SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended March 31, 1997 Commission file number: 001-12933
AUTOLIV, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0378542
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
World Trade Center
Klarabergsviadukten 70
S-107 24 Stockholm
(Address of principal executive offices)
Registrant's telephone number, including area code: 46 (8) 402 0600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to
such filing requirements for the past 90 days.
Yes: No: X (1)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: There were
approximately 101 million shares of Common Stock of Autoliv, Inc., par
value $1.00 per share, outstanding as of May 12, 1997.
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1. The registrant became subject to the reporting requirements of the
Securities Exchange Act of 1934 on April 24, 1997 when it filed its
Registration Statement on Form 8-A.
PART I. Financial Information
Items 1-2. Financial Statements, Management's Discussion and Analysis
of Financial Condition and Results of Operations
On May 1, 1997, pursuant to the Combination Agreement, dated as
of November 25, 1996 (the "Combination Agreement"), by and among Autoliv
AB, a corporation organized under the laws of the Kingdom of Sweden
("Autoliv"), Morton International, Inc., an Indiana corporation
("Morton"), Autoliv, Inc., a Delaware corporation ("New Autoliv"), and ASP
Merger Sub Inc., a Delaware corporation ("Merger Sub"), Merger Sub merged
with and into Morton (the "Merger"), with Morton being the surviving entity
in the Merger and effective upon the consummation of the Merger, Morton
changed its name to Autoliv ASP, Inc. ("Autoliv ASP"). On April 30, 1997,
Morton, in accordance with the Distribution Agreement dated April 30, 1997
(the "Distribution Agreement"), between Morton and New Morton
International, Inc., an Indiana Corporation ("New Morton"), had (i)
distributed to New Morton all of Morton's businesses, assets and
liabilities, other than Morton's automotive safety products business and
the assets and liabilities related thereto, and (ii) contributed to New
Morton an amount of cash calculated in accordance with the terms of the
Distribution Agreement.
In addition, pursuant to the Combination Agreement, New Autoliv
conducted an exchange offer (the "Exchange Offer" and together with the
Merger, the "Combination") for all of the issued and outstanding shares of
common stock, par value Swedish kronor 10 per share, of Autoliv (the
"Autoliv Common Stock") and American Depositary Shares each representing
one share of Autoliv Common Stock ("ADSs" and together with the Autoliv
Common Stock, the "Autoliv Securities"), in return for shares of common
stock, par value $1.00 per share of New Autoliv ("New Autoliv Common
Stock"). On April 25, 1997, New Autoliv announced that over 90% of the
Autoliv Securities had been tendered in the Exchange Offer, and, that since
all the other conditions for consummation of the Exchange Offer had been
fulfilled or waived, New Autoliv would exchange New Autoliv Common Stock
for Autoliv Securities which were tendered in the Exchange Offer. On April
28, 1997, New Autoliv announced that it had extended the acceptance period
of the Exchange Offer until May 9, 1997. On May 14, 1997, New Autoliv
issued a press release announcing that 97.2% of the Autoliv Securities had
been tendered in the Exchange Offer and that any Autoliv Securities which
had not been tendered in the Exchange Offer would be acquired by New
Autoliv in a compulsory acquisition process under the Swedish Companies
Act. A copy of such press release is attached hereto as Exhibit 99.1 and is
incorporated by reference herein.
As a result of the Combination, Autoliv ASP has become a
wholly-owned subsidiary of New Autoliv and following the commencement of
the compulsory acquisition process, Autoliv will also become a wholly owned
subsidiary of New Autoliv.
Operating results for New Autoliv will be published as they
become available, but in any event, New Autoliv's initial two months of
operations will be made available in New Autoliv's Quarterly Report on Form
10-Q for the quarter ending June 30, 1997. Reference is made to the New
Autoliv Registration Statement on Form S-4 (File No. 333-23813) filed with
the Securities and Exchange Commission (the "Commission") on March 24, 1997
and Post Effective Amendment No. 1 thereto filed with the Commission on
April 30, 1997.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits
2.1 Distribution Agreement, dated as of April 30,
1997, by and between Morton and New Morton.
The Registrant agrees to furnish
supplementally a copy of any omitted exhibit
or schedule to the Commission upon request.
2.2 Tax Sharing Agreement, dated as of April 30,
1997, by and between Morton and New Morton.
The Registrant agrees to furnish
supplementally a copy of any omitted exhibit
or schedule to the Commission upon request.
2.3 Employee Benefits Allocation Agreement, dated
as of April 30, 1997, by and between Morton
and New Morton. The Registrant agrees to
furnish supplementally a copy of any omitted
exhibit or schedule to the Commission upon
request.
3.1 Registrant's Restated Certificate of
Incorporation.
3.2 Registrant's Restated By-Laws.
8.1 Opinion of Ernst & Young AB as to certain tax
matters.
99.1 Press Release dated May 14, 1997.
(b) Reports on Form 8-K
During 1997, New Autoliv filed three 8-K reports, with
each one reporting under Item 2 - Acquisition or
Disposition of Assets; and Item 5 - Other Events. No
financial statements were filed with any of the 8-K
reports. The dates of the filing of the 8-K reports
are as follows:
(i) Current Report on Form 8-K, dated as of April 28,
1997.
(ii) Current Report on Form 8-K, dated as of April 30,
1997.
(iii) Current Report on Form 8-K, dated as of May 1,
1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
AUTOLIV, INC.
Dated: May 14, 1997 By: /S/ WILHELM
-----------
Wilhelm Kull
Chief Financial Officer (principal
financial officer)
EXHIBIT INDEX
Exhibit No. Description
2.1 Distribution Agreement, dated as of April 30, 1997, by
and between Morton and New Morton International Inc.
The Registrant agrees to furnish supplementally a copy
of any omitted exhibit or schedule to the Commission
upon request.
2.2 Tax Sharing Agreement, dated as of April 30, 1997, by
and between Morton and New Morton. The Registrant
agrees to furnish supplementally a copy of any
omitted exhibit or schedule to the Commission upon
request.
2.3 Employee Benefits Allocation Agreement, dated as of
April 30, 1997, by and between Morton and New Morton.
The Registrant agrees to furnish supplementally a copy
of any omitted exhibit or schedule to the Commission
upon request.
3.1 Registrant's Restated Certificate of Incorporation.
3.2 Registrant's Restated By-Laws.
8.1 Opinion of Ernst & Young AB as to certain tax matters.
99.1 Press Release dated May 14, 1997.
Exhibit 2.1
DISTRIBUTION AGREEMENT
DATED AS OF APRIL 30, 1997
BY AND BETWEEN
MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
(TO BE RENAMED "AUTOLIV ASP, INC.")
AND
NEW MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
(TO BE RENAMED "MORTON INTERNATIONAL, INC.")
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.1 General . . . . . . . . . . . . . . . 2
Section 1.2 Exhibits, Etc. . . . . . . . . . . . . 12
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE
Section 2.1 Financing . . . . . . . . . . . . . . 12
Section 2.2 Transfer of New Morton Assets . . . . 16
Section 2.3 Transfers Not Effected Prior to
the Distribution; Transfers
Deemed Effective as of the
Distribution Date . . . . . . . . . 16
Section 2.4 No Representations or Warranties;
Consents . . . . . . . . . . . . . . 17
Section 2.5 Assumption and Satisfaction of New
Morton Liabilities; Retention of
Safety Liabilities . . . . . . . . . 17
Section 2.6 Financial Representations and
Warranties . . . . . . . . . . . . . 17
Section 2.7 Conveyancing and Assumption
Instruments . . . . . . . . . . . . 18
Section 2.8 Certificate of Incorporation;
By-laws; Share Purchase Rights
Plan . . . . . . . . . . . . . . . . 18
Section 2.9 New Morton Capitalization . . . . . . 18
Section 2.10 Certain Pre-Distribution
Transactions . . . . . . . . . . . . 19
ARTICLE III
THE DISTRIBUTION
Section 3.1 Cooperation Prior to the
Distribution . . . . . . . . . . . . 19
Section 3.2 Company Board Action; Distribution
Procedures . . . . . . . . . . . . . 20
Section 3.3 Conditions Precedent to the
Distribution . . . . . . . . . . . . 20
Section 3.4 The Distribution . . . . . . . . . . . 22
ARTICLE IV
SERVICES
Section 4.1 Provision of Management Services . . . 22
Section 4.2 Fee for Services; Expenses . . . . . . 23
Section 4.3 Independent Contractor Status . . . . 23
Section 4.4 Disclaimer; Limited Liability . . . . 23
ARTICLE V
INDEMNIFICATION
Section 5.1 Indemnification by Safety . . . . . . 24
Section 5.2 Indemnification by New Morton . . . . 25
Section 5.3 Limitations on Indemnification
Obligations . . . . . . . . . . . . 25
Section 5.4 Procedure for Indemnification . . . . 26
Section 5.5 Remedies Cumulative . . . . . . . . . 29
Section 5.6 Survival of Indemnities . . . . . . . 29
Section 5.7 Right of Inquiry . . . . . . . . . . . 30
ARTICLE VI
CERTAIN ADDITIONAL MATTERS AND COVENANTS
Section 6.1 The New Morton Board . . . . . . . . . 31
Section 6.2 Resignations; Safety Board . . . . . . 31
Section 6.3 Certain Post-Distribution
Transactions . . . . . . . . . . . . 32
Section 6.4 Use of Names . . . . . . . . . . . . . 33
Section 6.5 Restrictions on Hiring of Other
Party's Employees . . . . . . . . . 34
Section 6.6 Further Assurances; Cooperation . . . 34
Section 6.7 Guarantees . . . . . . . . . . . . . . 34
Section 6.8 Shared Facilities . . . . . . . . . . 35
Section 6.9 Thiokol-Morton Spinoff . . . . . . . . 36
Section 6.10 Non-Competition . . . . . . . . . . . 36
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.1 Provision of Corporate Records . . . . 37
Section 7.2 Access to Information . . . . . . . . 38
Section 7.3 Production of Witnesses . . . . . . . 40
Section 7.4 Reimbursement . . . . . . . . . . . . 41
Section 7.5 Retention of Records . . . . . . . . . 41
Section 7.6 Confidentiality . . . . . . . . . . . 41
ARTICLE VIII
INSURANCE
Section 8.1 Policies and Rights . . . . . . . . . 42
Section 8.2 Post-Distribution Date Claims . . . . 42
Section 8.3 Administration and Reserves . . . . . 43
Section 8.4 Agreement for Waiver of Conflict
and Shared Defense . . . . . . . . . 44
Section 8.5 Cooperation with Respect
to Insurance . . . . . . . . . . . . 44
ARTICLE IX
MISCELLANEOUS
Section 9.1 Complete Agreement; Construction . . . 45
Section 9.2 Survival of Agreements . . . . . . . . 45
Section 9.3 Expenses . . . . . . . . . . . . . . . 45
Section 9.4 Governing Law . . . . . . . . . . . . 45
Section 9.5 Notices . . . . . . . . . . . . . . . 46
Section 9.6 Amendments . . . . . . . . . . . . . . 46
Section 9.7 Successors and Assigns . . . . . . . . 47
Section 9.8 Counterparts . . . . . . . . . . . . . 47
Section 9.9 Subsidiaries . . . . . . . . . . . . . 47
Section 9.10 Third Party Beneficiaries . . . . . . 47
Section 9.11 Titles and Headings . . . . . . . . . 47
Section 9.12 Exhibits and Schedules . . . . . . . . 47
Section 9.13 Legal Enforceability . . . . . . . . . 47
Section 9.14 Consent to Jurisdiction . . . . . . . 48
Schedules and Exhibits
Schedule 1.01(a) Safety Business, Retained Subsidiary
and Other Safety Interests and
Investments
Schedule 1.01(b) Safety Liabilities
Schedule 1.01(c)(1) Company Policies
Schedule 1.01(c)(2) New Morton Policies
Schedule 1.01(c)(3) Safety Policies
Schedule 1.01(d)(1) New Morton Real Property
Schedule 1.01(d)(2) Safety Real Property
Schedule 1.01(e) New Morton Businesses, New Morton
Subsidiaries and Other New Morton
Interests and Investments
Schedule 1.01(f) New Morton Liabilities
Schedule 1.01(g)(1) New Morton Intellectual Property
Schedule 1.01(g)(2) Safety Intellectual Property
Schedule 4.02 Rates for Services - Formula Format
Schedule 6.08 Terms of Rochester Hills Shared Usage
Exhibit A Form of Employee Benefits Allocation
Agreement
Exhibit B New Morton By-Laws
Exhibit C New Morton Articles of Incorporation
Exhibit D Form of Tax Sharing Agreement
Exhibit E Form of New Morton Share Purchase
Rights Plan
Exhibit F Records Retention Policy
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (this "Agreement"), dated as
of April 30, 1997, by and between MORTON INTERNATIONAL, INC.,
an Indiana corporation (the "Company") and NEW MORTON
INTERNATIONAL, INC., an Indiana corporation and a wholly owned
subsidiary of the Company ("New Morton").
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to separate the
Company and its subsidiaries into two companies by
consolidating its Specialty Chemicals and Salt businesses in
New Morton and distributing to the holders of shares of common
stock, $1 par value per share, of the Company ("Company Common
Stock"), all outstanding shares of common stock $1 par value
per share, of New Morton ("New Morton Common Stock"), together
with the associated preferred share purchase rights ("New
Morton Rights");
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to enter into the
Combination Agreement, dated as of November 25, 1996 (the
"Combination Agreement"), by and among the Company, Autoliv
AB, a corporation organized under the laws of the Kingdom of
Sweden ("Autoliv"), Autoliv, Inc., a Delaware corporation
("Newco"), and ASP Merger Sub Inc., a Delaware corporation and
a wholly owned subsidiary of Newco ("Newco Sub"), pursuant to
which, among other things, Newco Sub will be merged with and
into the Company (the "Merger") and Newco will offer to
acquire all of the outstanding capital stock of Autoliv
pursuant to the Exchange Offer (as defined in the Combination
Agreement, and, together with the other transactions
contemplated thereby, the "Transactions");
WHEREAS, immediately prior to the Effective Time (as
defined in Section 1.2 of the Combination Agreement) of the
Merger, the Company's Board of Directors (the "Company
Board"), subject to the approval of the Company's stockholders
and the other conditions set forth in Section 3.03 of this
Agreement, expects to distribute to the holders of Company
Common Stock, other than shares held in the treasury of the
Company, on a pro rata basis, all of the issued and
outstanding shares of New Morton Common Stock (the
"Distribution");
WHEREAS, immediately prior to the Distribution, the
Company Board, subject to the approval of the Company's
stockholders and the other conditions set forth in Section
3.03 of this Agreement, expects to cause (i) the Company to
contribute the New Morton Assets (as defined below) to New
Morton or another wholly-owned subsidiary of the Company as a
capital contribution or in exchange for shares of such
subsidiary's stock, (ii) the Company to contribute to New
Morton the New Morton Capital Contribution (as defined
herein), the Safety Supplemental Distribution (as defined
herein) as well as the stock of the New Morton Subsidiaries
(as defined herein) and certain other assets to New Morton as
a capital contribution and (iii) New Morton to assume the New
Morton Liabilities (as defined below), all as more
specifically provided herein (the transactions described in
clauses (i), (ii) and (iii) are referred to collectively as
the "Contribution");
WHEREAS, the purpose of the Distribution is to make
possible the Merger by divesting the Company of the businesses
and operations to be conducted by New Morton and its
subsidiaries, which Newco and Autoliv have required as a
condition to their willingness to consummate the Transactions;
WHEREAS, it is the intention of the parties to this
Agreement that the Contribution and the Distribution will
qualify as transactions described in Sections 351 and Section
355 of the Internal Revenue Code of 1986, as amended (the
"Code") and/or a "reorganization" within the meaning of
Section 368(a)(1)(D) of the Code; and
WHEREAS, this Agreement sets forth or provides for
certain agreements by and among the Company and New Morton in
consideration of the separation of the ownership of the
Company and New Morton.
NOW, THEREFORE, in consideration of the mutual
agreements, provisions and covenants contained in this
Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General. As used in this Agreement,
the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and
plural forms of the terms defined):
Action: any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any
governmental or other regulatory or administrative agency or
commission or any arbitration tribunal.
Affiliate: as defined in Rule 12b-2 promulgated by
the Commission under the Exchange Act, as such Regulation is
in effect on the date hereof.
Agent: the distribution agent appointed by the
Company to distribute shares of New Morton Common Stock
pursuant to the Distribution.
Ancillary Agreements: all of the written
agreements, instruments, understandings, assignments or other
arrangements entered into in connection with the Transactions
contemplated hereby, including, without limitation, the
Combination Agreement, the Conveyancing and Assumption
Instruments, the Benefits Agreement, the Safety Credit
Agreement and the Tax Sharing Agreement.
Assets: any and all assets, properties and rights,
whether tangible or intangible, whether real, personal or
mixed, whether fixed, contingent or otherwise, and wherever
located, including, without limitation, the following:
(a) real property interests (including leases),
land, plants, buildings and improvements;
(b) machinery, equipment, tooling, vehicles,
furniture and fixtures, leasehold improvements, repair
parts, tools, plant, laboratory and office equipment and
other tangible personal property, together with any
rights or claims arising out of the breach of any express
or implied warranty by the manufacturers or sellers of
any of such assets or any component part thereof;
(c) inventories, including raw materials, work-in-
process, finished goods, parts, accessories and supplies;
(d) cash, bank accounts, notes, loans and accounts
receivable (whether current or not current), interests as
beneficiary under letters of credit, advances and
performance and surety bonds;
(e) certificates of deposit, banker's acceptances,
shares of stock, bonds, debentures, evidences of
indebtedness, certificates of interest or participation
in profit-sharing agreements, collateral trust
certificates, pre-organization certificates or
subscriptions, transferable shares, investment contracts,
voting-trust certificates, interests in partnerships and
other entities (including joint ventures), puts, calls,
straddles, options, swaps, collars, caps and other
securities or hedging arrangements of any kind;
(f) financial, accounting and operating data and
records including, without limitation, books, records,
notes, sales and sales promotional data, advertising
materials, credit information, cost and pricing
information, customer and supplier lists, reference
catalogs, payroll and personnel records, minute books,
stock ledgers, stock transfer records and other similar
property, rights and information;
(g) patents, patent applications, trademarks,
trademark applications and registrations, trade names,
service marks, service names, copyrights and copyright
applications and registrations, commercial and technical
information including engineering, production and other
designs, drawings, specifications, formulae, technology,
computer and electronic data processing programs and
software, inventions, processes, trade secrets, know-how,
confidential information and other proprietary property,
rights and interests;
(h) agreements, leases, contracts, sale orders,
purchase orders, open bids and other commitments and all
rights therein;
(i) prepaid expenses, deposits and retentions held
by third parties;
(j) claims, causes of action, choses in action,
rights under insurance policies, rights under express or
implied warranties, rights of recovery, rights of set-
off, rights of subrogation and all other rights of any
kind;
(k) licenses, franchises, permits, authorizations
and approvals; and
(l) goodwill and going concern value.
Benefits Agreement: the Employee Benefits
Allocation Agreement, dated as of the date of this Agreement,
between the Company and New Morton, the form of which is
attached hereto as Exhibit A.
Claims Administration: the processing of claims
made under the Policies, including the reporting of claims to
the insurance carrier, management and defense of claims and
providing for appropriate releases upon settlement of claims.
Code: the Internal Revenue Code of 1986, as
amended, or any successor legislation.
Commission: the Securities and Exchange Commission.
Company Policies: all Policies, current or past,
which are owned or maintained by or on behalf of the Company
or any of its predecessors which relate to both the Safety
Business and the New Morton Businesses, including without
limitation the Policies identified on Schedule 1.01(c)(1).
Conveyancing and Assumption Instruments:
collectively, the various agreements, instruments and other
documents to be entered into to effect the transfer of assets
and the assumption of Liabilities in the manner contemplated
by this Agreement and the Ancillary Agreements.
Corporate Assets: the Assets of the Company
relating to the Corporate Operations.
Corporate Operations: the activities and operations
of the Company's corporate administrative group and the senior
executive management of the Company, which activities and
operations do not primarily relate to or primarily arise from
the Safety Business.
Distribution Date: the date determined by the
Company Board as of which the Distribution shall be effected,
which is presently contemplated to be April 30, 1997.
Distribution Record Date: the date to be determined
by the Company Board as the record date for the Distribution.
Exchange Act: the Securities Exchange Act of 1934,
as amended.
Foreign Exchange Rate: with respect to any currency
other than United States dollars as of any date of
determination, the average of the opening bid and asked rates
on such date at which such currency may be exchanged for
United States dollars as quoted by Bank of America Illinois
except that, with respect to any Indemnifiable Loss (as
defined in Section 5.01) covered by insurance, the Foreign
Exchange Rate for such currency shall be as set forth in
Section 5.03(b)(ii).
Form S-4: The registration statement on Form S-4 to
be filed by New Morton with the Commission to effect the
registration of the New Morton Common Stock and the New Morton
Rights pursuant to the Securities Act, provided that in the
event such form is not required to be filed, "Form S-4" shall
refer to the registration statement on Form 10 filed by New
Morton with respect to such securities.
Insurance Administration: with respect to each
Policy, the accounting for premiums, retrospectively-rated
premiums, defense costs, indemnity payments, deductibles and
retentions as appropriate under the terms and conditions of
each of the Policies; and the reporting to excess insurance
carriers of any losses or claims which may cause the per-
occurrence or aggregate limits of any policy to be exceeded,
and the distribution of Insurance Proceeds as contemplated by
this Agreement.
Insurance Proceeds: those monies (a) received by an
insured from an insurance carrier or (b) paid by an insurance
carrier on behalf of the insured, in either case net of any
applicable premium adjustment, co-insurance, retrospectively-
rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
Insured Claims: those Liabilities that,
individually or in the aggregate, are covered within the terms
and conditions of any of the Policies, whether or not subject
to deductibles, co-insurance, uncollectability or
retrospectively-rated premium adjustments, but only to the
extent that such Liabili-ties are within applicable Policy
limits, including aggregates.
IRS: the Internal Revenue Service.
Liabilities: any and all debts, liabilities,
commitments and obligations, absolute or contingent, matured
or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all
costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising
under any law, rule, regulation, Action, threatened Action,
order or consent decree of any governmental entity or any
award of any arbitrator of any kind, and those arising under
any contract, commitment or undertaking.
New Morton Assets: collectively, all of the rights
and Assets of the Company and its subsidiaries other than the
Safety Assets, including without limitation: (a) the assets
included on the consolidated balance sheet of New Morton as of
June 30, 1996 and any assets acquired by the Company or New
Morton other than Safety Assets from July 1, 1996 to the
Distribution Date (other than, in each case, assets sold or
otherwise disposed of on or prior to the Distribution Date);
(b) the real property, owned or leased, listed on Schedule
1.01(d)(1); (c) any recoveries under the liabilities listed on
Schedule 1.01(f) or the litigation not included in the Safety
Liabilities; (d) subject to Section 6.04 hereof, the patents,
trademarks, trade names, copyrights (including applications
for any of the foregoing), and invention records of the
Company other than the Safety Assets, including without
limitation the patents, trademarks and copyrights listed on
Schedule 1.01(g)(1); (e) the Company's books and records to
the extent set forth in Section 7.01(a); (f) all of the
outstanding capital stock or other interests of the Company in
the New Morton Subsidiaries and in the partnerships, joint
ventures and investments listed on Schedule 1.01(e); (g) the
New Morton Capital Contribution, the Safety Supplemental
Distribution and all domestic and foreign cash bank balances
and short-term investments other than (i) cash generated from
the operations of the Safety Business from July 1, 1996
through the Distribution Date in excess of the sum of (x) the
cash used by the Safety Business from July 1, 1996 through the
Distribution Date, (y) the Safety Supplemental Distribution
and (z) $15 million of expenses incurred by the Company in
connection with the transactions contemplated by the
Combination Agreement and (ii) petty checking and cash
accounts with respect to the Safety Business not maintained,
in the ordinary course of business, on the central company
cash management system, including without limitation to the
extent set forth in Section 2.01(f) of this Agreement; (h) the
New Morton Policies and the rights under the Company Policies
to the extent set forth in Article VIII of this Agreement; and
(i) the Company's rights under Sections 8.3(b), 8.6, 8.13(c)
and 8.22 of the Combination Agreement that survive the
Effective Time (as defined in the Combination Agreement), and
New Morton's rights and Assets under the other Ancillary
Agreements.
New Morton Board: the Board of Directors of New
Morton.
New Morton Businesses: all assets, businesses and
operations of the Company other than those included in the
Safety Business, including without limitation the New Morton
Assets and the businesses and operations of the Adhesives &
Chemical Specialties Group, the Coatings Group, the Electronic
Materials Group, the Salt Group and the Corporate Operations,
as heretofore, currently or hereafter conducted, including
without limitation the businesses listed on Schedule 1.01(e)
and all assets, businesses or operations managed or operated
by, or otherwise operationally related to, any of such
businesses, which have been sold or otherwise disposed of or
discontinued prior to the Distribution Date but which shall
not include the Safety Business.
New Morton By-Laws: the By-Laws of New Morton,
substantially in the form of Exhibit B, to be in effect on the
Distribution Date.
New Morton Capital Contribution: the capital
contribution or repayment in cash of intercompany indebtedness
(including as provided in Section 2.10(b) of this Agreement)
in the aggregate amount of $750,000,000 to be contributed by
the Company to New Morton on or immediately prior to the
Distribution Date.
New Morton Charter: the Articles of Incorporation
of New Morton, substantially in the form of Exhibit C, to be
in effect on the Distribution Date.
New Morton Employee: any individual who, on or
prior to the Distribution Date, was employed by the Company or
any of its subsidiaries and who, on or after the Distribution
Date, or otherwise in connection with the Distribution, is
intended by the parties hereto to be employed by New Morton or
a New Morton Subsidiary or in a New Morton Business on an on-
going basis.
New Morton Liabilities: collectively, all of the
Liabilities of the Company and its subsidiaries incurred on or
prior to the Distribution Date (other than Safety Liabilities)
including without limitation: all of (i) the Liabilities of
New Morton under this Agreement or any of the Ancillary
Agreements, (ii) the Liabilities arising out of or relating to
any of the New Morton Businesses or the New Morton Assets;
(iii) the Liabilities referred to in the proviso contained in
clause (v) of the definition of Safety Liabilities contained
herein, and (iv) the Liabilities specified on Schedule
1.01(f).
New Morton Policies: all Policies, current or past,
which are owned or maintained by or on behalf of the Company
or any of its predecessors which relate to the New Morton
Businesses but do not relate to the Safety Business, including
without limitation the Policies identified on Schedule
1.01(c)(2).
New Morton Subsidiaries: all of the subsidiaries of
the Company other than the Retained Subsidiaries, including
without limitation those listed on Schedule 1.01(e), and any
other subsidiary of New Morton which hereafter may be
organized or acquired, all of which subsidiaries will become
subsidiaries of New Morton.
NYSE: New York Stock Exchange, Inc.
Policies: insurance policies and insurance
contracts of any kind, including without limitation primary
and excess policies, comprehensive general liability policies,
automobile, aircraft and workers' compensation insurance
policies, life insurance and other employee benefit insurance
policies, and self-insurance and captive insurance company
arrangements, together with the rights, benefits and
privileges thereunder.
Proxy Statement: the proxy
statement/prospectus/offer to purchase sent to the holders of
shares of Company Common Stock in connection with the Special
Meeting and to the holders of Autoliv common stock in
connection with the Exchange Offer.
Retained Subsidiaries: the subsidiaries of the
Company listed on Schedule 1.01(a).
Rights Agreement: the Rights Agreement, dated as of
April 24, 1997, by and between New Morton and First Chicago
Trust Company of New York, as Rights Agent, substantially in
the form of Exhibit E hereto.
Ruling Request: the private letter ruling request
to be filed by the Company with the IRS, as supplemented and
amended from time to time, with respect to certain tax aspects
of the Distribution and the Merger.
Safety: Autoliv ASP, Inc., the surviving
corporation of the Merger (as defined in the Combination
Agreement), which shall occur pursuant to the Combination
Agreement immediately subsequent to the Distribution.
Safety Assets: collectively, the following rights
and Assets of the Company and its subsidiaries: (a) the
assets included on the consolidated balance sheet of the
Safety Business as of June 30, 1996 and any assets acquired by
the Company exclusively relating to the Safety Business from
July 1, 1996 to the Distribution Date (other than, in each
case, assets sold or otherwise disposed of on or prior to the
Distribution Date); (b) the real property owned or leased
listed on Schedule 1.01(d)(2); (c) any recoveries under the
litigation listed on Schedule 1.01(b); (d) other than with
respect to the "Morton" and "Morton International" names and
related trademarks and trade names (but subject to Section
6.04 hereof), the patents, trademarks, trade names, copyrights
(including applications for any of the foregoing), and
invention records of the Company relating primarily to the
Safety Business, including without limitation the patents,
trademarks and copyrights listed on Schedule 1.01(g)(2); (e)
the Company's books and records to the extent set forth in
Section 7.01(b); (f) all of the outstanding capital stock or
other interests of the Company in the Retained Subsidiaries
and in the partnerships, joint ventures and investments listed
on Schedule 1.01(a); (g) petty checking and cash accounts
with respect to the Safety Business not maintained, in the
ordinary course of business, on the central company cash
management system; (h) cash generated from the operations of
the Safety Business from July 1, 1996 through the Distribution
Date in excess of the sum of (x) cash used by the Safety
Business, (y) the Safety Supplemental Distribution and (z) $15
million of expenses incurred by the Company in connection with
the transactions contemplated by the Combination Agreement;
(i) the Safety Policies and the rights under the Company
Policies to the extent set forth in Article VIII of this
Agreement; (j) the rights and Assets of Safety under the
Ancillary Agreements; and (k) any other rights and Assets of
the Company and its subsidiaries exclusively relating to the
Safety Business, provided that the Safety Assets shall not
include (1) cash and cash equivalents, except as set forth in
clause (g) or (h) above, and (2) assets associated with the
Corporate Operations.
Safety Business: the Safety Assets and the assets,
business and operations of the Company's Automotive Safety
Products Group, as heretofore, currently or hereafter
conducted, including without limitation the businesses listed
on Schedule 1.01(a) and all businesses or operations
predominantly managed or operated by, or otherwise
operationally related to, the Company's Automotive Safety
Products Group which have been sold or otherwise disposed of
or discontinued prior to the Distribution Date but shall not
include any of the New Morton Businesses.
Safety Credit Agreement: the credit agreement or
other financing agreements or arrangements to be entered into
by the Company prior to the Distribution Date to provide
Safety with working capital, to fund the New Morton Capital
Contribution and, if necessary, to repay certain intercompany
indebtedness pursuant to Section 2.10(b) hereof.
Safety Employee: any individual who, on or prior to
the Distribution Date, was employed by the Company or any of
its subsidiaries and who, on or after the Distribution Date,
or otherwise in connection with the Distribution, is intended
by the parties hereto to be employed by Safety or a Safety
subsidiary or parent company or in the Safety Business
(including the business of Newco and its subsidiaries) on an
on-going basis.
Safety Liabilities: collectively, all of (i) the
Liabilities assigned to or assumed by the Company under this
Agreement or any of the Ancillary Agreements, except as
otherwise expressly provided herein or therein; (ii) all of
the Liabilities (or portion thereof) relating exclusively to
or arising exclusively from the Safety Business or the Safety
Assets; (iii) the Liabilities listed on Schedule 1.01(b);
(iv) Liabilities on the balance sheet of the Safety Business
as of June 30, 1996 (or reflected in the notes thereto), and
Liabilities incurred by the Safety Business on or after July
1, 1996, excluding, in each case, Liabilities paid or
otherwise satisfied on or prior to the Distribution Date; and
(v) the liabilities of the Company under the Safety Credit
Agreement, provided that Liabilities under the Safety Credit
Agreement relating to the representations and warranties of
the Company, to the extent such Liabilities relate to a
representation or warranty with respect to the New Morton
Businesses or the New Morton Assets on or prior to the
Distribution Date, shall not be a Safety Liability and shall
be a New Morton Liability.
Safety Policies: all Policies, current or past,
which are owned or maintained by or on behalf of the Company
or any of its predecessors which relate to the Safety Business
but do not relate to the New Morton Businesses, including
without limitation the Policies identified on Schedule
1.01(c)(3).
Safety Supplemental Distribution: an amount in cash
equal to $50,000,000 (subject to adjustment pursuant to
Sections 2.01(a) and 2.10(a)) plus, if the Distribution Date
occurs after March 31, 1997, an additional amount in cash
equal to the product of $7,200,000 times the number of months
(or fraction thereof) between March 31, 1997 and the
Distribution Date, such amounts to be contributed by the
Company to New Morton on or prior to the Distribution Date.
Securities Act: the Securities Act of 1933, as
amended.
Special Meeting: the Special Meeting of
Stockholders of the Company to consider the Distribution, the
Merger and certain related matters.
Special Meeting Record Date: the record date for
stockholders of the Company entitled to vote at the Special
Meeting.
Subsidiaries: the term "subsidiaries" as used
herein with respect to any entity shall, unless otherwise
indicated, be deemed to refer to both direct and indirect
subsidiaries of such entity and any other entity at least 45%
of the stock or other voting interests of which are owned by
such entity.
Tax Sharing Agreement: the Tax Sharing Agreement,
dated as of the date hereof, between New Morton and the
Company, the form of which is attached hereto as Exhibit D.
Section 1.2 Exhibits, Etc. References to an
"Exhibit" or to a "Schedule" are, unless otherwise specified,
to one of the Exhibits or Schedules attached to this
Agreement, and references to a "Section" are, unless otherwise
specified, to one of the Sections of this Agreement.
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE
Section 2.1 Financing.
(a) Safety Credit Agreement; New Morton Capital
Contribution; Safety Supplemental Distribution. On or shortly
prior to the Distribution Date, the Company shall enter into
the Safety Credit Agreement, on terms reasonably acceptable to
Autoliv and the Company, and shall contribute the New Morton
Capital Contribution to New Morton. New Morton shall have no
obligations or Liabilities with respect to the Safety Credit
Agreement. On or prior to the Distribution Date, the Company
shall contribute the Safety Supplemental Distribution to New
Morton to the extent not previously paid under Section 2.01(c)
of this Agreement; provided that if the estimated retained
earnings (exclusive of any costs and expenses to be paid by
Safety pursuant to Section 9.03 of this Agreement relating to
the transactions contemplated by this Agreement and the
Combination Agreement and prior to giving effect to the Safety
Supplemental Distribution) of the Safety Business from July 1,
1996 through the Distribution Date (or through the most recent
date prior to the Distribution Date for which such estimate
can reasonably be made), based solely upon the Company's
accounting principles, practices, policies and procedures
consistently applied, as set forth in a certificate of the
Chief Financial Officer of the Company dated the Distribution
Date (the "CFO Certificate"), are less than the amount of the
Safety Supplemental Distribution as otherwise determined, the
amount of the Safety Supplemental Distribution shall be
adjusted (without interest) to equal such lesser amount as set
forth in such certificate. The CFO Certificate shall be
prepared in good faith, shall be final and binding upon the
parties, and each party hereby waives and releases any claim
or remedy it might otherwise have with respect thereto.
(b) Credit Sensitive Debentures. Prior to the
Distribution Date, New Morton shall enter into a supplemental
indenture or other instrument to the extent required by the
indenture pursuant to which the Company's Credit Sensitive
Debentures due June 1, 2020 have been issued, which
supplemental indenture or instrument will provide that, as of
the Distribution Date and pursuant to Sections 801 and 802 of
such indenture, the obligations of the Company thereunder
shall become obligations of New Morton, and the Company shall
have no remaining obligations thereunder.
(c) Operation of the Safety Business Prior to the
Distribution Date. The Company and New Morton shall, to the
fullest extent reasonably practicable, treat, solely for the
purposes of this Agreement, the Safety Business as if it were
a stand-alone, self-financed entity from July 1, 1996 through
the Distribution Date. Accordingly, for the period from July
1, 1996 through the Distribution Date (i) the Safety Business
shall be treated as retaining all cash generated from the
operations of the Safety Business in excess of the sum of (x)
the cash used by the Safety Business, (y) the Safety
Supplemental Distribution, which shall be deemed to be made on
the last day of each month on a prorated basis and (z) $15
million of expenses incurred by the Company in connection with
the transactions contemplated by the Combination Agreement,
which shall be the responsibility of the Safety Business, to
the extent not theretofore charged to the Safety Business;
(ii) the Safety Business shall be credited with interest on
its positive cash balances and charged for interest on any
negative cash balances funded by the New Morton Businesses at
a per annum interest rate equal to the average interest rate
earned on the Company's cash balances during such period, with
any intercompany borrowings to fund the operations of the
Safety Business in excess of the amount reflected on the
audited balance sheet of the Safety Business as of June 30,
1996 treated as a payable to New Morton from the Company;
(iii) any payments by the Safety Business in connection with
the New Morton Businesses or the New Morton Employees
(including, without limitation, any such payments in respect
of New Morton Liabilities) shall be treated as a payable to
the Safety Business from New Morton, and any payments by the
New Morton Businesses in connection with the Safety Business
or the Safety Employees (including, without limitation, any
such payments in respect of Safety Liabilities) shall be
treated as a payable to New Morton from the Safety Business;
(iv) the Safety Business and the New Morton Businesses shall
make adjustments for late deposits, checks returned for
insufficient funds and other similar transactions occurring on
or after July 1, 1996 as shall be reasonable under the
circumstances consistent with the purpose and intent of this
Agreement; and (v) the net balance due to the Safety Business
or the New Morton Businesses, as the case may be, in respect
of the aggregate amounts of clauses (i) through (iv) shall be
paid by New Morton or Safety, as appropriate, as promptly as
practicable following each month end. For purposes of this
Section 2.01(c), the parties contemplate that the Safety
Business, including but not limited to the administration of
accounts payable and accounts receivable, will be conducted in
the normal course consistent with the covenants contained in
Section 7.1 of the Combination Agreement and that the Safety
Business will not be charged for general administrative
services provided by the Corporate Operations, including
legal, tax compliance, risk management and other similar
corporate services, in a manner consistent with the Company's
practice in preparing the audited balance sheet of the Safety
Business dated as of June 30, 1996. All transactions
contemplated by this Section 2.01(c) shall be subject to
review by the parties, and any dispute thereunder shall be
resolved by Ernst & Young LLP (or another "Big Six" accounting
firm acceptable to the parties), whose decision shall be final
and unappealable.
(d) Consents. Each of the Company and New Morton
agrees that it shall use reasonable efforts to obtain, prior
to the Distribution Date, all necessary consents, waivers or
amendments to each bank credit agreement, debt security or
other financing facility to which it or its respective
subsidiaries is a party or by which it or any of its
respective subsidiaries is bound, or to refinance such
agreement, security or facility, in each case on terms
satisfactory to the Company and New Morton and to the extent
necessary to permit the Distribution to be consummated without
any material breach of the terms of such agreement, security
or facility. To the extent Safety determines, in its
reasonable judgment, that such consents, waivers or amendments
would reasonably be expected to create Safety Liabilities,
such terms shall also be reasonably satisfactory to Safety.
From the date hereof until there no longer remain any such
material consents, waivers or amendments to be obtained in
connection with the Distribution pursuant to the terms of this
Agreement and the Ancillary Agreements, New Morton shall
inform Safety regularly, but not less than on a monthly basis,
of its progress in obtaining such consents, waivers and
amendments.
(e) Intercompany Accounts. All agreements,
contracts, arrangements and commitments between the New Morton
Businesses, on the one hand, and the Safety Business, on the
other hand, entered into prior to the Distribution Date for
the purchase or sale of goods or services ("Intercompany
Arrangements"), which intercompany arrangements shall be
subject to the reasonable approval of a senior executive of
the Safety Business, shall remain in effect on and after the
Closing Date. All amounts under such Intercompany
Arrangements which are unbilled as of the Distribution Date
shall be billed and payable on and after the Distribution Date
in accordance with the terms thereof. Subject to Sections
2.01(c) and 2.10 of this Agreement, on or before the
Distribution Date, the Company shall cause all intercompany
indebtedness (which shall include payables and receivables but
which shall not include unbilled amounts under Intercompany
Arrangements) between the New Morton Businesses, on the one
hand, and the Safety Business, on the other hand, to be
settled or otherwise eliminated.
(f) Cash Management and Intercompany Accounts After
the Distribution Date. The Company and New Morton shall
establish and maintain a separate cash management system and
accounting records with respect to the New Morton Businesses
effective as of immediately prior to the Distribution Date;
thereafter, (i) any payments by the Company or a Remaining
Subsidiary to or on behalf of New Morton or a New Morton
Subsidiary or otherwise, in connection with the New Morton
Businesses or the New Morton Employees (including, without
limitation, any such payments in respect of New Morton
Liabilities) shall be recorded in the accounts of New Morton
as a payable to the Company from New Morton; any payments by
New Morton or a New Morton Subsidiary to or on behalf of the
Company or a Remaining Subsidiary or otherwise, in connection
with the Safety Business or in connection with Safety
Employees (including, without limitation, any such payments in
respect of Safety Liabilities) shall be recorded in the
accounts of the Company as a payable to New Morton from the
Company; (ii) other than petty checking and cash accounts with
respect to the Safety Business not maintained, in the ordinary
course of business, on the central Company cash management
system, and the accounts listed on Schedule 1.01(a), which
petty cash, checking and other accounts (but not the balances
therein, except as provided by Section 2.01(c) and the
definition of Safety Assets) the Company shall retain, New
Morton shall be entitled to all domestic and international
cash bank balances and short-term investments as of the
Distribution Date per the books of the Company (other than
cash which constitutes a Safety Asset) including, without
limitation, such cash balances (other than cash which
constitutes a Safety Asset) representing deposited checks or
drafts for which only a provisional credit has been allowed,
in the depository accounts of the Company or any of its
subsidiaries; any such cash balances as of the Distribution
Date which have not been transferred to New Morton shall be
recorded as a payable to New Morton from Safety in the
accounts of Safety; (iii) New Morton and the Company shall
make adjustments for late deposits, checks returned for not
sufficient funds and other post-Distribution Date transactions
as shall be reasonable under the circumstances consistent with
the purpose and intent of this Agreement; and (iv) the net
balance due to the Company or New Morton, as the case may be,
in respect of the aggregate amounts of clauses (i), (ii) and
(iii) shall be paid by New Morton or Safety, as appropriate,
as promptly as practicable. For purposes of this Section
2.01(f), the parties contemplate that the Safety Business and
the New Morton Businesses, including but not limited to the
administration of accounts payable and accounts receivable,
will be conducted in the normal course. All transactions
contemplated in this Section 2.01(f) shall be subject to
review by the parties, and any dispute thereunder shall be
resolved by Ernst & Young LLP (or another "Big Six" accounting
firm acceptable to the parties), whose decision shall be final
and unappealable.
Section 2.2 Transfer of New Morton Assets. The
Company shall transfer to New Morton or, at New Morton's
option, to a New Morton Subsidiary effective as of the
Distribution Date all of the Company's right, title and
interest in the New Morton Assets.
Section 2.3 Transfers Not Effected Prior to the
Distribution; Transfers Deemed Effective as of the
Distribution Date. To the extent that any transfers
contemplated by this Article II shall not have been
consummated on the Distribution Date, the parties shall
cooperate to effect such transfers as promptly following the
Distribution Date as shall be practicable. Nothing herein
shall be deemed to require the transfer of any Assets or the
assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed; provided,
however, that the Company and New Morton and their respective
subsidiaries shall cooperate to seek to obtain any necessary
consents or approvals for the transfer of all Assets and
Liabilities contemplated to be transferred pursuant to this
Article II. In the event that any such transfer of Assets or
Liabilities has not been consummated, effective as of and
after the Distribution Date, the party retaining such Asset or
Liability shall thereafter hold such Asset in trust for the
use and benefit of the party entitled thereto (at the expense
of the party entitled thereto) and retain such Liability for
the account of the party by whom such Liability is to be
assumed pursuant hereto, and take such other action as may be
reasonably requested by the party to which such Asset is to be
transferred, or by whom such Liability is to be assumed, as
the case may be, in order to place such party, insofar as
reasonably possible, in the same position as would have
existed had such Asset or Liability been transferred as
contemplated hereby. As and when any such Asset or Liability
becomes transferable, such transfer shall be effected
forthwith. The parties agree that, as of the Distribution
Date, each party hereto shall be deemed to have acquired
complete and sole beneficial ownership over all of the Assets,
together with all rights, powers and privileges incident
thereto, and shall be deemed to have assumed in accordance
with the terms of this Agreement all of the Liabilities, and
all duties, obligations and responsibilities incident thereto,
which such party is entitled to acquire or required to assume
pursuant to the terms of this Agreement.
Section 2.4 No Representations or Warranties;
Consents. Except as otherwise contemplated in Section 2.06 or
in connection with any Conveyancing and Assumption Instruments
related to real estate, as to which the Company shall transfer
to New Morton with "special warranty" or equivalent deeds,
each of the parties hereto understands and agrees that no
party hereto is, in this Agreement or in any other agreement
or document contemplated by this Agreement or otherwise,
representing or warranting in any way (i) as to the value or
freedom from encumbrance of, or any other matter concerning,
any Assets of such party or (ii) as to the legal sufficiency
to convey title to any Asset of the execution, delivery and
filing of this Agreement or any Ancillary Agreement,
including, without limitation, any Conveyancing and Assumption
Instruments. It is also agreed and understood that all Assets
either transferred to or retained by the parties, as the case
may be, shall be "as is, where is" and that the party to which
such Assets are to be transferred hereunder shall bear the
economic and legal risk that any conveyances of such Assets
shall prove to be insufficient or that such party's or any of
its subsidiaries' title to any such Assets shall be other than
good and marketable and free from encumbrances. The parties
shall use their best efforts to obtain all consents and
approvals, to enter into all amendatory agreements and to make
all filings and applications which may be required for the
consummation of the transactions contemplated by this
Agreement, including, without limitation, all applicable
regulatory filings or consents under federal, state or foreign
environmental laws.
Section 2.5 Assumption and Satisfaction of New
Morton Liabilities; Retention of Safety Liabilities. Except
as set forth in the Benefits Agreement or the Tax Sharing
Agreement, effective as of and after the Distribution Date,
(a) New Morton shall, or shall cause its subsidiaries to,
assume, pay, perform, and discharge in due course all of the
New Morton Liabilities and (b) Safety shall, or shall cause
its subsidiaries to, pay, perform and discharge in due course
all of the Safety Liabilities.
Section 2.6 Financial Representations and
Warranties. New Morton hereby represents and warrants to the
Company that:
(a) Safety Assets. The Safety Assets as of the
Distribution Date shall include all Assets then owned or held
by the Company and its subsidiaries which are exclusively
used in the operation of the Safety Business as such business
is conducted as of such date, including cash and cash
equivalents as provided in clauses (g) and (h) of the
definition of Safety Assets.
(b) Financial Liabilities. The interest-bearing
indebtedness (excluding hedging or similar contracts and
letters or lines of credit in the ordinary course) of the
Safety Business as of the Distribution Date will not exceed
$750,000,000 plus the outstanding amount of the municipal
financing, not to exceed $1,100,000.
The representations contained in this Section 2.06 shall
survive the Distribution Date until March 31, 1998.
Section 2.7 Conveyancing and Assumption
Instruments. In connection with the transfers of Assets other
than capital stock and the assumptions of Liabilities
contemplated by this Agreement, the parties shall execute or
cause to be executed by the appropriate entities the
Conveyancing and Assumption Instruments in such forms as the
parties shall reasonably agree, including the transfer of real
property with special warranty or equivalent deeds. The
transfer of capital stock shall be effected by means of
delivery of stock certificates and executed stock powers and
notation in the stock record books of the corporation or other
legal entities involved and, to the extent required by
applicable law, by notation on public registries.
Section 2.8 Certificate of Incorporation; By-laws;
Share Purchase Rights Plan. Prior to the Distribution Date,
the Company and New Morton shall take all action necessary so
that, at the Distribution Date, the New Morton Charter, the
New Morton By-laws and the Rights Agreement shall be in
effect, with such changes as New Morton may approve.
Section 2.9 New Morton Capitalization. Prior to
the Distribution Date, the Company and New Morton shall take
all steps necessary to increase the outstanding shares of New
Morton Common Stock so that, except as otherwise contemplated
by this Agreement or the Benefits Agreement, immediately prior
to the Distribution Date the number of shares of New Morton
Common Stock outstanding and held by the Company shall equal
the number of shares of Company Common Stock outstanding on
the Distribution Record Date.
Section 2.10 Certain Pre-Distribution Transactions.
(a) Prior to the Distribution, the Company shall use its
reasonable best efforts to form a registered German limited
liability corporation (GmbH) ("Safety GmbH"). Prior to the
Distribution, Safety GmbH shall purchase or assume, and the
Company shall cause Morton International GmbH ("Morton GmbH"),
a limited liability corporation under the laws of Germany, to
sell or assign, the Safety Assets and Safety Liabilities owned
or held by Morton GmbH for the fair market value thereof,
which amount shall be determined by mutual agreement of the
Company and New Morton. The Safety Supplemental Distribution
shall be reduced by the amount of any such cash payment, with
any such cash payment in excess of such amount to be credited
against the New Morton Capital Contribution.
(b) Prior to the Distribution Date, Morton
Manufacturing B.V., a limited liability corporation under the
laws of the Netherlands ("Safety B.V."), shall repay in cash
intercompany indebtedness owed by Safety B.V. to each of
Morton International B.V. and Morton Service B.V. ("Morton
B.V."), each a limited liability corporation under the laws of
the Netherlands, with such repayment funded by an intercompany
loan from the Safety Business pursuant to its borrowing under
the Safety Credit Agreement. After such repayment and prior
to the Distribution, Morton B.V. shall transfer to the Company
all of the outstanding capital stock of Safety B.V. as a
distribution in respect of the shares of Morton B.V. held by
the Company. Any such cash payments by Safety B.V. to repay
such intercompany indebtedness, up to $51,648,000
(representing the amount of such intercompany indebtedness as
of June 30, 1996), shall be credited against the New Morton
Capital Contribution.
ARTICLE III
THE DISTRIBUTION
Section 3.1 Cooperation Prior to the Distribution.
Subject to the terms of the Combination Agreement, the Company
and New Morton shall take the following actions:
(a) the Company and New Morton shall prepare, and
the Company shall mail to the holders of shares of
Company Common Stock as of the Special Meeting Record
Date, the Proxy Statement, which shall set forth
appropriate disclosure concerning Newco, Autoliv, the
Company, New Morton, Safety, the Merger, the
Distribution, the Transactions and other matters. The
Company and New Morton shall also prepare, and New Morton
shall file with the Commission, the Form S-4, which
shall include the Proxy Statement. The Company and New
Morton shall use their best efforts to cause the Form S-4
to become effective under the Securities Act;
(b) the Company and New Morton shall cooperate in
preparing, filing with the Commission and causing to
become effective any registration statements or
amendments thereof which are appropriate to reflect the
establishment of, or amendments to, any employee benefit
and other plans contemplated by the Combination
Agreement, the Benefits Agreement or this Agreement;
(c) the Company and New Morton shall take all such
action as may be necessary or appropriate under the
securities or blue sky laws of states or other political
subdivisions of the United States in connection with the
transactions contemplated by this Agreement and the
Ancillary Agreements;
(d) the Company and New Morton shall prepare, and
New Morton shall file and seek to make effective, subject
to official notice of issuance, an application to permit
the listing of New Morton Common Stock on the NYSE; and
(e) the Company and New Morton shall use their best
efforts to obtain the rulings contemplated by the Ruling
Request in form and substance satisfactory to the Company
Board as advised by counsel.
Section 3.2 Company Board Action; Distribution
Procedures. Subject to the terms of the Combination
Agreement, and the satisfaction or waiver of the conditions
set forth in Section 3.03 hereof, the Company Board shall, in
its discretion, establish the Distribution Record Date and the
Distribution Date and any appropriate procedures in connection
with the Distribution. Prior to the Distribution Date, the
Company shall enter into an agreement with the Agent providing
for, among other things, the payment of the Distribution to
the holders of Company Common Stock in accordance with this
Article III.
Section 3.3 Conditions Precedent to the
Distribution. In no event shall the Distribution occur (a) if
at the Distribution Date the Ruling Request shall not have
been granted in form and substance satisfactory to the Company
in its sole discretion and be in full force and effect, or (b)
prior to such time as the following conditions shall have been
satisfied or, to the extent permitted, waived:
(i) all third party consents and governmental
approvals required in connection with the transactions
contemplated hereby shall have been received, except
where the failure to obtain such consents or approvals
would not have a material adverse effect on either (i)
the ability of the parties to consummate the transactions
contemplated by this Agreement or (ii) the business,
financial condition or results of operations of Safety or
New Morton;
(ii) the Distribution, the Combination Agreement and
the related transactions (including the Merger) shall
have been approved by the holders of a majority of the
outstanding shares of Company Common Stock at the Special
Meeting;
(iii) the transactions contemplated by Sections
2.01, 2.02, 2.05, 2.08, 2.09 and 2.10 shall have been
consummated in all material respects, to the extent
required to be consummated prior to the Distribution;
(iv) the New Morton Common Stock shall have been
authorized for listing on the NYSE, subject to official
notice of issuance;
(v) the New Morton Board, composed as contemplated
by Section 6.01, shall have been elected by the Company,
as sole stockholder of New Morton;
(vi) the Form S-4 (to the extent required) shall
have been declared effective under the Securities Act (or
the Form 10 shall have been declared effective under the
Exchange Act) by the Commission and no stop order
suspending the effectiveness of the Form S-4 (or the Form
10) shall have been issued by the Commission and, to the
knowledge of the Company and New Morton, no proceeding
for that purpose shall have been instituted by the
Commission;
(vii) the applicable parties shall have entered
into each of the Ancillary Agreements;
(viii) each condition to the Closing of the
Merger and the Exchange Offer set forth in Article IX of
the Combination Agreement, other than with respect to
consummation of the Distribution and the transactions set
forth in Article II hereof, shall have been fulfilled or
waived by the party for whose benefit such condition
exists;
(ix) the Company Board shall be reasonably satisfied
that, after giving effect to the transactions set forth
in Article II hereof, (A) the Company will not be
insolvent and will not have unreasonably small capital
with which to engage in its businesses and (B) the
Company's surplus would be sufficient to permit the
Distribution without violation of Section 23-1-28-3 of
the Indiana Business Corporation Law; and
(x) the representations and warranties contained in
Section 2.06 shall be true and correct.
Neither the Company nor New Morton shall waive any condition
contained in this Section 3.03 without the consent of Autoliv,
which consent shall not be unreasonably withheld.
Section 3.4 The Distribution. On the Distribution
Date, subject to the conditions and rights of termination set
forth in this Agreement, the Company shall deliver to the
Agent a share certificate representing all of the then
outstanding shares of New Morton Common Stock owned by the
Company and shall instruct the Agent to distribute, on or as
soon as practicable following the Distribution Date, such New
Morton Common Stock to holders of record of shares of Company
Common Stock on the Distribution Record Date. New Morton
agrees to provide all share certificates and any information
that the Agent shall require in order to effect the
Distribution. All shares of New Morton Common Stock issued in
the Distribution shall be duly authorized, validly issued,
fully paid and nonassessable.
ARTICLE IV
SERVICES
Section 4.1 Provision of Management Services. From
the Distribution Date through not later than the first
anniversary thereof (the "Services Period"), New Morton shall
make available to Safety the following services (collectively,
the "Services"):
(a) Legal, tax, accounting, patent and other
intellectual property, payroll and payroll tax, real
estate, human resources (including pension
administration), environmental, corporate secretarial,
insurance, treasury and management information services,
in each case including reasonable access to New Morton's
systems and resources; and
(b) Such other personnel of New Morton whose
services the parties agree would be necessary and
desirable to permit Safety and its subsidiaries to
operate its business in the ordinary course and to
facilitate the orderly transition of Safety and Newco to
an independent and self-sufficient company in a
reasonable and timely manner.
It is understood that Services provided to Safety
and its subsidiaries hereunder will be performed by those
employees of New Morton who perform equivalent services for
New Morton in the normal course of their employment.
Accordingly, New Morton shall not be obligated to make
available any services to the extent that doing so would
unreasonably interfere with the performance by any New Morton
Employee of services for New Morton or otherwise cause
unreasonable burden to New Morton, in light of the purposes of
this Agreement. Notwithstanding the other provisions of this
Article IV to the contrary, Safety shall be obligated to
obtain from New Morton, and New Morton shall agree to provide
to Safety, Services related to the preparation, filing and
auditing of tax returns for periods ended on or before the
Distribution Date, subject to the provisions of the Tax
Sharing Agreement.
Section 4.2 Fee for Services; Expenses. Subject to
applicable law, Safety shall pay for all Services provided
under Section 4.01 of this Agreement (including tax, audit,
employee benefits and other Services contemplated to be
provided by the Tax Sharing Agreement or the Benefits
Agreement) pursuant to the formula set forth on Schedule 4.02
or as otherwise agreed by the parties, together with
reimbursement of out-of-pocket expenses. Such payments shall
be due and payable by Safety 30 days after receipt of invoices
therefor.
Section 4.3 Independent Contractor Status. New
Morton shall render and perform the Services as an independent
contractor in accordance with its own standards, subject to
its compliance with the provisions of this Agreement and with
all applicable laws, ordinances and regulations.
Section 4.4 Disclaimer; Limited Liability.
(a) New Morton makes no express or implied
representations, warranties, or guarantees relating to the
Services or the quality or results of Services to be performed
under this Agreement; provided, however, that New Morton shall
use reasonable efforts to provide the Services in a manner at
least comparable to the quality of such services provided to
the Safety Business as of and prior to the date hereof in all
material respects.
(b) New Morton shall not be liable to Safety for
any expense, claim (for malpractice or otherwise), loss or
damage, including, without limitation, indirect, special,
consequential or exemplary damages in performing the Services
pursuant to this Article IV; provided, however, that this
Section 4.04(b) shall not apply to any expense, claim (for
malpractice or otherwise), loss or damage resulting from the
failure of New Morton to comply with the covenant contained in
the proviso in paragraph (a) above.
(c) New Morton shall not be liable to Safety for
the consequences of any failure or delay to perform any of its
obligations under this Agreement other than for damages
arising from New Morton's willful or reckless misconduct;
provided, that it shall provide reasonably prompt notice to
Safety of such inability and the reasons therefor.
ARTICLE V
INDEMNIFICATION
Section 5.1 Indemnification by Safety.
(a) Except with respect to the matters governed by
the indemnification provisions set forth in the Tax Sharing
Agreement (which shall be governed by those provisions),
Safety shall indemnify, defend and hold harmless New Morton,
each of its directors, officers, employees and agents and each
Affiliate of New Morton and each of the heirs, executors,
successors and assigns of any of the foregoing (the "New
Morton Indemnitees") from and against the Safety Liabilities
and any and all losses, claims and Liabilities (including,
without limitation, the costs and expenses of any and all
Actions, threatened Actions, demands, assessments, judgments,
settlements and compromises relating thereto and attorneys'
fees and any and all expenses whatsoever reasonably incurred
in investigating, preparing or defending against any such
Actions or threatened Actions) (collectively, "Indemnifiable
Losses" and, individually, an "Indemnifiable Loss") of the New
Morton Indemnitees arising out of or due to the failure or
alleged failure of Safety or any of its Affiliates to pay,
perform or otherwise discharge in due course any of the Safety
Liabilities.
(b) Safety shall indemnify, defend and hold
harmless each of the New Morton Indemnitees from and against
any and all Indemnifiable Losses of the New Morton Indemnitees
arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any portion
of the Proxy Statement (including any preliminary filings
related thereto or any amendments thereof) to be supplied by,
or containing information relating to, Autoliv or its
subsidiaries, or the omission or alleged omission to state in
any such portion a material fact required to be stated therein
or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
Section 5.2 Indemnification by New Morton.
(a) Except with respect to the matters governed by
the indemnification provisions set forth in the Tax Sharing
Agreement (which shall be governed by those provisions), New
Morton shall indemnify, defend and hold harmless each of the
Company and Newco, each of the directors, officers, employees
and agents of each of the Company and Newco and each Affiliate
of each of the Company and Newco and each of the heirs,
executors, successors and assigns of any of the foregoing (the
"Safety Indemnitees") from and against the New Morton
Liabilities and any and all Indemnifiable Losses of the Safety
Indemnitees arising out of or due to the failure or alleged
failure of New Morton or any of its Affiliates to pay, perform
or otherwise discharge in due course any of the New Morton
Liabilities.
(b) New Morton shall indemnify, defend and hold
harmless each of the Safety Indemnitees from and against any
and all Indemnifiable Losses of the Safety Indemnitees arising
out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any portion of the
Proxy Statement (including any preliminary filing related
thereto or any amendments thereof) to be supplied by, or
containing information relating to, any of New Morton, the New
Morton Subsidiaries or Safety, or the omission or alleged
omission to state in any such portion a material fact required
to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were
made, not misleading.
Section 5.3 Limitations on Indemnification
Obligations.
(a) Insurance Proceeds. The amount which any party
(an "Indemnifying Party") is or may be required to pay to any
other party (an "Indemnitee") pursuant to Section 5.01 or
Section 5.02 shall be reduced (including, without limitation,
retroactively) by any Insurance Proceeds or other amounts
actually recovered by or on behalf of such Indemnitee, in
reduction of the related Indemnifiable Loss. If an Indemnitee
shall have received the payment required by this Agreement
from an Indemnifying Party in respect of an Indemnifiable Loss
and shall subsequently actually receive Insurance Proceeds or
other amounts in respect of such Indemnifiable Loss, then such
Indemnitee shall pay to such Indemnifying Party a sum equal to
the amount of such Insurance Proceeds or other amounts
actually received.
(b) Foreign Currency Adjustments. In the event
that any indemnification payment required to be made hereunder
or under any Ancillary Agreement shall be denominated in a
currency other than United States dollars, the amount of such
payment shall be translated into United States dollars using
the Foreign Exchange Rate for such currency determined in
accordance with the following rules:
(i) with respect to an Indemnifiable Loss arising
from payment by a financial institution under a
guarantee, comfort letter, letter of credit, foreign
exchange contract or similar instrument, the Foreign
Exchange Rate for such currency shall be determined as of
the date on which such financial institution shall have
been reimbursed;
(ii) with respect to an Indemnifiable Loss covered
by insurance, the Foreign Exchange Rate for such currency
shall be the Foreign Exchange Rate employed by the
insurance company providing such insurance in settling
such Indemnifiable Loss with the Indemnifying Party; and
(iii) with respect to an Indemnifiable Loss not
covered by clause (i) or (ii) above, the indemnification
payment shall be paid in the applicable local currency
without any translation into United States dollars.
Section 5.4 Procedure for Indemnification.
(a) If an Indemnitee shall receive notice or
otherwise learn of the assertion by a person (including,
without limitation, any governmental entity) who is not a
party to this Agreement or to any of the Ancillary Agreements
of any claim or of the commencement by any such person of any
Action (a "Third Party Claim") with respect to which an
Indemnifying Party may be obligated to provide indemnification
pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after
becoming aware of such Third Party Claim; provided, that the
failure of any Indemnitee to give notice as provided in this
Section 5.04 (the "Notice") shall not relieve the related
Indemnifying Party of its obligations under this Article V,
except to the extent that such Indemnifying Party is
prejudiced by such failure to give Notice. Such Notice shall
describe the Third Party Claim in reasonable detail, and shall
indicate the amount (to the extent practicable) of the
Indemnifiable Loss that has been or may be sustained by such
Indemnitee.
(b) An Indemnifying Party may elect to defend or to
seek to settle or compromise, at such Indemnifying Party's own
expense and by such Indemnifying Party's own counsel, any
Third Party Claim by delivering to the Indemnitee, within 30
days of receipt of Notice (or sooner (but in no event less
than 10 days after the receipt of Notice), if the nature of
such Third Party Claim so requires), the written
acknowledgment (the "Acknowledgment") of its indemnification
obligation under this Agreement with respect to the Third
Party Claim. The Acknowledgment may specify reservations and
exceptions to the extent reasonably acceptable to the
Indemnitee or consistent with the terms of this Agreement and
the Ancillary Agreements, and such Indemnitee shall cooperate
in the defense or settlement or compromise of such Third Party
Claim. If the Indemnifying Party elects to assume
responsibility for defending such Third Party Claim, the
Indemnifying Party shall also notify the claimant or plaintiff
asserting such Third Party Claim of such election and request
that all communications in relation to the Third Party Claim
be made, delivered or addressed to the Indemnifying Party,
instead of the Indemnitee. If it is later determined that the
defendants to the Third Party Claim include both the
Indemnifying Party and the Indemnitee, the Indemnitee shall
thereupon notify the claimant or plaintiff asserting such
Third Party Claim that all communications in relation to the
Third Party Claim should also be made, delivered or addressed
to the Indemnitee. After notice from an Indemnifying Party to
an Indemnitee of its election to assume the defense of a Third
Party Claim, such Indemnifying Party shall not be liable to
such Indemnitee under this Article V for any legal or other
expenses (except expenses approved in advance by the
Indemnifying Party) subsequently incurred by such Indemnitee
in connection with the defense thereof; provided, that, if the
defendants in any such claim include both the Indemnifying
Party and one or more Indemnitees and in such Indemnitees'
reasonable judgment a conflict of interest between such
Indemnitees and such Indemnifying Party exists in respect of
such claim or if the Indemnifying Party shall assume
responsibility for such claim with such reservations or
exceptions to the extent reasonably acceptable to the
Indemnitee or consistent with the terms of this Agreement and
the Ancillary Agreements, such Indemnitees shall have the
right to employ separate counsel to represent such Indemnitees
and in that event the reasonable fees and expenses of such
separate counsel (but not more than one separate counsel
reasonably satisfactory to the Indemnifying Party) shall be
paid by such Indemnifying Party.
If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim (which
election may be made only in the event of a good faith dispute
that a claim was inappropriately tendered under Section 5.01
or 5.02, as the case may be) such Indemnitee may defend or
(subject to the following sentence) seek to compromise or
settle such Third Party Claim. Notwithstanding the foregoing,
an Indemnitee may not settle or compromise any claim without
prior written notice to the Indemnifying Party, which shall
have the option within ten days following the receipt of such
notice (i) to disapprove the settlement and assume all past
and future responsibility for the claim, including reimbursing
the Indemnitee for prior expenditures in connection with the
claim, or (ii) to disapprove the settlement and continue to
refrain from participation in the defense of the claim, in
which event the Indemnifying Party shall have no further right
to contest the amount or reasonableness of the settlement if
the Indemnitee elects to proceed therewith, or (iii) to
approve the amount of the settlement, reserving the
Indemnifying Party's right to contest the Indemnitee's right
to indemnity, or (iv) to approve and agree to pay the
settlement. In the event the Indemnifying Party makes no
response to such written notice from the Indemnitee, the
Indemnifying Party shall be deemed to have elected option
(ii).
(c) If an Indemnifying Party chooses to defend or
to seek to compromise any Third Party Claim, the related
Indemnitee shall make available to such Indemnifying Party any
personnel or any books, records or other documents within its
control or which it otherwise has the ability to make
available that are necessary or appropriate for such defense.
(d) Notwithstanding anything else in this Section
5.04 to the contrary, an Indemnifying Party shall not settle
or compromise any Third Party Claim unless such settlement or
compromise contemplates as an unconditional term thereof the
giving by the claimant or plaintiff asserting such Third Party
Claim to the Indemnitee of a written release from all
liability in respect of such Third Party Claim. In the event
the Indemnitee shall notify the Indemnifying Party in writing
that such Indemnitee declines to accept any such settlement or
compromise, such Indemnitee may continue to contest such Third
Party Claim, free of any participation by such Indemnifying
Party, at such Indemnitee's sole expense. In such event, the
obligation of such Indemnifying Party to such Indemnitee with
respect to such Third Party Claim shall be equal to (i) the
costs and expenses of such Indemnitee prior to the date such
Indemnifying Party notifies such Indemnitee of the offer to
settle or compromise (to the extent such costs and expenses
are otherwise indemnifiable hereunder) plus (ii) the lesser of
(A) the amount of any offer of settlement or compromise which
such Indemnitee declined to accept and (B) the actual out-of-
pocket amount such Indemnitee is obligated to pay subsequent
to such date as a result of such Indemnitee's continuing to
pursue such Third Party Claim.
(e) Any claim on account of an Indemnifiable Loss
which does not result from a Third Party Claim shall be
asserted by written notice given by the Indemnitee to the
related Indemnifying Party. Such Indemnifying Party shall
have a period of 30 days after the receipt of such notice
within which to respond thereto. If such Indemnifying Party
does not respond within such 30-day period, such Indemnifying
Party shall be deemed to have refused to accept responsibility
to make payment. If such Indemnifying Party does not respond
within such 30-day period or rejects such claim in whole or in
part, such Indemnitee shall be free to pursue such remedies as
may be available to such party, under applicable law or under
this Agreement.
(f) In addition to any adjustments required
pursuant to Section 5.03, if the amount of any Indemnifiable
Loss shall, at any time subsequent to the payment required by
this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by
the Indemnitee to the Indemnifying Party.
(g) In the event of payment by an Indemnifying
Party to any Indemnitee in connection with any Third Party
Claim, such Indemnifying Party shall be subrogated to and
shall stand in the place of such Indemnitee as to any events
or circumstances in respect of which such Indemnitee may have
any right or claim relating to such Third Party Claim against
any claimant or plaintiff asserting such Third Party Claim.
Such Indemnitee shall cooperate with such Indemnifying Party
in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or
claim.
(h) In the event Safety shall determine in its
reasonable judgment that it is likely that it will be named as
a potentially responsible party in any Superfund or other
environmental litigation or investigation with respect to a
New Morton Liability, if requested to do so by Safety, New
Morton shall notify the potential claimant(s) in such
potential litigation of its indemnification obligation in
favor of Safety under this Agreement.
Section 5.5 Remedies Cumulative. The remedies
provided in this Article V shall be cumulative and shall not
preclude assertion by any Indemnitee of any other rights or
the seeking of any and all other remedies against any
Indemnifying Party.
Section 5.6 Survival of Indemnities. The
obligations of New Morton and the Company under this Article
V, shall survive the Distribution Date and the sale or other
transfer by it of any Assets or businesses or the assignment
by it of any Liabilities, with respect to any Indemnifiable
Loss of the other related to such Assets, businesses or
Liabilities. Such obligations shall be binding upon the
successors and assigns of the Safety Business or the New
Morton Businesses, as the case may be, and upon any transferee
of all or substantially all of the assets (in one transaction
or a series of related transactions) of the Safety Business or
the New Morton Businesses, which transferee shall assume in
writing such obligations. If 25% or more of the Assets of the
Safety Business or the New Morton Businesses, as the case may
be, are spun off to the respective stockholders of Safety or
New Morton, such spun-off entity shall assume in writing a
proportionate share of the indemnity obligation contained
herein of Safety or New Morton, as the case may be, based upon
the relative assets of such spun-off entity and the remaining
assets in its parent, and thereafter Safety or New Morton, as
the case may be, shall be released from the proportionate
share so assumed. The assumption of obligations of a
transferee or spun-off entity shall not apply with respect to
any transaction consummated after the twentieth anniversary of
this Agreement.
Section 5.7 Right of Inquiry.
(a) In the event of a material adverse change after
the Distribution Date in the financial condition of New Morton
or Safety, which change creates a substantial likelihood that
New Morton or Safety, as the case may be, will not be able to
satisfy or otherwise settle, when due, its indemnification
obligations to Safety or New Morton, respectively, under this
Article V, Safety or New Morton, as the case may be, shall
have the right, subject to entering into an agreement with the
other party to preserve confidentiality and any applicable
privilege for the benefit of such other party, upon
consultation with such party, to have limited access on
reasonable prior notice to such party's personnel in order to
monitor the status of pending and anticipated litigation and
governmental investigations or proceedings for which Safety or
New Morton, as the case may be, could be contingently liable.
Such right of inquiry shall terminate at such time as there is
no longer a substantial likelihood that the applicable party
will not be able to satisfy its indemnification obligations
under this Agreement and the Ancillary Agreements. The
reasonable attorneys' fees and out-of-pocket costs incurred in
connection with a party's inquiry pursuant to this Section
5.07 shall be treated as Indemnifiable Losses pursuant to this
Article V.
(b) In addition to the provisions of paragraph (a)
above, each of Safety and New Morton shall have the right on
an annual basis and subject to reasonable prior notice to
meet with the General Counsel of the other party (or such
corporate officer or employee designated by such General
Counsel) and receive an oral report, in a forum in which the
requesting party may ask reasonable questions regarding the
status of material pending and threatened litigation and
material governmental investigations or proceedings for which
the requesting party may be contingently liable. For the
avoidance of doubt, no such right shall require Safety or New
Morton, as the case may be, to (i) provide non-public written
information, (ii) provide confidential information, (iii)
jeopardize the benefit of any applicable privilege or (iv)
engage in lengthy or burdensome meetings or discussions. In
addition, each of Safety and New Morton shall have the further
right to request one additional meeting per year in connection
with the public disclosure by the other party during such year
of a material adverse development in any pending or threatened
litigation or governmental investigation or proceeding for
which the requesting party may be contingently liable, such
meeting otherwise to be on the same terms as set forth in this
Section 5.07(b). Each of Safety and New Morton shall bear its
own cost of attendance at such meetings, which shall be held
at the corporate offices of the non-requesting party.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS AND COVENANTS
Section 6.1 The New Morton Board. New Morton and
the Company shall take all actions which may be required to
elect or otherwise appoint, as of the Distribution Date, each
of the directors of the Company Board as a director of New
Morton.
Section 6.2 Resignations; Safety Board.
(a) The Company shall cause all of its directors
and New Morton Employees to resign, effective as of the
Distribution Date, from all boards of directors or similar
governing bodies of Safety or the Retained Subsidiaries on
which they serve, and from all positions as officers of Safety
or the Retained Subsidiaries in which they serve. The Company
shall cause all of the Safety Employees to resign from all
boards of directors or similar governing bodies of New Morton
or any New Morton Subsidiary on which they serve, and from all
positions as officers of New Morton or any New Morton
Subsidiary in which they serve.
(b) The Company shall take all actions which may be
required to elect or otherwise appoint to the Company Board
and the board of directors of each Remaining Subsidiary, as of
the Effective Time, such officers of Newco or the Company as
the Company may designate prior to the Effective Time.
Section 6.3 Certain Post-Distribution Transactions.
(a) New Morton. (i) New Morton shall, and shall
cause each New Morton Subsidiary to, comply with each
representation and statement made, or to be made, to any
taxing authority in connection with any ruling obtained, or to
be obtained, by the Company and New Morton acting together,
from any such taxing authority with respect to any transaction
contemplated by this Agreement.
(ii) Neither New Morton nor any New Morton
Subsidiary shall for a period of one year following the
Distribution Date engage or agree to engage in any of the
following transactions, unless (X) an opinion in form and
substance reasonably satisfactory to Safety is obtained from
nationally recognized tax counsel to New Morton and/or (Y) a
supplemental ruling is obtained from the IRS, in either case
to the effect that such transaction(s) would not adversely
affect the tax consequences of the contributions, transfers,
assumptions, Merger and Distribution described in Articles II
and III of this Agreement to the Company, any Retained
Subsidiary, or any shareholder or former shareholder of the
Company. The transactions subject to this provision are: (A)
ceasing to engage in an active trade or business within the
meaning of Section 355(b) of the Code, whether by means of a
disposition or distribution of stock or assets, or otherwise;
(B) repurchasing more than 20% of the New Morton Common Stock
outstanding immediately after the Distribution; (C) issuing an
amount of New Morton capital stock that would cause the
Distribution to fail to satisfy the requirement that the
Company have been in control of New Morton within the meaning
of Section 368(c) of the Code immediately prior to the
Distribution or that the New Morton shareholders be in control
of New Morton immediately after the Distribution within the
meaning of Section 368(a)(1)(D) of the Code; or (D)
liquidating or merging with or into any other entity
(including a New Morton Subsidiary). New Morton hereby
represents and warrants that neither New Morton nor any New
Morton Subsidiary has any plan or intention to undertake any
of the transactions set forth in (A), (B), (C), or (D) above.
Notwithstanding the foregoing, any act or transaction that is
consistent with the representations contained in (x) the
request for rulings and any supplement thereto filed with the
IRS in connection with the Distribution or (y) the tax
certificates described in Section 9.1(g)(ii) of the
Combination Agreement relating to the opinions of counsel to
be rendered in connection with the Distribution and the
Merger, shall not be subject to the provisions of this Section
6.03(a)(ii).
(b) The Company. The Company shall, and shall
cause each Remaining Subsidiary to, comply with each
representation and statement made, or to be made, to any
taxing authority in connection with any ruling obtained, or to
be obtained, by the Company and New Morton acting together,
from any such taxing authority with respect to any transaction
contemplated by this Agreement.
Section 6.4 Use of Names.
(a) Any existing printed material showing any
affiliation or connection of Safety or the Retained
Subsidiaries with New Morton, including any names using
"Morton" or a derivative thereof, may be used by Safety or the
Retained Subsidiaries only for a period ending eight months
after the Distribution Date. On and after the Distribution
Date, Safety shall not otherwise represent to third parties
that it is presently affiliated with New Morton.
(b) From and after the Effective Time, New Morton
shall have all rights in and use of the names "Morton" and
"Morton International" and all other names, marks, scripts,
type fonts, forms, styles, logos, designs, devices, trade
dress, symbols and other forms of trade identity constituting
New Morton Assets (collectively, the "Morton Name Rights"),
and all derivatives thereof. The Company acknowledges that
New Morton has all such rights and that the Company will not
use the New Morton Rights, or names, marks or other material
confusingly similar therewith except as permitted by this
Agreement. Prior to or promptly after the Effective Time, the
Company shall change its name and the name of any Subsidiary
or other person under its control to eliminate therefrom the
names "Morton" and "Morton International" and all derivatives
thereof. For a period of eight months after the Distribution
Date, the Company may use the names "Morton" and "Morton
International" only to the extent that it is not practical to
change such names or as permitted by Section 6.04(a),
including in connection with any signs, letterhead, business
cards, invoices or other printed forms, telephone directory
listings or promotional material, and products in inventory as
of the Distribution Date and shall cause the Company and its
subsidiaries to maintain the same standards of quality with
respect to such names, logos and marks as previously
exercised.
(c) Nothing in this Section 6.04 shall obligate
Safety to replace any tooling or other equipment used in the
manufacturing process, provided that Safety uses all
reasonable efforts to comply with the requirements of
paragraphs (a) and (b) with respect to such tooling and
equipment by, for example, affixing labels thereto or
providing other appropriate signage.
(d) As of the date of this Agreement, New Morton
intends to use "Morton International, Inc." as its corporate
name following the Effective Time, although nothing herein
shall preclude New Morton from changing such name in the
future.
Section 6.5 Restrictions on Hiring of Other Party's
Employees. For a period of two years after the Distribution
Date, each of Safety and New Morton agrees that, without the
prior written consent of the other, it will not, and it will
cause its Affiliates not to, solicit the employment of or
employ any New Morton Employee or Safety Employee,
respectively.
Section 6.6 Further Assurances; Cooperation. Each
of the parties hereto promptly shall execute such documents
and other instruments and take such further actions as may be
reasonably required or desirable to carry out the provisions
hereof and to consummate the transactions contemplated hereby.
The parties shall cooperate with each other in all reasonable
respects to ensure the transfer to New Morton or a New Morton
Subsidiary of the New Morton Assets, New Morton Liabilities
and the businesses related thereto, and the retention by the
Company of the Safety Business, including, without limitation,
(i) allocating rights and obligations under contracts,
agreements and other arrangements, if any, of the Company that
relate to both the Safety Business and the New Morton
Businesses, (ii) determining whether to enter into any service
or other sharing agreements on a mutually acceptable arm's-
length basis that may be necessary to assure a smooth and
orderly transition, and (iii) obtaining any reasonably
necessary or appropriate third-party consents, licenses and
permits in connection with the Distribution. In case at any
time after the Distribution Date any further action is
necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to
this Agreement shall take all such necessary or desirable
action.
Section 6.7 Guarantees.
(a) Safety and New Morton shall cooperate, and
shall cause their respective Affiliates to cooperate, to
terminate, or to cause Safety or one of its Affiliates to be
substituted in all respects for New Morton or its Affiliates
in respect of, all obligations of New Morton and its
Affiliates under any loan, financing, lease, contract, or
other obligation in existence as of the Distribution Date
pertaining to the Safety Business for which New Morton or an
Affiliate of New Morton may be liable, as guarantor, original
tenant, primary obligor or otherwise. If such a termination
or substitution is not effected by the Distribution Date, (i)
Safety shall indemnify and hold harmless the New Morton
Indemnitees for any Indemnifiable Loss arising from or
relating thereto, and (ii) without the prior written consent
of the Chief Financial Officer of New Morton, from and after
the Distribution Date, Safety shall not, and shall not permit
any of its Affiliates to, renew or extend the term of,
increase its obligations under, or transfer to a third party,
any loan, lease, contract or other obligation for which New
Morton or any of its Affiliates is or may be liable unless all
obligations of New Morton and its Affiliates with respect
thereto are thereupon terminated by documentation reasonably
satisfactory in form and substance to the Chief Financial
Officer of New Morton.
(b) Safety and New Morton shall cooperate, and
shall cause their respective Affiliates to cooperate, to
terminate, or to cause New Morton or one of its Affiliates to
be substituted in all respects for Safety and its Affiliates
in respect of, all obligations of Safety and its Affiliates
under any loan, financing, lease, contract or other obligation
in existence as of the Distribution Date pertaining to the New
Morton Businesses for which Safety or its Affiliates may be
liable, as guarantor, original tenant, primary obligor or
otherwise. If such a termination or substitution is not
effected by the Distribution Date, (i) New Morton shall
indemnify and hold harmless the Company Indemnitees for any
Indemnifiable Loss arising from or relating thereto, and (ii)
without the prior written consent of the Chief Financial
Officer of Safety or Newco, from and after the Distribution
Date, New Morton shall not, and shall not permit any of its
Affiliates to, renew or extend the term of, increase its
obligations under, or transfer to a third party, any loan,
lease, contract or other obligation for which Safety or its
Affiliates is or may be liable unless all obligations of
Safety and its Affiliates with respect thereto are thereupon
terminated by documentation reasonably satisfactory in form
and substance to the Chief Financial Officer of Safety or
Newco.
(c) Safety and New Morton shall provide Newco with
information and documentation relating to the actions to be
taken pursuant to this Section 6.07.
Section 6.8 Shared Facilities. From and after the
Distribution Date, New Morton shall have access to the
facilities specified in Schedule 6.08 on the terms set forth
thereon.
Section 6.9 Thiokol-Morton Spinoff. Safety agrees
that, at New Morton's request and expense and subject to New
Morton's obligation to indemnify Safety for such actions,
Safety shall act as agent for New Morton in making any claim
against Morton Thiokol, Inc. (now named Thiokol Corporation)
in connection with New Morton's indemnification and similar
rights pursuant to the agreements entered into between Thiokol
and Morton International, Inc. in connection with the 1989
distribution of the capital stock of Morton International,
Inc. Safety shall not knowingly waive any such rights of New
Morton without New Morton's consent. Notwithstanding the
foregoing, Safety shall not be obligated to take any actions
in furtherance of its obligations under this Section 6.09 if
Safety determines, in its reasonable judgment, that taking
such actions would entail an undue level of risk to Safety or
involve Safety in a substantial controversy or dispute.
Section 6.10 Non-Competition. (a) For a period of
four years from and after the Distribution Date, New Morton
will not engage, directly or through any subsidiary or other
entity controlled by New Morton, in the automotive safety
restraint business (as such business is conducted by Newco and
its subsidiaries immediately following the Effective Time (as
defined in the Contribution Agreement)); provided, however,
that this Section 6.10 shall not prevent New Morton from:
(i) acquiring no more than 10% of the
outstanding stock, partnership or other
equity interests in any corporation,
partnership, limited liability company or
other person or entity ("Person");
(ii) acquiring more than 10% of the outstanding
capital stock, partnership or other equity
interests in any Person for which the
annual revenues derived from the business
of such Person that competes with the
automotive safety restraint business (as
such business is conducted by Newco and
its subsidiaries immediately following the
Effective Time) are not more than 10% of
such Person's total annual revenues;
(iii) acquiring more than 50% of the outstanding
capital stock, partnership or other equity
interests in any Person (or any lesser
percentage if, pursuant to contractual or
other arrangements, New Morton has the
right to cause such Person to take the
actions specified in the following
proviso) for which the annual revenues
derived from the business of such Person
that competes with the automotive safety
restraint business (as such business is
conducted by Newco and its subsidiaries
immediately following the Effective Time)
are more than 10% (or, in the event such
revenues represent less than 10% of such
Person's total annual revenues, constitute
a stand-alone business that can be
divested without materially affecting the
remaining businesses or operations of such
Person) but less than 40% of such Person's
total annual revenues; provided, however,
that New Morton shall use all commercially
reasonable efforts to divest that portion
of such Person that competes with the
automotive safety restraint business (as
such business is conducted by Newco and
its subsidiaries immediately following the
Effective Time) on commercially reasonable
terms as soon as practicable after
acquisition of such ownership or interest;
or
(iv) engaging in any investment activities with
respect to any pension plan, trust for the
benefit of employees or retirees, employee
savings or stock ownership plan or other
employee benefit, retirement or welfare
plan or program.
(b) Notwithstanding anything to the contrary in
Section 6.10(a), for a period of ten years from and after the
Distribution Date, New Morton will not engage, directly or
through any subsidiary or other entity controlled by New
Morton, in the automotive safety restraint business using as
its trade name any name containing the words "Morton" or "MI".
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.1 Provision of Corporate Records.
(a) New Morton Assets shall include the original
corporate minute books, stock ledgers and certificates and
corporate seals of each New Morton Subsidiary, all licenses,
leases, agreements, litigation files and filings with foreign
governments primarily relating to the New Morton Businesses
and all other such material that does not relate exclusively
to the Safety Business. Safety shall arrange as soon as
practicable following the Distribution Date for the
transportation to New Morton of existing corporate records in
its possession primarily relating to the New Morton
Businesses, except to the extent such items are already in the
possession of New Morton or a New Morton Subsidiary or
located at the Company's present principal executive offices
or on premises included in the New Morton Assets. Such
records shall be the property of New Morton, but shall be
available to Safety for review and duplication and shall
otherwise be subject to Section 7.05 of this Agreement.
(b) Safety Assets shall include the original
corporate minute books, stock ledgers and certificates and
corporate seals of the Company and the Retained Subsidiaries
and all licenses, leases, agreements, litigation files and
filings exclusively relating to the Safety Business. New
Morton shall arrange as soon as practicable following the
Distribution Date, to the extent not previously delivered in
connection with the transactions contemplated in Article II,
for the transportation to Safety of existing corporate records
(excluding accounting, tax, and financial records and original
Policies except as otherwise agreed by the parties) in its
possession or located at the Company's principal executive
offices exclusively relating to Safety and the Retained
Subsidiaries, except to the extent such items are already in
the possession of Safety. Such records shall be the property
of Safety, but shall be available to New Morton for review and
duplication and shall otherwise be subject to Section 7.05 of
this Agreement.
Section 7.2 Access to Information.
(a) From and after the Distribution Date, Safety
shall afford to New Morton and its authorized accountants,
counsel and other designated representatives reasonable access
(including using reasonable efforts to give access to persons
or firms possessing information) and duplicating rights during
normal business hours to all records, books, contracts,
instruments, computer data and other data and information
(collectively, "Information") within Safety's possession
insofar as such access is reasonably required by New Morton,
subject to appropriate restrictions for classified
information. Similarly, New Morton shall afford to Safety and
its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable
efforts to give access to persons or firms possessing
information) and duplicating rights during normal business
hours to Information within New Morton's possession, insofar
as such access is reasonably required by Safety. Information
may be requested under this Article VII for, without
limitation, audit, accounting, claims, litigation and tax
purposes, as well as for purposes of fulfilling disclosure and
reporting obligations and for performing this Agreement and
the transactions contemplated hereby.
(b) For a period of five years following the
Distribution Date, each of New Morton and Safety shall provide
to the other, promptly following such time at which such
documents shall be filed with the Commission, all documents
which shall be filed by it or any of its subsidiaries with the
Commission pursuant to the periodic and interim reporting
requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder.
(c) In furtherance of the rights and obligations of
the parties set forth in subsections (a) and (b) of this
Section 7.02:
(i) Each party hereto acknowledges that (A) each of
Safety and the Retained Subsidiaries (the "Safety Group")
on the one hand, and New Morton and the New Morton
Subsidiaries (the "New Morton Group") on the other hand,
has or may obtain Information regarding a member of the
other Group, or any of its operations, employees, Assets
or Liabilities (whether in documents or stored in any
other form or known to its employees or agents) that is
or may be protected from disclosure pursuant to the
attorney-client privilege, the work product doctrine or
other applicable privileges ("Privileged Information");
(B) there are a number of actual, threatened or future
litigations, investigations, proceedings (including
arbitration proceedings), claims or other legal matters
that have been or may be asserted by or against, or
otherwise affect, each or both of Safety and New Morton
(or members of either Group) ("Litigation Matters"); (C)
Safety and New Morton have a common legal interest in
Litigation Matters, in the Privileged Information, and in
the preservation of the confidential status of the
Privileged Information, in each case relating to the
Safety Business or the New Morton Businesses as it or
they existed prior to the Distribution Date or relating
to or arising in connection with the relationship between
the constituent elements of the Groups on or prior to the
Distribution Date; and (D) the Company, Safety and New
Morton intend that the transactions contemplated by this
Agreement and the Ancillary Agreements and any transfer
of Privileged Information in connection herewith or
therewith shall not operate as a waiver of any
potentially applicable privilege.
(ii) Each of the Company, Safety and New Morton
agrees, on behalf of itself and each member of the Group
of which it is a member, not to disclose or otherwise
waive any privilege attaching to any Privileged
Information relating to the New Morton Businesses or the
Safety Business as they or it existed prior to the
Distribution Date, respectively, or relating to or
arising in connection with the relationship between the
Groups on or prior to the Distribution Date, without
providing prompt written notice to and obtaining the
prior written consent of the other, which consent shall
not be unreasonably withheld and shall not be withheld if
the other party certifies that such disclosure is to be
made in response to a likely threat of suspension or
debarment or similar action; provided, however, that
Safety and New Morton may make such disclosure or waiver
with respect to Privileged Information if such Privileged
Information relates, in the case of Safety, solely to the
Safety Business as it existed prior to the Distribution
Date or, in the case of New Morton, solely to the New
Morton Businesses as they existed prior to the
Distribution Date. In the event of a disagreement
between any member of the Safety Group and any member of
the New Morton Group concerning the reasonableness of
withholding such consent, no disclosure shall be made
prior to a final, nonappealable resolution of such
disagreement by a court of competent jurisdiction.
(iii) Upon any member of the Safety Group or any
member of the New Morton Group receiving any subpoena or
other compulsory disclosure notice from a court, other
governmental agency or otherwise which requests
disclosure of Privileged Information, in each case
relating to the New Morton Businesses or the Safety
Business, respectively, as they or it existed prior to
the Distribution Date or relating to or arising in
connection with the relationship between the constituent
elements of the Groups on or prior to the Distribution
Date, the recipient of the notice shall promptly provide
to Safety, in the case of receipt by a member of the New
Morton Group, or New Morton, in the case of receipt by a
member of the Safety Group, a copy of such notice, the
intended response, and all materials or information
relating to the other Group that might be disclosed. In
the event of a disagreement as to the intended response
or disclosure, unless and until the disagreement is
resolved as provided in paragraph (ii) above, Safety and
New Morton shall cooperate to assert all defenses to
disclosure claimed by either Group, at the cost and
expense of the Group claiming such defense to disclosure,
and shall not disclose any disputed documents or
information until all legal defenses and claims of
privilege have been finally determined.
Section 7.3 Production of Witnesses. At all times
from and after the Distribution Date, each of New Morton and
Safety shall use reasonable efforts to make available to the
other upon written request, its and its subsidiaries'
officers, directors, employees and agents as witnesses to the
extent that such persons may reasonably be required in
connection with any legal, administrative or other proceedings
in which the requesting party may from time to time be
involved.
Section 7.4 Reimbursement. Except to the extent
otherwise contemplated by Article IV hereof or any Ancillary
Agreement, a party providing Information or witness services
to the other party under this Article VII shall be entitled to
receive from the recipient, upon the presentation of invoices
therefor, payments for such amounts, relating to supplies,
disbursements and other out-of-pocket expenses and direct and
indirect costs of employees who are witnesses, as may be
reasonably incurred in providing such Information or witness
services.
Section 7.5 Retention of Records. Except as
otherwise required by law or agreed to in writing, each of
Safety and New Morton may destroy or otherwise dispose of any
of the Information in accordance with the records retention
policy of the Company at the date of this Agreement as set
forth on Exhibit F, provided that, prior to destruction or
disposal of Information relating in any material respect to
the New Morton Business or the Safety Business, respectively,
(a) it shall provide no less than 90 or more than 120 days
prior written notice to the other, specifying in reasonable
detail the Information proposed to be destroyed or disposed of
and (b) if a recipient of such notice shall request in writing
prior to the scheduled date for such destruction or disposal
that any of the Information proposed to be destroyed or
disposed of be delivered to such requesting party, the party
proposing the destruction or disposal shall promptly arrange
for the delivery of such of the Information as was requested
at the expense of the party requesting such Information.
Section 7.6 Confidentiality. Each of Safety and
the Retained Subsidiaries on the one hand, and New Morton and
the New Morton Subsidiaries on the other hand, shall hold, and
shall cause its consultants and advisors to hold, in strict
confidence, all Information concerning the other in its
possession or furnished by the other or the other's
representatives pursuant to this Agreement (except to the
extent that such Information has been (a) in the public domain
through no fault of such party or (b) later lawfully acquired
from other sources by such party), and each party shall not
release or disclose such Information to any other person,
except its auditors, attorneys, financial advisors, bankers
and other consultants and advisors, unless compelled to
disclose by judicial or administrative process or, as advised
by its counsel, by other requirements of law.
ARTICLE VIII
INSURANCE
Section 8.1 Policies and Rights.
(a) New Morton Assets. Without limiting the
generality of the definition of New Morton Assets set forth in
Section 1.01 or the effect of Section 2.02, the New Morton
Assets shall include (i) any and all rights of an insured
party under each of the Company Policies, specifically
including rights of indemnity and the right to be defended by
or at the expense of the insurer, with respect to all
injuries, losses, Liabilities, damages and expenses incurred
or claimed to have been incurred prior to the Distribution
Date by any party in or in connection with the conduct of the
New Morton Businesses or, to the extent any claim is made
against New Morton or any of its subsidiaries, the Safety
Business and which injuries, losses, Liabilities, damages and
expenses may arise out of insured or insurable occurrences or
events under one or more of the Company Policies; provided,
however, that nothing in this clause shall be deemed to
constitute (or to reflect) the assignment of the Company
Policies, or any of them, to New Morton; and (ii) the New
Morton Policies.
(b) Safety Assets. Without limiting the generality
of the definition of Safety Assets set forth in Section 1.01,
the Safety Assets shall include (i) any and all rights of an
insured party under each of the Company Policies, specifically
including rights of indemnity and the right to be defended by
or at the expense of the insurer, other than the rights under
the Company Policies included in New Morton Assets pursuant to
Section 8.01(a); and (ii) the Safety Policies.
(c) No Further Indemnity. Nothing in this Article
VIII shall be deemed to constitute an indemnity of New Morton
by Safety or an indemnity of Safety by New Morton.
Section 8.2 Post-Distribution Date Claims. If,
subsequent to the Distribution Date, any person, corporation,
firm or entity shall assert a claim against New Morton or any
New Morton Subsidiary with respect to any injury, loss,
liability, damage or expense incurred or claimed to have been
incurred prior to the Distribution Date in or in connection
with the conduct of the New Morton Businesses or, to the
extent any claim is made against New Morton or any of its
subsidiaries, the Safety Business, or any of them, and which
injury, loss, liability, damage or expense may arise out of
insured or insurable occurrences or events under one or more
of the Company Policies, the Company shall at the time such
claim is asserted be deemed to assign, without need of further
documentation, to New Morton any and all rights of an insured
party under the applicable Company Policy with respect to such
asserted claim, specifically including rights of indemnity and
the right to be defended by or at the expense of the insurer;
provided, however, that nothing in this sentence shall be
deemed to constitute (or to reflect) the assignment of the
Company Policies, or any of them, to New Morton.
Section 8.3 Administration and Reserves.
(a) Notwithstanding the provisions of Article III,
from and after the Distribution Date:
(i) New Morton shall be responsible for the (A)
Insurance Administration of the Company Policies and the
New Morton Policies, and (B) Claims Administration with
respect to the New Morton Liabilities; provided, that the
retention of the Company Policies and the New Morton
Policies by New Morton is in no way intended to limit,
inhibit, or preclude any right to insurance coverage for
any Insured Claim of a named insured under the Company
Policies and the New Morton Policies, including but not
limited to Safety and any of its operations, subsidiaries
and Affiliates;
(ii) Unless otherwise agreed pursuant to Article IV
hereof, Safety shall be responsible for the (A) Insurance
Administration of the Safety Policies and (B) Claims
Administration with respect to the Safety Liabilities;
provided that the retention of the Safety Policies by
Safety is in no way intended to limit, inhibit, or
preclude any right to insurance coverage for any Insured
Claim of a named insured under the Safety Policies;
(iii) New Morton shall be entitled to reserves
established by the Company or any of its subsidiaries, or
the benefit of reserves held by any insurance carrier,
with respect to the New Morton Liabilities; and
(iv) Safety shall be entitled to reserves
established by the Company or any of its subsidiaries, or
the benefit of reserves held by any insurance carrier,
with respect to the Safety Liabilities.
(b) Insurance Premiums. New Morton shall have the
right but not the obligation to pay the premiums, to the
extent that Safety does not pay premiums with respect to
Safety Liabilities (retrospectively-rated or otherwise), with
respect to the Company Policies and the New Morton Policies,
as required under the terms and conditions of the respective
Policies, whereupon Safety shall forthwith reimburse New
Morton for that portion of such premiums paid by New Morton as
are attributable to the Safety Liabilities. Unless otherwise
agreed by the parties hereto, Safety shall purchase (subject
to a 50% reimbursement by New Morton within 15 days of notice
of such purchase) continued coverage under its director and
officer liability insurance policy for claims made prior to
the sixth anniversary of the Distribution Date based upon acts
or omissions occurring on or prior to the Distribution Date.
(c) Allocation of Insurance Proceeds. Insurance
Proceeds received with respect to claims, costs and expenses
under the Policies shall be paid to New Morton with respect to
the New Morton Liabilities and to Safety with respect to the
Safety Liabilities. Payment of the allocable portions of
indemnity costs of Insurance Proceeds resulting from the
Policies will be made to the appropriate party upon receipt
from the insurance carrier. In the event that the aggregate
limits on any Company Policies are exceeded, the parties agree
to provide an equitable allocation of Insurance Proceeds based
upon their respective bona fide claims. The parties agree to
use their best efforts to cooperate with respect to insurance
matters.
Section 8.4 Agreement for Waiver of Conflict and
Shared Defense. In the event that Insured Claims of both New
Morton and Safety exist relating to the same occurrence, New
Morton and Safety agree to jointly defend and to waive any
conflict of interest necessary to the conduct of that joint
defense. Nothing in this paragraph shall be construed to
limit or otherwise alter in any way the indemnity obligations
of the parties to this Agreement, including those created by
this Agreement, by operation of law or otherwise.
Section 8.5 Cooperation with Respect to Insurance.
New Morton shall provide all reasonable cooperation in order
to assist Safety during the transition period in obtaining
such continuous insurance coverage as Safety shall request,
provided, that New Morton shall not be obligated to pay any
premiums or other costs in connection therewith.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Complete Agreement; Construction. This
Agreement, including the Schedules and Exhibits and the
Ancillary Agreements and other agreements and documents
referred to herein, shall (to the extent each party hereto is
a party thereto) constitute the entire agreement between the
parties with respect to the subject matter hereof and shall
supersede all previous negotiations, commitments and writings
with respect to such subject matter. Notwithstanding any
other provisions in this Agreement to the contrary, in the
event and to the extent that there shall be a conflict between
the provisions of this Agreement (or any Conveyancing and
Assumption Instrument or other instrument of assumption) and
the provisions of the Benefits Agreement or the Tax Sharing
Agreement, the provisions of the Benefits Agreement or the Tax
Sharing Agreement, as the case may be, shall control.
Section 9.2 Survival of Agreements. Except as
otherwise contemplated by this Agreement, all covenants and
agreements of the parties contained in this Agreement shall
survive the Distribution Date.
Section 9.3 Expenses. Safety Liabilities shall
include $15 million of expenses incurred by the Company in
connection with the transactions contemplated by the
Combination Agreement to the extent not previously paid by
Safety prior to the Distribution Date, together with all
costs, including financing costs, and expenses (except as
provided in the next succeeding sentence) in connection with
the Safety Credit Agreement, with New Morton responsible for
any additional expenses incurred by the Company on or prior to
the Distribution Date in connection therewith, including the
costs and expenses incurred by the Company or New Morton on or
prior to the Distribution Date in connection with the
preparation, execution, delivery and implementation of this
Agreement. New Morton shall be responsible, up to a maximum
of $500,000, for fifty percent of the costs, including
financing costs, and expenses incurred in connection with the
Safety Credit Agreement.
Section 9.4 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without regard to the principles of
conflicts of laws thereof.
Section 9.5 Notices. All notices and other
communications hereunder shall be in writing and shall be
delivered by hand or mailed by registered or certified mail
(return receipt requested) to the parties at the following
addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the
date on which such notice is received:
To the Company or Safety:
Autoliv ASP, Inc.
3350 Airport Road
Ogden, Utah 84409
Attention: Corporate Secretary
with a copy to:
Autoliv, Inc.
c/o Autoliv AB
Box 703 81
S-107 24 Stockholm
Sweden
Attention: Corporate Secretary
and
Skadden, Arps, Slate, Meagher & Flom
One Canada Square
Canary Wharf
London E14 8DS, England
Attention: Scott V. Simpson, Sr., Esq.
To New Morton:
Morton International, Inc.
100 North Riverside Plaza
Chicago, Illinois 60606
Attention: Corporate Secretary
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Eric S. Robinson, Esq.
Section 9.6 Amendments. This Agreement may not be
modified or amended except by an agreement in writing signed
by the respective duly authorized representatives of the
parties.
Section 9.7 Successors and Assigns. This Agreement
and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties and their respective
successors and permitted assigns.
Section 9.8 Counterparts. This Agreement may be
executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all
such counterparts shall together constitute the same
agreement.
Section 9.9 Subsidiaries. Each of the parties
hereto shall cause to be performed, and hereby guarantees the
performance of, all actions, agreements and obligations set
forth herein to be performed by any subsidiary of such party
which is contemplated to be a subsidiary of such party on and
after the Distribution Date.
Section 9.10 Third Party Beneficiaries. Except for
the provisions of Article V relating to Indemnitees, which
shall be for the benefit of such Indemnitees, and for Newco,
which shall be a third-party beneficiary of the Company's
rights under this Agreement, this Agreement is solely for the
benefit of the parties hereto and their respective
subsidiaries and Affiliates and should not be deemed to confer
upon third parties any remedy, claim, Liability,
reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 9.11 Titles and Headings. Titles and
headings to sections herein are inserted for the convenience
of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
Section 9.12 Exhibits and Schedules. The Exhibits
and Schedules shall be construed with and as an integral part
of this Agreement to the same extent as if the same had been
set forth verbatim herein.
Section 9.13 Legal Enforceability. Any provision
of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies
otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees
that the obligations of the parties hereunder shall be
specifically enforceable.
Section 9.14 Consent to Jurisdiction. Each of the
parties hereto irrevocably submits to the exclusive
jurisdiction of any state or federal court in the State of
Delaware for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction
contemplated hereby (and agrees not to commence any action,
suit or proceeding relating hereto except in such courts).
Each of the parties hereto further agrees that service of any
process, summons, notice or document hand delivered or sent by
registered mail to such party's respective address set forth
in Section 9.05 will be effective service of process for any
action, suit or proceeding in Delaware with respect to any
matters to which it has submitted to jurisdiction as set forth
in the immediately preceding sentence. Each of the parties
hereto irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising
out of this Agreement or the transactions contemplated hereby
in any state or federal court in the State of Delaware, and
hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such
action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of the day and year first
above written.
MORTON INTERNATIONAL, INC.
By: /s/ Thomas F. McDevitt
-----------------------------
Thomas F. McDevitt
Vice President Finance and
Chief Financial Officer
NEW MORTON INTERNATIONAL, INC.
By: /s/ Raymond P. Buschmann
-----------------------------
Raymond P. Buschmann
Vice President for Legal
Affairs and General Counsel
Exhibit 2.2
TAX SHARING AGREEMENT
DATED AS OF APRIL 30, 1997
BY AND BETWEEN
MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
AND
NEW MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
. . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
FILING OF TAX RETURNS
Section 2.01 Manner of Filing . . . . . . . . . . . . 6
Section 2.02 Pre-Distribution Tax Returns . . . . . . 7
Section 2.03 Post-Distribution Tax Returns . . . . . 9
ARTICLE III
BALANCE SHEET ADJUSTMENTS AND PAYMENT OF TAXES
Section 3.01 Allocation of Tax Liabilities With Respect
to Unfiled Returns for Pre-Distribution
Periods . . . . . . . . . . . . . . . 10
(a) United States Consolidated Income
Tax for Periods Ended on the
Distribution Date . . . . . . . . 10
(b) State and Local Income and Similar
Taxes for Periods Ended on or
Before the Distribution Date for
which the Company is Responsible 13
(c) Federal, State and Local Taxes Other
Than Income Taxes for Periods that
Include the Distribution Date for
which the Company is Responsible 16
(d) Federal, State and Local Taxes for
which New Morton is Responsible . 18
(e) Foreign Tax Returns . . . . . . . . 21
Section 3.02
(a) Change in the Company Filed Returns 21
(b) Changes in New Morton Group Member
Filed Returns . . . . . . . . . . 24
(c) Manner of Payment; Miscellaneous . 27
Section 3.03 Restructuring Taxes . . . . . . . . . . 27
Section 3.04 Liability for Taxes with Respect to Post-
Distribution Periods . . . . . . . . . 28
Section 3.05
(a) Carrybacks . . . . . . . . . . . . 29
(b) Payment . . . . . . . . . . . . . . 30
Section 3.06 Liabilities . . . . . . . . . . . . . . 30
Section 3.07 Payment . . . . . . . . . . . . . . . . 33
Section 3.08 Breach . . . . . . . . . . . . . . . . . 33
ARTICLE IV
INDEMNITY; COOPERATION AND EXCHANGE OF INFORMATION
Section 4.01 Indemnity . . . . . . . . . . . . . . . 34
Section 4.02 Tax Controversies . . . . . . . . . . . 35
Section 4.03 Cooperation and Exchange of Information 39
ARTICLE V
MISCELLANEOUS
Section 5.01 Expenses . . . . . . . . . . . . . . . . 42
Section 5.02 Entire Agreement; Termination of Prior
Agreements . . . . . . . . . . . . . . 42
Section 5.03 Notices . . . . . . . . . . . . . . . . 43
Section 5.04 Resolution of Disputes . . . . . . . . . 44
Section 5.05 Application to Present and Future
Subsidiaries . . . . . . . . . . . . . 44
Section 5.06 Term . . . . . . . . . . . . . . . . . . 45
Section 5.07 Titles and Headings . . . . . . . . . . 45
Section 5.08 Legal Enforceability . . . . . . . . . . 45
Section 5.09 Singular and Plural . . . . . . . . . . 46
Section 5.10 Governing Law . . . . . . . . . . . . . 46
TAX SHARING AGREEMENT
Tax Sharing Agreement (the "Agreement"), dated as of
April 30, 1997, by and between Morton International, Inc., an
Indiana corporation (the "Company"), and New Morton
International, Inc., an Indiana corporation and a wholly owned
subsidiary of the Company ("New Morton").
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to enter into the
Distribution Agreement (the "Distribution Agreement") dated as
of April 30, 1997, by and between the Company and New Morton,
pursuant to which, among other things, the Company will
distribute to holders of its common stock all the issued and
outstanding shares of common stock of New Morton (the
"Distribution");
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to enter into the
Combination Agreement, dated as of November 25, 1996 (the
"Combination Agreement"), by and among the Company, Autoliv
AB, a corporation organized under the laws of the Kingdom of
Sweden ("Autoliv"), Autoliv, Inc., a Delaware corporation
("New Parent"), and ASP Merger Sub Inc., a Delaware
corporation and a wholly owned subsidiary of New Parent
("Safety Sub"), pursuant to which, among other things, Safety
Sub will be merged with and into the Company (the "Merger")
and New Parent will offer to acquire all of the outstanding
capital stock of Autoliv pursuant to the Offer (as defined in
the Combination Agreement, and, together with the other
transactions contemplated thereby, the "Transactions");
WHEREAS, the Company, on behalf of itself and its
present and future subsidiaries other than the New Morton
Group (as hereinafter defined) (the "Company Group"), and New
Morton, on behalf of itself and its present and future
subsidiaries (the "New Morton Group"), wish to provide for the
allocation between the Company Group and the New Morton Group
of all responsibilities, liabilities and benefits relating to
or affecting Taxes (as hereinafter defined) paid or payable by
either of them for all taxable periods, whether beginning
before, on or after the Distribution Date (as hereinafter
defined) and to provide for certain other matters.
NOW, THEREFORE, in consideration of the mutual
agreements, provisions and covenants contained in this
Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Any capitalized terms used but not defined in this
Agreement shall have the meanings ascribed thereto in the
Distribution Agreement. As used in this Agreement, the
following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and
the plural forms of the terms defined):
"Code" means the Internal Revenue Code of 1986, as
amended, and shall include corresponding provisions of any
subsequently enacted federal tax laws.
"Distribution Date" means the date determined by the
Company's Board of Directors as of which the Distribution
shall be effected, which is presently contemplated to be the
close of business on April 30, 1997.
"due date" means, with respect to any Tax Return or
payment, the date on which such Tax Return is due to be filed
with or such payment is due to be made to the appropriate
governmental authority pursuant to applicable law, giving
effect to any applicable extensions of the time for such
filing or payment.
"Final Determination" shall mean the final
resolution of liability for any Tax for a taxable period, (i)
by IRS Form 870 or 870-AD (or any successor forms thereto), on
the date of acceptance by or on behalf of the IRS, or by a
comparable form under the laws of other jurisdictions; except
that a Form 870 or 870-AD or comparable form that reserves
(whether by its terms or by operation of law) the right of the
taxpayer to file a claim for refund and/or the right of the
taxing authority to assert a further deficiency shall not
constitute a Final Determination; (ii) by a decision,
judgment, decree, or other order by a court of competent
jurisdiction, which has become final and unappealable; (iii)
by a closing agreement or accepted offer in compromise under
Section 7121 or 7122 of the Code, or comparable agreements
under the laws of other jurisdictions; (iv) by any allowance
of a refund or credit in respect of an overpayment of Tax, but
only after the expiration of all periods during which such
refund may be recovered (including by way of offset) by the
Tax imposing jurisdiction; or (v) by any other final
disposition, including by reason of the expiration of the
applicable statute of limitations.
"IRS" means the Internal Revenue Service.
"Reasonable Basis" means "reasonable basis" within
the meaning of section 1.6662-7(d) of the Treasury
Regulations.
"Restructuring Taxes" means any Taxes resulting from
the transfers of stock and/or assets undertaken to effect the
Distribution; including, without limitation, any Tax imposed
pursuant to or as a result of Code Section 311.
"Tax" means any of the Taxes.
"Tax Benefit" means any item of loss, deduction,
credit or any other Tax Item which decreases Taxes paid or
payable.
"Tax Detriment" means any item of income, gain,
recapture of credit or any other Tax Item which increases
Taxes paid or payable.
"Tax Item" means any item of income, gain, loss,
deduction, credit, recapture of credit or any other item which
increases or decreases Taxes paid or payable, including an
adjustment under Code Section 481 resulting from a change in
accounting method.
"Tax Return" means any return, filing, questionnaire
or other document required to be filed, including requests for
extensions of time, filings made with estimated tax payments,
claims for refund and amended returns that may be filed, for
any period with any taxing authority (whether domestic or
foreign) in connection with any Tax or Taxes (whether or not a
payment is required to be made with respect to such filing).
"Taxes" means all forms of taxation, whenever
created or imposed, and whether of the United States or
elsewhere, and whether imposed by a local, municipal,
governmental, state, federation or other body, and without
limiting the generality of the foregoing, shall include
income, sales, use, ad valorem, gross receipts, value added,
franchise, transfer, recording, withholding, payroll,
employment, excise, occupation, premium and property taxes,
together with any related interest, penalties and additions to
any such tax, or additional amounts imposed by any taxing
authority (domestic or foreign) upon the New Morton Group,
the Company Group or any of their respective members,
divisions, assets or branches.
ARTICLE II
FILING OF TAX RETURNS
Section 2.1. Manner of Filing. All Tax Returns
filed after the date hereof relating to taxable periods
beginning prior to the close of business on the Distribution
Date shall be prepared on a basis which is consistent with the
rulings obtained in connection with the Distribution (in the
absence of a controlling change in law or circumstances) and
otherwise in accordance with past practice and shall be filed
on a timely basis (including extensions) by the party
responsible for such filing under this Agreement. To the
extent that an inconsistent position would result in a Tax
Detriment to the other party and in the absence of a
controlling change in law or circumstances, all Tax Returns
filed after the date hereof relating to taxable periods
beginning prior to the Distribution Date shall be prepared on
a basis consistent with the elections, accounting methods,
conventions, and principles of taxation used for the most
recent taxable periods for which Tax Returns involving similar
Tax Items have been filed. Subject to the provisions of this
Agreement, all decisions relating to the preparation of Tax
Returns shall be made in the reasonable discretion of the
party responsible under this Agreement for such preparation.
Section 2.2. Pre-Distribution Tax Returns. All
consolidated federal income Tax Returns which include a member
of the Company Group and the New Morton Group that are
required to be filed for periods beginning before the
Distribution Date ("Pre-Distribution Federal Periods") shall
be prepared by New Morton and provided to the Company at least
twenty days prior to the due date for such Tax Return. If
requested to do so by New Morton, the Company shall make
consent dividend elections or any other elections provided for
under the Code and, for a newly organized New Morton Group
member, including, without limitation, New Morton, to adopt
any permissible accounting method with respect to the
Company's consolidated federal income Tax Return for the
Company's taxable year ending on the Distribution Date;
provided, that the Company shall not be required to make any
such election if the Company determines in good faith that
such election would cause a material Tax Detriment or other
material adverse effect to any member of the Company Group.
All state and local income and/or franchise Tax
Returns or other Tax Returns for state and local Taxes
measured by income including, without limitation, the Michigan
Single Business Tax, which include a member of the Company
Group and/or the New Morton Group that may be or are required
to be filed for periods beginning before the Distribution Date
shall be prepared by New Morton and provided to the Company at
least twenty days prior to the due date for such Tax Return.
Notwithstanding the foregoing, if the corresponding return for
the most recent period for which such a Tax Return was filed
was filed by a member of the New Morton Group, such New Morton
Group member shall file such return.
Unless otherwise agreed to by the Company and New
Morton, all foreign Tax Returns and any other Tax Returns not
described elsewhere in this Section 2.02 which include a
member of the New Morton Group that are required to be filed
for periods beginning before the Distribution Date shall be
prepared by New Morton and provided to the Company at least
twenty days prior to the due date for such Tax Return. Such
Tax Return shall be filed by the member of the Company Group
or the New Morton Group, as the case may be, who filed the
corresponding Tax Return for the most recent period for which
such a Tax Return has been filed, or, if no such corresponding
Tax Return has been filed, by the appropriate entity in
accordance with local law or custom.
Except as otherwise provided in this Section 2.02,
the Company shall consent to and assume responsibility for the
filing of each Tax Return described in this Section 2.02 as
prepared by New Morton, which consent shall not be withheld
unless the Company delivers written notice to New Morton that
the Company disagrees with one or more Tax Items (each, a
"Disputed Item") in such Tax Return at least ten days prior to
the due date for such Tax Return. If, after receiving such
notice and prior to such due date for such Tax Return, New
Morton delivers to the Company an opinion of nationally
recognized tax counsel to the effect that each of the Disputed
Items has a Reasonable Basis, then the Company shall file such
Tax Return as prepared by New Morton, and an amended Tax
Return shall, if necessary, be filed to report such Disputed
Item as determined pursuant to Section 5.04 of this Agreement.
Notwithstanding the foregoing, if the Company disagrees with
the treatment of any Tax Item as reported on a Tax Return
described in this Section 2.02, and such Tax Item is a Tax
Item the liability for which is allocated to the Company
pursuant to Article III hereof (a "Safety Item"), such Safety
Item shall be reported as directed by the Company, provided
that the Company shall first provide New Morton with an
opinion of counsel to the effect that there is a Reasonable
Basis for the treatment of such Safety Item as directed by the
Company. If New Morton and the Company have not agreed to the
treatment of a Safety Item as of the due date of such Tax
Return, the Tax Return shall be filed as prepared by New
Morton, and an amended Tax Return shall, if necessary, be
filed to report such Safety Item as determined pursuant to
Section 5.04 of this Agreement.
Section 2.3. Post-Distribution Tax Returns. All
Tax Returns for periods beginning after the Distribution Date
shall be the responsibility of the New Morton Group if such
Tax Returns relate solely to New Morton Businesses, and all
other Tax Returns shall be the responsibility of the Company.
ARTICLE III
BALANCE SHEET ADJUSTMENT
AND PAYMENT OF TAXES
Section 3.1. Allocation of Tax Liabilities With
Respect to Unfiled Returns for Pre-Distribution Periods.
(a) United States Consolidated Income Tax for
Periods Ended on the Distribution Date. Except as otherwise
provided in this Section 3.01(a), the Company shall pay, on a
timely basis, all Taxes due with respect to the United States
consolidated income tax liability for Pre-Distribution Federal
Periods ("Pre-Distribution Consolidated Federal Tax
Liability"). New Morton hereby assumes and agrees to pay on
or prior to the due date for payment thereof its share of the
Pre-Distribution Consolidated Federal Tax Liability, which
payment may be made either directly to the IRS by New Morton
(provided that New Morton shall provide the Company with
written notice of such payment at least ten business days
prior to the due date of the corresponding Tax Return and
provide proof of such payment within five business days of
making such payment) or to the Company which shall then
forward such New Morton payment to the IRS together with its
own payment, if any.
New Morton's share of the Pre-Distribution
Consolidated Federal Tax Liability for each Pre-Distribution
Federal Period shall be
(i) that portion of the total tax liability shown
on the Company's United States consolidated income tax return
for such Pre-Distribution Federal Period, as filed (each, a
"Company Pre-Distribution Consolidated Federal Return"), as
would be allocated to New Morton under the Company's existing
federal income tax allocation election (it being agreed and
understood that with respect to New Morton and the New Morton
Businesses amounts will be allocated to the Pre-Distribution
Federal Period which ends on the Distribution Date and the
post-Distribution period which ends June 30, 1998 using the
ratable allocation election provided for in Treasury
Regulation SECTION 1.1502-76) if: (p) the Company and New Morton
were separately incorporated members of the same consolidated
group for such Pre-Distribution Federal Period and all
previous taxable periods; (q) the Company owned and operated
the Safety Business during such Pre-Distribution Federal
Period and all previous taxable periods; and (r) New Morton
owned and operated the New Morton Businesses during such Pre-
Distribution Federal Period and all previous taxable periods;
(ii) reduced by the sum of (x) all amounts paid by
New Morton after the Distribution Date with respect to such
Pre-Distribution Consolidated Federal Tax Liability, and (y)
an amount equal to New Morton's share of all estimated
federal income tax payments remitted by the Company to the IRS
on or prior to the Distribution Date with respect to such Pre-
Distribution Federal Period. New Morton's share of all
estimated federal income tax payments remitted by the Company
to the IRS on or prior to the Distribution Date with respect
to such Pre-Distribution Federal Period shall with respect to
any such payment made on or after July 1, 1996, be equal to
the amount of such payments less the amounts taken into
account in determining "cash used in the Safety Business" for
purposes of Section 2.01(c) of the Distribution Agreement.
If the calculations made pursuant to paragraphs (i)
and (ii) of this Section 3.01(a) indicate that New Morton has
either overpaid or underpaid its share of any such Pre-
Distribution Consolidated Federal Tax Liability, then at the
time that the relevant Company Pre-Distribution Consolidated
Federal Return is filed, the Company shall pay New Morton the
amount of any such overpayment or New Morton shall pay the
Company the amount of any such underpayment, the amount of
such overpayment or underpayment, as the case may be, to be
equal to the difference between the amounts calculated
pursuant to paragraphs (i) and (ii) of this Section 3.01(a).
All calculations and determinations required to be
made pursuant to this Section 3.01(a) shall be made in good
faith by New Morton and shall be subject to the Company's
approval, which approval shall not be withheld unless the
Company in good faith reasonably disputes any such calculation
or determination, in which case any payments shall
nevertheless be made in accordance with New Morton's
calculations and determinations, subject to subsequent
adjustment in accordance with the provisions of Section 5.04
of this Agreement.
(b) State and Local Income and Similar Taxes for
Periods Ended on or Before the Distribution Date for which the
Company is Responsible. Except as otherwise provided in this
Section 3.01(b), the Company shall pay, on a timely basis, all
state and local income taxes, and other Taxes the calculations
of which are based upon income, including, without limitation,
the Michigan Single Business Tax, with respect to taxable
periods ending on or before the Distribution Date ("Pre-
Distribution State or Local Taxable Periods") for those Tax
Returns with respect to which it has filing responsibility
pursuant to Section 2.02 of this Agreement (each such Tax
being individually referred to as a "Pre-Distribution State or
Local Income Tax"). New Morton hereby assumes and agrees to
pay on or prior to the due date thereof its share of each Pre-
Distribution State or Local Income Tax, which payment may be
made either directly to the appropriate taxing authority by
New Morton (provided that New Morton shall provide the Company
with written notice of such payment at least ten business days
prior to the due date of the corresponding Tax Return and
provide proof of such payment within five business days of
making such payment) or to the Company which shall then
forward such New Morton payment to the appropriate taxing
authority together with its own payment, if any. For each
Pre-Distribution State or Local Taxable Period, New Morton's
share of each Pre-Distribution State or Local Income Tax shall
be
(i) that portion of each such Tax as shown on the
applicable Tax Return, as filed, as the ratio (referred to as
the "New Morton State or Local Income Tax Ratio"), of the
aggregate Pre-Distribution State or Local Income Tax liability
of the New Morton Group with respect to such Pre-Distribution
State or Local Taxable Period (determined on a separate return
basis as if the corporate separation contemplated by the
Distribution Agreement had been effected on the first day of
each relevant taxable period), bears to the sum of the
applicable Pre-Distribution State or Local Income Tax
liability of the New Morton Group and the Company Group (each
determined on a separate return basis as if the corporate
separation contemplated by the Distribution Agreement had been
the first day of each relevant taxable period);
(ii) reduced by the sum of (x) all amounts paid by
New Morton after the Distribution Date with respect to such
Pre-Distribution State or Local Income Tax and (y) an amount
equal to New Morton's share of all estimated tax payments
remitted by the Company to the relevant taxing authority on or
prior to the Distribution Date with respect to each such Pre-
Distribution State or Local Income Tax. New Morton's share of
each such estimated tax payment remitted by the Company to the
relevant taxing authority on or before the Distribution Date
shall (A) with respect to any such payment made on or before
June 30, 1996, be an amount equal to the product of (r) such
payment and (s) the applicable New Morton Pre-Distribution
State or Local Income Tax Ratio and (B) with respect to any
such payment made on or after July 1, 1996, be equal to the
amount of such payments less the amounts taken into account in
determining "cash used in the Safety Business" for purposes of
Section 2.01(c) of the Distribution Agreement.
With respect to each Pre-Distribution State or Local
Income Tax, if the calculations made pursuant to paragraphs
(i) and (ii) of this Section 3.01(b) indicate that New Morton
has either overpaid or underpaid its share of such liability,
then not later than 30 days after the actual filing date, the
Company shall pay New Morton the amount of any such
overpayment or New Morton shall pay the Company the amount of
any such underpayment, the amount of such overpayment or
underpayment, as the case may be, to be equal to the
difference between the amounts calculated pursuant to
paragraphs (i) and (ii) of this Section 3.01(b).
All calculations and determinations required to be
made pursuant to this Section 3.01(b) shall be made in good
faith by New Morton and shall be subject to the Company's
approval, which approval shall not be withheld unless the
Company in good faith reasonably disputes any such calculation
or determination, in which case any payments shall
nevertheless be made in accordance with New Morton's
calculations and determinations, subject to subsequent
adjustment in accordance with the provisions of Section 5.04
of this Agreement.
(c) Federal, State and Local Taxes Other Than
Income Taxes for Periods that Include the Distribution Date
for which the Company is Responsible. Except as otherwise
provided in this Section 3.01(c), the Company shall pay, on a
timely basis, all federal, state and local Taxes not dealt
with in either Section 3.01(a) or 3.01(b), with respect to all
Tax Returns due after the Distribution Date that include any
period ending on or before the Distribution Date with respect
to which it has filing responsibility pursuant to Section 2.02
of this Agreement (each such Tax being individually referred
to as an "1997 Other Tax"). New Morton hereby assumes and
agrees to pay prior to the due date thereof its share of each
1997 Other Tax, which payment may be made either directly to
the appropriate taxing authority by New Morton (provided that
New Morton shall provide the Company with written notice of
such payment at least ten business days prior to the due date
of the corresponding Tax Return and provide proof of such
payment within five business days of making such payment) or
to the Company which shall then forward such New Morton
payment to the appropriate taxing authority together with its
own payment, if any. New Morton's share of each 1997 Other
Tax shall be
(i) that portion of each such Tax as shown on the
applicable Tax Return, as filed, as the ratio (referred to as
the "New Morton 1997 Other Tax Ratio") of the applicable 1997
Other Tax liability of the New Morton Group (determined on a
separate return basis as if the corporate separation
contemplated by the Distribution Agreement had been effected
July 1, 1996), bears to the sum of the applicable 1997 Other
Tax liability of the New Morton Group and the Company Group
(each determined on a separate return basis as if the
corporate separation contemplated by the Distribution
Agreement had been effected July 1, 1996);
(ii) reduced by the sum of (x) all amounts paid by
New Morton after the Distribution Date with respect to such
1997 Other Tax and (y) an amount equal to New Morton's share
of all estimated or other similar payments remitted by the
Company to the relevant taxing authority on or prior to the
Distribution Date with respect to each such 1997 Other Tax.
New Morton's share of each such estimated or other similar
payment remitted by the Company on or before the Distribution
Date shall be an amount equal to the product of (r) such
payments and (s) the applicable New Morton 1997 Other Tax
Ratio.
With respect to each 1997 Other Tax, if the
calculations made pursuant to paragraphs (i) and (ii) of this
Section 3.01(c) indicate that New Morton has either overpaid
or underpaid its share of such liability, then, not later than
30 days after the actual filing date, the Company shall pay
New Morton the amount of such overpayment or New Morton shall
pay the Company the amount of any such underpayment, the
amount of such overpayment or underpayment, as the case may
be, to be equal to the difference between the amounts
calculated pursuant to paragraphs (i) and (ii) of this Section
3.01(c).
All calculations and determinations required to be
made pursuant to this Section 3.01(c) shall be made in good
faith by New Morton and shall be subject to the Company's
approval, which approval shall not be withheld unless the
Company in good faith reasonably disputes any such calculation
or determination, in which case any payments shall
nevertheless be made in accordance with New Morton's
calculations and determinations, subject to subsequent
adjustment in accordance with the provisions of Section 5.04
of this Agreement.
(d) Federal, State and Local Taxes for which New
Morton is Responsible. New Morton or a member of the New
Morton Group, as the case may be, shall pay, on a timely
basis, all federal, state and local Taxes with respect to all
Tax Returns due after the Distribution Date with respect to
periods ending on or before the Distribution Date for which
New Morton or any member of the New Morton Group has filing
responsibility pursuant to Section 2.02 of this Agreement
(each such Tax being individually referred to as a "New Morton
2.02 Tax"). The Company hereby assumes and agrees to pay
prior to the due date thereof its share of each New Morton
2.02 Tax, which payment may be made either directly to the
appropriate taxing authority by the Company (provided that the
Company shall provide New Morton with written notice of such
payment at least ten business days prior to the due date of
the corresponding Tax Return and provide proof of such payment
within five business days of making such payment) or to New
Morton which shall then forward such Company payment to the
appropriate taxing authority together with its own payment, if
any. The Company's share of each New Morton 2.02 Tax shall be
(i) that portion of each such Tax as shown on the
applicable Tax Return (other than any amended Tax Return), as
filed, as the ratio (referred to as the "Company 2.02 Ratio")
of the applicable New Morton 2.02 Tax liability of the Company
Group (determined on a separate return basis as if the
corporate separation contemplated by the Distribution
Agreement had been effected July 1, 1996), bears to the sum of
the applicable New Morton 2.02 Tax liability of the Company
Group and the New Morton Group (each determined on a separate
return basis as if the corporate separation contemplated by
the Distribution Agreement had been effected July 1, 1996);
(ii) reduced by the sum of (x) all amounts paid by
the Company after the Distribution Date with respect to such
New Morton 2.02 Tax and (y) an amount equal to the Company's
share of all estimated or other similar payments remitted by
the Company on or prior to the Distribution Date, with respect
to each such New Morton 2.02 Tax. The Company's share of each
such estimated or other similar payment remitted by the
Company on or before the Distribution Date shall be an amount
equal to the product of (r) such payments and (s) the
applicable Company 2.02 Ratio.
With respect to each New Morton 2.02 Tax, if the
calculations made pursuant to paragraphs (i) and (ii) of this
Section 3.01(d) indicate that the Company has either overpaid
or underpaid its share of such liability, then not later than
30 days after the actual filing date, New Morton shall pay the
Company the amount of any such overpayment or the Company
shall pay New Morton the amount of such underpayment, the
amount of such overpayment or underpayment, as the case may
be, to be equal to the difference between the amounts
calculated pursuant to paragraphs (i) and (ii) of this Section
3.01(d).
All calculations and determinations required to be
made pursuant to this Section 3.01(d) shall be made in good
faith by New Morton and shall be subject to the Company's
approval, which approval shall not be withheld unless the
Company in good faith reasonably disputes any such
calculation or determination, in which case any payments shall
nevertheless be made in accordance with New Morton's
calculations and determinations, subject to subsequent
adjustment in accordance with the provisions of Section 5.04
of this Agreement.
(e) Foreign Tax Returns. The New Morton Group
shall be responsible for the filing of all foreign Tax Returns
that are due with respect to periods ending on or before the
Distribution Date and for the payment of all Taxes due or
payable in connection therewith.
Section 3.2. (a) Change in the Company Filed
Returns. If as a result of any audit, amendment or other
change in a Tax Return as filed by the Company or any of the
Automotive Safety Businesses with respect to any period ending
on or before the Distribution Date, any Tax Benefit or Tax
Detriment is changed (a "Change"), then:
(i) If in connection with any such Change, the
amount of the Tax Detriments generated by or attributable to
New Morton Businesses with respect to the taxable period to
which such return relates ("New Morton Business Tax
Detriments") exceeds the amount of Tax Benefits generated by
or attributable to New Morton Businesses with respect to such
taxable period ("New Morton Business Tax Benefits"), New
Morton hereby assumes and agrees to pay to the appropriate
taxing authority (provided that New Morton shall provide the
Company with written notice of such payment at least ten
business days prior to the due date of the corresponding Tax
Return and provide proof of such payment within five business
days of making such payment), or to the Company to the extent
payment cannot be made directly to such taxing authority the
Company has previously made the payment to such taxing
authority, or no payment is due to the taxing authority, an
amount equal to the product of (x) the amount by which New
Morton Business Tax Detriments exceed New Morton Business Tax
Benefits and (y) the actual marginal tax rate applicable with
respect to the relevant Tax Return, with appropriate
adjustment to account for Tax credits generated by or
attributable to New Morton Businesses included in such
calculation and an amount equal to all interest payable with
respect thereto, which interest shall be calculated as
hereinafter set forth. New Morton shall pay interest at the
rate the taxing jurisdiction imposes upon tax deficiencies
(the "Deficiency Rate") for the relevant periods with respect
to that portion of such tax payment attributable to the lesser
of (a) the amount by which New Morton Business Tax Detriments
exceed New Morton Business Tax Benefits, and (b) the amount by
which New Morton Business Tax Detriments (net of New Morton
Business Tax Benefits) exceeds Automotive Safety Business Tax
Benefits net of Automotive Safety Business Tax Detriments,
each as defined below. New Morton shall pay interest on the
balance, if any, of such tax payment (the "Balance") in an
amount equal to one-half of the sum of (x) the interest the
taxing jurisdiction would have paid with respect to the
Balance had the Balance been a refund from the taxing
jurisdiction, and (y) the interest that New Morton would have
paid to the taxing authority with respect to the tax
deficiency represented by the Balance, in each case, for the
relevant periods (the "Blended Rate").
(ii) If in connection with any such Change, the New
Morton Business Tax Benefits exceed the New Morton Business
Tax Detriments, the Company shall pay or cause to be paid to
New Morton the product of (x) the amount by which New Morton
Business Tax Benefits exceed New Morton Business Tax
Detriments and (y) the actual marginal Tax rate applicable
with respect to the relevant Tax Return, with appropriate
adjustment to account for Tax credits generated by or
attributable to New Morton Businesses included in such
calculation plus a payment equal to any interest received by
the Company, acting as agent for New Morton with respect to
such amount. If, however, the refund of tax, exclusive of
interest, received by the Company as New Morton's agent is
less than the amount due New Morton pursuant to this Section
3.02(a)(ii), the Company shall also pay to New Morton interest
on the additional tax amount (the "Excess") in an amount equal
to one-half of the sum of (x) the interest the taxing
jurisdiction would have paid to the Company with respect to
the Excess had the Excess been refunded by the taxing
jurisdiction, and (y) the interest the Company would have paid
to the taxing jurisdiction with respect to the Excess had the
Excess been a deficiency due from the Company to such
jurisdiction, in each case, for the relevant periods.
(b) Changes in New Morton Group Member Filed
Returns. If as a result of any Change in any Tax Return as
filed by any member of the New Morton Businesses with respect
to any period ending on or before the Distribution Date, any
Tax Benefit or Tax Detriment is changed, then:
(i) If in connection with any such Change, the
amount of the Tax Detriments generated by or attributable to
Automotive Safety Businesses with respect to the taxable
period to which such return relates ("Automotive Safety
Business Tax Detriments") exceeds the amount of Tax Benefits
generated by or attributable to Automotive Safety Businesses
with respect to such taxable period ("Automotive Safety
Business Tax Benefits"), the Company shall pay to the
appropriate New Morton Business or to the appropriate taxing
authority (provided that the Company shall provide New Morton
with written notice of such payment at least ten business days
prior to the due date of the corresponding Tax Return and
provide proof of such payment within five business days of
making such payment) an amount equal to the product of (x) the
amount by which Automotive Safety Business Tax Detriments
exceed Automotive Safety Business Tax Benefits and (y) the
actual marginal Tax rate applicable with respect to the
relevant Tax Return, with appropriate adjustment to account
for Tax credits generated by or attributable to the Safety
Business included in such calculation and an amount equal to
all interest payable with respect thereto, which interest
shall be calculated as hereinafter set forth, any such payment
to be reduced to the extent it would otherwise duplicate any
Tax refund received by New Morton. The Company shall pay
interest at the Deficiency Rate for the relevant periods with
respect to that portion of such tax payment attributable to
the lesser of (a) the amount by which the Automotive Safety
Business Tax Detriments exceed the Automotive Safety Business
Tax Benefits, and (b) the amount by which the Automotive
Safety Business Tax Detriments (net of the Automotive Safety
Business Tax Benefits) exceeds New Morton Business Tax
Benefits (net of New Morton Business Tax Detriments). The
Company shall pay interest on the balance, if any, of such tax
payment (the "Company Balance") in an amount equal to one-half
of the sum of (x) the interest the taxing jurisdiction would
have paid with respect to the Company Balance had the Company
Balance been a refund from the taxing jurisdiction, and (y)
the interest that the Company would have paid to the taxing
authority with respect to the tax deficiency represented by
the Company Balance, in each case, for the relevant periods
(the "Company Blended Rate").
(ii) If in connection with any such Change, the
Automotive Safety Business Tax Benefits exceed the Automotive
Safety Business Tax Detriments, the appropriate New Morton
Business shall pay to the Company the product of (x) the
amount by which Automotive Safety Business Tax Benefits exceed
Automotive Safety Business Tax Detriments and (y) the actual
marginal Tax rate applicable with respect to the relevant Tax
Return, with appropriate adjustment for Tax credits generated
by or attributable to the Safety Business included in such
calculation, such payment to be reduced to the extent it would
otherwise duplicate any Tax refund received by the Company
directly from a taxing authority plus a payment equal to any
interest received by New Morton, acting as agent for the
Company with respect to such amount. If, however, the refund
of tax, exclusive of interest, received by New Morton as the
Company's agent is less than the amount due the Company
pursuant to this Section 3.02(a)(ii), New Morton shall also
pay to the Company interest on the additional tax amount (the
"Company Excess") in an amount equal to one-half of the sum of
(x) the interest the taxing jurisdiction would have paid New
Morton with respect to the Company Excess had the Company
Excess been refunded by the taxing jurisdiction, and (y) the
interest New Morton would have paid to the taxing jurisdiction
with respect to the Company Excess had the Company Excess been
a deficiency due from New Morton to such jurisdiction, in each
case, for the relevant periods.
(c) Manner of Payment; Miscellaneous. Any payment
required to be made pursuant to this Section 3.02 with respect
to any Tax Return shall be made by the party obligated to make
such payment at such time as such party shall reasonably
determine and direct.
Section 3.3. Restructuring Taxes. (a) (i)
Notwithstanding any other provision of this Agreement to the
contrary, and except as otherwise provided in this Section
3.03(a) or in Section 9.03 of the Distribution Agreement, New
Morton shall pay or cause to be paid, and shall fully
indemnify and hold harmless the Company from and against, all
Restructuring Taxes, including all liability, costs and
expenses associated with claims with respect to such
Restructuring Taxes asserted by third parties against any
member of the Company Group. New Morton hereby assumes and
agrees to pay prior to the due date thereof all such
Restructuring Taxes, which payment may be made either directly
to the appropriate taxing authority by New Morton (provided
that New Morton shall provide the Company with written notice
of such payment at least ten business days prior to the due
date of the corresponding Tax Return and provide proof of such
payment within five business days of making such payment) or
to the Company which shall then forward such New Morton
payment to the appropriate taxing authority.
(ii) Anything in this Section 3.03(a) to the
contrary notwithstanding, Section 3.03(a) hereof shall not
apply to any Restructuring Taxes to the extent that all or
any portion of such Restructuring Taxes would not have
resulted but for an act or omission of the Company or any of
its affiliates, a misrepresentation on the part of the Company
made in connection with the opinions of counsel described in
Section 6.03 of the Distribution Agreement, or any other post
Distribution Date transaction involving either the stock or
assets of the Company or any of its affiliates.
(b) If the Company is otherwise required to
recognize gain pursuant to Code Section 311 with respect to
the Distribution, then, to the extent permitted by law or
regulation, the Company, if so requested by New Morton, shall
elect pursuant to Code Section 336(e) to treat the
Distribution as a disposition of all the assets of New Morton;
provided, that the Company shall not be required to make any
such election if the Company determines in good faith that
such election would cause a material Tax Detriment or other
material adverse effect to any member of the Company Group.
Section 3.4. Liability for Taxes with Respect to
Post-Distribution Periods. Unless otherwise provided in this
Agreement, the Company Group shall pay all Taxes and shall be
entitled to receive and retain all refunds of Taxes with
respect to periods beginning after the Distribution Date which
are attributable to Automotive Safety Businesses. Unless
otherwise provided in this Agreement, the New Morton Group
shall pay all Taxes and shall be entitled to receive and
retain all refunds of Taxes with respect to periods beginning
after the Distribution Date which are attributable to New
Morton Businesses.
Section 3.5. (a) Carrybacks. Except as provided
in this Section 3.05, if the consolidated federal income taxes
of the Company Group are reduced for a taxable period ending
on or before the Distribution Date (a "Company Tax
Reduction"), by reason of (i) a New Morton loss or other Tax
attribute arising on or after the Distribution Date (a "New
Morton Carryback"), and/or (ii) a Company loss or other Tax
attribute arising on or after the Distribution Date (a
"Company Carryback"), then the Company shall pay to New Morton
an amount equal to the portion of the Company Tax Reduction
which is attributable to the New Morton Carryback. If both a
New Morton Carryback and a Company Carryback exist, the rules
of Treas. Reg. SECTION 1.1502-21T(b) shall be applied to determine
the portion of the Company Tax Reduction attributable to the
New Morton Carryback and the Company Carryback, respectively.
The preceding two sentences shall apply, mutatis mutandis, to
state and local Taxes. The Company shall, and shall cause
each member of the Company Group to, take all steps reasonably
necessary to receive a reduction in Taxes attributable to a
New Morton Carryback. Notwithstanding anything in this
Section 3.05 to the contrary, the Company shall not be
required to take any action to carry back a New Morton
Carryback if the Company determines in good faith that
carrying back such New Morton Carryback would cause a material
Tax Detriment or other material adverse effect to any member
of the Company Group.
(b) Payment. Any payment required to be made
pursuant to this Section 3.05 shall be made no later than 10
days after the Company Tax Reduction is actually received,
credited or otherwise utilized by the Company. Any payment
not so made within 10 days shall thereafter bear interest at
the Federal short-term rate established pursuant to Section
6621 of the Code.
Section 3.6. Liabilities.
(a) To the extent that Taxes imposed on a member of
the New Morton Group are reduced for a taxable period
beginning after the Distribution Date (the "Section 3.06(a)
Tax Reduction") by reason of a deduction, loss or credit with
respect to an item for which a member of the Company Group
bore the economic responsibility (such as a foreign tax
credit), then New Morton shall pay to the Company an amount
equal to the Section 3.06(a) Tax Reduction; provided, however,
that if a New Morton Tax Benefit, but for such deduction, loss
or credit, would have resulted in a reduction in Taxes by New
Morton or any member of the New Morton Group (the "Section
3.06(a) Hypothetical Tax Reduction") in the same taxable
period with respect to which the Section 3.06(a) Tax Reduction
occurred (assuming that such New Morton Tax Benefit had been
utilized to the extent otherwise possible in such taxable
period), New Morton shall pay to the Company only an amount
equal to the excess, if any, of the Section 3.06(a) Tax
Reduction over the Section 3.06(a) Hypothetical Tax Reduction
plus, for the taxable period in which the New Morton Tax
Benefit, in fact, results in a reduction of Taxes payable by
the New Morton Group an amount equal to such reduction of
Taxes (but such aggregate payments shall not exceed the amount
of the Section 3.06(a) Tax Reduction). New Morton shall, and
shall cause each member of the New Morton Group to, take all
steps reasonably necessary to receive a reduction in Taxes
attributable to such deduction, loss or credit. Within twelve
months of the end of each taxable year New Morton shall
provide the Company with an accounting setting forth the
utilization of the Section 3.06(a) Tax Reduction and New
Morton Tax Benefits.
(b) To the extent that Taxes imposed on a member of
the Company Group are reduced for a taxable period (the
"Section 3.06(b) Tax Reduction") by reason of a deduction,
loss or credit with respect to an item for which a member of
the New Morton Group bore the economic responsibility (such as
a foreign tax credit), then the Company shall pay to New
Morton an amount equal to the Section 3.06(b) Tax Reduction;
provided, however, that if the Company Tax Benefit, but for
such deduction, loss or credit, would have resulted in a
reduction in Taxes by the Company or any member of the Company
Group (the "Section 3.06(b) Hypothetical Tax Reduction") in
the same taxable period with respect to which the Section
3.06(b) Tax Reduction occurred (assuming that such Company Tax
Benefit had been utilized to the extent otherwise possible in
such taxable period), the Company shall pay to New Morton only
an amount equal to such excess, if any, of the Section 3.06(b)
Tax Reduction over the Section 3.06(b) Hypothetical Tax
Reduction plus, for the taxable period in which the Company
Tax Benefit, in fact, results in a reduction of Taxes payable
by the Company Group an amount equal to such reduction of
Taxes (but such aggregate payments shall not exceed the amount
of the Section 3.06(b) Tax Reduction). The Company shall, and
shall cause each member of the Company Group to, take all
steps reasonably necessary to receive a reduction in Taxes
attributable to such deduction, loss or credit. Within twelve
months of the end of each taxable year the Company shall
provide New Morton with an accounting setting forth the
utilization of the Section 3.06(b) Tax Reduction and the
Company Tax Benefits.
(c) Any payment required to be made pursuant to
this Section 3.06 shall be made no later than 10 days after
the Section 3.06(a) Tax Reduction and New Morton Tax Benefits
or the Section 3.06(b) Tax Reduction, as the case may be, is
actually received, credited or otherwise utilized, after
giving effect to the Section 3.06(a) Hypothetical Tax
Reduction or the Section 3.06(b) Hypothetical Tax Reduction
and the Company Tax Benefits, as the case may be. Any payment
not so made within 10 days shall thereafter bear interest at
the Federal short-term rate established pursuant to Section
6621 of the Code.
Section 3.7. Payment. Pursuant to Article V of the
Distribution Agreement and Article III of this Agreement, a
member of the Company Group will or may assume or satisfy, or
make an indemnification payment with respect to, a liability
of a member of the New Morton Group, and vice versa. If any
such payment or portion thereof by any member of either the
New Morton Group or the Company Group pursuant to Article III
of this Agreement or Article V of the Distribution Agreement
is characterized by any taxing authority as a Tax Detriment to
a member of the other Group, then the payor shall pay the
other Group an additional amount so the total payments made by
the payor equal the sum of (i) the portion, if any , of such
payments that was not characterized by such taxing authority
as a Tax Detriment, plus (ii) x/(l-y) where x is the amount
payable under said Article V of the Distribution Agreement or
Article III of this Agreement, as the case may be, which was
characterized by such taxing authority as a Tax Detriment,
without reference to this Section 3.07, and y is the then
highest marginal blended rate reflecting the federal corporate
income Tax and applicable state and local corporate income
Taxes.
Section 3.8. Breach. The Company shall indemnify
and hold harmless each member of the New Morton Group and New
Morton shall indemnify and hold harmless each member of the
Company Group from and against any payment required to be made
as a result of the breach by a member of the Company Group or
the New Morton Group, as the case may be, of any obligation
under this Agreement.
ARTICLE IV
INDEMNITY; COOPERATION AND EXCHANGE OF INFORMATION
Section 4.1. Indemnity. (a) Notwithstanding
anything to the contrary in this Agreement, the Company shall
indemnify and hold harmless each member of the New Morton
Group for, from and against all liability for all Taxes or
portion thereof for the payment of which the Company is
responsible pursuant to Article III of this Agreement.
(b) Notwithstanding anything to the contrary in
this Agreement, New Morton shall indemnify and hold harmless
each member of the Company Group for, from and against all
liability for all Taxes or portion thereof for the payment of
which New Morton is responsible pursuant to Article III of
this Agreement, including, without limitation, any liability
for Taxes for which New Morton is responsible under Article
III and which is imposed upon any member of the Company Group
pursuant to Treasury Regulation Section 1.1502-6 or any
similar provision of state, local or foreign law as a result
of any member of the New Morton Group or the Company Group
being a member of an affiliated, combined, consolidated,
unitary or similar group of corporations.
Section 4.2. Tax Controversies. (a) Whenever a
party hereto (hereinafter an "Indemnitee") is notified in
writing by any taxing authority of the existence of an issue
which could increase the liability for any Tax of the other
party hereto or any member of its Group (hereinafter an
"Indemnity Issue"), the Indemnitee shall promptly give notice
to such other party (hereinafter the "Indemnitor") of such
Indemnity Issue. The Indemnitor and its representatives, at
the Indemnitor's expense, shall be entitled to participate (i)
in all conferences, meetings or proceedings with any taxing
authority, the subject matter of which is or includes an
Indemnity Issue and (ii) in all appearances before any court,
the subject matter of which is or includes an Indemnity Issue.
The Responsible Party (as defined below) for any Tax Return
with respect to which there is an increase or decrease in
liability for any Tax or with respect to which a payment is
required hereunder shall have the right to decide as between
the parties hereto how such matter is to be dealt with and
finally resolved with the appropriate taxing authority and
shall control all audits and similar proceedings. The
Responsible Party agrees to cooperate in the settlement of any
Indemnity Issue with the other party and to take such other
party's interests into account. If the Indemnitor is not the
Responsible Party, such cooperation may include permitting the
Indemnitor, at the Indemnitor's sole expense, to litigate or
otherwise resolve any Indemnity Issue. Notwithstanding the
foregoing, if the Responsible Party is not the Indemnitor,
the Responsible Party shall not enter into a final settlement
with the relevant taxing authority with respect to any matter
involving an Indemnity Issue without first presenting the
proposed settlement to the Indemnitor, who shall provide the
Responsible Party with written consent to such settlement
within ten days of receipt (which consent may not unreasonably
be withheld), whereupon (or if the Indemnitor fails to respond
to such settlement in writing within such ten day period) the
Responsible Party may enter into such settlement with the
relevant taxing authority; provided, however, that the
Indemnitor may withhold its consent to the proposed settlement
by notifying the Responsible Party in writing within such ten
day period that the Indemnitor does not consent to the
proposed settlement. If the Indemnitor provides the
Responsible Party with written notification withholding
consent in accordance with the immediately preceding sentence,
then:
(1) The Indemnitor shall fully indemnify and hold
harmless the Responsible Party from and against any and all
liabilities for Taxes and other costs and expenses (including,
without limitation, reasonable attorneys' and accountants'
fees) over and above the payments that the Responsible Party
would have been liable for if the Responsible Party had
entered into the proposed settlement; and
(2) The Responsible Party shall, in its sole
discretion:
(A) enter into a closing agreement or other
final resolution with respect to such matter with the
relevant taxing authority with respect to all issues
other than Indemnity Issues and shall allow the
Indemnitor to continue to defend the Indemnity Issues in
proceedings with the relevant taxing authority; or
(B) settle all issues with respect to such
matter with the relevant taxing authority and/or pay any
additional liability for Taxes as provided for in such
settlement, provided, that such settlement shall permit
the Indemnitor to file a claim for refund with respect to
any Indemnity Issues; or
(C) pay to the Indemnitor any additional
liability for Taxes as provided for in such settlement to
the extent that such liability relates to issues other
than Indemnity Issues, whereupon the Indemnitor shall
assume control over and responsibility for any proceeding
related to such matter and shall be fully liable for and
shall fully indemnify and hold the Responsible Party
harmless from and against any and all liability for Taxes
with respect to such matter.
For purposes of this Agreement, "Responsible Party" shall mean
(x) with respect to a Tax Return that relates solely to the
operations of the Safety Business, the Company, and (y) with
respect to a Tax Return that relates solely to the operations
of the New Morton Business, New Morton. With respect to all
Tax Returns other than those described in clauses (x) and (y),
above, the Company and New Morton shall attempt to separate
the Indemnity Issues in controversy with respect to such Tax
Return into Indemnity Issues for which the Company shall be
the Responsible Party and Indemnity Issues for which New
Morton shall be the Responsible Party. If the Company and New
Morton do not succeed in separating such Indemnity Issues, the
Company and New Morton shall jointly act as Responsible Party
with respect to such Tax Return and shall cooperate reasonably
in any audit or similar proceeding with respect to such Tax
Return, provided, that New Morton shall always be the
Responsible Party with respect to Indemnity Issues relating to
Restructuring Taxes to the extent that New Morton bears
indemnification responsibility with respect thereto pursuant
to this Agreement. Neither the Company nor New Morton shall
take any action with respect to such Tax Return without the
other's written consent, which consent shall not be
unreasonably withheld, and the Company and New Morton shall
agree as to any settlement or compromise of Indemnity Issues
on such Tax Return. If the Company and New Morton cannot
agree as to any action to be taken with respect to any
Indemnity Issue on such Tax Return, the parties shall take
such action as shall be determined pursuant to Section 5.04
with respect to such Indemnity Issue.
(b) Notwithstanding the foregoing, if the
settlement of any Indemnity Issue would materially increase
the other party's liability for Taxes, the Responsible Party
shall not enter into a final settlement without the consent of
the other party, which consent shall not be unreasonably
withheld.
(c) The right to participate referred to in Section
4.01(a) shall include the submission and content of
documentation, protests, memoranda of fact and law and briefs,
the conduct of oral arguments or presentations, the selection
of witnesses and the negotiation of stipulations of fact.
Section 4.3. Cooperation and Exchange of
Information. (a) New Morton shall prepare and submit to the
Company on a timely basis blank Tax Return workpaper packages
for the year of the Distribution. The Company shall, and
shall cause each appropriate member of the Company Group to,
prepare and submit to New Morton in accordance with the
various due dates set forth in the tax package instructions,
all information as New Morton shall reasonably request to
enable New Morton to prepare the Company Tax Returns for the
taxable year ended the Distribution Date.
(b) The Company, on behalf of itself and each
member of the Company Group, agrees to provide the New Morton
Group, and New Morton, on behalf of itself and each member of
the New Morton Group, agrees to provide the Company Group,
with such cooperation and information as the other shall
reasonably request of the other in connection with the
preparation or filing of any Tax Return or claim for refund
contemplated by this Agreement or in conducting any audit or
other proceeding in respect of Taxes. The Company shall file
on a timely basis all Tax Returns prepared by New Morton for
filing by the Company, in accordance with this Agreement.
Such cooperation and information shall include without
limitation promptly forwarding copies of appropriate notices
and forms or other communications received from or sent to any
taxing authority which relate to Automotive Safety Businesses
in the case of the New Morton Group and New Morton Businesses
in the case of the Company Group, and providing copies of all
relevant Tax Returns, together with accompanying schedules and
related workpapers, documents relating to rulings or other
determinations by taxing authorities, including without
limitation, foreign taxing authorities, and records concerning
the ownership and Tax basis of property, which either party
may possess. Each party shall make its employees and
facilities available on a mutually convenient basis to provide
explanation of any documents or information provided
hereunder.
(c) New Morton and the Company agree to retain all
Tax Returns, related schedules and workpapers, and all
material records and other documents relating thereto existing
on the date hereof or created through or with respect to
periods ending on or before the Distribution Date, until the
expiration of the statute of limitations (including
extensions) of the taxable years to which such Tax Returns and
other documents relate and until the Final Determination of
any payments which may be required in respect of such years
under this Agreement. The Company and New Morton agree to
advise each other promptly of any such Final Determination.
Any information obtained under this Agreement shall be kept
confidential, except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund
or in conducting any audit or other proceeding.
(d) If any member of the Company Group or the New
Morton Group, as the case may be, fails to provide any
information requested pursuant to this Section 4.02 by (i) the
dates, specified in subsection (a) hereof or, (ii) with
respect to information not requested pursuant to subsection
(a) hereof, within a reasonable period, as determined in good
faith by the party requesting information, then the requesting
party shall have the right to engage a public accountant of
its choice to gather such information. New Morton and the
Company, as the case may be, agree upon 24 hours' notice, in
the case of a failure to provide information pursuant to
subsection (a) hereof, and otherwise upon 30 days' notice
after the expiration of such reasonable period, to permit any
such public accountant full access to all appropriate records
or other information in the possession of any member of the
Company Group or the New Morton Group, as the case may be,
during reasonable business hours, and to reimburse or pay
directly all costs and expenses in connection with the
engagement of such public accountant.
ARTICLE V
MISCELLANEOUS
Section 5.1. Expenses. Unless otherwise expressly
provided in this Agreement or in the Distribution Agreement,
each party shall bear any and all expenses that arise from
their respective obligations under this Agreement.
Section 5.2. Entire Agreement; Termination of Prior
Agreements. This Agreement constitutes the entire agreement
of the parties concerning the subject matter hereof and
supersedes all other agreements, whether or not written, in
respect of any Tax between or among any member or members of
the Company Group, on the one hand, and any member or members
of the New Morton Group, on the other hand. All such
agreements are hereby cancelled and any rights or obligations
existing thereunder are hereby fully and finally settled
without any payment by any party thereto. This Agreement may
not be amended except by an agreement in writing, signed by
the parties hereto. Anything in this Agreement or the
Distribution Agreement to the contrary notwithstanding, in the
event and to the extent that there shall be a conflict between
the provisions of this Agreement and the Distribution
Agreement, the provisions of this Agreement shall control.
Section 5.3. Notices. All notices and other
communications hereunder shall be in writing and shall be
delivered by hand or mailed by registered or certified mail
(return receipt requested) to the parties at the following
addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the
date on which such notice is received:
To the Company or any member of the Company Group:
Autoliv ASP, Inc.
3350 Airport Road
Ogden, Utah 84409
Attention: Corporate Secretary
with a copy to:
Autoliv, Inc.
c/o Autoliv AB
Box 70381
S-107 24 Stockholm
Sweden
Attention: Corporate Secretary
and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Attention: Stuart M. Finkelstein, Esq.
To New Morton or any member of the New Morton Group:
Morton International, Inc.
100 North Riverside Drive
Chicago, Illinois 60606
Attention: Corporate Secretary
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Jodi J. Schwartz, Esq.
Section 5.4. Resolution of Disputes. Any disputes
between the parties with respect to this Agreement that cannot
be resolved by good faith effort by the parties shall be
resolved by a "Big Six" public accounting firm or a law firm
satisfactory to the Company and New Morton, whose
determination shall be final and binding on all parties and
whose fees and expenses shall be shared by each of New Morton
and the Company in accordance with the final allocation of the
Tax liability in dispute.
Section 5.5. Application to Present and Future
Subsidiaries. This Agreement is being entered into by the
Company and New Morton on behalf of themselves and each member
of the Company Group and New Morton Group, respectively. This
Agreement shall constitute a direct obligation of each such
member and shall be deemed to have been readopted and affirmed
on behalf of any corporation which becomes a member of the
Company Group or New Morton Group in the future. The Company
and New Morton hereby guarantee the performance of all
actions, agreements and obligations provided for under this
Agreement of each member of the Company Group and the New
Morton Group, respectively. The Company and New Morton shall,
upon the written request of the other, cause any of their
respective group members formally to execute this Agreement.
This Agreement shall be binding upon, and shall inure to the
benefit of, the successors, assigns and persons controlling
any of the corporations bound hereby for so long as such
successors, assigns or controlling persons are members of the
Company Group or the New Morton Group or their successors and
assigns.
Section 5.6. Term. This Agreement shall commence
on the date of execution indicated below and shall continue in
effect until otherwise mutually agreed to in writing by the
Company and New Morton, or their successors.
Section 5.7. Titles and Headings. Titles and
headings to sections herein are inserted for the convenience
of reference only and are not intended to be a part or to
affect the meaning or interpretation of this Agreement.
Section 5.8. Legal Enforceability. Any provision
of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies
otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees
that the obligations of the parties hereunder shall be
specifically enforceable.
Section 5.9. Singular and Plural. As used herein,
the singular shall include the plural and vice versa.
Section 5.10. Governing Law. This Agreement shall
be governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this
agreement as of the 30th day of April, 1997.
MORTON INTERNATIONAL, INC. NEW MORTON INTERNATIONAL, INC.
By /s/ Thomas F. McDevitt By /s/ Raymond P. Buschmann
Thomas F. McDevitt Raymond P. Buschmann
Vice President Finance and Vice President for Legal
Chief Financial Officer Affairs and General
Counsel
Exhibit 2.3
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
DATED AS OF APRIL 30, 1997
BY AND BETWEEN
MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
AND
NEW MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.1 General . . . . . . . . . . . . . . . . 2
Section 1.2 Schedules, Etc. . . . . . . . . . . . . 11
Section 1.3 Certain Constructions . . . . . . . . . 11
ARTICLE II
EMPLOYEE BENEFITS; LABOR MATTERS
Section 2.1 New Morton Free-Standing Qualified
Plan . . . . . . . . . . . . . . . . 12
Section 2.2 Company Retained Qualified Plans . . . 14
Section 2.3 Company-New Morton Joint Qualified
Plans . . . . . . . . . . . . . . . . 15
Section 2.4 Foreign Plans . . . . . . . . . . . . . 22
Section 2.5 Welfare Plans . . . . . . . . . . . . . 24
Section 2.6 Stock Option Plans . . . . . . . . . . 26
Section 2.7 Company Incentive Plans . . . . . . . . 27
Section 2.8 Severance Pay . . . . . . . . . . . . . 29
Section 2.9 Company Restricted Trust . . . . . . . 30
Section 2.10 Company Miscellaneous Plans; Post-
Distribution Liabilities . . . . . . 31
Section 2.11 Collective Bargaining Agreements;
Labor Management Relations Act . . . 31
Section 2.12 Other Balance Sheet Adjustments . . . . 32
Section 2.13 Preservation of Rights To Amend or
Terminate Plans . . . . . . . . . . . 32
Section 2.14 Reimbursement; Indemnification . . . . 33
Section 2.15 Further Transfers . . . . . . . . . . . 34
ARTICLE III
MISCELLANEOUS
Section 3.1 Complete Agreement; Construction . . . 35
Section 3.2 Guarantee of Subsidiaries'
Obligations . . . . . . . . . . . . . 35
Section 3.3 Failure of the Company and New
Morton To Agree on Certain
Determinations . . . . . . . . . . . 36
Section 3.4 Governing Law . . . . . . . . . . . . . 36
Section 3.5 Notices . . . . . . . . . . . . . . . . 37
Section 3.6 Amendments . . . . . . . . . . . . . . 38
Section 3.7 Successors and Assigns . . . . . . . . 38
Section 3.8 Termination . . . . . . . . . . . . . . 38
Section 3.9 No Third Party Beneficiaries . . . . . 38
Section 3.10 Titles and Headings . . . . . . . . . . 38
Section 3.11 Schedules . . . . . . . . . . . . . . . 39
Section 3.12 Legal Enforceability . . . . . . . . . 39
Signatures 40
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
Employee Benefits Allocation Agreement (the
"Agreement"), dated as of April 30, 1997, by and between
Morton International, Inc., an Indiana corporation (the
"Company"), and New Morton International, Inc., an Indiana
corporation and a wholly owned subsidiary of the Company ("New
Morton").
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to enter into the
Distribution Agreement (the "Distribution Agreement") dated as
of April 30, 1997, by and between the Company and New Morton,
pursuant to which, among other things, the Company will
distribute to holders of its common stock all the issued and
outstanding shares of common stock of New Morton (the
"Distribution");
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to enter into the
Combination Agreement, dated as of November 25, 1996 (the
"Combination Agreement"), by and among the Company, Autoliv
AB, a corporation organized under the laws of the Kingdom of
Sweden ("Autoliv"), Autoliv, Inc., a Delaware corporation
("New Parent"), and ASP Merger Sub Inc. a Delaware corporation
("Newco Sub") and wholly owned subsidiary of New Parent,
pursuant to which, among other things, Newco Sub will be
merged with and into the Company (the "Merger") and New Parent
will offer to acquire all of the outstanding capital stock of
Autoliv pursuant to the Exchange Offer (as defined in the
Combination Agreement, and, together with the other
transactions contemplated thereby, the "Transactions");
WHEREAS, it is intended that in connection with such
separation and distribution New Morton will adopt employee
benefit plans and programs which are substantially identical
to those sponsored by the Company; and
WHEREAS, in connection with such separation and
distribution, the Company and New Morton desire to provide for
the allocation of assets and liabilities and other matters
relating to employee benefit arrangements.
NOW, THEREFORE, in consideration of the mutual
agreements, provisions and covenants contained in this
Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General. As used in this Agreement,
the following terms shall have the following meanings:
Accountants: Ernst & Young or any other "Big Six"
accounting firm which is New Morton's outside auditor.
Bonus Plan: the Morton International, Inc.
executive bonus program which is comprised of the Morton
International, Inc. Key Executive Annual Bonus Program, the
Morton International, Inc. Staff Executive Annual Bonus
Program and the Morton International, Inc. Group Executive
Annual Bonus Program.
Code: the Internal Revenue Code of 1986, as
amended, or any successor legislation.
Collective Bargaining Agreement: any collective
bargaining and other labor agreement to which the Company or
any of its subsidiaries is a party, including, without
limitation, those listed on Schedule A.
Commission: the Securities and Exchange Commission.
Company Business: any business or operation of the
Company and its subsidiaries which is, pursuant to the
Distribution Agreement, to be conducted, following the
Distribution, by the Company or any Company Subsidiary or any
business or operation which is, following the Distribution,
otherwise conducted by the Company or any Company Subsidiary.
Company Common Stock: the Common Stock, par value
$1.00 per share, of the Company.
Company Employee: any individual who is, following
the Distribution, intended to be employed by the Company or any
Company Subsidiary on an ongoing basis.
Company Incentive Plan: the Bonus Plan, the Company
Option Plan or the LTIP.
Company Individual: any individual who (i) is a
Company Employee as of the Cut-off Date or, following the
Distribution, becomes a Company Employee pursuant to Section
2.15 hereof or (ii) is, as of the Cut-off Date, an employee of
or former employee of the Company or its predecessors whose
last employment with the Company or its predecessors was with
a Company Business or a Former Company Business other than
anyone who is to become a New Morton Employee pursuant to
Section 2.15 hereof or who was a corporate officer at the time
of retirement or (iii) is a beneficiary of any individual
specified in clause (i) or (ii).
Company Miscellaneous Plans: the Plans of the
Company and its subsidiaries, including, without limitation,
the Plans listed on Schedule D, but excluding any Qualified
Plan, Welfare Plan, any of the Company Incentive Plan, any
Plan which provides for the payment of severance, salary
continuation or similar benefits and any Plan which is
governed by a Collective Bargaining Agreement.
Company-New Morton Joint Qualified Plan: the Morton
International, Inc. Pension Plan (the "Joint Defined Benefit
Plan") or the Morton International, Inc. Employee Savings and
Investment Plan (the "Joint Savings Plan").
Company Option: an option to purchase shares of the
Company Common Stock granted pursuant to the Company Option
Plan.
Company Option Plan: the Morton International, Inc.
1989 Incentive Plan or any predecessor stock option plan of
the Company pursuant to which there are outstanding options.
Company Restricted Trust: the trust established
pursuant to a trust agreement between the Company and Bankers
Trust Company, as trustee, dated June 23, 1989.
Company Retained Foreign Plan: any Plan which is
maintained by a foreign subsidiary or foreign division of the
Company or any of its subsidiaries exclusively for the benefit
of Company Individuals.
Company Retained Qualified Plan: a Qualified Plan
sponsored or maintained by the Company or any of its
subsidiaries exclusively for the benefit of Company
Individuals.
Company Subsidiary: as of and following the
Distribution Date, any direct or indirect subsidiary of the
Company other than New Morton or any New Morton Subsidiary.
Company VEBA: the Morton International, Inc.
Employees' Insurance Trust established pursuant to a Trust
Agreement dated February 22, 1995 between the Company and Bank
of America Illinois (successor to Continental Trust Company).
Current Plan Year: the plan year or fiscal year, to
the extent applicable with respect to any Plan, during which
the Cut-off Date occurs. The plan year for the Bonus Plan,
the Company Option Plan and the LTIP shall be the year ended
June 30.
Cut-off Date: the close of business on the
Distribution Date.
Distribution: the distribution to holders of
Company Common Stock of the shares of New Morton Common Stock
and related rights owned by the Company on the Distribution
Date on the basis of one share of New Morton Common Stock for
each outstanding share of Company Common Stock.
Distribution Date: the date determined by the
Company's Board as of which the Distribution shall be
effected, which is presently contemplated to be April 30,
1997.
Enrolled Actuary: Hewitt Associates, or any other
enrolled actuary making actuarial or similar determinations
with respect to assets or liabilities relating to a particular
employee benefit plan selected by New Morton.
ERISA: the Employee Retirement Income Security Act
of 1974, as amended, or any successor legislation.
Ex-Distribution Date: the first trading day prior
to the Distribution Date on which the Company Common Stock is
traded on the New York Stock Exchange ex-dividend with respect
to the Distribution of New Morton Common Stock; provided, that
if the Company Common Stock does not trade ex-dividend prior
to the Distribution Date, the Ex-Distribution Date shall be
deemed to be the Distribution Date.
Former Company Businesses: all of the businesses
and operations heretofore but not currently conducted by the
Company or any of its current or former subsidiaries or
conducted currently or heretofore by any of the Company's
former subsidiaries all of which are listed on Schedule B and
all businesses or operations predominantly managed or operated
by, or otherwise operationally related to, the Company's
Automotive Safety Products Group which have been sold or
otherwise disposed of or discontinued prior to the
Distribution Date but shall not include any of the Former New
Morton Businesses.
Former New Morton Businesses: all of the businesses
and operations heretofore but not currently conducted by the
Company or any of its current or former subsidiaries or hereto
or currently conducted by any of its former subsidiaries or
predecessors which are listed on Schedule C and any other
business and operation not currently conducted by the Company
or any of its current subsidiaries or any predecessors of the
Company including Morton Thiokol, Inc., Thiokol Chemical
Corporation, Thiokol Corporation or Morton Norwich Products
Inc. and their respective subsidiaries and affiliates which
does not constitute a Former Company Business.
IRS: the Internal Revenue Service.
LTIP: the Morton International, Inc. Key Executive
Long Term Incentive Program.
New Morton Businesses: any business or operation of
the Company and its subsidiaries which is, pursuant to the
Distribution Agreement, to be conducted, following the
Distribution, by New Morton or any New Morton Subsidiary,
including the Corporate Operations (as defined in the
Distribution Agreement) or any business or operation which is,
following the Distribution, otherwise conducted by New Morton
or any New Morton Subsidiary.
New Morton Common Stock: the Common Stock, par
value $1.00 per share, of New Morton.
New Morton Employee: any individual who is,
following the Distribution, intended to be employed by New
Morton or a New Morton Subsidiary on an ongoing basis.
New Morton Free-Standing Foreign Plan: any Plan
which is maintained by a foreign subsidiary or foreign
division of the Company or any of its subsidiaries exclusively
for the benefit of New Morton Individuals.
New Morton Free-Standing Qualified Plan: the Morton
International, Inc. Pension Plan for Collectively Bargained
Employees, the Morton International, Inc. Retirement Income
Plan for Collectively Bargained Employees, the Morton
International, Inc. Bargaining Unit Employee Savings and
Investment Plan, and the Morton International, Inc. Retirement
Savings Plan.
New Morton Individual: any individual who (i) is a
New Morton Employee as of the Cut-off Date or, following the
Distribution, becomes a New Morton Employee pursuant to the
second sentence of Section 2.15 hereof, (ii) is, as of the
Cut-off Date, an employee of or former employee of the Company
or its predecessors whose last employment with the Company or
its predecessors was with a New Morton Business or a Former
New Morton Business (including, without limitation, retirees
from corporate headquarters' staff who retired on or prior to
the Cut-off Date or any corporate officer who retired prior to
the Cut-Off Date) other than anyone who is to become a Company
Employee, or (iii) is a beneficiary of any individual
specified in clause (i) or (ii).
New Morton Subsidiary: any direct or indirect
subsidiary of the Company that, effective as of the
Distribution Date or otherwise in connection with the
Distribution, will be, or is contemplated by the Distribution
Agreement to be, a direct or indirect subsidiary of New
Morton, and any other subsidiary of New Morton which may be
organized or acquired on or after the Distribution Date.
New Morton Option Plan: a Plan to be adopted by New
Morton pursuant to which options to purchase shares of New
Morton Common Stock may be granted to New Morton Employees.
New Morton Qualified Plan: a Qualified Plan to be
sponsored or maintained by New Morton or a New Morton
Subsidiary which will provide benefits for New Morton
Individuals who, immediately prior to the Cut-off Date, are
active or inactive participants in or otherwise entitled to
benefits under any Company-New Morton Joint Qualified Plan and
which is expected to provide substantially identical benefits
to the Company-New Morton Joint Qualified Plan in which each
such New Morton Individual currently participates.
Plan: any plan, program, policy or arrangement or
contract or agreement providing benefits for any group of
employees or former employees or individual employee or former
employee, or the beneficiary or beneficiaries of any such
employee or former employee, whether formal or informal or
written or unwritten and whether or not legally binding, and
including, without limitation, any means, whether or not
legally required, pursuant to which any benefit is provided
by an employer to any employee or former employee or the
beneficiary or beneficiaries of any such employee or former
employee.
Prior Plan Year: a plan year or fiscal year, to the
extent applicable with respect to any Plan, which ended on or
prior to the Cut-off Date.
Qualified Plan: a Plan which is an employee pension
benefit plan (within the meaning of Section 3(2) of ERISA) and
which constitutes or is intended in good faith to constitute a
qualified plan under Section 401(a) of the Code.
Welfare Plan: any Plan, including, without
limitation, the Plans listed on Schedule E, which is not a
Qualified Plan and which provides medical, health, disability,
accident, life insurance, death, dental or any other welfare
benefit, including, without limitation, any post-employment
benefit.
Section 1.2 Schedules, Etc. References to a
"Schedule" are, unless otherwise specified, to one of the
Schedules attached to this Agreement, and references to a
"Section" are, unless otherwise specified, to one of the
Sections of this Agreement.
Section 1.3 Certain Constructions. References to
the singular in this Agreement shall refer to the plural and
vice-versa and references to the disjunctive shall refer to
the conjunctive and vice-versa and references to the
masculine shall refer to the feminine and vice-versa.
ARTICLE II
EMPLOYEE BENEFITS; LABOR MATTERS
Section 2.1 New Morton Free-Standing Qualified
Plan.
(a) Effective as of the Cut-off Date, New Morton
shall or shall cause one or more New Morton Subsidiaries, as
appropriate, to assume or retain, as the case may be, and be
solely responsible for, all assets, liabilities and
obligations whatsoever of the Company and its subsidiaries
under the New Morton Free-Standing Qualified Plan; provided,
however, that the Company shall make all required
contributions, no later than the later of the Cut-off Date and
the date such contributions are legally required to be made,
to such New Morton Free-Standing Qualified Plan for all Prior
Plan Years, to the extent not previously made. The Company
and New Morton shall take such action as is necessary to
effect an adjustment to the books of the Company and New
Morton so that, as of the Cut-off Date, the prepaid expense
balances and accrued pension liabilities with respect to the
New Morton Free-Standing Qualified Plan are reflected on New
Morton's consolidated balance sheet rather than the Company's
consolidated balance sheet as of the Cut-off Date. New Morton
and the Company shall each take, or cause to be taken, all
such actions as may be necessary or appropriate in order to
establish New Morton or the New Morton Subsidiaries, as
appropriate, as successor to the Company or any of its
subsidiaries, as to all rights, assets, duties, liabilities
and obligations under, or with respect to, the New Morton
Free-Standing Qualified Plan, including, but not limited to,
the rights, assets, duties, liabilities and obligations of the
Company or any of its subsidiaries under, or with respect to,
any and all trust agreements to the extent that they relate to
such New Morton Free-Standing Qualified Plan. From and after
the Cut-off Date, the Company and the Company Subsidiaries
shall cease to have any liability or obligation whatsoever
with respect to the New Morton Free-Standing Qualified Plan,
except as otherwise specifically provided in this Section
2.01.
(b) Upon New Morton or any New Morton Subsidiary
becoming the successor employer or successor plan sponsor to
the Company or any of its subsidiaries under such New Morton
Free-Standing Qualified Plan, the Company agrees to take such
actions as may be necessary to amend each individual trust in
order for New Morton or a New Morton Subsidiary effectively to
maintain and administer such New Morton Free-Standing
Qualified Plan, including, if necessary, to direct the trustee
of each individual trust, or, to the extent applicable, each
master trust in which assets of such New Morton Free-Standing
Qualified Plan are invested, to transfer to the new trustee or
other funding agent appointed by New Morton for such plan the
amount of assets in such individual trust or master trust, as
the case may be, determined by the former trustee of such New
Morton Free-Standing Qualified Plan to be attributable to such
New Morton Free-Standing Qualified Plan. Such transfer shall
be made in cash, securities, other property or a combination
thereof, as determined by the Company and New Morton. The
Company agrees, during the period ending with the date of
complete transfer of assets to a trust or other funding
arrangement maintained by New Morton to cause distributions in
respect of retired or terminated participants who are New
Morton Individuals to be made, on behalf of New Morton, from
the New Morton Free-Standing Qualified Plan in accordance with
applicable law and pursuant to plan provisions and to cause
loans and hardship distributions to be made in accordance with
applicable law and pursuant to plan provisions. The Company
agrees that it shall, as soon as practicable after the
Distribution Date, provide New Morton such information (in the
possession of the Company or a Company Subsidiary and not
already in the possession of New Morton or a New Morton
Subsidiary) as may be reasonably requested by New Morton and
necessary in order for New Morton or any New Morton Subsidiary
effectively to maintain and administer the New Morton Free-
Standing Qualified Plan.
Section 2.2 Company Retained Qualified Plans.
Effective as of the Cut-off Date, the Company shall or shall
cause one or more Company Subsidiaries, as appropriate, to
retain and be solely responsible for, all liabilities and
obligations whatsoever of the Company and its subsidiaries
under each of the Company Retained Qualified Plans. The
Company and New Morton shall take such action as is necessary
to effect an adjustment to the books of the Company and New
Morton so that, as of the Cut-off Date, the prepaid expense
balances and accrued pension liabilities with respect to the
Company Retained Qualified Plans are reflected on the
Company's consolidated balance sheet rather than New Morton's
consolidated balance sheet as of the Cut-off Date. From and
after the Cut-off Date, New Morton and the New Morton
Subsidiaries shall cease to have any liability or obligation
whatsoever with respect to any of the Company Retained
Qualified Plans.
Section 2.3 Company-New Morton Joint Qualified
Plans.
(a) As soon as practicable after the date hereof
and effective as of the Cut-off Date, New Morton shall take,
or cause to be taken, all action necessary and appropriate to
establish and administer one or more new New Morton Qualified
Plans and to provide benefits thereunder for all New Morton
Individuals who, immediately prior to the Cut-off Date, were
participants in or otherwise entitled to benefits under any
Company-New Morton Joint Qualified Plan. New Morton agrees
that each such New Morton Individual shall be, to the extent
applicable, entitled, for all purposes under any applicable
new New Morton Qualified Plan, to be credited with the term of
service and any accrued benefit or account balance credited to
such New Morton Individual as of the Cut-off Date under the
terms of any applicable Company-New Morton Joint Qualified
Plan as if such service had been rendered to New Morton and as
if such accrued benefit or account balance had originally been
credited to such New Morton Individual under the new New
Morton Qualified Plan. The Company agrees to provide New
Morton, as soon as practicable after the Distribution Date
(with the cooperation of New Morton, to the extent that
relevant information is in the possession of New Morton or a
New Morton Subsidiary), with a list of the New Morton
Individuals who were, to the best knowledge of the Company,
participants in or otherwise entitled to benefits under each
Company-New Morton Joint Qualified Plan immediately prior to
the Cut-off Date, together with a listing, if requested by New
Morton, of each such New Morton Individual's term of service
for eligibility and vesting purposes under such Plan and a
listing of each such New Morton Individual's accrued benefit
or account balance thereunder. The Company shall, as soon as
practicable after the Distribution Date, provide New Morton
with such additional information (in the possession of the
Company or a Company Subsidiary and not already in the
possession of New Morton or a New Morton Subsidiary) as may be
reasonably requested by New Morton and necessary in order for
New Morton or the New Morton Subsidiary to establish and
administer effectively any new New Morton Qualified Plan.
(b) The Company agrees, as soon as practicable
following the Distribution Date, to direct the trustee of the
trust funding the Company-New Morton Joint Qualified Plan
which is a Joint Defined Benefit Plan to transfer to the
trustee or other funding agent of any applicable new New
Morton Qualified Plan, in cash, securities, other property or
a combination thereof, as determined by the Company and New
Morton, an amount equal to (W) plus (X) less (Y), as adjusted
by (Z) and as further reduced to reflect contributions due but
not paid in respect of New Morton Individuals with respect to
the portion of the Current Plan Year which ends on the Cut-off
Date (as set forth on Annex I); where (W) equals that amount
of the assets of the Joint Defined Benefit Plan which would be
allocated to the plan participants and beneficiaries who are
New Morton Individuals if the Company-New Morton Joint Defined
Benefit Plan had been terminated as of the Distribution Date
(the "Valuation Date"), using the actuarial assumptions and
methods set forth in Annex I, including the procedures
outlined in ERISA Section 4044 for allocating assets among
priority categories (with all of the foregoing calculations
being determined as of the Valuation Date by the Enrolled
Actuary, which determination shall be based upon the actuarial
assumptions set forth on Annex I hereto); where (X) equals the
amount of all contributions, if any, attributable to New
Morton Individuals made subsequent to the Valuation Date to
the Joint Defined Benefit Plan through the date of complete
transfer; where (Y) equals aggregate payments made from the
trust relating to the Joint Defined Benefit Plan in respect of
New Morton Individuals from the Valuation Date through the
date of complete transfer; and where (Z) equals the amount of
the net earnings or losses, as the case may be, from the
Valuation Date through the date of transfer, on the average of
the daily balances of W, X and Y and based upon the actual
rate of return earned by the applicable Joint Defined Benefit
Plan during such period. To the extent that total assets of
the Joint Defined Benefit Plan exceeds the total liabilities
of the Joint Defined Benefit Plan as of the Valuation Date
calculated using the actuarial assumptions on Annex I (the
"Excess"), then in addition to the transfer described in the
preceding sentence an additional amount of assets shall be
transferred equal to the percentage of such Excess that the
liabilities of such plan (determined using the same actuarial
assumptions) attributable to New Morton Individuals bears to
the total plan liabilities. Notwithstanding the foregoing
provisions of Section 2.03(b), each such transfer shall be
adjusted, if and to the extent necessary, to comply with
Section 414(l) of the Code and the regulations promulgated
thereunder. The Company further agrees that, as soon as
practicable following the later of the Distribution Date and
the establishment of the qualified trust for the New Morton
Qualified Plan which is a Joint Defined Benefit Plan, an
initial transfer of assets will be made based on an estimate
prepared by the Enrolled Actuary of the amount described in
clause (W) as of the Valuation Date (using January 1, 1996
participant data for such estimate). Once the final transfer
amount is determined, a transfer of assets will be made from
the Company-New Morton Joint Qualified Plan to the New Morton
Qualified Plan (or vice versa) as necessary to result in a
split of assets which is consistent with this section.
(c) The Company agrees, as soon as practicable
following the Distribution Date, to direct the trustee of the
trust funding the Company-New Morton Joint Qualified Plan
which is a Joint Savings Plan to transfer to the trustee or
other funding agent of any applicable new New Morton Qualified
Plan in cash, securities or other property or a combination
thereof, as determined by the Company and New Morton, an
amount equal to the account balances as of the date of
transfer attributable to the participants and beneficiaries in
the Joint Savings Plan who are New Morton Individuals plus the
portion of any unallocated contributions and trust earnings
attributable to such participants and beneficiaries who are
New Morton Individuals. To the extent practicable such
transfers shall be effected so as to preserve investment
elections of the participants and beneficiaries in the Joint
Savings Plan.
(d) New Morton and the Company shall, in connection
with the transfers described in this Section 2.03, cooperate
in making any and all appropriate filings required under the
Code or ERISA, and the regulations thereunder, and any
applicable securities laws and take all such action as may be
necessary and appropriate to cause such transfers to take
place as soon as practicable after the Distribution Date;
provided, however, that each such transfer shall not take
place until as soon as practicable after the later of (i) the
expiration of a 30-day period following the date of filing the
required Forms 5310 (or any successor form thereto) with the
IRS and (ii) the earlier of (A) the receipt of a favorable IRS
determination letter with respect to the qualification of each
applicable new New Morton Qualified Plan under Section 401(a)
of the Code or (B) the receipt by the Company of an opinion of
New Morton's counsel in the form set forth in Annex III hereto
to the effect that each applicable new New Morton Qualified
Plan is intended in good faith to be qualified under Section
401(a) of the Code. The Company agrees to provide to New
Morton's counsel such information in the possession of the
Company or any Company Subsidiary as may be reasonably
requested by New Morton's counsel in connection with the
issuance of such opinion. The Company agrees, during the
period ending with the date of complete transfer of assets and
liabilities to each such new New Morton Qualified Plan, to
cause distributions in respect of terminated or retired
participants who are New Morton Individuals to be made, on
behalf of New Morton, from the relevant Company-New Morton
Joint Qualified Plan in accordance with applicable law and
pursuant to plan provisions.
(e) Except as specifically set forth in this
Section 2.03, from and after the Cut-off Date, the Company and
the Company Subsidiaries shall cease to have any liability or
obligation whatsoever with respect to New Morton Individuals
under the Company-New Morton Joint Qualified Plans, and New
Morton shall assume or retain, as the case may be, and shall
be solely responsible for, all liabilities and obligations
whatsoever of the Company and its subsidiaries with respect to
New Morton Individuals under the Company-New Morton Joint
Qualified Plans; provided, however, that the Company shall
either be responsible for or make all required contributions,
no later than the later of the Cut-off Date and the date such
contributions are legally required to be made, in respect of
New Morton Individuals with respect to each Company-New Morton
Joint Qualified Plan for all Prior Plan Years and for the
portion of the Current Plan Year ending on the Cut-off Date
(determined as set forth in Section 2.03(b)), to the extent
not previously made. The Company and New Morton shall take
such action as is necessary to effect an adjustment to the
books of the Company and New Morton so that, as of the Cut-off
Date, the prepaid expense balances and accrued pension
liabilities with respect to the Company-New Morton Joint
Qualified Plans to the extent attributable to the New Morton
Individuals are reflected on New Morton's consolidated
balance sheet rather than the Company's consolidated balance
sheet as of the Cut-off Date.
Section 2.4 Foreign Plans. (a) With respect to
each New Morton Free-Standing Foreign Plan:
(i) New Morton and the Company shall take, or cause
to be taken, all such action as may be necessary or
appropriate in order to establish New Morton or one or
more New Morton Subsidiaries, as appropriate, as
successor to the Company or any of its subsidiaries as to
all rights, assets, duties, liabilities and obligations
as of the Cut-off Date under, or with respect to, such
New Morton Free-Standing Foreign Plan. The Company
agrees that it shall, as soon as practicable, provide New
Morton with all information (in the possession of the
Company or a Company Subsidiary and not already in the
possession of New Morton or a New Morton Subsidiary) as
may be reasonably requested by New Morton and necessary
for the New Morton or New Morton Subsidiaries to
administer effectively such New Morton Free-Standing
Foreign Plan.
(ii) From and after the Cut-off Date, the Company
and the Company Subsidiaries shall cease to have any
liability or obligation whatsoever under such New Morton
Free-Standing Foreign Plan; provided, however, that the
Company shall make all required contributions to such New
Morton Free-Standing Foreign Plan for all Prior Plan
Years, to the extent not previously made. The Company
and New Morton shall take such action as is necessary to
effect an adjustment to the books of the Company and New
Morton so that, as of the Cut-off Date, the prepaid
expense balances and accrued pension liabilities with
respect to such New Morton Free-Standing Foreign Plan are
reflected on New Morton's consolidated balance sheet,
rather than the Company's consolidated balance sheet as
of the Cut-off Date. As of the Cut-off Date, New Morton
and the New Morton Subsidiaries shall assume or retain,
as the case may be, and shall be solely responsible for,
all liabilities and obligations whatsoever under such New
Morton Free-Standing Foreign Plan, except as otherwise
specifically provided in this Section 2.04(a)(ii).
(b) Effective as of the Cut-off Date, Company and
the Company Subsidiaries shall take, or cause to be taken, all
such action as may be necessary or appropriate in order to
establish Company or one or more Company Subsidiaries, as
appropriate, to retain and be solely responsible for all
assets, liabilities and obligations whatsoever of the Company
and its subsidiaries under each Company Retained Foreign Plan.
The Company and New Morton shall take such action as is
necessary to effect an adjustment to the books of the Company
and New Morton so that, as of the Cut-off Date, the prepaid
expense balances and accrued pension liabilities with respect
to the Company Retained Foreign Plans are reflected on the
Company's consolidated balance sheet rather than New Morton's
consolidated balance sheet as of the Cut-off Date. From and
after the Cut-off Date, New Morton and the New Morton
Subsidiaries shall cease to have any liability or obligation
whatsoever with respect to any of the Company Retained Foreign
Plans.
Section 2.5 Welfare Plans.
(a) As of the Cut-off Date, New Morton shall assume
or retain, or cause a New Morton Subsidiary to assume or
retain, as the case may be, and shall be solely responsible
for, or cause its insurance carriers to be responsible for,
all liabilities and obligations whatsoever of the Company and
its subsidiaries whether or not incurred prior to the Cut-off
Date in connection with claims under any Welfare Plan
(including any Welfare Plan providing for post-retirement
benefits) brought by or in respect of any New Morton
Individual and the Company and the Company Subsidiaries shall
cease to have any such liability or obligation.
(b) New Morton shall take, or cause to be taken,
all actions necessary and appropriate on behalf of itself and
the New Morton Subsidiaries (i) to assume any existing Welfare
Plan of the Company or any of its subsidiaries, which Welfare
Plan, as of the Cut-off Date, provides benefits solely for New
Morton Individuals or (ii) otherwise to adopt such Welfare
Plans as necessary to provide welfare benefits, effective as
of the Cut-off Date, and in either case shall assume the
liabilities and obligations to New Morton Individuals which
are or shall become the responsibility of New Morton under
Section 2.05(a). For this purpose with respect to any New
Morton individual, New Morton or a New Morton Subsidiary
shall, to the extent applicable, credit such New Morton
Individual with term of service and consider such New Morton
Individual to have satisfied any other eligibility criteria
(including satisfaction of applicable deductibles or
coinsurance amounts) as of the Cut-off Date as if such service
had been rendered to New Morton or the New Morton Subsidiary
and as if such eligibility criteria had been satisfied while
employed by New Morton or the New Morton Subsidiary. In
connection with the foregoing, the Company agrees to provide
New Morton or its designated insurance representative with
such information (in the possession of the Company or any
Company Subsidiary and not already in the possession of New
Morton or a New Morton Subsidiary) as may be reasonably
requested by New Morton and necessary for New Morton and the
New Morton Subsidiaries to assume or establish any such
Welfare Plan.
(c) The Company shall take, or cause to be taken,
all actions necessary and appropriate to direct the trustee of
the Company VEBA to transfer in cash to the new trustee or
other funding agent appointed by New Morton for a trust
arrangement similar to the Company VEBA the amount of assets
in such trust determined by the Accountants to be attributable
as of the last day of the month in which the Cut-off Date
occurs to contributions (and earnings thereon) made by the
employees who are New Morton Employees. The Company shall, as
soon as practicable after the Distribution Date, provide New
Morton with such additional information (not already in the
possession of New Morton or the New Morton Subsidiaries) as
may be reasonably requested by New Morton and necessary in
order for the New Morton Subsidiaries to manage effectively
the trust assets transferred in accordance with this Section
2.05(c).
(d) The Company and the Company Subsidiaries shall
assume, or retain, all liabilities and obligations whatsoever
of the Company and its subsidiaries for benefits under any
Welfare Plan other than as set forth in Section 2.05(a).
Section 2.6 Stock Option Plans. The Company and
New Morton shall cooperate and take all action necessary
(including obtaining the consent of the holders of the Company
Options, if required, and, if deemed necessary or appropriate,
seeking a "no-action" letter or interpretive advice from the
Commission) to amend (if necessary) the Company Option Plan
and to adopt the New Morton Option Plan so that as of the
Distribution Date, each Company Option which is outstanding
and not exercised immediately prior to the Distribution Date
and which is held by a New Morton Individual shall, without
any action on the part of the holder thereof, be converted
into an option to purchase shares of New Morton Common Stock,
the number of shares of New Morton Common Stock subject to,
and the exercise price of such option to be determined in
accordance with, the requirements of Section 424 of the Code
and the regulations promulgated thereunder, based upon (A) the
average of the high and low trading prices on the New York
Stock Exchange for the Company Common Stock for each of the
last five trading days prior to the Ex-Distribution Date and
(B) the average of the high and low trading prices on the New
York Stock Exchange for the New Morton Common Stock for each
of the first five trading days following the Distribution Date
on which the New Morton Common Stock is traded regular way on
the New York Stock Exchange; such option to be subject to
substantially similar terms and conditions as in effect prior
to the conversion. The exercise price of any such option
shall be rounded to the nearest $.01; the number of shares
subject to any such option shall be rounded to the nearest
share. Any related limited stock appreciation rights or
supplemental cash payment rights held by New Morton
Individuals shall be adjusted in a consistent manner and shall
be assumed by, and become the responsibility of, New Morton.
Section 2.7 Company Incentive Plans.
(a) The Company shall be responsible for the
payment of all liabilities and obligations for benefits due
and payable or unpaid as of and through the Cut-off Date under
each Company Incentive Plan with respect to any Prior Plan
Year (other than the Current Plan Year). Any deferred bonuses
that were earned with respect to any Prior Plan Year that are
not paid as of the Cut-off Date shall be treated as benefits
for the Current Plan Year in accordance with Section 2.07(b).
(b) Except as specifically provided in Section
2.06, for any Current Plan Year under each Company Incentive
Plan, the Company and the Company Subsidiaries shall be
responsible for the payment of all liabilities and obligations
for benefits unpaid as of and through the Cut-off Date
(including for deferred compensation) with respect to Company
Individuals and New Morton and the New Morton Subsidiaries
shall assume and be responsible for the payment of all
liabilities and obligations for benefits unpaid as of and
through the Cut-off Date (including for deferred compensation)
with respect to New Morton Individuals. Except as
specifically provided in Section 2.06, each of the Company and
New Morton will, to the extent practicable, either continue
each such Company Incentive Plan or adopt a new Plan in
substitution therefor and, in this connection, adjust, in a
manner equitable to participants, any incentive goals
contained in each Company Incentive Plan to reflect the
Distribution.
(c) For purposes of the Company Incentive Plans,
individuals who, in connection with the Distribution, cease to
be employees of the Company and become New Morton Employees
shall not be deemed to have terminated employment for purposes
of any deferral elections made by such individuals and service
with New Morton shall be deemed continuous service with the
Company.
Section 2.8 Severance Pay.
(a) New Morton and the Company agree that, with
respect to individuals who, in connection with the
Distribution, cease to be employees of the Company and become
New Morton Employees, such cessation shall not be deemed a
severance of employment from the Company and its subsidiaries
for purposes of any Plan of the Company or any of its
subsidiaries that provides for the payment of severance,
salary continuation or similar benefits and shall, in
connection with the Distribution, if and to the extent
appropriate obtain waivers from individuals against any such
assertion.
(b) Notwithstanding anything in the Agreement to
the contrary, the Company and the Company Subsidiaries shall
assume and be solely responsible for all liabilities and
obligations whatsoever in connection with claims made by or on
behalf of the Company Individuals and New Morton and the New
Morton Subsidiaries shall assume and be solely responsible for
all liabilities and obligations whatsoever in connection with
claims made by or on behalf of New Morton Individuals in
respect of severance pay, salary continuation and similar
obligations relating to the termination or alleged termination
of any such person's employment either before, to the extent
unpaid on the Cut-off Date, or on or after the Cut-off Date.
Section 2.9 Company Restricted Trust.
(a) Effective as of the Distribution Date, New
Morton shall or shall cause one or more New Morton
Subsidiaries, as appropriate, to assume or retain, as the case
may be, and be solely responsible for, all assets, liabilities
and obligations whatsoever of the Company and its subsidiaries
with respect to New Morton Individuals to the extent such
liabilities are funded as of the Cut-off Date under the
Company Restricted Trust. In this connection, New Morton
agrees to establish one or more trusts substantially similar
to the Company Restricted Trust to hold the assets
attributable to such liabilities and the Company agrees to
take such action as may be necessary to amend the Company
Restricted Trust to effectuate the purposes of this Section
2.09 and to direct the trustee of the Company Restricted Trust
to transfer to the new trustee or other funding agent
appointed by New Morton the amount of assets, plus the portion
of any unallocated contributions and trust earnings,
determined by the Enrolled Actuary in accordance with the
procedures set forth on Annex II hereto to be attributable to
New Morton Individuals. Such transfer shall be made in cash,
securities, other property or a combination thereof, as
determined by the Company and New Morton.
Section 2.10 Company Miscellaneous Plans; Post-
Distribution Liabilities.
(a) The Company and the Company Subsidiaries shall
be solely responsible for the payment of all liabilities and
obligations whatsoever with respect to any Company Individual
unpaid as of and through the Cut-off Date under any Company
Miscellaneous Plan and New Morton and the New Morton
Subsidiaries shall assume and be solely responsible for the
payment of all liabilities and obligations whatsoever with
respect to any New Morton Individual unpaid as of and through
the Cut-off Date under any Company Miscellaneous Plan.
(b) The Company and the Company Subsidiaries shall
be solely responsible for the payment of all liabilities and
obligations whatsoever arising with respect to any Company
Individual and attributable to any period subsequent to the
Cut-off Date and New Morton and the New Morton Subsidiaries
shall be solely responsible for the payment of all liabilities
and obligations whatsoever arising with respect to any New
Morton Individual and attributable to any period subsequent to
the Cut-off Date.
Section 2.11 Collective Bargaining Agreements;
Labor Management Relations Act. New Morton agrees that it
shall assume and discharge all of the liabilities and
obligations of the Company and its subsidiaries relating to
New Morton Individuals which have not been satisfied as of and
through the Cut-off Date with respect to any Collective
Bargaining Agreement, and to be bound by any and all
provisions of such Collective Bargaining Agreements with
respect to such New Morton Individuals as if New Morton or a
New Morton Subsidiary were the signatory employer. The
provisions of this Section 2.11 are, to the extent applicable,
governed by and subject to the Labor Management Relations Act,
as amended.
Section 2.12 Other Balance Sheet Adjustments. To
the extent not otherwise provided in this Agreement, the
Company and New Morton shall take such action as is necessary
to effect an adjustment to the books of the Company and New
Morton so that, as of the Cut-off Date, the prepaid expense
balances and accrued liabilities with respect to any employee
liability or obligation assumed or retained as of the Cut-off
Date by the Company and the Company Subsidiaries, on the one
hand, and New Morton and the New Morton Subsidiaries, on the
other hand, are appropriately reflected on the respective
consolidated balance sheets as of the Cut-off Date,
respectively, of the Company and New Morton.
Section 2.13 Preservation of Rights To Amend or
Terminate Plans. No provisions of this Agreement, including,
without limitation, the agreement of the Company or New Morton
that it, or any Company Subsidiary or New Morton Subsidiary,
will make a contribution or payment to or under any Plan
herein referred to for any period, shall be construed as a
limitation on the right of the Company or New Morton or any
Company Subsidiary or New Morton Subsidiary to amend such Plan
or terminate its participation therein which the Company or
New Morton or any Company Subsidiary or New Morton Subsidiary
would otherwise have under the terms of such Plan or
otherwise, and no provision of this Agreement shall be
construed to create a right in any employee or former employer
or beneficiary of such employee or former employee under a
Plan which such employee or former employer or beneficiary
would not otherwise have under the terms of the Plan itself.
Section 2.14 Reimbursement; Indemnification. The
Company and New Morton acknowledge that the Company and the
Company Subsidiaries, on the one hand, and New Morton and the
New Morton Subsidiaries, on the other hand, may incur costs
and expenses (including, but not limited to, contributions to
Plans and the payment of insurance premiums) arising from or
related to any of the Plans which are, as set forth in this
Agreement, the responsibility of the other party hereto.
Accordingly, the Company (and any Company Subsidiary
responsible therefor) and New Morton (and any New Morton
Subsidiary responsible therefor) agree to reimburse each
other, as soon as practicable but in any event within 30 days
of receipt from the other party of appropriate verification,
for all such costs and expenses reduced by the amount of any
tax reduction or recovery of tax benefit realized by the
Company or New Morton, as the case may be, in respect of the
corresponding payment made by it; provided, however, that
notwithstanding anything in this Section 2.14 to the contrary,
costs and expenses or other recovery arising from any
challenge by the U.S. Government to the allocation of assets
set forth in Section 2.03 shall not be subject to
reimbursement and indemnification under this Agreement or the
Distribution Agreement. All liabilities and obligations
retained, assumed or indemnified by New Morton or any New
Morton Subsidiary pursuant to this Agreement, in each case,
shall be deemed to be New Morton Liabilities, as defined in
the Distribution Agreement, and all liabilities retained,
assumed or indemnified by the Company or any Company
Subsidiary pursuant to this Agreement, shall be deemed to be
Safety Liabilities, as defined in the Distribution Agreement,
and, in each case, shall be subject to the indemnification
provisions set forth in Article V thereof.
Section 2.15 Further Transfers. The Company and
New Morton recognize that there may be New Morton Individuals
who will, after the Distribution Date, become employed by the
Company and there may be Company Individuals who become
employed, after the Distribution Date, by New Morton. Any
such transfers or assumptions will be considered to be
governed by the terms of this Agreement and shall not require
the agreement of the Company and New Morton if they occur
within 12 months of the Distribution Date. After such date,
if the Company and New Morton so agree with respect to any
such individuals, the assets and liabilities with respect to
such employees which are associated with the plans and
programs described in this Agreement may be transferred and
assumed in a manner consistent with this Agreement. Any costs
associated with or arising out of such transfers and
assumptions shall be borne by the party that becomes the new
employer of the transferred individual.
ARTICLE III
MISCELLANEOUS
Section 3.1 Complete Agreement; Construction. This
Agreement, including the Schedules and Annexes hereto and the
agreements and documents referred to herein, shall constitute
the entire agreement between the parties with respect to the
subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such
subject matter. Notwithstanding any other provisions in this
Agreement or the Distribution Agreement to the contrary, in
the event and to the extent that there shall be a conflict
between the provisions of the Distribution Agreement and this
Agreement, the provisions of this Agreement shall control,
except with respect to Section 9.03 of the Distribution
Agreement, which shall control over any contrary provision
hereof.
Section 3.2 Guarantee of Subsidiaries' Obligations.
The Company shall cause to be performed, and hereby guarantees
the performance and payment of, all actions, agreements,
obligations and liabilities set forth herein to be performed
or paid by the Company Subsidiaries and New Morton shall cause
to be performed, and hereby guarantees the performance and
payment of, all actions, obligations and liabilities set forth
herein to be performed or paid by the New Morton Subsidiaries.
Section 3.3 Failure of the Company and New Morton
To Agree on Certain Determinations. In any case in which the
Company shall disagree with the determination of an amount
which this Agreement requires to be made by the Enrolled
Actuary or the Accountants (as the case may be), the Company
shall have the right within 30 days after receipt of notice of
such determination and back-up workpapers to engage at the
expense of the Company, an enrolled actuary (or "Big Six"
accounting firm) to make the determination of such amount. If
the amount determined by such actuaries (or "Big Six"
accounting firm) should differ, such amount shall be finally
determined by another enrolled actuary (or "Big Six"
accounting firm) selected by agreement between or among the
Enrolled Actuary (or the Accountants) and the enrolled actuary
or enrolled actuaries (or Big Six accounting firm or firms)
for the Company, whose fees and expenses shall be borne solely
by the Company.
Section 3.4 Governing Law. Subject to applicable
federal law, this Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without
regard to the principles of conflicts of laws thereof.
Section 3.5 Notices. All notices and other
communications hereunder shall be in writing and shall be
delivered by hand or mailed by registered or certified mail
(return receipt requested) to the parties at the following
addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the
date on which such notice is received:
To the Company:
Autoliv ASP, Inc.
3350 Airport Road
Ogden, Utah 84409
Attention: Corporate Secretary
with a copy to:
Autoliv, Inc.
c/o Autoliv AB
Box 70381
S10724 Stockholm
Sweden
Attention: Corporate Secretary
and
Skadden, Arps, Slate, Meagher & Flom
25 Bucklersbury
London EC4N 8DA, England
Attention: Scott V. Simpson, Sr., Esq.
To New Morton:
New Morton International, Inc.
100 North Riverside Drive
Chicago, Illinois 60606-1560
Attention: Corporate Secretary
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Jodi J. Schwartz
Section 3.6 Amendments. This Agreement may not be
modified or amended except by an agreement in writing signed
by the parties.
Section 3.7 Successors and Assigns. This Agreement
and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties and their respective
successors and permitted assigns.
Section 3.8 Termination. This Agreement may be
terminated in the event that the Distribution Agreement is
terminated and the Distribution abandoned prior to the
Distribution Date. In the event of such termination, neither
party shall have any liability of any kind to the other party.
Section 3.9 No Third Party Beneficiaries. This
Agreement is solely for the benefit of the parties hereto and
their respective subsidiaries and should not be deemed to
confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 3.10 Titles and Headings. Titles and
headings to sections herein are inserted for the convenience
of reference only and are not intended to be a part of or to
affect the meaning of or interpretation of this Agreement.
Section 3.11 Schedules. The Schedules shall be
construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim
herein.
Section 3.12 Legal Enforceability. Any provision
of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of the day and year first
above written.
MORTON INTERNATIONAL, INC.
By /s/ P. Michael Phelps
-------------------------------
P. Michael Phelps
Vice President and Secretary
NEW MORTON INTERNATIONAL, INC.
By /s/ Christopher K. Julsrud
-------------------------------
Christopher K. Julsrud
Vice President, Human Resources
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
AUTOLIV, INC.
AUTOLIV, INC., a Delaware corporation, the original Certificate of
Incorporation of which was filed with the Secretary of State of the State
of Delaware on October 1, 1996 and a Certificate of Amendment of which was
filed with the Secretary of State of the State of Delaware on November 20,
1996, HEREBY CERTIFIES that this Restated Certificate of Incorporation,
restating, integrating and amending its Certificate of Incorporation, was
duly adopted in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
FIRST: The name of the Corporation is Autoliv, Inc. (hereinafter
the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at that address is
The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 350,000,000 of which 25,000,000 shares
shall be Preferred Stock, of the par value of $1.00 per share, and
325,000,000 shares shall be Common Stock, of the par value of $1.00 per
share. The authorized shares of Preferred Stock and Common Stock will,
except as otherwise required by applicable law or the rules of any stock
exchange on which the corporation's stock is traded, be available for
issuance without any further action by the stockholders.
A. Preferred Stock. The board of directors of the Corporation (the
"Board of Directors") is expressly authorized to provide for the issue of
all or any shares of the Preferred Stock, in one or more series, and to fix
for each such series such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating,
optional or other special rights and such qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions adopted by the Board of Directors providing for the issue of
such series (a "Preferred Stock Designation") and as may be permitted by
the GCL, including terms and rights relating to (a) whether dividends, if
any, will be cumulative or non-cumulative and the dividend rate of the
series, (b) the dates at which dividends, if any, will be payable, (c) the
redemption rights and price or prices, if any, for shares of the series,
(d) the terms and amount of any sinking fund provided for the purchase or
redemption of shares of the series, (e) the amounts payable on shares of
the series in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, (f) whether
the shares of the series will be convertible into shares of any other class
or series, or any other security, of the Corporation or any other
corporation, and, if so, the specification of such other class or series or
such other security, the conversion price or prices or rate or rates, any
adjustments thereof, the date or dates as of which such shares shall be
convertible and all other terms and conditions upon which such conversion
may be made, (g) restrictions on the issuance of shares of the same series
or of any other class or series and (h) the voting rights, if any, of the
holders of such series. The number of authorized shares of Preferred Stock
may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of
the voting power of all of the then outstanding shares of the capital stock
of the Corporation entitled to vote generally in the election of directors
(the "Voting Stock"), voting together as a single class, without a separate
vote of the holders of the Preferred Stock, or any series thereof, unless a
vote of any such holders is required pursuant to any Preferred Stock
Designation or by the GCL.
B. Common Stock. Except as otherwise required by law or as
otherwise provided in any Preferred Stock Designation, the holders of
Common Stock shall be entitled to receive, out of any funds legally
available for the purpose, such dividends as may be declared from time to
time by the Board of Directors. When and as dividends are declared on the
Common Stock, whether payable in cash, property or securities of the
Corporation, each holder of Common Stock will be entitled to participate
in such dividends ratably on a per share basis. In the event of any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, or upon the distribution of its assets, after
the payment in full or the setting apart for payment of such preferential
amounts, if any, to which the holders of Preferred Stock at the time
outstanding shall be entitled, the remaining assets of the Corporation
available for payment and distribution to stockholders shall, subject to
any participating or similar rights of any series of Preferred Stock at the
time outstanding, be distributed ratably among the holders of Common Stock
at the time outstanding. Shares of Common Stock shall have no preference,
conversion, exchange, preemptive or other similar rights. Except as
otherwise required by the GCL, on all matters to be voted on by the
Corporation's stockholders, the Common Stock will be entitled to one vote
per share. Except as otherwise required by law or the terms of any series
of Preferred Stock, the Common Stock will vote together with the Preferred
Stock on all matters submitted to a vote of stockholders.
FIFTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(2) a. Number, election and terms of directors. Subject to the
rights of the holders of any series of Preferred Stock to elect additional
directors under specified circumstances, the number of directors shall be
fixed from time to time exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the number of directors which the
Corporation would have if there were no vacancies (the "Whole Board"). The
directors, other than those who may be elected by the holders of any series
of Preferred Stock under specified circumstances, shall be divided, with
respect to the time for which they severally hold office, into three
classes, with the term of office of the first class to expire at the 1998
annual meeting of stockholders, the term of office of the second class to
expire at the 1999 annual meeting of stockholders and the term of office of
the third class to expire at the 2000 annual meeting of stockholders, with
each director to hold office until his or her successor shall have been
duly elected and qualified. At each annual meeting of stockholders,
commencing with the 1998 annual meeting, (i) directors elected to succeed
those directors whose terms then expire shall be elected by plurality vote
for a term of office to expire at the third succeeding annual meeting of
stockholders after their election, with each director to hold office until
his or her successor shall have been duly elected and qualified, and (ii)
if authorized by a resolution of the Board of Directors, directors may be
elected to fill any vacancy on the Board of Directors, regardless of how
such vacancy was created.
b. Stockholder nomination of director candidates and introduction
of business. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting
of the stockholders of the Corporation shall be given in the manner
provided in the By-Laws of the Corporation.
c. Newly created directorships and vacancies. Subject to the rights
of the holders of any series of Preferred Stock, and unless the Board of
Directors otherwise determines, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies of the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause may be filled only
by a majority vote of the directors then in office, though less than a
quorum, and directors so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of office of the class
to which they have been elected expires and until such director's successor
shall have been duly elected and qualified. No decrease in the number of
authorized directors constituting the entire Board of Directors shall
shorten the term of any incumbent director.
d. Removal. Subject to the rights of the holders of any class or
series of Preferred Stock, any director, or the entire Board of Directors,
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least 80 percent of the voting power
of all the then-outstanding shares of the Voting Stock, voting together as
a single class.
(3) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL and this Certificate of Incorporation.
SIXTH: Any action required or permitted to be taken by the
stockholders of the Corporation may only be effected at an annual or
special meeting of stockholders of the Corporation and may not be
effected by any consent in writing by any such holders. Special meetings of
stockholders of the Corporation may be called only by the Board of
Directors pursuant to a resolution adopted by a majority of the Whole
Board.
SEVENTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director for any act or omission, except to
the extent such exemption from liability or limitation thereof is not
permitted under the GCL. If the GCL is hereafter amended to permit further
elimination or limitation of the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the GCL as so amended. Any repeal or
modification of this Article SEVENTH by the stockholders of the Corporation
or otherwise shall not apply to or have any adverse effect on any right or
protection of a director of the Corporation existing hereunder for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
EIGHTH: (1) The Corporation shall, to the fullest extent permitted
by Section 145 of the GCL, as the same exists or may hereafter be amended
(but, in the case of any such amendment, to the fullest extent permitted by
law, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including any action by or in the right of
the Corporation) against any expenses (including attorneys' fees),
judgments, fines and amounts paid or to be paid in settlement, excise taxes
or penalties arising under the Employee Retirement Income Security Act of
1974, as amended, actually and reasonably incurred by such person in
connection with such action, suit or proceeding (and such indemnification
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of his heirs, executors
and administrators) by reason of the fact that he, or a person of whom he
is a legal representative, is or was an officer, director, employee or
agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise if such
person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceedings, had no reasonable cause to believe
that his conduct was unlawful; provided, however, that except as provided
in subsection (7) of this Article EIGHTH, the Corporation shall indemnify
any such person seeking indemnification in connection with a proceeding
or part thereof initiated by such a person only if such proceeding (or part
thereof) was authorized by the Board of Directors. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceedings, had reasonable cause to believe that his conduct was unlawful.
The rights to indemnification pursuant to this Article EIGHTH (including
advancement of expenses) shall be a contract right.
(2) Any indemnification under subsection (1) of this Article EIGHTH
(unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsection (1) of this Article EIGHTH. Such determination shall be made (i)
by a majority vote of the directors who are not parties to such action,
suit or proceeding even though less than a quorum, or (ii) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (iii) by the stockholders.
(3) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking (to the extent required by the GCL) by or on behalf of such
director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the
Corporation as authorized in this Article EIGHTH. Such expenses (includ-
ing attorneys' fees) incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
(4) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Article EIGHTH shall not
be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to
action in another capacity while holding such office.
(5) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
any liability asserted against and incurred by such person in any such
capacity or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such
liability under this Article EIGHTH.
(6) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article EIGHTH shall continue as to a person who
has ceased to be a director or officer and shall inure to the benefit of
the heirs, executor and administrators of such a person. The
indemnification and advancement of expenses provided by, or grants pursuant
to, this Article EIGHTH shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be an employee or agent
(other than an officer or director), and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(7) If a claim for indemnification pursuant to this Article EIGHTH
is not paid in full by the Corporation within 30 days after a written claim
has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall
also be entitled to be paid the expenses of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been rendered to the Corporation) that the claimant has not
met the applicable standard of conduct set forth in the GCL for the
Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. The Corporation
shall be precluded from asserting in any judicial proceeding commenced
pursuant to this paragraph that the procedures and presumptions of this
Article EIGHTH are not valid, binding and enforceable and shall stipulate
in such proceeding that the Corporation is bound by all the provisions of
this Article. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because such person has met
the applicable standard of conduct set forth in the GCL, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel or stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met such applicable standard
of conduct.
NINTH: In addition to any other considerations which the Board of
Directors may lawfully take into account, in determining whether to take or
to refrain from taking corporate action on any matter, including making or
declining to make any recommendation to the shareholders of the
Corporation, the Board of Directors may in its discretion consider the
long-term as well as short-term best interests of the Corporation
(including the possibility that these interests may be best served by the
continued independence of the Corporation), taking into account, and
weighing as the directors deem appropriate, the effects of such action on
employees, suppliers and customers of the Corporation and its subsidiaries
and the effect upon communities in which offices or other facilities of the
Corporation are located, and any other factors the directors consider
pertinent.
TENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered in the manner provided in the By-Laws of the
Corporation, to make, alter, amend and repeal the By-Laws of the
Corporation in any respect not inconsistent with the laws of the State of
Delaware or with this Restated Certificate of Incorporation of the
Corporation.
ELEVENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by the GCL, and
all rights conferred upon stockholders herein are granted subject to this
reservation; provided, however, that (i) no amendment, alteration, change
or repeal in any respect of any provision of Article FIFTH, Article SIXTH,
Article TENTH, or this Article ELEVENTH hereof may be made by the
stockholders of the Corporation, and no provision inconsistent therewith
may be so adopted, without the affirmative vote of 80 percent of the voting
power of all the then outstanding shares of the Voting Stock, voting
together as a single class.
IN WITNESS WHEREOF, the Corporation has caused this certificate to
be signed in its name and attested by its duly authorized officers this 1st
day of May, 1996.
AUTOLIV, INC.
/S/ JORGEN SVENSSON
By: Jorgen Svensson
Title: Secretary
Exhibit 3.2
RESTATED BY-LAWS
OF
Autoliv, Inc.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State
of Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the
board of directors of the Corporation (the "Board of Directors") may from
time to time determine. The books and records of the Corporation may be
kept outside the State of Delaware at such place or places as may from time
to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meetings of stockholders
shall be held on such date, and at such times as shall be designated from
time to time by the Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall elect by a plurality vote
directors to the Board of Directors, and transact such other business as
may properly be brought before the meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not later than the close
of business on the 10th day, and not earlier than the close of business on
the 60th day, before the date of the meeting.
Section 3. Special Meetings. Special meetings of stockholders may
be called only by the Board of Directors pursuant to a resolution adopted
by a majority of the number of directors which the Corporation would have
if there were no vacancies (the "Whole Board"). Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given to each stockholder
entitled to vote at such meeting not later than the close of business on
the 10th day, and not earlier than the close of business on the 60th day,
before the date of the meeting. At any special meeting of the stockhold-
ers, only such business shall be conducted as shall have been brought
before the meeting by or at the direction of the Board of Directors and as
stated in the written notice of meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital
stock issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all meetings
of the stockholders for the transaction of business, except that when
specified business is to be voted on by a class or series of stock voting
as a class, the holders of a majority of the shares of such class or series
shall constitute a quorum of such class or series for the transaction of
such business. If, however, such quorum shall not be present or represented
at any meeting of the stockholders, the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than an-
nouncement at the meeting, until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given
to each stockholder entitled to vote at the meeting. The Chairman of the
meeting or a majority of the shares so represented may adjourn the meeting
from time to time, whether or not there is such a quorum. The stockholders
present at a duly called meeting at which a quorum is present may continue
to transact business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum.
Section 5. Notice of Stockholder Business. At an annual meeting of
the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an
annual meeting business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought
before an annual meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation and
such other business must otherwise be a proper matter for stockholder
action. To be timely, a stockholder's notice must be delivered to or mailed
and received by the Secretary of the Corporation not later than the close
of business on the 60th day, nor earlier than the close of business on the
90th day, prior to the first anniversary of the previous year's annual
meeting; provided, however, that if the date of the annual meeting is more
than 30 days before or more than 60 days after such anniversary date, not
earlier than the close of business on the 90th day prior to such meeting
and not later than the close of business on the later of (i) the 60th day
prior to such meeting or (ii) the fifth day after public announcement of
the date of such meeting is first made by the Corporation. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (a) a brief description of the
business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name and record
address of the stockholder proposing such business and the beneficial
owner, if any, on whose behalf the proposal is submitted, (c) the class and
number of shares of the Corporation which are beneficially owned by the
stockholder and the beneficial owner, if any, on whose behalf the proposal
is submitted, and (d) any material interest of the stockholder in such
business. Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with
the procedures set forth in this Article II, Section 5. The Chairman of an
annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Article II, Section 5, and if he
should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder with respect to the matters set forth in this
By-Law. Nothing in this By-Law shall be deemed to affect any rights (i) of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the
holders of any series of Preferred Stock to elect directors under specified
circumstances.
Section 6. Notice of Stockholder Nominees. Only persons who are
nominated in accordance with the procedures set forth in this Article II,
Section 6 shall be eligible for election as directors. Nominations of
persons for election to the Board of Directors may be made at a meeting of
stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting by or at the direction of the Board of
Directors, by any nominating committee or person appointed by the Board of
Directors or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice
procedures set forth in this Article II, Section 6. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be
made pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received by the Secretary of the Corporation not earlier than
the close of business on the 90th day before such meeting and not later
than the close of business on the later of (a) the 60th day prior to such
meeting or (b) the 10th day after public announcement of the date of such
meeting is first made. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director, (i) the name, age, business address and resi-
dence address of such person, (ii) the principal occupation or employment
of such person, (iii) the class and number of shares of the Corporation
which are beneficially owned by such person and (iv) any other information
relating to such person that is required to be disclosed in solicitations
of proxies for election of directors, or is otherwise required, in each
case pursuant to Regulation 14A under the Exchange Act (including without
limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a Director if elected); and (b) as
to the stockholder giving the notice and any other beneficial owner on
whose behalf the nomination is made (i) the name and record address of the
stockholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. Notwithstanding anything
to the contrary in this Section 6, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the increased Board
of Directors at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by this
By-Law shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if it shall be delivered to
the Secretary of the Corporation not later than the close of business on
the 10th day following the day on which such public announcement is first
made by the Corporation. For purposes of this By-Law, "public
announcement" shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act. No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth in
this Article II, Section 6. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not
made in accordance with the procedures prescribed by the By-Laws, and if
he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this By-Law, a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this By-Law.
Section 7. Voting. Unless otherwise required by law, the
Certificate of Incorporation or these By-Laws, all matters other than the
election of directors brought before any meeting of stockholders shall be
decided by the vote of the holders of a majority of the stock represented
and entitled to vote thereat. Except as otherwise set forth in any
Preferred Stock Designation (as defined in Article FOURTH of the
Certificate of Incorporation), each stockholder represented at a meeting of
stockholders shall be entitled to cast one vote for each share of the
capital stock entitled to vote thereat held by such stockholder. Such
votes may be cast in person or by proxy executed in writing (or in such
manner prescribed by the GCL) but no proxy shall be voted on or after one
year from its date. The Board of Directors, in its discretion, or the
officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast
by written ballot.
Section 8. Consent of Stockholders in Lieu of Meeting. Any action
required or permitted to be taken by the stockholders of the Corporation
may only be effected at an annual or special meeting of stockholders of the
Corporation and may not be effected by any consent in writing by any such
holders.
Section 9. Stock Ledger. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger or the books of the Corporation, or to vote in person or by
proxy at any meeting of stockholders.
Section 10. Postponement. Any previously scheduled meeting of
stockholders, whether annual or special, may be postponed, and (unless the
Certificate of Incorporation provides otherwise) any special meeting of the
stockholders may be cancelled, by resolution of the Board of Directors upon
public notice given prior to the date previously scheduled for such meeting
of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. Subject to the rights
of the holders of any series of Preferred Stock to elect directors under
specified circumstances, the number of directors shall be fixed from time
to time exclusively by the Board of Directors pursuant to a resolution
adopted by a majority of the Whole Board. To the extent practicable,
one-half of the directors shall be citizens of the United States and
one-half of the directors shall be nationals of Sweden or member states of
the European Union. The directors, other than those who may be elected by
the holders of any series of Preferred Stock under specified circumstances,
shall be divided, with respect to the time for which they severally hold
office, into three classes, with the term of office of the first class to
expire at the 1998 annual meeting of stockholders, the term of office of
the second class to expire at the 1999 annual meeting of stockholders and
the term of office of the third class to expire at the 2000 annual
meeting of stockholders, with each director to hold office until his or her
successor shall have been duly elected and qualified. At each annual
meeting of stockholders, commencing with the 1998 annual meeting, (i)
directors elected to succeed those directors whose terms then expire shall
be elected by plurality vote for a term of office to expire at the third
succeeding annual meeting of stockholders after their election, with each
director to hold office until his or her successor shall have been duly
elected and qualified, and (ii) if authorized by a resolution of the Board
of Directors, directors may be elected to fill any vacancy on the Board of
Directors, regardless of how such vacancy shall have been created. Any
director may resign at any time upon written notice to the Corporation.
Directors need not be stockholders.
Section 2. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board of Directors may hold
such responsibilities with respect to the governance of the Corporation as
from time to time may be assigned by the Board of Directors. The Chairman
of the Board shall be elected from among the directors.
Section 3. Vacancies. Subject to the rights of the holders of any
class or series of Preferred Stock, and unless the Board of Directors
otherwise determines, vacancies resulting from death, resignation,
retirement, disqualification, removal from office or other cause, and newly
created directorships resulting from any increase in the authorized number
of directors may be filled only by the affirmative vote of a majority of
the remaining directors, though less than a quorum of the Board of
Directors, and directors so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of office of the class
to which they have been elected expires and until such director's successor
shall have been duly elected and qualified. No decrease in the number of
authorized directors constituting the Whole Board shall shorten the term of
any incumbent director.
Section 4. Removal. Subject to the rights of the holders of any
class or series of Preferred Stock, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and
only by the affirmative vote of the holders of at least 80 percent of the
voting power of all of the then-outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (the
"Voting Stock"), voting together as a single class.
Section 5. Duties and Powers. The business of the Corporation shall
be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by
these By-Laws directed or required to be exercised or done by the
stockholders.
Section 6. Meetings. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware.
Regular meetings of the Board of Directors may be held without notice at
such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be
called by the Chairman of the Board of Directors, the Chief Executive
Officer, the President, or a majority of the Board of Directors. Notice
thereof stating the place, date and hour of the special meeting shall be
given to each director, either (i) by mail, addressed to each director at
their residence or usual place of business and received at least five
days before the date on which such meeting is to be held, (ii) personally
or by telephone and not later than three days before the date on which such
meeting is to be held, or (iii) by telecopy, at least three days before the
date on which such meeting is to be held. A meeting may be held at any time
without notice if all the directors are present or if those not present
waive notice of the meeting in accordance with Article VI, Section 2 of
these By-Laws. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be
specified in the notice of such meeting, except for amendments to these
By-Laws, as provided under Article IX, Section 1 of these By-Laws.
Section 7. Quorum. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these By-Laws, at all meetings
of the Board of Directors, a majority of the Whole Board shall constitute a
quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee.
Section 9. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws,
members of the Board of Directors, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference by telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
this Article III, Section 9 shall constitute presence in person at such
meeting.
Section 10. Committees. The Board of Directors may, by resolution
adopted by a majority of the Whole Board, designate one or more committees,
each such committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any such committee, who may replace any absent or dis-
qualified member at any meeting of any such committee. In the absence or
disqualification of a member of any such committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members of such committee
present at any meeting and not disqualified from voting, whether or not he
or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the committee meeting in the place of any
absent or disqualified member. Such committees to the extent allowed by law
and provided in the resolution establishing such committees, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee
shall keep regular minutes and report to the Board of Directors when
required. A majority of any such committee may determine its action and fix
the time and place of its meetings, unless the Board of Directors shall
otherwise provide. Notice of such meetings shall be given to each member of
the committee in the manner provided in Article III, Section 6. The Board
of Directors shall have the power at any time to fill vacancies in, to
change the membership of or to dissolve any such committee. Nothing herein
shall be deemed to prevent the Board of Directors from appointing one or
more other committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such committee
shall or may exercise any authority of the Board of Directors.
Section 11. Records. The Board of Directors shall cause to be kept
a record containing the minutes of the proceedings of the meetings of the
Board of Directors and of the stockholders, appropriate stock books and
registers and such books of records and accounts as may be necessary for
the proper conduct of the business of the Corporation.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a Chief Executive Officer, a Chief
Operating Officer, a Chief Financial Officer, a Secretary and such other
officers (including, without limitation, a President and a Treasurer) as
the Board of Directors may from time to time deem proper. The Board of
Directors, in its discretion, may also choose one or more Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers. All
officers elected by the Board of Directors shall each have such powers and
duties as generally pertain to their respective offices, subject to the
specific provisions of this Article IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof. The Board of Directors or any
committee thereof, may from time to time elect, or the Chief Executive
Officer or the President may appoint, such other officers (including one or
more Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers
and Assistant Controllers) and such agents, as may be necessary or
desirable for the conduct of the business of the Corporation. Such other
officers and agents shall have such duties and shall hold their offices for
such terms as shall be provided in these By-Laws or as may be prescribed by
the Board of Directors or such committee or by the Chief Executive Officer
or the President, as the case may be. Any number of offices may be held by
the same person, unless otherwise prohibited by law, the Certificate of
Incorporation or these By-Laws. The officers of the Corporation need not be
stockholders of the Corporation nor need such officers be directors of the
Corporation.
Section 2. Election. The Board of Directors at its first meeting
held after each annual meeting of stockholders shall elect the officers of
the Corporation who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors; and all officers of the Corporation
shall hold office until their successors are chosen and qualified, or until
their earlier resignation or removal. Any officer elected by the Board of
Directors may be removed at any time by the affirmative vote of a majority
of the Whole Board. Any officer or agent appointed by the Chief Executive
Officer or the President may be removed by the Chief Executive Officer or
the President whenever, in their judgment, the best interests of the
Corporation would be served thereby. Any vacancy occurring in any office of
the Corporation may be filled by the Board of Directors. Any vacancy for
any reason in an office appointed by the Chief Executive Officer or the
President may be filled by the Chief Executive Officer or the President.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed
in the name of and on behalf of the Corporation by the Chief Executive
Officer, the President, or any Vice President and any such officer may, in
the name of and on behalf of the Corporation, take all such action as any
such officer may deem advisable to vote in person or by proxy at any
meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any
and all rights and power incident to the ownership of such securities and
which, as the owner thereof, the Corporation might have exercised and
possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
Section 4. Chief Executive Officer. The Chief Executive Officer of
the Corporation shall, subject to the control of the Board of Directors,
have general supervision of the business of the Corporation and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. In the absence or disability of the Chairman of the Board of
Directors, the Chief Executive Officer shall preside at all meetings of the
stockholders and the Board of Directors. The Chief Executive Officer shall
also perform such other duties and may exercise such other powers as from
time to time may be assigned to him by these By-Laws or by the Board of
Directors of the Corporation.
Section 5. Chief Operating Officer. The Chief Operating Officer of
the Corporation shall have such responsibilities as may be assigned to him
by the Chief Executive Officer of the Corporation.
Section 6. President. The President (if any) shall possess the same
power as the Chief Executive Officer to sign all contracts, certificates
and other instruments of the Corporation to the extent authorized by the
Board of Directors or the Chief Executive Officer. During the absence or
disability of the Chief Executive Officer, the President shall exercise all
the powers and discharge all the duties of the Chief Executive Officer to
the extent authorized to do so by the Board of Directors or the Chief
Executive Officer. The President shall also perform such other duties and
may exercise such other powers as from time to time may be assigned to him
by these By-Laws, the Board of Directors or the Chief Executive Officer.
Section 7. Vice Presidents. At the request of the President or the
Chief Executive Officer or in their absence or in the event of their
inability or refusal to act, the Vice President (if any) or the Vice
Presidents if there is more than one (in the order designated by the Board
of Directors) shall, to the extent authorized to do so by the President or
the Chief Excecutive Officer, perform the duties of the President or the
Chief Executive Officer, as the case may be, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the Presi-
dent or the Chief Executive Officer, as the case may be. Each Vice
President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Vice
President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or the Chief Executive
Officer or in the event of the inability or refusal of the President or the
Chief Executive Officer to act, shall perform the duties of the President
or the Chief Executive Officer, as the case may be, and when so acting,
shall have all the powers of and be subject to all the restrictions upon
the President or the Chief Executive Officer, as the case may be.
Section 8. Chief Financial Officer. The Chief Financial Officer
shall act in an executive financial capacity. He shall assist the Chief
Executive Officer and the President (if any) in the general supervision of
the Corporation's financial policies and affairs.
Section 9. Secretary. The Secretary or, in the event the Board of
Directors has not appointed a Secretary, the Officer of the Corporation to
whom the Board of Directors shall have assigned the duties described in
this Section 8, shall attend all meetings of the Board of Directors and all
meetings of stockholders and record all the proceedings thereat in a book
or books to be kept for that purpose; the Secretary shall also perform like
duties for the standing committees when required. The Secretary shall give,
or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors, the Chief Executive
Officer or the President, under whose supervision he shall be. If the
Secretary shall be unable or shall refuse to cause to be given notice of
all meetings of the stockholders and special meetings of the Board of
Directors, and if there be no Assistant Secretary, then either the Board of
Directors, the Chief Executive Officer or the President may choose another
officer to cause such notice to be given. The Secretary shall have custody
of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by
his signature. The Secretary shall see that all books, reports, statements,
certificates and other documents and records required by law to be kept or
filed are properly kept or filed, as the case may be.
Section 10. Treasurer. The Treasurer (if any) shall have the
custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all monies and other valuable effects in the
name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. The Treasurer shall disburse the
funds of the Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the
Chief Executive Officer, the President and the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 11. Assistant Vice Presidents. Except as may be otherwise
provided in these By-Laws, Assistant Vice Presidents, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chief Executive Officer,
the President, or any Vice President.
Section 12. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall
perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chief Executive Officer,
the President, any Vice President, if there be one, or the Secretary, if
there be one, and in the absence of the Secretary or in the event of his
disability or refusal to act, shall perform the duties of the Secretary,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 13. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors, the Chief Executive
Officer, the President, any Vice President, if there be one, or the
Treasurer, if there be one, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such
sum and with such surety or sureties as shall be satisfactory to the Board
of Directors for the faithful performance of the duties of his office and
for the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money
and other property of whatever kind in his possession or under his control
belonging to the Corporation.
Section 14. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board
of Directors may delegate to any other officer of the Corporation the power
to choose such other officers and to prescribe their respective duties and
powers.
ARTICLE V
STOCK
Section 1. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws,
including, without limitation, through a "book-entry" system if so
prescribed by the Board. Transfers of stock shall be made on the books of
the Corporation only by the person named in the certificate or by his
attorney lawfully constituted in writing, which shall be cancelled before a
new certificate shall be issued, with such proof of the authenticity of the
signature as the Corporation or its agents may require.
Section 2. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than
60 days nor less than 10 days before the date of such meeting, nor more
than 60 days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board
of Directors may fix a new record date for the adjourned meeting.
Section 3. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
Section 4. Shares Without Certificates. The Board of Directors may
authorize the issuance of any shares of any of its classes or series
without certificates. The authorization does not affect shares already
represented by certificates until the certificates are surrendered to the
Corporation. Within a reasonable time after the issuance or transfer of
shares without certificates, the Corporation shall send the stockholder a
written statement that includes (1) all of the information required by
applicable law on share certificates and (2) any transfer restrictions
applicable to the shares.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time
when the same shall be deposited in the United States mail. Written notice
may also be given personally or by telecopy, however, in the case of notice
by telecopy, such notice shall be deemed given at the time when it is
transmitted to the proper number, confirmation received.
Section 2. Waivers of Notice. Whenever any notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in
writing, signed, by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation,
or for any proper purpose, and the Board of Directors may modify or abolish
any such reserve. The Corporation shall make such arrangements as are
necessary or appropriate to ensure that all dividends payable to holders of
Swedish Depositary Receipts of the Corporation (the "Swedish Holders") are
paid in Swedish kronor.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall
end on December 31st of each year.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the
words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 5. Swedish Depositary Receipts and Swedish Holders of
Common Stock. The Corporation shall use reasonable efforts to maintain the
listing and index membership of its Swedish Depositary Receipts in Sweden
on the Stockholm Stock Exchange to the extent permitted by applicable rules
and regulations. The foregoing notwithstanding, the Corporation may resolve
to list the shares of its common stock directly on the Stockholm Stock
Exchange. The Corporation shall use reasonable efforts to establish
arrangements such that the Swedish Holders will have, to the extent
permitted by applicable rules and regulations, the opportunity to exercise
such rights with respect to the Corporation as would be exercisable by such
Swedish Holders if they held shares of common stock of the Corporation
directly.
Section 6. Stockholder Communications. All communications to
stockholders shall be made available in both the English and Swedish
languages, including, without limitation, financial statements and the
annual and any semi-annual or quarterly reports of the Corporation.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification of Directors, Officers, Employees and
Agents. The Corporation shall provide indemnification as set forth in
Article EIGHTH of the Certificate of Incorporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-Laws may be altered, amended or
repealed, in whole or in part, or new By-Laws may be adopted by the
stockholders or by the Board of Directors, provided, however, that notice
of such proposed alteration, amendment, repeal or adoption of new By-Laws
be contained in the notice of such meeting of stockholders or Board of
Directors as the case may be. All such amendments must be approved by
either the affirmative vote of the holders of a majority of the outstanding
capital stock of the Corporation entitled to vote thereon and voting
together as a single class, or by a majority of the Whole Board then in
office.
Exhibit 8.1
[LETTERHEAD OF ERNST & YOUNG AB]
Autoliv AB
Autoliv, Inc.
Morton International Inc.
Stockholm April 30, 1997
Ladies and Gentlemen,
In connection with the (i) formation of Autoliv, Inc., a Delaware
Corporation ("New Autoliv"), (ii) exchange of securities of Autoliv AB (the
"Autoliv Securities"), a corporation organised under the laws of the
Kingdom of Sweden ("Autoliv"), for shares of New Autoliv pursuant to an ex-
change offer (the "Exchange Offer") and (iii) compulsory acquisition by a
wholly-owned subsidiary of New Autoliv which is a corporation organised
under the laws of the Kingdom of Sweden ("Swedish Newco"), of Autoliv
Securities from holders of Autoliv Securities not participating in the
Exchange Offer (the "Compulsory Acquisition") under the laws of the Kingdom
of Sweden, together with the contemporaneous merger (the "Merger") into
Morton International, Inc., an Indiana corporation ("Morton"), of ASP
Merger Sub Inc., a Delaware corporation and wholly -owned subsidiary of New
Autoliv ("Merger Sub"), as stipulated in the Combination Agreement dated as
of November 25, 1996, among New Autoliv, Morton, Merger Sub and Autoliv
(the "Combination"), you have requested that we render as contemplated by
Section 9.1 (i) of the Combination Agreement, an opinion concerning the
consequences under the Swedish income tax laws of the Exchange Offer as it
relates to New Autoliv, Autoliv and the Autoliv stockholders.
For purposes of the opinion set forth below, we have examined and relied
upon the accuracy and completeness of the facts, information, covenants,
statements and representations contained in originals or copies, certified
or otherwise identified to our satisfaction, of the Combination Agreement,
the Proxy Statement/Prospectus/Exchange Offer, dated March 24, 1997, and
such other documents as we deemed necessary or appropriate. We have assumed
that the facts and information contained in the documents mentioned above
were true, correct and complete in all material respects as of March 24,
1997, and that no material changes have occurred since such date. In
addition, we have relied upon the accuracy and completeness of certain
statements and representations (which statements and representations we
have neither investigated nor verified) rendered by officers of Autoliv and
New Autoliv.
Based upon and subject to the foregoing and subject to the limitation of
the following sentence, it is our opinion that under Swedish income tax law
as in effect on the date hereof, the Exchange Offer will not be taxable to
New Autoliv, Autoliv, or the Autoliv stockholders who are fiscal residents
of Sweden, with the exception of individuals who have emigrated from Sweden
but are still considered to be residents of Sweden for tax purposes due to
continuing significant personal connections to Sweden. We express no
opinion with regard to the tax consequences to Autoliv stockholders whose
shares are (i) treated, under the Swedish tax laws, as current assets in a
business operation, (ii) are held by a partnership, or (iii) are held by
nonresidents of Sweden.
Except as set forth above, we express no opinion to any party as to the tax
consequences of the Merger, the Exchange Offer and certain related
transactions. This opinion is furnished to you solely for your benefit
pursuant to Section 9.1(i) of the Combination Agreement and is not to be
used, circulated, quoted or otherwise referred to for any purposes without
our prior written consent. We disclaim any undertaking to advise you of any
subsequent changes of the facts stated or assumed herein or any subsequent
changes in applicable law.
Yours sincerely
/s/ Staffan Estberg
Staffan Estberg
Tax Partner
Exhibit 99.1
PRESS RELEASE
97.1% of Autoliv AB shares have been tendered.
(Stockholm, May 14, 1997) -- As of May 9, 1997,
the expiration date of the extended tender
period, 53.4 million shares, corresponding to
97.1% of the Autoliv AB shares, have been
tendered in the Exchange Offer conducted by
Autoliv Inc. and will be exchanged for shares of
Autoliv Inc.
Autoliv Inc. intends to initiate a compulsory
acquisition process in order to acquire any
shares of Autoliv AB which were not tendered in
the Exchange Offer.
Autoliv Inc manufactures airbags for driver,
passenger and side-impact applications;
inflatable knee bolsters, seat belts,
pretensioners, steering wheels, seat components,
child seats, sensors and safety electronics for
virtually all major automotive manufacturers in
the world. The company has more than 50
subsidiaries and joint ventures with 15,000
employees in 24 vehicle-producing countries. In
addition the company has more research and
development centers around the world, including
14 test tracks, than any other automotive safety
supplier. The company's shares are listed on the
New York Stock Exchange (NYSE: ALV) and the
company's Swedish Depository Receipts on the
Stockholm Stock Exchange (SSE: ALIV).
For further information, contact:
- Mats oedman, Director Investor Relations, Tel.
+46-8-402 0623
Autoliv AB, P.O. Box 703 81, S-107 24 Stockholm,
Sweden, Fax: +46-8-244-479/244 493
