that (A) all of the accounts listed on the revised Schedule III are in existence and all of the information contained therein is correct as of the date of such certificate, and (B) in the case of a termination or change of a Lock-Box or Deposit Account, the Obligors who were depositing payments to such accounts have been directed to deposit payments on and after the Control Modification Date to either an existing Lock-Box or Deposit Account or a new Lock-Box or Deposit Account, in either case as identified on the revised Schedule III. (i) Deposits to Deposit Accounts. Prior to the occurrence of a Special Event, the Seller shall deposit or cause to be deposited all Collections of Pool Receivables into the FMC Deposit Accounts. After the occurrence of a Special Event and prior to instructing the Obligors to remit all Collections to a Seller Deposit Account following the occurrence of an Event of Termination or a Designated Event as required by Section 3.03(b), the Seller shall deposit or cause to be deposited all Collections of Pool Receivables into the FMC Deposit Accounts and shall cause such amounts to be promptly (and in any event within one (1) Business Day after receipt) remitted to a Seller Deposit Account. After instructing the Obligors to remit all Collections to a Seller Deposit Account following the occurrence of an Event of Termination or a Designated Event the Seller shall deposit or cause to be deposited all Collections of Pool Receivables directly into the Seller Deposit Accounts. The Seller will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Deposit Account cash or cash proceeds other than Collections of Pool Receivables; provided, however, that prior to the occurrence of a Special Event, Collections in respect of Foreign Receivables may be remitted to the FMC Deposit Account. 36 (j) Marking of Records. At its expense, the Seller shall identify on its books, records and master data processing records the Pool Receivables and indicate that Receivable Interests related to such Pool Receivables have been sold in accordance with this Agreement. (k) Further Assurances. (i) The Seller agrees from time to time, at its expense, promptly to execute and deliver all further instruments and documents, and to take all further actions, that may be necessary or desirable, or that the Agent may reasonably request, to perfect, protect or more fully evidence the Receivable Interests purchased under this Agreement, or to enable the Investors, the Banks or the Agent to exercise and enforce their respective rights and remedies under this Agreement and the other Program Documents. Without limiting the foregoing, the Seller will, upon the request of the Agent, execute and file such financing or continuation statements, or amendments thereto, and such other instruments and documents, that may be necessary or desirable, or that the Agent may reasonably request, to perfect, protect or evidence such Receivable Interests. (ii) The Seller authorizes the Agent to file financing or continuation statements, and amendments thereto and assignments thereof, relating to the Pool Receivables and the Related Security, the related Contracts and the Collections with respect thereto without the signature of the Seller where permitted by law. A photocopy or other reproduction of this Agreement shall be sufficient as a financing statement where permitted by law. (l) Reporting Requirements. The Seller will provide to the Agent (in multiple copies, if requested by the Agent) the following: (i) as soon as available and in any event within forty-five (45) days after the end of the first three quarters of each fiscal year of each Originator and the Seller, balance sheets of each Originator and its consolidated subsidiaries and the Seller as of the end of such quarter and statements of income and retained earnings of each Originator and its consolidated subsidiaries and the Seller for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by its chief financial officer, treasurer or chief accounting officer; (ii) as soon as available and in any event within ninety (90) days after the end of each fiscal year of each Originator, a copy of the annual report for such year for each Originator and its consolidated subsidiaries, containing financial statements for such year audited by KPMG LLP or such other nationally recognized ("big six") independent public accounting firm; (iii) as soon as available and in any event within ninety (90) days after the end of each fiscal year of the Seller, a copy of the unaudited balance sheet of the Seller for such year and statements of income and retained earnings for the Seller for such year, certified by its chief financial officer, treasurer or chief account officer; 37 (iv) as soon as possible and in any event within three (3) Business Days after the occurrence of each Event of Termination or Incipient Event of Termination, a statement of the chief financial officer or treasurer of the Seller setting forth details of such Event of Termination or event and the action that the Seller has taken and proposes to take with respect thereto; (v) promptly after the filing or receiving thereof, copies of all reports and notices that the Seller or any Affiliate files under ERISA with the Internal Revenue Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any Affiliate receives from any of the foregoing or from any multiemployer plan (within the meaning of the Section 4001(a)(3) or ERISA) to which the Seller or any affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition which could, in the aggregate, result in the imposition or liability on the Seller or result in any liability of any Affiliate of the Seller which could reasonably be expected to have a Material Adverse Effect; (vi) so long as any Capital shall be outstanding, as soon as possible and in any event no later than the day of occurrence thereof, notice that any Originator has stopped selling or contributing to the Seller, pursuant to the First-Tier Agreement, all newly arising Receivables; (vii) at the time of the delivery of the financial statements provided for in clauses (i), (ii) and (iii) of this clause (l), a certificate of the chief financial officer or the treasurer of FMC to the effect that, to the best of such officer's knowledge, no Event of Termination has occurred and is continuing or, if any Event of Termination has occurred and is continuing, specifying the nature and extent thereof; (viii) at least twenty (20) Business Days prior to any change in the name of any Originator or the Seller, a notice setting forth the new name and the effective date thereof; (ix) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Seller, any Originator or any of their respective Affiliates, as the Agent may from time to time reasonably request; (x) promptly after receipt thereof, copies of all notices, reports and financial statements received by the Seller from each Originator under the First-Tier Agreement; and (xi) as soon as possible and in any event within five (5) Business Days after any material change after the date hereof in the status of the Schedule IV Claim or any additional claims or proceedings relating to or arising out of the subject matter of the Schedule IV Claim, a statement of an officer of the Seller setting forth in reasonable detail such change and/or a description of such additional claims or proceedings. 38 (m) Other Agreements. The Seller shall not enter into or be a party to any agreement or instrument other than agreements with an Originator covering the lease of its offices, the allocation of its overhead and the provision for management expenses, agreements covering insurance, other agreements incidental to the conduct of its business (in which the indebtedness thereunder in the aggregate shall not exceed $4,500), this Agreement or the other Program Documents, and shall not amend, modify or waive any provision in any thereof, or give any approval or consent or permission provided for in any thereof without the prior written consent of the Agent; provided, however, that each such agreement shall contain an undertaking from each Person who enters into any such agreement with the Seller of the type referred to in Section 10.05. (n) Other Business. Without the prior written consent of the Agent, the Seller will not engage in any business or enterprise or enter into any transaction other than as contemplated by this Agreement and the other Program Documents. (o) Amendment of Certificate of Incorporation or By-laws. Without the prior written consent of the Agent (which consent shall not be unreasonably withheld), the Seller will not amend its Certificate of Incorporation or By-Laws. (p) Permitted Debt. The Seller shall not incur any Debt or other liability except as contemplated by this Agreement or the First-Tier Agreement. (q) Distributions, Etc. The Seller will not (i) declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of capital stock of the Seller, or return any capital to its shareholders as such, or (ii) purchase, retire, defease, redeem or otherwise acquire for value or make any payment in respect of any shares of any class of capital stock of the Seller or any warrants; provided, that the Seller may declare and pay cash dividends on its capital stock to its shareholders so long as (A) no Event of Termination or Designated Event shall then exist or would occur as a result thereof, (B) such dividends are in compliance with all applicable law including the corporate law of the State of Delaware, (C) such dividends have been approved by all necessary and appropriate corporate action of the Seller, and (D) after giving effect thereto, the Seller's Tangible Net Worth is not less than the greater of (i) three percent (3%) of the Net Receivable Pool Balance, and (ii) $1,000,000. (r) Mergers, Etc. The Seller will not merge with or into or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions), all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets or capital stock or other ownership interest of, or enter into any joint venture or partnership agreement with, any Person, other than the disposition of its assets contemplated by the Program Documents. (s) First-Tier Agreement. The Seller shall, at its expense, timely and fully perform and comply in all material respects with all provisions, covenants and other promises required to be observed by it under the First-Tier Agreement, maintain the First-Tier Agreement in full force and effect, enforce the First-Tier Agreement in accordance with its terms, take all such action to such end as may be from time to time reasonably requested by the Agent, and 39 make to any party to the First-Tier Agreement comply with all such demands and requests for information and reports or for action as the Seller is entitled to make thereunder and as may be from time to time reasonably requested by the Agent. The Seller shall not (i) cancel or terminate the First-Tier Agreement or consent to or accept any cancellation or termination thereof, (ii) amend or otherwise modify any term or condition of the First-Tier Agreement or give any consent, waiver or approval thereunder without the prior written consent of the Agent, or (iii) take any other action under the First-Tier Agreement not required by the terms thereof that would impair the value of any Pool Receivable, the Related Security or the rights or interests of the Seller thereunder or of the Agent, any Investor or any Bank hereunder or thereunder. (t) Tangible Net Worth. The Seller will maintain Tangible Net Worth at all times equal to at least $30,000,000. (u) Separate Corporate Existence. (i) The Seller shall maintain in full effect its existence, rights and franchises as a corporation under the laws of the state of its incorporation and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement and each of the Program Documents to which it is a party and each other instrument or agreement necessary or appropriate to proper administration hereof and permit and effectuate the transactions contemplated hereby. (ii) The Seller shall not maintain joint bank accounts or other depository accounts with its Affiliates. The funds of the Seller will not be diverted to any other Person or for other than the corporate use of the Seller except as contemplated hereby and, except as may be permitted by this Agreement, the funds of the Seller shall not be commingled with those of any Originator or any of their respective Affiliates. (iii) To the extent that the Seller contracts or does business with vendors or service providers where the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among the Seller and such entities for whose benefit the goods and services are provided, and the Seller and each such entity shall bear its fair share of such costs. All material transactions between the Seller and any of its Affiliates shall be only on an arm's-length basis. (iv) The Seller shall maintain a principal executive and administrative office through which its business is conducted separate from those of its stockholders, each Originator and their respective Affiliates. (v) The Seller shall conduct its affairs strictly in accordance with its Certificate of Incorporation and observe all necessary, appropriate and customary corporate formalities, including, but not limited to, holding all regular and special stockholders' and directors' meetings appropriate to authorize all corporate action, keeping separate and accurate minutes of such meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate 40 and separate books, records and accounts, including, but not limited to, intercompany transaction accounts. The Seller shall hold regular stockholders' and directors' meetings at least annually. (vi) The Seller shall ensure that decisions with respect to its business and daily operations shall be independently made by the Seller (although the officer making any particular decision may also be an employee, officer or director of an Affiliate of the Seller) and shall not be dictated by any Originator or any of their respective Affiliates. (vii) The Seller shall act solely in its own corporate name and through its own authorized officers and agents, and neither an Originator nor any of their respective Affiliates shall be appointed to act as its agent, except as expressly contemplated by this Agreement or the First-Tier Agreement. The Seller shall at all times use its own stationery. (viii) The Seller shall ensure that no Affiliate of the Seller or any Originator shall advance funds to the Seller, other than (i) capital contributions or loans from FMC, made to enable the Seller to pay the purchase price of Receivables or (ii) as is otherwise provided herein or in the First-Tier Agreement and no Affiliate of the Seller or any Originator will otherwise supply funds to, or guaranty debts of, the Seller; provided, however, that an Affiliate of the Seller may provide funds to the Seller in connection with the capitalization of the Seller, including the provision of capital necessary to assure that the Seller has "substantial assets" as described in Treasury Regulation Section 301.7701-2(d)(2) as in effect prior to amendment by Treasury Decision 8697 on December 17, 1996. (ix) Other than organizational expenses and as expressly provided herein, the Seller shall pay all expenses, indebtedness and other obligations incurred by it. (x) The Seller shall not enter into any guaranty, or otherwise become liable, with respect to any obligation of any Originator or any of their respective Affiliates. (xi) The Seller shall ensure that any financial reports required of the Seller shall comply with generally accepted accounting principles and shall be issued separately from, but may be consolidated with, any reports prepared for any Originator, or any of their respective Affiliates; provided, that if so consolidated, such financial reports shall contain a footnote indicating that the Receivables have been sold and are not available to FMC's creditors unless all other obligations of the Seller have been fully satisfied. (xii) The Seller shall ensure that at all times it is adequately capitalized to engage in the transactions contemplated in its Certificate of Incorporation, the First-Tier Agreement and this Agreement. (xiii) The Seller shall at all times from and after the election of the initial Board of Directors, have at least one (1) director of the Seller who shall at all times be an Independent Director. An "Independent Director" will be an individual who (x) is 41 not, and during the immediately preceding twelve (12) months has not been, a director, officer, employee, or Affiliate of any Originator or any of their respective Affiliates (other than the Seller or any other Affiliate formed for similar purposes relating to receivables originated by Affiliates of any Originator), (y) does not have any significant ownership or creditor interest in any Originator or any Affiliate of any Originator, and (z) is not related to any individual satisfying clause (x) or (y) of this Section 5.01(u)(xiii). (xiv) The Seller shall maintain arm's-length relationships with FMC and any Affiliate of FMC, and will not be, or will hold itself out to be, responsible for the debts of FMC or the decisions or actions respecting the daily business affairs of FMC. ARTICLE VI ADMINISTRATION AND COLLECTION OF POOL RECEIVABLES SECTION 6.01. Designation of Servicer. ----------------------- The servicing, administration and collection of the Pool Receivables shall be conducted by the Servicer so designated hereunder from time to time. Until the Agent gives notice to the Seller of the designation of a new Servicer, FMC is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. The Agent may at any time after the occurrence of a Designated Event, during the continuance of an Incipient Event of Termination of the type specified in clause (g) of Section 7.01 or during the continuance of any Event of Termination designate as Servicer any Person (including itself) to succeed the Seller or any successor Servicer, if such Person shall consent and agree to the terms hereof. Any such designation of a successor Servicer hereunder shall not limit or affect the liability of FMC as Servicer for the period prior to such designation. The Servicer may, with the prior consent of the Agent, subcontract with any other Person for the servicing, administration or collection of the Pool Receivables and the Agent hereby consents to FMCW serving as a subcontractor. Any such subcontract shall not affect the Servicer's liability for performance of its duties and obligations pursuant to the terms hereof. SECTION 6.02. Duties of Servicer. ------------------ (a) The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to collect each Pool Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. The Seller and the Agent hereby appoint the Servicer, from time to time designated pursuant to Section 6.01, as agent for themselves and for the Investors and the Banks to enforce their respective rights and interests in the Pool Receivables, the Related Security and the related Contracts. In performing its duties as Servicer, the Servicer shall exercise the same care and apply the same policies as it would exercise and apply if it owned such Receivables. (b) The Servicer shall administer the Collections in accordance with the procedures described in Section 2.04. 42 (c) If no Event of Termination, Incipient Event of Termination or Designated Event shall have occurred and be continuing, FMC, while FMC is the Servicer, may, in accordance with the Credit and Collection Policy, extend the maturity or adjust the Outstanding Balance of any Receivable as the Servicer deems appropriate to maximize Collections thereof; provided, that such extension or adjustment shall not alter the status of such Receivables as a Delinquent Receivable or a Defaulted Receivable. (d) The Servicer shall hold in trust for the Seller and each Investor and Bank, in accordance with their respective interests, all documents, instruments and records (including, without limitation, computer tapes or disks) which evidence or relate to Pool Receivables. At the request of the Agent after the occurrence of a Designated Event or during the continuance of any Event of Termination, the Servicer shall mark conspicuously each invoice evidencing each Pool Receivable and the related Contract with a legend, acceptable to the Agent, evidencing that Receivable Interests therein have been sold and shall mark its master data processing records evidencing such Pool Receivables and related Contracts with such a legend. (e) The Servicer shall, as soon as practicable following receipt, turn over to the Seller any cash collections or other cash proceeds received with respect to Receivables not constituting Pool Receivables. (f) The Servicer shall, from time to time at the request of the Agent, furnish to the Agent (promptly after any such request) a calculation of the amounts set aside for the Investors and the Banks pursuant to Section 2.04. (g) Prior to the fifteenth (15th) Business Day of each month or more frequently as the Agent shall reasonably request, the Servicer shall prepare and forward to the Agent (i) an Investor Report relating to the outstanding Receivables, and (ii) upon the request of the Agent, a listing by Obligor of all outstanding Pool Receivables, together with an analysis of the aging of such Receivables. Subject to the following terms and conditions the Servicer may, unless otherwise notified to the contrary by the Agent, transmit Investor Reports to the Agent by electronic mail (each an "E-Mail Report"): (i) The Servicer shall make arrangements with VeriSign, Inc. (or another authenticating organization acceptable to the Agent) to enable the Servicer to generate digital signatures. The Servicer shall safeguard the keys, access codes or other means of generating its digital signature. (ii) Each E-Mail Report shall be formatted as the Agent may designate from time to time and shall be digitally signed. Each E-Mail Report shall be sent to the Agent at an electronic mail address designated by the Agent. (iii) Each E-Mail Report shall be deemed given when receipt of such transmission thereof is acknowledged by the Agent. (h) The Servicer shall, upon direction from the Seller, make payments on behalf of the Seller from the Seller's Funds as directed by the Seller. 43 SECTION 6.03. Certain Rights of the Agent. --------------------------- (a) At any time following any Event of Termination or a Designated Event the Agent is authorized to date and deliver to the Deposit Banks, the Lock-Box Notices. The Seller and FMC hereby transfers to the Agent, effective when the Agent delivers such Lock-Box Notices, the exclusive ownership and control of the Deposit Accounts to which the Obligors of Pool Receivables shall make payments. The Seller shall take any actions reasonably requested by the Agent to effect such transfer. The Agent also may notify the Obligors of Pool Receivables, at any time and at the Seller's expense, of the ownership of Receivable Interests under this Agreement. (b) At any time following any Event of Termination or a Designated Event or the designation of a Servicer other than FMC pursuant to Section 6.01: (i) The Agent may direct the Obligors of Pool Receivables that all payments thereunder be made directly to the Agent or its designee. (ii) At the Agent's request and at the Seller's expense, the Seller shall notify or cause the Servicer to notify each Obligor of Pool Receivables of the ownership of Receivable Interests under this Agreement and direct that payments be made directly to the Agent or its designee. (iii) At the Agent's request and at the Seller's expense, the Seller and the Servicer shall (A) assemble all of the documents, instruments and other records (including, without limitation, computer tapes and disks) that evidence or relate to the Pool Receivables and the related Contracts and Related Security, or that are otherwise necessary or desirable to collect the Pool Receivables, and shall make the same available to the Agent at a place selected by the Agent or its designee, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Pool Receivables in a manner acceptable to the Agent and, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Agent or its designee. (iv) The Seller and the Servicer authorize the Agent to take any and all steps in the Seller's or the Servicer's name and on behalf of the Seller that are necessary or desirable, in the determination of the Agent, to collect amounts due under the Pool Receivables, including, without limitation, endorsing the Seller's or the Servicer's name on checks and other instruments representing Collections of Pool Receivables and enforcing the Pool Receivables and the Related Security and related Contracts. SECTION 6.04. Rights and Remedies. ------------------- (a) If the Seller or Servicer fails to perform any of its obligations under this Agreement, including without limitation the obligations under Section 3.03, the Agent may (but shall not be required to) itself perform, or cause performance of, such obligation; and the Agent's costs and expenses incurred in connection therewith shall be payable jointly by the Seller and the Servicer. 44 (b) The exercise by the Agent on behalf of the Investors and the Banks of their rights under this Agreement shall not release the Servicer or the Seller from any of their duties or obligations with respect to any Pool Receivables or related Contracts. Neither the Agent, the Investors nor the Banks shall have any obligation or liability with respect to any Pool Receivables or related Contracts, nor shall any of them be obligated to perform the obligations of any Originator or the Seller thereunder. (c) In the event of any conflict between the provisions of Article VI of this Agreement and Article VI of the First-Tier Agreement, the provisions of this Agreement shall control. SECTION 6.05. Covenants of the Servicer. ------------------------- (a) Audits. The Servicer will, from time to time during regular business hours as requested by the Agent, permit and shall cause FMCW to permit, the Agent or its agents or representatives (including independent public accountants which may be the Servicer's independent public accountants), (i) to conduct periodic audits of the Receivables, the Related Security and the related books and records and collections systems of the Servicer and FMCW, (ii) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Servicer and FMCW (including those located at off-site data processing or storage facilities) relating to Pool Receivables and the Related Security, including, without limitation, the Contracts, and (iii) to visit the offices and properties of the Servicer and FMCW for the purposes of examining such materials described in clause (ii) above, and to discuss matters relating to Pool Receivables and the Related Security or the Servicer's performance hereunder with any of the officers or employees of the Servicer having knowledge of such matters; provided, however, that such periodic audits shall be limited to two (2) per calendar year unless an Audit Deficiency has occurred or unless a Designated Event or an Event of Termination or Incipient Event of Termination has occurred in such calendar year. In addition, upon the Agent's request at least once per year, the Servicer (if other than FMC) will, at its expense, appoint independent public accountants (which may, with the consent of the Agent, be the Servicer's regular independent public accountants), or utilize the Agent's representatives or auditors, to prepare and deliver to the Agent a written report with respect to the Receivables and the Credit and Collection Policy (including, in each case, the systems, procedures and records relating thereto) on a scope and in a form reasonably requested by the Agent. (b) Change in Business or Credit and Collection Policy. Without the prior written consent of the Agent, the Servicer will not make any change in the Credit and Collection Policy to the extent that such change could impair the collectibility of the Pool Receivables or could otherwise give rise to a Material Adverse Effect. (c) Change in Payment Instructions to Obligors. Subject only to Section 3.03 the Servicer will not add or terminate any bank as a Deposit Bank, make any changes in its Lock-Boxes or Deposit Accounts from those listed in Schedule III to this Agreement, or make any change in its instructions to obligors regarding payments to be made to any Lock-Box or Deposit Account in any case unless the Agent shall have received written notice of such addition, termination or change at least fifty-seven (57) days prior to the effective date of such addition, 45 termination or change (the "Control Modification Date") and the Agent shall have received at least thirty (30) days prior to the Control Modification Date, the following: a revised Schedule III, a Deposit Agreement executed by each new Deposit Bank or an existing Deposit Bank with respect to each new Lock-Box or Deposit Account, as applicable and by the Agent and FMC or the Seller, as applicable, and a certificate of an officer of FMC certifying that (A) all of the accounts listed on the revised Schedule III are in existence and all of the information contained therein is correct as of the date of such certificate, and (B) in the case of a termination or change of a Lock-Box or Deposit Account, the Obligors who were depositing payments to such accounts have been directed to deposit payments on and after the Control Modification Date to either an existing Lock-Box or Deposit Account or a new Lock-Box or Deposit Account, in either case as identified on the revised Schedule III. (d) Collections. (i) In the event that the Servicer receives any Collections, the Servicer agrees to hold any such Collections in trust and to mail such Collections to a Lock-Box or deposit such Collections to the appropriate Deposit Account as soon as practicable, but in no event later than two (2) Business Days after receipt thereof. (ii) In the event that any Affiliate of the Servicer receives any Collections, the Servicer agrees to cause such Affiliate to hold all such Collections in trust and to cause such Affiliate to mail such Collections to a Lock-Box or deposit Such Collections to the appropriate Deposit Account as soon as practicable, but in no event later than two (2) Business Days after receipt thereof. (e) Deposits to Deposit Accounts. Prior to the occurrence of a Special Event, the Servicer shall deposit or cause to be deposited all Collections of Pool Receivables into the FMC Deposit Accounts. After the occurrence of a Special Event and prior to instructing the Obligors to remit all Collections to a Seller Deposit Account following the occurrence of an Event of Termination or a Designated Event, the Servicer shall deposit or cause to be deposited all Collections of Pool Receivables into the FMC Deposit Accounts and shall cause such amounts to be promptly (and in any event within one (1) Business Day after receipt) remitted to a Seller Deposit Account. After instructing the Obligors to remit all Collections to a Seller Deposit Account following the occurrence of an Event of Termination or a Designated Event the Servicer shall deposit or cause to be deposited all Collections of Pool Receivables into the Seller Deposit Accounts. The Servicer shall not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Deposit Account cash or cash proceeds other than Collections of Pool Receivables; provided, however, that prior to the occurrence of a Special Event Collections in respect of Foreign Receivables may be remitted to the FMC Deposit Account. (f) Performance and Compliance with Contracts and Credit and Collection Policy. The Servicer will, at its expense, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Pool Receivables, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Pool Receivable and the related Contract. 46 (g) Sales, Liens, Etc. The Servicer will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to any Pool Receivable, Related Security, related Contract or Collections, or upon or with respect to any account to which any Collections of any Pool Receivable are sent, or assign any right to receive income in respect thereof. (h) Extension or Amendment of Receivables. Except as provided in Section 6.02(c), the Servicer will not extend, amend or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any Contract related thereto. SECTION 6.06. Indemnities by the Servicer. --------------------------- Without limiting any other rights that the Agent, the Investors, the Banks or any of their respective Affiliates and each of their respective directors, partners, officers, employees and agents (each, a "Special Indemnified Party") may have hereunder or under applicable law, and in consideration of its appointment as Servicer, the Servicer hereby agrees to indemnify each Special Indemnified Party from and against any and all claims, losses and liabilities (including reasonable attorneys' fees and expenses) (all of the foregoing being collectively referred to as "Special Indemnified Amounts") arising out of or resulting from any of the following (excluding, however, Special Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Special Indemnified Party. (i) any representation or warranty (including without limitation clauses (i), (j), (k) and (w) of Section 4.01) or statement made or deemed made by the Servicer under or in connection with any Program Document which shall have been incorrect when made or delivered; or the characterization in any Investor Report of any Receivable as an Eligible Receivable which is not an Eligible Receivable as of the date of such Investor Report; (ii) the failure by the Servicer to comply with any applicable law, rule or regulation with respect to any Pool Receivable or Contract; or the failure of any Pool Receivable or Contract to conform to any such applicable law, rule or regulation; (iii) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool, the Contracts and the Related Security and Collections in respect thereof, whether at the time of any purchase or reinvestment or at any subsequent time; (iv) any failure of the Servicer to perform its duties or obligations in accordance with the provisions of any Program Document; (v) the commingling of Collections of Pool Receivables at any time with other funds; 47 (vi) any action or omission by the Servicer reducing or impairing the rights of any Investor or any Bank with respect to any Pool Receivable or the value of any Pool Receivable; (vii) any Servicer Fees or other costs and expenses payable to any replacement Servicer, to the extent in excess of the Servicer Fees payable to the Servicer hereunder; (viii) any claim brought by any Person other than a Special Indemnified Party arising from any activity by the Servicer or its Affiliates in Servicing, administering or collecting any Receivable; or (ix) the failure of the Servicer's computer applications to resolve the Year 2000 Problem. ARTICLE VII EVENTS OF TERMINATION SECTION 7.01. Events of Termination. --------------------- If any of the following events ("Events of Termination") shall occur and be continuing: (a) the Seller or any Originator (as Servicer or otherwise) shall fail to make when due any payment or deposit to be made by it under this Agreement or any other Program Document, and such failure shall remain unremedied for one (1) Business Day, or (b) the Seller or any Originator (as Servicer or otherwise) shall fail to perform or observe in any material respect any other term, covenant or agreement under this Agreement or any other Program Document and such failure shall remain unremedied for fifteen (15) Business Days after notice shall have been given to such breaching party or such breaching party has knowledge of such failure; or (c) the Servicer shall fail to transfer to the Agent when requested any rights pursuant to this Agreement which the Servicer then has as Servicer or to make any payment required under Section 2.04 and such failure shall continue for two (2) Business Days; or (d) any representation or warranty made or deemed made by the Seller or any Originator (as Servicer or otherwise) (or any of its officers) under or in connection with any Program Document or any information or report delivered by pursuant to this Agreement shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered; provided, however, that if (i) any such representation is capable of being cured within fifteen (15) days after the date such representation was originally breached, and such cure is diligently being pursued by the Seller or such Originator, as the case may be, and (ii) the breach of such representation does not give rise to a reasonable possibility of a Material Adverse Effect, 48 such breach will not constitute an Event of Termination unless such breach is continuing on the fifteenth (15th) day after the date such representation was originally breached; or (e) the Seller, any Originator or any of their respective Affiliates shall fail to pay any principal of or premium or interest on any of its Debt which is outstanding in a principal amount of at least $50,000,000 in the aggregate when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period and not waived, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (f) any purchase or any reinvestment pursuant to this Agreement shall for any reason (other than pursuant to the terms hereof) cease to create, or any Receivable Interest shall for any reason cease to be, a valid and perfected first priority undivided percentage ownership interest to the extent of the pertinent Receivable Interest in each applicable Pool Receivable and the Related Security and Collections with respect thereto; or (g) the Seller, any Originator or any of their respective Affiliates shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Seller, any Originator or any of their respective Affiliates seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of sixty (60) days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Seller, any Originator or any of their respective Affiliates shall take any corporate action to authorize any of the actions set forth above in this subsection (g); or (h) as of the last day of any calendar month, the average of the Default Ratio determined as of such last day, and as of the last day of each of the immediately preceding two calendar months shall exceed 5.5%; or (i) as of the last day of any calendar month, the average Delinquency Ratio determined as of such last day, and as of the last day of the immediately preceding two (2) calendar months shall exceed 6.0%; or 49 (j) as of the last day of any calendar month, the average Loss-to-Liquidation Ratio determined as of such last day, and as of the last day of each of the immediately preceding two (2) calendar months shall exceed 1.0%; or (k) the sum of the Receivable Interests shall be greater than the Specified Percentage for a period of five (5) consecutive Business Days; or (l) FMC shall cease to directly own all of the outstanding capital stock of the Seller; or (m) an "Event of Termination" as defined in the First-Tier Agreement shall have occurred and be continuing or the First-Tier Agreement or the Undertaking shall cease to be in full force and effect; or (n) any material provision of any Program Documents shall for any reason cease to be the legal, valid and binding obligation of the Seller or any Originator (as Servicer or otherwise) or any such party shall so assert in writing; or (o) FMC shall cease to have at least the Required Tier-2 Ratings; then, and in any such event, any or all of the following actions may be taken by notice to the Seller: (x) the Agent may declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred), (y) the Agent may declare the Commitment Termination Date to have occurred (in which case the Commitment Termination Date shall be deemed to have occurred), and (z) without limiting any right under this Agreement to replace the Servicer, the Agent may designate another Person to succeed FMC as the Servicer; provided, that, automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice) described in paragraph (g) of this Section 7.01, the Facility Termination Date and the Commitment Termination Date shall occur, FMC (if it is then serving as the Servicer) shall cease to be the Servicer, and the Agent or its designee shall become the Servicer. Upon any such declaration or designation or upon such automatic termination, the Investors, the Banks and the Agent shall have, in addition to the rights and remedies which they may have under the Program Documents, all other rights and remedies provided after default under the UCC and under other applicable law, which rights and remedies shall be cumulative. ARTICLE VIII THE AGENT SECTION 8.01. Authorization and Action. ------------------------ Each Investor and each Bank hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Program Documents as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. 50 SECTION 8.02. Agent's Reliance, Etc. ----------------------- Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them as Agent under or in connection with any Program Document (including, without limitation, the Agent's servicing, administering or collecting Pool Receivables as Servicer), except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent: (a) may consult with legal counsel (including counsel for the Seller or any Originator), independent certified public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation to any Investor or Bank (whether written or oral) and shall not be responsible to any Investor or Bank for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement or any other Program Document; (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Program Document on the part of the Seller or any Originator (as Servicer or otherwise) or to inspect the property (including the books and records) of the Seller or any Originator (as Servicer or otherwise); (d) shall not be responsible to any Investor or Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Program Document; and (e) shall incur no liability under or in respect of this Agreement or any other Program Document by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by telecopier or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 8.03. CNAI and Affiliates. ------------------- The obligation of Citibank, N.A. to purchase Receivable Interests under this Agreement may be satisfied by CNAI or any of its Affiliates. With respect to any Receivable Interest or interest therein owned by it, CNAI shall have the same rights and powers under this agreement as any Bank and may exercise the same as though it were not the Agent. CNAI and any of its Affiliates may generally engage in any kind of business with the Seller, any Originator or any Obligor, any of their respective Affiliates and any Person who may do business with or own securities of the Seller, any Originator or any Obligor or any of their respective Affiliates, all as if CNAI were not the Agent and without any duty to account therefor to the Investors or the Banks. ARTICLE IX INDEMNIFICATION SECTION 9.01. Indemnities by the Seller. ------------------------- Without limiting any other rights that the Agent, the Investors, the Banks or any of their respective Affiliates and each of their respective directors, partners, officers, employees and agents (each, an "Indemnified Party") may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all claims, 51 losses and liabilities, other than taxes on the overall net income of an Indemnified Party and franchise taxes imposed on an Indemnified Party by any taxing authority in any jurisdiction which asserts jurisdiction to impose such taxes on the basis of the contacts which such Indemnified Party maintains with such jurisdiction other than the contacts arising from the execution, performance and delivery of, or receipt of payments under, this Agreement or any other Program Document, (including reasonable attorneys' fees) (all of the foregoing being collectively referred to as "Indemnified Amounts") arising out of or resulting from this Agreement, any other Program Document, the transactions contemplated thereby or the use of proceeds of purchases or reinvestments or the ownership of Receivable Interests or in respect of any Receivable or any Contract, excluding, however, Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party. Without limiting or being limited by the foregoing, the Seller shall pay on demand to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts relating to or resulting from any of the following: (i) the creation of an undivided percentage ownership interest in any Pool Receivable that is not at the date of any creation of such interest an Eligible Receivable or which thereafter ceases to be an Eligible Receivable; (ii) any representation or warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with any Program Document which shall have been incorrect in any material respect when made; (iii) the failure by the Seller or any of its Affiliates or any Originator (as Servicer or otherwise) to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract; or the failure of any Pool Receivable or the related Contract to conform to any such applicable law, rule or regulation; (iv) the failure to vest in the Investors or the Banks, as the case may be, a perfected undivided percentage ownership interest, to the extent of each Receivable Interest, in the Receivables in, or purporting to be in, the Receivables Pool and the Related Security and Collections in respect thereof, free and clear of any Adverse Claim; (v) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the Related Security and Collections in respect thereof, whether at the time of any purchase or reinvestment or at any subsequent time; (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services related to such Receivable or 52 the furnishing or failure to furnish such merchandise or services or relating to collection activities with respect to such Receivable; (vii) any failure of the Seller to perform its duties or obligations in accordance with the provisions of the Program Documents or to perform its duties or obligations under the Contracts; (viii) any products liability or other claim arising out of or in connection with merchandise, insurance or services which are the subject of any Contract; (ix) the commingling of Collections of Pool Receivables at any time with other funds; (x) any investigation, litigation or proceeding related to any Program Document or the use of proceeds of purchases or reinvestments or the ownership of Receivable Interests or in respect of any Receivable or Related Security or Contract; (xi) any failure of the Seller to comply with its covenants contained in this Agreement; (xii) any claim brought by any Person other than an Indemnified Party arising from any activity by the Seller in servicing, administering or collecting any Receivable; (xiii) any Event of Termination or a Designated Event; (xiv) any inability to litigate any claim against any Obligor in respect of any Receivable as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding; (xv) any Pool Receivable becoming a Diluted Receivable; (xvi) any failure of funds or revenues to be set aside or otherwise appropriated for payment of any Receivable the Obligor of which is a government or a governmental subdivision or agency; or (xvii) the application of assignment of claims or similar laws to any Receivable the Obligor of which is a government or a governmental subdivision or agency. 53 ARTICLE X MISCELLANEOUS SECTION 10.01. Amendments, Etc. ----------------- No amendment or waiver of any provision of this Agreement or consent to any departure by the Seller therefrom shall be effective unless in a writing signed by the Agent, as agent for the Investors and the Banks (and, in the case of any amendment, also signed by the Seller), and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by the Servicer in addition to the Agent, affect the rights or duties of the Servicer under this Agreement. No failure on the part of the Investors, the Banks or the Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. SECTION 10.02. Notices, Etc. --------------- All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and faxed or delivered, to each party hereto, at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by regular mail), and notices and communications sent by other means shall be effective when received. SECTION 10.03. Assignability. ------------- (a) This Agreement and the Investors' rights and obligations herein (including ownership of each Receivable Interest) shall be assignable by the Investors and their successors and assigns; provided, however, that unless a Designated Event or an Event of Termination or an Incipient Event of Termination is continuing the Investor shall not without the prior written consent of the Seller assign its rights or obligations to any Person other than to an Eligible SPE of the Agent or pursuant to the Asset Purchase Agreement. Each assignor of a Receivable Interest or any interest therein shall notify the Agent and the Seller of any such assignment. Subject to Section 10.06, each assignor of a Receivable Interest or any interest therein may, in connection with the assignment or participation, disclose to the assignee or participant any information relating to the Seller or the Originators, including the Receivables, furnished to such assignor by or on behalf of the Seller or by the Agent. (b) Each Bank may, with the consent of the Seller (which consent shall not be unreasonably withheld or delayed) assign to any Eligible Assignee or to any other Bank all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Bank Commitment and any Receivable Interests or interests therein owned by it); provided, however, that the Seller consent shall not be required if a Designated Event, an Incipient Event of Termination or an Event of Termination is continuing at the time of such 54 assignment or if such assignee is then an existing Bank hereunder. The parties to each such assignment shall execute and deliver to the Agent an Assignment and Acceptance. In addition, Citibank, N.A. or any of its Affiliates may assign any of its rights (including, without limitation, rights to payment of Capital and Yield) under this Agreement to any Federal Reserve Bank without notice to or consent of the Seller or the Agent. (c) This Agreement and the rights and obligations of the Agent herein shall be assignable by the Agent and its successors and assigns. (d) The Seller may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the Agent. SECTION 10.04. Costs, Expenses and Taxes. ------------------------- (a) In addition to the rights of indemnification granted under Section 9.01 hereof, the Seller agrees to pay on demand all costs and expenses in connection with the preparation, execution, delivery and administration (including periodic auditing and other activities contemplated in Section 5.01(g)) of this Agreement or any other Program Document, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent, CNAI, CIESCO, Citibank, N.A. and their respective Affiliates, partners, shareholders and directors with respect thereto and with respect to advising the Agent, CNAI, CIESCO, Citibank, N.A. and their respective Affiliates as to their rights and remedies under this Agreement, and all costs and expenses, if any (including reasonable counsel fees and expenses), of the Agent, CNAI, the Investors, the Banks and their respective Affiliates, in connection with the enforcement of this Agreement and the other documents and agreements to be delivered hereunder. (b) In addition, the Seller shall in connection the transactions contemplated by the Program Documents pay on demand all costs and expenses of the rating agencies' rating CIESCO's debt securities. (c) The Seller shall pay any present or future sales, stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payments made hereunder or deposit from Collections hereunder or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the other Program Documents (hereinafter referred to as "Taxes"). (d) The Seller shall indemnify the Agent, each Investor and each Bank for and hold it harmless against the full amount of Taxes imposed on or paid by the Agent, such Investor or such Bank and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto whether or not such Taxes or other Taxes were correctly or legally asserted. This indemnification shall be made promptly upon the Agent, such Investor or such Bank making a written demand therefor (with a copy to the Agent). SECTION 10.05. No Proceedings. -------------- Each of the Seller, the Servicer, the Agent, each Investor, each Bank, each assignee of a Receivable Interest or any interest therein and each entity which enters into a commitment to purchase Receivable Interests or interests therein hereby agrees that it will not 55 institute against any proceeding of the type referred to in Section 7.01(g) so long as any promissory notes or other senior indebtedness issued by CIESCO shall be outstanding or there shall not have elapsed one (1) year plus one (1) day since the last day on which any such promissory notes or other senior indebtedness shall have been outstanding. SECTION 10.06. Confidentiality. --------------- (a) The Seller and FMC agree that it shall and shall cause FMCW and each of its other Affiliates (i) to keep this Agreement and the other Program Documents, the proposal relating to the structure of the facility contemplated by this Agreement and the other Program Documents (the "Facility"), any analyses, computer models, information or document prepared by the Agent, Citibank, N.A. or any of their respective Affiliates in connection with the Facility, the Agent's or its Affiliate's written reports to the Seller, the Originators or any of their respective Affiliates and any related written information (collectively, the "Product Information") confidential and to disclose Product Information only to those of its officers, employees, agents, accountants, legal counsel and other representatives (collectively, the "Company Representatives") who have a need to know such Product Information for the purpose of obtaining any necessary consents or approvals (including internal approval) and for the purpose of assisting in the negotiation, completion and administration of the Facility or for any legitimate business purpose in connection therewith (the "Approved Purposes"); (ii) to use the Product Information only in connection with Approved Purposes and not for any other purpose; and (iii) to cause the Company Representatives to comply with the provisions of this Section 9.09 and to be responsible for any failure of any Company Representative to so comply. The provisions of this Section 10.06(a) shall not apply to any Product Information that is a matter of general public knowledge or that has heretofore been made available to the public by any Person other than the Seller, any Originator, FMC, any of their respective Affiliates or any Company Representative or that is required to be disclosed by applicable law or is requested by any governmental or regulatory authority with jurisdiction over the Seller, the Originators or any of their respective Affiliates. (b) The Agent, the Investors and the Banks agree (i) to keep all non-public information with respect to the Seller, the Originators and their respective Affiliates which they receive pursuant to the Program Documents (collectively, the "Company Information") confidential and to disclose Company Information only to those of its officers, employees, agents, accountants, legal counsel and other representatives of the Agent, the Investors and the Banks (collectively, the "Investor Representatives") and to S&P, and Moody's which, in each case, may have a need to know or review such Company Information for the purpose of assisting in the negotiation, completion, administration and evaluation of the Facility and for any other Approved Purpose; (ii) to use the Company Information only in connection with the Approved Purposes and not for any other purpose; and (iii) to cause its related Investor Representatives to comply with the provisions of this Section 10.06(b). The provisions of this Section 10.06(b) shall not apply to any Company Information that is a matter of general public knowledge or that has heretofore been made available to the public by any Person other than such Investor Representative or that is required to be disclosed by applicable law or is requested by any governmental authority with jurisdiction 56 over any the Agent, any Investor or any Bank or any Investor Representative or any of their respective Affiliates. Notwithstanding the foregoing, the Company Information may be disclosed by the Agent, the Investor the Banks and any Investor Entity to permitted assignees and participants and potential assignees and participants in the Facility to the extent such assignees or participants agree to be bound by this Section 10.06(b). SECTION 10.07. Security Interest. ----------------- As collateral security for the performance by the Seller of all the terms, covenants and agreements on the part of the Seller to be performed under this Agreement and other Program Documents including the punctual payment when due of all obligations of the Seller hereunder and thereunder, whether for indemnification payments, fees, expenses, or otherwise, the Seller hereby assigns to the Agent for its benefit and the ratable benefit of the Investors, and hereby grants to the Agent for its benefit and the ratable benefit of the Investors, a security interest in, all of the Seller's right, title and interest in and to (A) the First-Tier Agreement, including, without limitation, (i) all rights of the Seller to receive monies due or to become due under or pursuant to the First-Tier Agreement, (ii) all security interests and property subject thereto from time to time purporting to secure payment of monies due or to become due under or pursuant to the First-Tier Agreement, (iii) all rights of the Seller to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the First-Tier Agreement, (iv) claims of the Seller for damages arising out of or for breach of or default under the First-Tier Agreement, and (v) the right of the Seller to compel performance and otherwise exercise all remedies thereunder, (B) all Receivables, the Related Security with respect thereto and the Collections and all other assets, including, without limitation, accounts, chattel paper, instruments and general intangibles (as those terms are defined in the UCC) owned by the Seller and not otherwise purchased or scheduled to be purchased under this Agreement, and (C) to the extent not included in the foregoing, all proceeds of any and all of the foregoing. SECTION 10.08. Intent of Agreement. ------------------- (a) It is the intention of the parties to this Agreement that each purchase and reinvestment of an interest in Pool Receivables and the Related Security hereunder shall convey to the Investors and the Banks, as the case may be, an undivided ownership interest in such Pool Receivables and Related Security and the Collections in respect thereto to the extent of the Receivable Interest and that such transactions shall constitute a True Sale and not a secured loan. If, notwithstanding such intention, any conveyance of any interest in any Pool Receivable, Related Security or the Collections with respect thereto hereunder shall ever be recharacterized as a secured loan and not a sale, it is the intention of this Agreement that this Agreement shall constitute a security agreement under applicable law, and that the Seller shall be deemed to have granted to the Agent, on behalf of the Investors and the Bank, a duly perfected first priority security interest in the Receivable Interest and the Collections in respect thereto free and clear of any Adverse Claim. (b) It is the intent of the parties to this Agreement that, for federal, state and local income and franchise tax purposes, the sale of the Receivable Interests to the Investors and 57 the Bank will be indebtedness of the Seller, and the Seller and the Investors and the Banks, by entering into this Agreement, agree to treat all transfers of an interest in Receivables and the Related Security pursuant to this Agreement for federal, state and local income and franchise tax purposes, as indebtedness of the Seller. SECTION 10.09. Governing Law. ------------- THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. SECTION 10.10. Execution in Counterparts. ------------------------- This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. SECTION 10.11. Survival of Termination. ----------------------- The provisions of Sections 2.08, 2.09, 6.06, 9.01, 10.04, 10.05 and 10.06 shall survive any termination of this Agreement. SECTION 10.12. FMCW Effective Date. Prior to the FMCW Effective Date (i) all references to an "Originator" or the "Originators" set for in the this Agreement or the Undertaking and all references to a "Seller" or the "Sellers" set forth in the First-Tier Agreement shall be deemed to refer only to FMC and all references to the Receivables shall (other than in Section 3.02(b)) be deemed to only refer to the Receivables originated by FMC. From and after the FMCW Effective Date (i) FMCW shall be deemed to be a party to the First-Tier Agreement, (ii) all references to an "Originator" or the "Originators" set forth in this Agreement and the Undertaking and all references to a "Seller" or the "Sellers" set forth in the First-Tier Agreement shall be deemed to also refer to FMCW as applicable, and (iii) all references to the Receivables shall be deemed to also include the Receivables originated by FMC. 58 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SELLER: FMC FUNDING CORPORATION By: /s/ S. K. Kushner ------------------------------------ Name: S. K. Kushner Title: President c/o FMC Corporation Address: 200 East Randolph Drive Chicago, Illinois 60602 Attention: D. N. Schuchardt Telephone No. 312/861-6143 Facsimile No.: 312/861-5797 SERVICER: FMC CORPORATION By: /s/ S. K. Kushner ------------------------------------ Name: S. K. Kushner Title: VP & Treasurer Address: 200 East Randolph Drive Chicago, Illinois 60601 Attention: D. N. Schuchardt Telephone No. 312/861-6143 Facsimile No.: 312/861-5797 CIESCO: CIESCO, L.P. By: CITICORP NORTH AMERICA, INC. By: /s/ Illegible ------------------------------------ Attorney-in-Fact 450 Mamaroneck Avenue Harrison, N.Y. 10528 Attention: U.S. Securitization Telephone No. (914) 899-7122 Facsimile No. (914) 899-7890 AGENT: CITICORP NORTH AMERICA, INC., as Agent By /s/ Lain J. Gutierrez ------------------------------------ Name: Lain J. Gutierrez Title: Vice President 450 Mamaroneck Avenue Harrison, N.Y. 10528 Attention: U.S. Securitization Telephone No. (914) 899-7122 Facsimile No. (914)899-7890 BANK: CITIBANK, N.A. By: /s/ Lain J. Gutierrez ------------------------------------ Attorney-in-Fact Percentage Interest: 100% 450 Mamaroneck Avenue Harrison, N.Y. 10528 Telephone No. (914) 899-7122 Facsimile No. (914)899-7890 60 Schedule III DEPOSIT BANKS, DEPOSIT ACCOUNTS AND LOCK-BOXES FMC CORPORATION - --------------- Deposit Bank Deposit Accounts Lock-Box Numbers - ------------ ---------------- ---------------- Bank of America 12332-02822 62242 42243 12452 52447 81885-00935 91377 91334 1255-254772 845736 87657-60851 98201 81881-01021 98165 6550105035 (ABA No. 026 009 593) 81888-10003 (ABA No. 071 000 039) 81880-10002 (ABA No. 071 000 039) 81886-10004 (ABA No. 071 000 039) 81884-10005 (ABA No. 071 999 039) 87657-60851 (ABA No. 071 000 039) 81880-01031 (ABA No. 071 000 039) 81881-01021 (ABA No. 071 000 039) First Union 2000213788971 4195 National Bank 2190 3600 3750 2445 1910 Firstar Bank 827-777-4 00164 Wachovia Bank 3606-028949 101505 75688 75103 101289 FMC FUNDING CORPORATION - ----------------------- Bank of America 81888-11791 (ABA No. 071 000 039) First Union 2000002921745 National Bank (ABA No. 053 000 219) Wachovia Bank 6267-077595 (ABA No. 053 100 494) Firstar Bank N.A. 821654936 (ABA No. 042 000 013) Schedule IV Proceedings On April 14, 1998, a jury returned a verdict against the FMC Corporation in an action entitled USA ex rel Boisvert, Henry v. FMC Corporation (Docket Nos. 99-15084 and 99-15085) in the amount of $125.0 million in conjunction with claims under the federal False Claims Act, in which Mr. Henry Boisvert filed and ultimately took to trial allegations that the FMC Corporation had filed false claims for payment in connection with its contract to provide Bradley Fighting Vehicles to the Army between 1981 and 1996. Under law, portions of the jury verdict were subject to doubling or trebling. On December 24, 1998, the U.S. District Court for the Northern District of California entered judgment for Mr. Boisvert in the amount of approximately $87 million. This was approximately $300 million less than the maximum judgment possible under a jury verdict at the trial level. The reduction resulted from several rulings by the District Court in favor of the FMC Corporation in the post-trial motions. The decision was appealed by both parties to the U.S. Court of Appeals for the Ninth Circuit. Cross-appeals are now pending. Both sides are asserting arguments on appeal, and a number of those arguments, if successful, would alter or eliminate the amount of existing judgment. SCHEDULE V List of Trade Names - ------------------- Airport Products Systemms Division Agricultural Products Group Alkili Chemicals Division Active Oxidants Division Food Ingredients Division Pharmaceutical Division Phosphorus Chemical Division Peroxide Division Jetway Systems Division FMC Biopolymers Hydrogen Peroxide Division FMC Wyoming Corporation EXHIBIT A-1 FORM OF FMC DEPOSIT AGREEMENT [Date] [Name and Address of Deposit Bank] Re: FMC Corporation Lock-Box No. Deposit Account No. Ladies and Gentlemen: FMC Corporation (the "Assignor") hereby notifies you that in connection with certain transactions involving the Assignor's accounts receivable, the Assignor will transfer exclusive ownership, dominion and control of its lock-box number ________ (the "Lock-Box") and the corresponding deposit account number ________ maintained with you (the "Deposit Account") to Citicorp North America, Inc., as agent (the "Agent"). These transfers will become effective upon delivery to you of the Lock-Box Notice (as defined below). In connection with the foregoing, the Assignor and the Agent hereby instruct you, beginning on the date of your receipt of the Lock-Box Notice: (i) to collect the monies, checks, instruments and other items of payment mailed to the Lock-Box; (ii) to deposit into the Deposit Account all such monies, checks, instruments and other items of payment (unless otherwise instructed by the Agent); and (iii) to transfer all funds deposited and collected in the Deposit Account pursuant to, and otherwise to comply with, instructions originated by the Agent from time to time directing disposition of the funds in the Deposit Account. You are hereby further instructed: (i) unless and until the Agent notifies you to the contrary at any time upon or after your receipt of the Lock-Box Notice, to make such transfers from the Deposit Account at such times and in such manner as the Assignor, in its capacity as servicer for the Agent, shall from time to time instruct to the extent such instructions are not inconsistent with the instructions set forth herein, and (ii) to permit the Assignor (in its capacity as servicer for the Agent) and the Agent to obtain upon request any information relating to the Deposit Account, including, without limitation, any information regarding the balance or activity of the Deposit Account. The Assignor also hereby notifies you that, beginning on the date of your receipt of the Lock-Box Notice and notwithstanding anything herein or elsewhere to the contrary, the 2 Agent, and not the Assignor, shall be irrevocably entitled to exercise any and all rights in respect of or in connection with the Lock-Box and the Deposit Account, including, without limitation, the right to direct disposition of the funds in the Deposit Account without further consent by the Assignor. The Agent acts as agent for persons having a continuing interest in all of the checks and their proceeds and all monies and earnings, if any, thereon in the Deposit Account, and you shall be the Agent's agent for the purpose of holding and collecting such property. The monies, checks, instruments and other items of payment mailed to the Lock-Box and the funds deposited into the Deposit Account will not be subject to deduction, setoff, banker's lien, or any other right in favor of any person other than the Agent (except that you may set off (i) all amounts due to you in respect of your customary fees and expenses for the routine maintenance and operation of the Deposit Account, and (ii) the face amount of any checks which have been credited to the Deposit Account but are subsequently returned unpaid because of uncollected or insufficient funds). If the balances in the Deposit Account are not sufficient to pay you for any returned check, the Assignor agrees to pay you on demand the amount due you. If the balances in the Deposit Account are not sufficient to compensate you for any fees or charges due you in connection with this Agreement, the Assignor agrees to pay you on demand the amount due you. This Agreement may not be terminated at any time by the Assignor without the prior written consent of the Agent. You may terminate this Agreement upon 60 days prior written notice to the Assignor and the Agent. Upon any termination of this Agreement, (i) the Assignor, prior to delivery to you of the Lock-Box Notice, or the Agent following the delivery to you of the Lock-Box Notice, shall promptly arrange for payments received at the Lock-box or otherwise in or for deposit to the Deposit Account to be forwarded to another bank acceptable to the Agent and processed pursuant to an agreement acceptable to the Agent, and (ii) you shall no longer be required to process payments, but subject to payment in advance by the Assignor of your standard charges for such service, for a period of 90 days following any termination of this Agreement and for any successive 90 day periods mutually agreed upon by you and the Agent, shall forward all payment then held by you and all mail thereafter received at the Lock-Box to such address or account as Agent may direct. Neither this Agreement nor any provision hereof may be changed, amended, modified or waived orally but only by an instrument in writing signed by the Agent and the Assignor. You will not be liable to the Assignor or the Agent for any expense, claim, loss, damage or cost ("Damages") arising out of or relating to your performance under this Agreement other than those Damages which result from your acts or omissions constituting negligence or willful misconduct, subject to the limits in the following sentence. In no event will you be liable for any special, indirect, consequential or exemplary damages or for lost profits. You will be excused from failing to act or delay in acting, and no such failure or delay shall constitute a breach of this Agreement or otherwise give rise to any liability of you, if such failure or delay is caused by circumstances beyond your control, including but not limited, 3 to legal constraint, action or inaction of governmental, civil or military authority, fire, strike, lockout or other labor dispute, war, riot, theft, flood, earthquake or other natural disaster, breakdown of public or private or common carrier communications or transmission facilities, or act, negligence or default of the Assignor or the Agent unless the same shall be caused by your negligence or willful misconduct. You agree to give the Assignor and the Agent prompt notice of any actual or anticipated failure or delay resulting from any of the foregoing but any failure of you to give such notice shall not affect your rights (or the limitation of its liability) hereunder. The Assignor shall indemnify you against, and hold you harmless from, any and all liabilities, claims, costs, expenses and damages of any nature (including but not limited to allocated costs of staff counsel, other reasonable attorneys' fees and any fees and expenses incurred in enforcing this Agreement) in any way arising out of or relating to disputes or legal actions concerning this Agreement, the Lock-Box or any payment; provided, however, that this does not apply to any cost or damage attributable to the gross negligence or intentional misconduct of you. The Assignor's obligations under this paragraph shall survive termination of this Agreement. You shall not assign or transfer your rights or obligations hereunder (other than to the Agent) without the prior written consent of the Agent and the Assignor. Subject to the preceding sentence, this Agreement shall be binding upon each of the parties hereto and their respective successor and assigns, and shall inure to the benefit of, and be enforceable by, the Agent, each of the parties hereto and their respective successor and assigns. You hereby represent that the person signing this Agreement on your behalf is duly authorized by you to so sign. You agree to give the Agent and the Assignor prompt notice if the Lock-Box or the Deposit Account becomes subject to any writ, judgment, warrant of attachment, execution or similar process. The Assignor agrees to pay to you, upon receipt of your invoice, all costs, expenses and attorneys' fees (including allocated costs for in-house legal services) incurred by you in connection with the preparation and administration and enforcement of this Agreement (including any amendments) and any instrument or agreement required hereunder, including but not limited to, any such costs, expenses and fees arising out of the resolution of any conflict, dispute, motion regarding entitlement to rights or rights of action, or other action to enforce your rights in a case arising under Title 11, United States Code. Any notice, demand or other communication required or permitted to be given hereunder shall be in writing and may be personally served or sent by telecopier or by courier service or by United States mail and shall be deemed to have been delivered when delivered in person or by courier service or by telecopier or three (3) Business Days after deposit in the United States mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, (i) the addresses of the parties hereto shall be as set forth below each party's 4 name below, or, as to each party, at such other address as may be designated by such party in a written notice to the other party and the Agent and (ii) the address of the Agent shall be 450 Mamaroneck Avenue, Harrison, New York 10528, Attention: _________________, with a copy to Citicorp North America, Inc., 399 Park Avenue - 6th Floor, New York, New York 10043, Attention: _________________, or at such other address as may be designated by the Agent in a written notice to each of the parties hereto. This Agreement shall be governed be the laws of the State New York (without giving effect to its conflicts of law rules). Please agree to the terms of, and acknowledge receipt of, this notice by signing in the space provided below and please complete any information missing below such space. The transfers of the ownership, dominion and control of the Lock-Box and the Deposit Account, referred to in the first paragraph of this letter, shall become effective upon delivery to you of a notice (the "Lock-Box Notice") in substantially the form attached hereto as Annex A. Very truly yours, FMC CORPORATION By:________________________________ Name: Title: [Address] Attention:____________________ Telecopier No: ACKNOWLEDGED AND AGREED: [NAME OF DEPOSIT BANK] By:________________________________ Name: Title: Date: [Address] Attention:_______________________ Telecopier No.: 5 ACKNOWLEDGMENT AND AUTHORIZATION Citicorp North America, Inc., as agent (the "Agent"), hereby acknowledges the transfer of exclusive ownership, dominion and control of the Lock-Box and the Deposit Account, in each case as defined in and pursuant to the foregoing letter agreement (the "Lock-Box Agreement"), executed by FMC Corporation (the "Assignor") and acknowledged by [Name of Deposit Bank] (the "Bank"), which transfer shall be effective upon delivery to the Bank of the Lock-Box Notice (as defined in the Deposit Agreement). Pursuant to the third paragraph of the Deposit Agreement, the Agent hereby instructs the Bank, beginning on the date of the Lock-Box Notice until the Agent notifies the Bank to the contrary, to accept the directions of the Assignor, as servicer for the Agent, as to the manner and timing of transfers from the Deposit Account. Very truly yours, CITICORP NORTH AMERICA, INC., as Agent By:________________________________ Name: Title: ANNEX A TO DEPOSIT AGREEMENT LOCK-BOX NOTICE Dated: ________, ____ [Name of Deposit Bank] [Address] Attention: Re: Lock-Box No. Deposit Account No. Ladies and Gentlemen: We hereby give you notice that the transfer of the ownership, dominion and control of the above-referenced Lock-Box and the Deposit Account, as described in our letter agreement with you dated __________, ____, is effective as of the date hereof. You are hereby instructed to comply immediately with the instructions originated by Citicorp North America, Inc., as Agent, directing disposition of the funds in such Deposit Account (without further consent by the undersigned) and otherwise to comply with the instructions set forth in that letter agreement. Very truly yours, FMC CORPORATION By:________________________________ Name: Title: ACKNOWLEDGED AND AGREED: [NAME OF DEPOSIT BANK] By:________________________________ Name: Title: Date: EXHIBIT A-2 FORM OF DEPOSIT AGREEMENT [Date] [Name and Address of Deposit Bank] Re: FMC Funding Corporation Lock-Box No. Deposit Account No. Ladies and Gentlemen: FMC Funding Corporation (the "Assignor") hereby notifies you that in connection with certain transactions involving the Assignor's accounts receivable, the Assignor will transfer exclusive ownership, dominion and control of its lock-box number ________ (the "Lock Box") and the corresponding deposit account number ________ maintained with you (the "Deposit Account") to Citicorp North America, Inc., as agent (the "Agent"). These transfers will become effective upon delivery to you of the Lock-Box Notice (as defined below). In connection with the foregoing, the Assignor and the Agent hereby instruct you, beginning on the date of your receipt of the Lock-Box Notice: (i) to collect the monies, checks, instruments and other items of payment mailed to the Lock Box; (ii) to deposit into the Deposit Account all such monies, checks, instruments and other items of payment (unless otherwise instructed by the Agent); and (iii) to transfer all funds deposited and collected in the Deposit Account pursuant to, and otherwise to comply with, instructions originated by the Agent from time to time directing disposition of the funds in the Deposit Account. You are hereby further instructed: (i) unless and until the Agent notifies you to the contrary at any time upon or after your receipt of the Lock-Box Notice, to make such transfers from the Deposit Account at such times and in such manner as the Assignor, in its capacity as servicer for the Agent, shall from time to time instruct to the extent such instructions are not inconsistent with the instructions set forth herein, and (ii) to permit the Assignor (in its capacity as servicer for the Agent) and the Agent to obtain upon request any information relating to the Deposit Account, including, without limitation, any information regarding the balance or activity of the Deposit Account. The Assignor also hereby notifies you that, beginning on the date of your receipt of the Lock-Box Notice and notwithstanding anything herein or elsewhere to the contrary, the Agent, and not the Assignor, shall be irrevocably entitled to exercise any and all rights in respect of or in connection with the Lock-Box and the Deposit Account, including, without limitation, the right to direct disposition of the funds in the Deposit Account without further consent by the Assignor. The Agent acts as agent for persons having a continuing interest in all of the checks and their proceeds and all monies and earnings, if any, thereon in the Deposit Account, and you shall be the Agent's agent for the purpose of holding and collecting such property. The monies, checks, instruments and other items of payment mailed to the Lock-Box and the funds deposited into the Deposit Account will not be subject to deduction, setoff, banker's lien, or any other right in favor of any person other than the Agent (except that you may set off (i) all amounts due to you in respect of your customary fees and expenses for the routine maintenance and operation of the Deposit Account, and (ii) the face amount of any checks which have been credited to the Deposit Account but are subsequently returned unpaid because of uncollected or insufficient funds). If the balances in the Deposit Account are not sufficient to pay you for any returned check, the Assignor agrees to pay you on demand the amount due you. If the balances in the Deposit Account are not sufficient to compensate you for any fees or charges due you in connection with this Agreement, the Assignor agrees to pay you on demand the amount due you. This Agreement may not be terminated at any time by the Assignor without the prior written consent of the Agent. You may terminate this Agreement upon 60 days prior written notice to the Assignor and the Agent. Upon any termination of this Agreement, (i) the Assignor prior to delivery to you of the Lock Box Notice, or the Agent following the delivery to you of the Lock box Notice shall promptly arrange for payments received at the Lockbox(es) or otherwise in or for deposit to the Deposit Account to be forwarded to another bank acceptable to the Agent and processed pursuant to an agreement acceptable to the Agent, and (ii) you shall no longer be required to process payments, but subject to payment in advance by the Assignor of your standard charges for such service, for a period of 90 days following any termination of this Agreement and for any successive 90 day periods mutually agreed upon by you and the Agent, shall forward all payment then held by you and all mail thereafter received at the Lockbox to such address or account as Agent may direct. Neither this Agreement nor any provision hereof may be changed, amended, modified or waived orally but only by an instrument in writing signed by the Agent and the Assignor. You will not be liable to the Assignor or the Agent for any expense, claim, loss, damage or cost ("Damages") arising out of or relating to your performance under this Agreement other than those Damages which result directly from your acts or omissions constituting negligence or willful misconduct, subject to the limits in the following sentence. Your liability is limited to direct money damages actually incurred. In no event will you be liable for any special, indirect, consequential or exemplary damages or for lost profits. You will be excused from failing to act or delay in acting, and no such failure or delay shall constitute a breach of this Agreement or otherwise give rise to any liability of you, if (i) such failure or delay is caused by circumstances beyond your reasonable control, including but not limited to legal constraint, emergency conditions, action or inaction of governmental, 3 civil or military authority, fire, strike, lockout or other labor dispute, war, riot, theft, flood, earthquake or other natural disaster, breakdown of public or private or common carrier communications or transmission facilities, equipment failure, or act, negligence or default of the Assignor or the Agent or (ii) such failure or delay resulted from your reasonable belief that the action would have violated any guideline, rule or regulation of any governmental authority. You agree to give the Assignor and the Agent prompt notice of any actual or anticipated failure or delay resulting from any of the foregoing but any failure of you to give such notice shall not affect your rights (or the limitation of its liability) hereunder. The Assignor shall indemnify you against, and hold you harmless from, any and all liabilities, claims, costs, expenses and damages of any nature (including but not limited to allocated costs of staff counsel, other reasonable attorney's fees and any fees and expenses incurred in enforcing this Agreement) in any way arising out of or relating to disputes or legal actions concerning this Agreement, the Lockbox(es) or any payment; provided however, that this does not apply to any cost or damage attributable to the gross negligence or intentional misconduct of you. The Assignor's obligations under this paragraph shall survive termination of this Agreement. You shall not assign or transfer your rights or obligations hereunder (other than to the Agent) without the prior written consent of the Agent and the Assignor. Subject to the preceding sentence, this Agreement shall be binding upon each of the parties hereto and their respective successor and assigns, and shall inure to the benefit of, and be enforceable by, the Agent, each of the parties hereto and their respective successor and assigns. You hereby represent that the person signing this Agreement on your behalf is duly authorized by you to so sign. You agree to give the Agent and the Assignor prompt notice if the Lock-Box or the Deposit Account becomes subject to any writ, judgment, warrant of attachment, execution or similar process. The Assignor agrees to pay to you, upon receipt of your invoice, all costs, expenses and attorneys' fees (including allocated costs for in-house legal services) incurred by you in connection with the preparation and administration (including any amendments) and enforcement of this Agreement and any instrument or agreement required hereunder, including but not limited to any such costs, expenses and fees arising out of the resolution of any conflict, dispute, motion regarding entitlement to rights or rights of action, or other action to enforce your rights in a case arising under Title 11, United States Code. Any notice, demand or other communication required or permitted to be given hereunder shall be in writing and may be personally served or sent by telecopier or by courier service or by United States mail and shall be deemed to have been delivered when delivered in person or by courier service or by telecopier or three (3) Business Days after deposit in the United States mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, (i) the addresses of the parties hereto shall be as set forth below each party's name below, or, as to each party, at such other address as may be designated by such party in a 4 written notice to the other party and the Agent and (ii) the address of the Agent shall be 450 Mamaroneck Avenue, Harrison, New York 10528, Attention: _________________, with a copy to Citicorp North America, Inc., 399 Park Avenue - - 6th Floor, New York, New York 10043, Attention: _________________, or at such other address as may be designated by the Agent in a written notice to each of the parties hereto. This Agreement shall be governed be the laws of the State New York maintained, (without giving effect to its conflicts of law rules). Please agree to the terms of, and acknowledge receipt of, this notice by signing in the space provided below and please complete any information missing below such space. The transfers of the ownership, dominion and control of the Lock-Box and the Deposit Account, referred to in the first paragraph of this letter, shall become effective upon delivery to you of a notice (the "Lock-Box Notice") in substantially the form attached hereto as Annex A. Very truly yours, FMC FUNDING CORPORATION By:________________________________ Name: Title: [Address] Attention:____________________ Telecopier No: 5 ACKNOWLEDGED AND AGREED: [NAME OF DEPOSIT BANK] By:________________________________ Name: Title: Date: [Address] Attention:_______________________ Telecopier No.: 6 ACKNOWLEDGMENT AND AUTHORIZATION Citicorp North America, Inc., as agent (the "Agent"), hereby acknowledges the transfer of exclusive ownership, dominion and control of the Lock Box and the Deposit Account, in each case as defined in and pursuant to the foregoing letter agreement (the "Lock-Box Agreement"), executed by FMC Funding Corporation (the "Assignor") and acknowledged by [Name of Deposit Bank] (the "Bank"), which transfer shall be effective upon delivery to the Bank of the Lock-Box Notice (as defined in the Deposit Agreement). Pursuant to the third paragraph of the Deposit Agreement, the Agent hereby instructs the Bank, beginning on the date of the Lock-Box Notice until the Agent notifies the Bank to the contrary, to accept the directions of the Assignor, as servicer for the Agent, as to the manner and timing of transfers from the Deposit Account. Very truly yours, CITICORP NORTH AMERICA, INC., as Agent By:________________________________ Name: Title: ANNEX A TO DEPOSIT AGREEMENT LOCK-BOX NOTICE Dated: ________, ____ [Name of Deposit Bank] [Address] Attention: Re: Lock Box No. Deposit Account No. Ladies and Gentlemen: We hereby give you notice that the transfer of the ownership, dominion and control of the above-referenced Lock Box and the Deposit Account, as described in our letter agreement with you dated __________, ____, is effective as of the date hereof. You are hereby instructed to comply immediately with the instructions originated by Citicorp North America, Inc., as Agent, directing disposition of the funds in such Deposit Account (without further consent by the undersigned) and otherwise to comply with the instructions set forth in that letter agreement. Very truly yours, FMC FUNDING CORPORATION By:________________________________ Name: Title: ACKNOWLEDGED AND AGREED: [NAME OF DEPOSIT BANK] By:________________________________ Name: Title: Date: EXHIBIT B ASSIGNMENT AND ACCEPTANCE Reference is made to the Receivables Purchase Agreement dated as November 24, 1999 (as amended, supplemented or otherwise modified from time to time, the "Purchase Agreement") among FMC Funding Corporation (together with its permitted successors and assigns, the "Seller"), CIESCO L.P. (together with its successors and assigns, the "CIESCO"), FMC Corporation (together with its successors and assigns, the "Servicer"), Citibank, N.A. and the other banks from time to time parties thereto (Citibank and such banks, together with their successors and assigns, the "Banks") and Citicorp North America, Inc. as agent for CIESCO and the Banks (together with its successors and assigns, the "Agent"). Terms defined in the Purchase Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as follows: 1. As of the Effective Date (as defined below), the Assignor hereby absolutely and unconditionally sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, with recourse to or representation of any kind (except as set forth below) from Assignor, a percentage interest in and to the Assignor's rights and obligations under the Purchase Agreement and under the other Program Documents equal to the percentage interest specified on Schedule I hereto, including the Assignor's Bank Commitment, Assignor's Percentage and the Assignor's outstanding portion of Capital (such rights and obligations assigned hereby being the "Assigned Interests"). After giving effect to such, sale, assignment and assumption, the Assignee's "Bank Commitment" and the Assignee's "Percentage" will be as set forth on Schedule 1 hereto. 2. The Assignor (i) represents and warrants that immediately prior to the Effective Date it is the legal and beneficial owner of the Assigned Interest free and clear of any Adverse Claim created by the Assignor; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Program Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security of ownership interest created or purported to be created under or in connection with, the Program Documents or any other instrument or document furnished pursuant thereto or the condition or value of the Assigned Interest, the Pool Receivables or any interest therein; and (iii) makes no representation or warranty and assumes no responsibility with respect to the condition (financial or otherwise) of any of the Originators, the Seller or the Servicer or the performance or observance by any Person of any of its obligations under any Program Document or any other instrument or document furnished pursuant thereto. 3. The Assignee (i) confirms that is has received a copy of the Purchase Agreement and the other Program Documents, together with copies of any financial statements delivered pursuant to Section 3.01 of the Purchase Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or CIESCO or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under or in connection with any of the Program Documents; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Program Documents as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Program Documents are required to be performed by it as a Bank; (vi) confirms that the assignment hereunder complies with any applicable legal requirements including the Securities Act of 1933, as amended; (vii) confirms that such Assignee is a United States Person (as defined in Section 7701(a)(30) of the Internal Revenue Code) or that such Assignee shall have provided the Seller with two Internal REvenue SErvice forms 4224 (or a successor form) certifying that the income from the Assigned Interest is effectively connected with the conduct of such Person's trade or business in the United States; and (viii) confirms that such Assignee is not a partnership, grantor trust or S corporation (as such terms are defined in the Internal Revenue Code). 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date of acceptance hereof by the Agent and if required by Schedule I hereto, the Seller, unless a later effective date is specified on Schedule 1 hereto. 5. Upon such acceptance and recording by the Agent, as of the Effective Date, (i) the Assignee shall be a party to and bound by the provisions of the Purchase Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder and under any other Program Document and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Purchase Agreement and under any other Program Document. 6. Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments under the Purchase Agreement in respect of the Assigned Interest to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Purchase Agreement and the Assigned interests for period prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed an original and all of which taken together shall constitute one and the same assignment. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assigment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. Schedule 1 Percentage interest transferred by Assignor: ______% Assignee's "Bank Commitment": $______ Assignee's "Percentage" ______% Assignor: [INSERT NAME OF ASSIGNOR], as Assignor, By:______________________ Authorized Signatory, Assignee: [INSERT NAME OF ASSIGNEE], as Assignee By:______________________ Authorized Signatory Accepted, Consented to and Acknowledged this __ day of ______, 19__ CITICORP NORTH AMERICA, INC., as Agent By:______________________ Authorized Signatory [FMC FUNDING CORPORATION] By:______________________ Authorized Signatory/1/ ______________________ /1/ If consent of Seller is required pursuant to Section 10.03 of the Purchase Agreement. EXHIBIT C Form of Funds Transfer Letter FMC FUNDING CORPORATION 200 East Randolph Drive Chicago, Illinois 60602 [Date] Citicorp North America, Inc., as Agent 450 Mamaroneck Avenue Harrison, New York 10528 Re: Funds Transfers --------------- Gentlemen: This letter is the Funds Transfer Letter referred to in Section 2.02(b) of, the Receivables Purchase Agreement, dated as of November 24, 1999, as modified, amended or restated from time to time (the "RPA"; terms used in the RPA, unless otherwise defined herein, having the meaning set forth therein) among the undersigned, CIESCO, L.P., Citibank, N.A., and you, as Agent for the Investors and the Banks. You are hereby directed to deposit [amount] on [date] representing amounts paid for Receivable Interests to Account #: 81885-00935, Credit: FMC Corporation, at Bank of America - Chicago Branch, Chicago, Illinois, ABA #: 071 000 039. The provisions of this Letter may not be changed or amended orally, but only by a writing in substantially the form of this letter signed by the undersigned and acknowledged by you. Very truly yours, FMC FUNDING CORPORATION By:________________________________ Name: Title: EX-10.18 7 dex1018.txt CONSULTING AGREEMENT EXHIBIT 10.18 CONSULTING AGREEMENT This Consulting Agreement ("Agreement") dated October 31, 2001, is made and entered into by and between FMC CORPORATION, a Delaware corporation (the "Company") and Robert N. Burt (the "Advisor"). The Advisor has been employed by the Company and retires from employment with the Company on October 31, 2001. The Advisor has been Chief Executive Officer of the Company for ten years, and the Company wishes to continue to have access to his familiarity with the Company's strategy, business and customers. The parties therefore agree as follows: 1. Advisory Services. The Advisor shall render the services described in this Section for the period beginning on November 1, 2001 and ending on October 31, 2003, (the "Advisory Period"). During the Advisory Period, the Advisor will provide such advisory services concerning the business, affairs and management of the Company as may be reasonably requested by the Board of Directors or the Chief Executive Officer of the Company, but shall not be required to devote more than 30 hours each month to such requested services. Services shall be performed at a time and place mutually convenient to both parties and consistent with Advisor's other activities. If at anytime during the Advisory Period, the Advisor engages in full-time commercial employment, outside of his Advisory activities, the Advisory Period shall terminate and the Company shall have no further obligations under this Agreement other than with respect to earned and unpaid accrued fees and benefits. Company and Advisor acknowledge and agree, subject to Section 8 of this Agreement, that during the Advisory Period, the Advisor may provide less than full-time services to third parties (including serving as a member of the Board of Directors of any third party). During the Advisory Period, the Advisor shall be entitled to receive an annual fee of $400,000 payable monthly, and shall be entitled to the benefits described herein. In the event of the Advisor's illness or disability or death so as to be unable to render services under this Agreement, the Company shall continue to make payments hereunder to the Advisor or the Advisor's heirs or personal representative, as the case may be. 2. Office, Tax Preparation and Financial Planning. Until the Advisor reaches age 70, the Company will provide (a) reasonable office space, related parking and administrative support, so long as requested by the Advisor, and (b) continuing tax preparation and financial planning assistance. 3. Annual Medical Examination. The Advisor shall be entitled during the Advisory Period at the Company's expense to an annual executive physical examination similar to such examinations available to other executives of the Company. 4. Club Dues. During the Advisory Period, the Company shall continue to pay on behalf of the Advisor monthly dues and other charges in connection with membership at Robert Trent Jones and Castle Pines Country Clubs, so as to permit the Advisor to conduct advisory business for the Company and represent the Company in the business community. The Advisor agrees to host events for the Company at either facility. 5. Expenses. The Company shall, upon receipt of adequate supporting documentation, reimburse the Advisor for reasonable expenses incurred by the Advisor in rendering services under this Agreement, subject to the Company's expense reimbursement policies. The Company shall provide for availability of the Company airplane for the business use of the Advisor so long as the Company continues to own the airplane. Such availability will acknowledge the possible priority of such aircraft for other business purposes of the Company. 6. Independent Contractor Relationship. In providing the requested services under this Agreement, Advisor acknowledges and agrees that he will be serving as an independent contractor. The Company and the Advisor agree the Advisor shall have no obligation to work any particular schedule and the Company has no right to control or direct the details, manner or means in which the Advisor provides his services. Other than as provided in this Agreement, the Company is not obligated to provide any employee benefits whether retirement, welfare or otherwise, for the Advisory Period and is not liable for any employment tax or withholding tax obligations in relation to the fees and benefits paid hereunder. As an independent contractor, Advisor shall not be eligible to participate in any employee benefits plans (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended), sponsored by Company or any of its affiliates. 7. Termination for Cause. The Company may terminate this Agreement and all of the Company's obligations under this Agreement (other than fees and benefits accrued through the date of termination) by action of the Company's Board of Directors, or a committee thereof, because of the Consultant's conviction (treating a nolo contender plea as a conviction) of a felony (whether or not any right to appeal has been or may be exercised) or willful refusal without proper cause to perform his obligations under this Agreement or because of the Consultant's breach of any of the covenants provided for in Sections 8, 9 or 10. 8. Noncompetition Agreement. During the Advisory Period, the Advisor shall not, without the written consent of the Company, directly or indirectly be employed or retained by, or render any services for, or be financially interested in, any firm or corporation engaged in any business which competes with any business in which the Company or any of its affiliates may engage during the Advisory Period. The foregoing restriction shall not apply to the purchase by the Advisor of up to 5% of the outstanding shares of capital stock of any corporation whose securities are listed on any national securities exchange. 2 9. Loyalty Commitments. During the Advisory Period or any time thereafter: (i) the Advisor shall not disclose any confidential proprietary or trade secret business information about the affairs of the Company or any of its affiliates; and (ii) the Advisor shall not, without the prior written consent of the Company, induce or attempt to induce any employee or agency representative of the Company or any affiliate to leave the employment or representative of the Company or any affiliate. 10. Ownership of Work Product. The Advisor acknowledges that in the course of providing services under this Agreement during the Advisory Period, he may conceive of, discover, invent or create inventions improvements, new contributions, literary property, material, ideas and discoveries, whether patentable or copyrightable or not (all of the foregoing being collectively referred to herein as "Work Product"), and that various business opportunities shall be presented to him by reason of his relationship to the Company. The Advisor acknowledged that all of the foregoing shall be owned by and belong exclusively to the Company and that he shall have no personal interest therein, provided that they are either related in any manner to the business (commercial or experimental) of the Company, or are, in the case of Work Product, conceived or made on the Company's time or with the use of the Company's facilities or materials, or, in the case of business opportunities, are presented to him for the possible interest or participation of the Company. 11. Specific Remedy. In addition to such other rights and remedies as the Company may have at equity or in law with respect to any breach of this Agreement, if the Advisor commits a material breach of any of the provisions of Section 8, 9, or 10, the Company shall have the right and remedy to have such provisions specifically enforced by any court having equity jurisdiction, it begin acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. 12. Notices. Any notices shall be deemed to have been delivered for the purposes of this Agreement when delivered in person or placed in sealed, postpaid envelope addressed to such party and mailed by registered mail, return receipt requested to: Robert N. Burt FMC Corporation 5 Kent Road 1735 Market Street Winnetka, Il 60093 Philadelphia, PA 19103 13. Arbitration. Any controversy arising from or related to the Agreement, other than those addressed in Section 11, shall be determined by arbitration in the City of Philadelphia, PA, in accordance with rules of the American Arbitration Association, and judgment upon any such determination or award may be entered in any court having jurisdiction. In the event of any arbitration between the Advisor and the Company related to the Agreement, if the Advisor shall be 3 the successful party, the Company will indemnify and reimburse the Advisor against any reasonable legal fees and expenses incurred in such arbitration. 14. Separability of Provisions. The terms of this Agreement shall be considered to be separate from each other, and in the event any shall be found to be invalid, it shall not affect the validity of the remaining terms. 15. Binding Effect. This Agreement shall be binding upon and inure to the benefits of (i) the Company and its successors, and (ii) the Consultant, his personal representatives, heirs and legatees. 16. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes and revokes all prior oral or written understandings between the parties relating to the Advisor's services. The Agreement may not be changed orally, but only by a written document signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 17. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the substantive laws of the State of Pennsylvania applicable to agreements made to be performed entirely in Pennsylvania. FMC CORPORATION William G. Walter By: -------------------------- /s/ Robert N. Burt -------------------------- Robert N. Burt 4 EX-10.19 8 dex1019.txt CONSULTING AGREEMENT DATED 02/02/2001 EXHIBIT 10.19 FMC Corporation Executive Offices 200 East Randolph Drive Chicago Illinois 60601 312 861 6000 [LOGO] FMC August 2, 2001 Stephen F. Gates 70 East Cedar Street Chicago, IL 60611 Dear Steve: FMC Corporation desires to engage you for legal counseling and consulting services after your separation from FMC. FMC agrees to retain you and you agree to render professional services as requested by FMC as follows: 1. For an initial six months at the rate of $30,000 per month for up to 1/3 of your professional time; 2. For a subsequent six months at the rate of $15,000 per month for up to 1/6 of your professional time; 3. For a final period of six months at your applicable hourly rate for time as mutually agreed. Areas of emphasis are expected to be corporate governance, M&A, Legal policies, board and shareholder issues, other corporate matters, and dispute solution. Services will be provided on a mutually determined schedule accommodating FMC's meetings, filings, and transactional schedules. Reasonable travel and living expenses outside of Chicago at FMC's request will be reimbursed. You will submit monthly statements of time expended and expenses. Time covered by retainer paid but not fully utilized in a period can be utilized in the subsequent period. FMC will endeavor to place additional appropriate legal engagements with a law firm of sound reputation with which you may associate as follows: $300,000 of legal fees during the first twelve months of this retainer and $100,000 of legal fees during the following six months. Services under this agreement are acknowledged to be as an independent lawyer and advisor and not as an employee. You agree to be responsible for all taxes resulting from this retainer. Please sign below to indicate this expresses our agreement. Very truly yours, /s/ William G Walter William G. Walter Executive Vice President Accepted and agreed to; /s/Stephen F Gates 08-02-01 - ------------------ -------- Stephen F. Gates Date EX-10.20 9 dex1020.txt EXECUTIVE SEVERANCE AGREEMENT DATED 10/01/2001 EXHIBIT 10.20 Form IA FMC Corporation Executive Severance Agreement ----------------------------- THIS AGREEMENT is made and entered into as of the 1/st/ day of October, ----- ------- 2001, by and between FMC Corporation (hereinafter referred to as the "Company") and William G. Walter (hereinafter referred to as the "Executive"). ----------------- WHEREAS, the Board has approved the Company's entering into severance agreements with certain key executives of the Company; WHEREAS, the Executive is a key executive of the Company; WHEREAS, should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board should be able to rely upon the Executive to continue in the Executive's position, and that the Company should be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; WHEREAS, the Executive agrees that the terms of this Agreement completely replace and supersede the provisions of any prior executive severance agreement with the Company; WHEREAS, should the possibility of a Change in Control arise, in addition to the Executive's regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its shareholders, and to take such other actions as the Board might determine to be appropriate; WHEREAS, the Executive acknowledges that neither the IPO nor the Distribution will result in a Change in Control; and WHEREAS, the Executive and the Company desire that the terms of this Agreement will completely replace and supersede the provisions set forth in the Plan, setting forth the terms and provisions with respect to the Executive's entitlement to payments and benefits following a Change in Control. NOW THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of the Executive's advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Executive agree as follows: -1- Article 1. Establishment, Term, and Purpose This Agreement will commence on the Effective Date and will continue in effect for a three (3) year term, until the third anniversary of the Effective Date. Upon each anniversary of the Effective Date, the term of this Agreement will be extended automatically for one (1) additional year, unless the Committee delivers written notice six (6) months prior to such anniversary to the Executive that this Agreement will not be extended. In such case, this Agreement will terminate at the end of the term, or extended term, then in progress. However, in the event a Change in Control occurs during the original or any extended term, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; and (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. Article 2. Definitions Whenever used in this Agreement, the following terms will have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized. 2.1. Base Salary means the salary of record paid to an Executive as annual ----------- salary, excluding amounts received under incentive or other bonus plans, whether or not deferred. 2.2. Beneficiary means the persons or entities designated or deemed designated ----------- by the Executive pursuant to Section 11.2 herein. 2.3. Board means the Board of Directors of the Company. ----- 2.4. Cause means: ----- (a) the Executive's Willful and continued failure to substantially perform the Executive's employment duties in any material respect (other than any such failure resulting from physical or mental incapacity or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes the Executive has failed to perform the Executive's duties, and after the Executive has failed to resume substantial performance of the Executive's duties on a continuous basis within thirty (30) calendar days of receiving such demand; (b) the Executive's Willfully engaging in conduct (other than conduct covered under (a) above) which is demonstrably and materially injurious to the Company or an Affiliate; or -2- (c) the Executive's having been convicted of, or pleading guilty or nolo contendere to, a felony under federal or state law on or prior to a Change in Control. 2.5. Change in Control means the happening of any of the following events: ----------------- (a) An acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (A) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition pursuant to a transaction which complies with Subsections (i), (ii) and (iii) of Subsection (C) of this Section 2.5; (b) A change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (such Board will be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section 2.5, that any individual who becomes a member of the Board subsequent to the Effective Date, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) will be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board will not be so considered as a member of the Incumbent Board; (c) Consummation of a reorganization, merger or consolidation, sale or other disposition of all or substantially all of the assets of the Company, or acquisition by the Company of the assets or stock of another entity ("Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (i) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote -3- generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, twenty percent (20%) or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction, and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (d) The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding the foregoing, neither the IPO, nor the Distribution will be treated as a Change in Control of the Company. 2.6. Code means the Internal Revenue Code of 1986, as amended from time to ---- time, and any successor thereto. 2.7. Committee means the Compensation and Organization Committee of the --------- Board or any other committee of the Board appointed to perform the functions of the Compensation and Organization Committee. 2.8. Company means FMC Corporation, a Delaware corporation, or any successor ------- thereto as provided in Article 10 herein. 2.9. Disability means complete and permanent inability by reason of illness ---------- or accident to perform the duties of the occupation at which the Executive was employed when such disability commenced. 2.10. Distribution means the Company's distribution of its interest in FMC ------------ Technologies, Inc. 2.11. Effective Date means the date of this Agreement set forth above. -------------- 2.12. Effective Date of Termination means the date on which a Qualifying ----------------------------- Termination occurs which triggers the payment of Severance Benefits hereunder. -4- 2.13. Exchange Act means the Securities Exchange Act of 1934, as amended from ------------ time to time, and any successor thereto. 2.15. Good Reason means, without the Executive's express written consent, the ----------- occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including, without limitation, offices, titles and reporting requirements) as an employee of the Company (including, without limitation, any material change in duties or status as a result of the stock of the Company ceasing to be publicly traded or of the Company becoming a subsidiary of another entity), or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from the greatest of (i) those in effect on the Effective Date; (ii) those in effect during the fiscal year immediately preceding the year of the Change in Control; and (iii) those in effect immediately preceding the Change in Control; (b) The Company's requiring the Executive to be based at a location which is at least fifty (50) miles further from the Executive's then current primary residence than is such residence from the office where the Executive is located at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business obligations as of the Effective Date or as the same may be changed from time to time prior to a Change in Control; (c) A reduction by the Company in the Executive's Base Salary as in effect on the Effective Date or as the same may be increased from time to time; (d) A material reduction in the Executive's level of participation in any of the Company's short- and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the Executive participates from the greatest of the levels in place: (i) on the Effective Date; (ii) during the fiscal year immediately preceding the fiscal year of the Change in Control; and (iii) on the date immediately preceding the date of the Change in Control; (e) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Article 10 herein; or (f) Any termination of Executive's employment by the Company that is not effected pursuant to a Notice of Termination. -5- The existence of Good Reason will not be affected by the Executive's temporary incapacity due to physical or mental illness not constituting a Disability. The Executive's continued employment will not constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. 2.15. IPO means the initial registered public offering by the Company of --- shares of common stock of the Company. 2.16. Notice of Termination means a written notice which indicates the --------------------- specific termination provision in this Agreement relied upon, and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.17. Person has the meaning ascribed to such term in Section 3(a)(9) of the ------ Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as provided in Section 13(d). 2.18. Qualifying Termination means any of the events described in Section 3.2 ---------------------- herein, the occurrence of which triggers the payment of Severance Benefits hereunder. 2.19. Retirement means the Executive's voluntary termination of employment in ---------- a manner that qualifies the Executive to receive immediately payable retirement benefits from the FMC Corporation Salaried Employees' Retirement Program. 2.20. Severance Benefits means the payment of severance compensation as --------- provided in Section 3.3 herein. 2.21. Trust means the Company grantor trust to be created pursuant to Article ----- 6 of this Agreement. 2.22. Willful means any act or omission by the Executive that was in good ------- faith and without a reasonable belief that the action or omission was in the best interests of the Company or its affiliates. Any act or omission based upon authority given pursuant to a duly adopted Board resolution, or, upon the instructions of any senior officer of the Company, or based upon the advice of counsel for the Company will be conclusively presumed to be taken or omitted by the Executive in good faith and in the best interests of the Company and/or its affiliates. Article 3. Severance Benefits 3.1. Right to Severance Benefits. The Executive will be entitled to receive --------------------------- from the Company Severance Benefits, as described in Section 3.3 herein, if there has been a Change in Control of the Company and if, within twenty-four (24) calendar months following the Change in Control, a Qualifying Termination of the Executive has occurred. -6- The Executive will not be entitled to receive Severance Benefits if the Executive's employment is terminated (i) for Cause, (ii) due to a voluntary termination without Good Reason other than during the thirteenth (13th) calendar month following the month in which a Change in Control occurred, or (iii) due to death or Disability after the thirteenth (13th) calendar month following the month in which a Change in Control occurs. 3.2. Qualifying Termination. The occurrence of any one or more of the ----------------------- following events will trigger the payment of Severance Benefits to the Executive under this Agreement: (a) An involuntary termination of the Executive's employment by the Company for reasons other than Cause, Disability or death within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs; (b) A voluntary termination by the Executive for Good Reason within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs pursuant to a Notice of Termination delivered to the Company by the Executive; (c) A voluntary termination by the Executive within the thirteenth (13th) calendar month following the month in which a Change in Control occurs pursuant to a Notice of Termination delivered to the Company by the Executive; (d) The Executive's termination of employment due to Retirement, Disability or death at any time following a Change in Control and prior to the thirteenth (13/th/) calendar month following the month in which the Change in Control occurs; or (e) The Company or any successor company breaches any of the provisions of this Agreement. 3.3. Description of Severance Benefits. In the event the Executive becomes --------------------------------- entitled to receive Severance Benefits, as provided in Sections 3.1 and 3.2 herein, the Company will pay to the Executive (or in the event of the Executive's death, the Executive's Beneficiary) and provide him with the following: (a) An amount equal to three (3) times the highest rate of the Executive's annualized Base Salary in effect at any time up to and including the Effective Date of Termination. (b) An amount equal to three (3) times the greater of (i) the Executive's highest annualized target total Management Incentive Award granted under the Company's Incentive Compensation and Stock Plan for any -7- plan year up to and including the plan year in which the Executive's Effective Date of Termination occurs, and (ii) the average of the actual total Management Incentive Awards paid (or payable) to the Executive for the two plan years immediately preceding the Effective Date of Termination, or for such lesser number of such plan years for which the Executive was eligible to earn a Management Incentive Award, annualized for any year that the Executive was not employed by the Company for the entire plan year. For purposes of determining actual total Management Incentive Awards under the preceding sentence, any amounts the Executive deferred will be treated as if they had been paid to the Executive, rather than deferred. (c) An amount equal to the Executive's unpaid Base Salary, and unused and accrued vacation pay, earned or accrued through the Effective Date of Termination. (d) An amount equal to the target total Management Incentive Award established for the plan year in which the Executive's Effective Date of Termination occurred, prorated through the Effective Date of Termination. (e) A continuation of the Company's welfare benefits of health care, life and accidental death and dismemberment, and disability insurance coverage for three (3) full years after the Effective Date of Termination. These benefits will be provided to the Executive (and to the Executive's covered spouse and dependents) at the same premium cost, and at the same coverage level, as in effect as of the date of the Change in Control. The continuation of these welfare benefits will be discontinued prior to the end of the three (3) year period if the Executive has available substantially similar benefits at a comparable cost from a subsequent employer, as determined by the Committee. The date that welfare benefits cease to be provided under this paragraph will be the date of the Executive's qualifying event for continuation coverage purposes under Code Section 4980B(f)(3)(B). Awards granted under the FMC Corporation Incentive Compensation and Stock Plan, and other incentive arrangements adopted by the Company will be treated pursuant to the terms of the applicable plan. The aggregate benefits accrued by the Executive as of the Effective Date of Termination under the FMC Corporation Salaried Employees' Retirement Program, the FMC Corporation Savings and Investment Plan, the FMC Corporation Salaried Employees' Equivalent Retirement Plan, the FMC Corporation Non-Qualified Savings and Investment Plan and other savings and retirement plans sponsored by the Company will be distributed pursuant to the terms of the applicable plan. For all purposes under the Company's nonqualified retirement plans (including, but not limited to, benefit calculation and benefit commencement), it will be assumed that the Executive's employment continued following the Effective Date of Termination for -8- three (3) full years (i.e., three (3) additional years of age and service credits will be added); provided, however, that for purposes of determining "final average pay" under such programs, the Executive's actual pay history as of the Effective Date of Termination will be used. 3.4. Termination for Disability. If the Executive's employment is terminated due -------------------------- to Disability, the Executive will receive the Executive's Base Salary through the Effective Date of Termination; the Executive's benefits will be determined in accordance with the Company's disability, retirement, survivor's benefits, insurance and other applicable plans and programs then in effect; and, if such termination occurs after a Change in Control and prior to the thirteenth (13/th/) calendar month following the month in which the Change in Control occurs, the Executive will receive the Severance Benefits described in Section 3.3. If the Executive's employment is terminated due to Disability after the thirteenth (13/th/) calendar month following the month in which a Change in Control occurs, he will not be entitled to the Severance Benefits described in Section 3.3. 3.5. Termination upon Death. If the Executive's employment is terminated due to ---------------------- death, the Executive's benefits will be determined in accordance with the Company's retirement, survivor's benefits, insurance and other applicable programs of the Company then in effect; and, if such termination occurs after a Change in Control and prior to the thirteenth (13/th/) calendar month following the month in which the Change in Control occurs, Executive will receive the Severance Benefits described in Section 3.3. If the Executive's employment is terminated due to death after the thirteenth (13/th/) calendar month following the month in which a Change in Control occurs, neither the Executive nor the Executive's Beneficiary will be entitled to the Severance Benefits described in Section 3.3. 3.6. Termination for Cause, or Other Than for Good Reason or Retirement. ------------------------------------------------------------------ Following a Change in Control of the Company, if the Executive's employment is terminated either: (a) by the Company for Cause; or (b) by the Executive (other than for Retirement, Good Reason, or under circumstances giving rise to a Qualifying Termination described in Section 3.2(c) herein), the Company will pay the Executive an amount equal to the Executive's Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other amounts to which the Executive is entitled under any plans of the Company, at the time such payments are due and the Company will have no further obligations to the Executive under this Agreement. 3.7. Notice of Termination. Any termination of employment by the Company or by --------------------- the Executive for Good Reason or during the thirteenth (13/th/) calendar month following the month in which a Change in Control occurs will be communicated by a Notice of Termination. -9- Article 4. Form and Timing of Severance Benefits 4.1. Form and Timing of Severance Benefits. The Severance Benefits described in ------------------------------------- Sections 3.3 (a), (b), (c) and (d) herein will be paid in cash to the Executive (or the Executive's Beneficiary, if applicable) in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 4.2. Withholding of Taxes. The Company will be entitled to withhold from any -------------------- amounts payable under this Agreement all taxes as may be legally required (including, without limitation, any United States federal taxes and any other state, city, or local taxes). Article 5. Excise Tax Equalization Payment 5.1. Excise Tax Equalization Payment. In the event that the Executive (or the ------------------------------- Executive's Beneficiary, if applicable) becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), whether or not the Executive has terminated employment with the Company, if all or any part of the Total Payments will be subject to the tax imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), (the "Excise Tax") the Company will pay to the Executive in cash an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax upon the Total Payments and any federal, state, and local income taxes, penalties, interest, and Excise Tax upon the Gross-Up Payment provided for by this Section 5.1 (including FICA and FUTA), will be equal to the Total Payments. 5.2. Tax Computation. All determinations of whether any of the Total Payments --------------- will be subject to the Excise Tax, the amounts of such Excise Tax, whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be used in arriving at such determinations, shall be made by a nationally recognized certified public accounting firm that does not serve as an accountant or auditor for any individual, entity or group effecting the Change in Control as designated by the Company (the "Accounting Firm"). The Accounting Firm will provide detailed supporting calculations to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive or the Company requesting a calculation hereunder. The Gross-Up Payment will be made by the Company to the Executive as soon as practical following the Accounting Firm's determination of the Gross-Up Payment, but in no event beyond thirty (30) days from the Effective Date of Termination. All fees and expenses of the Accounting Firm will be paid by the Company. For purposes of determining the amount of the Gross-Up Payment, the Executive will be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made, -10- and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Effective Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. 5.3. Subsequent Recalculation. In the event the Internal Revenue Service adjusts ------------------------ the computations to be made pursuant to Section 5.2 herein, and as a result of such adjustment the Gross-Up Payment made to the Executive is less than the greatest Gross-Up Payment that the Executive is entitled to receive under Section 5.2, the Company will pay to the Executive an amount equal to the difference between the greatest Gross-Up Payment the Executive is entitled to receive, and the Gross-Up Payment initially made to the Executive, plus a market rate of interest, as determined by the Committee, for the period commencing on the date the first Gross-Up Payment is made, and ending on the day immediately preceding the date the subsequent Gross-Up Payment is made. Article 6. Establishment of Trust As soon as practicable following the Effective Date hereof, the Company will create a Trust (which will be a grantor trust within the meaning of Sections 671-678 of the Code) for the benefit of the Executive and Beneficiaries, as appropriate. The Trust will have a Trustee as selected by the Company, and will have certain restrictions as to the Company's ability to amend the Trust or cancel benefits provided thereunder. Any assets contained in the Trust will, at all times, be specifically subject to the claims of the Company's general creditors in the event of bankruptcy or insolvency; such terms to be specifically defined within the provisions of the Trust, along with the required procedure for notifying the Trustee of any bankruptcy or insolvency. At any time following the Effective Date hereof, the Company may, but is not obligated to, deposit assets in the Trust in an amount equal to or less than the aggregate Severance Benefits which may become due to the Executive under Sections 3.3 (a), (b), (c) and (d) and 5.1 of this Agreement. As soon as practicable after the Company has knowledge that a Change in Control is imminent, but no later than the day immediately preceding the date of the Change in Control, the Company will deposit assets in such Trust in an amount equal to the estimated aggregate Severance Benefits which may become due to the Executive under Sections 3.3 (a), (b), (c) and (d), 5.1 and 8.1 of this Agreement. Such deposited amounts will be reviewed and increased, if necessary, every six (6) months following a Change in Control to reflect the Executive's estimated aggregate Severance Benefits at such time. Article 7. The Company's Payment Obligation The Company's obligation to make the payments and the arrangements provided for herein will be absolute and unconditional, and will not be affected by any -11- circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder will be paid without notice or demand. Each and every payment made hereunder by the Company will be final, and the Company will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive will not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment will in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 3.3(e) herein. Notwithstanding anything in this Agreement to the contrary, if Severance Benefits are paid under this Agreement, no severance benefits under any program of the Company, other than benefits described in this Agreement, will be paid to the Executive. Article 8. Fees and Expenses To the extent permitted by law, the Company will pay as incurred (within ten (10) days following receipt of an invoice from the Executive) all legal fees, costs of litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the Severance Benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict (including, without limitation, conflicts related to the calculations under Section 5 hereof) between the parties pertaining to this Agreement. Article 9. Outplacement Assistance Following a Qualifying Termination, other than a voluntary termination by the Executive during the thirteenth (13th) calendar month following the month in which a Change in Control occurs (as described in Section 3.2 herein), the Executive will be reimbursed by the Company for the costs of all outplacement services obtained by the Executive within the two (2) year period after the Effective Date of Termination; provided, however, that the total reimbursement for such outplacement services will be limited to an amount equal to fifteen percent (15%) of the Executive's Base Salary as of the Effective Date of Termination. Article 10. Successors and Assignment 10.1. Successors to the Company. The Company will require any successor ------------------------- (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or -12- substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. 10.2. Assignment by the Executive. This Agreement will inure to the benefit of --------------------------- and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Agreement to the Executive's Beneficiary. If the Executive has not named a Beneficiary, then such amounts will be paid to the Executive's devisee, legatee, or other designee, or if there is no such designee, to the Executive's estate, and such designee, or the Executive's estate will be treated as the Beneficiary hereunder. Article 11. Miscellaneous 11.1. Employment Status. Except as may be provided under any other agreement ----------------- between the Executive and the Company, the employment of the Executive by the Company is "at will," and may be terminated by either the Executive or the Company at any time, subject to applicable law. 11.2. Beneficiaries. The Executive may designate one or more persons or entities ------------- as the primary and/or contingent Beneficiaries of any Severance Benefits, including, without limitation, payments under Section 5 hereof, owing to the Executive under this Agreement. Such designation must be in the form of a signed writing acceptable to the Committee. The Executive may make or change such designations at any time. 11.3. Severability. In the event any provision of this Agreement will be held ------------ illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Agreement, and the Agreement will be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and will have no force and effect. 11.4. Modification. No provision of this Agreement may be modified, waived, or ------------ discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. 11.5. Applicable Law. To the extent not preempted by the laws of the United --------------- States, the laws of the state of Delaware will be the controlling law in all matters relating to this Agreement. -13- 11.6 Indemnification. To the full extent permitted by law, the Company will, --------------- both during and after the period of the Executive's employment, indemnify the Executive (including by advancing him expenses) for any judgments, fines, amounts paid in settlement and reasonable expenses, including any attorneys' fees, incurred by the Executive in connection with the defense of any lawsuit or other claim to which he is made a party by reason of being (or having been) an officer, director or employee of the Company or any of its subsidiaries. The Executive will be covered by director and officer liability insurance to the maximum extent that that insurance covers any officer or director (or former officer or director) of the Company. IN WITNESS WHEREOF, the parties have executed this Agreement on this 30/th/ day ----- day of October, 2001. ------- FMC Corporation, Inc. Executive: By: /s/ Robert N. Burt /s/ William G. Walter ---------------------------- -------------------------- Its: Chairman Attest: /s/ Kenneth R. Garrett ---------------------------- -14- EX-10.21 10 dex1021.txt EXECUTIVE SEVERANCE AGREEMENT DATED 12/31/2001 EXHIBIT 10.21 FORM I FMC Corporation Executive Severance Agreement ----------------------------- THIS AGREEMENT is made and entered into as of the 31/st/ day of December, ------ -------- 2001, by and between FMC Corporation (hereinafter referred to as the "Company") and Robert I. Harries (hereinafter referred to as the "Executive"). ----------------- WHEREAS, the Board has approved the Company's entering into severance agreements with certain key executives of the Company; WHEREAS, the Executive is a key executive of the Company; WHEREAS, should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board should be able to rely upon the Executive to continue in the Executive's position, and that the Company should be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; WHEREAS, the Executive agrees that the terms of this Agreement completely replace and supersede the provisions of any prior executive severance agreement with the Company; WHEREAS, should the possibility of a Change in Control arise, in addition to the Executive's regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its shareholders, and to take such other actions as the Board might determine to be appropriate; WHEREAS, the Executive acknowledges that neither the IPO nor the Distribution will result in a Change in Control; and WHEREAS, the Executive and the Company desire that the terms of this Agreement will completely replace and supersede the provisions set forth in the Plan, setting forth the terms and provisions with respect to the Executive's entitlement to payments and benefits following a Change in Control. NOW THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of the Executive's advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Executive agree as follows: -1- Article 1. Establishment, Term, and Purpose This Agreement will commence on the Effective Date and will continue in effect for a three (3) year term, until the third anniversary of the Effective Date. Upon each anniversary of the Effective Date, the term of this Agreement will be extended automatically for one (1) additional year, unless the Committee delivers written notice six (6) months prior to such anniversary to the Executive that this Agreement will not be extended. In such case, this Agreement will terminate at the end of the term, or extended term, then in progress. However, in the event a Change in Control occurs during the original or any extended term, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; and (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. Article 2. Definitions Whenever used in this Agreement, the following terms will have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized. 2.1. Base Salary means the salary of record paid to an Executive as annual ----------- salary, excluding amounts received under incentive or other bonus plans, whether or not deferred. 2.2. Beneficiary means the persons or entities designated or deemed designated ----------- by the Executive pursuant to Section 11.2 herein. 2.3. Board means the Board of Directors of the Company. ----- 2.4. Cause means: ----- (a) the Executive's Willful and continued failure to substantially perform the Executive's employment duties in any material respect (other than any such failure resulting from physical or mental incapacity or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes the Executive has failed to perform the Executive's duties, and after the Executive has failed to resume substantial performance of the Executive's duties on a continuous basis within thirty (30) calendar days of receiving such demand; (b) the Executive's Willfully engaging in conduct (other than conduct covered under (a) above) which is demonstrably and materially injurious to the Company or an Affiliate; or -2- (c) the Executive's having been convicted of, or pleading guilty or nolo contendere to, a felony under federal or state law on or prior to a Change in Control. 2.5. Change in Control means the happening of any of the following events: ----------------- (a) An acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (A) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition pursuant to a transaction which complies with Subsections (i), (ii) and (iii) of Subsection (C) of this Section 2.5; (b) A change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (such Board will be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section 2.5, that any individual who becomes a member of the Board subsequent to the Effective Date, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) will be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board will not be so considered as a member of the Incumbent Board; (c) Consummation of a reorganization, merger or consolidation, sale or other disposition of all or substantially all of the assets of the Company, or acquisition by the Company of the assets or stock of another entity ("Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (i) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote -3- generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, twenty percent (20%) or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction, and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (d) The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding the foregoing, neither the IPO, nor the Distribution will be treated as a Change in Control of the Company. 2.6. Code means the Internal Revenue Code of 1986, as amended from time to ---- time, and any successor thereto. 2.7. Committee means the Compensation and Organization Committee of the Board --------- or any other committee of the Board appointed to perform the functions of the Compensation and Organization Committee. 2.8. Company means FMC Corporation, a Delaware corporation, or any successor ------- thereto as provided in Article 10 herein. 2.9. Disability means complete and permanent inability by reason of illness or ---------- accident to perform the duties of the occupation at which the Executive was employed when such disability commenced. 2.10. Distribution means the Company's distribution of its interest in FMC ------------ Technologies, Inc. 2.11. Effective Date means the date of this Agreement set forth above. -------------- 2.12. Effective Date of Termination means the date on which a Qualifying ----------------------------- Termination occurs which triggers the payment of Severance Benefits hereunder. -4- 2.13. Exchange Act means the Securities Exchange Act of 1934, as amended from ------------ time to time, and any successor thereto. 2.14. Good Reason means, without the Executive's express written consent, the ----------- occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including, without limitation, offices, titles and reporting requirements) as an employee of the Company (including, without limitation, any material change in duties or status as a result of the stock of the Company ceasing to be publicly traded or of the Company becoming a subsidiary of another entity), or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from the greatest of (i) those in effect on the Effective Date; (ii) those in effect during the fiscal year immediately preceding the year of the Change in Control; and (iii) those in effect immediately preceding the Change in Control; (b) The Company's requiring the Executive to be based at a location which is at least fifty (50) miles further from the Executive's then current primary residence than is such residence from the office where the Executive is located at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business obligations as of the Effective Date or as the same may be changed from time to time prior to a Change in Control; (c) A reduction by the Company in the Executive's Base Salary as in effect on the Effective Date or as the same may be increased from time to time; (d) A material reduction in the Executive's level of participation in any of the Company's short- and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the Executive participates from the greatest of the levels in place: (i) on the Effective Date; (ii) during the fiscal year immediately preceding the fiscal year of the Change in Control; and (iii) on the date immediately preceding the date of the Change in Control; (e) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Article 10 herein; or (f) Any termination of Executive's employment by the Company that is not effected pursuant to a Notice of Termination. The existence of Good Reason will not be affected by the Executive's temporary incapacity due to physical or mental illness not constituting a Disability. The -5- Executive's continued employment will not constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. 2.16. IPO means the initial registered public offering by FMC Technologies, Inc. --- of shares of its common stock. 2.17. Notice of Termination means a written notice which indicates the specific --------------------- termination provision in this Agreement relied upon, and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.18. Person has the meaning ascribed to such term in Section 3(a)(9) of the ------ Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as provided in Section 13(d). 2.19. Qualifying Termination means any of the events described in Section 3.2 ---------------------- herein, the occurrence of which triggers the payment of Severance Benefits hereunder. 2.20. Retirement means the Executive's voluntary termination of employment in a ---------- manner that qualifies the Executive to receive immediately payable retirement benefits from the FMC Corporation Salaried Employees' Retirement Program. 2.21. Severance Benefits means the payment of severance compensation as provided ------------------ in Section 3.3 herein. 2.22. Trust means the Company grantor trust to be created pursuant to Article 6 ----- of this Agreement. 2.23. Willful means any act or omission by the Executive that was in good faith ------- and without a reasonable belief that the action or omission was in the best interests of the Company or its affiliates. Any act or omission based upon authority given pursuant to a duly adopted Board resolution, or, upon the instructions of any senior officer of the Company, or based upon the advice of counsel for the Company will be conclusively presumed to be taken or omitted by the Executive in good faith and in the best interests of the Company and/or its affiliates. Article 3. Severance Benefits 3.1. Right to Severance Benefits. The Executive will be entitled to receive --------------------------- from the Company Severance Benefits, as described in Section 3.3 herein, if there has been a Change in Control of the Company and if, within twenty-four (24) calendar months following the Change in Control, a Qualifying Termination of the Executive has occurred. -6- The Executive will not be entitled to receive Severance Benefits if the Executive's employment is terminated (i) for Cause, (ii) due to a voluntary termination without Good Reason, or (iii) due to death or Disability. 3.2. Qualifying Termination. The occurrence of any one or more of the following ---------------------- events will trigger the payment of Severance Benefits to the Executive under this Agreement: (a) An involuntary termination of the Executive's employment by the Company for reasons other than Cause, Disability or death within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs; (b) A voluntary termination by the Executive for Good Reason within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs pursuant to a Notice of Termination delivered to the Company by the Executive; or (c) The Company or any successor company breaches any of the provisions of this Agreement. 3.3. Description of Severance Benefits. In the event the Executive becomes --------------------------------- entitled to receive Severance Benefits, as provided in Sections 3.1 and 3.2 herein, the Company will pay to the Executive (or in the event of the Executive's death, the Executive's Beneficiary) and provide him with the following: (a) An amount equal to three (3) times the highest rate of the Executive's annualized Base Salary in effect at any time up to and including the Effective Date of Termination. (b) An amount equal to three (3) times the greater of (i) the Executive's highest annualized target total Management Incentive Award granted under the FMC Corporation Incentive Compensation and Stock Plan for any plan year up to and including the plan year in which the Executive's Effective Date of Termination occurs, and (ii) the average of the actual total Management Incentive Awards paid (or payable) to the Executive for the two plan years immediately preceding the Effective Date of Termination, or for such lesser number of such plan years for which the Executive was eligible to earn a Management Incentive Award, annualized for any year that the Executive was not employed by the Company for the entire plan year. For purposes of determining actual total Management Incentive Awards under the preceding sentence, any amounts the Executive deferred will be treated as if they had been paid to the Executive, rather than deferred. -7- (c) An amount equal to the Executive's unpaid Base Salary, and unused and accrued vacation pay, earned or accrued through the Effective Date of Termination. (d) An amount equal to the target total Management Incentive Award established for the plan year in which the Executive's Effective Date of Termination occurred, prorated through the Effective Date of Termination. (e) A continuation of the Company's welfare benefits of health care, life and accidental death and dismemberment, and disability insurance coverage for three (3) full years after the Effective Date of Termination. These benefits will be provided to the Executive (and to the Executive's covered spouse and dependents) at the same premium cost, and at the same coverage level, as in effect as of the date of the Change in Control. The continuation of these welfare benefits will be discontinued prior to the end of the three (3) year period if the Executive has available substantially similar benefits at a comparable cost from a subsequent employer, as determined by the Committee. The date that welfare benefits cease to be provided under this paragraph will be the date of the Executive's qualifying event for continuation coverage purposes under Code Section 4980B(f)(3)(B). Awards granted under the FMC Corporation Incentive Compensation and Stock Plan, and other incentive arrangements adopted by the Company will be treated pursuant to the terms of the applicable plan. The aggregate benefits accrued by the Executive as of the Effective Date of Termination under the FMC Corporation Salaried Employees' Retirement Program, the FMC Corporation Savings and Investment Plan, the FMC Corporation Salaried Employees' Equivalent Retirement Plan, the FMC Corporation Non-Qualified Savings and Investment Plan and other savings and retirement plans sponsored by the Company will be distributed pursuant to the terms of the applicable plan. For all purposes under the Company's nonqualified retirement plans (including, but not limited to, benefit calculation and benefit commencement), it will be assumed that the Executive's employment continued following the Effective Date of Termination for three (3) full years (i.e., three (3) additional years of age and service credits will be added); provided, however, that for purposes of determining "final average pay" under such programs, the Executive's actual pay history as of the Effective Date of Termination will be used. 3.4. Termination for Disability. If the Executive's employment is terminated due -------------------------- to Disability, the Executive will receive the Executive's Base Salary through the Effective Date of Termination, and the Executive's benefits will be determined in accordance with the Company's disability, retirement, survivor's benefits, insurance and other applicable plans and programs then in effect. If the Executive's -8- employment is terminated due to Disability, he will not be entitled to the Severance Benefits described in Section 3.3. 3.5. Termination upon Death. If the Executive's employment is terminated due to ---------------------- death, the Executive's benefits will be determined in accordance with the Company's retirement, survivor's benefits, insurance and other applicable programs of the Company then in effect. If the Executive's employment is terminated due to death, neither the Executive nor the Executive's Beneficiary will be entitled to the Severance Benefits described in Section 3.3. 3.6. Termination for Cause, or Other Than for Good Reason or Retirement. ------------------------------------------------------------------ Following a Change in Control of the Company, if the Executive's employment is terminated either: (a) by the Company for Cause; or (b) by the Executive (other than for Retirement, Good Reason, or under circumstances giving rise to a Qualifying Termination described in Section 3.2(c) herein), the Company will pay the Executive an amount equal to the Executive's Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other amounts to which the Executive is entitled under any plans of the Company, at the time such payments are due and the Company will have no further obligations to the Executive under this Agreement. 3.7. Notice of Termination. Any termination of employment by the Company or by --------------------- the Executive for Good Reason will be communicated by a Notice of Termination. Article 4. Form and Timing of Severance Benefits 4.1. Form and Timing of Severance Benefits. The Severance Benefits described in ------------------------------------- Sections 3.3 (a), (b), (c) and (d) herein will be paid in cash to the Executive (or the Executive's Beneficiary, if applicable) in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 4.2. Withholding of Taxes. The Company will be entitled to withhold from any -------------------- amounts payable under this Agreement all taxes as may be legally required (including, without limitation, any United States federal taxes and any other state, city, or local taxes). Article 5. Excise Tax Equalization Payment 5.1. Excise Tax Equalization Payment. In the event that the Executive (or the ------------------------------- Executive's Beneficiary, if applicable) becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), whether or not the Executive has terminated employment with the Company, if all or any part of the Total Payments will be subject to the tax imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), (the "Excise Tax") the Company will -9- pay to the Executive in cash an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax upon the Total Payments and any federal, state, and local income taxes, penalties, interest, and Excise Tax upon the Gross-Up Payment provided for by this Section 5.1 (including FICA and FUTA), will be equal to the Total Payments. 5.2. Tax Computation. All determinations of whether any of the Total Payments --------------- will be subject to the Excise Tax, the amounts of such Excise Tax, whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be used in arriving at such determinations, shall be made by a nationally recognized certified public accounting firm that does not serve as an accountant or auditor for any individual, entity or group effecting the Change in Control as designated by the Company (the "Accounting Firm"). The Accounting Firm will provide detailed supporting calculations to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive or the Company requesting a calculation hereunder. The Gross-Up Payment will be made by the Company to the Executive as soon as practical following the Accounting Firm's determination of the Gross-Up Payment, but in no event beyond thirty (30) days from the Effective Date of Termination. All fees and expenses of the Accounting Firm will be paid by the Company. For purposes of determining the amount of the Gross-Up Payment, the Executive will be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Effective Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. 5.3. Subsequent Recalculation. In the event the Internal Revenue Service adjusts ------------------------ the computations to be made pursuant to Section 5.2 herein, and as a result of such adjustment the Gross-Up Payment made to the Executive is less than the greatest Gross-Up Payment that the Executive is entitled to receive under Section 5.2, the Company will pay to the Executive an amount equal to the difference between the greatest Gross-Up Payment the Executive is entitled to receive, and the Gross-Up Payment initially made to the Executive, plus a market rate of interest, as determined by the Committee, for the period commencing on the date the first Gross-Up Payment is made, and ending on the day immediately preceding the date the subsequent Gross-Up Payment is made. Article 6. Establishment of Trust As soon as practicable following the Effective Date hereof, the Company will create a Trust (which will be a grantor trust within the meaning of Sections 671-678 of the Code) for the benefit of the Executive and Beneficiaries, as appropriate. The Trust will have a Trustee as selected by the Company, and will have certain restrictions as -10- to the Company's ability to amend the Trust or cancel benefits provided thereunder. Any assets contained in the Trust will, at all times, be specifically subject to the claims of the Company's general creditors in the event of bankruptcy or insolvency; such terms to be specifically defined within the provisions of the Trust, along with the required procedure for notifying the Trustee of any bankruptcy or insolvency. At any time following the Effective Date hereof, the Company may, but is not obligated to, deposit assets in the Trust in an amount equal to or less than the aggregate Severance Benefits which may become due to the Executive under Sections 3.3 (a), (b), (c) and (d) and 5.1 of this Agreement. As soon as practicable after the Company has knowledge that a Change in Control is imminent, but no later than the day immediately preceding the date of the Change in Control, the Company will deposit assets in such Trust in an amount equal to the estimated aggregate Severance Benefits which may become due to the Executive under Sections 3.3 (a), (b), (c) and (d), 5.1 and 8.1 of this Agreement. Such deposited amounts will be reviewed and increased, if necessary, every six (6) months following a Change in Control to reflect the Executive's estimated aggregate Severance Benefits at such time. Article 7. The Company's Payment Obligation The Company's obligation to make the payments and the arrangements provided for herein will be absolute and unconditional, and will not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder will be paid without notice or demand. Each and every payment made hereunder by the Company will be final, and the Company will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive will not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment will in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 3.3(e) herein. Notwithstanding anything in this Agreement to the contrary, if Severance Benefits are paid under this Agreement, no severance benefits under any program of the Company, other than benefits described in this Agreement, will be paid to the Executive. Article 8. Fees and Expenses To the extent permitted by law, the Company will pay as incurred (within ten (10) days following receipt of an invoice from the Executive) all legal fees, costs of -11- litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the Severance Benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict (including, without limitation, conflicts related to the calculations under Section 5 hereof) between the parties pertaining to this Agreement. Article 9. Outplacement Assistance Following a Qualifying Termination (as described in Section 3.2 herein), the Executive will be reimbursed by the Company for the costs of all outplacement services obtained by the Executive within the two (2) year period after the Effective Date of Termination; provided, however, that the total reimbursement for such outplacement services will be limited to an amount equal to fifteen percent (15%) of the Executive's Base Salary as of the Effective Date of Termination. Article 10. Successors and Assignment 10.1. Successors to the Company. The Company will require any successor (whether ------------------------- direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. 10.2. Assignment by the Executive. This Agreement will inure to the benefit of --------------------------- and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Agreement to the Executive's Beneficiary. If the Executive has not named a Beneficiary, then such amounts will be paid to the Executive's devisee, legatee, or other designee, or if there is no such designee, to the Executive's estate, and such designee, or the Executive's estate will be treated as the Beneficiary hereunder. Article 11. Miscellaneous 11.1. Employment Status. Except as may be provided under any other agreement ----------------- between the Executive and the Company, the employment of the Executive by the Company is "at will," and may be terminated by either the Executive or the Company at any time, subject to applicable law. 11.2. Beneficiaries. The Executive may designate one or more persons or entities ------------- as the primary and/or contingent Beneficiaries of any Severance Benefits, including, -12- without limitation, payments under Section 5 hereof, owing to the Executive under this Agreement. Such designation must be in the form of a signed writing acceptable to the Committee. The Executive may make or change such designations at any time. 11.3. Severability. In the event any provision of this Agreement will be held ------------ illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Agreement, and the Agreement will be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and will have no force and effect. 11.4. Modification. No provision of this Agreement may be modified, waived, or ------------ discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. 11.5. Applicable Law. To the extent not preempted by the laws of the United -------------- States, the laws of the state of Delaware will be the controlling law in all matters relating to this Agreement. 11.6 Indemnification. To the full extent permitted by law, the Company will, --------------- both during and after the period of the Executive's employment, indemnify the Executive (including by advancing him expenses) for any judgments, fines, amounts paid in settlement and reasonable expenses, including any attorneys' fees, incurred by the Executive in connection with the defense of any lawsuit or other claim to which he is made a party by reason of being (or having been) an officer, director or employee of the Company or any of its subsidiaries. The Executive will be covered by director and officer liability insurance to the maximum extent that that insurance covers any officer or director (or former officer or director) of the Company. IN WITNESS WHEREOF, the parties have executed this Agreement on this 18/th/ day of Janaury, 2001. FMC Corporation, Inc. Executive: By: /s/ Kenneth R. Garrett /s/ Robert I. Harries ------------------------------------- ------------------------------ Its: Vice President, Human Resources, Communications and Public Affairs Attest: /s/ Shirley Starbuck ------------------------------------------------ -13- Schedule to Exhibit 10.21 ------------------------- In accordance with Instruction 2 of Item 601 of Regulation S-K, Executive Severance Agreements for William K. Foster, Andrea Utecht and Milton Steele, dated as of December 31, 2001, were omitted. These agreements contain terms and conditions identical to the Executive Severance Agreement for Robert I. Harries, a copy of which is filed as this Exhibit. EX-10.22 11 dex1022.txt EXECUTIVE SEVERANCE AGREEMENT DATED 12/31/2001 EXHIBIT 10.22 FORM II FMC Corporation Executive Severance Agreement ----------------------------- THIS AGREEMENT is made and entered into as of the 31/st/ day of ------ December, 2001, by and between FMC Corporation (hereinafter referred to as the - --------- "Company") and Graham R. Wood (hereinafter referred to as the "Executive"). -------------- WHEREAS, the Board has approved the Company's entering into severance agreements with certain key executives of the Company; WHEREAS, the Executive is a key executive of the Company; WHEREAS, should the possibility of a Change in Control of the Company arise, the Board believes it is imperative that the Company and the Board should be able to rely upon the Executive to continue in the Executive's position, and that the Company should be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its shareholders without concern that the Executive might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; WHEREAS, the Executive agrees that the terms of this Agreement completely replace and supersede the provisions of any prior executive severance agreement with the Company; WHEREAS, should the possibility of a Change in Control arise, in addition to the Executive's regular duties, the Executive may be called upon to assist in the assessment of such possible Change in Control, advise management and the Board as to whether such Change in Control would be in the best interests of the Company and its shareholders, and to take such other actions as the Board might determine to be appropriate; WHEREAS, the Executive acknowledges that neither the IPO nor the Distribution will result in a Change in Control; and WHEREAS, the Executive and the Company desire that the terms of this Agreement will completely replace and supersede the provisions set forth in the Plan, setting forth the terms and provisions with respect to the Executive's entitlement to payments and benefits following a Change in Control. NOW THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of the Executive's advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company, and for other good and valuable consideration, the Company and the Executive agree as follows: -1- Article 1. Establishment, Term, and Purpose This Agreement will commence on the Effective Date and will continue in effect for a three (3) year term, until the third anniversary of the Effective Date. Upon each anniversary of the Effective Date, the term of this Agreement will be extended automatically for one (1) additional year, unless the Committee delivers written notice six (6) months prior to such anniversary to the Executive that this Agreement will not be extended. In such case, this Agreement will terminate at the end of the term, or extended term, then in progress. However, in the event a Change in Control occurs during the original or any extended term, this Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the month in which such Change in Control occurred; and (ii) until all obligations of the Company hereunder have been fulfilled, and until all benefits required hereunder have been paid to the Executive. Article 2. Definitions Whenever used in this Agreement, the following terms will have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized. 2.1. Base Salary means the salary of record paid to an Executive as annual ----------- salary, excluding amounts received under incentive or other bonus plans, whether or not deferred. 2.2. Beneficiary means the persons or entities designated or deemed ----------- designated by the Executive pursuant to Section 11.2 herein. 2.3. Board means the Board of Directors of the Company. ----- 2.4. Cause means: ----- (a) the Executive's Willful and continued failure to substantially perform the Executive's employment duties in any material respect (other than any such failure resulting from physical or mental incapacity or occurring after issuance by the Executive of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes the Executive has failed to perform the Executive's duties, and after the Executive has failed to resume substantial performance of the Executive's duties on a continuous basis within thirty (30) calendar days of receiving such demand; (b) the Executive's Willfully engaging in conduct (other than conduct covered under (a) above) which is demonstrably and materially injurious to the Company or an Affiliate; or -2- (c) the Executive's having been convicted of, or pleading guilty or nolo contendere to, a felony under federal or state law on or prior to a Change in Control. 2.5. Change in Control means the happening of any of the following events: ----------------- (a) An acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (A) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition pursuant to a transaction which complies with Subsections (i), (ii) and (iii) of Subsection (C) of this Section 2.5; (b) A change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (such Board will be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section 2.5, that any individual who becomes a member of the Board subsequent to the Effective Date, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) will be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board will not be so considered as a member of the Incumbent Board; (c) Consummation of a reorganization, merger or consolidation, sale or other disposition of all or substantially all of the assets of the Company, or acquisition by the Company of the assets or stock of another entity ("Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (i) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation -3- resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, twenty percent (20%) or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction, and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (d) The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding the foregoing, neither the IPO, nor the Distribution will be treated as a Change in Control of the Company. 2.6. Code means the Internal Revenue Code of 1986, as amended from time to --- time, and any successor thereto. 2.7. Committee means the Compensation and Organization Committee of the --------- Board or any other committee of the Board appointed to perform the functions of the Compensation and Organization Committee. 2.8. Company means FMC Corporation, a Delaware corporation, or any successor ------- thereto as provided in Article 10 herein. 2.9. Disability means complete and permanent inability by reason of illness ---------- or accident to perform the duties of the occupation at which the Executive was employed when such disability commenced. 2.10. Distribution means the Company's distribution of its interest in FMC ------------ Technologies, Inc. 2.11. Effective Date means the date of this Agreement set forth above. -------------- 2.12. Effective Date of Termination means the date on which a Qualifying ----------------------------- Termination occurs which triggers the payment of Severance Benefits hereunder. 2.13. Exchange Act means the Securities Exchange Act of 1934, as amended from ------------ time to time, and any successor thereto. -4- 2.14. Good Reason means, without the Executive's express written consent, the ----------- occurrence of any one or more of the following: (a) The assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities, and status (including, without limitation, offices, titles and reporting requirements) as an employee of the Company (including, without limitation, any material change in duties or status as a result of the stock of the Company ceasing to be publicly traded or of the Company becoming a subsidiary of another entity), or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from the greatest of (i) those in effect on the Effective Date; (ii) those in effect during the fiscal year immediately preceding the year of the Change in Control; and (iii) those in effect immediately preceding the Change in Control; (b) The Company's requiring the Executive to be based at a location which is at least fifty (50) miles further from the Executive's then current primary residence than is such residence from the office where the Executive is located at the time of the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's business obligations as of the Effective Date or as the same may be changed from time to time prior to a Change in Control; (c) A reduction by the Company in the Executive's Base Salary as in effect on the Effective Date or as the same may be increased from time to time; (d) A material reduction in the Executive's level of participation in any of the Company's short- and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the Executive participates from the greatest of the levels in place: (i) on the Effective Date; (ii) during the fiscal year immediately preceding the fiscal year of the Change in Control; and (iii) on the date immediately preceding the date of the Change in Control; (e) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Article 10 herein; or (f) Any termination of Executive's employment by the Company that is not effected pursuant to a Notice of Termination. The existence of Good Reason will not be affected by the Executive's temporary incapacity due to physical or mental illness not constituting a Disability. The Executive's continued employment will not constitute a waiver of the Executive's rights with respect to any circumstance constituting Good Reason. -5- 2.16. IPO means the initial registered public offering by FMC Technologies, --- Inc. of shares of its common stock. 2.17. Notice of Termination means a written notice which indicates the --------------------- specific termination provision in this Agreement relied upon, and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.18. Person has the meaning ascribed to such term in Section 3(a)(9) of the ------ Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as provided in Section 13(d). 2.19. Qualifying Termination means any of the events described in Section 3.2 ---------------------- herein, the occurrence of which triggers the payment of Severance Benefits hereunder. 2.20. Retirement means the Executive's voluntary termination of employment in ---------- a manner that qualifies the Executive to receive immediately payable retirement benefits from the FMC Corporation Salaried Employees' Retirement Program. 2.21. Severance Benefits means the payment of severance compensation as ------------------ provided in Section 3.3 herein. 2.22. Trust means the Company grantor trust to be created pursuant to Article ----- 6 of this Agreement. 2.23. Willful means any act or omission by the Executive that was in good ------- faith and without a reasonable belief that the action or omission was in the best interests of the Company or its affiliates. Any act or omission based upon authority given pursuant to a duly adopted Board resolution, or, upon the instructions of any senior officer of the Company, or based upon the advice of counsel for the Company will be conclusively presumed to be taken or omitted by the Executive in good faith and in the best interests of the Company and/or its affiliates. Article 3. Severance Benefits 3.1. Right to Severance Benefits. The Executive will be entitled to receive --------------------------- from the Company Severance Benefits, as described in Section 3.3 herein, if there has been a Change in Control of the Company and if, within twenty-four (24) calendar months following the Change in Control, a Qualifying Termination of the Executive has occurred. The Executive will not be entitled to receive Severance Benefits if the Executive's employment is terminated (i) for Cause, (ii) due to a voluntary termination without Good Reason, or (iii) due to death or Disability. -6- 3.2. Qualifying Termination. The occurrence of any one or more of the ---------------------- following events will trigger the payment of Severance Benefits to the Executive under this Agreement: (a) An involuntary termination of the Executive's employment by the Company for reasons other than Cause, Disability or death within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs; (b) A voluntary termination by the Executive for Good Reason within twenty-four (24) calendar months following the month in which a Change in Control of the Company occurs pursuant to a Notice of Termination delivered to the Company by the Executive; or (c) The Company or any successor company breaches any of the provisions of this Agreement. 3.3. Description of Severance Benefits. In the event the Executive becomes --------------------------------- entitled to receive Severance Benefits, as provided in Sections 3.1 and 3.2 herein, the Company will pay to the Executive (or in the event of the Executive's death, the Executive's Beneficiary) and provide him with the following: (a) An amount equal to two (2) times the highest rate of the Executive's annualized Base Salary in effect at any time up to and including the Effective Date of Termination. (b) An amount equal to two (2) times the greater of (i) the Executive's highest annualized target total Management Incentive Award granted under the FMC Corporation Incentive Compensation and Stock Plan for any plan year up to and including the plan year in which the Executive's Effective Date of Termination occurs, and (ii) the average of the actual total Management Incentive Awards paid (or payable) to the Executive for the two plan years immediately preceding the Effective Date of Termination, or for such lesser number of such plan years for which the Executive was eligible to earn a Management Incentive Award, annualized for any year that the Executive was not employed by the Company for the entire plan year. For purposes of determining actual total Management Incentive Awards under the preceding sentence, any amounts the Executive deferred will be treated as if they had been paid to the Executive, rather than deferred. (c) An amount equal to the Executive's unpaid Base Salary, and unused and accrued vacation pay, earned or accrued through the Effective Date of Termination. (d) An amount equal to the target total Management Incentive Award established for the plan year in which the Executive's Effective Date of Termination occurred, prorated through the Effective Date of Termination. -7- (e) A continuation of the Company's welfare benefits of health care, life and accidental death and dismemberment, and disability insurance coverage for two (2) full years after the Effective Date of Termination. These benefits will be provided to the Executive (and to the Executive's covered spouse and dependents) at the same premium cost, and at the same coverage level, as in effect as of the date of the Change in Control. The continuation of these welfare benefits will be discontinued prior to the end of the two (2) year period if the Executive has available substantially similar benefits at a comparable cost from a subsequent employer, as determined by the Committee. The date that welfare benefits cease to be provided under this paragraph will be the date of the Executive's qualifying event for continuation coverage purposes under Code Section 4980B(f)(3)(B). Awards granted under the FMC Corporation Incentive Compensation and Stock Plan, and other incentive arrangements adopted by the Company will be treated pursuant to the terms of the applicable plan. The aggregate benefits accrued by the Executive as of the Effective Date of Termination under the FMC Corporation Salaried Employees' Retirement Program, the FMC Corporation Savings and Investment Plan, the FMC Corporation Salaried Employees' Equivalent Retirement Plan, the FMC Corporation Non-Qualified Savings and Investment Plan and other savings and retirement plans sponsored by the Company will be distributed pursuant to the terms of the applicable plan. For all purposes under the Company's nonqualified retirement plans (including, but not limited to, benefit calculation and benefit commencement), it will be assumed that the Executive's employment continued following the Effective Date of Termination for two (2) full years (i.e., two (2) additional years of age and service credits will be added); provided, however, that for purposes of determining "final average pay" under such programs, the Executive's actual pay history as of the Effective Date of Termination will be used. 3.4. Termination for Disability. If the Executive's employment is terminated due -------------------------- to Disability, the Executive will receive the Executive's Base Salary through the Effective Date of Termination, and the Executive's benefits will be determined in accordance with the Company's disability, retirement, survivor's benefits, insurance and other applicable plans and programs then in effect. If the Executive's employment is terminated due to Disability, he will not be entitled to the Severance Benefits described in Section 3.3. 3.5. Termination upon Death. If the Executive's employment is terminated due to ---------------------- death, the Executive's benefits will be determined in accordance with the Company's retirement, survivor's benefits, insurance and other applicable programs of the Company then in effect. If the Executive's employment is terminated due to death, neither the Executive nor the Executive's Beneficiary will be entitled to the Severance Benefits described in Section 3.3. -8- 3.6. Termination for Cause, or Other Than for Good Reason or Retirement. ------------------------------------------------------------------ Following a Change in Control of the Company, if the Executive's employment is terminated either: (a) by the Company for Cause; or (b) by the Executive (other than for Retirement, Good Reason, or under circumstances giving rise to a Qualifying Termination described in Section 3.2(c) herein), the Company will pay the Executive an amount equal to the Executive's Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other amounts to which the Executive is entitled under any plans of the Company, at the time such payments are due and the Company will have no further obligations to the Executive under this Agreement. 3.7. Notice of Termination. Any termination of employment by the Company ---------------------- or by the Executive for Good Reason will be communicated by a Notice of Termination. Article 4.Form and Timing of Severance Benefits 4.1. Form and Timing of Severance Benefits. The Severance Benefits ------------------------------------- described in Sections 3.3 (a), (b), (c) and (d) herein will be paid in cash to the Executive (or the Executive's Beneficiary, if applicable) in a single lump sum as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 4.2. Withholding of Taxes. The Company will be entitled to withhold from -------------------- any amounts payable under this Agreement all taxes as may be legally required (including, without limitation, any United States federal taxes and any other state, city, or local taxes). Article 5.Excise Tax Equalization Payment 5.1. Excise Tax Equalization Payment. In the event that the Executive (or ------------------------------- the Executive's Beneficiary, if applicable) becomes entitled to Severance Benefits or any other payment or benefit under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, the "Total Payments"), whether or not the Executive has terminated employment with the Company, if all or any part of the Total Payments will be subject to the tax imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), (the "Excise Tax") the Company will pay to the Executive in cash an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax upon the Total Payments and any federal, state, and local income taxes, penalties, interest, and Excise Tax upon the Gross-Up Payment provided for by this Section 5.1 (including FICA and FUTA), will be equal to the Total Payments. 5.2. Tax Computation. All determinations of whether any of the Total --------------- Payments will be subject to the Excise Tax, the amounts of such Excise Tax, whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be used in arriving at such determinations, shall be made by a nationally recognized certified public accounting firm that does not serve as an accountant or auditor for any individual, entity or group effecting the Change in -9- Control as designated by the Company (the "Accounting Firm"). The Accounting Firm will provide detailed supporting calculations to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive or the Company requesting a calculation hereunder. The Gross-Up Payment will be made by the Company to the Executive as soon as practical following the Accounting Firm's determination of the Gross-Up Payment, but in no event beyond thirty (30) days from the Effective Date of Termination. All fees and expenses of the Accounting Firm will be paid by the Company. For purposes of determining the amount of the Gross-Up Payment, the Executive will be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the Effective Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. 5.3. Subsequent Recalculation. In the event the Internal Revenue Service adjusts ------------------------ the computations to be made pursuant to Section 5.2 herein, and as a result of such adjustment the Gross-Up Payment made to the Executive is less than the greatest Gross-Up Payment that the Executive is entitled to receive under Section 5.2, the Company will pay to the Executive an amount equal to the difference between the greatest Gross-Up Payment the Executive is entitled to receive, and the Gross-Up Payment initially made to the Executive, plus a market rate of interest, as determined by the Committee, for the period commencing on the date the first Gross-Up Payment is made, and ending on the day immediately preceding the date the subsequent Gross-Up Payment is made. Article 6. Establishment of Trust As soon as practicable following the Effective Date hereof, the Company will create a Trust (which will be a grantor trust within the meaning of Sections 671-678 of the Code) for the benefit of the Executive and Beneficiaries, as appropriate. The Trust will have a Trustee as selected by the Company, and will have certain restrictions as to the Company's ability to amend the Trust or cancel benefits provided thereunder. Any assets contained in the Trust will, at all times, be specifically subject to the claims of the Company's general creditors in the event of bankruptcy or insolvency; such terms to be specifically defined within the provisions of the Trust, along with the required procedure for notifying the Trustee of any bankruptcy or insolvency. At any time following the Effective Date hereof, the Company may, but is not obligated to, deposit assets in the Trust in an amount equal to or less than the aggregate Severance Benefits which may become due to the Executive under Sections 3.3 (a), (b), (c) and (d) and 5.1 of this Agreement. As soon as practicable after the Company has knowledge that a Change in Control is imminent, but no later than the day immediately preceding the date of the Change in Control, the Company will deposit assets in such Trust in an amount equal to the -10- estimated aggregate Severance Benefits which may become due to the Executive under Sections 3.3 (a), (b), (c) and (d), 5.1 and 8.1 of this Agreement. Such deposited amounts will be reviewed and increased, if necessary, every six (6) months following a Change in Control to reflect the Executive's estimated aggregate Severance Benefits at such time. Article 7. The Company's Payment Obligation The Company's obligation to make the payments and the arrangements provided for herein will be absolute and unconditional, and will not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder will be paid without notice or demand. Each and every payment made hereunder by the Company will be final, and the Company will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive will not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment will in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 3.3(e) herein. Notwithstanding anything in this Agreement to the contrary, if Severance Benefits are paid under this Agreement, no severance benefits under any program of the Company, other than benefits described in this Agreement, will be paid to the Executive. Article 8. Fees and Expenses To the extent permitted by law, the Company will pay as incurred (within ten (10) days following receipt of an invoice from the Executive) all legal fees, costs of litigation, prejudgment interest, and other expenses incurred in good faith by the Executive as a result of the Company's refusal to provide the Severance Benefits to which the Executive becomes entitled under this Agreement, or as a result of the Company's contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict (including, without limitation, conflicts related to the calculations under Section 5 hereof) between the parties pertaining to this Agreement. Article 9. Outplacement Assistance Following a Qualifying Termination (as described in Section 3.2 herein), the Executive will be reimbursed by the Company for the costs of all outplacement services obtained by the Executive within the two (2) year period after the Effective Date of Termination; provided, however, that the total reimbursement for such -11- outplacement services will be limited to an amount equal to fifteen percent (15%) of the Executive's Base Salary as of the Effective Date of Termination. Article 10. Successors and Assignment 10.1. Successors to the Company. The Company will require any successor (whether ------------------------- direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. 10.2. Assignment by the Executive. This Agreement will inure to the benefit of --------------------------- and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount would still be payable to him hereunder had he continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Agreement to the Executive's Beneficiary. If the Executive has not named a Beneficiary, then such amounts will be paid to the Executive's devisee, legatee, or other designee, or if there is no such designee, to the Executive's estate, and such designee, or the Executive's estate will be treated as the Beneficiary hereunder. Article 11. Miscellaneous 11.1. Employment Status. Except as may be provided under any other agreement ----------------- between the Executive and the Company, the employment of the Executive by the Company is "at will," and may be terminated by either the Executive or the Company at any time, subject to applicable law. 11.2. Beneficiaries. The Executive may designate one or more persons or entities ------------- as the primary and/or contingent Beneficiaries of any Severance Benefits, including, without limitation, payments under Section 5 hereof, owing to the Executive under this Agreement. Such designation must be in the form of a signed writing acceptable to the Committee. The Executive may make or change such designations at any time. 11.3. Severability. In the event any provision of this Agreement will be held ------------ illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Agreement, and the Agreement will be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and will have no force and effect. 11.4. Modification. No provision of this Agreement may be modified, waived, or ------------ discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by an authorized member of the Committee, or by the respective parties' legal representatives and successors. -12- 11.5. Applicable Law. To the extent not preempted by the laws of the United -------------- States, the laws of the state of Delaware will be the controlling law in all matters relating to this Agreement. 11.6 Indemnification. To the full extent permitted by law, the Company will, --------------- both during and after the period of the Executive's employment, indemnify the Executive (including by advancing him expenses) for any judgments, fines, amounts paid in settlement and reasonable expenses, including any attorneys' fees, incurred by the Executive in connection with the defense of any lawsuit or other claim to which he is made a party by reason of being (or having been) an officer, director or employee of the Company or any of its subsidiaries. The Executive will be covered by director and officer liability insurance to the maximum extent that insurance covers any officer or director (or former officer or director) of the Company. IN WITNESS WHEREOF, the parties have executed this Agreement on this 23/rd/ day of January, 2002. - ------ ------- FMC Corporation Executive: By: /s/ Kenneth R. Garrett /s/ Graham R. Wood ------------------------------------- ---------------------------------- Its: Vice President, Human Resources, Communications and Public Affairs Attest: /s/ Shirley Starbuck ------------------------------------------------ -13- Schedule to Exhibit 10.22 ------------------------- In accordance with Instruction 2 of Item 601 of Regulation S-K, an Executive Severance Agreement for Thomas Deas, dated as of December 31, 2001, was omitted. This Agreement contains terms and conditions identical to the Executive Severance Agreement for Graham R. Wood, a copy of which is filed as this Exhibit. EX-11 12 dex11.txt COMPUTATION OF DILUTED EARNINGS PER SHARE Exhibit 11 Computation of Diluted Earnings Per Share (Unaudited) (In millions, except share and per share data)
Year ended December 31, ------------------------ 2001 2000 1999 ------- ------- ------- Earnings: Net income (loss)................................... $(337.7) $ 110.6 $ 212.6 Shares: Weighted average number of Shares of common stock outstanding............... 31,052 30,439 31,516 Weighted average additional shares Assuming conversion of stock options (1)..... -- 1,137 861 ------- ------- ------- Shares--diluted basis........................ 31,052 31,576 32,377 Diluted earnings (loss) per share................... $(10.86) $ 3.50 $ 6.57
- -------- (1) The weighted average additional shares of 77.0 thousand for the nine months ended December 30, 2001, assuming conversion of stock options, were not included in the computation of diluted earnings per share because to do so would have had an antidilutive effect on the computation. EX-12 13 dex12.txt RATIOS OF EARNINGS TO FIXED CHARGES Exhibit: 12 Computation of Ratios of Earnings to Fixed Charges (In millions, except ratios)
Years ended December 31, --------------------------------------- 2001 2000 1999 1998 1997 ------- ------ ------ ------ ------ Earnings: Income (loss) from continuing operations before income taxes and cumulative effect of a change in accounting principle.................. $(472.9) $158.6 $195.1 $154.8 $(77.3) Minority interests...................................................... 2.3 4.8 5.2 6.4 8.5 Undistributed (earnings) losses of affiliates........................... (5.6) (15.2) (1.3) (0.6) (0.3) Interest expense and amortization of debt discount, fees and expenses... 61.6 66.6 83.9 81.2 79.2 Amortization of capitalized interest.................................... 3.6 3.8 3.3 3.4 6.9 Interest included in rental expense..................................... 4.3 5.9 7.2 8.8 7.2 ------- ------ ------ ------ ------ Total earnings.............................................................. $(406.7) $224.5 $293.4 $254.0 $ 24.2 ======= ====== ====== ====== ====== Fixed charges: Interest expense and amortization of debt discount, fees and expenses... $ 61.6 66.6 83.9 81.2 79.2 Interest capitalized as part of fixed assets............................ 9.4 9.0 2.3 4.7 6.6 Interest included in rental expense..................................... 4.3 5.9 7.2 8.8 7.2 ------- ------ ------ ------ ------ Total fixed charges......................................................... $ 75.3 81.5 93.4 94.7 93.0 ======= ====== ====== ====== ====== Ratio of earnings to fixed charges.......................................... (5.4) 2.8 3.1 2.7 0.3 ======= ====== ====== ====== ======
EX-21 14 dex21.txt LIST OF SIGNIFICANT SUBSIDIARIES Exhibit 21 Significant Subsidiaries of the Registrant
Name of Subsidiary State or Country of Incorporation FMC Corporation (the Registrant) Delaware Electro Quimica Mexicana, S.A. de C.V. Mexico FMC A/S Denmark FMC Agricultural Products International, AG Switzerland FMC Argentina, S.A. Argentina FMC Asia Pacific Inc. Delaware FMC BioPolymer AS Norway FMC BioPolymer G.m.b.H. Germany FMC BioPolymer S.A. France FMC Chemical Holding B.V. Netherlands FMC Chemical International, AG Ireland FMC Chemical International, AG Switzerland FMC Chemicals (Malaysia) Sdn. Bdh. Malaysia FMC Chemicals (Thailand) Limited Thailand FMC Chemicals Italy srl. Italy FMC Chemicals KK Japan FMC Chemicals Limited United Kingdom FMC Chemicals S.p.r.l. Belgium FMC de Mexico, S.A. de C.V. Mexico FMC Finance B.V. Netherlands FMC Foret, S.A. Spain FMC France S.A. France FMC Funding Corporation Delaware FMC Germany G.m.b.H. Germany FMC Industrial Chemicals (Netherlands) B.V. Netherlands FMC Korea Ltd. Korea FMC of Canada Limited Canada FMC Overseas, Ltd. Delaware FMC Quimica do Brasil Limitada Brazil FMC Singapore PTE, Ltd. Singapore FMC Wyoming Corporation Wyoming Forel, S.L. Spain Forsean, S.A. Spain Intermountain Research and Development Corporation Wyoming Minera Del Altiplano Argentina
NOTE: All subsidiaries listed are greater than 50% owned, directly or indirectly, by FMC Corporation as of December 31, 2001. The names of various active and inactive subsidiaries have been omitted. Such subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. EX-23 15 dex23.txt CONSENT OF KPMG LLP Exhibit 23 Independent Auditors' Consent The Board of Directors FMC Corporation: We consent to incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-10661, 33-7749, 33-41745, 33-48984, 333-18383, 333-24039, 333-62683, 333-64702, 333-68905 and 333-69714) and the Registration Statement on Form S-3 (No. 333-59543) of FMC Corporation of our report dated February 14, 2002 relating to the consolidated balance sheets of FMC Corporation and consolidated subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, cash flows, and changes in stockholders' equity for each of the years in the three-year period ended December 31, 2001, and the related financial statement schedule as listed in the accompanying index in Item 14, Exhibit 11, which report is incorporated by reference in the December 31, 2001 annual report on Form 10-K of FMC Corporation. /s/ KPMG LLP Philadelphia, Pennsylvania March 8, 2002 -----END PRIVACY-ENHANCED MESSAGE-----