<PAGE>
PROSPECTUS SUPPLEMENT Filed pursuant to Rule 424(b)(5)
(To Prospectus dated August 3, 1998) Registration No. 333-59543
$500,000,000
FMC Corporation
MEDIUM-TERM NOTES, SERIES B
------------
FMC CORPORATION MAY OFFER FROM TIME TO TIME MEDIUM-TERM NOTES, SERIES B. THE
SPECIFIC TERMS OF ANY NOTES OFFERED WILL BE INCLUDED IN A PRICING SUPPLEMENT.
UNLESS THE PRICING SUPPLEMENT PROVIDES OTHERWISE, THE NOTES OFFERED WILL HAVE
THE FOLLOWING GENERAL TERMS:
. THE NOTES WILL MATURE IN 9 MONTHS . FIXED AND FLOATING RATE INTEREST
OR MORE FROM THE DATE OF ISSUE. WILL BE PAID ON THE DATES STATED
IN THE APPLICABLE PRICING
. THE NOTES WILL BEAR INTEREST AT SUPPLEMENT.
EITHER A FIXED OR A FLOATING RATE.
FLOATING RATE INTEREST WILL BE . THE NOTES WILL BE HELD EITHER IN
BASED ON: GLOBAL FORM BY THE DEPOSITORY
TRUST COMPANY OR IN DEFINITIVE
. CD RATE FORM BY YOU AS SET FORTH IN THE
APPLICABLE PRICING SUPPLEMENT.
. COMMERCIAL PAPER RATE
. THE NOTES MAY NOT BE REDEEMED BY
. FEDERAL FUNDS RATE FMC CORPORATION PRIOR TO MATURITY
UNLESS OTHERWISE SPECIFIED IN THE
. LIBOR APPLICABLE PRICING SUPPLEMENT.
. PRIME RATE . THE NOTES WILL BE DENOMINATED IN
U.S. DOLLARS AND HAVE MINIMUM
. TREASURY RATE DENOMINATIONS OF $1,000 UNLESS
OTHERWISE SPECIFIED IN THE
. CMT RATE APPLICABLE PRICING SUPPLEMENT.
. ANY OTHER RATE SPECIFIED IN THE
APPLICABLE PRICING SUPPLEMENT.
------------
<TABLE>
<S> <C> <C> <C>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
-------- ----------- -----------
Per Note.................... 100% .125%-.750% 99.875%-99.250%
Total....................... $500,000,000 $625,000-$3,750,000 $499,375,000-$496,250,000
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus
supplement or the accompanying prospectus are truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated, J.P. Morgan Securities Inc. and Salomon
Smith Barney Inc. will solicit offers to purchase the notes as agents for FMC
Corporation. The agents have agreed to use their reasonable efforts to sell the
notes.
------------
MORGAN STANLEY DEAN WITTER
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
November 12, 1998
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED
IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT. WE ARE OFFERING TO SELL THE NOTES, AND SEEKING OFFERS TO BUY THE
NOTES, ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING
PROSPECTUS AND ANY PRICING SUPPLEMENT IS ACCURATE ONLY AS OF THEIR RESPECTIVE
DATES, REGARDLESS OF THE TIME OF THEIR DELIVERY OR ANY SALE OF THE NOTES. IN
THIS PROSPECTUS SUPPLEMENT, FMC CORPORATION IS REFERRED TO AS THE "COMPANY,"
AND ITS MEDIUM-TERM NOTES, SERIES B ARE REFERRED TO AS THE "NOTES."
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Important Currency Exchange Information................................... S-2
Description of Notes...................................................... S-3
Foreign Currency Risks.................................................... S-20
United States Federal Taxation............................................ S-21
Plan of Distribution...................................................... S-33
Validity of Notes......................................................... S-34
PROSPECTUS
Available Information..................................................... 2
Documents Incorporated by Reference....................................... 2
Forward-Looking Statements................................................ 3
The Company............................................................... 3
Use of Proceeds........................................................... 4
Ratio of Earnings to Fixed Charges........................................ 4
General Description of the Offered Securities............................. 4
Description of the Common Stock........................................... 4
Description of the Preferred Stock........................................ 6
Description of Depository Shares.......................................... 7
Description of the Debt Securities........................................ 10
Description of the Warrants to Purchase Common Stock or Preferred Stock... 19
Description of the Warrants to Purchase Debt Securities................... 20
Plan of Distribution...................................................... 21
Legal Matters............................................................. 22
Experts................................................................... 22
</TABLE>
----------------
IMPORTANT CURRENCY EXCHANGE INFORMATION
Purchasers are required to pay for the Notes in U.S. dollars, or in other
currencies, including composite currencies such as the European Currency Unit,
as may be specified in the applicable Pricing Supplement (the "Specified
Currency"), and payments of principal, premium, if any, and interest on the
Notes will also be made in U.S. dollars, unless the applicable Pricing
Supplement provides that such payments will be made in a Specified Currency.
Currently, there are limited facilities in the United States for the conversion
of U.S. dollars into foreign currencies and vice versa. In addition, most banks
do not currently offer non-U.S. dollar denominated checking or savings account
facilities in the United States. Accordingly, unless otherwise specified in a
Pricing Supplement or unless alternative arrangements are made, payment of
principal, premium, if any, and interest on Notes in a Specified Currency other
than U.S. dollars will be made to an account at a bank outside the United
States. See "Description of Notes" and "Foreign Currency Risks."
S-2
<PAGE>
If the applicable Pricing Supplement provides for payments of principal of
and interest on a non-U.S. dollar denominated Note to be made in U.S. dollars
or for payments of principal of and interest on a U.S. dollar denominated Note
to be made in a Specified Currency other than U.S. dollars, the conversion of
the Specified Currency into U.S. dollars or U.S. dollars into the Specified
Currency, as the case may be, will be handled by the entity appointed by the
Company to act as the exchange rate agent (the "Exchange Rate Agent"). On the
date hereof, the Exchange Rate Agent is Harris Trust and Savings Bank. The
costs of such conversion will be borne by the holder of a Note through
deductions from such payments.
Reference herein to "U.S. dollars" or "U.S. $" or "$" are to the currency of
the United States of America.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Senior Debt Securities set forth in
the accompanying Prospectus. The particular terms of the Notes sold pursuant to
any Pricing Supplement will be described therein. The terms and conditions set
forth in "Description of Notes" will apply to each Note unless otherwise
specified in the applicable Pricing Supplement and in such Note.
If any Note is not to be denominated in U.S. dollars, the applicable Pricing
Supplement will specify the currency or currencies, including composite
currencies such as the European Currency Unit ("ECU"), in which the principal,
premium, if any, and interest, if any, with respect to such Note are to be
paid, along with any other terms relating to the non-U.S. dollar denomination,
including exchange rates for the Specified Currency as against the U.S. dollar
at selected times during the last five years, and any exchange controls
affecting such Specified Currency. See "Foreign Currency Risks."
GENERAL
The Notes will be issued under the Indenture dated as of July 1, 1996, as
amended or supplemented from time to time (the "Senior Indenture"), between the
Company and Harris Trust and Savings Bank, as trustee (the "Trustee"). The
Notes issued under the Senior Indenture will constitute one series under such
Senior Indenture. The Notes will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Company. The Notes may be issued from time
to time in an aggregate principal amount of up to $500,000,000 or the
equivalent thereof in one or more foreign or composite currencies, subject to
reduction as a result of the sale by the Company of other Offered Securities
referred to in the accompanying Prospectus. For the purpose of this Prospectus
Supplement, (i) the principal amount of any Original Issue Discount Note (as
defined below) means the Issue Price (as defined below) of such Note and (ii)
the principal amount of any Note issued in a foreign currency or composite
currency means the U.S. dollar equivalent on the date of issue of the Issue
Price of such Note.
The Notes will mature on any day more than nine months from the date of
issue, as set forth in the applicable Pricing Supplement. Except as may be
provided in the applicable Pricing Supplement, the Notes will be issued only in
fully registered form. Unless otherwise provided in the applicable Pricing
Supplement, Notes will be denominated in Authorized Denominations (as defined
below).
The Notes will be offered on a continuous basis, and each Note will be issued
initially as either a Global Security registered in the name of a nominee of
The Depository Trust Company, as Depository (a "Global Note"), or by a
certificate issued in definitive form (a "Definitive Note"), as set forth in
the applicable Pricing Supplement. Except as set forth in the Prospectus under
"Description of the Debt Securities--Global Debt Securities," Global Notes will
not be issuable as Definitive Notes. The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to own,
transfer or pledge beneficial interests in Global Securities. See "Description
of Notes--Book-Entry System" below.
S-3
<PAGE>
The Notes may be presented for payment of principal and interest, transfer of
the Notes will be registrable and the Notes will be exchangeable at the office
or offices or agency maintained by the Company for such purpose; provided that
Global Notes will be exchangeable only in the manner and to the extent set
forth in the Prospectus under "Description of the Debt Securities--Global Debt
Securities." On the date hereof, the agent for the payment, transfer and
exchange of the Notes (the "Paying Agent") is Harris Trust and Savings Bank,
acting through its corporate trust office at 111 West Monroe Street, Chicago,
Illinois 60603.
The applicable Pricing Supplement will specify the price (the "Issue Price")
of each Note to be sold pursuant thereto (unless such Note is to be sold at
100% of its principal amount), the interest rate or interest rate formula,
maturity, currency or composite currency and principal amount and any other
terms on which each Note will be issued.
As used herein, the following terms shall have the meanings set forth below:
"Authorized Denominations" means, unless otherwise provided in the applicable
Pricing Supplement, (i) with respect to Notes denominated in U.S. dollars,
$1,000 or any amount in excess thereof which is an integral multiple of $1,000
and (ii) with respect to Notes denominated in foreign or composite currencies,
the equivalent of $1,000 (rounded to an integral multiple of 1,000 units of
such Specified Currency), or any amount in excess thereof which is an integral
multiple of 1,000 units of such Specified Currency, as determined by reference
to the noon dollar buying rate in New York City for cable transfers of such
Specified Currency published by the Federal Reserve Bank of New York (the
"Market Exchange Rate") on the Business Day (as defined below) immediately
preceding the date of issuance; provided, however, that in the case of ECUs,
the Market Exchange Rate shall be the rate of exchange determined by the
Commission of the European Communities (or any successor thereto) as published
in the Official Journal of the European Communities, or any successor
publication, on the Business Day immediately preceding the date of issuance.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close in The City of New York or Chicago,
Illinois and (i) with respect to LIBOR Notes (as defined below), is also a
London Banking Day, (ii) with respect to Notes denominated in a Specified
Currency other than U.S. dollars, Australian dollars or ECUs, in the principal
financial center of the country of the Specified Currency, (iii) with respect
to Notes denominated in Australian dollars, in Sydney and (iv) with respect to
Notes denominated in ECUs, that is not a non-ECU clearing day, as determined by
the ECU Banking Association in Paris.
An "Interest Payment Date" with respect to any Note shall be a date on which,
under the terms of such Note, regularly scheduled interest shall be payable.
Such Interest Payment Date shall be specified in the applicable Pricing
Supplement.
"London Banking Day" means any day on which dealings in deposits in the Index
Currency (as defined below) are transacted in the London interbank market.
"Original Issue Discount Note" means any Note that provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof pursuant to the Senior Indenture.
The "Record Date" with respect to any Interest Payment Date shall be the date
15 calendar days prior to such Interest Payment Date, whether or not such date
shall be a Business Day.
PAYMENT CURRENCY
If the holder of a Foreign Currency Note (as defined in "United States
Federal Taxation--Tax Consequences to United States Holders--Foreign Currency
Notes" below) is permitted to elect, and has elected, to receive payments of
principal of, premium, if any, and interest on a Foreign Currency Note in U.S.
S-4
<PAGE>
dollars, the Specified Currency will be converted into U.S. dollars based on
the highest bid quotation in The City of New York received by the Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the applicable payment date from three recognized foreign
exchange dealers (one of which may be the Exchange Rate Agent) for the purchase
by the quoting dealer of the Specified Currency for U.S. dollars for settlement
on the payment date in the aggregate amount of the Specified Currency payable
to the holders of Notes and at which the applicable dealer commits to execute a
contract. If such bid quotations are not available, payments will be made in
the Specified Currency unless such Specified Currency is not available due to
the imposition of exchange controls or to other circumstances beyond the
Company's control, in which case the Company will be entitled or obligated to
make payments in other currencies as described below. All currency exchange
costs will be borne by the holders of Notes by deductions from such payments.
Except as set forth below, if the principal of, premium, if any, or interest
on, any Note is payable in a Specified Currency other than U.S. dollars and
such Specified Currency is not available to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances
beyond the control of the Company or is no longer used by the government of the
country issuing the currency or for the settlement of transactions by public
institutions within the international banking community, then the Company will
be entitled to satisfy its obligations to holders of the Notes by making the
payments in U.S. dollars on the basis of the Market Exchange Rate on the date
of the payment or, if the Market Exchange Rate is not available on such date,
as of the most recent practicable date; provided, however, that if such
Specified Currency is replaced by the Euro (as described in "Special Provisions
Relating to Notes Denominated in ECU" below), the payment of principal of,
premium, if any, or interest on any Note denominated in such currency shall be
effected in Euro in conformity with legally applicable measures taken pursuant
to, or by virtue of, the treaty establishing the European Community (the "EC"),
as amended by the treaty on European Union (as so amended, the "Treaty"). Any
payment made under such circumstances in U.S. dollars (or, if applicable, in
Euro) where the required payment is in a Specified Currency other than U.S.
dollars will not constitute an Event of Default.
SPECIAL PROVISIONS RELATING TO NOTES DENOMINATED IN ECU
Valuation of the ECU
Subject to the provisions under "Payment in a Component Currency" below, the
value of the ECU, in which the Notes may be denominated or may be payable, is
equal to the value of the ECU that is from time to time used as the unit of
account of the EC and which is at the date hereof valued on the basis of
specified amounts of the currencies of 12 of the 15 member states of the EC.
Under Article 109G of the Treaty, the currency composition of the ECU may not
be changed. Other changes to the ECU may be made by the EC in conformity with
EC law, in which event the ECU will change accordingly. The Treaty contemplates
that European Economic and Monetary Union ("EMU") will occur in three stages.
The Treaty provides that the third stage of EMU will start on January 1, 1999,
and on that date the value of the ECU as against the currencies of member
states participating in the third stage will be irrevocably fixed and the ECU
will become a currency in its own right, replacing all or some of the
currencies of the 15 member states of the EC (as of the date of this Prospectus
Supplement, such currencies include the Austrian shilling, Belgian franc,
Danish krone, Dutch guilder, Finnish markka, French franc, German mark, Greek
drachma, Irish pound, Italian lira, Luxembourg franc, Portuguese escudo,
Spanish peseta, Swedish krona and pound sterling). On June 17, 1997, the
Council of the European Union adopted Council Regulation (EC) No. 1103/97,
which recites that the name of that currency will be the Euro and provides
that, in accordance with the Treaty, references to the ECU will be replaced by
references to the Euro at the rate of one Euro for one ECU. References in this
Prospectus Supplement to the "Euro" are to such new currency adopted pursuant
to the Treaty. From the start of the third stage of EMU, all payments in
respect of the Notes denominated or payable in ECU will be payable in Euro at
the rate of one Euro for one ECU.
S-5
<PAGE>
Payment in a Component Currency
With respect to each due date for the payment of principal of, premium, if
any, or interest on, the Notes on or after the first business day in Brussels
on which the ECU ceases to be used as the unit of account of the EC and has not
become a currency in its own right replacing all or some of the currencies of
the member states of the EC, the Company shall choose a substitute currency
(the "Chosen Currency"), which may be any currency which was, on the last day
on which the ECU was used as the unit of account of the EC, a component
currency of the ECU or U.S. dollars, in which all payments due on or after the
date with respect to the Notes, shall be made. The amount of each payment in
such Chosen Currency shall be computed on the basis of the equivalent of the
ECU in that currency determined as described below, as of the fourth business
day in Brussels prior to the date on which such payment is due.
On the first business day in Brussels on which the ECU ceases to be used as
the unit of account of the EC and has not become a currency in its own right
replacing all or some of the currencies of the member states of the EC, the
Company shall select a Chosen Currency in which all payments with respect to
Notes having a due date prior thereto but not yet presented for payment are to
be made. The amount of each payment in such Chosen Currency shall be computed
on the basis of the equivalent of the ECU in that currency, determined as
described below, as of such first business day.
The equivalent of the ECU in the relevant Chosen Currency as of any date (the
"Day of Valuation") shall be determined by, or on behalf of, the Exchange Rate
Agent on the following basis. The amounts and components composing the ECU for
this purpose (the "Components") shall be the amounts and components that
composed the ECU as of the last date on which the ECU was used as the unit of
account of the EC. The equivalent of the ECU in the Chosen Currency shall be
calculated by, first, aggregating the U.S. dollar equivalents of the
Components, and then, in the case of a Chosen Currency other than U.S. dollars,
using the rate used for determining, the U.S. dollar equivalent of the
Components in the Chosen Currency as set forth below, calculating the
equivalent in the Chosen Currency of such aggregate amount in U.S. dollars.
The U.S. dollar equivalent of each of the Components shall be determined by,
or on behalf of, the Exchange Rate Agent on the basis of the middle spot
delivery quotations prevailing at 2:30 p.m., Brussels time, on the Day of
Valuation, as obtained by, or on behalf of the Exchange Rate Agent from one or
more major banks, as selected by the Company, in the country of issue of the
component currency question.
If for any reason no direct quotations are available for a Component as of a
Day of Valuation from any of the banks selected for this purpose, in computing
the U.S. dollar equivalent of such Component, the Exchange Rate Agent shall
(except as provided below) use the most recent direct quotations for such
Component obtained by it or on its behalf, provided that such quotations were
prevailing in the country of issue not more than two Business Days before such
Day of Valuation. If such most recent quotations were so prevailing in the
country of issue more than two Business Days before such Day of Valuation, the
Exchange Rate Agent shall determine the U.S. dollar equivalent of such
Component on the basis of cross rates derived from the middle spot delivery
quotations for such component currency and for the U.S. dollar prevailing at
2:30 p.m., Brussels time, on such Day of Valuation, as obtained by, or on
behalf of, the Exchange Rate Agent from one or more major banks, as selected by
the Company, in a country other than the country of issue of such component
currency. Notwithstanding the foregoing, the Exchange Rate Agent shall
determine the U.S. dollar equivalent of such Component on the basis of such
cross rates if the Company judges that the equivalent so calculated is more
representative than the U.S. dollar equivalent calculated as provided in the
first sentence of this paragraph. Unless otherwise specified by the Company, if
there is more than one market for dealing in any component currency by reason
of foreign exchange regulations or for any other reason, the market to be
referred to in respect of such currency shall be that upon which a nonresident
issuer of securities denominated in such currency would purchase such currency
in order to make payments in respect of such securities.
Payments in the Chosen Currency will be made at the specified office of a
paying agent in the country of the Chosen Currency, or, if none, at the option
of the holder, at the specified office of any Paying Agent either
S-6
<PAGE>
by a check drawn on, or by transfer to an account maintained by the holder
with, a bank in the principal financial center of the country of the Chosen
Currency.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into
two or more currencies, the amount of that currency as a Component shall be
replaced by amounts of such two or more currencies, each of which shall have a
value on the date of division equal to the amount of the former component
currency divided by the number of currencies into which that currency was
divided.
All determinations referred to above made by, or on behalf of, the Company or
by, or on behalf of, the Exchange Rate Agent shall be at such entity's sole
discretion and shall, in the absence of manifest error, be conclusive for all
purposes and binding, on holders of Notes and coupons.
Notes Denominated in the Currencies of EC Member States
If, pursuant to the Treaty, all or some of the currencies of the member
countries of the EC are replaced by the Euro, the payment of principal of,
premium, if any, or interest on, the Notes denominated in such currencies shall
be effected in Euro in conformity with legally applicable measures taken
pursuant to, or by virtue of, the Treaty.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable upon maturity, redemption or repayment (whether or not the
date of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. The initial interest
payment on a Note will be made on the first Interest Payment Date falling after
the date the Note is issued; provided, however, that payments of interest (or,
in the case of a Note bearing interest at a fixed rate that may pay a level
amount in respect of both interest and principal amortized over the life of the
Note (an "Amortizing Note"), principal and interest) on a Note issued less than
15-calendar days before an Interest Payment Date will be paid on the next
succeeding Interest Payment Date to the holder of record on the Record Date
with respect to such succeeding Interest Payment Date, unless otherwise
specified in the applicable Pricing Supplement. See "United States Federal
Taxation--Tax Consequences to United States Holders--Notes Issued with Original
Issue Discount" below.
U.S. dollar payments of interest, other than interest payable at maturity (or
on the date of redemption or repayment, if a Note is redeemed or repaid by the
Company prior to maturity), will be made by check mailed to the address of the
person entitled thereto as shown on the Note register. U.S. dollar payment of
principal, premium, if any, and interest upon maturity, redemption or repayment
will be made in immediately available funds against presentation and surrender
of the Note. Notwithstanding the foregoing, (a) the Depository (as defined
below), as holder of Global Notes, shall be entitled to receive payments of
interest by wire transfer of immediately available funds and (b) a holder of
$10,000,000 (or the equivalent) or more in aggregate principal amount of
Definitive Notes having the same Interest Payment Date shall be entitled to
receive payments of interest by wire transfer of immediately available funds
upon written request to the Paying Agent, provided such request is received not
later than 15-calendar days prior to the applicable Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, a beneficial
owner of Global Notes denominated in a Specified Currency electing to receive
payments of principal or any premium or interest in a currency other than U.S.
dollars must notify the participant through which its interest is held on or
prior to the applicable Record Date, in the case of a payment of interest, and
on or prior to the sixteenth day prior to maturity, in the case of principal or
premium of such beneficial owner's election to receive all or a portion of
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<PAGE>
such payment in a Specified Currency. Such participant must notify the
Depository of such election on or prior to the third Business Day after such
Record Date. The Depository will notify the Paying Agent of such election on or
prior to the fifth Business Day after such Record Date. If complete
instructions are received by the participant and forwarded by the participant
to the Depository, and by the Depository to the Paying Agent, on or prior to
such dates, the beneficial owner will receive payments in the Specified
Currency by wire transfer of immediately available funds to an account
maintained by the payee with a bank located outside the United States;
otherwise the beneficial owner will receive payments in U.S. dollars.
Certain Notes, including Original Issue Discount Notes, may be considered to
be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant rate. See "United
States Federal Taxation--Tax Consequences to United States Holders--Notes
Issued with Original Issue Discount" below. Unless otherwise specified in the
applicable Pricing Supplement, if the principal of any Original Issue Discount
Note is declared to be due and payable immediately as described under
"Description of the Debt Securities--Events of Default" in the Prospectus, the
amount of principal due and payable with respect to such Note shall be limited
to the aggregate principal amount of such Note multiplied by the sum of its
Issue Price (expressed as a percentage of the aggregate principal amount) plus
the original issue discount amortized from the date of issue to the date of
declaration, which amortization shall be calculated using the "interest method"
(computed in accordance with generally accepted accounting principles in effect
on the date of declaration). Special considerations applicable to any such
Notes will be set forth in the applicable Pricing Supplement.
FIXED RATE NOTES
Each Note bearing interest at a fixed rate (a "Fixed Rate Note") will bear
interest from the date of issuance at the annual rate stated on the face
thereof, except as described below under "Extension of Maturity," until the
principal thereof is paid or made available for payment. Unless otherwise
specified in the applicable Pricing Supplement, such interest will be computed
on the basis of a 360-day year of twelve 30-day months. Unless otherwise
specified in the applicable Pricing Supplement, payments of interest on Fixed
Rate Notes other than Amortizing Notes will be made semiannually on each
Interest Payment Date specified in the Pricing Supplement and at maturity or
upon any earlier redemption or repayment. Payments of principal and interest on
Amortizing Notes, which are securities on which payments of principal and
interest are made in equal installments over the life of the security, will be
made either quarterly on each Interest Payment Date or semiannually on each
Interest Payment Date, as set forth in the applicable Pricing Supplement, and
at maturity or upon any earlier redemption or repayment. Payments with respect
to Amortizing Notes will be applied first to interest due and payable thereon
and then to the reduction of the unpaid principal amount thereof. A table
setting forth repayment information in respect of each Amortizing Note will be
provided to the original purchaser and will be available, upon request, to
subsequent holders.
If any Interest Payment Date for any Fixed Rate Note falls on a day that is
not a Business Day, the interest payment shall be made on the next day that is
a Business Day, and no interest on such payment shall accrue for the period
from and after the Interest Payment Date. If the maturity (or date of
redemption or repayment) of any Fixed Rate Note falls on a day that is not a
Business Day, the payment of interest and principal (and premium, if any) will
be made on the next succeeding Business Day, and no interest on such payment
shall accrue for the period from and after the maturity date (or date of
redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from and
including the date of issue or from and including the last date in respect of
which interest has been paid, as the case may be, to, but excluding, the
Interest Payment Date or the date of maturity or earlier redemption or
repayment, as the case may be. The interest rates the Company will agree to pay
on newly issued Fixed Rate Notes are subject to change without notice by the
Company from time to time, but no such change will affect any Fixed Rate Notes
theretofore issued or that the Company has agreed to issue.
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FLOATING RATE NOTES
Each Note bearing interest at a floating rate (a "Floating Rate Note") will
bear interest from the date of issuance until the principal thereof is paid or
made available for payment at a rate determined by reference to an interest
rate basis or formula (the "Base Rate"), which may be adjusted by a Spread
and/or Spread Multiplier (each as defined below). The applicable Pricing
Supplement will designate one or more of the following Base Rates as applicable
to each Floating Rate Note: (a) the CD Rate (a "CD Rate Note"), (b) the
Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the Federal Funds
Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"), (e) the Prime
Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury Rate Note"), (g)
the CMT Rate (a "CMT Rate Note") or (h) such other Base Rate or interest rate
formula as is set forth in such Pricing Supplement and in such Floating Rate
Note. The "Index Maturity" for any Floating Rate Note is the period of maturity
of the instrument or obligation from which the Base Rate is calculated and will
be specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the interest
rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii)
multiplied by the Spread Multiplier, if any. The "Spread" is the number of
basis points (one one-hundredth of a percentage point) specified in the
applicable Pricing Supplement to be added to or subtracted from the Base Rate
for such Floating Rate Note, and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement to be applied to the Base Rate
for such Floating Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest which may accrue during any interest period
("Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the rate
of interest which may accrue during any interest period ("Minimum Interest
Rate"). In addition to any Maximum Interest Rate that may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on a
Floating Rate Note will in no event be higher than the maximum rate permitted
by Illinois law, as the same may be modified by United States law of general
application. Under current Illinois law, no maximum rate of interest would
apply to the Notes.
Unless otherwise specified in the applicable Pricing Supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period" for such Note, and the first day of each Interest Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the Pricing Supplement, the Interest Reset Date
will be:
. in the case of Floating Rate Notes which reset daily, each Business
Day;
. in the case of Floating Rate Notes (other than Treasury Rate Notes)
which reset weekly, the Wednesday of each week;
. in the case of Treasury Rate Notes which reset weekly, the Tuesday of
each week, except as provided below;
. in the case of Floating Rate Notes which reset monthly, the third
Wednesday of each month;
. in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December;
. in the case of Floating Rate Notes which reset semiannually, the third
Wednesday of two months of each year, as specified in the applicable
Pricing Supplement; and
. in the case of Floating Rate Notes which reset annually, the third
Wednesday of one month of each year, as specified in the applicable
Pricing Supplement.
The interest rate in effect from the date of issue to the first Interest
Reset Date with respect to a Floating Rate Note will be the initial interest
rate set forth in the applicable Pricing Supplement (the "Initial Interest
Rate"). Unless otherwise specified in the applicable Pricing Supplement, the
interest rate in effect for the ten
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calendar days immediately prior to maturity, redemption or repayment will be
that in effect on the tenth calendar day preceding such maturity, redemption or
repayment date. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Reset Date shall
be postponed to the next succeeding Business Day, except that in the case of a
LIBOR Note, if such Business Day is in the next succeeding calendar month, such
Interest Reset Date shall be the immediately preceding Business Day.
Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable:
. in the case of Floating Rate Notes with a daily, weekly or monthly
Interest Reset Date, on the third Wednesday of each month or on the
third Wednesday of March, June, September and December, as specified in
the applicable Pricing Supplement;
. in the case of Floating Rate Notes with a quarterly Interest Reset
Date, on the third Wednesday of March, June, September and December;
. in the case of Floating Rate Notes with a semiannual Interest Reset
Date, on the third Wednesday of the two months specified in the
applicable Pricing Supplement; and
. in the case of Floating Rate Notes with an annual Interest Reset Date,
on the third Wednesday of the month specified in the applicable Pricing
Supplement.
If any Interest Payment Date for any Floating Rate Note would fall on a day
that is not a Business Day with respect to such Floating Rate Note, such
Interest Payment Date will be postponed to the following day that is a Business
Day with respect to such Floating Rate Note, except that, in the case of a
LIBOR Note, if such Business Day is in the next succeeding calendar month, such
Interest Payment Date shall be the immediately preceding day that is a Business
Day with respect to such LIBOR Note. If the maturity date or any earlier
redemption or repayment date of a Floating Rate Note would fall on a day that
is not a Business Day, the payment of principal, premium, if any, and interest
will be made on the next succeeding Business Day, and no interest on such
payment shall accrue for the period from and after such maturity, redemption or
repayment date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued from
and including the date of issue or from and including the last date to which
interest has been paid to, but excluding, the Interest Payment Date or maturity
date or date of redemption or repayment.
With respect to a Floating Rate Note, accrued interest shall be calculated by
multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement,
the interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime Rate Notes or by
the actual number of days in the year, in the case of Treasury Rate Notes and
CMT Rate Notes. All percentages used in or resulting from any calculation of
the rate of interest on a Floating Rate Note will be rounded, if necessary, to
the nearest one hundred-thousandth of a percentage point, with five one-
millionths of a percentage point rounded upward, and all dollar amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded to
the nearest cent, with one-half cent rounded upward. The interest rate in
effect on any Interest Reset Date will be the applicable rate as reset on such
date. The interest rate applicable to any other day is the interest rate from
the immediately preceding Interest Reset Date (or, if none, the Initial
Interest Rate).
Unless otherwise stated in the applicable Pricing Supplement, the calculation
agent (the "Calculation Agent") with respect to any issue of Floating Rate
Notes shall be Harris Trust and Savings Bank. Upon the request of the holder of
any Floating Rate Note, the Calculation Agent will provide the interest rate
then in effect and, if determined, the interest rate that will become effective
on the next Interest Reset Date with respect to such Floating Rate Note.
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The "Interest Determination Date" pertaining to an Interest Reset Date for CD
Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate
Notes and Prime Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day preceding
such Interest Reset Date. The Interest Determination Date pertaining to an
Interest Reset Date for a Treasury Rate Note will be the day of the week in
which such Interest Reset Date falls on which Treasury bills would normally be
auctioned. Treasury bills are normally sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is normally held
on the following Tuesday, but such auction may be held on the preceding Friday.
If, as the result of a legal holiday, an auction is so held on the preceding
Friday, such Friday will be the Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week. If an auction falls
on a day that is an Interest Reset Date, such Interest Reset Date will be the
next following Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest
Payment Date or Maturity Date, as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note (a "CD Interest Determination Date"), the rate on such date for negotiable
certificates of deposit having the Index Maturity specified in the applicable
Pricing Supplement as published by the Board of Governors of the Federal
Reserve System in "Statistical Release H.15(519), Selected Interest Rates" or
any successor publication of the Board of Governors of the Federal Reserve
System ("H.15(519)") under the heading "CDs (Secondary Market)."
The following procedures will be followed if the CD Rate cannot be determined
as described above:
. If the above rate is not published in H.15(519) by 9:00 a.m., New York
City time, on the Calculation Date, the CD Rate will be the rate on
such CD Interest Determination Date set forth in the daily update of
H.15(519), available through the world wide website of the Board of
Governors of the Federal Reserve System at
http://www.bogifrb.fed.us/releases/h15/update, or any successor site or
publication ("H.15 Daily Update"), for the day in respect of
certificates of deposit having the Index Maturity specified in the
applicable Pricing Supplement under the caption "CDs (Secondary
Market)."
. If such rate is not yet published in either H.15(519) or the H.15 Daily
Update by 3:00 p.m., New York City time, on the Calculation Date, then
the Calculation Agent will determine the CD Rate to be the arithmetic
mean of the secondary market offered rates as of 10:00 a.m., New York
City time, on such CD Interest Determination Date, of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in
New York City selected by the Calculation Agent (after consultation
with the Company) for negotiable certificates of deposit of major
United States money center banks of the highest credit standing in the
market for negotiable certificates of deposit with a remaining maturity
closest to the Index Maturity specified in the applicable Pricing
Supplement in the denomination of $5,000,000.
. If the dealers selected by the Calculation Agent are not quoting as set
forth above, the CD Rate will remain the CD Rate then in effect on such
CD Interest Determination Date.
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Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date relating to
a Commercial Paper Rate Note (a "Commercial Paper Interest Determination
Date"), the Money Market Yield (calculated as described below) of the rate on
such date for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement, as such rate shall be published in H.15(519)
under the heading "Commercial Paper--Nonfinancial."
The following procedures will be followed if the Commercial Paper Rate cannot
be determined as described above:
. If the above rate is not published by 9:00 a.m., New York City time, on
the Calculation Date, then the Commercial Paper Rate will be the Money
Market Yield of the rate on such Commercial Paper Interest
Determination Date for commercial paper of the Index Maturity specified
in the applicable Pricing Supplement as published in H.15 Daily Update
under the heading "Commercial Paper--Nonfinancial."
. If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or H.15 Daily Update, then the
Calculation Agent will determine the Commercial Paper Rate to be the
Money Market Yield of the arithmetic mean of the offered rates of 11:00
a.m., New York City time, on such Commercial Paper Interest
Determination Date of three leading dealers of commercial paper in New
York City selected by the Calculation Agent (after consultation with
the Company) for commercial paper of the Index Maturity specified in
the applicable Pricing Supplement placed for an industrial issuer whose
bond is "AA," or the equivalent, from a nationally recognized
statistical rating agency.
. If the dealers selected by the Calculation Agent are not quoting as
mentioned above, the Commercial Paper Rate with respect to such
Commercial Paper Interest Determination Date will remain the Commercial
Paper Rate then in effect on such Commercial Paper Interest
Determination Date.
"Money Market Yield" will be a yield calculated in accordance with the
following formula:
D X 360 X
100
------------
Money Market Yield =
360 - (D X
M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rates (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to
a Federal Funds Rate Note (a "Federal Funds Interest Determination Date"), the
rate on that day for Federal Funds as published in H.15(519) under the heading
"Federal Funds (Effective)."
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The following procedures will be followed if the Federal Funds Rate cannot be
determined as described above:
. If the above rate is not published by 9:00 a.m., New York City time, on
the Calculation Date, the Federal Funds Rate will be the rate on such
Federal Funds Interest Determination Date as published in H.15 Daily
Update under the heading "Federal Funds/(Effective)."
. If such rate is not yet published in either H.15(519) or H.15 Daily
Update by 3:00 p.m., New York City time, on the Calculation Date, the
Calculation Agent will determine the Federal Funds Rate to be the
arithmetic mean of the rates for the last transaction in overnight
Federal Funds arranged by each of three leading brokers of Federal Funds
transactions in New York City selected by the Calculation Agent (after
consultation with the Company) prior to 9:00 a.m., New York City time, on
such Federal Funds Interest Determination Date.
. If the brokers selected by the Calculation Agent are not quoting as
mentioned above, the Federal Funds Rate with respect to such Federal
Funds Interest Determination Date will remain the Federal Funds Rate then
in effect on such Federal Funds Interest Determination Date.
LIBOR Notes
LIBOR Notes will bear interest at the interest rates (calculated with
reference to the London interbank offered rate ("LIBOR") and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the LIBOR Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, LIBOR for
each Interest Determination Date will be determined by the Calculation Agent as
follows:
. As of the Interest Determination Date, LIBOR will be either: (a) if
"LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the specified Designated
LIBOR Page (as defined below) by its terms provides only for a single
rate, in which case such single rate shall be used) for deposits in the
Index Currency having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Banking Day
immediately following such Interest Determination Date, that appear on
the Designated LIBOR Page as of 11:00 a.m., London time, on that Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement, the rate for deposits in the Index Currency (as defined
below) having the Index Maturity designated in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date, that appears on such
Designated LIBOR Page as of 11:00 a.m., London time, on that Interest
Determination Date. If fewer than two offered rates appear (if "LIBOR
Reuters" is specified in the applicable Pricing Supplement) or no rate
appears (if "LIBOR Telerate" is specified in the applicable Pricing
Supplement), LIBOR in respect of the related Interest Determination Date
will be determined as if the parties had specified the rate described
below.
. With respect to an Interest Determination Date on which fewer than two
offered rates appear (if "LIBOR Reuters" is specified in the applicable
Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified
in the applicable Pricing Supplement), the Calculation Agent will request
the principal London offices of each of four major reference banks in the
London interbank market, as selected by the Calculation Agent, to provide
the Calculation Agent with its offered quotation for deposits in the
Index Currency for the period of the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Banking
Day immediately following such Interest Determination Date, to prime
banks in the London interbank market at approximately 11:00 a.m., London
time, on such Interest Determination Date and in a principal amount of
not less than $1,000,000 (or the equivalent in the Index Currency, if the
Index Currency is not the U.S. dollar) that is
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representative of a single transaction in such Index Currency in such
market at such time. If at least two such quotations are provided, LIBOR
determined on such Interest Determination Date will be the arithmetic
mean of such quotations. If fewer than two quotations are provided, LIBOR
determined on such Interest Determination Date will be the arithmetic
mean of the rates quoted at approximately 11:00 a.m. (or such other time
specified in the applicable Pricing Supplement), in the applicable
principal financial center for the country of the Index Currency on such
Interest Determination Date, by three major banks in such principal
financial center selected by the Calculation Agent for loans in the Index
Currency to leading European banks, having the Index Maturity designated
in the applicable Pricing Supplement and in a principal amount of not
less than $1,000,000 commencing on the second London Banking Day
immediately following such Interest Determination Date (or the equivalent
in the Index Currency, if the Index Currency is not the U.S. dollar) that
is representative for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence,
LIBOR in effect for the applicable period will be the same as LIBOR for
the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the LIBOR Notes
for which such LIBOR is being determined shall be the Initial Interest
Rate).
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate had been
specified. If the U.S. dollar is the Index Currency, LIBOR will be determined
as if Page 3750 had been specified. "Page 3750" means the display designated as
page "3750" on the Dow Jones Telerate Service (or such other page as may
replace the 3750 page on that service or such other service or services as may
be nominated by the British Bankers' Association for the purposes of displaying
London interbank offered rates for U.S. dollar deposits).
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date relating to a Prime Rate
Note (a "Prime Interest Determination Date"), the rate on such date as
published in H.15(519) under the heading "Bank Prime Loan."
The following procedures will be followed if the Prime Rate cannot be
determined as described above:
. If the rate if not published prior to 9:00 a.m., New York City time, on
the Calculation Date, then the Prime Rate will be the rate on such Prime
Interest Determination Date as published in H.15 Daily Update opposite
the caption "Bank Prime Loan."
. If the rate is not published prior to 3:00 p.m., New York City time, on
the Calculation Date, in either H.15(519) or H.15 Daily Update then the
Calculation Agent will determine the Prime Rate to be the arithmetic mean
of the rates of interest publicly announced by each bank that appears on
the Reuters Screen US Prime1 Page (as defined below) as such bank's prime
rate or base lending rate as in effect for that Prime Interest
Determination Date.
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. If fewer than four such rates but more than one such rate appear on the
Reuters Screen US Prime1 Page for the Prime Interest Determination Date,
the Calculation Agent will determine the Prime Rate to be the arithmetic
mean of the prime rates quoted on the basis of the actual number of days
in the year divided by 360 as of the close of business on such Prime
Interest Determination Date by at least two major money center banks in
New York City selected by the Calculation Agent (after consultation with
the Company).
. If fewer than two such rates appear on the Reuters Screen US Prime1 Page,
the Calculation Agent will determine the Prime Rate on the basis of the
rates furnished in New York City by three substitute banks or trust
companies organized and doing business under the laws of the United
States, or any State thereof, in each case having total equity capital of
at least $500,000,000 and being subject to supervision or examination by
Federal or State authority, selected by the Calculation Agent (after
consulting with the Company) to provide such rate or rates.
. If the banks selected are not quoting as mentioned above, the Prime Rate
will remain the Prime Rate in effect on such Prime Interest Determination
Date.
"Reuters Screen US Prime1 Page" means the display designated as page "US
Prime1" on the Reuters Monitor Money Rates Service (or such other page as may
replace the US Prime1 page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rates (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Treasury Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note (a "Treasury Interest Determination Date"), the rate
applicable to the auction held on such date of direct obligations of the United
States ("Treasury bills") having the Index Maturity specified in the applicable
Pricing Supplement as such rate appears on either the Telerate Page 56 or the
Telerate Page 57 under the heading "AVGE INVEST YIELD."
The following procedures will be followed if the Treasury Rate cannot be
determined as described above:
. If the above rate is not published by 9:00 a.m., New York City time, on
the Calculation Date, the Treasury Rate will be the auction average rate
on such Treasury Interest Determination Date (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States
Department of the Treasury. Treasury bills are usually sold at auction on
Monday of each week unless that day is a legal holiday, in which case the
auction is usually held on the following Tuesday, except that such
auction may be held on the preceding Friday.
. In the event that the results of the auction of Treasury bills having the
Index Maturity specified in the applicable Pricing Supplement are not
published or reported as provided above by 3:00 p.m., New York City time,
on such Calculation Date, or if no such auction is held on such Treasury
Interest Determination Date, then the Calculation Agent will determine
the Treasury Rate to be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market
bid rates, as of approximately 3:30 p.m, New York City time, on such
Treasury Interest Determination Date, of three leading primary United
States government securities dealers selected by the Calculation Agent
(after consultation with the Company), for the issue of Treasury bills
with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement.
. If the dealers selected by the Calculation Agent are not quoting as
mentioned above, the Treasury Rate with respect to such Treasury Interest
Determination Date will remain the Treasury Rate then in effect on such
Treasury Interest Determination Date.
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CMT Rate Notes
CMT Rate Notes will bear interest at the interest rates (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a CMT Rate
Note (a "CMT Interest Determination Date"), the rate displayed on the
Designated CMT Telerate Page (as defined below) under the caption ". . .
Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . .
Mondays Approximately 3:45 p.m.," under the column for the Designated CMT
Maturity Index (as defined below) for:
(i) If the Designated CMT Telerate Page is 7051, the rate on such CMT
Interest Determination Date; and
(ii) If the Designated CMT Telerate Page is 7052, the week or the month,
as applicable, ended immediately preceding the week in which the related
CMT Interest Determination Date occurs.
The following procedures will be used if the CMT Rate cannot be determined as
described above:
. If such rate is no longer displayed on the relevant page, or if not
displayed by 3:00 p.m., New York City time, on the related Calculation
Date, then the CMT Rate will be such Treasury Constant Maturity rate for
the Designated CMT Maturity Index as published in the relevant H.15(519).
. If that rate is no longer published, or if not published by 3:00 p.m.,
New York City time, on the related Calculation Date, then the CMT Rate
will be such Treasury Constant Maturity rate for the Designated CMT
Maturity Index (or other United States Treasury rate for the Designated
CMT Maturity Index) for the CMT Interest Determination Date with respect
to such Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate
Page and published in the relevant H.15(519).
. If such information is not provided by 3:00 p.m., New York City time, on
the related Calculation Date, then the Calculation Agent will determine
the CMT Rate to be a yield to maturity, based on the arithmetic mean of
the secondary market closing offer side prices as of approximately 3:30
p.m., New York City time, on the CMT Interest Determination Date
reported, according to their written records, by three leading primary
United States government securities dealers (each, a "Reference Dealer")
in The City of New York selected by the Calculation Agent as described in
the following sentence. The Calculation Agent will select five Reference
Dealers and will eliminate the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event
of equality, one of the lowest), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury
notes") with an original maturity of approximately the Designated CMT
Maturity Index and a remaining term to maturity of not less than such
Designated CMT Maturity Index minus one year.
. If the Calculation Agent cannot obtain three such Treasury notes
quotations, the Calculation Agent will determine the CMT Rate to be a
yield to maturity based on the arithmetic mean of the secondary market
offer side prices as of approximately 3:30 p.m., New York City time, on
the CMT Interest Determination Date of three Reference Dealers in the
City of New York (selected using the same method described above), for
Treasury notes with an original maturity of the number of years that is
the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an
amount of at least $100,000,000.
. If three or four (and not five) of such Reference Dealers are quoting as
described above, then the CMT Rate will be based on the arithmetic mean
of the offer prices obtained and neither the highest nor the lowest of
such quotes will be eliminated.
. If fewer than three Reference Dealers selected by the Calculation Agent
are quoting as described herein, the CMT Rate will be the CMT Rate in
effect on such CMT Interest Determination Date.
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If two Treasury notes with an original maturity as described above have
remaining terms to maturity equally close to the Designated CMT Maturity Index,
the quotes for the Treasury note with the shorter remaining term to maturity
will be used.
"Designated CMT Telerate Page" means the display on the Telerate (or any
successor service) on the page designated in the applicable Pricing Supplement
(or any other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be two years.
RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable notes
(the "Renewable Notes") that will bear interest at the interest rate
(calculated with reference to a Base Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Renewable Notes and in the applicable
Pricing Supplement.
The Renewable Notes will mature on an Interest Payment Date as specified in
the applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates
(each such Interest Payment Date, an "Election Date"), the maturity of the
Renewable Notes will be extended to the Interest Payment Date occurring twelve
months after such Election Date, unless the holder thereof elects to terminate
the automatic extension of the maturity of the Renewable Notes or of any
portion thereof having a principal amount of $1,000 or any multiple of $1,000
in excess thereof by delivering a notice to such effect to the Paying Agent not
less than nor more than a number of days to be specified in the applicable
Pricing Supplement prior to such Election Date. Such option may be exercised
with respect to less than the entire principal amount of the Renewable Notes;
provided that the principal amount for which such option is not exercised is at
least $1,000 or any larger amount that is an integral multiple of $1,000.
Notwithstanding the foregoing, the maturity of the Renewable Notes may not be
extended beyond the Final Maturity Date (as hereafter defined), as specified in
the applicable Pricing Supplement. If the holder elects to terminate the
automatic extension of the maturity of any portion of the principal amount of
the Renewable Notes and such election is not revoked as described below, such
portion will become due and payable on the Interest Payment Date falling six
months (unless another period is specified in the applicable Pricing
Supplement) after the Election Date prior to which the holder made such
election.
An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of $1,000 or
any multiple of $1,000 in excess thereof by delivering a notice to such effect
to the Paying Agent on any day following the effective date of the election to
terminate the automatic extension of maturity and prior to the date 15 days
before the date on which such portion would otherwise mature. Such a revocation
may be made for less than the entire principal amount of the Renewable Notes
for which the automatic extension of maturity has been terminated; provided
that the principal amount of the Renewable Notes for which the automatic
extension of maturity has been terminated and for which such a revocation has
not been made is at least $1,000 or any larger amount that is an integral
multiple of $1,000. Notwithstanding the foregoing, a revocation may not be made
during the period from and including a Record Date to but excluding the
immediately succeeding Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent holder.
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The Renewable Notes may be redeemed in whole or in part at the option of the
Company on the Interest Payment Dates in each year specified in the applicable
Pricing Supplement, commencing with the Interest Payment Date specified in the
applicable Pricing Supplement, at a redemption price as stated in the
applicable Pricing Supplement, together with accrued and unpaid interest to the
date of redemption. Notwithstanding anything to the contrary in this Prospectus
Supplement, notice of redemption will be provided by mailing a notice of such
redemption to each holder by first class mail, postage prepaid, at least 180
days prior to the date fixed for redemption.
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date more than nine months from the date of original issue
(the "Stated Maturity") and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors
(the "Indexed Notes"), as indicated in the applicable Pricing Supplement.
Holders of Indexed Notes may receive a principal amount at maturity that is
greater than or less than the face amount of such Notes depending upon the
fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at maturity, a historical comparison of the relative value, rate
or price of the specified index and the face amount of the Indexed Note and
certain additional United States federal tax considerations will be described
in the applicable Pricing Supplement.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note (other than an Amortizing Note)
will indicate whether the Company has the option to extend the maturity of such
Note for one or more periods of one or more whole years (each an "Extension
Period") up to but not beyond the date (the "Final Maturity Date") set forth in
such Pricing Supplement. If the Company has such option with respect to any
such Note (an "Extendible Note"), the following procedures will apply, unless
modified as set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to an Extendible Note by
notifying the Paying Agent of such exercise at least 45 but not more than 60
days prior to the maturity date originally in effect with respect to such Note
(the "Original Maturity Date") or, if the maturity date of such Note has
already been extended, prior to the maturity date then if effect (an "Extended
Maturity Date"). No later than 38 days prior to the Original Maturity Date or
an Extended Maturity Date, as the case may be (each, a "Maturity Date"), the
Paying Agent will mail to the holder of such Note a notice (the "Extension
Notice") relating to such Extension Period, by first class mail, postage
prepaid, setting forth (a) the election of the Company to extend the maturity
of such Note; (b) the new Extended Maturity Date; (c) the interest rate
applicable to the Extension Period (which, in the case of a Floating Rate Note,
will be calculated with reference to a Base Rate and the Spread and/or Spread
Multiplier, if any); and (d) the provisions, if any, for redemption during the
Extension Period, including the date or dates on which, the period or periods
during which and the price or prices at which such redemption may occur during
the Extension Period. Upon the mailing by the Paying Agent of an Extension
Notice to the holder of an Extendible Note, the maturity of such Note shall be
extended automatically, and, except as modified by the Extension Notice and as
described in the next paragraph, such Note will have the same terms it had
prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 a.m., New York City time,
on the twentieth calendar day prior to the Maturity Date then in effect for an
Extendible Note (or, if such day is not a Business Day, not later than 10:00
a.m., New York City time, on the immediately succeeding Business Day), the
Company may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any) for the
Extension Period by causing the Paying Agent to send notice of such higher
interest rate (or, in the case of a Floating Rate Note, a higher Spread and/or
Spread Multiplier, if any) to the holder of such Note by first class mail,
postage prepaid, or by such other means as shall be agreed between the Company
and the Paying Agent. Such
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notice shall be irrevocable. All Extendible Notes with respect to which the
Maturity Date is extended in accordance with an Extension Notice will bear such
higher interest rate (or, in the case of a Floating Rate Note, a higher Spread
and/or Spread Multiplier, if any) for the Extension Period, whether or not
tendered for repayment.
If the Company elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to require the Company to repay such
Note on the Maturity Date then in effect at a price equal to the principal
amount thereof plus any accrued and unpaid interest to such date, unless such
Note is an Original Issue Discount Note, in which case the Pricing Supplement
will specify the amount payable upon such repayment. In order for an Extendible
Note to be repaid on such Maturity Date, the holder thereof must follow the
procedures set forth below under "Repayment at the Noteholders' Option;
Repurchase" for optional repayment, except that the period for delivery of such
Note or notification to the Paying Agent shall be at least 25 but not more than
35 days prior to the Maturity Date then in effect and except that a holder who
has tendered an Extendible Note for repayment pursuant to an Extension Notice
may, by written notice to the Paying Agent, revoke any such tender for
repayment until 3:00 p.m., New York City time, on the twentieth calendar day
prior to the Maturity Date then in effect (or, if such day is not a Business
Day, until 3:00 p.m., New York City time, on the immediately succeeding
Business Day).
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Global Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, maturity date and other
terms, if any, will be represented by one or more Global Securities, and all
Floating Rate Global Notes having the same Issue Date, Initial Interest Rate,
Base Rate, Interest Reset Period, Interest Payment Dates, Index Maturity,
Spread and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, maturity date and other terms, if any, will be
represented by one or more Global Securities. Each Global Security representing
Global Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York (the "Depository"), and registered in the name of a
nominee of the Depository. Global Notes will not be exchangeable for Definitive
Notes, except under the circumstances described in the Prospectus under
"Description of the Debt Securities--Global Debt Securities." Definitive Notes
will not be exchangeable for Global Notes and will not otherwise be issuable as
Global Notes.
A further description of the Depository's procedures with respect to Global
Securities representing Global Notes is set forth in the Prospectus under
"Description of the Debt Securities--Global Debt Securities." The Depository
has confirmed to the Company, the Agents and the Trustee that it intends to
follow such procedures.
OPTIONAL REDEMPTIONS
The Pricing Supplement will indicate that the Notes cannot be redeemed prior
to maturity or will indicate the terms on which the Notes will be redeemable at
the option of the Company. Notice of redemption will be provided by mailing a
notice of such redemption to each holder by first class mail, postage prepaid,
at least 30 days and not more than 60 days prior to the date fixed for
redemption to the respective address of each holder as that address appears
upon the books maintained by the Paying Agent. Unless otherwise provided in the
applicable Pricing Supplement, the Notes, except for Amortizing Notes, will not
be subject to any sinking fund.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity date and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment, unless such Note is an
Original Issue Discount Note, in which case the Pricing Supplement will specify
the amount payable upon such repayment.
In order for such a Note to be repaid, the Paying Agent must receive at least
30 days but not more than 60 days prior to the repayment date (i) the Note with
the form entitled "Option to Elect Repayment" on the reverse of the Note duly
completed, or (ii) a telegram, telex, facsimile transmission or a letter from a
member of a national securities exchange, or the National Association of
Securities Dealers, Inc. (the "NASD") or a commercial bank or trust company in
the United States setting forth the name of the holder of the Note, the
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principal amount of the Note, the principal amount of the Note to be repaid,
the certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of the Note, will be
received by the Paying Agent not later than the fifth Business Day after the
date of such telegram, telex, facsimile transmission or letter; provided,
however, that such telegram, telex, facsimile transmission or letter shall only
be effective if such Note and form duly completed are received by the Paying
Agent by such fifth Business Day. Except in the case of Renewable Notes or
Extendible Notes, and unless otherwise specified in the applicable Pricing
Supplement, exercise of the repayment option by the holder of a Note will be
irrevocable. The repayment option may be exercised by the holder of a Note for
less than the principal amount of the Note but, in that event, the principal
amount of the Note remaining outstanding after repayment must be an Authorized
Denomination.
If a Note is represented by a Global Security, the Depository's nominee will
be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depository's nominee
will timely exercise a right to repayment with respect to a particular Note,
the beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an interest in such Note to notify
the Depository of its desire to exercise a right to repayment. Different firms
have different deadlines for accepting instructions from their customers, and,
accordingly, each beneficial owner should consult the broker or other direct or
indirect participant through which it holds an interest in a Note in order to
ascertain the deadline by which such an instruction must be given in order for
timely notice to be delivered to the Depository.
The Company may purchase Notes at any price in the open market or otherwise.
Notes so purchased by the Company may, at the discretion of the Company, be
held or resold or surrendered to the relevant Trustee for cancellation.
FOREIGN CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
Any investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls by either
the United States or a foreign government. Such risks generally depend on
economic and political events over which the Company has no control. In recent
years, rates of exchange between U.S. dollars and certain foreign currencies
have been highly volatile and such volatility may be expected to continue in
the future. Fluctuations in any particular exchange rate that have occurred in
the past are not necessarily indicative, however, of fluctuations in such rate
that may occur during the term of any Note. Depreciation against the U.S.
dollar of the currency in which a Note is payable would result in a decrease in
the effective yield of such Note below its coupon rate and, in certain
circumstances, could result in a loss to the investor on a U.S. dollar basis.
In addition, depending on the specific terms of a currency linked Note, changes
in exchange rates relating to any of the currencies involved may result in a
decrease in its effective yield and, in certain circumstances, could result in
a loss of all or a substantial portion of the principal of a Note to the
investor.
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN CURRENCY OR A
COMPOSITE CURRENCY, AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE
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FROM TIME TO TIME. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND
LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED
IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, SPECIFIED CURRENCIES
OTHER THAN U.S. DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR
INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY
TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, premium,
if any, and interest on the Notes. Such persons should consult their own
counsel with regard to such matters.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of,
premium, if any, or interest on, a Note. Even if there are no actual exchange
controls, it is possible that the Specified Currency for any particular Note
not denominated in U.S. dollars would not be available when payments on such
Note are due. In that event, the Company would make required payments in U.S.
dollars on the basis of the Market Exchange Rate on the date of such payment,
or if such rate of exchange is not then available, on the basis of the Market
Exchange Rate as of the most recent practicable date. See "Description of
Notes--Payment Currency."
With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable current exchange
controls, if any, and historic exchange rate information on such currency or
currency unit. The information contained therein shall constitute a part of
this Prospectus Supplement and is furnished as a matter of information only and
should not be regarded as indicative of the range of or trends in fluctuations
in currency exchange rates that may occur in the future.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of Illinois. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a court in the
United States, it is likely that such court would grant a judgment relating to
the Notes only in U.S. dollars.
UNITED STATES FEDERAL TAXATION
The following is a summary of the principal United States federal income tax
consequences of ownership and disposition of the Notes to initial holders
purchasing Notes at their original issue. This summary is based on the Internal
Revenue Code of 1986, as amended to the date hereof (the "Code"),
administrative pronouncements, judicial decisions and existing and proposed
Treasury Regulations, including regulations concerning the treatment of debt
instruments issued with original issue discount (the "OID Regulations"),
changes to any of which subsequent to the date of this Prospectus Supplement,
including with retroactive effect, may affect the tax consequences described
herein. This summary discusses only Notes held as capital assets within the
meaning of Section 1221 of the Code and assumes that the Notes are treated as
debt, and not equity, for federal income tax purposes. It does not discuss all
of the tax consequences that may be relevant to a holder in light of his
particular circumstances or to holders subject to special rules, such as
certain financial institutions, tax-exempt organizations, regulated investment
companies, insurance companies, dealers in securities or foreign currencies,
persons holding Notes as a hedge against, or which are hedged against, currency
risks, or holders whose functional currency (as defined in Code Section 985) is
not the U.S. dollar. Additional United States federal income tax considerations
applicable to particular Notes may be set forth in the applicable Pricing
Supplement. This summary does not discuss Original Issue Discount Notes which
qualify as "applicable high-yield discount obligations" under Section 163(i) of
the Code. Holders of Original Issue
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Discount Notes which are "applicable high-yield discount obligations" may be
subject to special rules. Finally, this summary is subject to the requirement
that a taxpayer obtain the consent of the Internal Revenue Service (the "IRS")
before changing a method of tax accounting. Persons considering the purchase,
ownership or disposition of Notes should consult their tax advisors with regard
to the application of the United States federal income tax laws to their
particular situations as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.
As used herein, the term "United States Holder" means an owner of a Note for
United States federal income tax purposes (including, where applicable, a
beneficial owner) that is (i) for United States federal income tax purposes a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source, (iv)
a "United States trust" (as defined below) or (v) any other person or entity
that otherwise is subject to United States federal income taxation on a net
income basis in respect of a Note. A "United States trust" means any trust if,
and only if, (x) a court within the United States is able to exercise primary
supervision over the administration of the trust and (y) one or more trustees
which are United States persons have the authority to control all substantial
decisions of the trust.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
Payments of Interest
Interest paid on a Note, to the extent treated as "qualified stated interest"
(as defined below), will generally be taxable to a United States Holder as
ordinary interest income at the time it accrues or is received in accordance
with the holder's method of accounting for federal income tax purposes. Special
rules governing the treatment of interest paid with respect to Notes issued
with original issue discount for federal income tax purposes, including certain
Floating Rate Notes, Indexed Notes, Foreign Currency Notes, Currency Indexed
Notes (as defined below), Notes providing for payments of principal or interest
linked to commodity prices, equity indices or other factors, are discussed
below. Under the OID Regulations, all payments of interest on a Note that
matures one year or less from its date of issuance will be included in the
stated redemption price at maturity of the Note and will be taxed in the manner
described below under "Notes Issued with Original Issue Discount."
Notes Issued with Original Issue Discount
Under the Code and the OID Regulations, a Note which is issued for an amount
less than its stated redemption price at maturity will generally be considered
to have been issued at an original issue discount for federal income tax
purposes. The "issue price" of a Note will equal the first price at which a
substantial amount of the Notes is sold to the public (not including bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). The stated redemption price at
maturity of a Note will equal the sum of all payments required under the Note
other than payments of "qualified stated interest." "Qualified stated interest"
is stated interest unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually during the entire term of the Note
and equal to the outstanding principal balance of the Note multiplied by a
single fixed rate or certain variable rates of interest, or certain
combinations thereof. The OID Regulations set forth a set of special rules for
"variable rate debt instruments," as a consequence of which certain Notes (in
particular, Floating Rate Notes and Indexed Notes) may or may not be issued
with original issue discount. Notice will be given in the applicable Pricing
Supplement when a particular Note will be issued with original issue discount.
Unless an applicable Pricing Supplement so indicates, the Notes will not be
issued with original issue discount. Under the OID Regulations, if a Note that
provides for a variable rate of interest does not qualify as a variable rate
debt instrument, the Note will be a contingent payment debt instrument, as
discussed below. Special tax considerations (including possible original issue
discount) may arise with respect to Floating Rate Notes providing for (i) one
Base Rate followed by one or more different Base Rates, (ii) a single fixed
rate followed
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by a floating rate, or (iii) a Spread Multiplier. Purchasers of Floating Rate
Notes with any of such features should carefully examine the applicable Pricing
Supplement and should consult their tax advisors with respect to such a feature
since the tax consequences will depend, in part, on the particular terms of the
purchased Note. Special rules may also apply if a Floating Rate Note is subject
to a cap, floor, governor or similar restriction that is not fixed throughout
the term of the Note or is reasonably expected as of the issue date to cause
the yield on the Note to be significantly less or more than the expected yield
determined without the restriction.
If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity, then the Note generally will not be considered to have original
issue discount. Holders of Notes with a de minimis amount of original issue
discount will generally include such original issue discount in income, as
capital gain, on a pro rata basis as principal payments are made on the Note.
A United States Holder of a Note issued with original issue discount will be
required to include any qualified stated interest payments in income in
accordance with the United States Holder's method of accounting for federal
income tax purposes. A United States Holder of such a Note that matures more
than one year from its date of issuance will be required to include original
issue in income for federal income tax purposes as it accrues for each day
during the taxable year on which it holds such Note, in accordance with a
constant yield method based on a compounding of interest, before the receipt of
cash payments attributable to such income. Under this method, a United States
Holder of such a Note generally will be required to include in income
increasingly greater amounts of original issue discount in successive accrual
periods.
Under the OID Regulations, a Note that matures one year or less from its date
of issuance will be treated as a "short-term original issue discount Note." In
general, a cash method United States Holder of a short-term original issue
discount Note is not required to accrue original issue discount for United
States federal income tax purposes unless it elects to do so. United States
Holders who either make such an election or report income for federal income
tax purposes on the accrual method and certain other United States Holders,
including banks and dealers in securities, are required to include original
issue discount in income on such short-term original issue discount Notes as it
accrues on a straight-line basis, unless an election is made to accrue the
original issue discount according to a constant yield method based on daily
compounding. In the case of a United States Holder who is not required and who
does not elect to include original issue discount in income currently, any gain
realized on the sale, exchange or retirement of the short-term original issue
discount Note will be ordinary income to the extent of the original issue
discount accrued on a straight-line basis (or, if elected, according to a
constant yield method based on daily compounding) through the date of sale,
exchange or retirement. In addition, such United States Holders will be
required to defer deductions for any interest paid on indebtedness incurred or
continued to purchase or carry short-term original issue discount Notes up to
an amount not exceeding the accrued original issue discount not previously
included in income.
Under the OID Regulations, an accrual basis United States Holder may make an
election (the "Constant Yield Election") to include in gross income all
interest that accrues on a Note (including stated interest, acquisition
discount, original issue discount, de minimis original issue discount, market
discount, de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium) in accordance with a constant
yield method based on the compounding of interest. If a United States Holder
makes this election for a Note with market discount or amortizable bond
premium, the election is treated as an election under the market discount or
amortizable bond premium provisions, described below, and the electing United
States Holder will be required to amortize bond premium or include market
discount in income currently for all of the United States Holder's other debt
instruments with market discount or amortizable bond premium. The election is
to be made for the taxable year in which the United States Holder acquired the
Note and may not be revoked without the consent of the IRS. United States
Holders should consult with their own tax advisors about this election.
Certain of the Notes may be redeemed or extended prior to maturity. Notes
containing such a feature may be subject to rules that differ from the general
rules discussed above. Purchasers of Notes with such a feature
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should carefully examine the applicable Pricing Supplement and should consult
their tax advisors with respect to such a feature since the tax consequences
with respect to original issue discount will depend, in part, on the particular
terms and the particular features of the purchased Note.
The OID Regulations contain aggregation rules stating that in certain
circumstances if more than one type of Note is issued as part of the same
issuance of securities to a single holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price,
maturity date, yield to maturity and stated redemption price at maturity for
purposes of calculating and accruing any original issue discount. Unless
otherwise provided in the related Pricing Supplement, the Company does not
expect to treat any of the Notes as being subject to the aggregation rules for
purposes of computing original issue discount.
Under the OID Regulations, Notes (other than Foreign Currency Notes) that
provide for contingent payments (e.g., certain payments on Notes that are not
treated as variable rate debt instruments, as described above) and that are
issued for money will be subject to the "noncontingent bond method" of
recognizing original issue discount. Under this method, the issuer must
determine a projected payment schedule for the debt instrument as of the issue
date (which must be followed by each United States Holder, unless disclosed on
such holder's federal income tax return) and, based on such schedule (and the
issue price), determine the instrument's projected yield and the daily portions
of interest that accrue on the debt instrument (effectively, original issue
discount). The applicable Pricing Supplement will include any such projected
payment schedule and projected yield. Such accruals will be required to be
included in income even though, for example, contingent payments are not yet
fixed. Under the OID Regulations, the projected payment schedule includes each
noncontingent payment and an amount for each contingent payment, if such
payment is based on market information, equal to the forward price which one
party would agree, as of the issue date, to pay an unrelated party for the
contingent payment on the date the contingent payment is made, or otherwise the
expected value of such contingent payment. Investors should consult their own
tax advisors concerning the possible application of the OID Regulations
relating to contingent payments on the Notes.
Integration of Notes with Other Financial Instruments
Any United States Holder of Notes that also acquires or has acquired any
financial instrument which, in combination with such Notes, would permit the
calculation of a single yield to maturity or could generally constitute a
"variable-rate" debt instrument that pays a qualified floating rate or rates of
an equivalent term, may in certain circumstances treat such Notes and such
financial instrument as an integrated debt instrument for purposes of the Code,
with a single determination of issue price and the character and timing of
income, deductions, gains and losses. (For purposes of determining OID, none of
the payments under the integrated debt instrument will be treated as qualified
stated interest.) Moreover, the IRS may require in certain circumstances that a
United States Holder who owns Notes integrate such Notes with a financial
instrument held or acquired by such holder or a related party. United States
Holders should consult their tax advisors as to the possible integration of the
Notes under the OID Regulations.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a United States Holder will
generally recognize taxable gain or loss equal to the difference between the
amount realized on the sale, exchange or retirement and such United States
Holder's adjusted tax basis in the Note. For these purposes, the amount
realized does not include any amount attributable to accrued interest on the
Note. Amounts attributable to accrued interest are treated as interest as
described under "Payments of Interest" above, in accordance with the United
States Holder's method of accounting for federal income tax purposes as
described therein. A United States Holder's adjusted tax basis in a Note will
equal the cost of the Note to such United States Holder, increased by the
amount of any original issue discount and market discount previously included
in income by the United States Holder with respect to such Note and reduced by
any amortized premium (each as described below) and by the amounts of any other
payments that do not constitute qualified stated interest (as defined above),
such as principal payments.
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Subject to the discussion under "Foreign Currency Notes" below, gain or loss
realized on the sale, exchange or retirement of a Note will be capital gain or
loss (except in the case of a short-term original issue discount Note in
certain cases, to the extent of any original issue discount not previously
included in the United States Holder's taxable income and to the extent of
market discount as described below), and will be long-term capital gain or loss
if at the time of sale, exchange or retirement the Note has been held for more
than one year. See "Notes Issued with Original Issue Discount" above. The
excess of net long-term capital gains over net short-term capital losses is
currently taxed at a lower rate than ordinary income for certain non-corporate
taxpayers. The distinction between capital gain or loss and ordinary income or
loss is also relevant for purposes of, among other things, limitations on the
deductibility of capital losses.
Notes Purchased at a Premium or Market Discount
A United States Holder that purchases a Note at a premium (defined under the
OID Regulations as the excess of the Holder's adjusted tax basis in the Note
immediately after purchase, over the sum of all amounts payable on the
instrument after the purchase other than qualified stated interest) will not be
subject to the original issue discount rules, and may elect to amortize the
"amortizable bond premium" (defined generally under the Code as an amount paid
in excess of the amount payable at maturity), in which case the amount required
to be included in the United States Holder's income each year with respect to
interest on the Note will be reduced by the amount of amortizable bond premium
allocable (based on the United States Holder's yield to maturity) to such year.
Any such election shall apply to all bonds (other than bonds the interest on
which is excludable from gross income) held by the United States Holder at the
beginning of the first taxable year to which the election applies or thereafter
acquired by the United States Holder and is irrevocable without the consent of
the IRS. Special rules apply to the determination of the Holder's basis in the
bond if the bond is a convertible bond or is acquired by the Holder in certain
exchanges.
On December 30, 1997, the Treasury adopted final Federal Regulations for the
amortization of bond premium (the "Bond Premium Regulations"). The Bond Premium
Regulations describe the constant yield method under which such premium is
amortized. In general, the Bond Premium Regulations require that amortizable
bond premium be treated as an offset to qualified stated interest income, as
qualified stated interest is taken into account under the Holder's method of
accounting. If the amount of bond premium allocable to an accrual period
exceeds the amount of qualified stated interest allocable to that period, the
Bond Premium Regulations provide that any excess bond premium allocable to an
accrual period is deductible by the Holder to the extent of the Holder's prior
income inclusions on the bond. If any of the excess bond premium is not
deductible, this amount is carried forward to the next accrual period and is
treated as bond premium allocable to that period. The Bond Premium Regulations
provide that bond premium on a variable rate debt instrument is determined by
reference to the stated redemption price at maturity of the equivalent fixed
rate debt instrument constructed for the variable rate debt instrument. Special
rules govern the calculation of bond premium for bonds subject to
contingencies. In general, the Company is deemed to exercise or not exercise an
option or combination of options in the manner that minimizes the Holder's
yield on the obligation. The Company is deemed to exercise or not exercise a
call option or combination of call options, however, in the manner that
minimizes the Holder's yield on the bond. A Holder is deemed to exercise or not
exercise an option or combination of options in the manner that maximizes the
Holder's yield on the bond. The Bond Premium Regulations are effective for debt
instruments acquired on or after March 2, 1998. If a United States Holder
elects to amortize bond premium for the taxable year containing such effective
date, or for any subsequent year, the Bond Premium Regulations would apply to
all the United States Holder's debt instruments held on or after the first day
of that taxable year.
A United States Holder that purchases a Note issued with original issue
discount at an acquisition premium (defined under the OID Regulations as an
amount paid in excess of its adjusted issue price but less than or equal to all
amounts payable on the instrument after the purchase other than qualified
stated interest) will be subject to the original issue discount rules, but will
proportionately reduce the daily portions of original
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issue discount includible in income to reflect the premium paid relative to
issue price. In lieu of such offset, the United States Holder may compute
original issue discount accruals by treating the purchase price as the issue
price and applying the constant yield method.
If a United States Holder of a Note, other than a short-term original issue
discount Note, that had an initial tax basis in such Note which is less than
the issue price of such Note, subsequently disposes of such Note, holds it
until maturity or receives a principal payment, the tax consequences are the
same as described above, except that any gain upon a sale or other disposition
(including certain nontaxable dispositions such as a gift and the receipt of
principal payments) will be recognized and treated as ordinary income to the
extent of any "market discount" accrued for the period that such purchaser
holds the Note.
Market discount generally will equal the excess, if any, of the adjusted
basis that the Note would have in the hands of the original holder (or in the
case of a Note issued with original issue discount, the issue price plus the
aggregate amount of original issue discount previously accrued thereon) over
the purchaser's basis in the Note immediately after such purchaser acquired the
Note. In general, market discount on a Note will be treated as accruing ratably
over the term of such Note, or at the irrevocable election of the United States
Holder, under a constant yield method.
A United States Holder of a Note with market discount may be required to
defer, until the maturity of the Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note. Such United
States Holder may instead elect to include market discount in income as it
accrues, in which case the rule described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies, and may not be
revoked without the consent of the IRS.
In lieu of the foregoing rules, different rules apply in the case of Notes
with contingent payments where a holder's tax basis in such Note is different
than the Note's adjusted issue price (determined under special rules set out in
the OID Regulations). Accordingly, prospective purchasers of such Notes should
consult with their tax advisors with respect to the application of such rules
to such Notes.
Foreign Currency Notes
The following summary relates to Notes that are denominated in a currency or
currency unit other than the U.S. dollar ("Foreign Currency Notes").
A United States Holder who uses the cash method of accounting and who
receives a payment of qualified stated interest in a foreign currency with
respect to a Foreign Currency Note will be required to include in income the
U.S. dollar value of the foreign currency payment (determined on the date such
payment is received) regardless of whether the payment is in fact converted to
U.S. dollars at that time, and such U.S. dollar value will be the United States
Holder's tax basis in the foreign currency. No foreign currency gain or loss
will be recognized with respect to the receipt of such payment. A cash method
United States Holder who receives such a payment in U.S. dollars pursuant to an
option available under such Note will be required to include the amount of such
payment in income upon receipt. A cash method United States Holder of a Foreign
Currency Note will take into account original issue discount on a Note in the
same manner as an accrual method United States Holder, as described below,
including the recognition of ordinary foreign currency exchange gain or loss.
Accrual method United States Holders will be required to include in income
the U.S. dollar value of the amount of interest income (including any original
issue discount (as measured in the relevant foreign currency), or as reduced by
amortizable bond premium) that has accrued and is otherwise required to be
taken into account with respect to a Foreign Currency Note during an accrual
period. Unless the United States Holder elects the "spot rate convention," the
U.S. dollar value of such accrued income and original issue discount will
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be determined by translating such income at the average rate of exchange for
the accrual period or, with respect to an accrual period that spans two taxable
years, at the average rate for the partial period within the taxable year. In
addition, such United States Holder will recognize ordinary foreign currency
exchange gain or loss with respect to accrued interest income on the date such
income is actually received. The amount of such ordinary gain or loss
recognized will equal the difference between the U.S. dollar value of the
foreign currency payment received (based on the exchange rate in effect on the
date such payment is received) in respect of such accrual period (or, where a
United States Holder receives U.S. dollars, the amount of such payment in
respect of such accrual period) and the U.S. dollar value of interest income
that has accrued during such accrual period (as determined above). Any such
foreign currency gain or loss generally will not be treated as interest income
or expense, except to the extent provided in regulations or administrative
pronouncements of the IRS. A United States Holder may elect the spot rate
election to translate original issue discount (and, in the case of an accrual
basis United States Holder, accrued interest) into U.S. dollars at the exchange
rate on the last day of the interest accrual period (or, in the case of a
partial accrual period, the exchange rate on the last date of the taxable year)
or, if the date of receipt is within five business days of the last day of the
interest accrual period or taxable year, the exchange rate on the date of
receipt. A United States Holder that makes such an election must apply it
consistently to all debt instruments from year to year and cannot change the
election without the consent of the IRS. United States Holders should consult
with their own tax advisors about this election.
A United States Holder of a Foreign Currency Note with amortizable bond
premium, who has elected to amortize such premium, will take into account such
amortizable bond premium (as measured in the relevant foreign currency) on a
current basis by reducing interest income (as measured in the relevant foreign
currency). Ordinary foreign currency exchange gain or loss will be realized
with respect to amortizable premium based on the difference between the spot
exchange rate on the date the premium is paid to acquire the Note and the spot
exchange rate on the date the premium is treated as being returned as part of
the stated principal. The principles described in this paragraph also apply to
acquisition premium.
Accrued market discount on a Foreign Currency Note will be measured in the
relevant foreign currency. Accrued market discount on a Foreign Currency Note
that is not currently included in the United States Holder's income will not
result in exchange gain or loss. Exchange gain or loss with respect to accrued
market discount on a Foreign Currency Note that is currently includible in
income is calculated in the same manner as exchange gain or loss with respect
to accrued interest income, as described above.
A United States Holder's tax basis in a Foreign Currency Note, and the amount
of any subsequent adjustment to such United States Holder's tax basis in
respect of original issue discount and premium, will be the U.S. dollar value
of the foreign currency amount paid for such Foreign Currency Note, or of the
foreign currency amount of the adjustment, determined on the date of such
purchase or adjustment. A United States Holder who purchases a Foreign Currency
Note with previously owned foreign currency will recognize ordinary foreign
currency exchange gain or loss in an amount equal to the difference, if any,
between such United States Holder's tax basis in the foreign currency and the
U.S. dollar fair market value of the Foreign Currency Note on date of purchase.
However, the conversion of U.S. dollars to a foreign currency and the immediate
use of that currency to purchase a Note generally will not result in taxable
foreign currency exchange gain or loss for a United States Holder.
If a United States Holder receives foreign currency in respect of the sale,
exchange or retirement of a Foreign Currency Note, the amount realized
generally will be the U.S. dollar value of the foreign currency received (on
the date that payment is received or the Note is disposed of, in accordance
with the United States Holder's method of tax accounting). In addition, gain or
loss realized upon the sale, exchange or retirement of a Foreign Currency Note
that is attributable to fluctuations in currency exchange rates will be
ordinary income or loss which will not be treated as interest income or expense
(unless otherwise provided in future regulations or administrative
pronouncements). Gain or loss attributable to fluctuations in exchange rates
will equal the difference between (i) the U.S. dollar value of the foreign
currency principal amount of such Note, and any
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payment with respect to accrued interest, determined on the date such payment
is received or such Note is disposed of and (ii) the U.S. dollar value of the
foreign currency principal amount of such Note, determined on the date such
United States Holder acquired such Note, and the U.S. dollar value of the
accrued interest received, determined by translating such interest at the
average exchange rate for the accrual period. Such foreign currency gain or
loss will be recognized only to the extent of the total gain or loss realized
by a United States Holder on the sale, exchange or retirement of the Foreign
Currency Note. Any gain or loss realized by such a United States Holder in
excess of such foreign currency gain or loss will generally be capital gain or
loss except in the case of a short-term Original Issue Discount Note, to the
extent of any original issue discount not previously included in the United
States Holder's income.
A United States Holder will have a tax basis in any foreign currency received
on the sale, exchange or retirement of a Foreign Currency Note equal to the
U.S. dollar value of such foreign currency, determined at the time of such
sale, exchange or retirement. An additional foreign currency gain or loss could
result on the sale or other disposition of the foreign currency received if the
exchange rate on the date of sale or other disposition differs from the
exchange rate on the date of receipt. Regulations issued under Section 988 of
the Code provide a special rule for purchases and sales of publicly traded
Foreign Currency Notes by a cash method taxpayer under which units of foreign
currency paid or received are translated into U.S. dollars at the spot rate on
the settlement date of the purchase or sale. Accordingly, no exchange gain or
loss will result from currency fluctuations between the trade date and the
settlement of such a purchase or sale. An accrual method taxpayer may elect the
same treatment required of cash-method taxpayers with respect to the purchases
and sale of publicly traded Foreign Currency Notes provided the election is
applied consistently. Such election cannot be changed without the consent of
the IRS. Any gain or loss realized by a United States Holder on a sale or other
disposition of foreign currency (including its exchange for U.S. dollars or its
use to purchase Foreign Currency Notes) will be ordinary income or loss.
A United States Holder who receives U.S. dollar payments on the sale,
exchange or retirement of a Foreign Currency Note may have a different amount
realized for United States federal income tax purposes than the amount it
receives in cash, because the relevant exchange rates required to be used for
United States federal income tax purposes may not be the same as the exchange
rates used by the Agent to convert foreign currency payments into U.S. dollar
payments.
On January 1, 1999, participating member states of the European Union will
replace their respective national currencies ("legacy currencies") with a
single European currency (the "Euro"). Recently, the IRS published temporary
and proposed Treasury Regulations on the effect of the Euro conversion. At that
time, Foreign Currency Notes, denominated in a legacy currency, may likewise be
converted to the Euro. Under the temporary and proposed Treasury Regulations,
conversion of an obligation denominated in a legacy currency to an obligation
denominated in the Euro, in and of itself, will not be treated as a taxable
exchange. In addition, the conversion, in and of itself, will not result in a
market or foreign currency gain or loss until a subsequent realization event
with respect to the underlying instrument occurs. The temporary and proposed
Treasury Regulations apply to tax years ending after July 29, 1998.
Currency Indexed Notes
Indexed Notes, the payment of principal or interest of which is determined by
reference to one or more currency exchange rates ("Currency Indexed Notes"),
should constitute debt obligations of the Company for United States federal
income tax purposes and no portion of the issue price of the Currency Indexed
Notes should be separately allocated to the foreign exchange feature of the
Notes. However, the proper treatment of payments of principal of and interest
on such Currency Indexed Notes is uncertain at this time.
United States Holders of Currency Indexed Notes should consult with their tax
advisors as to the federal income tax consequences of the ownership and
disposition of such Notes.
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Extension of Maturity
If so indicated in the Pricing Supplement relating to a Note, the Company
will have the option to extend the maturity of such Note. See "Description of
Notes--Renewable Notes" above. The treatment of a United States Holder of Notes
with respect to which such an option has been exercised who does not elect to
have the Company repay such Notes on the Initial Maturity Date will depend on
the terms established for such Notes by the Company pursuant to the exercise of
such option (the "Revised Terms"). Such United States Holder may be treated for
United States federal income tax purposes as having exchanged such Notes (the
"Old Notes") for new Notes with Revised Terms (the "New Notes"). If the United
States Holder is treated as having exchanged Old Notes for New Notes, such
exchange may be treated as either a taxable exchange or a tax-free
recapitalization.
If the exercise of the option by the Company is not treated as an exchange of
Old Notes for New Notes, no gain or loss will be recognized by a United States
Holder as a result thereof. If the exercise of the option is treated as a
taxable exchange of Old Notes for New Notes, a United States Holder would
recognize gain or loss equal to the difference between the issue price of the
New Notes (increased, in the case of Notes which provide for contingent
payments (described above), where the Old Note is not traded on an established
market, by the fair market value of such contingent payments) and such United
States Holder's adjusted tax basis in the Old Notes. If the exercise of the
option is treated as a tax-free recapitalization, no loss would be recognized
by a United States Holder as a result thereof and gain, if any, would be
recognized to the extent of the fair market value of the excess, if any, of the
principal amount of notes received over the principal amount of notes
surrendered. In this regard, the meaning of the term "principal amount" is not
clear. Such term could be interpreted to mean "issue price" with respect to
notes that are received and "adjusted issue price" with respect to notes that
are surrendered. Legislation to that effect has been introduced in the past. It
is not possible to determine whether such legislation will be reintroduced, and
if so, enacted and, if enacted, whether it would apply to recapitalizations
occurring prior to the date of enactment.
However, whether or not such exercise results in an exchange of the Old Notes
for New Notes, the Old Notes may be treated as retired and then reissued on the
date of exercise for the adjusted issue price of the Old Notes solely for
purposes of calculating original issue discount.
Notes Linked to Commodity Prices, Equity Indices or Other Factors
The United States federal income tax consequences to a holder of the
ownership and disposition of Indexed Notes and Notes that are exchangeable into
the stock or a debt instrument of another issuer may vary depending on the
exact terms of the Notes. United States Holders intending to purchase such
Notes should refer to the discussion relating to taxation in the applicable
Pricing Supplement.
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
"United States Alien Holder" means any owner of a Note for United States
federal income tax purposes (including, where applicable, a beneficial owner),
who is not a United States Holder. Under present United States federal income
and estate tax law, and subject to the discussion of backup withholding below:
(i) interest and principal payments on a Note, including premium, and
original issue discount, made by the Company or any of its paying agents to
any United States Alien Holder, will not be subject to United States
withholding tax; provided, that in the case of original issue discount or
interest, (a) the holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote, (b) the holder is not a controlled foreign
corporation that is related to the Company through stock ownership, (c) the
holder is not a bank receiving interest described in section 881(c)(3)(A)
of the Code, (d) the interest is not contingent interest under Code Section
871(h)(4)(A), and (e) either (1) the beneficial owner of the Note certifies
to the Company or its agent, under penalties of perjury, that it is not a
United States Holder and provides its name and address
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or (2) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "financial institution") and holds the Note on behalf
of the beneficial owner certifies to the Company or its agent, under
penalties of perjury, that such statement has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof (which
certification under temporary Treasury Regulations may be provided by the
beneficial owner of a Note on IRS Form W-8);
(ii) a United States Alien Holder will not be subject to United States
federal income tax on gain realized on the sale, exchange or retirement of
a Note if such gain is not effectively connected with the conduct of a
United States trade or business and, in the case of a United States Alien
Holder who is an individual, such holder is not present in the United
States for a total of 183 days or more during the taxable year in which
such gain is realized; and
(iii) a Note held by an individual who at the time of death is not a
citizen or resident of the United States (including its territories,
possessions and other areas subject to its jurisdiction, such as the
Commonwealth of Puerto Rico) will not be subject to United States federal
estate tax as a result of such individual's death if the individual does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, the interest
is not contingent interest under Code Section 871(h)(4)(A), and at the time
of the individual's death, payments with respect to the Note would not have
been effectively connected with the conduct of a trade or business by the
individual in the United States.
On October 14, 1997, the IRS published in the Federal Register final
regulations (the "1997 Final Regulations") which affect the United States
taxation of United States Alien Holders. As promulgated, the 1997 Final
Regulations are effective for payments after December 31, 1998, regardless of
the issue date of the instrument with respect to which such payments are made,
subject to certain transition rules. The IRS recently announced its intention
to amend the 1997 Final Regulations to extend this effective date to December
31, 1999, subject to certain transition rules. The discussion under this
heading and under "Information Reporting and Backup Withholding" below is not
intended to be a complete discussion of the provisions of the 1997 Final
Regulations or the recent IRS announcement, and prospective purchasers of the
Notes are urged to consult their tax advisors concerning the tax consequences
of their acquiring, holding and disposing of the Notes in light of the 1997
Final Regulations.
The 1997 Final Regulations provide documentation procedures designed to
simplify compliance by withholding agents. The 1997 Final Regulations generally
do not affect the documentation rules described above, but instead add other
certification options. Under one such option, a withholding agent will be
allowed to rely on an intermediary withholding certificate furnished by a
"qualified intermediary" (as defined below) on behalf of one or more beneficial
owners (or other intermediaries) without having to obtain the beneficial owner
certificate described above. "Qualified intermediaries" include (i) foreign
financial institutions or foreign clearing organizations (other than a United
States branch or United States office of such institution or organization), or
(ii) foreign branches or offices of United States financial institutions or
foreign branches or offices of United States clearing organizations, which, as
to both (i) and (ii), have entered into withholding agreements with the IRS. In
addition to certain other requirements, qualified intermediaries must obtain
withholding certificates, such as revised IRS Form W-8 (see below), from each
beneficial owner. Under another option, an authorized foreign agent of a United
States withholding agent will be permitted to act on behalf of the United
States withholding agent, provided certain conditions are met.
For purposes of the certification requirements, the 1997 Final Regulations
generally treat, as the beneficial owners of payments on a Note, those persons
that, under United States tax principles, are the taxpayers with respect to
such payments, rather than persons such as nominees or agents legally entitled
to such payments. In the case of payments to an entity classified as a foreign
partnership under United States tax principles, the partners, rather than the
partnership, generally will be required to provide the required certifications
to qualify for the withholding exemption described above. A payment to a United
States partnership, however, is treated for these purposes as payment to a
United States payee, even if the partnership has one or more foreign
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partners. The 1997 Final Regulations provide certain presumptions with respect
to withholding for Holders not furnishing the required certifications to
qualify for the withholding exemption described above. In addition, the 1997
Final Regulations will replace a number of current tax certification forms
(including IRS Form W-8 and IRS Form 4224 discussed below) with a single,
revised IRS Form W-8 (which, in certain circumstances, requires information in
addition to that previously required). Under the 1997 Final Regulations, this
Form W-8 will remain valid until the last day of the third-calendar year
following the year in which the certificate is signed. The 1997 Final
Regulations contained detailed rules, which might be changed in light of the
recent IRS announcement that the effective date will be postponed, governing
tax certifications during the transition period prior to and immediately
following the effectiveness of the 1997 Final Regulations.
If a United States Alien Holder of a Note is engaged in a trade or business
in the United States, and if interest (including original issue discount) on
the Note, or gain recognized on the sale, exchange, redemption, retirement or
other disposition of a Note, is effectively connected with the conduct of such
trade or business, the United States Alien Holder, although exempt from
withholding of United States federal income tax, will generally be subject to
regular United States federal income tax on such interest (including OID) or
gain in the same manner as if it were a United States Holder. See "Tax
Consequences to United States Holders" above. In lieu of the certificate
described above, such Holder must provide to the withholding agent a properly
executed IRS Form 4224 (or successor form) in order to claim an exemption from
withholding. In addition, if such United States Alien Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments. For
purposes of the branch profits tax, interest (including OID) on, and any gain
recognized on the sale, exchange, redemption, retirement or other disposition
of, a Note will be included in the effectively connected earnings and profits
of such United States Alien Holder if such interest (including OID) or gain is
effectively connected with the conduct by the United States Alien Holder of a
trade or business in the United States.
United States Alien Holders should consult their own tax advisors with
respect to their particular circumstances.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under current United States federal income tax law, a 31% "backup"
withholding tax is applied to certain interest and principal payments
(including premium and original issue discount) made to, and to the proceeds of
sale before maturity by, certain United States persons if such persons fail to
supply taxpayer identification numbers and other information. In addition,
certain persons making such payments are required to submit information returns
to the United States Treasury Department with regard to those payments. Backup
withholding and information reporting, however, generally do not apply to any
such payments made to certain "exempt recipients" such as corporations. Under
current law, backup withholding and information reporting will not apply to
interest and principal payments (including premium and original issue discount)
made by the Company or any of its paying agents on a Note if the Company or
such paying agents, as the case may be, receive the certification described in
section (i)(e) under "United States Alien Holders" above and do not have actual
knowledge that the payee is a United States person, and in the case of
principal payments (including premium), receive certification from the payee as
to the absence of the conditions set forth in section (ii) under "United States
Alien Holders" above. If such Holder does not provide the required
certification, such Holder may nevertheless avoid backup withholding or
information reporting in the circumstances described below, but might be
subject to withholding of United States federal income tax as described above
under "Tax Consequences to United States Alien Holders."
Under currently applicable United States Treasury Regulations, if payments of
principal or interest are collected outside the United States by a foreign
office of a custodian, nominee or other agent acting on behalf of a beneficial
owner of a Note, such custodian, nominee or other agent will not be required to
apply backup withholding to such payments made to such beneficial owner, and
generally will not be subject to information
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reporting requirements. However, if such custodian, nominee or other agent is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting (but not backup withholding) will be required
unless such custodian, nominee or other agent has in its records documentary
evidence that the beneficial owner is not a United States Holder and certain
other conditions are met or the beneficial owner otherwise establishes an
exemption.
Under current regulations, payments on the sale, exchange or retirement of a
Note to or through a foreign office of a broker will not be subject to backup
withholding. Such payments, however, will be subject to information reporting
if the broker is a United States person, a controlled foreign corporation for
United States federal income tax purposes or a foreign person 50% or more of
whose gross income is effectively connected with the conduct of a United States
trade or business for a specified three-year period, unless the broker has in
its records documentary evidence that the beneficial owner is not a United
States person and certain other conditions are met, or the beneficial owner
otherwise establishes an exemption.
The Company will withhold all amounts required by law to be withheld from
reportable payments made and with respect to the Notes. The amount of any
backup withholding from a payment to a holder of a Note will be allowed as a
credit against such holder's United States federal income tax liability and may
entitle such holder to a refund, provided that the required information is
furnished to the IRS.
In general, the 1997 Final Regulations do not significantly alter the
substantive backup withholding and information reporting requirements described
above. As under current law, backup withholding and information reporting will
not apply to (i) payments to a United States Alien Holder of principal and
interest and (ii) payments to a United States Alien Holder on the sale,
exchange, redemption, retirement or other disposition of a Note, in each case
if such United States Alien Holder provides the required certification to
establish an exemption from the withholding of United States federal income tax
or otherwise establishes an exemption. Similarly, even if a United States Alien
Holder does not provide such certification or otherwise establish an exemption,
unless the payor has actual knowledge that the payee is a United States Holder,
backup withholding will not apply to (i) payments of interest made outside the
United States to certain offshore accounts and (ii) payments on the sale,
exchange, redemption, retirement or other disposition of a Note effected
outside the United States. However, information reporting (but not backup
withholding) will apply to (i) payments of interest made by a payor outside the
United States and (ii) payments on the sale, exchange, redemption, retirement
or other disposition of a Note effected outside the United States if payment is
made by a broker that is, for United States federal income tax purposes, (a) a
United States person, (b) a controlled foreign corporation, (c) a United States
branch of a foreign bank or foreign insurance company, (d) a foreign
partnership controlled by United States persons or engaged in a United States
trade or business or (e) a foreign person 50% or more of whose gross income is
effectively connected with the conduct of a United States trade or business for
a specified three-year period, in each case unless such payor or broker has in
its records documentary evidence that the beneficial owner is not a United
States Holder and certain other conditions are met or the beneficial owner
otherwise establishes an exemption (in which case neither information reporting
nor backup withholding will apply). As noted above, the IRS has announced that
the 1997 Final Regulations will be amended to be effective generally for
payments after December 31, 1999, subject to certain transition rules.
United States Alien Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF
NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES OF
HOLDING, EXCHANGING OR SELLING THE NOTES, INCLUDING THE APPLICATION AND EFFECT
OF ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGES IN
APPLICABLE TAX LAWS.
S-32
<PAGE>
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution Agreement,
the Notes are being offered on a continuous basis by the Company through Morgan
Stanley & Co. Incorporated, J.P. Morgan Securities Inc. and Salomon Smith
Barney Inc. (individually, an "Agent" and collectively, the "Agents"), who have
agreed to use reasonable efforts to solicit offers to purchase Notes. The
Company will have the sole right to accept offers to purchase Notes and may
reject any offer to purchase Notes in whole or in part. An Agent will have the
right to reject any offer to purchase Notes solicited by it in whole or in
part. Payment of the purchase price of the Notes will be required to be made in
immediately available funds. The Company will pay an Agent, in connection with
sales of Notes resulting from a solicitation made or an offer to purchase
received by such Agent, a commission ranging from .125% to .750% of the
principal amount of Notes to be sold; provided, however, that commissions with
respect to Notes maturing more than thirty years from the date of issue will be
negotiated.
The Notes will be sold to the public at 100% of their principal amount unless
otherwise indicated in the applicable Pricing Supplement. If the Company sells
a Note at a discount to or at a premium over its principal amount, the price to
the public will be set forth in the applicable Pricing Supplement.
The Company will receive from 99.875% to 99.250% of the principal amount of
Notes sold before deducting expenses of approximately $600,000.
The Company may also sell Notes to any Agent as principal for its own account
at discounts to be agreed upon at the time of sale. Such Notes may be resold to
investors and other purchasers at prevailing market prices, or prices related
thereto at the time of such resale, as determined by such Agent or, if so
agreed, at a fixed public offering price. In addition, an Agent may offer the
Notes that such Agent purchased as principal to other dealers. An Agent may
sell Notes to any dealer at a discount, and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed to any dealer will not be
in excess of the discount to be received by the Agent from the Company. After
the initial public offering of Notes to be resold to investors and other
purchasers, the public offering price (in the case of Notes to be resold at a
fixed public offering price), concession and discount may be changed.
The Company has reserved the right to sell the Notes directly to investors,
and may solicit and accept offers to purchase Notes directly from investors
from time to time on its own behalf. No commission will be payable on Notes
sold directly to investors by the Company. The Company may accept (but not
solicit) offers to purchase Notes through additional agents and may appoint
additional agents for the purpose of soliciting offers to purchase Notes. Such
other agents, if any, will be named in the applicable Pricing Supplement.
An Agent, and each dealer to whom an Agent may sell Notes, may be deemed to
be an "underwriter" within the meaning of the Securities Act of 1933 (the
"Securities Act"). The Company and the Agents have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act, or to contribute to payments made in respect thereof. The Company has also
agreed to reimburse the Agents for certain expenses.
The Notes will not have an established trading market when issued. The
Company does not intend to apply for the listing of the Notes on a national
securities exchange. The Company has been advised by the Agents that the Agents
intend to make a market in the Notes, as permitted by applicable laws and
regulations. The Agents are not obligated to do so, however, and the Agents may
discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Offered Securities as described in the
accompanying Prospectus.
The Agents and/or certain of the Agents' affiliates may engage in investment
banking and/or commercial banking transactions with and perform services for
the Company and certain of its affiliates in the ordinary course of business.
S-33
<PAGE>
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Winston &
Strawn, Chicago, Illinois, counsel for the Company, or such other attorney of
the Company as the Company may designate, and for the Agents by Mayer, Brown &
Platt, Chicago, Illinois. The Chairman of the Executive Committee of Winston &
Strawn, Governor James R. Thompson, serves as a member of the Company's Board
of Directors and as of November 10, 1998 beneficially owned 4,353 shares of
Common Stock and had options to acquire 900 additional shares of Common Stock.
Mayer, Brown & Platt from time to time acts as counsel for the Company on
certain matters.
S-34
<PAGE>
PROSPECTUS
$500,000,000
FMC CORPORATION
COMMON STOCK, PREFERRED STOCK, DEPOSITORY SHARES, DEBT SECURITIES, WARRANTS TO
PURCHASE COMMON STOCK, WARRANTS TO PURCHASE PREFERRED STOCK AND WARRANTS TO
PURCHASE DEBT SECURITIES
FMC Corporation, a Delaware corporation (the "Company"), may from time to
time offer in one or more series (i) shares of Common Stock, $.10 par value
per share ("Common Stock"), (ii) whole or fractional shares of Preferred
Stock, no par value (collectively, "Preferred Stock"), (iii) Preferred Stock
represented by depository shares ("Depository Shares"), (iv) unsecured debt
securities ("Debt Securities"), which may be senior debt securities ("Senior
Debt Securities") or subordinated debt securities ("Subordinated Debt
Securities"), (v) warrants to purchase Common Stock ("Common Stock Warrants"),
(vi) warrants to purchase Preferred Stock ("Preferred Stock Warrants"), and
(vii) warrants to purchase Debt Securities ("Debt Warrants"), with an
aggregate public offering price of up to $500,000,000, on terms to be
determined at the time or times of offering. The Common Stock, Preferred
Stock, Depository Shares, Debt Securities, Common Stock Warrants, Preferred
Stock Warrants and Debt Warrants (collectively referred to herein as the
"Offered Securities") may be offered, separately or together, in separate
classes or series, in amounts, at prices and on terms to be set forth in one
or more supplements to this Prospectus (each, a "Prospectus Supplement").
All specific terms of the offering and sale of the Offered Securities in
respect of which this Prospectus is being delivered will be set forth in the
applicable Prospectus Supplement and will include, when applicable: (i) in the
case of Common Stock, any public offering price and the aggregate number of
shares offered; (ii) in the case of Preferred Stock, the specific class,
series, title and stated value, any dividend, liquidation, redemption,
conversion, voting and other rights, any dividend payment dates, any sinking
fund provisions, the aggregate number of shares offered and any public
offering price; (iii) in the case of Depository Shares, the aggregate number
of shares offered, the shares of whole or fractional Preferred Stock
represented by each such Depository Share and any public offering price; (iv)
in the case of Debt Securities, the specific title, aggregate principal
amount, ranking as Senior Debt Securities or as Subordinated Debt Securities,
currency, form (which may be registered or bearer or certificated or global),
authorized denominations, maturity, rate (or manner of calculation thereof)
and time of payment of interest, if any, terms for redemption at the option of
the Company or repayment at the option of the holder thereof, terms for
sinking fund payments, terms for conversion into Common Stock or Preferred
Stock and any public offering price; (v) in the case of Common Stock Warrants,
the duration, offering price, exercise price and detachability features; (vi)
in the case of Preferred Stock Warrants, description of the Preferred Stock
for which each warrant will be exercisable and the duration, offering price,
exercise price and detachability features; and (vii) in the case of Debt
Warrants, description of the Debt Securities for which each warrant will be
exercisable and the duration, offering price, exercise price and detachability
features.
The applicable Prospectus Supplement will also contain information, when
applicable, about certain United States federal income tax considerations
relating to the Offered Securities covered by that Prospectus Supplement.
The Common Stock is listed on the New York Stock Exchange, the Pacific Stock
Exchange and the Chicago Stock Exchange under the symbol "FMC". Any Common
Stock sold pursuant to a Prospectus Supplement will be listed on such
exchanges, subject to official notice of issuance. The Company has not yet
determined whether any other Offered Securities offered hereby will be listed
on any exchange or over-the-counter market. If the Company decides to seek
listing of any other Offered Securities, the Prospectus Supplement relating
thereto will disclose such exchange or market.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names and any applicable purchase price, fee, commission or
discount arrangement between or among them will be set forth in or will be
calculable from the information set forth in the applicable Prospectus
Supplement. No Offered Securities may be sold without delivery of the
applicable Prospectus Supplement describing the method and terms of the
offering of those Offered Securities. See "Plan of Distribution" for possible
indemnification arrangements with underwriters, dealers and agents.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
This Prospectus may not be used to consummate sales of the Offered Securities
unless accompanied by a Prospectus Supplement.
----------------
August 3, 1998
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR AN APPLICABLE PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER,
DEALER OR AGENT. THIS PROSPECTUS AND ANY APPLICABLE PROSPECTUS SUPPLEMENT DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and the Commission's
Regional Offices at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, reports, proxy
statements and other information concerning the Company may be inspected and
copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005, the Chicago Stock Exchange, 440 South LaSalle
Street, Chicago, Illinois 60605 and the Pacific Stock Exchange, Inc., 301 Pine
Street, San Francisco, California 94104 or 618 South Spring Street, Los
Angeles, California 90014. The Commission also maintains a web site
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants that file electronically with the
Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), which
relates to the Offered Securities (the "Registration Statement"). This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto as permitted by
the rules and regulations of the Commission. For information with respect to
the Company and the Offered Securities, reference is hereby made to such
Registration Statement, exhibits and schedules. The Registration Statement may
be inspected without charge by anyone at the office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and copies of all or any part
thereof may be obtained from the Commission upon payment of the prescribed
fees. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in all respects by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission (File No. 1-2376) are
incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1997;
(ii) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998;
(iii) the Company's Current Reports on Form 8-K dated April 15, 1998,
April 17, 1998 and April 24, 1998;
(iv) the description of the Company's Preferred Stock Purchase Rights
contained in the Company's Registration Statement on Form 8-A filed on
March 6, 1986 pursuant to Section 12 of the Exchange Act and all amendments
thereto and reports filed for the purposes of updating such description;
and
2
<PAGE>
(v) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on May 12, 1986 pursuant to
Section 12 of the Exchange Act and all amendments thereto and reports filed
for the purposes of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Offered Securities shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein (or in the applicable Prospectus
Supplement) or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge to any person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person,
a copy of any document incorporated by reference herein other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
in such document. Requests should be directed to J. Paul McGrath, Senior Vice
President, General Counsel and Corporate Secretary, FMC Corporation, 200 East
Randolph Drive, Chicago, Illinois 60601 (telephone: (312) 861-6000).
FORWARD-LOOKING STATEMENTS
This Prospectus contains, any Prospectus Supplement will contain and the
documents incorporated by reference herein contain or will contain certain
statements which describe the Company's beliefs concerning future business
conditions and the outlook for the Company based on currently available
information. Wherever possible, the Company has identified these "forward-
looking statements" (as defined in Section 27A of the Securities Act and
Section 21E of the Exchange Act) by words such as "anticipates," "believes,"
"estimates," "expects" and similar expressions. These forward-looking
statements are subject to risks and uncertainties which could cause the
Company's actual results, performance or achievements to differ materially
from those expressed in, or implied by, these statements. These risks and
uncertainties include, but are not limited to, the following: risks associated
with significant price competition, higher ingredient and raw material prices
or shortages of such commodities, risks associated with new product
introductions (including the potential for unanticipated delays or cost
overruns in connection with introductions of new products and the development
of new manufacturing processes), freight transportation delays beyond the
control of the Company, inability of the Company or its suppliers to remedy
potential information systems problems related to the year 2000, risks
associated with joint ventures, partnerships or limited endeavors, future
environmental liabilities not covered by insurance or indemnity, risks
relating to general economic conditions and unforeseen outcomes of litigation
or other contingencies. The Company assumes no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.
THE COMPANY
The Company is one of the world's leading producers of chemicals and
machinery for industry and agriculture. The Company employs over 16,000 people
at over 100 manufacturing facilities and mines in 25 countries. The Company
divides its businesses into three main segments: Machinery and Equipment,
Industrial Chemicals and Performance Chemicals. Machinery and Equipment
businesses provide specialized machinery to the food, petroleum,
transportation and material handling industries. Industrial Chemicals
businesses manufacture a wide variety of chemicals including soda ash,
phosphates and hydrogen peroxide. Major customers include detergent, glass and
paper producers, as well as other chemical companies. Performance Chemicals
develops, manufactures and markets proprietary specialty chemicals for the
agricultural, food and pharmaceutical industries.
3
<PAGE>
The Company was incorporated in 1928 under Delaware law and has its
principal executive offices at 200 East Randolph Drive, Chicago, Illinois
60601 (telephone number: (312) 861-6000). As used herein, "FMC" or the
"Company" refers to FMC Corporation and its subsidiaries, unless otherwise
indicated by the context.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered
Securities for general corporate purposes, which may include the repayment of
existing indebtedness and the financing of capital expenditures and
acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the unaudited historical ratio of earnings to
fixed charges of the Company for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ---------------------------------------------------
1998 1997 1997(1) 1996 1995(2) 1994 1993(3)
---- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
2.1x 1.8x 0.6x 2.7x 2.4x 2.9x 0.2x
</TABLE>
- --------
(1) Earnings did not cover fixed charges by $52.4 million for the year ended
December 31, 1997. The ratio of earnings to fixed charges for the year
ended December 31, 1997 before asset impairments and restructuring and
other charges was 2.5x.
(2) The ratio of earnings to fixed charges for the year ended December 31,
1995 before the gain on the sale of FMC Wyoming stock, asset impairments,
restructuring and other charges and write-off of acquired in-process
research and development costs was 2.9x.
(3) Earnings did not cover fixed charges by $72.3 million for the year ended
December 31, 1993. The ratio of earnings to fixed charges for the year
ended December 31, 1993 before asset impairments and restructuring and
other charges was 1.6x.
GENERAL DESCRIPTION OF THE OFFERED SECURITIES
The Company may offer under this Prospectus Common Stock, Preferred Stock,
Depository Shares, Debt Securities, Common Stock Warrants, Preferred Stock
Warrants or Debt Warrants, or any combination of the foregoing, either
individually or as units consisting of two or more Offered Securities. The
aggregate offering price of Offered Securities offered by the Company under
this Prospectus will not exceed $500,000,000. If Offered Securities are
offered as units, the terms of the units will be set forth in a Prospectus
Supplement.
DESCRIPTION OF THE COMMON STOCK
GENERAL
Under the Company's Restated Certificate of Incorporation (the "Certificate
of Incorporation"), the Company is authorized to issue up to 130,000,000
shares of Common Stock. As of March 31, 1998, there were 34,674,094 shares of
Common Stock issued and outstanding. In addition, up to 5,025,918 shares have
been reserved as of March 31, 1998 for issuance upon the exercise of options
and awards under the Company's incentive compensation plans. The shares of
Common Stock are listed on the New York Stock Exchange, the Pacific Stock
Exchange and the Chicago Stock Exchange under the symbol "FMC". Harris Trust
and Savings Bank, Chicago, Illinois, is the transfer agent and registrar of
the shares of Common Stock.
The Common Stock is not redeemable, does not have any conversion rights and
is not subject to call. Holders of shares of Common Stock have no preemptive
rights to maintain their percentage of ownership in future offerings or sales
of stock of the Company. Holders of shares of Common Stock have one vote per
share
4
<PAGE>
in all elections of directors and on all other matters submitted to a vote of
stockholders of the Company. The holders of Common Stock are entitled to
receive dividends, if any, as and when declared from time to time by the Board
of Directors of the Company out of funds legally available therefor. Upon
liquidation, dissolution or winding up of the affairs of the Company, the
holders of Common Stock will be entitled to participate equally and ratably,
in proportion to the number of shares held, in the net assets of the Company
available for distribution to holders of Common Stock. The shares of Common
Stock currently outstanding are fully paid and nonassessable. The shares of
Common Stock offered hereby, upon issuance against full payment of the
purchase price therefor, will be fully paid and nonassessable.
CERTAIN CERTIFICATE OF INCORPORATION PROVISIONS
General Effect
The Company has adopted a number of provisions in its Certificate of
Incorporation that might discourage certain types of transactions that involve
an actual or threatened change in control of the Company. The provisions may
make it more difficult and time-consuming to change majority control of the
Board of Directors and thus reduce the vulnerability of the Company to an
unsolicited offer, particularly an offer that does not contemplate the
acquisition of all of the Company's outstanding shares.
These provisions are intended to encourage persons seeking to acquire
control of the Company to initiate such an acquisition through arm's-length
negotiations with the Company's management and Board of Directors.
Additionally, such provisions provide management with the time and information
necessary to evaluate a takeover proposal and to study alternative proposals.
Nonetheless, the provisions could have the effect of discouraging a third
party from making a tender offer or otherwise attempting to obtain control of
the Company, even though such an attempt might be beneficial to the Company
and its stockholders.
Business Combination
The Certificate of Incorporation provides that significant asset sales,
dispositions of stock, liquidations, mergers and certain other business
combinations ("Business Combinations") involving the Company and persons
beneficially owning 10% or more of the voting power of the outstanding shares
of Common Stock (an "Interested Stockholder") must be approved by the holders
of at least 80% of the voting power of the Company's outstanding voting stock
("Voting Stock"). The Certificate of Incorporation requires the affirmative
vote of the holders of 80% or more of the outstanding Voting Stock to amend,
alter or repeal, or to adopt any provisions inconsistent with, such
provisions.
Stockholders' Meetings
The Certificate of Incorporation provides that special meetings of the
stockholders may only be called pursuant to a resolution approved by a
majority of the Board of Directors. This limitation prevents a stockholder or
group of stockholders from forcing the Company to conduct a stockholders'
meeting at any time not sanctioned by the Board of Directors, regardless of
the number of shares of Common Stock held by such stockholder or group of
stockholders.
No Action by Stockholder Consent
The Certificate of Incorporation prohibits action that is required or
permitted to be taken at any annual or special meeting of stockholders of the
Company from being taken by the written consent of stockholders without a
meeting. This provision may be altered, amended or repealed only if the
holders of 80% or more of Voting Stock vote in favor of such action.
PREFERRED STOCK PURCHASE RIGHTS
The Company has adopted a preferred stock purchase rights plan and has
distributed preferred stock purchase rights (the "Rights") to holders of the
Company's Common Stock. The preferred stock purchase rights plan enables the
holder of such Rights to purchase, under certain circumstances, one one-
hundredth of a share of
5
<PAGE>
Junior Participating Preferred Stock, Series A, without par value, of the
Company at a price of $300 per one one-hundredth of a share, subject to
certain adjustments. The Rights are intended to deter attempts to acquire the
Company on terms not approved by the Company's Board of Directors.
DESCRIPTION OF THE PREFERRED STOCK
Under the Certificate of Incorporation, the Board of Directors of the
Company may direct the issuance of up to 5,000,000 shares of Preferred Stock
in one or more series and with rights, preferences, privileges and
restrictions, including dividend rights, voting rights, conversion rights,
terms of redemption and liquidation preferences, that may be fixed or
designated by the Board of Directors pursuant to a certificate of designation
without any further vote or action by the Company's stockholders. As of March
31, 1998, the Board of Directors had designated 400,000 shares of the
Preferred Stock as Junior Participating Preferred Stock, Series A for possible
issuance in connection with the Rights. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of
the Company. Preferred Stock, upon issuance against full payment of the
purchase price therefor, will be fully paid and nonassessable. The specific
terms of a particular series of Preferred Stock will be described in the
Prospectus Supplement relating to that series. The description of Preferred
Stock set forth below and the description of the terms of a particular series
of Preferred Stock set forth in the related Prospectus Supplement do not
purport to be complete and are qualified in their entirety by reference to the
certificate of designation relating to that series. The related Prospectus
Supplement will contain a description of certain United States federal income
tax consequences relating to the purchase and ownership of the series of
Preferred Stock described in such Prospectus Supplement.
As of the date of this Prospectus, no shares of Preferred Stock were issued
or outstanding.
The rights, preferences, privileges and restrictions of the Preferred Stock
of each series will be fixed by the certificate of designation relating to
such series. A Prospectus Supplement, relating to each series, will specify
the terms of the Preferred Stock as follows:
(a) The maximum number of shares to constitute the series and the
distinctive designation thereof;
(b) The annual dividend rate, if any, on shares of the series, whether
such rate is fixed or variable or both, the date or dates from which
dividends will begin to accrue or accumulate and whether dividends will be
cumulative;
(c) The price at and the terms and conditions on which the shares of the
series may be redeemed, including the time during which shares of the
series may be redeemed and any accumulated dividends thereon that the
holders of shares of the series shall be entitled to receive upon the
redemption thereof;
(d) The liquidation preference, if any, and any accumulated dividends
thereon, that the holders of shares of the series shall be entitled to
receive upon the liquidation, dissolution or winding up of the affairs of
the Company;
(e) Whether or not the shares of the series will be subject to operation
of a retirement or sinking fund, and, if so, the extent and manner in which
any such fund shall be applied to the purchase or redemption of the shares
of the series for retirement or for other corporate purposes and the terms
and provisions relating to the operation of such fund;
(f) The terms and conditions, if any, on which the shares of the series
shall be convertible into, or exchangeable for, shares of any other class
or classes of capital stock of the Company or a third party or of any other
series of the same class, including the price or prices or the rate or
rates of conversion or exchange and the method, if any, of adjusting the
same and whether such conversion is mandatory or optional;
(g) The stated value of the shares of such series;
(h) The voting rights, if any, of the shares of the series; and
(i) Any or all other preferences and relative, participating, optional or
other special rights or qualifications, limitations or restrictions
thereof.
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In the event of any voluntary liquidation, dissolution or winding up of the
affairs of the Company, the holders of any series of any class of Preferred
Stock shall be entitled to receive in full out of the assets of the Company,
including its capital, before any amount shall be paid or distributed among
the holders of the Common Stock or any other shares ranking junior to such
series, the amounts fixed by the Board of Directors with respect to such
series and set forth in the applicable Prospectus Supplement plus an amount
equal to all dividends accrued and unpaid thereon to the date of payment of
the amount due pursuant to such liquidation, dissolution or winding up of the
affairs of the Company. After payment to the holders of the Preferred Stock of
the full preferential amounts to which they are entitled, the holders of
Preferred Stock, as such, shall have no right or claim to any of the remaining
assets of the Company.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed
among the holders of any other classes or series of capital stock ranking
junior to the Preferred Stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case
according to their respective numbers of shares. The merger or consolidation
of the Company into or with any other corporation, or the sale, lease or
conveyance of all or substantially all of the assets of the Company, shall not
constitute a dissolution, liquidation or winding up of the Company.
DESCRIPTION OF DEPOSITORY SHARES
GENERAL
The Company may offer receipts ("Depository Receipts") for Depository
Shares, each of which will represent a fractional interest in a share of a
particular series of a class of Preferred Stock, as specified in the
applicable Prospectus Supplement. Preferred Stock of each series of each class
represented by Depository Shares will be deposited under a separate Deposit
Agreement (each, a "Deposit Agreement") among the Company, the depository
named therein (such depository or its successor, the "Preferred Stock
Depository") and the holders from time to time of the Depository Receipts.
Subject to the terms of the Deposit Agreement, each owner of a Depository
Receipt will be entitled, in proportion to the fractional interest of a share
of the particular series of a class of Preferred Stock represented by the
Depository Shares evidenced by such Depository Receipt, to all the rights and
preferences of the Preferred Stock represented by such Depository Shares
(including dividend, voting, conversion, redemption and liquidation rights).
The Depository Shares will be evidenced by Depository Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the Preferred Stock by the Company to the Preferred
Stock Depository, the Company will cause the Preferred Stock Depository to
issue, on behalf of the Company, the Depository Receipts. Copies of the
applicable form of Deposit Agreement and Depository Receipt may be obtained
from the Company upon request.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depository will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock to the record
holders of the Depository Receipts evidencing the related Depository Shares in
proportion to the number of such Depository Receipts owned by such holder,
subject to certain obligations of holders to file proofs, certificates and
other information and to pay certain charges and expenses to the Preferred
Stock Depository.
In the event of a distribution other than in cash, the Preferred Stock
Depository will distribute property received by it to the record holders of
Depository Receipts entitled thereto, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Preferred Stock Depository, unless the Preferred
Stock Depository determines that it is not feasible to make such distribution,
in which case the Preferred Stock Depository may, with the approval of the
Company, sell such property and distribute the net proceeds from such sale to
such holders.
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WITHDRAWAL OF SHARES
Upon surrender of the Depository Receipts at the corporate trust office of
the Preferred Stock Depository (unless the related Depository Shares have
previously been called for redemption), the holders thereof will be entitled
to delivery at such office, to or upon such holder's order, of the number of
whole shares of Preferred Stock and any money or other property represented by
the Depository Shares evidenced by such Depository Receipts. Holders of
Depository Receipts will be entitled to receive whole shares of the related
Preferred Stock on the basis of the proportion of Preferred Stock represented
by each Depository Share as specified in the applicable Prospectus Supplement,
but holders of such Preferred Stock will not thereafter be entitled to receive
Depository Shares therefor. If the Depository Receipts delivered by the holder
evidence a number of Depository Shares in excess of the number of Depository
Shares representing the number of shares of Preferred Stock to be withdrawn,
the Preferred Stock Depository will deliver to such holder at the same time a
new Depository Receipt evidencing such excess number of Depository Shares.
REDEMPTION OF DEPOSITORY SHARES
Whenever the Company redeems Preferred Stock held by the Preferred Stock
Depository, the Preferred Stock Depository will redeem as of the same
redemption date the number of Depository Shares representing the Preferred
Stock so redeemed, provided the Company shall have paid in full to the
Preferred Stock Depository the redemption price of the Preferred Stock to be
redeemed plus an amount equal to any accrued and unpaid dividends (except,
with respect to noncumulative shares of Preferred Stock, dividends for the
current dividend period only) thereon to the date fixed for redemption. The
redemption price per Depository Share will be equal to the redemption price
and any other amounts per share payable with respect to the Preferred Stock.
If less than all the Depository Shares are to be redeemed, the Depository
Shares to be redeemed will be selected by the Preferred Stock Depository by
lot.
After the date fixed for redemption, the Depository Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depository Receipts evidencing the Depository Shares so called
for redemption will cease, except the right to receive any moneys payable upon
such redemption and any money or other property to which the holders of such
Depository Receipts were entitled upon such redemption upon surrender thereof
to the Preferred Stock Depository.
VOTING OF THE UNDERLYING PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depository will mail the
information contained in such notice of meeting to the record holders of the
Depository Receipts evidencing the Depository Shares which represent such
Preferred Stock. Each record holder of Depository Receipts evidencing
Depository Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the
Preferred Stock Depository as to the exercise of the voting rights pertaining
to the amount of Preferred Stock represented by such holder's Depository
Shares. The Preferred Stock Depository will vote the amount of Preferred Stock
represented by such Depository Shares in accordance with such instructions,
and the Company will agree to take all reasonable action which may be deemed
necessary by the Preferred Stock Depository in order to enable the Preferred
Stock Depository to do so. The Preferred Stock Depository will abstain from
voting the amount of Preferred Stock represented by such Depository Shares to
the extent it does not receive specific instructions from the holders of
Depository Receipts evidencing such Depository Shares.
LIQUIDATION PREFERENCE
In the event of liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, each holder of a Depository Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depository Share evidenced by such
Depository Receipt, as set forth in the applicable Prospectus Supplement.
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CONVERSION OF PREFERRED STOCK
The Depository Shares, as such, are not convertible into Common Stock or any
securities or property of the Company. Nevertheless, if so specified in the
applicable Prospectus Supplement relating to an offering of Depository Shares,
the Depository Receipts may be surrendered by holders thereof to the Preferred
Stock Depository with written instructions to the Preferred Stock Depository
to instruct the Company to cause conversion of the Preferred Stock represented
by the Depository Shares evidenced by such Depository Receipts into whole
shares of Common Stock, other Preferred Stock of the Company or other shares
of capital stock, and the Company has agreed that upon receipt of such
instructions and any amounts payable in respect thereof, it will cause the
conversion thereof utilizing the same procedures as those provided for
delivery of Preferred Stock to effect such conversion. If the Depository
Shares evidenced by a Depository Receipt are to be converted in part only, one
or more new Depository Receipts will be issued for any Depository Shares not
to be converted. No fractional shares of Common Stock will be issued upon
conversion, and if such conversion will result in a fractional share being
issued, an amount will be paid in cash by the Company equal to the value of
the fractional interest based upon the closing price of the Common Stock on
the last business day prior to the conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depository Receipt evidencing the Depository Shares which
represent the Preferred Stock and any provision of the Deposit Agreement may
at any time be amended by agreement between the Company and the Preferred
Stock Depository. However, any amendment that materially and adversely alters
the rights of the holders of Depository Receipts will not be effective unless
such amendment has been approved by the existing holders of at least a
majority of the Depository Shares evidenced by the Depository Receipts then
outstanding.
The Deposit Agreement may be terminated by the Company upon not less than 30
days' prior written notice to the Preferred Stock Depository if a majority of
each class of Depository Shares affected by such termination consents to such
termination, whereupon the Preferred Stock Depository shall deliver or make
available to each holder of Depository Receipts, upon surrender of the
Depository Receipts held by such holder, such number of whole or fractional
shares of Preferred Stock as are represented by the Depository Shares
evidenced by such Depository Receipts. In addition, the Deposit Agreement will
automatically terminate if (i) all outstanding Depository Shares shall have
been redeemed, (ii) there shall have been a final distribution in respect of
the related Preferred Stock in connection with any liquidation, dissolution or
winding up of the Company and such distribution shall have been distributed to
the holders of Depository Receipts evidencing the Depository Shares
representing such Preferred Stock or (iii) each related share of Preferred
Stock shall have been converted into capital stock of the Company not so
represented by Depository Shares.
CHARGES OF PREFERRED STOCK DEPOSITORY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Stock Depository in
connection with the performance of its duties under the Deposit Agreement.
However, holders of the Depository Receipts will pay the fees and expenses of
the Preferred Stock Depository for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
RESIGNATION AND REMOVAL OF PREFERRED STOCK DEPOSITORY
The Preferred Stock Depository may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time
remove the Preferred Stock Depository, any such resignation or removal to take
effect upon the appointment of a successor Preferred Stock Depository. A
successor Preferred Stock Depository must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000.
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MISCELLANEOUS
The Preferred Stock Depository will forward to holders of Depository
Receipts any reports and communications from the Company that are received by
the Preferred Stock Depository with respect to the related Preferred Stock.
Neither the Preferred Stock Depository nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the Deposit Agreement. The
obligations of the Company and the Preferred Stock Depository under the
Deposit Agreement will be limited to performing their duties thereunder in
good faith and without gross negligence or willful misconduct, and the Company
and the Preferred Stock Depository will not be obligated to prosecute or
defend any legal proceeding in respect of any Depository Receipts, Depository
Shares or Preferred Stock represented thereby unless satisfactory indemnity is
furnished. The Company and the Preferred Stock Depository may rely on written
advice of counsel or accountants, or information provided by persons
presenting Preferred Stock represented thereby for deposit, holders of
Depository Receipts or other persons believed to be competent to give such
information, and on documents believed to be genuine and signed by a proper
party.
If the Preferred Stock Depository shall receive conflicting claims, requests
or instructions from any holders of Depository Receipts, on the one hand, and
the Company, on the other hand, the Preferred Stock Depository shall be
entitled to act on such claims, requests or instructions received from the
Company.
DESCRIPTION OF THE DEBT SECURITIES
The Senior Debt Securities will be issued under an Indenture, as amended or
supplemented from time to time (the "Senior Indenture"), between the Company
and Harris Trust and Savings Bank, as trustee (the "Trustee"). The
Subordinated Debt Securities will be issued under an Indenture, as amended or
supplemented from time to time (the "Subordinated Indenture"), between the
Company and the Trustee. The Senior Indenture and the Subordinated Indenture
are sometimes referred to herein collectively as the "Indentures" and each
individually as an "Indenture".
The Senior Indenture and the form of Subordinated Indenture have been filed
as exhibits to the Registration Statement of which this Prospectus is a part
and are available for inspection at the corporate trust office of the Trustee
at 111 West Monroe Street, Chicago, Illinois 60603. The Indentures are subject
to, and are governed by, the Trust Indenture Act of 1939, as amended. The
statements made hereunder relating to the Indentures and the Debt Securities
to be issued hereunder are summaries of certain provisions thereof and do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Indentures and such Debt Securities.
All section references appearing in this section "Description of the Debt
Securities" are to sections of the applicable Indenture, and capitalized terms
used but not defined herein shall have the respective meanings set forth in
the applicable Indenture.
GENERAL
The Indentures do not limit the amount of Debt Securities that can be issued
thereunder and provide that Debt Securities of any series may be issued
thereunder up to the aggregate principal amount which may be authorized from
time to time by the Company. The Indentures do not limit the amount of other
indebtedness or securities, other than certain secured indebtedness as
described below which is limited by the Senior Indenture, that may be issued
by the Company or its subsidiaries.
The Debt Securities will be direct, unsecured obligations of the Company and
will constitute Senior Debt Securities and/or Subordinated Debt Securities.
Creditors of the Company's subsidiaries are entitled to a claim on the assets
of such subsidiaries. Consequently, in the event of a liquidation or
reorganization of any subsidiary, creditors of the subsidiary are likely to be
paid in full before any distribution is made to the Company and holders of
Debt Securities, except to the extent that the Company is itself recognized as
a creditor of such subsidiary, in which case the claims of the Company would
still be subordinate to any security interests in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by the
Company.
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Reference is made to the Prospectus Supplement for the following and other
possible terms of each series of the Debt Securities in respect of which this
Prospectus is being delivered: (i) the title of the Debt Securities; (ii) any
limit upon the aggregate principal amount of the Debt Securities; (iii) if
other than 100% of the principal amount, the percentage of their principal
amount at which the Debt Securities will be offered; (iv) the date or dates on
which the principal of the Debt Securities will be payable (or method of
determination thereof); (v) the rate or rates (or method of determination
thereof) at which the Debt Securities will bear interest, if any, the date or
dates from which any such interest will accrue and on which such interest will
be payable and the record dates for the determination of the holders to whom
interest is payable; (vi) if other than as set forth herein, the place or
places where the principal of and interest, if any, on the Debt Securities
will be payable; (vii) the price or prices at which, the period or periods
within which and the terms and conditions upon which Debt Securities may be
redeemed, in whole or in part, at the option of the Company; (viii) if other
than the principal amount thereof, the portion of the principal amount of the
Debt Securities payable upon declaration of acceleration of the maturity
thereof; (ix) the obligation, if any, of the Company to redeem, repurchase or
repay Debt Securities, whether pursuant to any sinking fund or analogous
provisions or pursuant to other provisions set forth therein or at the option
of a Holder thereof; (x) whether the Debt Securities will be represented in
whole or in part by one or more global notes registered in the names of a
depository or its nominee; (xi) any conversion or exchange provisions and
whether such conversion or exchange is optional or mandatory; (xii) the
ranking of such Debt Securities as Senior Debt Securities or Subordinated Debt
Securities; and (xiii) any other terms or conditions not inconsistent with the
provisions of the Indenture under which the Debt Securities will be issued.
(Section 2.3) "Principal" when used herein includes, when appropriate, the
premium, if any, on the Debt Securities.
Unless otherwise provided in the Prospectus Supplement relating to any Debt
Securities, principal and interest, if any, will be payable, and the Debt
Securities will be transferable, at the office or offices or agency maintained
by the Company for such purposes, provided that payment of interest on the
Debt Securities will be paid at such place of payment by check mailed to the
persons entitled thereto at the addresses of such persons appearing on the
Security register. Interest on the Debt Securities will be payable on any
interest payment date to the persons in whose name the Debt Securities are
registered at the close of business on the record date with respect to such
interest payment date.
The Debt Securities may be issued only in fully registered form in minimum
denominations of $1,000 and any integral multiple thereof. Additionally, the
Debt Securities may be represented in whole or in part by one or more global
notes registered in the name of a depository or its nominee, and, if so
represented, interests in such global note will be shown on, and transfers
thereof will be effected only through, records maintained by the designated
depository and its participants.
The Debt Securities may be exchanged for an equal aggregate principal amount
of Debt Securities of the same series and date of maturity in such authorized
denominations as may be requested upon surrender of the Debt Securities at an
agency of the Company maintained for such purpose and upon fulfillment of all
other requirements of such agent. No service charge will be made for any
transfer or exchange of the Debt Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. (Section 2.8)
The Indentures require the annual filing by the Company with the Trustee of
a certificate as to compliance with certain covenants contained in the
Indentures. (Section 3.4)
The Company will comply with Section 14(e) under the Exchange Act, to the
extent applicable, and any other tender offer rules under the Exchange Act
which may then be applicable, in connection with any obligation of the Company
to purchase Debt Securities at the option of the holders thereof. Any such
obligation applicable to a series of Debt Securities will be described in the
Prospectus Supplement relating thereto.
Unless otherwise described in a Prospectus Supplement relating to any Debt
Securities, there are no covenants or provisions contained in the Indentures
which may afford the holders of Debt Securities protection in the event of a
highly leveraged transaction involving the Company.
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CONVERSION AND EXCHANGE
The terms, if any, on which Debt Securities of any series are convertible
into or exchangeable for Common Stock or Preferred Stock, property or cash, or
a combination of any of the foregoing, will be set forth in the Prospectus
Supplement relating thereto. Such terms may include provisions for conversion
or exchange, either mandatory, at the option of the holder or at the option of
the Company, in which the number of shares of Common Stock or Preferred Stock
to be received by the holders of the Debt Securities would be calculated
according to the factors and at such time as set forth in the related
Prospectus Supplement.
COVENANTS APPLICABLE TO SENIOR DEBT SECURITIES
Limitations on Liens
The Senior Indenture provides that, so long as any of the Senior Debt
Securities of a series remain outstanding, the Company will not, nor will it
permit any Restricted Subsidiary (as hereinafter defined) to, secure
indebtedness for money borrowed ("Secured Debt") by placing a Lien (as
hereinafter defined) on any Principal Property (as hereinafter defined) now or
hereafter owned by the Company or any Restricted Subsidiary or on any shares
of stock or securing indebtedness for money borrowed of any Restricted
Subsidiary without equally and ratably securing the Debt Securities of such
series, unless (i) the aggregate principal amount of such Secured Debt then
outstanding plus (ii) all Attributable Debt (as hereinafter defined) of the
Company and its Restricted Subsidiaries in respect of sale and leaseback
transactions described below covering Principal Properties (other than sale
and leaseback transactions under (b) of the following paragraph) does not
exceed an amount equal to 10% of Consolidated Net Tangible Assets (as
hereinafter defined). This restriction will not apply to, and there shall be
excluded in computing such Secured Debt for purposes of this restriction,
certain permitted Liens, including (a) with respect to each series of Senior
Debt Securities, Liens existing as of the date of the issuance of Senior Debt
Securities of such series; (b) Liens on property or assets of, or any shares
of stock or securing indebtedness for money borrowed of, any corporation
existing at the time such corporation becomes a Restricted Subsidiary; (c)
Liens on property or assets or shares of stock or securing indebtedness for
money borrowed existing at the time of acquisition (including acquisition
through merger or consolidation) and certain Liens to secure indebtedness
incurred prior to, at the time of or within 120 days after the later of the
acquisition of, or the completion of the construction of and commencement of
operation of, any such property, for the purpose of financing all or any part
of the purchase price or construction cost thereof; (d) Liens to secure
certain development, operation, construction, alteration, repair or
improvement costs; (e) Liens in favor of, or which secure indebtedness owing
to, the Company or a Restricted Subsidiary; (f) Liens in connection with
government contracts, including the assignment of moneys due or to come due
thereon; (g) certain Liens in connection with legal proceedings to the extent
such proceedings are being contested in good faith; (h) certain Liens arising
in the ordinary course of business and not in connection with the borrowing of
money such as mechanics', materialmens', carriers' or other similar Liens; (i)
Liens on property securing obligations issued by a domestic governmental
issuer to finance the cost of acquisition or construction of such property;
and (j) extensions, substitutions, replacements or renewals of the foregoing.
(Section 3.5)
Limitations on Sale and Leaseback Transactions
The Senior Indenture provides that, so long as any of the Senior Debt
Securities of a series remain outstanding, the Company will not, nor will it
permit any Restricted Subsidiary to, enter into any sale and leaseback
transaction (except a lease for a period not exceeding three years) covering
any Principal Property which was or is owned by the Company or a Restricted
Subsidiary and which has been or is to be sold or transferred more than 120
days after such property has been owned by the Company or such Restricted
Subsidiary and completion of construction and commencement of full operation
thereof, unless (a) the Attributable Debt in respect thereto and all other
sale and leaseback transactions entered into after the date of the first
issuance of Senior Debt Securities of such series (other than those the
proceeds of which are applied to reduce indebtedness or acquire additional
property under (b) following), plus the aggregate principal amount of then
outstanding Secured Debt not otherwise permitted or excepted without equally
and ratably securing the Senior Debt Securities does not exceed 10% of
Consolidated Net Tangible Assets; or (b) an amount equal to the
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value of the Principal Property sold and leased back is applied within 120
days after the sale or transfer to (x) the voluntary retirement of Funded Debt
(as hereinafter defined), including Senior Debt Securities, or (y) the
acquisition of properties, facilities or equipment used for general operating
purposes for the Company or any Restricted Subsidiary. (Section 3.6)
Certain Definitions
The term "Subsidiary" is defined to mean (i) a corporation, a majority of
whose capital stock with voting power, under ordinary circumstances, to elect
directors is, at the date of determination, directly or indirectly owned by
the Company, by one or more Subsidiaries of the Company or by the Company and
one or more Subsidiaries of the Company, (ii) a partnership in which the
Company or a Subsidiary of the Company holds a majority interest in the equity
capital or profits of such partnership or (iii) any other person (other than a
corporation) in which the Company, a Subsidiary of the Company or the Company
and one or more Subsidiaries of the Company, directly or indirectly, at the
date of determination, has (x) at least a majority ownership interest or (y)
the power to elect or direct the election of a majority of the directors or
other governing body of such person.
The term "Restricted Subsidiary" is defined to mean any Subsidiary (i)
substantially all the property of which is located within the continental
United States of America or Canada and (ii) which owns or leases a Principal
Property.
The term "Principal Property" is defined to mean any manufacturing or
processing plant or facility (other than any pollution control facility) or
any mineral producing property which is located within the continental United
States of America and is owned by the Company or any Subsidiary, whether owned
at or acquired after the date of the applicable Indenture, the gross book
value on the books of the Company or such Subsidiary (without deduction of any
depreciation reserve) of which on the date as of which the determination is
being made exceeds 1% of Consolidated Net Tangible Assets, other than any such
property, plant or facility, or any portion thereof, which in the opinion of
the Board of Directors is not of material importance to the total business
conducted by the Company and its Restricted Subsidiaries as an entirety or
which is financed with certain tax exempt securities.
The term "Attributable Debt", in respect of the sale and leaseback
transactions described above, is defined to mean the amount determined by
multiplying the greater, at the time such transaction is entered into, of (i)
the fair value of the property, plant or facility subject to such arrangement
(as determined by the Company); or (ii) the net proceeds of the sale of such
property, plant or facility to the lender or investor, by a fraction of which
the numerator shall be the unexpired initial term of the lease of such real
property as of the date of determination of such computation and of which the
denominator shall be the full initial term of such lease. Sale and leasebacks
with respect to facilities financed with certain tax exempt securities are
excepted from the definition.
The term "Consolidated Net Tangible Assets" is defined to mean the aggregate
amount of assets (less applicable reserves and other properly deductible
items) after deducting therefrom (a) all current liabilities (excluding any
thereof constituting Funded Debt by reason of being extendible or renewable);
and (b) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, all as set forth on the books
and records of the Company and its consolidated subsidiaries and computed in
accordance with generally accepted accounting principles.
The term "Funded Debt" is defined to mean all indebtedness whether or not
evidenced by a bond, debenture, note or similar instrument or agreement, for
the repayment of money borrowed, having a maturity of more than 12 months from
the date of its creation or having a maturity of less than 12 months from the
date of its creation but by its terms being renewable or extendible beyond 12
months from such date at the option of the borrower. For the purpose of
determining "Funded Debt" of any corporation, there shall be excluded any
particular indebtedness if, on or prior to the maturity thereof, there shall
have been deposited with the proper depository in trust the necessary funds
for the payment, redemption or satisfaction of such indebtedness. (Section
1.1)
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The term "Lien" is defined to mean any pledge, mortgage or other lien
(including lease purchase, installment purchase and other title retention
financing arrangements) on or in respect of any Principal Property owned by
the Company or any Restricted Subsidiary or on any shares of stock or
indebtedness for money borrowed of any Restricted Subsidiary. (Section 3.5)
EVENTS OF DEFAULT
An Event of Default with respect to the Debt Securities of any series is
defined in the Indentures as: (i) default in the payment of any installment of
interest upon any of the Debt Securities of such series as and when the same
shall become due and payable, and continuance of such default for a period of
30 days; (ii) default in the payment of all or any part of the principal of
any of the Debt Securities of such series as and when the same shall become
due and payable either at maturity, upon any redemption, by declaration or
otherwise; (iii) default in the performance, or breach, of any other covenant
or warranty of the Company contained in the Debt Securities of such series or
set forth in the applicable Indenture (other than a covenant or warranty
included in the applicable Indenture solely for the benefit of a series of
Debt Securities other than such series) and continuance of such default or
breach for a period of 90 days after due notice by the Trustee or by the
holders of at least 25% in principal amount of the outstanding securities of
that series; or (iv) certain events of bankruptcy, insolvency or
reorganization of the Company. (Section 5.1) Additional Events of Default may
be added for the benefit of holders of certain series of Debt Securities
which, if added, will be described in the Prospectus Supplement relating to
such Debt Securities. The Indentures provide that the Trustee shall notify the
holders of Debt Securities of each series of any continuing default known to
the Trustee which has occurred with respect to that series within 90 days
after the occurrence thereof. The Indentures provide that notwithstanding the
foregoing, except in the case of default in the payment of the principal of,
or interest, if any, on any of the Debt Securities of such series, the Trustee
may withhold such notice if the Trustee in good faith determines that the
withholding of such notice is in the interests of the holders of Debt
Securities of such series. (Section 6.5)
The Indentures provide that if an Event of Default with respect to any
series of Debt Securities shall have occurred and be continuing, either the
Trustee or the holders of not less than 25% in aggregate principal amount of
Debt Securities of that series then outstanding may declare the principal
amount of all Debt Securities of that series to be due and payable
immediately, but upon certain conditions such declaration may be annulled.
(Section 5.1) Any past defaults and the consequences thereof (except a default
in the payment of principal of or interest, if any, on Debt Securities of that
series) may be waived by the holders of a majority in principal amount of the
Debt Securities of that series then outstanding. (Section 5.9) The Senior
Indenture also permits the Company to omit compliance with certain covenants
in such Indenture with respect to Senior Debt Securities of any series upon
waiver by the holders of a majority in principal amount of the Senior Debt
Securities of such series then outstanding. (Section 3.7)
Subject to the provisions of the Indentures relating to the duties of the
Trustee, in case an Event of Default with respect to any series of Debt
Securities shall occur and be continuing, the Trustee shall not be under any
obligation to exercise any of the trusts or powers vested in it by the
Indentures at the request or direction of any of the holders of that series,
unless such holders shall have offered to such Trustee reasonable security or
indemnity. (Sections 6.1 and 6.2) The holders of a majority in aggregate
principal amount of the Debt Securities of each series affected and then
outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee under the
applicable Indenture or exercising any trust or power conferred on the Trustee
with respect to the Debt Securities of that series; provided that the Trustee
may refuse to follow any direction which is in conflict with any law or such
Indenture and subject to certain other limitations. (Section 5.8)
No holder of any Debt Security of any series will have any right by virtue
or by availing of any provision of the Indentures to institute any proceeding
at law or in equity or in bankruptcy or otherwise upon or under or with
respect to the Indentures or for any remedy thereunder, unless such holder
shall have previously given the Trustee written notice of an Event of Default
with respect to Debt Securities of that series and unless the holders of at
least 25% in aggregate principal amount of the outstanding Debt Securities of
that series shall also have
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made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee and the Trustee shall have failed to
institute such proceeding within 60 days after its receipt of such request,
and the Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of that series a
direction inconsistent with such request. (Section 5.5) However, the right of
a holder of any Debt Security to receive payment of the principal of and
interest, if any, on such Debt Security on or after the due dates expressed in
such Debt Security, or to institute suit for the enforcement of any such
payment on or after such dates, shall not be impaired or affected without the
consent of such holder. (Section 5.6)
MERGER
Each Indenture provides that the Company may consolidate with, or sell,
convey or lease all or substantially all of its assets to, or merge with or
into, any other corporation, if (i) either the Company is the continuing
corporation or the successor corporation is a domestic corporation and
expressly assumes the due and punctual payment of the principal of and
interest on all the Debt Securities outstanding under such Indenture according
to their tenor and the due and punctual performance and observance of all of
the covenants and conditions of such Indenture to be performed or observed by
the Company; and (ii) the Company or such successor corporation, as the case
may be, is not, immediately after such merger or consolidation, or such sale,
conveyance or lease, in material default in the performance or observance of
any such covenant or condition. (Section 9.1)
SATISFACTION AND DISCHARGE OF INDENTURES
The applicable Indenture with respect to any series of Debt Securities
(except for certain specified surviving obligations including, among other
things, the Company's obligation to pay the principal of and interest on the
Debt Securities of such series) will be discharged and canceled upon the
satisfaction of certain conditions, including the payment of all the Debt
Securities of such series or the deposit with the Trustee under such Indenture
of cash or appropriate Government Obligations or a combination thereof
sufficient for such payment or redemption in accordance with the applicable
Indenture and the terms of the Debt Securities of such series. (Section 10.1)
MODIFICATION OF THE INDENTURES
The Indentures contain provisions permitting the Company and the Trustee
thereunder, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debt Securities of each series at the time
outstanding under the applicable Indenture, to execute supplemental indentures
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, the applicable Indenture or any supplemental indenture with
respect to the Debt Securities of such series or modifying in any manner the
rights of the holders of the Debt Securities of such series; provided that no
such supplemental indenture may (i) extend the final maturity of any Debt
Security, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of any interest thereon, or reduce any amount payable on
redemption thereof, or impair or affect the right of any holder of Debt
Securities to institute suit for payment thereof or, if the Debt Securities
provide therefor, any right of repayment at the option of the holders of the
Debt Securities, without the consent of the holder of each Debt Security so
affected or (ii) reduce the aforesaid percentage of Debt Securities of such
series, the consent of the holders of which is required for any such
supplemental indenture, without the consent of the holders of all Debt
Securities of such series so affected. (Section 8.2) Additionally, in certain
prescribed instances, the Company and the Trustee may execute supplemental
indentures without the consent of the holders of Debt Securities. (Section
8.1)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide, if such provision is made applicable to the Debt
Securities of any series, that the Company may elect either (a) to terminate
(and be deemed to have satisfied) all its obligations with respect to such
Debt Securities (except for the obligations to register the transfer or
exchange of such Debt Securities, to
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replace mutilated, destroyed, lost or stolen Debt Securities, to maintain an
office or agency in respect of the Debt Securities, to compensate and
indemnify the Trustee and to punctually pay or cause to be paid the principal
of, and interest, if any, on all Debt Securities of such series when due)
("defeasance"); or (b) in the case of the Senior Indenture, to be released
from its obligations with respect to Senior Debt Securities under Sections 3.5
and 3.6 of the Senior Indenture (being the restrictions described above under
"Limitations on Liens" and "Limitations on Sale and Leaseback Transactions")
("covenant defeasance"), upon the deposit with the Trustee, in trust for such
purpose, of money and/or Government Obligations which through the payment of
principal and interest in accordance with their terms will provide money, in
an amount sufficient (in the opinion of a nationally recognized firm of
independent public accountants) to pay the principal of and premium and
interest, if any, on the outstanding Debt Securities of such series, and any
mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor. Such a trust may be established only if, among other things,
the Company has delivered to the Trustee an opinion of counsel (as specified
in the applicable Indenture) with regard to certain matters, including an
opinion to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and discharge and will be subject to federal income tax on the
same amounts and in the same manner and at the same times as would have been
the case if such deposit and defeasance or covenant defeasance, as the case
may be, had not occurred. The Prospectus Supplement may further describe these
or other provisions, if any, permitting defeasance or covenant defeasance with
respect to the Debt Securities of any series. (Section 10.1)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
The Senior Debt Securities will constitute part of the Senior Indebtedness
(as defined below) of the Company and will rank pari passu with all
outstanding senior debt. Except as set forth in the related Prospectus
Supplement, the Subordinated Debt Securities will be subordinated, in right of
payment, to the prior payment in full of the Senior Indebtedness (as defined
below), including the Senior Debt Securities, whether outstanding at the date
of the Subordinated Indenture or thereafter incurred, assumed or guaranteed.
The term "Senior Indebtedness" means (1) the principal of and premium, if any,
and unpaid interest on indebtedness for money borrowed, (2) purchase money and
similar obligations, (3) obligations under capital leases, (4) guarantees,
assumptions or purchase commitments relating to, or other transactions as a
result of which the Company is responsible for the payment of, such
indebtedness of others, (5) renewals, extensions and refunding of any such
indebtedness, (6) interest or obligations in respect of any such indebtedness
accruing after the commencement of any insolvency or bankruptcy proceedings
and (7) obligations associated with derivative products such as interest rate
and currency exchange contracts, foreign exchange contracts, commodity
contracts, and similar arrangements, unless, in each case, the instrument by
which the Company incurred, assumed or guaranteed the indebtedness or
obligations described in clauses (1) through (7) hereof expressly provides
that such indebtedness or obligation is not senior in right of payment to the
Subordinated Debt Securities.
Upon any distribution of assets of the Company in connection with any
dissolution, winding up, liquidation or reorganization of the Company, whether
in a bankruptcy, insolvency, reorganization or receivership proceeding or upon
an assignment for the benefit of creditors or any other marshaling of the
assets and liabilities of the Company or otherwise, except a distribution in
connection with a merger or consolidation or a conveyance or transfer of all
or substantially all of the properties of the Company in accordance with the
Subordinated Indenture, the holders of all Senior Indebtedness shall first be
entitled to receive payment of the full amount due thereon, or provision shall
be made for such payment in money or money's worth, before the holders of any
of the Subordinated Debt Securities are entitled to receive any payment in
respect of the Subordinated Debt Securities. In the event that a payment
default shall have occurred and be continuing with respect to the Senior
Indebtedness, the holders of all Senior Indebtedness shall first be entitled
to receive payment of the full amount due thereon, or provision shall be made
for such payment in money or money's worth, before the holders of any of the
Subordinated Debt Securities are entitled to receive any payment in respect of
the Subordinated Debt Securities. In the event that the principal of the
Subordinated Debt Securities of any series shall have been declared due and
payable pursuant to the Subordinated Indenture and such declaration shall not
have been rescinded and annulled, the holders of all Senior Indebtedness
outstanding at the time of such declaration shall
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first be entitled to receive payment of the full amount due thereon, or
provision shall be made for such payment in money or money's worth, before the
holders of any of the Subordinated Debt Securities are entitled to receive any
payment in respect of the Subordinated Debt Securities.
This subordination will not prevent the occurrence of any event of default
with respect to the Subordinated Debt Securities. There is no limitation on
the issuance of additional Senior Indebtedness in the Subordinated Indenture.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (each, a "Global Security") that will be
deposited with, or on behalf of, a Debt Depository identified in the
applicable Prospectus Supplement. Global Securities may be issued in either
registered or bearer form and in either temporary or permanent form. Unless
otherwise provided in such Prospectus Supplement, Debt Securities that are
represented by a Global Security will be issued in denominations of $1,000 or
any integral multiple thereof and will be issued in registered form only,
without coupons. Payments of principal of, and interest, if any, on Debt
Securities represented by a Global Security will be made by the Company to the
Trustee under the applicable Indenture and then forwarded to the Debt
Depository.
The Company anticipates that any Global Securities will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York ("DTC"), and
that such Global Securities will be registered in the name of Cede & Co.,
DTC's nominee. The Company further anticipates that the following provisions
will apply to the depository arrangements with respect to any such Global
Securities. Any additional or differing terms of the depository arrangements
will be described in the Prospectus Supplement relating to a particular series
of Debt Securities issued in the form of Global Securities.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Debt Securities represented by such Global Security for all purposes under
the applicable Indenture. Except as described below, owners of beneficial
interests in a Global Security will not be entitled to have Debt Securities
represented by such Global Security registered in their names, will not
receive or be entitled to receive physical delivery of Debt Securities in
certificated form and will not be considered the owners or Holders thereof
under the applicable Indenture. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
certificated form; accordingly, such laws may limit the transferability of
beneficial interests in a Global Security.
If DTC is at any time unwilling or unable to continue as depository or if at
any time DTC ceases to be a clearing agency registered under the Exchange Act
if so required by applicable law or regulation, and, in either case, a
successor Debt Depository is not appointed by the Company within 90 days, the
Company will issue individual Debt Securities in certificated form in exchange
for the Global Securities. In addition, the Company may at any time, and in
its sole discretion, determine not to have any Debt Securities represented by
one or more Global Securities, and, in such event, will issue individual Debt
Securities in certificated form in exchange for the relevant Global
Securities. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery of individual Debt
Securities in certificated form of like tenor and rank, equal in principal
amount to such beneficial interest, and to have such Debt Securities in
certificated form registered in its name. Unless otherwise described in the
applicable Prospectus Supplement, Debt Securities so issued in certificated
form will be issued in denominations of $1,000, or any integral multiple
thereof, and will be issued in registered form only, without coupons.
DTC will act as securities depository for the Debt Securities. The Debt
Securities will be issued as fully registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). One fully registered Debt
Security certificate will be issued with respect to each $200 million of
principal amount of the Debt Securities of a series, and an additional
certificate will be issued with respect to any remaining principal amount of
such series.
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DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others, such as securities brokers and dealers, and banks and trust companies
that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the Commission.
Purchases of Debt Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Debt Securities on
DTC's records. The ownership interest of each actual purchaser of each Debt
Security ("Beneficial Owner") is in turn recorded on the Direct and Indirect
Participants' records. A Beneficial Owner does not receive written
confirmation from DTC of its purchase, but is expected to receive a written
confirmation providing details of the transaction, as well as periodic
statements of its holdings, from the Direct or Indirect Participants through
which such Beneficial Owner entered into the action. Transfers of ownership
interests in Debt Securities are accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners do not
receive certificates representing their ownership interests in Debt
Securities, except in the event that use of the book-entry system for the Debt
Securities is discontinued.
To facilitate subsequent transfers, the Debt Securities are registered in
the name of DTC's partnership nominee, Cede & Co. The deposit of the Debt
Securities with DTC and their registration in the name of Cede & Co. will
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Debt Securities; DTC records reflect only the
identity of the Direct Participants to whose accounts Debt Securities are
credited, which may or may not be the Beneficial Owners. The Participants
remain responsible for keeping account of their holdings on behalf of their
customers.
Delivery of notice and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants and by Direct Participants and
Indirect Participants to Beneficial Owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. consents or votes with respect to the Debt
Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the Debt Securities are credited on the record date
(identified on a list attached to the Omnibus Proxy).
Principal and interest payments, if any, on the Debt Securities are made to
DTC. DTC's practice is to credit Direct Participants' accounts on the payment
date in accordance with their respective holdings as shown on DTC's records
unless DTC has reason to believe that it will not receive payment on the
payment date. Payments by Participants to Beneficial Owners are governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name" and are the responsibility of such Participant and not of DTC, the
Trustee or the Company, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and interest, if any,
to DTC is the responsibility of the Company or the Trustee, disbursement of
such payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility
of Direct and Indirect Participants.
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DTC may discontinue providing its services as securities depository with
respect to the Debt Securities at any time by giving reasonable notice to the
Company or the Trustee. Under such circumstances, in the event that a
successor securities depository is not appointed, Debt Security certificates
are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Debt Security certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
Unless stated otherwise in the Prospectus Supplement, the underwriters or
agents with respect to a series of Debt Securities issued as Global Securities
will be Direct Participants in DTC.
None of the Company, any underwriter or agent, the Trustee or any applicable
paying agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial interest.
CONCERNING THE TRUSTEE
The Trustee has extended credit facilities to the Company and conducts other
business with the Company and certain of its affiliates, including cash
management and stock transfer services and serving as the trustee for the FMC
Employees' Thrift and Stock Purchase Plan.
DESCRIPTION OF THE WARRANTS TO PURCHASE
COMMON STOCK OR PREFERRED STOCK
The following statements with respect to the Common Stock Warrants and
Preferred Stock Warrants (collectively, the "Stock Warrants") are summaries
of, and subject to, the detailed provisions of a warrant agreement ("Stock
Warrant Agreement") to be entered into by the Company and a warrant agent to
be selected at the time of issue (the "Stock Warrant Agent"), which Stock
Warrant Agreement may include or incorporate by reference standard warrant
provisions substantially in the form of the Standard Stock Warrant Provisions
(the "Stock Warrant Provisions") filed as an exhibit to the Registration
Statement.
GENERAL
The Stock Warrants, evidenced by warrant certificates (the "Stock Warrant
Certificates"), may be issued under the Stock Warrant Agreement independently
or together with any Offered Securities offered by any Prospectus Supplement
and may be attached to or separate from such Offered Securities. If Stock
Warrants are offered, the related Prospectus Supplement will describe the
terms of the Stock Warrants, including, without limitation, the following: (1)
the offering price, if any; (2) the designation and terms of the Common or
Preferred Stock purchasable upon exercise of the Stock Warrants; (3) the
number of shares of Common or Preferred Stock purchasable upon exercise of one
Stock Warrant and the initial price at which such shares may be purchased upon
exercise; (4) the date on which the right to exercise the Stock Warrants shall
commence and the date on which such right shall expire; (5) a discussion of
certain federal income tax considerations; (6) the call provisions, if any;
(7) the currency, currencies or currency units in which the offering price, if
any, and exercise price are payable; (8) the antidilution provisions of the
Stock Warrants; and (9) any other terms of the Stock Warrants. The shares of
Common or Preferred Stock issuable upon exercise of the Stock Warrants will,
when issued in accordance with the Stock Warrant Agreement, be fully paid and
nonassessable.
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EXERCISE OF STOCK WARRANTS
Stock Warrants may be exercised by surrendering to the Stock Warrant Agent
the Stock Warrant certificate signed by the warrantholder, or its duly
authorized agent, indicating the warrantholder's election to exercise all or a
portion of the Stock Warrants evidenced by the certificate. Surrendered Stock
Warrant certificates shall be accompanied by payment of the aggregate exercise
price of the Stock Warrants to be exercised, as set forth in the related
Prospectus Supplement, which payment may be made in the form of cash or a
check equal to the exercise price. Certificates evidencing duly exercised
Stock Warrants will be delivered by the Stock Warrant Agent to the transfer
agent for the Common Stock or the Preferred Stock, as the case may be. Upon
receipt thereof, the transfer agent shall deliver or cause to be delivered, to
or upon the written order of the exercising warrantholder, a certificate
representing the number of shares of Common Stock or Preferred Stock
purchased. If fewer than all of the Stock Warrants evidenced by any
certificate are exercised, the Stock Warrant Agent shall deliver to the
exercising warrantholder a new Stock Warrant certificate representing the
unexercised Stock Warrants.
ANTIDILUTION PROVISIONS
The exercise price payable and the number of shares of Common or Preferred
Stock purchasable upon the exercise of each Stock Warrant will be subject to
adjustment in certain events, including the issuance of a stock dividend to
holders of Common or Preferred Stock, respectively, or a combination,
subdivision or reclassification of Common or Preferred Stock, respectively. In
lieu of adjusting the number of shares of Common or Preferred Stock
purchasable upon exercise of each Stock Warrant, the Company may elect to
adjust the number of Stock Warrants. No adjustment in the number of shares
purchasable upon exercise of the Stock Warrants will be required until
cumulative adjustments require an adjustment of at least 1% thereof. The
Company may, at its option, reduce the exercise price at any time. No
fractional shares will be issued upon exercise of Stock Warrants, but the
Company will pay the cash value of any fractional shares otherwise issuable.
Notwithstanding the foregoing, in case of any consolidation, merger or sale or
conveyance of the property of the Company as an entirety or substantially as
an entirety, the holder of each outstanding Stock Warrant shall have the right
to the kind and amount of shares of stock and other securities and property
(including cash) receivable by a holder of the number of shares of Common or
Preferred Stock into which such Stock Warrants were exercisable immediately
prior thereto.
NO RIGHTS AS STOCKHOLDERS
Holders of Stock Warrants will not be entitled, by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice as
stockholders with respect to any meeting of stockholders for the election of
directors of the Company or any other matter or to exercise any rights
whatsoever as stockholders of the Company.
DESCRIPTION OF THE WARRANTS TO PURCHASE DEBT SECURITIES
The following statements with respect to the Debt Warrants are summaries of,
and subject to, the detailed provisions of a warrant agreement (the "Debt
Warrant Agreement") to be entered into by the Company and a warrant agent to
be selected at the time of issue (the "Debt Warrant Agent"), which Debt
Warrant Agreement may include or incorporate by reference standard warrant
provisions substantially in the form of the Standard Debt Securities Warrant
Provisions (the "Debt Warrant Provisions") filed as an exhibit to the
Registration Statement.
GENERAL
The Debt Warrants, evidenced by warrant certificates (the "Debt Warrant
Certificates"), may be issued under the Debt Warrant Agreement independently
or together with any Offered Securities offered by any Prospectus Supplement
and may be attached to or separate from such Offered Securities. If Debt
Warrants are
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offered, the related Prospectus Supplement will describe the terms of the
warrants, including, without limitation, the following: (1) the offering
price, if any; (2) the designation, aggregate principal amount and terms of
the Debt Securities purchasable upon exercise of the warrants; (3) if
applicable, the designation and terms of the Debt Securities with which the
Debt Warrants are issued and the number of Debt Warrants issued with each such
Debt Security; (4) if applicable, the date on and after which the Debt
Warrants and the related Offered Securities will be separately transferable;
(5) the principal amount of Debt Securities purchasable upon exercise of one
Debt Warrant and the price at which such principal amount of Debt Securities
may be purchased upon exercise; (6) the date on which the right to exercise
the Debt Warrants shall commence and the date on which such right shall
expire; (7) a discussion of certain federal income tax considerations; (8)
whether the warrants represented by the Debt Warrant Certificates will be
issued in registered or bearer form; (9) the currency, currencies or currency
units in which the offering price, if any, and exercise price are payable;
(10) the antidilution provisions of the Debt Warrants; and (11) any other
terms of the Debt Warrants.
Debt Warrant Certificates may be exchanged for new Debt Warrant Certificates
of different denominations and may (if in registered form) be presented for
registration of transfer at the corporate trust office of the Debt Warrant
Agent, which will be listed in the related Prospectus Supplement, or at such
other office as may be set forth therein. Warrantholders do not have any of
the rights of holders of Debt Securities (except to the extent that the
consent of warrantholders may be required for certain modifications of the
terms of an Indenture or form of the Debt Security, as the case may be, and
the series of Debt Securities issuable upon exercise of the Debt Warrants) and
are not entitled to payments of principal of and interest, if any, on the Debt
Securities.
EXERCISE OF DEBT WARRANTS
Debt Warrants may be exercised by surrendering the Debt Warrant Certificate
at the corporate trust office of the Debt Warrant Agent, with the form of
election to purchase on the reverse side of the Debt Warrant Certificate
properly completed and executed, and by payment in full of the exercise price,
as set forth in the Prospectus Supplement. Upon the exercise of Debt Warrants,
the Debt Warrant Agent will, as soon as practicable, deliver the Debt
Securities in authorized denominations in accordance with the instructions of
the exercising warrantholder and at the sole cost and risk of such holder. If
less than all of the Debt Warrants evidenced by the Debt Warrant Certificate
are exercised, a new Debt Warrant Certificate will be issued for the remaining
amount of Debt Warrants.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities (1) through underwriters or dealers,
(2) directly to one or more purchasers or (3) through agents. A Prospectus
Supplement will set forth the terms of the offering of the Offered Securities
offered thereby, including the name or names of any underwriters, the purchase
price of the Offered Securities and the proceeds to the Company from the sale,
any underwriting discounts and other items constituting underwriters'
compensation, any public offering price, any discounts or concessions allowed
or reallowed or paid to dealers and any securities exchange or market on which
the Offered Securities may be listed. Only underwriters so named in such
Prospectus Supplement are deemed to be underwriters in connection with the
Offered Securities offered thereby.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase the Offered Securities
will be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all the Offered Securities of the series offered by the
Prospectus Supplement if any of the Offered Securities are purchased. Any
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
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Offered Securities may also be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offering and sale of Offered Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the related Prospectus Supplement, any such agent will be acting
on a best-efforts basis for the period of its appointment.
All Offered Securities offered other than Common Stock will be a new issue
of securities with no established trading market. Any underwriters to whom
such Offered Securities are sold by the Company for public offering and sale
may make a market in such Offered Securities, but such underwriters will not
be obligated to do so and may discontinue any market making at any time
without notice. No assurance can be given as to the liquidity of or the
trading markets for any such Offered Securities.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act that may arise
from any untrue statement or alleged untrue statement of a material fact or
any omission or alleged omission to state a material fact in this Prospectus,
any supplement or amendment hereto, or in the registration statement of which
this Prospectus forms a part, or to contribution with respect to payments
which the agents or underwriters may be required to make in respect thereof.
Agents and underwriters may engage in transactions with, or perform services
for, the Company in the ordinary course of business.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Offered Securities
will be passed upon for the Company by Winston & Strawn, Chicago, Illinois.
The Chairman of the Executive Committee of Winston & Strawn, Governor James R.
Thompson, serves as a member of the Company's Board of Directors and as of
March 1, 1998 beneficially owned 4,030 shares of Common Stock. Certain legal
matters with respect to the Offered Securities will be passed upon for any
underwriters or agents by Mayer, Brown & Platt, Chicago, Illinois. Mayer,
Brown & Platt from time to time acts as counsel for the Company on certain
matters.
EXPERTS
The consolidated financial statements of FMC Corporation and consolidated
subsidiaries as of December 31, 1997 and 1996, and for each of the years in
the three-year period ended December 31, 1997, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP ("KPMG"), independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
With respect to the unaudited interim financial information for the three-
month periods ended March 31, 1998 and 1997, incorporated by reference herein,
KPMG has reported that they applied limited procedures in accordance with
professional standards for a review of such information. However, their
separate report included in the Company's quarterly report on Form 10-Q for
the quarter ended March 31, 1998, and incorporated by reference herein, states
that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their report on
such information should be restricted in light of the limited nature of the
review procedures applied. The accountants are not subject to the liability
provisions of Section 11 of the Securities Act for their report on the
unaudited interim financial information because that report is not a "report"
or a "part" of the Registration Statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Securities Act.
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